Condors and Wind Turbines: Green-vs-Green Conflict Revisited February 29, 2012Posted by Michael Hoexter in Energy Policy, Renewable Energy, Sustainable Thinking.
(This post was originally published at Renewable Energy Magazine)
The likely conflict between the extension of the California condor’s habitat and wind development in California pulls the green movement in opposite directions, an unfortunate story that has repeated itself a number of times in the combined environmental-climate action community in the United States. Both sides of the conflict have personal relevance to me: I remember as a child reading about and cheering on the condor, in part because of its role as the largest flying bird in North America, as well as its endangered status. More recently, I have also advocated for the last 5 years that worldwide we build a Renewable Electron Economy, a massive build-out of wind and solar energy in the context of a multi-technology, largely renewable energy powered electric grid.
In his excellent article in Forbes, Todd Woody summarizes the conflict between wind turbines and the reintroduced condor and explores some of the technological fixes that are being explored by scientists and the wind industry. The condor had been decimated via poaching, DDT poisoning and lead poisoning from swallowing bullets in the carrion that this quite intelligent vulture prefers to eat. Via what some say is the largest species conservation effort in North America, wildlife biologists and conservationists have worked hard to revive the condor by running nurseries with the few remaining birds and then, since 1992, releasing some back into the wild.
Such is the success of the efforts to revive this critically endangered species that approximately 400 condors are now active in a larger portion of their native range throughout the mountains of Californiaand the Western US. Apparently condors fly in thermal updrafts near mountain ranges and at an altitude which puts them potentially on a collision course with the blades of wind turbines in areas such as the Tehachapi Mountains of Central-Southern California. If a condor were killed, the owners of the project might face criminal prosecution. While there have yet been no documented deaths of condors from collision with a wind turbine, a number of large scale projects have been cancelled because of fears of such an event occurring. Wind project developers are aware of and attempting to avoid projects that have the highest likelihood to kill a condor but to many wildlife conservationists and fish and wildlife authorities, almost any project in this wind-rich area of Californiais too much risk. A 2005 US Forest Service study determined that overall wind turbines contribute to a small fraction of human-caused bird deaths of all species with buildings killing 4 orders of magnitude more birds than wind turbines.
One possible technical solution, discussed in the Forbes piece, is to develop a system of condor detection plus wind turbine controls that enable stoppage of turbines when condors approach them. These technologies have not matured to the point where they could be used in projects that are already in California’s approval process.
The wind turbine-condor conflict is the latest in a series of setbacks for large-scale renewable development on California’s renewable-energy rich landscape. Concerns about impacts on the desert tortoise and Mojave ground squirrel have scuttled a number of large-scale solar projects in California’s deserts. California is attempting to meet a fairly ambitious renewable portfolio standard of 33% of electricity generated by renewable energy by 2020, which is now in doubt given the roadblocks put up by issues related to wildlife and viewscape conservation.
We are starting to see an emerging pattern of “green-on-green” political and ethical conflict surrounding what are the acceptable costs and speed with which renewable energy generation should be built. While the condor vs. turbine conflict has some unique features, it corresponds to a now common “map” of the positions available to those who believe themselves to be preserving natural habitats, wild species and/or the habitability of the globe more generally. Some of these positions are compatible with one another and are found within the same group or pro-or-con argument; others are diametrically opposed to each other:
- Return to Nature – Ever since the Romantic reaction to industrialization in the early 19th Century, there have been individuals and groups that believe that human civilization should retreat before and should come more under the influence of eco-systems that are not controlled by people (i.e. Nature). While this is not an official or stated position of any mainstream environmental organization, some individual environmentalists and or defenders of wildlife might feel that human civilization must retreat to create a more bucolic world. From a slightly different angle, some “neo-Malthusians” might join in the belief that population growth and the ecological footprint of humanity has become too great, thereby necessitating a contraction of human societies. At its most radical this stance can become a celebration of the collapse of manmade structures and society in the face of non-human dominated eco-systems. Hollywood has provided us with some visions of this future in movies like “Planet of the Apes” and “I am Legend”. The condor’s advance into some of its previous range opens up the possibility that human intentions to build or maintain the civilization’s footprint could be abandoned in the face of strong wildlife preservation concerns.
- Wildlife/Habitat Preservationism – Most who are strongly committed to protecting wildlife over and above other concerns believe that, while they may be motivated by dreams of a significantly “wilder” landscape, the highest good is to protect existing remnants of endangered species and their habitats. This stance is commonly held in mainstream environmental organizations, such as the Sierra Club or the Nature Conservancy, as well as their base among generally politically left-of-center member/contributors. Additionally various governmental bureaucracies such as parts of the US Fish and Wildlife Service and the Parks Service represent preservationist interests, especially those which are tasked to preserve land areas or wild species.
- Anti Wind-Turbine Activism – Wind turbines are the targets of activists who focus on a number of real or perceived attributes of the technology without offering a clean energy alternative. Besides concerns about threats to birdlife, these activists focus on the visual appearance of the turbines, the perceptible or imperceptible sound they make, and, less commonly, the intermittency of power produced by the turbines. These activists usually do not count themselves as environmentalists or “green”.
- Brownfield/Rooftop PV Only – A compatible position with wildlife preservationism is the idea that renewable energy development should be confined to only so-called “brownfields” where there is already human development or rooftop installations. This is sometimes called “distributed energy”, though the definition of “distributed” varies depending on who is using the term. This position focuses on reducing the external and often visible impacts of energy development but tends to ignore the parameters of replacing fossil energy supply as it is currently used to power civilization. Often this group combines this energy prescription with a political preference for small-scale, local political and economic organization, a.k.a. “small is beautiful”.
- “Green is Good” – A position that is common among politicians and that is fairly widely held in the population is that “green is good” in some undifferentiated way. Many people don’t bother to read up on or feel themselves to be competent to judge the merits of various green issues. On the other hand, they want to think of themselves as generally virtuous people who do not support the clubbing of baby seals or who try to recycle when it is made easy. The opinions of this group will be influenced by those with stronger views for, and against, any particular green issue.
- Anti-AGW, Pro-RE (AGW= anthropogenic global warming: RE = renewable energy) – Supporting a wide-range of RE powered generators to replace fossil fuels for electricity production and transport, this position shared by some climate activists, business groups, and renewable energy advocates focuses on climate impacts of current fossil fueled transport and electricity generation. Parts of mainstream non-profit environmental organizations have supported this position, including Greenpeace and the Sierra Club. Unlike the “small is beautiful” distributed RE position, these groups see a role for large scale renewable development and a renewable energy “supergrid” to balance energy flows on the electric grid. Some who support this position specifically argue against nuclear power while others accept that nuclear power will play some role in climate strategy. I count this position as my own but do not justify my views via total opposition to nuclear power. The conflict between condors and wind development is a challenge for this group, as many in it consider themselves to be as “green” as anybody else.
- Anti-AGW, Pro-Nuke – A number of advocacy groups, business interests, and governmental officials argue for nuclear power, justifying their views via the predictability of the power generated by nuclear plants and using, in my opinion, optimistic projections about its near term development and safety. Most in this camp argue for nuclear power against renewable energy, often making pessimistic or negative statements about the technical or environmental attributes of RE electrical generation technologies such as wind turbines. There are some in this camp that see renewable energy and nuclear power as complementary as witnessed by the French national energy strategy which combines both nuclear and renewable energy. Some with these views emphasize the high level of energy demand and often de-emphasize or criticize energy efficiency efforts. There are a number of active Internet “trolls” that write from this position with varying degrees of interest in combating climate change but always taking jabs at various perceived and real drawbacks of renewable energy, including potential conflicts between wind turbines and birds. The Fukushima disaster has put a damper on enthusiasm for this position for the time being.
- Innovation First – Optimism and cheerleading for technology in a more general sense can be found among a substantial group that see in technological innovation a solution to almost all energy problems. The sole role for political decision makers in this view of the world is to foster innovation and the technical skills associated with continual innovation. As an example, the Breakthrough Institute hopes to accelerate “breakthroughs” or quantum leaps in innovation as a means to solve energy problems. The political love of innovation is however more generalized and is, in the United States, at least, almost a secular religion. Innovations in wind turbine technology and bird detection would be seen as the solution rather than political conflict over the role and valuation of different aspects of the dependence of people on the environment (energy use vs. individual species preservation).
- More Energy is Better – Finally there is another position that is compatible with the corporate goals of diversified energy companies (including some large fossil fuel conglomerates) and technology-neutral investors, which sees in the building of more energy supply of almost any kind an unalloyed good. This position would support the building of wind turbines (or any other energy production facilities) and might then lobby to get certain projects built, given an opportunity for an acceptable return on investment. Those with this position do not tend to support restrictive policies on energy development but also will work with and lobby regulators or government officials if regulation allows their business to continue or grow.
- Anti-Enviromentalist, Climate Denial – In the background and currently a very politically powerful position in the US is right-wing anti-environmentalism that also denies the reality of climate change. While it is not clear which “side” of the condors vs. wind turbines debate people with this position would support, it is more than likely that supporters of this position would want to encourage the division between supporters of wildlife protection and supporters of renewable energy development. It is my belief that many with this position would show a preference for wildlife protection over the systemic changes implied in active efforts at climate change mitigation.
The diversity of these positions, most of which might call themselves “green” or green affiliated in some form or other, shows how easily divided environmentally interested political forces are in theUnited States and perhaps beyond.
At the end of this list are the powerful opponents to both renewable energy and to wildlife conservation: the radicalized right-wing in America, for the most part in the Republican Party, corporate groups opposed to changing the energy system, and, in particular, the fossil fuel lobbies. The inter-green conflicts give these anti-environmental groups enormous leverage to stall and divide action on topics of mutual interest to make America“greener” in some form or other.
To some, who hold one or more of these views, this issue is already a settled matter in terms of technical and political choices. For instance, those who believe that energy should only be generated locally at a small scale, believe that the solutions are already there for a habitable civilization to be powered by PV, lead acid batteries, energy efficiency, and perhaps local biomass burning. Thus a conflict with wildlife preservation would, they imagine, be avoided. I am not convinced that the distributed-PV-only vision would work on a technical level, nor do I believe that local is necessarily better: I have not yet seen a realistic scenario for the production, maintenance and disposal of the millions of tons of batteries required to store energy for a populations of 100’s of millions and billions of people. Nuclear advocates, likewise, think that nuclear power’s drawbacks will be quickly overcome by technological advances, thereby making the conflict between wind power and birds moot.
Many in the environmental community are not even producing what they believe to be a realistic systemic solution but are simply committed to an issue, which they consider to be irreproachable in terms of its morality. Sometimes implied in these issue by issue commitments is a deeply held vision of a more (non-human) nature-dominated world and the interests of the human community as a whole and calculations of its energy requirements more or less “be damned”.
Each of these positions makes assumptions about the world, about human beings and about technologies that need to be clarified in order for a rational discussion to take place about how to proceed here in California and elsewhere. These assumptions are part of what might be called a “decision space”. In coming posts, I will develop a map of the underlying decision space within which these conflicts take place.
An “All of the Above” Energy Policy Concedes the Future June 10, 2011Posted by Michael Hoexter in Climate Policy, Efficiency/Conservation, Energy Policy, Green Transport, Renewable Energy.
