Over at Grist, David Roberts has an in-depth interview with Doug Holtz-Eakin, McCain's domestic-policy guru, on the subject of climate policy. This bit nicely delved into a topic we've discussed on this blog before:
DR: [You've] distinguished McCain's policy approach from his competitors' by saying he favors putting a cap-and-trade system in place and otherwise refraining from further policies and regulations -- even getting rid of a lot of sector-specific or industry-specific regulations and subsidies. Is that fair?
DHE: Right; that's a fair description of the philosophy. …
DR: Let's focus for a second on the transportation sector. Analyses have found that the price of carbon would have to reach politically untenable levels -- $200, $300 per ton -- to move gas prices even a dollar or so. We've already seen a $2 rise in the price of gas, which hasn't produced much of a sea change away from emission-heavy transportation. So if you're going to get rid of CAFE, or the low-carbon fuel standard, how do you move the transportation sector?
DHE: The basic construct is, you don't target the transportation sector. Obviously as part of the overall policy we'd expect it to change, but when you do the economy-wide cap-and-trade, you don't pick each sector to have a particular part of meeting the caps. If you can trade across sectors, then off you go. ...
Point No. 2 is, you don't get rid of CAFE -- which was just passed and increased -- right away, because we haven't even implemented cap-and-trade. ...
When we saw those large oil price spikes in '79, '80, we saw dramatic changes in the energy content of the U.S. economy. We cut it in half. And then oil got cheap again, and we stopped. I would never want people to underestimate the power of just pricing oil. Sustained changes in energy prices matter -- "sustained" being the key -- and you have to have policy to ensure that.
I don't quite agree with Holtz-Eakin here. There's decent evidence that fuel-economy standards can be even more effective than gas-price spikes at curbing gasoline consumption (at the very least, the two work well in tandem). And if you want people to drive less, it helps to offer an alternative. Public transit options won't just sprout up out of nowhere, even if the price of carbon skyrockets—there's still a clear role for government here, and one that McCain tends to ignore.
Meanwhile, Holtz-Eakin's defense of McCain's ardent support for nuclear subsidies is at least logically coherent—he argues that the subsidies are different in kind from the "bad" corporate handouts that McCain usually denounces because bolstering nuclear power is in the national interest. Well, okay. But then why does McCain oppose subsidies for renewables like wind or solar? One could make a perfectly compelling "national interest" case for those, too.
On the upside, Holtz-Eakin's quote on whether emission caps would cause grave harm to the economy seems noteworthy, coming from a guy who used to head the Congressional Budget Office: "Economic models have consistently underestimated the capacity of the U.S. economy to recover from shocks and to be flexible and grow." Same for this line, which has become vanishingly rare to hear from an economist: "But the world is a better place if you do this policy, even if GDP growth is a little bit smaller."