I am happy to see that Barack Obama is not entirely in reality-avoidance mode with his climate policy:
You know, when I was asked earlier about the issue of coal, uh, you know "” Under my plan of a cap and trade system, electricity rates would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I'm capping greenhouse gases, coal power plants, you know, natural gas, you name it "” whatever the plants were, whatever the industry was, uh, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers.
To folks with any kind of background in economics, this has to be the case. Reducing the total output of current power plants, and thereby obsoleting all that investment and squeezing supply, at least in the medium term until new capacity of other types can be built, can only lead to a) rationing through blackouts or b) higher prices to ration the shorter supply. The cost of option a is so high that price is going to have to be the rationing mechanism. Skyrocket is actually pretty close to what would happen to rates if Obama sticks by his plan of limiting greenhouse gasses to 1990 or earlier levels. (His explanation is actually pretty poor for the mechanism - pass-through of retrofit costs would likely be minor to the supply / demand balancing effect of shaving 20/30% off supply in a short period of time.
I think a frank discussion of the dangers of a "pollutant" vs. the cost of abatement is a fair one. I personally think the threat of CO2 is wildly exaggerated, and the cost of doubling or tripling electricity costs will hurt Americans far worse than a few tenths of a degree of warming.
But don't get too excited. Obama is still living in economic never-never land on other related issues:
yes, there is going to be some increase in electricity rates on the front end, but that over the long term, because of combinations of more efficient energy usage, changing lightbulbs and more efficient appliance, but also technology improving how we can produce clean energy, the economy would benefit.
Sorry, but this is way wrong. Obsoleting perfectly good infrastructure and wholesale replacing it with trillions of dollars of new infrastructure does not help the economy any more than if a massive earthquake had destroyed the plants. This is the broken windows fallacy on steroids. The only benefit from all this cost will be whatever climate benefit we accrue from the CO2 reduction. For there to be such a benefit, one must assume a) substantial future warming and b) that the current temperature happens to be the best possible temperature we could ever be at. But that, as they say, is a whole other blog.