The dominant theme in President Obama’s 2011 State of the Union address was “winning the future”. As has become typical during Obama’s tenure in office, the speech and the metaphor selected seemed designed to avoid making a clear and decisive statement and to make peace with his Republican opponents. However if we take the President’s metaphor seriously, Obama’s energy policies seem more likely to continue conceding the future to other nations who are making real choices in the area of energy. Rather than take the initiative as he could as President, Obama has chosen in energy to make friends with almost every aspect of the energy industry, green and, in particular, brown.
Choosing “All of the Above”
While I had hopes that President Obama would significantly change our approach to energy in favor of sustainable energy choices, as it turns out the best description for his approach would be that it is an “all of the above” energy policy. Not as aggressively retrograde as his predecessor, George W. Bush, Obama has tried to show that he is not only a reliable friend to the oil and gas lobbies but also is willing to “throw a bone to” the renewable energy industry and public transit supporters. He has made a cautious foray into high speed rail though not bold enough to insure that HSR has a secure funding base. His administration provided loan guarantees to large renewable energy projects that were already in the pipelines. He seems to treat energy and transport alternatives as, for the most part being representative of a larger political “constituency” which he courts by offering more or less support for their presumed favorite projects or ideas.
The problem with the apparent equivalence in this political strategy is that it ignores the real-world physical energy balance, the depletion curve of fossil energy, and emissions of US society as well as political and market power differences between these constituencies and industry segments. Oil, gas and coal companies are the dominant energy companies on the planet and have considerable power in Washington as well as beyond the Beltway in the real economy. In order for there to be actual equality between these different groups, if that is even a desirable outcome, government institutions would need to favor the “infant industries” of renewable energy and energy efficiency to compensate for years of subsidy and centuries of precedence in the energy and transport sectors for fossil energy. Our society has to an overwhelming degree been built around oil, gas and coal.
Another approach, that is not even on the table, would be, rather than play to one or the other constituency, to build an energy policy based on the real geological, geopolitical, environmental, and social factors that condition energy availability and energy use. Such a policy would favor renewable energy and energy efficiency but would also challenge these segments to radically scale up production and reduce emissions sooner rather than later. Furthermore only government policy can push the now not-inexpensive energies of the future down the cost curve.
Beyond trying to project the image of not playing favorites between industry segments, Obama seems to view energy very much in “Left-Right” terms. The 2009 stimulus package had some promising financing for renewable energy projects (optically “Left”) but these have not so far turned into a durable renewable energy support policy beyond the existing status quo. In March 2010, Obama announced plans to open new areas to offshore drilling, clearly an effort to blunt the “drill baby drill” mantra of the Republicans (optically “Right”). Natural gas drilling and fracking continues with the addition of a new drilling safety panel which seems to be an effort to address pro- and anti-fracking lobbies. Energy efficiency, the no-brainer energy solution, has been given some support but is not highlighted. An ultra-low energy retrofit of the White House, for instance, is inconceivable within Obama’s current political strategy because it would seem too “Left”, too hippy-ish.
Of a piece with this picture is the level and type of support offered to, for instance, high speed rail projects. Obama “slipped in” $8 billion dollars for 11 high speed rail projects but which in itself would not buy a single high speed rail route on its own. While this was the single largest investment in high speed rail in the US, it pales in comparison with investments made by China,France or Spain in HSR or, for that matter, the comprehensive vision of the US High Speed Rail Association.
The lack of “bigness” in Obama’s support made it, I believe, much easier to attack from the Right. Not as many constituencies could be served by the smaller package to be divided between 11 projects. But more damaging, was the lack of a comprehensible vision for the American people about what HSR was about, as a sustainable alternative to regional air travel throughout the US. If Obama had presented a multi-year plan to fund any the USHSRA’s 2020 or 2030 vision, he might have had to fight more with Republicans but at the same time, there would be a greater understanding of the utility of having an HSR network rather than single lines that serve fewer constituencies. In an effort to avoid conflict, the point of the entire effort was not so easy to communicate and win political points or inspire hope.
In energy efficiency and energy conservation, which are together possibly the greenest energy measures, President Obama has introduced some programs that are “rational” but are also not world-leading in their ambition. The best publicized portions of his energy saving plans have been higher fuel efficiency standards for trucks and cars but these are not world-beating. He has introduced some sizeable tax incentives for electric vehicles. He announced an initiative to increase energy efficiency in commercial buildings 20% by 2020 which is better than before but by no means a “stretch” goal. Strategically these initiatives have gotten buried in the news cycle as the President appears to want to show himself as “not a liberal” which the Right wing associates with energy efficiency and conservation.
Climate Bill Hangover or Ideology?
Many of the energy and environmental initiatives and policy direction of the first year of the Obama Administration were packed in the ACESA climate bill that barely passed by the House of Representatives but which in a modified version stalled in the Senate. The lack of a filibuster-proof majority in the Senate made the passage of the even less ambitious Senate bill impossible. At the time, the dysfunction of the US Senate was held responsible by many commentators for its failure, though some noted that Obama was not campaigning heavily for either bill. The seeming diffidence of Obama in these matters was in retrospect striking, though the standard of comparison in 2009 was the backwards-looking Bush Administration, so by contrast Obama has been praised as the “greenest” President to date.
Without this omnibus bill, Obama’s energy policy has been pieced together and in a manner that indicates that the Obama Administration does not prioritize sustainable energy and climate concerns if they at all conflict with an inside-the-Beltway political calculus. Luckily the 2009 one-time stimulus package contained greener energy initiatives which continue to yield some benefits, including the HSR funding as well as renewable energy loan guarantees mentioned above. However within the Obama political strategy, the optically “Left” appearance of ambitious climate and energy action seems to outweigh any upside from real benefits to either the American economy or the global environment of more aggressive policies. At best, the Obama Administration is “stealthily” green where it will not be noticed by his Republican opponents; Obama seems unwilling to fight about the environment with his opponents who deny the potential of human beings to do harm to the natural world.
The recent offering of coal leases in Wyoming indicates that the Administration is also solidly behind the fossil fuel industries and shows little concern for climate impacts. We see, at least in this first term of the Obama Administration an “ideology” of trying to offend as few people as possible, court Republicans and right-leaning independents, and in the process putting the United States further behind in green energy and climate.
Paling in International Comparison
While the Obama Administration appears “green” in comparison to the Bush Administration, in energy policy, the US lags most European countries and is actually in many respects has a much weaker climate and energy policy than energy- and coal-hungry China, if the relatively privileged geographical position of the US is considered. Unlike many European countries and China, the US is not resource constrained when it comes to renewable energy sources and could theoretically build multiple “Renewable Electron Economies” using copious wind and solar resources. A conservative German government has just committed to doubling the share of electricity generated from renewable sources by 2020 and replacing its nuclear power plants with renewable energy. Denmark is pledging to go 100% renewable by 2050. China, while it continues to pursue an “all of the above” strategy, has been extremely aggressive in pursuing renewable energy and high speed rail.
Not Confronting the Cheap Energy Contract
A fitting explanation for the failings of US energy policy over at least the last three decades is the continued rule of the Cheap Energy Contract, a label I invented three years ago for a common concept in American politics. A mostly North American social contract, the Cheap Energy Contract is an implicit and explicit commitment by lawmakers in the US and as well as the energy industry itself, that the price of energy must be as cheap as possible in the near term. An adherence to the Cheap Energy Contract means that adding an energy tax of almost any kind is considered to be political suicide as well as any actions that could be construed as raising energy prices viewed from the perspective of a future political campaign.
President Obama’s apparent unwillingness to confront our fossil fuel energy habits and, moreover his tendency to encourage those habits in the short and medium term, could be viewed as efforts on his part to immunize himself from accusations that he “raised the price of gas” which could lead to election day fallout. But Obama is not alone in his adherence to the Contract, a current obsession of leftward portions of the political spectrum currently is the role of speculators in the high price of gasoline at the moment. Bernie Sanders, a reliable voice on the Left for many issues, is very loud in his protests about the role of speculators in raising the price of gas, hurting his mostly rural constituents. In these discussions, the positive role of an ascending carbon or gasoline tax in weaning America off petroleum is not often mentioned. Obama in this regard is not exceptional but also not assuming a leadership role in energy at a critical period in our history.
Effective Energy Policy is a “Do or Die” Component for a Sustainable Future
While talk of “energy markets” is common, what is often overlooked is that these energy markets are in part artificial constructs, co-created by years and decades of energy and infrastructure policy by government. Individual private or sometimes public enterprises may discover or develop a certain energy resource but soon the interconnected nature of how energy is used and produced creates the need for government to create rules and/or provide infrastructure so that energy can be used to the extent and at a price that consumers and businesses demand, while keeping in check monopolistic and oligopolistic excesses via regulation. Even in market economies, there is more and less planning to be found in energy policy and energy infrastructure, depending on the country.
Against those who hold up the chimera of a completely “free” market, planning by governments is critical for a sound energy policy to emerge. A lot of this has to do with the fact that energy consumers, when they are using energy, could generally “care less” about how that energy is produced, unless they are participating in a large-scale national or international “mission” related to energy. If energy is treated as simply a unit of “utility” by the consumer, the sustainability or non-sustainability of the source of energy is ignored. While some of the products (motion, heat) and byproducts (pollutants, fire) of energy use are sensible by people, the energy itself cannot be sensed. Government policy is under most conceivable conditions the means via which a framework of meaning and measurement can be constructed around energy. Therefore we rely most on government policy to make distinctions between energy sources.
Energy Policy as a “Funnel” to the Future
Obama’s “all of the above” energy policy, keeps us beholden to the “care less” or “lazy’ reliance on whatever energy source is least expensive or convenient at one moment in time or another. If we continue to pursue energy opportunistically, like for instance, fully exploit the tar sands of Alberta, and fail to institute a significant and rising carbon tax, we will be unable to build the energy future, or at least others will end up building it and leaving us behind.
Rather than “go every which way” in our search for and use of energy, seeking out and consuming “joules’ in whatever form we may find them, government policy needs to focus energy users on sustainable options, functioning as a “funnel”. One might think of there being two forces in a policy funnel, positive and negative forces. A positive force “draws” people towards new sources via incentives or provision of sustainable alternatives. A negative force, the “sides” of a the funnel, redirects behavior away from harmful uses of energy, either in the form of a prohibition or a price placed on dirty energy. The ability to say “no” with sufficient political legitimacy is key to the creation of an effective energy policy, as is the provision of adequate positive choices that have low social and environmental external costs.
So far, though President Obama seems intellectually aware of many of the dimensions of the problem in some of his speeches, he has not fought for a “funnel-like” energy policy, instead reinforcing the status quo, out of what appears to be fear of his political opponents. The politically safe focus on “more innovation” avoids the issue of pushing for policies that deploys the solutions that we already have that can get us a long way to where we need to go. While this seems to be part of a larger political and economic worldview that unfortunately the President either believes or implicitly accepts as true, energy policy is I believe a critical component for Obama to become a transformational President. Even if he does not, from the point of view of character, want to be a transformational figure, the real challenges of our society require our leaders to step into this role anyway.
