options that nevertheless omitted additional hidden costs. The current goals for mitigation are such, Richels felt, that the policy debate should not be about whether there is a free lunch in mitigating climate change, but rather about whether the lunch is worth paying for. He expressed the concern that the debate over “how many free $20 bills are lying on the sidewalk” is irrelevant and should not be used as an excuse for policy paralysis. Hillard Huntington recalled that most of the same issues discussed earlier in this workshop session had been brought up more than a decade ago in an Energy Modeling Forum activity on supply curves. Despite some interesting things that have to be done analytically, Huntington was convinced that it is very important to communicate with policy makers about how to use these curves and the factors that change the shape and cost-effectiveness of these curves. He noted that behavioral issues appear to be critically important to explaining the gap between the technology opportunities and other energy-saving measures shown within these curves and the adoption of these measures by individuals and companies. Howard Gruenspecht began his remarks by concluding that the presenters and commenters had made it clear that analysts need to sharpen their focus on behavior in a variety of dimensions when assessing the costs of reducing energy use and greenhouse gas emissions. He went on to note that his agency’s (EIA’s) models include some behavior and a lot of technology detail. The EIA models use a mixed approach whereby decisions in some sectors are benchmarked to past behavior, whereas in other sectors, such as electric power generation, decisions are assumed to be based on a pure cost-minimizing behavior. He noted that recent experience suggests too little emphasis might have been placed on behavioral considerations, even in the electric power sector.
The session ended with comments and questions from the audience. Richard Moss from the Pacific Northwest National Laboratory/University of Maryland’s Pacific Joint Global Change Research Institute wondered whether the debate has moved beyond whether there are negative cost opportunities ($20 bills on the sidewalk) to the question of how we can use policy to more economically and efficiently bring about some of the transitions necessary to address climate change. Further, Moss noted that many of the claims made about different policies leading to job creation or improvements in energy security do have an economic component to them and yet are really difficult to get our hands around. He wondered how it might be possible to build on such studies of bottom-up technical potential for reducing energy use and emissions, and move onto some of these other challenging questions. Marilyn Brown responded by noting a growing appreciation that the market is not operating effectively, that intervention can improve things, and that many of the policies in place actually present barriers to efficient decision making. These barriers include the coupling of profits by the electric utility industry and the gas industry to the amount of revenue obtained, which discourages policies that reduce electricity or energy consumption. Rich Richels responded by recommending greater transparency in packaging some of the work that is being done, citing a talk he had heard recently about green jobs that mentioned only the number of jobs that would be added by adopting certain renewables, and did not discuss the potential negative impacts on other segments of the employment market. Richels’ conclusion was that, unless you give the whole picture, you are setting yourself up for being discredited.
Ed Ryder from Dow Chemical brought up the point that, although supply curves provide an entry point for discussion, one of the issues from an industrial perspective is the competition for capital and whether you spend your limited resources on energy efficiency projects or on some other projects that allow you to meet other objectives such as producing products in greater volume, expanding into different regions of the country or the world, or spending in another manner that provides greater returns on investment. William Nordhaus from Yale University noted that many of the comments on supply curves have been scornful of the bottom-up engineering approaches that are used to estimate the technical potentials shown in these curves. What he finds very exciting for the next decade or two of research is to bring to bear some of the important new advances in behavioral economics or the behavioral sciences more generally on issues related to supply curves.