How to Use Competition Policy to Speed Efforts to Cut Carbon Emissions
The Open Markets Approach
The world is at a crossroads. Scientists and engineers have created many highly efficient and low-cost technologies to produce, distribute, and store clean renewable energy. But in almost every instance, powerful actors exploit corporate chokepoints to slow or entirely block these advances in ways that lock our society into continued dependence on hydrocarbons. In recent years, our team at Open Markets has produced pioneering analysis of many of the economic activities where monopoly power and climate change intersect. These efforts have paid off in a unique understanding of how to use competition policy to speed and democratize the transition to a post-carbon society. Whereas most other groups focus on technology, at Open Markets we focus on how to structure markets and the behavior of corporations to drive radical change across entire systems of human industrial activity. Thus far, our insights have emerged largely from our work to address some of the many threats posed by Big Tech, Big Ag, and China’s hold on critical supply chains. But our team at Open Markets is now intentionally building our capacity to help lawmakers, law enforcers, environmental activists, and the public as a whole learn how to use competition policy to drive swift, fair, fundamental change.
I. IDEOLOGY & POWER
o How Monopoly Power Supports Carbon Power. The biggest barrier to a renewable future is the continuing influence of an economic philosophy that dates to the days of President Reagan. The ideology was designed in the 1970s theoretically to promote economic efficiency. But the real-world result was to drive an increasingly extreme concentration of power and control in a few giant corporations and banks. in ways that made it harder to bring better technologies to market. In recent years, our team at OMI has been the world-wide leader in detailing the political and economic dangers posed by this radical libertarian ideology and in helping people relearn how to shape economic power to serve our common public ends. Along the way we helped detail the central role played by Koch Industries and other hydrocarbon corporations in building a network of organizations to promote and defend an ideology that – at its core - is pro-monopoly, pro-carbon, and anti-democracy. Today our team at OMI is expanding this work by:
o Explaining how Google, Amazon, and other powerful monopolists – many of which are key players in U.S. electricity markets – support the Koch Industry’s network of far-right pro-monopoly propaganda (as this NYT article details).
o Detailing how this pro-monopoly ideology is still used to shape the U.S. judiciary’s view of economic power – and the behaviors of hydrocarbon corporations – and how liberals still misunderstand this philosophical fight.
o Creating a new narrative frame to support efforts to break the intellectual, political, and economic structures designed to protect private monopoly power and to block decarbonization.
II. GOVERNING THE GRID
o Power and the People. A century ago, citizens of every state introduced smart policies and models for public governance of electrical utilities. Their goal was to ensure fair, efficient, low-cost service for everyone and to keep the monopoly powers of these corporations in check. But in recent decades pro-carbon interests and their allies have overturned this regulatory model from one coast to the other, in ways that have jacked up prices, reduced safety, and driven down innovation. OMI has developed a range of ideas to make the electrical system more democratic and open through better regulation of the structure, behavior, and political power of the utilities themselves. This work includes the forthcoming book by OMI Legal Director Sandeep Vaheesan, “Democracy in Power,” and our outreach to the FTC on non-competitive practices of Investor-Owned Utilities (link). We are also developing ideas for better governance of today’s dominant buyers of electricity, such as the cloud computing operations of Microsoft and Amazon.
o An Internet of Energy? Today’s new generation of renewable electrical generation and transmission technologies requires an entirely new approach to controlling and tracking the flow of electricity – and data – to and from millions of highly distributed sources. Engineers have responded by building a network that resembles the internet far more than it does the traditional centralized systems of generation and distribution. And like the internet, today’s new “smart” grid also requires us to answer the question of who gets to profit and otherwise exploit the ability to track and control these flows of electricity and data. Unfortunately, thus far there is no real public policy to govern this activity, and few people have even begun to study how to ensure these revolutionary changes result in an open, resilient, safe, and equitable electrical system built to foster renewable energy. Absent such guidance, a few giant utilities and Big Tech corporations have been left largely free to structure these systems to serve their own private interests in ways that will only further concentrate their power and slow real innovation. OMI is working to leverage our pioneering research and analysis of internet-based communications and commercial networks and our close study of the business models of the dominant online platforms to provide unique insights into this challenge and to help to plot a safe and innovative path forward.
