What did you do with your Friday night? Like a hundred or so MIT students and members of the local energy community, I spent mine hearing the presidential campaigns debate one of the most important economic issues of our time. At least by my nerdy criteria, I win. The MIT Energy Initiative and the MIT Energy Club co-hosted a debate this evening with representatives of the Obama and Romney campaigns on energy, offering viewers a lively and nuanced view of each camp’s perspective on the subject.

I’ve been extremely critical of the Romney energy plan, and I have to say this forum offered the best possible case for that plan. Yes, I still find it lacking, but the campaign took advantage of the forum to make its arguments. Significant credit goes to Jason Pontin, Editor of Technology Review (to which I contribute), for his role as moderator. The questions were good, rebuttals were well managed, and timing was respected.

The debate covered federal energy incentives, fossil fuel production, energy security, energy financing, climate change, and more. I can’t hope to relate the discussions on all of those issues here, so I’ll focus on just a few that I find both interesting and important.

Climate Change

The segment on climate change came last, which is an interesting choice considering its significance to almost every other energy issue. And not surprisingly, it contained some controversy.

Oren Cass, Domestic Policy Director for the Romney campaign, said prior to that segment that limiting carbon dioxide emissions was not a legitimate goal for the federal government to pursue. That was a view he later fleshed out in more detail, but it was clear that the crowd – which was on its best behavior throughout – did not appreciate it.

Cass said a number of interesting things on climate, which I’ll summarize in bullet form:

  • Romney believes in climate change, but acknowledges uncertainty over its extent and supports more research into the area (which prompted snickering from the crowd).
  • Romney believes unilateral action on climate change without the cooperation of other countries wouldn’t be effective.
  • Romney’s focus is on promoting innovation of new energy technologies that can stand on their own (more on that later).
  • Cass pushed his opponent all night to be more specific about Obama’s preferred climate policies.

Joseph Aldy, a professor at Harvard’s Kennedy School and the representative of the Obama campaign of course pushed back on all of this. He pointed out that other nations are already acting and, given the U.S. role in emissions to date, some commitment up front is likely a prerequisite for further international cooperation. He also pointed out that Obama had put forth both cap-and-trade and a clean electricity standard as policy ideas, both of which had at one time garnered Republican support.

The vast majority of policy analysts in this space support those market-oriented measures, so the Romney camp is certainly well outside of the mainstream on this. But the politics were interesting, if a bit depressing. Cass kept hammering Aldy to say out loud that Obama favored cap-and-trade or a price on carbon. Aldy reiterated the President’s support in previous years but wouldn’t simply say that the President still favored those policies. Likewise, he refused to answer whether Obama would support a carbon tax. All of that points to the sad politics of climate change. It’s worth remembering that John McCain ran in 2008 in support of cap-and-trade. We’ve regressed a lot since then.

Innovation

As Cass kept trying to present Obama’s position on climate policy as opaque, his next move was to frame the two campaigns’ differences on climate policy as merely divergent views on the innovation process. That’s not the case, given that Obama believes climate change is a priority and Romney (according to Cass) does not, and given the President’s proposals in his last campaign and as President on the subject. But putting that aside, Cass did raise very legitimate questions about innovation policy.

Romney’s campaign argues that the role for government in the innovation process is at the earliest stages, funding basic and applied research, but that commercialization and deployment can be fully handled by the private sector. Therefore, Cass said Romney supports programs like ARPA-E, a Department of Energy program that funds risky pre-commercial energy projects.

Aldy, for his part, cited a history of public-private partnerships in innovations in fields like life sciences and agriculture. In one sense this is a very legitimate debate. How far into the innovation life cycle should the government be involved? Basically everyone agrees there’s a need to fund research, but what else? Are subsidies for the deployment of clean energy technologies really necessary?

This is the debate Cass would like to have, and ultimately it’s a debate I’d like to watch. But it gets quickly interrupted when you remember that the Romney campaign doesn’t favor any price on carbon. In a perfect market, the Romney vision of commercialization might work, but in a world where fossil fuels enjoy the implicit subsidy of not having to pay for the pollution they produce, it’s harder to imagine market forces on their own unlocking an energy revolution.

Energy Efficiency

In energy circles, efficiency is largely seen as a win-win. You save people money while lowering emissions. The up front costs of programs that implement efficiency initiatives are typically far outweighed by the benefits. And yet this was an area of stark disagreement.

Aldy emphasized the importance of efficiency and noted that Romney’s energy plan doesn’t mention it once. Cass replied that energy efficiency is often “a solution in search of a problem.”

That difference is truly instructive. The assumption behind the Romney campaign’s thinking is that markets are generally efficient. As Cass put it, you should be suspicious of any policy that is trying to help people save money because “if it would save them money they would do it on their own.”

Now, I could honestly talk myself into arguing either that that line of thinking is one of the most useful rules of thumb in all of social science, or a hopelessly naive trope from which economics must be rescued. I will say that the bulk of analysis I’ve seen on this issue contradicts the Romney argument. But to be fair to Cass and the Romney campaign, a paper out of MIT this year suggested that the market failures in energy efficiency may be overestimated by many of those analyses.

Energy Independence

I bring this one up because both debaters were asked for their definitions of energy independence, and neither gave what you’d consider the textbook answer. Energy independence commonly refers to a scenario where the U.S. produces all of its own energy, a situation considered by most analysts to be wildly unrealistic.

And yet energy independence remains a popular political topic. Aldy answered first and defined it as a state of affairs where American families were secure from shocks to the oil market. That typically gets called energy security; it’s a very important goal of energy policy, but it was interesting to see it used as the definition of independence.

Cass said something closer to the typical definition but still a bit different. He defined it as a situation where the economic activity around energy was predominantly captured domestically. For the purposes of fossil fuels this probably approximates the typical independence definition, but in theory it leaves open a wider interpretation. Consider for a moment an iPhone manufactured in China. The physical good isn’t produced in the U.S., but Apple, an American company, still captures the majority of the value. I have no particular point to make here, except that I found these different definitions of “energy independence” fascinating.

Conclusion

As I walked out of MIT I passed a couple of students venting over the Romney campaign’s insistence on downplaying the very real threat of climate change. No doubt that conversation was happening in countless other spots on campus as the crowd dispersed. Nonetheless, it’s a credit to MIT and to Cass and Aldy that the debate was able to involve top representatives from both campaigns while maintaining a high level of seriousness and policy detail.

By now I imagine you’re regretting whatever you chose to do with your Friday night. But don’t worry. I’m told the debate will be aired on E&E TV and then later on the MIT website.