Ten Miles Square

July/ August 2013 The Monthly Interview: Ted Nordhaus

A conversation with Ted Nordhaus, the head of a green think tank who thinks that environmentalism is dead, nuclear energy and gas are alive, and maybe the conservatives had it right all along.

By Washington Monthly

TN: In the U.S., our electrical system is structured so that demand growth is relatively low. So, yeah, making a big bet on a one- or two-gigawatt nuclear plant that’s dependent on what you think energy demand is going to be over the next forty or fifty years? I don’t believe that’s going to happen on a large scale. But you’ve got to get your head out of the U.S. and into the developed world. China built something like eleven new nuclear reactors last year and has plans to build ten to fifteen new reactors every year for the next decade at least. India is building new reactors and coming out with new reactor designs. South Africa is building new reactors. Countries like that are still building the basic infrastructure of modern societies, and that takes enormous amounts of energy. They have a growing demand and the political and economic imperatives to deploy a lot of those technologies.

WM: The designs being road tested in places like China are different than the traditional reactors we have here?

TN: Fundamentally different. Their designs are much simpler and use different fuel configurations. They’re much smaller and better suited to modularity. In many cases, they’re basically meltdown proof because of the physical characteristics inherent to the fuels they use. And the scale of these designs is different, too. China isn’t planning to just build one or two of these things. They’ll build twenty or thirty or forty of them. And the more of them they build, the better they’ll get and the cheaper they’ll be. And that’s good news for us. Anything that can scale in China should be able to scale here—and I think that’s exactly what we’ll start to see. They’ll perfect and commercialize these technologies, and then we’ll end up buying their nuclear designs from them. There’s a whole generation of environmentalists who are taking a second look at nuclear because of these designs.

WM: What role do you think government should play?

TN: Innovation. If you want more renewables, then keep the production tax credit for wind and the investment tax credit for solar. If you want more nuclear, then create incentives for utilities to deploy new modular nuclear technologies. Right now, most of the resources are going to subsidies, but we also need to spend a lot more on research and development, too. We need funding to improve basic technologies, demonstrate them on a commercial scale, and help them through the early stages of commercialization. And that last part is important. We can’t subsidize new technologies in perpetuity. Again, look at the gas revolution. We’re displacing lots and lots of coal right now, and emissions are going down, because gas has been cheaper than coal in real, unsubsidized terms. That’s the way forward: make clean energy cheap.

WM: What about the carbon tax or cap and trade?

TN: Environmentalists buy into this idea that if we put a price on carbon, the market will magically deliver all the technology we need. That’s been the central environmental strategy for twenty years, but there’s just no evidence that the energy economy actually works this way. Energy markets aren’t free markets. Utility and electrical markets are heavily regulated monopolies, and energy technologies are incredibly capital intensive. They require lots of infrastructure, and there are lots of nonmarket barriers to their success.

The switch from coal to gas is not simply a function of market response to cheap gas. It’s a response to a whole set of things that cheap gas unleashes in the larger political economy. For example, the EPA is able to pass stronger regulations on public utilities commissions, which have an interest in approving smaller, cheaper gas plants that don’t cost as much up front for ratepayers. Prices do matter in the energy market, but the price signals are being interpreted in a bunch of different institutional contexts that are not purely market contexts.

The point is, if you want a carbon tax, go ahead and pass one, but I don’t think that it is going to result in a sort of rapid transition to a low-carbon economy. And given that in pushing each new policy, you’re expending political capital, I wouldn’t put a carbon tax very high on that list.

WM: What is high on your list?

TN: Three-quarters or more of all of the carbon that’s going to be emitted over the next century is coming from what we now call the developing world. If you don’t have your head around what that challenge is, and how you’re going to change that picture, you have no strategy at all.

A previous version of this article incorrectly identified Nordhaus as the “head” of the BI. In fact, he is the cofounder. It also contained an incorrect reference to the 20th anniversary Rio conference, when the correct reference was to the 1992 event. Finally, a sentence reading “If we’re serious about reducing global emissions, renewables are not the answer,” has been changed to “If we’re serious about reducing global emissions, renewable technologies that are currently available are not the answer,” due to an error in transcription. The text has been corrected.