III. AI, CLOUD, CRYPTO & CARBON
o Mastering the New Technologies. The surging use of AI is powering a skyrocketing rise in the consumption of Cloud computing capacities, which in turn is exploding consumption of carbon and water by Microsoft, Amazon, and other a few other giant corporations. The rise of today’s AI and Cloud technologies is also helping to support the techniques and business models behind cryptocurrencies, many of which also consume vast quantities of hydrocarbons and water. Our team at OMI has taken a leading role in mapping the intersection between monopoly power and the political and economic threats posed by today’s dominant AI and Cloud models, including through an all-day conference and a 70-page report. We are now expanding this work to map how smart regulation to reduce the political and economic harm of AI and Cloud technologies can also help us limit or even reverse the immense and growing threat they pose to our climate.
IV. TRANSPORTATION IN THE DIGITAL AGE
o Faster, Fairer, Smarter, Cleaner. In 1980, the United States boasted the best cargo and passenger transport systems in the world. But the radical libertarian overthrow of regulation under presidents Reagan and Clinton freed monopoly corporations to strip these infrastructures to the point of collapse. One result was to leave these essential services subject to sudden, even catastrophic breakdown, as we saw with the many supply chain crises during the Pandemic. Another result was to make it much harder for many manufacturers and farmers to get their products to U.S. and foreign markets. A third was to make it much harder to regulate these systems in ways that reduce carbon emissions. Over the years, our team at OMI has developed an unparalleled knowledge of the regulation and functioning of the nation’s railroads, ocean shipping, ports, and airlines. This includes an extensive, unique, and internationally recognized body of pioneering studies about the flaws in the structure of industrial and transportation supply chains. Today we are developing a new vision for how to design and build a coherent integrated freight system that fully embraces the sorts of new technologies and services that increase real prosperity while radically reducing the use of carbon.
V. FOOD, FARMING, & COMMUNITY
o From the Ground Up. For more than a century after the Civil War the United States boasted the most democratic – and most innovative and productive – food system in the world. But the radical libertarian changes to regulation in the early 1980s unleashed extreme concentration at every level. One result was to drive millions of independent American farms and businesses into bankruptcy, in ways that have fed the widespread anger against government regulation. Another was to harm the wellbeing of millions of American families by driving up prices, driving down quality, and reducing our common security and safety. A third result is far greater emissions of carbon, as concentration of control and capacity strips competitors and innovators of the ability to introduce more efficient and resilient techniques and technologies. Our team at OMI has long helped lead the way in understanding these harms and how to fix them. Our work includes:
o Pioneering analysis of the role that the extreme concentration of power and control in retail has played in driving monopolization of U.S. agricultural and food systems, and of how to rebuild more open, competitive, and resilient systems that use less carbon.
o Vanguard reporting of the dangers posed by concentration in slaughterhouses and food processing plants, in ways that demonstrate the need to build more distributed and less carbon-intensive systems.
o Identifying flaws in policies such as carbon capture and offset schemes recently introduced by the USDA, based on our unique understanding of the influence that today’s Big Ag corporations exercise over federal and state policymaking.
