So we have to replace that system with a clean fuel system—because only a system allows ordinary people to do extraordinary things. If we don’t enable ordinary people to do extraordinary things by way of energy efficiency, clean power and conservation, you’ll never achieve the scale of change we need. One of the things you most often hear people say is, “We need a clean energy Manhattan Project.” I am against that approach, because I don’t think 12 scientists in Los Alamos are going to solve this problem or give us what we need. What we don’t have in energy today is a real market that would encourage 100,000 Manhattan Projects in 100,000 garages with 100,000 ideas, out of which 100 will be really promising, 10 will be workable and two will be the next green Google.
How do you get that kind of market? You’ve got to shape it in two ways. One is with the right price signal. We need to have a tax on carbon that is long-term, fixed and durable. So those 100,000 inventors know if they do come up with that breakthrough, and if OPEC lowers the price of oil, it won’t knock them out of the game. And second, we need to rewrite the rules around our utilities so that they are incentivized not to act like $5-all-you-can-eat electron buffets, where they get richer when you consume more electrons. Instead we should turn them into partners for energy efficiency, so they’re paid not for kilowatts sold, but for watts saved.
Is it a good idea to meddle so extensively with the free market for energy?
[Laughing.] Oh, yeah, a totally free market dominated globally by the world’s biggest cartel, dominated domestically by fossil-fuel companies who have written all the rules in Congress—pages’ worth of depletion allowances and tax shenanigans that these guys have written in to give themselves advantages. We wouldn’t want to upset that free market, would we? There is no such thing as a free market, no more than there is a farm or a garden that grows without fertilizer, without proper plowing, without intelligence brought into it. Markets are shaped by rules, incentives and disincentives, and right now our market is shaped by the dirty fuel system.
Because politicians won’t act. In effect they’ve said, “We’re just going to let the market do it.” Well, that market brought us $140-a-barrel oil, and it brought us $4.50 gasoline. If you like letting the market do this, that’s what you’re going to get.
Now, you could say, “Isn’t the market stimulating the development of alternatives?” Yes, to some degree. But when you let the market run all this policy, the biggest profits go to the petro-dictators. When the market sends the price up to $140 a barrel and you don’t have a tax on it to capture some of that yourself, nearly all of it goes to strengthening our enemies and weakening our balance of payments and our currency. What doesn’t go abroad goes here to legacy industries: coal, oil and gas companies that don’t have a huge incentive for moving to a new system.
Furthermore, if the market is in charge, it can send the price up, but it can also send the price down. If I’m someone who might have an incentive to move to a new system, do I really want to bet the farm on renewable energy? Maybe the oil price will go to $70 a barrel tomorrow, and my wind and solar company will be out of business. What Jeff Immelt [CEO of General Electric] says to me in my book is, “Tom, I am not going to make a 40-year multibillion-dollar bet on a 15-minute price signal.” And who would?
But how can politicians be induced to stand up for the unpopular move of imposing a carbon tax?
Let’s imagine you are in a campaign, and your opponent says, “There goes my opponent Mr. Friedman—another tax-and-spend liberal. He’s never met a tax he didn’t like. Now he’s for an energy tax, now he wants to tax your gasoline more.” What I would say is, “Let’s get one thing straight. My opponent and I are both for a tax. He doesn’t mind that his taxes go to the Saudi, Russian or Venezuelan treasuries. I just prefer that my taxes go to the U.S. Treasury. But let’s not fool ourselves that we’re not paying a tax here.” Now, if you can’t win that debate, you don’t belong in politics.