I realize that funnels are not the most attractive concept as applied to human behavior; I invite others to come up with better or more attractive ideas. I would still caution that one critical component of any effective energy policy or policy metaphor is the introduction of reasonable constraints on human energy-using behavior. The advocacy of these constraints will always provoke attacks from people operating under a quixotic vision of freedom that has no physical supports or characteristics. For us to maintain our real freedoms, we must refrain from using up all fossil fuels, starting very soon indeed.
In subsequent posts, I will outline what this policy “funnel” might look like, even though it may fall on deaf ears in Washington.
Energy Policy “Carrots and Sticks”: Bernard Chabot’s Profitability Index Method for Feed-in Tariffs July 19, 2010Posted by Michael Hoexter in Energy Policy, Renewable Energy, Sustainable Thinking.
Often policymakers are “flying blind” with regard to how they will incentivize or disincentivize various market and other social activities via policy design. Part of this has to do with the complex network of stakeholders that are always involved in the design of policy as well as mismatches between the influence of one or two powerful incumbent stakeholders and the less powerful. Another factor is that policymakers often need to rely on a disorganized web of economic opinions about how the economy works and how policy works, over which they themselves do not have clear oversight.
Bernard Chabot, a mild-mannered renewable energy engineer from France with extensive business and policy experience, has designed a system that may very well make it easier for policymakers to design policies that work according to public intentions. Last week at the national offices of the Sierra Club, I was able to attend Chabot’s Workshop on Feed in Tariff design sponsored by the Kern-Kaweah Chapter of the Sierra Club, organized by the leading North American feed-in tariff advocate Paul Gipe. The workshop was attended mostly by feed-in tariff and renewable energy advocates from the western US. Besides over 25 years working in the field of renewable energy and energy efficiency, Chabot has consulted in the design of the Ontario and the French feed-in tariffs so brings to the workshop a good deal of authority with regard to the technical, policy, and business aspects.
Chabot bases his method on a much overlooked tool from corporate finance and business economics, the Profitability Index. The Profitability Index (PI) is a number that is arrived at by dividing the present value (PV) of an investment by the total capital cost of the investment (I). Chabot alters this slightly by using NPV in the numerator, which means Chabot’s PI uses 0 as the “break even point” like NPV rather than 1 like the traditional Profitability Index. As NPV is much more widely used than PV as a decision tool, Chabot’s alteration can be considered justified. What emerges are a range of values that usually range between 1 and -1. Chabot explains how PI can be used as a universal value for understanding the profitability of various economic and even more broadly social activities and makes an argument that businesses and financiers more generally should use PI over other business measures of return on investment. Chabot has some fairly convincing arguments that using the more popular internal rate of return (IRR) statistic leads to some misleading results and unforeseen variations in how at least renewable energy policy turns out for different market actors.
In terms of policy “carrots and sticks”, Chabot observes that policymakers should make highly desirable activities more profitable than less desirable activities by using the profitability index as a guide. In manufacturing, a profitability index of 0.3 is minimal but in project development or construction with no R&D costs, such a PI would be highly incentivizing. On the other hand, harmful activities should be made less profitable by the imposition of taxes or the removal of tax subsidies, pushing their profitability towards zero or below.
Turning to feed-in tariffs, Chabot uses PI as the basis for developing incentive policies which enable policymakers to keep profitability levels at acceptable but not excessive levels for project developers and facility owners. As above, given the relatively low risk involved in a well-designed FiT, Chabot believes the PI should range between 0.1 and 0.3 for both simple “flat” FiTs and Advanced Renewable Tariffs. Chabot believes some of the policy missteps in FiT design in certain areas could have been avoided if policymakers had used the PI method.
While FiTs are considered by almost all observers of the renewable energy scene to be the policy of choice, some simple FiTs have run into problems with either excessive profitability and an overheated market, which has attracted disproportionate attention by opponents of FiTs, or with insufficient profitability for certain types of projects. Chabot proposes the Advanced Renewable Tariff (ART) as means for designing tariffs for wind or for regions with wide variability in the strength of renewable resources. A single flat tariff for solar in California for instance, would make projects in southern and eastern California extremely profitable relative to projects along the foggy coast. Similar variation can be found in many US states. Wind resources vary widely by location as well. The two-tier ART consists of two tariff levels with an initial higher tariff followed after a period of years by a lower tariff; those areas with a lower resource strength will continue at the higher tariff level longer in order to enable most reasonably well designed projects in areas with adequate resource to achieve minimal profitability. ARTs can be designed any number of ways but Chabot believes that the policy should reward utilization of the best resource areas with higher but not excessive profitability yet not overbuild solar or wind in areas with poorer resource base.
Chabot feels that ARTs are a critical instrument for a vast country like the US with multiple climate zones to be able to create policies that will spur investment in renewable energy. Similarly countries like Italy, France and Spain with multiple climatic zones would benefit from ARTs.
In any case, I highly recommend that policymakers who are considering any number of different policy instruments that depend on incentivizing or disincentivizing various economic activities consult with Chabot and learn about his method. While I have only experienced his one-day workshop on pricing feed-in tariffs, Chabot says that his longer workshop deals with energy efficiency as well, which similarly involves cash flows and is amenable to the profitability index. His resume and information can be found here.
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I recently became acquainted with the work of Danny Harvey, Prof. of Geography and a climate scientist at U. Toronto. Over the last few years, Danny has been putting together a large-scale energy plan that might be called a Renewable Electron Economy, to which a portion of this website is devoted. I believe Danny’s work is invaluable because he presents a great deal of detail about a wide range of technological solutions and also links these to climate scenarios. His website has a series of extensive powerpoint files which provide you with a great overview of most of the relevant issues in the climate and energy debate with a strong technical and scientific grounding. The materials on his website are available for educational use and with permission for other uses. Upon my request, he has sent the announcement of his new two volume book “Energy and the New Reality” published by Earthscan to which the powerpoint slides are linked. The first volume concerns reducing energy demand through energy efficiency and the second volume with carbon-free sources of energy. I highly recommend that anyone with even a mild interest in climate and energy issues take a look at Danny’s work.
Two new books by Danny Harvey (Dept of Geography, University of Toronto),
Energy and the New Reality, Volume 1: Energy Efficiency and the Demand for Energy Services (Earthscan, UK, 614 pages)
Energy and the New Reality, Volume 2: Carbon-Free Energy Supply (Earthscan, UK, 576 pages),
comprehensively and critically assess what it would take to stabilize atmospheric CO2 concentration at no greater than 450 ppmv, and can be purchased through links on my website (given in the email signature).
Some of the key conclusions from these books are that
• it is still technically and economically feasible to cap CO2 at no more than 450 ppmv without replacing existing nuclear power capacity as it retires and without resorting to carbon capture and storage (CCS), although the latter could be – in combination with bioenergy – part of a strategy to more rapidly draw down atmospheric CO2 from its peak than would otherwise occur;
• nuclear energy and CCS would, at best, be too little too late, whereas reliable C-free energy systems can be built up on the required time frame and likely at no greater cost than nuclear energy or CCS; and
• we will almost certainly have to abandon our insistence on continuous economic growth above all else if we are to have a reasonable chance of avoiding eventual global ecological and social catastrophe.
Complimenting these books are powerpoint presentations (with figures, summary tables, and explanatory notes) for each chapter (a total of 1899 slides) that can be obtained either through the publisher’s website (www.earthscan.co.uk/?tabid=102427) or the author’s website (faculty.geog.utoronto.ca/Harvey/Harvey/index.htm). These powerpoint files would be a valuable resource even without purchasing the books, but if slides from them are used in any public presentations, the source of the figures (whether the author of the books or the original sources given with the figures) should be acknowledged.
Also posted on my author’s website are (1) pdfs of the table of contents and chapter highlights for each book, (2) pdfs of the summary (policy) chapters from each book, (3) the package of Excel files used to generate all of the energy demand and supply scenarios presented in the two books, (4) an Excel-based building stock turnover and energy demand model, (5) the FORTRAN code and input files that are also used in one step in generating the energy demand scenarios, and (6) the flyer for the books and a link to the publisher’s website for those who wish to purchase the books (for professors, complimentary copies can be obtained if the books are adopted as course textbooks).
The author’s website also contains an Excel package on climate and carbon-cycle modeling that will be part of the online material associated with the author’s chapter in the forthcoming book, “Environmental Modelling: Finding Simplicity in Complexity, 2nd Edition” (Wiley-Blackwell, John Wainwright and Mark Mulligan, eds.). CO2 emission output from the Energy Excel package can be conveniently pasted into the second Excel package and used to generate scenarios of global mean temperature change for a variety of easily-changed assumptions concerning climate sensitivity and the strength of various climate-carbon cycle and internal carbon cycle feedbacks.
FURTHER DETAILS ON THE EXCEL FILES AND FORTRAN CODE:
The idea behind posting the Excel files and FORTRAN code is to permit those who are so interested to generate their own scenarios with their own input assumptions concerning population, GDP per person, activity levels per person, and physical energy intensities for various energy end uses in 10 different geopolitical regions, as well as to generate scenarios for energy supply from various C-free energy sources. Outputs from these files include global demand for fuels and electricity, annual material and energy inputs required to build a new energy infrastructure, land requirements for bioenergy, and annual and cumulative CO2 emissions to 2100 (the CO2 emissions in turn were used as inputs to a coupled climate-carbon cycle model to produce the scenarios of global mean warming and ocean acidification that are given in ENR Volume 2). The FORTRAN code applies a building stock turnover model to 2 different energy sources (fuels and electricity) in two different building sectors (residential and commercial) in the 10 geopolitical regions, and uses as input the growth in regional building floor area as generated from the Excel demand scenarios, along with a variety of other inputs.
The stock turnover model has also been implemented in Excel for one generic fuel, building type and region for those who wish to adjust the inputs to a particular region and building type of interest so as to explore the impact of alternative assumptions concerning growth in total floor area, rates of building renovation and replacement, and the change over time in the total energy intensity (annual energy use per unit floor area) of new buildings and of newly-renovated buildings.
The climate-carbon cycle Excel package (subsequently referred to as the CCC package) has three parts. The first part contains a number of worksheets that explain the physics of climate change and the development and properties of simple climate and carbon cycle model components. The second part of the CCC package contains a highly-simplified representation of the energy demand and supply framework used in my two energy books. These give scenarios of global fossil fuel emissions of CO2. CCC package also has worksheets that give land use emissions of CO2 and total anthropogenic emissions of CH4, N2O and halocarbons (all subject to alteration). The impacts (radiative forcings) of tropospheric ozone and aerosols are computed in a manner that is roughly consistent with the fossil fuel and land use CO2 emissions. The third part of the CCC package contains a coupled climate-carbon cycle model (built from the components illustrated in Part 1) that is driven by the outputs from Part 2. The climate sensitivity and a number of carbon-cycle and climate-carbon cycle feedbacks can be specified (including the possibility of eventually catastrophic releases of CO2 and methane from permafrost regions beginning slowly at some user-specified threshold temperature change). The climate-carbon cycle model in the CCC package can be driven either with the fossil fuel CO2 emissions that are generated from Part 2 of the package, or with the CO2 emissions that are produced from the Excel package for the two energy books (these emissions can be pasted into the CCC package). In this way, those who are so interested can explore the range of possible impacts on climatic change (given uncertainty in climate sensitivity and climate-carbon cycle feedbacks) resulting from very specific assumptions concerning future population, economic growth, activity levels and physical energy intensities at the regional level, and in the rate of deployment of C-free energy supplies at the global scale.
