Green tech

The most trendy topic in public policy circles these days has to be environmentally-friendly technology. The UN Secretary General now speaks of the "Age of Green Economics" while our President-elect, deficits be damned, has reiterated his call this week for $150 billion in spending on renewable energy. Thomas Friedman, meanwhile, continues to burble incessantly about the urgent need for "E.T" to head off environmental catastrophe.

Now, seeking to stick their fingers in as many pies as possible, the greenies are injecting themselves into the auto bailout debate. It is, as Kenneth Green brilliantly puts it, a "green carjacking":

House Speaker Nancy Pelosi wants to tie federal assistance to a requirement that Detroit make more fuel-efficient, eco-friendly cars. “Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol,” demands New York Times columnist Thomas Friedman. Writing in The Washington Post, Columbia University economist Jeffrey Sachs calls for a “major industry restructuring to position the United States to lead the world in producing cars that get 100 miles or more per gallon.” (Sachs is pinning his hopes on plug-in hybrid vehicles, “fuel-cell cars,” and the much-ballyhooed—but not yet seen or priced—Chevy Volt.)

In other words, at a time when the top Detroit automakers are desperate for financial aid, the federal government should force them to sell more expensive cars that are less profitable. Make sense to you? Me neither.

It’s hard to see how greening Detroit will help car companies, car drivers, or American taxpayers. Greener vehicles are more expensive to make and bring in less profit than other cars. They cost more to finance, more to repair, and more to insure. Their sales depend heavily on tax incentives—which means that selling more of them will require more taxpayer dollars. The National Renewable Energy Laboratory (NREL) estimates that plug-in hybrid vehicles cost $3,000 to $7,000 more than regular hybrids, even though the performance differences between the two models are slight, and the really fuel-efficient hybrids cost $12,000 to $18,000 more than the conventional brand.

This is exactly right. Thomas Friedman, Jeffrey Sachs and the rest of their environmental entourage haven't the first clue about how to save U.S. auto manufacturers. Their arrogance is quite breathtaking, walking into an industry they know nothing about and proclaiming to possess the answers. If a profit can be made building hybrid cars and the like, manufacturers will do this anyway and the role of Friedman et. al is superfluous. If it doesn't make financial sense then they are advocating what amounts to economic seppuku.

What we need to realize is it much easier to identify problems than solutions. Although I remain deeply skeptical about global warming, for the sake of debate let's assume that it is real and will impose significant costs. The answer, then, is to identify the sources of the problem -- in this instance, say carbon -- and tax it. Make it reflect the true costs on society. After that is done let the chips fall where they may. Let the free market develop the alternatives and let consumers figure out what is in their best interest. The answer could be biofuel, hybrid cars or something else we haven't even conceived of.

But to think that any one person, be it Jeffrey Sachs, T. Boone Pickens or Barack Obama has the answers is nonsensical. The answer will be found by millions of people wielding their collective knowledge as expressed by the marketplace.