VI. INDUSTRIAL AND TRADE POLICY & SUPPLY CHAINS
o Secure, Distributed, Open, Efficient. For more than 20 years our OMI team has led the world in detailing the core systemic flaws in the radical libertarian ideology of trade and industry. Foremost is to allow monopolists and mercantilists to concentrate the keystone production capacities of almost every industry on earth often to single point on the planet. Results of such concentration include radical increases in the risks of war, political coercion, and systemic collapse. OMI’s reporting and analysis on these issues is recognized around the world and has deeply informed the policies of the Biden Administration, the G7, the IMF, and the OECD, among others. More recently, OMI has begun to demonstrate how addressing these threats also helps support more rapid decarbonization, such as by reducing the power of incumbents to resist technological advances and by promoting distributed – and hence more efficient – production and transportation. Today our team is developing ideas for leveraging new U.S. and European industrial and trade policies to address these threats to ensure they also help speed decarbonization. These include:
o A New Vision of International Community and Cooperation. The OMI team is working with the White House, G7 allies, and nations in the Global South to develop and refine a new vision of trade and industrial policy. Our approach aims to build on the original post-WWII model for trade and industrial policy, which aimed to break dangerous concentrations of power and control and thereby promote individual liberty, democracy, security, opportunity, and innovation in the United States and around the world.
o Onshoring of Keystone Supply Chains and Technologies. The OMI team is helping to identify specific industrial sectors and activities that will require the United States to onshore much or even most of the industrial capacity on which we directly depend. In addition to the Semiconductor and Electric Vehicle supply chains targeted by the White House, our team has also focused on drugs, chemicals, PPE, minerals, munitions, and the capacities required to design and build next-generation transportation and defense industries.
VII. MARKET DESIGN & MERGER POLICY
o Pricing and Progress. Since Roman times, a basic task of government has been to regulate markets for food and energy to ensure robust supply at fair prices. Nowhere was this more true than the U.S., where local, state, and federal officials built the world’s most sophisticated system to stop powerful actors from manipulating prices for private purposes. But under the sway of radical libertarian ideology, U.S. regulators in the 1980s abandoned these practices. One result was to leave corporations and financiers largely free to structure chokepoints over both physical production and the markets where prices are established. At OMI, our team led the way in helping policymakers understand how such concentration of physical capacity helped to power the “chokeflation” that so harmed the public in recent years. Similarly, our team developed a vanguard understanding of how corporations and traders use futures contracts and algorithmic pricing systems to forge “virtual” supply chokepoints in the markets themselves. In tandem, these physical and contractual chokepoints have given the most powerful hydrocarbon corporations the ability to manipulate prices in ways that disrupt and destroy good policy and smart new business models, drive anti-environmental political reaction, and harm the most vulnerable. At OMI, specific areas of work include:
o Merger Policy and Enforcement. Big oil and gas corporations have long used their control over retail, refining, pipelines, tank farms, and other production and distribution chokepoints to manipulate prices to consumers. Often they have done so in ways designed to promote specific political or policy outcomes favorable to their interests. OMI’s team promotes a common-sense response to M&A deals by oil and gas corporations, to prevent decarbonization efforts from being exploited by private actors either to profiteer or to interfere with the introduction of new and cleaner technologies.
o Market Design and Enforcement. In pricing energy it is vital to strike the right balance. We want prices high enough to promote rapid technological advance. We also want to keep prices low enough to protect the economic wellbeing of all citizens. But in recent decades most public interest groups have largely ignored futures markets, even though this is where powerful corporations help to set and manipulate the prices of hydrocarbons and generic forms of energy. To address these threats, our team at OMI directly engages with regulators such as the Commodities Futures Trading Commission, and the judiciary through our amicus brief program.
o Promoting a Ban on Insider Information. In most U.S. marketplaces, it is a felony to trade on “inside” information. But for a variety of historical reasons, this is not true of commodities markets. As a result, traders of grains, ores, oil, gas, and electricity are allowed to place market bets based on what they know is in their ships, silos, pipelines, and refineries. This license boosts the ability of these corporations to manipulate prices while also giving them an ability to all but print money. Both actions pose a variety of threats to our democracy. Our team at OMI is developing a strategy to eliminate this dangerous regulatory loophole.
Join us on Wednesday, December 4 at 6:00 PM at the National Press Club as we launch legal director Sandeep Vaheesan’s new book.