In this report, Christensen and his co-authors (hereafter abbreviated as Christensen) discuss the potential for online education to be a disruptive influence on higher education with a total cost of education per student 40 percent less than the traditional universities (when you combine the state and federal subsidies with the cost of tuition). 

Probably the most relevant parts of Christensen’s paper are the recommendations at the back for policymakers and traditional universities.   Christensen says that state and federal officials must “honestly ask and answer” two questions.  The first question is “is the traditional universities’ business model sustainable?”  Christensen believes that there are few traditional universities that can answer yes to this question, particularly given the evidence that online education represents a scalable disruptive technology.  The second question is “is the primary stewardship to facilitate the best possible postsecondary education and training for the people in their state or whether they are appointed to be caretakers of the specific institutions that have historically provided higher education.”  If the answer is the former, then officials must include the disrupters in their partnership to ensure that as many as possible receive higher education.  If the answer is the latter, then low cost universities must be framed as “competitors and enemies.”

Christensen recommends that policymakers must remove the barriers to allowing low cost disruptors to gain share and cites Indiana’s partnership with Western Governors University that comes at no cost to the state because Western Governors is self-funded on tuition alone.  He and his co-authors also recommend that policymakers should encourage the move toward competency-based and next-generation learning models and not focus on traditional inputs such as seat time that lock in the traditional measure of a credit hour.  Christensen also states that we need to move beyond measuring degree attainment as a standard of achievement.  He states that focusing policy on degree attainment versus learning will have the impact of deflating the value of a degree and force people to focus more time and money on achieving advanced degrees which is not necessarily in the country’s best interest.

Christensen states that accreditation is a barrier but also states that it is not productive to fight accrediting bodies.  Instead, he recommends finding pathways around accreditation barriers.  As president of an institution that has worked hard to earn our accreditation, I am not sure that I agree with all of his recommendations with regards to accreditation but also understand why disrupters who have not achieved accreditation view it as a barrier.  I believe that accrediting bodies are an easy target when policymakers and disrupters choose not to understand the bigger picture, particularly when the accrediting bodies are not always transparent about their processes and policies.

The federal financial aid system is complex and many researchers avoid writing about it in great detail, choosing to focus on the macro issues instead.  Christensen and his co-authors not only state that the “all-or-nothing access to federal funds for institutions does not compel students to make rational quality-cost trade-offs” but they recommend an alternative system that would provide access to funding based on quality and student satisfaction measures relative to cost.  They call their new system the Quality-Value (QV) Index and propose measuring four items:  job placement, increase in graduates’ earnings relative to the institution’s tuition cost, whether alumni would choose to repeat the experience, and whether students are able to repay their loans.  Colleges would have access to these new funds based on a sliding scale relative to the QV Index.  A ranking in the top 25 percent would allow colleges to draw 100 percent of their revenue from Title IV programs, ranking between 50 and 75 would allow them to draw 90 percent from Title IV, a ranking between 25-50 would allow them to draw 75 percent, and a ranking between 0-25 would allow them to draw 50 percent from Title IV.  I find this proposed system much more creative than the proposed gainful employment regulations and much more appropriate to implement across the board in higher education regardless of the sector.  The only metric that I would alter would be the cohort default rate as currently measured since it measures repayment over three years versus looking at the higher percentage of loans that are eventually repaid and looks at overall defaults with no weighting on the dollars involved.

As mentioned earlier, Christensen provides recommendations for traditional university leaders as well as online university leaders.  First, Christensen recommends that the correct business model must be applied for the task.  He states that online universities are organized to optimize the flow of students rather than the faculty’s ability to do their research.  The authors also recommend that traditional universities develop a strategy of focus and to choose in what area they will be excellent, thus reducing complexity that allows a reduction in costs.

Lastly, Christensen and his co-authors recommend that administrators at traditional universities frame online learning as a long-term innovation that will allow them to use it to disrupt the traditional classroom experience.  Peer-to-peer teaching employed in many asynchronous online classes allows for students to learn more deeply because they have to adapt the material to fit their individual experiences and cognitive abilities.

The authors state that their intention was not to study higher education as a whole but to examine the industry’s challenges as “problems of managing innovation effectively.”  I think that their lens is a worthy examination that policymakers should consider when looking at the funding challenges that are occurring in many states.  Higher education is complex, but as the authors point out, complexity increases costs and a focus on teaching and outcomes can point the way to a reduction in costs allowing for a more affordable tuition for students.

The Environmental Protection Agency (EPA) states that “Cap and trade is an environmental policy tool that delivers results with a mandatory cap on emissions while providing emission sources flexibility in how they comply.”  After identifying the target group, a successful cap and trade program must establish a cap, or limit, on the amount of emissions for all sources within that group. The operational concept of the program rests on the assumption that it will be easier for some companies to establish effective mechanisms for limiting their emissions than for others.  Companies that manage to emit less than their cap are able to sell the difference to companies who are struggling to maintain their emissions within the established cap.

