In their LA Times article "The Green Bubble Has Burst"   Ted Nordhaus and Michael Shellenberger make two broad claims about the economics of the energy / climate change debate. The first is their assertion that "Drill baby drill" had anything to do with the reduction in oil prices this summer. It did not. If we have anyone to thank for lower gas prices in this country it is the American consumer, who reduced consumption enough to allow supply to finally catch up with global demand. It wasn't any fun, but we as a country did the heavy lifting this spring and summer to remedy the global supply/demand imbalance in the oil markets and OCS drilling had zero to do with it.

The second point is their assertion that an R&D program funded by the government is the best way to solve our linked energy and environmental problems.  This was also echoed in a blog posting by Andrew Sullivan of the Atlantic titled "Don't Control, Innovate". Whether or not you believe this approach had any promise of delivering results at the required scale in yesterday's economy is now a moot point. Given that we are faced with a large taxpayer-funded recovery program for the banking system, such additional public programs are unlikely to materialize. Even if they did, they would not be funded at a level that would make a meaningful difference in the pace of clean energy resource penetration. 

Indeed, if a new set of high-growth industries is needed to get America back on track, from re-tooling the auto industry to retrofitting buildings, to building the transmission infrastructure needed for a new energy economy, a cap and invest policy is our most effective policy solution. By combining limits on global warming pollution with incentives for private sector investment in clean energy, a smart cap and invest strategy can provide both the broad market drivers and targeted capital needed to build the new energy economy we need now more than ever.  And it does this by creating its own currency and collateral in the form of carbon allowances that can and should be independent of government budgets.

The benefits to the US economy in terms of job creation, export growth, and a reduced dependence on foreign oil will  provide a real economic stimulus and create a pathway to lower energy bills for Americans. This is more than we can ever hope to achieve by inadequate subsidies that would flow from a program limited to government R&D.  Cap and invest is more than just a way to curb CO2 emissions, it is an investment plan. By taking a significant portion of the revenues from carbon emissions markets and investing those in technology driven businesses in the early years, we will be growing industries and encouraging investment in America's new energy economy.