Tags: Climate Policy, Electric Vehicles, Energy Policy, Oil Independence, Oil Spill, rail electrification
President Obama is facing with the explosion of the Deepwater Horizon, a “local” disaster that exposes a deeper, endemic crisis in US energy policy and the US economy as a whole. As he has been in office for still just 16 months, Obama does not bear primary responsibility for this ongoing crisis but he has only recently, a couple weeks after the accident, publicly hinted at the “elephant in the room”: the obvious connection between the undersea oil volcano and our equally obvious need to transition from using oil as our primary transport fuel. Simple reference to the Kerry-Lieberman climate bill that encourages more offshore drilling does not constitute an answer to our oil dependence.
Unfortunately public rhetoric and policy discussions that hinge on the notion of a dependence on “foreign” oil play the role of a “shortstop” in keeping the discussion from going to the heart of the problem. The idea that oil produced on American shores will somehow differentially serve American consumers overlooks the international nature of the oil business with total offshore oil reserves destined never to make much of a difference in the overall price and availability of oil. Estimates put the total reserves of offshore oil in US waters at 18 billion barrels conventionally recoverable and an additional 58 billion barrels “technically recoverable”. While this oil, if extracted, would just be sold on the world market, it equals the equivalent of 11 years of consumption for the US at our current oil consumption rate of 8 billion barrels/year. Subtracting the huge costs of oil spill cleanups and damage, most of the economic benefit of offshore drilling would accrue to oil companies and secondarily to state and federal governments in harvesting royalties, however the latter are going to be left “holding the bag” for the really, really big costs.
To ground this discussion in reality for just a moment, the 2009 US DOE Transportation Energy Data Book attributes to the US 2% of the world’s oil reserves, 8% of production, and 24% of consumption while the rest of the non-OPEC world comes out just a little better at 29%, 48% and 67% respectively. Conventional natural gas is not a much more promising energy source for the future with the US having 3% of the reserves, 18% of the production, and 21 % of the consumption. In the US, transportation accounts for 70% of all petroleum use and 24% for industrial uses. Consumption of petroleum for transportation in the US is 84% for road transportation with around 65% for cars and light trucks and 18% for medium and heavy trucks. Airplanes use 9%, shipping 4.2%, and rail 2.0%. Even if we consumed petroleum and natural gas in proportion to worldwide production, there are credible predictions that we are somewhere in the neighborhood of the worldwide peak in production whether today or in a decade’s time. Even if there were two more decades until the peak and we looked away from oil’s climate and local pollution impacts, would it be justified for our generation to run through this exhaustible resource?
The ballooning US trade deficits are attributable in the last decade approximately 55-60% to outgoing payments for petroleum imports but with the 2008 price spike, oil’s proportion climbed to 65%. With oil prices once again ascending the petroleum related component of the US trade deficit will continue to climb. With the last US trade surplus in 1973, the total US trade deficit has since 2003 stayed in the range $500B to 800B per year.
Turning back to politics, the President, whether by his own inclination or badly counseled by his advisors, has since taking office had a tendency to let the issues be defined for him rather than shaping policy with original view of his own. He has approached health care, financial reform, and climate and energy as though there was some pre-formed wisdom which he simply needs to allude to or tap into in order for the American people and Congress to understand. Erring on the side of being too laid back, perhaps partaking of the Spirit of Aloha, has not always served him well: to get health care across the line he had to shed the “cool customer” image to actually win the votes in Congress.
The apparent rationale for his laid-back approach to issues, so commentators say, comes from overlearning what is considered to be a mistake of the early Clinton White House. Clinton’s hands-on approach to policy is supposed to have alienated Congress and doomed Clinton’s health care efforts. Obama has taken the opposite tack and can claim at least passage of a health care bill, though it is not clear yet how positive an achievement this will be considered when it actually takes effect.
What is missing so far in the Obama Presidency is the President taking the role of educating and perhaps changing the public’s views on important issues, which have been heavily colored by a very strong and organized counter-reform messaging machine. The President has shied away from using the “bully pulpit” and allows Congress, which is considered by the public at the moment to be corrupt and untrustworthy, to shape the terms of the debate.
With the approach to a climate and energy bill this year, post-health care, the President opened up with a tactic rather than with a strategic plan for energy. His announcement in March that he would lift the ban on offshore drilling in parts of the Gulf and the East Coast was a means of gaining support from Republicans for the ever more amorphous climate and energy package which is currently in the Senate. Meanwhile, with so many issues and concerns, it is safe to say that energy is not top-most on most people’s minds in the Great Recession.
But the President has so far treated this as a case of another industrial accident for which liability can be assigned to the owner or commissioner of the oil rig, BP. President Obama has not even advanced to the rhetorical level of George Bush’s 2006 State of Union where Bush declared America “Addicted to Oil”, despite Bush, in action, being responsible for gutting the regulatory agencies that may have prevented the spill. While nominally a more “liberal” President and not from the oil patch, Obama has not presented a tangible vision of a post-oil society and, in combination with his preferred policies and speeches, the public is left mired in the oil-dependent present.
Discussions about who is to blame, who will pay, and what can be done in the Gulf to recover from the spill are important but are ultimately distractions from the most important question:
What will the US do to wean itself from its oil dependency?
In media accounts, the effort to make this a conventional tale of corporate or regulatory malfeasance is becoming the favorite of supposedly hard-hitting television journalists. Yet these interviewers avoid looking into the frightening “maw” of our economy’s fatal dependence on oil. The President is also looking away, focused as he is on technical and regulatory “fixes” for the offshore drilling disaster.
The upcoming climate bill in the Senate is being sold as an effort to reduce our dependency on oil and other dirty fuels but it contains few aggressive provisions to get us there. The just released details of the bill, indicate that it’s mild cap and dividend provisions may slightly raise oil prices (starting in the area of $.10-$.20/gallon and increasing by 3-5% over inflation per year). And offshore drilling provisions are in the current draft, offered now as an opt-out for states that wish to keep the ban in place. As a whole, the bill postpones until the 2020’s any serious moves to cut emissions and focuses on the implementation of coal carbon capture and storage rather than more promising renewable technologies and grid enhancements. Ironically, Senator Kerry has mentioned on TV, as if this were a sign of his seriousness, that he had been working with the oil industry on this bill.
If we assume the best intentions of the President and the Congressional leadership, one single legislative session or bill cannot undo 30 years of negligence and foolish disregard in the area of energy. Whatever his ultimate goals and political commitments as President, Obama, if he endeavored to “do the right thing”, would have a number of hurdles (described below) to overcome. However right now, he, his Administration and his Congressional allies are managing just a few cosmetic moves in the direction of change. On the issue of oil use and oil dependence, the bill and the Administration’s efforts are weak.
I am proposing here a stronger response that deals directly with America’s oil dependency.
A Strategic Energy Plan for Oil-Independence and Carbon Mitigation
The only solution to our oil dependency and the inevitable disasters that come from a mad rush to extract as much oil as possible from the earth is to create a strategic national energy plan that addresses both our oil dependence and our climate concerns. A plan is required because changes in the transportation and energy system involve the coordination and arrangement in a sequence of certain key activities and infrastructure changes, for which market mechanisms, the current “default” preference for policymakers of both Left and Right, are ill-equipped. Such a plan would also be the occasion for leaders of government to show and exercise leadership rather than look around for a lucky break or well-meaning private actors and companies to step into the breach. Turning to planning is unfortunately now in America a politically fraught move but there is simply no alternative, if we want to have a sustainable economy, whether in the narrow economic sense or the broader ecological sense.
A growing chorus of corporate leaders and former government officials is calling for an electrified, oil-independent transportation system for national defense reasons as well as environmental ones. Recently Bill Ford, chairman of Ford Motor Company made the connection between national security and oil, indicating that Ford’s product roadmap will focus on electric drive vehicles in the future. James Woolsey, former CIA chief under Clinton, has been a long-time advocate of electrification for reasons of national defense.
Other nations are rapidly moving away from oil through plan-based efforts by governments in coordination with the private sector, even as almost every other country is starting from a position of less oil-dependence than the US. The Chinese leadership, as is well-known, is very concerned about the effects of oil shortages and prices on China’s economic development. China is in the process of building an extensive high-speed rail network (to Europe too)and is as well working on developing a lead in the area of battery powered vehicles. President Obama mentioned in a recent speech China’s ambitious rail program as an analogue to his efforts in the US but I believe he knows that there is no comparison between the scale of their efforts and our much modest ones. Japan and Switzerland have almost entirely electrified rail networks and France has the goal of electrifying its entire rail network by 2025. Russia, despite its plentiful oil reserves, has electrified the Trans-Siberian and Murmansk lines of its railways in the last 10 years. Denmark, Japan, France, and Israel all are executing plans to build widespread electric vehicle charge and battery-swap infrastructure. By contrast, US freight and passenger transportation in all modes is almost totally dependent upon oil, leaving the US vulnerable to political and geological disruptions of supply and price spikes (see Alan Drake’s proposal for a comprehensive electrified train system for the US).
Two Pronged Strategy: Efficient Use and Oil-Independent Infrastructure
There are two prongs to getting off oil which also share a common path. One prong is increasing the efficiency of oil use in the US via increasing the person or freight miles traveled per unit petroleum consumed. The other prong is building an oil-independent transport infrastructure and oil-independent vehicles. Investment in routes on the path common to both should be favored over those that commit us interminably to oil.
The dream of a quick-fix, a “drop-in” technological solution that will simply replace oil has proved to be elusive and has so far found little basis in the science of energy. So the proposed solution has a number of parts and involves tradeoffs and some large initial costs. However, the invitation is there to any readers to find a better, presently available solution and publicize it.
- Levying a gas tax or price stabilization tax that insures that drivers can plan on a minimum gas price going forward on an ascending schedule. Instead or in addition, a carbon tax or fee would disincentivize coal use as well, though might be supplemented by a gas tax to reduce gas use. (the Kerry Lieberman bill’s cap and dividend provisions will raise gasoline prices imperceptibly in the first few years).
- Enable full use of existing passenger rail and bus transportation infrastructure via adequate funding to increase schedules, keep current fare levels. Determine via market surveys and statistics optimal service levels for each route.
- Encourage shared ride and shared vehicle programs and services using Internet and mobile phone resources to coordinate and develop ride-sharing social networks
- Mandating idle-stop systems (a.k.a. “mild hybrid”) on all new trucks and cars as of 2013. Comprehensive idling reduction program at all truck stops, including incentivizing “shore power” electric hookups and retrofit kits. Mandate Cold ironing facilities at all shipping berths by 2015.
- Incentivize Transit Oriented Development via federal incentives for zoning changes at the local government level and developer and homeowner tax incentives.
While focusing on efficient use alone seems “pragmatic”, it actually does not have nearly the appeal and long-term economic stimulative effect of building an infrastructure that moves passenger/driver miles and freight ton-miles off of oil permanently. To focus on efficient use without building for the long-term is an incomplete strategy.
