KNX 1070 radio in LA called me at the bright hour of 6:50 for a comment on the new Energy Bill and the MTBE clause. (I must admit to being totally asleep when they called).

What do we think about the MTBE clause? I have heard both side of the story, both that MTBE is polluting our freshwater supplies, and that although MTBE is polluting, except for the smell it’s not an issue. What’s clear is that the oil lobby was worried about it — they staked a huge amount of political capital trying to get a liability waiver for MTBE.

The real tragedy here is poor government regulation. MTBE was a legislated solution to smog, and a poor one at that. The irony is that newer reformulated gasolines sans MTBE burn much cleaner with lower smog forming pollutants than the legislated solution. Politics are a slow process, and can’t be expected to keep up technologically.

Contrast with cap and trade systems. In these systems the regulation is centered on the goal, not the technology. Market participants are free to make their own technology decisions, as long as the pollution goals are met. In fact, a company with a technology advantage can exploit that and actually make money, by doing more than their fair share. And firms can make and bear their own legal risk calculations, rather than petitioning the government for legal protection (I am sure many trial lawyers where quite upset that they could not sue the US government over MTBE!).

Most commentators don’t dispute that we are heading towards a regulated carbon US — let’s just hope that the regulation takes the lessons from MTBE and gives us a flexible cap and trade system.