This past Friday, the House of Representatives narrowly passed the proposal but not without President Obama’s intense lobbying in its favor.  A recent Wall Street Journal article notes that the win in the House was not an easy one for the President; indeed, he even had to convince many within his own party to support the proposal.  Many business leaders caution that the bill, if passed in the Senate and codified into law, would cost American taxpayers significantly.  The Wall Street Journal quoted a statement of the National Mining Association which warns of the cost of the program:  “’It will affect every aspect of the American economy, harming our ability to compete in the world and provide secure and affordable energy to American consumers and businesses.’” The Congressional Budget Office (CBO) estimates that in 2020, the annual cost to implement the program will be a $175 per household, an estimate that naysayers contend is very low. 

Though the bill still must pass the Senate before it becomes law, its enactment will have a significant impact on the way that the United States generates and uses electricity.  The bill would not only put a cap on emissions, it would establish a complex trading system like the one described above.  The bill would require U.S. emissions to decline by 17 percent below 2005 levels by 2020 and 83 percent below 2005 levels by 2050.  Additionally, the bill will require that 15 percent of the nation’s energy come from renewable sources by 2020, an obvious boon for the green energy economy that President Obama promised even before his electoral win.

The cap and trade program seems to be modeled on the Clean Air Act of 1990.  According to the Center for American Progress, that program was intended to reduce sulfur emissions that cause acid rain; “it met the goals at a much lower cost than industry or government predicted.”  The Environmental Defense Fund (EDF) lauds the cap and trade program born from the Clean Air Act as a success noting that in the span of only one decade, the program “achieved 100 percent compliance in reducing sulfur dioxide emissions.”  While the EPA approximated the cost of implementing the program at some $6 billion annually, the Office of Management and Budget estimates actual costs at a fraction of the initial estimate, specifically stating the total cost somewhere between $1.1 and $1.8 billion.

The United States is not the only nation attempting to reduce overall carbon emissions by implementing cap and trade type programs.  The Netherlands, for example, has a fairly well-established program founded on two trading systems: one for emissions of carbon dioxide and one for emissions of nitrogen oxides.  Additionally, the European Union Greenhouse Gas Emission Trading System has provided a multi-country approach to addressing the issue of greenhouse gas emissions through a cap and trade system.

There are several benefits to using such programs to reduce overall emissions.  The ability of companies struggling to meet the standards for emissions to purchase allowances from other companies who have had more success provides flexibility for the lagging company to have additional time to comply with the standards.  Without a doubt, some companies are better-suited to quickly implement changes to comply than others are.  (In completing our own Greenhouse Gas Emissions Inventory, for example, as required by the American College and University Presidents Climate Commitment of which APUS is a charter signatory, we realized that our emissions are drastically lower than the traditional brick and mortar universities for obvious reasons.)  Additionally, the cost of purchasing such allowances will perhaps provide incentive for companies to come into compliance with the standards of the program.  Finally, if the federal government opts to auction emissions permits and allowances, it could create a substantial revenue stream which could be invested into research and development of green technologies.  In a March 2009 article in BusinessWeek, John Carey states that the program could generate $646 billion between 2012 and 2019 if the government decides to auction emission allowances and permits.

The program has drawn significant criticism.  House Minority Leader, John Boehner (R-Ohio), for example, told Scientific American that “’Cap-and-trade’ is code for increasing taxes, killing American jobs, and raising energy costs for consumers.”  Indeed, the proposed budget for the program includes a $19 billion increase for the EPA to use on a national greenhouse gas emission inventory which would establish baseline levels in order to establish realistic goals and metrics for evaluation once the program is underway.  U.S. Chamber of Commerce Vice President, William L. Kovacs, has stated that he believes that Obama’s cap and trade program “’is now a very expensive tax used to transfer wealth.’”  Still others seem to characterize the program as akin to indulgences sold by the Catholic Church during Medieval times, arguing that the program is in fact too lax to make much difference in the struggle to slow down and eventually halt climate change.

I feel strongly that the United States must do something to reduce our overall level of emissions.  There can be little doubt that the world cannot continue to emit pollutants into the environment at the pace we have been.  The United States’ lack of leadership on this issue has impacted the global progress of reducing emissions, particularly with China.  The House bill as passed on Friday will place hefty tariffs on imports from countries that do not meet the U.S. emissions restrictions in their own countries.  Many fear that this provision will harm economic and perhaps political relations with countries like China and India.  While those fears may be well-founded, it is “our world” and environmental issues in China impact the rest of us.  If U.S. companies are held to a high standard, China and other countries must be held to the same standard.

While I support the President’s desire to encourage the “greening” of America, I believe that the economics of the current cap and trade program need to be scrutinized in greater detail.  Given the current recession, I would hope that the Senate provides that scrutiny in their review and that the President would acknowledge and accept revisions to the program if the economic analysis proves to have a greater impact than what the bill’s proponents have indicated.  We did not get into our environmental situation over night and we will not fix it over night.  Let’s not rush to judgment and pass a bill with potentially crippling economic consequences.