Oil-Independent, Carbon-Independent Infrastructure:
See Drake et. al. for a slightly different more detailed proposal
- Double or multi-tracking the US rail system on all but low traffic lines enabling consistent speeds of 110 mph on non-high speed lines for freight and passenger trains.
- Stepwise electrification of rail infrastructure to 100% electric traction.
- Building on an accelerated basis dedicated high speed rail lines per the US HSR Association’s recommendation: http://www.ushsr.com/hsrnetwork.html
- Electrification of 80% of government vehicle fleets using a variety of battery charging technologies including trickle charge, rapid-charge and battery exchange technologies.
- Extended tax incentives for corporate vehicle fleet conversion to battery power or for plug-in hybrids.
- Rapid build-out of a super-grid supportive of renewable energy development throughout the US.
- A robust regime of incentives for renewable energy development (advanced feed in tariffs based on cost recovery plus reasonable profit with descending incentives for projects in later years).
- Electrification of high traffic bus routes via either trolleybuses or streetcars.
- Build out of light rail and regional rail networks to interconnect high and medium density cities and suburbs.
- Corporate tax credits for build-out of tele-presence (e.g. Cisco’s product here) technologies and to encourage tele-commuting and tele-meeting
While technologies could evolve in the future that might alter the relative proportions in the above plan, these policy proposals and programs rely on technologies that are available today, some of them with a track-record of over a century. However, the goal of getting off oil, let alone fossil fuels has not been a priority of US industrial development and government policy, so our rail and transport networks have remained dependent on the happenstance of oil extraction and the oil markets.
Substantial and Insubstantial Hurdles that Delay Us
If our country does not first slide into a state of permanent second or third-class status, it is inevitable that we in the US will move to a post-oil, post-carbon transport system incorporating most of the largely electric-drive technologies listed above. However this should not lull our current leadership into complacency or half-measures, because sliding into a state of decay and dependency is a distinct possibility. Will Obama be the President to lead us there, as Eisenhower was the President who built the Interstates? Or will he be the President who excited hope, talked a good game but gave too much discretion to fossil fuel interests? We can be the last nation in the world to wean ourselves off oil, massively in debt, and always be in the position of borrowing know-how from others or we can start to move “on our own power” towards a position of leadership in this area.
The current Senate climate bill sees most of what is proposed above as distant pipe dreams rather than near future realities. Most of the electric vehicle provisions in it are termed “pilot programs” with greater favor shown to natural gas vehicles and mild oversight for unconventional natural gas extraction. Public transportation and rails are given little or no mention.
Leadership will be required to push ahead to the solutions based on what is already known about the physics and technology of transport and energy, instead of stopping at the half-way measures or the dead-end technologies that depend on fossil fuels. True leadership involves anticipating and overcoming hurdles. I have listed below the main hurdles which present themselves to whomever, I hope President Obama, decides to place the American economy on a sustainable energy basis.
Hurdle #1: Market Idealization (Market Fundamentalism) Vs. Planning
One of the greatest hurdles is the ongoing influence of market idealization (or “market fundamentalism“) in Washington in general, on both sides of the aisle in Congress and in the White House. In the era of market idealization over the last 30 years, planning, especially government planning, got a bad name as markets were supposed to constitute all of economic life as well as being perfect and complete economic institutions. Through his sojourn at the University of Chicago, one of the centers of market idealization, President Obama was exposed to an environment that celebrated a view of markets as self-sufficient, self-regulating institutions which perhaps continues to color his view of planning and government’s role.
The use of “cap” legislation, carbon pricing, or emissions targets does not substitute for planning because such unspecified “plans” to achieve quantities of emissions reductions cannot substitute for the sequence of timed and specified actions that constitute a plan. Emissions caps or targets suggest that the market will find its way without planning. In some areas this works better than planning but in transportation and energy infrastructure, not so much.
Some major problems with markets are that they don’t price in future risks or distant future rewards very well in many sectors, including energy and transport, and, when unregulated, tend to focus market participants on their most immediate concerns. Markets also do not produce all the conditions for their own survival and continued profitability. Governments have historically stepped in to provide people and markets with structure for transactions that threaten to undermine trust between market actors. Additionally, governments of most nations with complex economies provide public goods like infrastructure that enable longer term social and economic goals of both private and public actors to be achieved. While market-like institutions can be imposed upon the “natural” monopolies of the electricity and the rail businesses, these market reforms do not generally orient these businesses to rapidly change their infrastructure but rather focus them on squeezing value out of existing assets.
Planning can originate from private and non-profit actors as well as from government though this does not release governments from the duty to initiate or help structure plans that effect diverse sets of stakeholders. The Desertec Initiative is an example of a large-scale international energy plan that has originated in the private and non-profit sectors. The Desertec Foundation and the Desertec Industrial Initiative (DII) are working on building a renewable energy supergrid that spans Europe, North Africa and the Middle East in order to provide renewable electrical power to the area, balancing wind and solar resources across the region. Munich Re, a large re-insurance company based in Germany, concerned about environmental and climate risk in the future and along with a consortium of electrical utilities and technology companies, including Siemens, ABB, Abengoa, MAN Solar Millennium has created the DII. Whether the impulse to plan has come from the private sector or from government, government needs to be involved in making sure that large scale energy and transportation plans serve national interests and are executed and financed in a transparent and fair manner.
As market idealization has been also a particularly fervent form of anti-Communism, government involvement in planning has been associated in the minds of US politicians and sections of the public over the past 30 years with centrally-planned Communist economies. Due to these still largely unchallenged views of market idealists, politicians making the argument for planning will need to run the political gauntlet of being accused of being a Communist (or, as is common in the precincts of the Tea Party and Fox News, a fascist). Unfortunately, academic economists too have also been lax in making the case for government planning beyond Left-Right ideology. Republicans and Democratic Presidents and other government officials between 1940 and 1980 did not generally have to justify their use of planning but since 1980, planners and planning advocates have needed to keep a low profile.
So presenting a full-on Oil-Independence Plan from the side of government would present the President with either having to make a two-stage argument (first for a role for planning and then for the plan) or to compress the two together in one artful package. The latter is not inconceivable but, our President, so far, has shown more interest in pointing out how much he has in common with the Republican Party that has been almost completely captured by market idealists.
On the other hand, almost everybody in contemporary American politics is for energy independence and national defense. It is not a stretch to imagine our centrist to right-leaning Democratic President reaching across the aisle to push for a “Oil Independence Transportation Plan”. This would require preparation, research and political leadership by the President, the Administration and Congress but is eminently do-able. Thus a brilliant and principled politician, maybe even our current President, could present this plan as a combined act of patriotism and long-term economic good sense.
Hurdle #2: Deficit Worries and Hysteria
Given that we are in an economic downturn and tax revenues will not be able to be boosted substantially, a post-oil transport infrastructure built in a timely manner will probably involve deficit spending. Some parts of this system can be built and financed privately and paid back via user fees while others will have the status of public goods, like roads, that will need to paid for via taxes and or potentially inflationary deficit spending, i.e. printing money.
We have been facing a rise in public debt and budget deficits over the course of the Bush administration and the first part of the Obama Administration. The current level of the public debt stands at approximately 60% of its maximum in relationship to GDP at the end of WWII (108%). Misinformed politicians, pundits, and financiers take this as an occasion to stir hysteria that is stoked by a combination of fabrications and partial truths about the potential impact of budget deficits on the American economy. Economists, such as Paul Krugman, Dean Baker and Joe Stiglitz, who have studied economic history and effects of deficit spending on jumpstarting the economy, have attempted to correct these misguided views of deficit spending in the context of a severe economic downturn.
Deficit hysteria seems to have a strong political component to it, as these fears remained largely dormant in the Republican Administrations that have run up large debts in the past. As a preventative, those who are opposed to a strong government role in the domestic economy (though generally not to military adventures) have attempted to intimidate the President and others by warning of runaway budget deficits. There are now some more severe budget problems in other countries (Greece for instance) and the differences between the US situation and these countries are played down to intimidate those who would want to spend deficits on building US domestic economic growth.
While those who stir deficit hysteria tend to be closed-lipped about their large-scale political and economic agenda, they generally are opponents of all government-provided social services and government-led economic initiatives preferring to reserve these functions for private enterprise. Deficit hysteria implies the idealization of markets, though is a more sophisticated variety that acknowledges that there is “some” role for government, only to minimize that role in every proposal, due to fear of budget deficits. Unfortunately President Obama has some vulnerability to deficit hysteria, in that he has not come out vigorously in defense of government’s role in the domestic economy, preferring instead to adopt an attitude of compromise and conciliation with people who talk as if there is no legitimate role for government social programs or in the domestic economy.
While budget deficits need to be monitored closely, the US has luckily somewhat more flexibility than many other countries to engage in deficit spending. A very strong case can be made that deficit spending to help finance a post-oil transportation infrastructure is a very good use of public funds and also shows nations that hold our debt that we are spending in ways that will improve our overall competitiveness and resilience as a nation. Deficit spending in this way actually works to reduce our trade deficit which is in most years larger than our budget deficit and largely attributable to oil imports.
Hurdle #3: Balancing the Interests of Stakeholders, Mix of Private and Public Enterprise
An Oil- and Carbon-Independence Plan will require the participation of a number of stakeholders some of whom will be less than enthusiastic participants in this ambitious effort. The railways in the US are ambivalent about the ambitious plans of advocates for either high-speed rail or electrification. Like other large infrastructure-dependent businesses, these usually risk-averse corporations make money by squeezing value out of their existing infrastructure and sticking to decades-long incremental capital investment strategies. Additionally, and ironically, railways, our cleanest and most efficient means of transporting freight even with diesel traction, haul the dirtiest fuel, coal, to power plants of the large coal-burning utilities; the largest source of revenue for railways is coal transport accounting for 21% of 2007 revenue with intermodal (container) being the fastest growing segment.
Left to themselves, the US freight railways would not be able to undertake nor necessarily see it in their short or medium-term interest to electrify their railroads nor embark on a massive program of track build-out. The railways are in favor of tax incentives to help them continue capital improvements but these alone will probably be not enough to double and triple track mileage. The railways own their own rights of way and are currently entirely self-funding and compete largely on price and capacity with other freight modalities. In order for massive public investment to be possible, the railways would have to develop an entirely different relationship with the federal government.
If they were intent on executing a Post-Oil transport plan, policymakers would need to lead the railways into a new relationship or perhaps buy some of them out, in part or in full. The massive level of public investment required to enable the railways to carry triple the freight plus 20 to 30 times the passenger volume would transform their capital base with largely public funds or public guarantees to be able to undertake the risk. Such action would require a combination of vision, leadership and negotiation skills from the side of government.
As diesel locomotion (actually diesel-electric) is still a very efficient method of hauling freight and passengers relative to other modes of transportation, the transition to an Oil-Independent infrastructure could be achieved in two stages: first railway track build-outs that are electricity-ready and then the electrification of those railroads as a separate project.
An alternate route towards oil-independent transport is possible that “deals in” the trucking industry but requires the adaptation of several existing technologies and an alteration to the interstate system: Using hybrid dual-mode trolley long-distance trucks on dedicated lanes of the interstate that also have a backup generator or battery pack that enable easy on and off and grid-detached travel. There are no technological breakthroughs required to do this but it needs the backing of a government or government-funded research program that seriously studies electrification of lanes of interstates and the high speed attachment and detachment of trolley poles or pantographs to overhead lines.
Designing and executing an Oil- and Carbon-Independence Transport and Energy Plan would also not necessarily inspire the other large conservative infrastructure-based companies, the power utilities, to join in the spirit of the enterprise. Similarly to the freight railways, utilities wring value from a decades-old infrastructure and generally adopt change very slowly. Particularly challenging for many US utilities is a transition away from coal which accounts for approximately 50% of electricity generated in the US. Selling electricity to railways may be an additional source of revenue but also would involve new infrastructure and might require new generation, which would need to be low- or zero-carbon. A portion of the electricity demand from railways may be supplied by federal power generation facilities, perhaps by a newly founded Railways Power Administration, modeled on the Western Area Power Administration or similar. Passenger railway power demand would require daytime generation which would coincide with solar but freight would add to baseload demand as it would operate around the clock.
A clear expression of purpose and demonstration of intent by government leaders to reduce oil demand in the US is a prerequisite for successful negotiation with stakeholders in shaping the post-oil future. So far the President and Congressional leaders haven’t shown the guts and independence of mind to work this out with industry stakeholders.
Hurdle #4: Many Americans’ Love of Expansive Resource Use (and Disregarding the Consequences)
Different cultures tend to have differing attitudes towards the material world and what is considered attractive or desirable in the use of resources. In Japan, with one of the world’s highest population densities, cultural preferences include a focus on small, sometimes intricate objects. Traditional agriculture in China is highly space- and resource-efficient. In Europe, culture has emerged from similar resource constraints, for which it is much admired throughout the world. In the US, we have through a large portion of our early history, not had to deal with as many resource constraints, including a belief that more abundance is always around the next bend. Europeans came here in search of “El Dorado” and we have had the tendency to believe in “Virgin Land”, either physically or virtually, into which we could move if we “messed up” or wanted to leave our original physical context.
The electoral defeat of Jimmy Carter in 1980 by Ronald Reagan and the subsequent growth of a culture of reactive anti-environmentalism has impressed politicians with the dangers of appearing to “wear the cardigan” rather than use resources “like you just don’t care”, yielding a culture of reactive or revived profligacy. Contrarian anti-environmentalism both on the Right and in the apolitical Center has meant a return for many to the energy and material use patterns with which Americans grew up until the 1973 OPEC Oil embargo. Because of the political defeat of Carter (for a number of reasons), the 1985-2001 return of cheap oil, and the 2001-2009 Bush Presidency, few politicians have attempted to experiment with what is possible in the way of communicating a stance that counsels wise use of resources while retaining a sense of American identity.
Obviously, we will need leaders to set an example and attempt once again to join the American spirit with an awareness of the earth’s limits and wise use of resources. Expansive plans to create a post-oil infrastructure can be combined with measures that suggest that the America of the future will not lay waste to the earth. The ability to break up the cultural “forced choice” between abstemiousness versus expansiveness will involve creativity on the part of political and cultural leaders. Whether the Obama Administration is up to the task and has the will to engage in this vital transition to a new kind of American identity remains to be seen.
Hurdle #5: The Biofuels Distraction
A few years ago, using biofuels as an oil substitute were treated seriously by some environmentalists and became a big favorite of politically powerful agricultural lobbies. Since then, it has dawned on most of the environmental movement plus more and more policymakers that biofuels are a poor source of fuel and environmentally may be under many conditions worse than using oil. The net energy yield, plus land use, plus water use put into making ethanol or biodiesel from dedicated crops rather than waste products turns out to be a net negative for the environment and economically disruptive for food production. To produce mechanical energy from sunlight it is far more advantageous to erect solar panels or use wind turbines in agriculturally marginal areas, which would occupy far less space, have far lower environmental impact, and produce far more energy.
Unfortunately, in the American heartland, it is difficult, in the absence of renewable electricity policy that is attractive to farmers and higher prices for food crops, to turn away from support for biofuels and the overproduction of corn for that purpose. While perhaps research may turn up a more sustainable biofuel, a strategy based on biomass production for biofuels other than as a subsidy to farmers is unjustified. There may in the future be niche uses for some future biofuel process but these will not serve the vast energy demand currently served by oil. A gradual shift to a sustainable agriculture policy that addresses the economic concerns of farmers without continuing our unsustainable corn policy would be the long-term solution.
As an immediate strategy, the policymakers would need simply to slowly back away from biofuel subsidies, while a compelling and well-explained alternative for farmers and farm-belt politicians is developed.
Hurdle #6: Corporate Funding of and Influence in American Politics
A recurrent theme throughout the last year and half of reform attempts has been the notable influence of incumbent industries and their lobbyists in influencing politicians in Washington of both parties. While there are many corporations that stand to benefit from an Oil- and Carbon-Independence Plan, these have not yet made common cause and many see their short-term interest in the energy and transport status quo.
The likelihood of formulation and implementation of a plan with the longer term interests of the US in mind, would be greater with corporate money taken out of politics to a very large degree, as then lobbyists would more likely to be seen as advisors and industry representatives rather than represent the co-“employers” of legislators. This is not to say that there aren’t politicians who bravely stand up now for the long-term view of what is best for the overall American economy. It can only be hoped that more politicians show this type of courage on a number of policy fronts and, as well, in the service of campaign finance reform.
Are There Any Other Options?
Those who read these recommendations with a jaundiced eye may say: “You expect too much from government” or “this will never happen”.
My response: Short of the United States slumping into further energy dependency, accelerated trade deficits, inflation due to spiraling oil prices and accelerated climate change worldwide, what are the other options?
If you have another workable option please share it with me or, better yet, the Administration and the world.
Standing on the side of the fishermen and the wildlife of the Gulf is not an act of excessive and unrealistic belief in human goodness, an underestimation of our energy demand, or an exaggeration of the sensitivity of natural systems. It is simply the recognition of the unwinding of a model of economic and energy development that has run its course.
Tags: Climate Policy, Energy Policy, Renewable Energy, Solar Energy
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The environmental news site Grist, has just published a piece I wrote that is a response to Bill Gates’ recent entry into the climate and energy discussion.
Check it out at:
Enjoy and comment if you like!
My New Post/Article on Post-Copenhagen Ethics March 3, 2010Posted by Michael Hoexter in Climate Policy, Efficiency/Conservation, Energy Policy, Green Activism, Renewable Energy, Sustainable Thinking.
Tags: Carbon Pricing, carbon tax, Climate Policy, Energy Policy, Renewable Energy, Solar Energy, Sustainability
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Frustrated with the state of climate action both here in the US and at the COP15 meeting in December, I have been focusing on how to distill thinking about climate action to some simple rules. I came up with a longer piece that builds on the work of Donald Brown at the Climate Ethics Center at Penn State University.
I also have a PDF version here, which some may find easier to read or refer to.
Please read and comment!
Cap and Trade Derails Climate Ethics, the Motive Force of Carbon Mitigation – Part 1 November 18, 2009Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Transport, Renewable Energy.
Tags: cap and trade, carbon tax, Energy Policy
In this 3-part post, I will outline how cap and trade’s composite structure contains within it fault lines that help defeat its and the climate action community’s goals. In this first part, I will sketch out the components of the cap and trade hybrid
Part 1. A Slow, Ineffective “Monstrous Hybrid” of a Climate and Energy Policy
The record of cap and trade (also called emissions trading) is not impressive despite the bulk of the instrument and its popularity with the current generation of policymakers, some corporate leaders and some activists. Even before it was applied to carbon dioxide emissions and the global warming problem, cap and trade’s use in the US to cut acid-rain forming emissions has only produced middling results (40% cuts) as compared to cuts elsewhere where traditional “command-and-control” environmental regulation was used (65% cuts). Furthermore the US acid rain cap and trade system had the benefit of the ready availability of new sources of low sulfur coal in the US as compared to a limited choices in types of coal in most other nations.
In the first 4 years of the implementation of cap and trade as a means to cut greenhouse gases (2005-present), it appears that reductions in emissions, where they have occurred, have been due to, or strongly conditioned by, factors other than participation in cap and trade. In the first 3 years of the European Union Emissions Trading Scheme or EU-ETS, Sweden for instance cut its emissions by 20% within regulated sectors (9% overall in a country with an already low level of per capita emissions) while neighboring Finland increased emissions by 28% within these sectors. The managers of the EU-ETS attributed an overall 3% reduction in emissions in 2008 to the EU-ETS’s “price signal” yet the US without a significant cap and trade system nationwide decreased emissions by almost the same amount (2.8%); the role of the massive economic downturn of 2008 would seem to far outweigh the effect of emissions trading. While most agree now that too many permits were given away or sold too cheaply in the early stages of these cap and trade schemes, there will always be a way to find justifications for failure in such a complex system by pointing to the failures or misalignment of one part or another. To date, beyond general economic conditions, the actual cutting of emissions as an intentional activity can be attributed to what I am calling below “Climate Keynesianism” rather than as a response to carbon pricing or permit regulation.
Cap and trade systems are not only marginally effective to ineffective but are also hugely cumbersome to implement at a time when we have at most a decade to make serious cuts in our emissions. It took 7 years after the ratification of the Kyoto treaty (1998) before the cap and trade systems were implemented (2005), which to date, 12 years after the 1997 Kyoto meeting, have not achieved noticeable cuts in emissions. If our political leaders and climate action communities believe that implementing a cap and trade system will be largely responsible for cutting emissions, they and we will soon be in hot water.
I have proposed elsewhere two (1, 2) more effective policy frameworks for cutting greenhouse gas emissions that are based for the most part on more reliable and time-tested methods for implementing technological change and shaping our behavior, which include government energy efficiency and renewable energy programs (Climate Keynesianism), disincentives like taxes or fees, and market incentives. There is literally no excuse to hang onto the cap and trade instrument given the stakes involved and its unimpressive record of accomplishment.
Primacy, Sunk Costs, and US Political History Outweigh the Facts
The most obvious reason that people who nominally care about the climate’s future cling to cap and trade is that it is the first worldwide regulatory framework. The “primacy effect” is the observation that we as human beings hold onto the first bits of information that we receive and assign importance to them beyond their actual truth value or relevance. Many attempts at communication and persuasion use the primacy effect by placing more important information before other information. Information that comes first often establishes the communicative “frame” or context against which succeeding bits of information are then evaluated.
As the first international carbon mitigation policy, cap and trade has enjoyed the benefit of primacy: the definition of action on climate change has in the minds of many come to mean instituting a cap and trade system, no other options are considered. In order to interrupt cap and trade’s primacy effect and arrive at a better solution, we need to circle back to the logical point before one would select ANY climate policy and define what the fundamental tasks of climate policy are in general, keeping in mind our current and emerging set of technological solutions. I have attempted to do the latter recently here. Without understanding what climate policy must do independent of any particular policy instrument, we cannot evaluate our current policies nor arrive at new ones.
In addition, cap and trade already has benefited to the detriment of more effective instruments, from sunk costs in that bureaucracies have been erected, labor, time, money, and political capital have been spent in building up the idea of cap and trade as the sole or best climate policy solution. I am sorry for this effort, some of which is wasted, but this is no reason not to retool or dismantle some of these investments as they have been built on a faulty foundation. That several thousand mostly well-intentioned people around the world have already invested a good deal of their time within the Kyoto system and affiliates is no reason for them not to turn to a more effective system, learning, as it were, from their experience. It is a choice between ego and the future of our planet.
Currently in the US, the momentum behind cap and trade-based Congressional bills has the “benefit” of fixation by a large number of environmental organizations and advocates upon cap and trade as the sole instrument. President Obama, perhaps influenced by the idealized view of markets at the University of Chicago where he taught, gravitated to the cap and trade idea as a solution to global warming. In these matters, he would have had few alternative sources of information from US environmental groups. Particularly set on cap and trade is, for instance, the Environmental Defense Fund, whose materials on cap and trade read like a sales prospectus for markets as an institution rather than defense of the environment. The confusion between celebrating the policy instrument and achieving the policy goal is rampant among those who are trying to “make the sale” of this cumbersome policy behemoth.
The choice of cap and trade as the international regulatory framework for greenhouse gases speaks also to the inordinate influence of the US and internal US politics on the course of events. Cap and trade was invented in the US as a means to avoid either environmental taxes or direct regulation, in conformance to US political preferences in the immediate post-Reagan era. As during the 1990’s, the world’s only superpower and still its predominant military power, the US has pressed the world to share its view of the global warming problem and the surrounding politics. Unfortunately political power and influence does not always yield the most effective policy framework even with substantial backing by that power.
With Kyoto we have the additional complication that the US partially withdrew its support for the framework in midstream, as the US Congress led by the Republican opposition to the then Clinton Administration, refused to ratify the treaty in 1998. Given its denial of the importance of global warming, there remained no chance that the Bush Administration would press for Kyoto’s instatement. Among veterans of the Clinton Administration who now surround our current President Obama, some may feel the need to vindicate their political choices and Administration after 8 to 10 years of exile from the international cap and trade process. The hope seems to be that simply turning up the volume on cap and trade via US participation will admit the US to the circle of climate-virtuous nations and/or transform that process into an effective greenhouse gas regulation regime.
Many key activists and officials have become personally associated with cap and trade so are not as free as others might be to criticize what they have helped institute. Al Gore, who is genuinely and deeply concerned about the future of the planet, was for a time advocating for a carbon tax though not campaigning against cap and trade. Since then, with the new Obama Administration gravitating towards the cap and trade instrument, he has said that he is for both cap and trade and a carbon tax.
“Make Only Big Mistakes”
In addition to these more understandable reasons for hanging on to cap and trade, there are also some “sharp practices” involved in selling the instrument to the public and the climate community. In politics and business there is a school of strategy that is focused on the “sale” to such a degree that long-term value, quality, and effectiveness are sacrificed just to “move product” or “pass the bill”. One strategy/tactic in the toolbox of people who are focused on the sale above all else is to make only large scale mistakes, which are usually easier to get away with than small errors. The reasons for this are four-fold:
- If you are presenting people with an entire, new (but deeply flawed) self-referential system, you are able to reframe objections to and doubts about it according to the newly presented system rather than to received norms. This is the benefit of “reframing” a debate and insisting on your framing of it when challenged.
- People feel unqualified to criticize something they can barely comprehend that in its design and presentation seems to be the product of wealth, power, and intelligence.
- Conversely, a competing more effective framework that is more easily grasped can be dismissed by critics for small errors or points of personal disagreement with what they already know or feel comfortable with.
- “The Emperor’s New Clothes” – pointing out major errors that call into question the competence or reality-basis of others puts critics into the uncomfortable position where some of the negativity you are attributing to the other is cast back upon you. People will have difficulty believing that upstanding members of a community can singly or as a group be so misleading or misled.
Cap and trade is a very, very big mistake so one can find many, many angles, without trying too hard, to criticize it. I have too many options in choosing approaches to its deficiencies and I am a person who does not particularly enjoy writing this type of criticism; historically my focus has been on offering solutions. Unfortunately cap and trade’s self-reinforcing system of assumptions have protected those “inside” the system from seeing what’s wrong. Furthermore, a number of people including myself have offered alternatives to cap and trade that are readily available and, in many cases, already in practice in some form but these are now not yet recognized or validated as “big picture” climate policy.
The exertion of more moral energy and political power upon the cap and trade instrument, as many climate activists counsel, will not yield substantially better results because the instrument itself is fractured and divided both against itself and against the real intended goals of concerned activists and political leaders. For one, it actually diffuses or defeats that moral energy rather than concentrating it for better use on the right targets.
Cap and Trade as a Monstrous Hybrid
Cap and trade is, even in climate activists’ “fantasy version” with 100% permit auction, tight caps, and no offsets, a third-best or worse climate policy for a number of reasons. It is, appropriating the framework of William McDonough, the inventor of “cradle-to-cradle” certification, a “monstrous hybrid” of a policy that is also ineffective (I have no idea what McDonough’s personal view is on this policy and am not pretending to represent it here). In McDonough’s typology, a “monstrous hybrid” is a material or product that cannot be redesigned, re-used or recycled after its initial life. An example of a monstrous hybrid is the modern disposable razor or razor cartridges which have metal bonded to plastic and in most circumstances has to be thrown out rather than recycled.
Cap and trade is like physical monstrous hybrids in that it is cumbersome, will install classes of stakeholders that are incentivized only to maintain its systems, and that it will be difficult to adapt it to changing circumstances as McDonough would with a physical product in his cradle-to-cradle process. Unlike eminently reusable cradle-to-cradle product components it doesn’t “play well with others” tending instead to dominate the policy landscape without concomitant good results to justify its expanding breadth.
I am however expanding McDonough’s usage of the word by adding “ineffective” to “monstrous hybrid”, because the hybridization has not improved the object’s initial usefulness, the whole purpose of creating a hybrid. One of today’s disposable razor cartridges offer a closer and safer shave than the metal razors of old, for instance, so is highly useful in its first life. In cap and trade, the hybrid nature of the policy does not help it to do its work. Its constituent parts are joined together but do not produce results that are an addition of or, better yet, a multiplication of their separate contributions. The “monstrosity” of the cap and trade hybrid is magnified by its poor results to date, comparative disadvantages to other policy frameworks, its unearned hegemony over climate policy thought, and the inconceivably high costs for its failure or ineffectiveness.
Parts of the Hybrid
Cap and trade has four business interfaces, the parts that are supposed to interact with the world and reduce carbon emissions:
- a (derived) carbon price,
- permit regulation,
- a competitive bidding and trading market for permits with accompanying profits and losses
- a statement of intent to reduce emissions via the cap
In the real world, besides economic contraction (which also reduces emissions though with unfortunate side-effects), emissions will be reduced when economic actors the world around use energy more efficiently, use clean non-emitting sources of energy, and build up stored carbon in the biosphere through conservation, changes in agricultural and silvicultural techniques. Here is how the components of cap and trade are supposed to effect these changes:
- The carbon price is supposed to be a disincentive to using carbon emitting fuels, an incentive to using fossil energy more efficiently, an incentive for the sequestration of carbon in land use changes and an incentive to switching to non-emitting energy production; as I have documented elsewhere a carbon tax or fee is a far more effective means of representing the cost of carbon to investors and consumers (rather than traders), as the price will be less variable and not be mediated via the gyrations of the carbon permit market.
- Permit regulation is the control mechanism of the level of emissions as well as the “mint” of the carbon emissions “currency”. It is supposed to represent the bulwark of the cap and trade system against dishonest dealing or invalid permits. In addition, via permit regulation will come the issuance of the ultimate “stop” command via the cap on the total amount of carbon pollution. Many, many critics of cap and trade or specific implementations of cap and trade have pointed out the severe flaws involved in using carbon offsets (permits/credits from elsewhere) which undermine the validity and honesty of permits, as well as undermine the entire cap and trade system’s effect on polluters in developed countries. Even if offsets were to be regulated in a satisfactory manner, the enforcement of the ultimate cap by regulators will always be “loose” in that enforcement actions will seem arbitrary relative to emissions intensity and be economically disruptive. Direct regulation, inclusive of coal moratoria, is a far simpler, more rational, and more forceful means to backstop price regulation and achieve emissions targets.
- Cap and trade’s permit trading markets are supposed to create a competitive environment where firms profit by some combination of cutting emissions and clever permit buying and selling. The profit motive is intended to spur firms to emit less to enable resale of permits. However, overall, there is a disincentive to overachieve too much in that at some point reselling permits becomes more profitable than further investment in low carbon technology; the policy creates an emissions “set-point” rather than a push towards carbon neutrality. Furthermore, if emissions are cut in one place, they are allowed in another up to the cap. In alternative policy frameworks there is no need for an analogue to the permit trading market.
- The setting of the cap, a statement of intent, is kind of a “carbon pledge” which may inspire action or at least give off the impression that action is being taken. The cap is also supposed to function in an international arena as a diplomatic and trading bargaining chip. As alternatives, there are other means of declaring goals that are paired with more effective instruments, with better track records. The statement of intent is politically seductive as it gives politicians and activists a sense of virtue that distracts them from the flaws of the policy’s 3 other parts, if they are able to discern them. Also the metaphor of the “cap” has a physicality to it that is betrayed by the policy’s deep flaws.
Dysfunctional Interactions between Cap and Trade’s Components
A “hybrid” is the melding of two or more components into a new synthesis that supposedly is more functional or better than the original components. In the case of cap and trade, the components actually interfere with each other leading to results that are far less than the sum of its parts.
- The regulation of emissions in quantities by permit interferes with the carbon pricing component as well as with the operations of firms in general. Firms cannot predict exactly how much they will emit and their projections may change during the course of a year. Furthermore over- or under-buying permits will change the cost of emissions for the firm. These technicalities distract from investment in emissions reductions or overall decreases in the carbon intensity of production. The amount of real emissions of any firm will always have a different size of “grain” and timing than that of the permits or their auctioning schedule, imposing additional administrative costs.
- The trading and auction markets interfere with the carbon price by introducing variability into the price, making calculations of long-term benefits from cutting emissions extremely difficult. It is these calculations that lead to investments in low carbon technologies which are the desired outcome of the policy in the first place. Demand for permits, the ultimate determinant of the price, has at best a tangential relationship with what the carbon price is supposed to measure: the damage or mitigation costs to emit carbon.
- As I noted previously in another piece, the carbon price will not act as a signal of coming administrative action if a firm runs out of permits and threatens to violate the cap. Administrative action will either be endlessly postponed or will come as an arbitrary punishment for failing to buy enough permits with damages to many of the firm’s customers. For this reason, cap and trade systems have been incredibly lax in the way they distribute permits.
- The declaration of the cap as a carbon pledge to mobilize voluntary action to cut emissions interferes with itself in this function and is interfered with by permit regulation and the trading market. Once someone “overachieves” their permit allocation, it is rational for them to sell their left-over permits, allowing others to pollute more at a price. Permit trading is about establishing an emissions “set point” not pushing emissions down towards zero.
Almost all of this is avoidable if another (set of) policy instruments is chosen. The design of more effective policies in a rapid and productive manner is not that difficult if we dispense with the cap and trade format.
Tags: Carbon Pricing, Electric Grid, Electric Vehicles, Energy Policy, Feed In Tariffs, Lithium Ion Battery, Renewable Energy, Wind Energy
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A quick “hats off” to David Brancaccio and NOW on PBS for their well-researched and informative documentary on what Denmark is doing to attain energy independence and get off oil by building a version of the Renewable Electron Economy that is suitable for their resource base.
You can view the 23 minute show here:
This installment of NOW does a great job of connecting Denmark’s historical dependence on other countries for energy and their current drive to build renewable energy and electric vehicle infrastructure. Denmark is one of the first countries/regions to work together with Better Place’s electric vehicle infrastructure.
While the show does a great job in tracing the policy environment which is unusual for a technology focused story, it does miss that Denmark used a feed-in tariff for wind in the 1990’s to jump-start the Danish industry.
Furthermore, I believe this show should be required viewing for all policymakers who will be attending COP15 or who are currently deliberating about climate legislation in the US Congress, because it is an example of how “things actually get done” in the area of emissions cuts. There is NO MENTION of cap and trade or emissions trading. The sole request of the CEO of DONG Energy is that out of COP15 that a (preferably high) price on carbon emerges.
Furthermore, the piece shows the people of Denmark moving quite rapidly (relative to the US at least) towards a much more energy efficient and cleaner energy economy over the past 20 years and into the near future by the application of what might called “Energy (and now Climate) Keynesianism”. It is no mystery that the Western Europeans have taxed petroleum-derived fuels heavily to, among other uses, build and maintain public transportation. What the NOW piece shows is that Danish tax policy is designed to relieve congestion, reduce oil dependence, and now to support the growth of renewable energy by bringing in more electric vehicles and therefore more energy storage.
While those readers who are convinced that a “carbon price = cap and trade” or “carbon policy = cap and trade” will not be persuaded or will miss the signs, what the NOW episode shows that a truly conservative in the best senses of the word climate policy is a “Climate (and Energy) Keynesianism” with an international carbon price that is a dollar/euro/yen/renminbi amount. We know that we can shape energy use and generation activities by tax policy and by incentives for private development of clean energy generators (feed-in tariffs). As I have been documenting here in my series on Cap and Trade, we have many very good reasons to doubt with its 12 year history of middling results and expansive bureaucracy that the twisted emissions trading policy will be as effective. Furthermore it is simply a political end run around the obvious “Climate Keynesian” solution, where government’s and business’s roles are differentiated and validated. Cap and trade will interfere with or obscure the benefits of Climate Keynesianism.
Cap and Trade: A Tangled Web… A Project-Based Alternative – Part 4 November 5, 2009Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Transport, Renewable Energy.
Tags: cap and trade, Carbon Pricing, carbon tax, CSP, Electric Grid, electric transmission, Electric Vehicles, energy storage, Feed In Tariffs, Project-based Policy, rail electrification, Solar Energy, Wind Energy
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In the first two parts (part 1 and part 2) of this post, I discussed cap and trade as well-intentioned but a fundamental misapplication of the permit trading policy framework. I also went on to identify 11 basic elements of any climate policy regardless of instrument. In the third part, I describe a package of mostly familiar policies that integrated together will have a far more profound effect on emissions that the cap and trade system. In this, the last part, I offer a second alternative to cap and trade which I believe is the most aggressive and secure approach to cutting emissions, though does not exclude elements of the package in part 3.
Project-Based Carbon Mitigation Policy (PCMP): A Heterodox Climate Policy Framework
I’ve redesigned an approach that is not entirely new but has been sidelined in current high-level climate and energy policy discussions. I’m calling it Project-Based Carbon Mitigation Policy– PCMP. Instead of or in addition to starting with an abstraction like a carbon price, PCMP starts with specific large-scale regional, national or global projects that with greater than 95% probability will cut emissions substantially within the next few years; these projects implement technologies and processes that are known to directly replace fossil fuel use, directly reduce demand for fossil fuel or, with some agreed-upon degree of certainty, sequester carbon emissions. A goal and timeline are set for the reductions based on the implementation of that technology or process then PCMP reverse-engineers the economic and social policies that will enable the project to take place in a timely manner. PCMP does not exclude nor discourage the use of abstractions like price mechanisms and society-wide or global targets but it starts with the security and relative certainty of projects that are technology- and process-based, supervised by some responsible party or regulator, and funded. PCMP may end up being a route to a set of policies very much like the Comprehensive policy discussed in Part 3. A PCMP policy approach also openly acknowledges the role of government leadership in achieving carbon emissions reduction goals, an attitude which has been shunned in recent history in the US and elsewhere.
Viewing projects as the fundamental element of policy also allows necessary supporting infrastructure that facilitate many types of emissions reduction to become the object and focus of high-level climate policy. Build out of the electric grid and electrification of transport are key to a zero emissions industrial/post-industrial society though, due to the variable carbon intensity of electricity production their exact contribution as separate individual projects cannot be quantified. A combined approach linking low- or zero-carbon electrical generation with electrification of transport would qualify as PCMP projects.
Carbon mitigation projects based on tested technologies and processes are the only assured means of cutting emissions, along with their supporting infrastructure. Carbon pricing may influence projects to be initiated but the projects themselves are the primary building blocks of policy. The focus on what might be called “secondary” or tertiary levels of climate policy has, in my observation, interfered with or at least obscured the importance of these primary on-the-ground projects.
The most directive end of the PCMP project spectrum would be a government program, funded by tax revenue, that uses “command-and-control” to push through a project that is vital to our ultimate survival as a society implemented either by government contractors or via government employees. On the other end of the spectrum in terms of directiveness are rulings, changes in tax law, and the institution of technology and process standards that will tweak existing market behavior. A PCMP project will have a target emissions reduction by a certain date; optimistic goals should be shunned in favor of “worst case” scenarios to ensure that goals are met or exceeded. Incentives should be aligned for the project leaders, whether they be public or private employees, if they achieve or, better, exceed emissions targets.
Many existing government programs in the area of environmental protection already are project-based policies in that an existing technology, set of technologies or process is chosen for implementation but, to date, not taking the next step to target specific carbon emissions reductions. In the US, we have a number of house weatherization programs including a grant program for low-income homeowners and rebate programs for other homeowners. To convert these into PCMP programs, one would need to make specific greenhouse gas mitigation goals and a timeline, tuning the policy instruments to achieve these reductions along the stated time line. However, the notion behind the PCMP concept is that policies that support one or another project may be generalized to a sector-wide or economy-wide policy or have knock-on effects. National policies or international agreements would be “reverse-engineered” to support key projects as priorities.
Project-based Policy, Infrastructure and Synergies between Technologies
The building of new infrastructure or its supervision, key to carbon mitigation, almost always falls to government, which undertakes the building of infrastructure on a project by project basis. The emphasis on market solutions to climate change, which focuses on influencing the decision-making of individual market actors ignores the fact that most infrastructure is built by government planning and programs that anticipate rather than respond to economic demand. One way to understand the sequence of events in building infrastructure is perhaps best summarized by the line: “build it and they will come”. Within this Hollywood formulation, what is captured is the ability of physical infrastructure to create or support markets as well as influence behavior beyond the influence of prices and goods for sale.
The carbon price signal, either the clear carbon tax version or the muddied cap and trade variety, will not by itself initiate the building of new infrastructure in a timely manner, especially if we consider the politically likely (low) level of the carbon price in the next few years. Even if we look to the history of infrastructure for market behavior shaping infrastructure (“Go West, young man” and the US railroads), in the face of catastrophic climate change we are looking at an accelerated implementation of new infrastructure as replacements for serviceable but polluting infrastructure, requiring a pro-active government role that anticipates rather than responds to trends and price signals.
In addition, basing policy on or limiting policy discussion to carbon pricing alone has been a way to say: “we don’t know what the solutions will be”. However, besides ignoring the key role of infrastructure, this is, at this point in history, disingenuous and more importantly time-wasting. As I have pointed out in two posts I wrote over a year ago, we now have about 24 technologies or processes that together could cut carbon emissions by at least 90%. These technologies and processes ranged from CSP with storage, internetworked wind powerwith hydroelectric storage, transport electrification, afforestation, to even voluntary (partial) veganism. Eventually much celebrated technologies like building-integrated photovoltaics will also play a major role. Other, more “traditional” climate policies that may be established more generally like a carbon price may aid the implementation of a PCMP policy but the combination of a carbon price and PCMP projects will achieve emissions reductions most rapidly. The project-based approach starts with a core of concrete intended outcomes in the way of realized projects but then welcomes and expects follow-on effects both from the realization of these projects and from the facilitating generalized policies like a carbon tax or fee.
Many of the gains associated with the most powerful of the 24 technologies, with a couple exceptions, are based on synergies between different technologies, not the solo implementation of those technologies. The impact of electric vehicles on total emissions varies a great deal depending on the type of generation that is used in a particular area of the globe. A carbon price will help urge this process on but will not of itself incentivize the creation of these synergies.
In renewable electricity generation there are some synergies between technologies, for instance between hydroelectric storage and wind power, which would need to be integrated in a planned manner across numbers of jurisdictions. These synergies between technologies can only be realized rapidly via integrated resource planning with adequate financing. Grid operators have already engaged in integrated resource planning anyway throughout the over 100 year history of the electric grid. Linking this planning with carbon mitigation is a step towards the PCMP policy framework.
Prospective PCMP Projects (US)
PCMP Example #1: CSP with Storage
One of the few standalone, scalable renewable energy technologies that can directly replace fossil electricity generation one-for-one is Concentrating Solar Thermal Electric Power (CSP) with thermal energy storage (TES). With sufficient transmission and judicious siting, CSP with storage could supply almost all the world’s energy using a small percentage of the area of the world’s deserts. DESERTEC which is a large CSP investment and policy project for Africa, the Middle East, and Europe, could be configured as a PCMP with specific targets for replacing fossil generation.
The example PCMP project below applying CSP with thermal storage provides close to certainty in emissions reductions and can be accelerated with increased funding. This contrasts dramatically with the lack of control over emissions under carbon pricing alone inclusive of cap and trade with its false “certainty”. Effective carbon pricing would catalyze this type of development but would not “cause” it as would a targeted program focused on implementation of the technology.
CSP with TES – American Southwest/West of Mississippi
Region: 6 US States (California, Arizona, Nevada, Utah, New Mexico, Texas) – Replace Energy Production in 19 Western US States.
Emissions Reductions Source: Replace fossil electricity production by specified gas and coal power plants by 241 million MWh/annum by 2020 in the WECC, SPP, MRO and ERCOT grids (50% natural gas/50% coal) without addition of new fossil generation. By 2030 replace 1200 million MWh/annum fossil generation in NERC.
Technology: Concentrating Solar Thermal Electric Power with Storage (Capacity factors from 35% to 70%) – 50GW installed by 2020, 250 GW installed by 2030 – mean capacity factor >50%. Formation of CSP industrial base to replace fossil generation.
Target CO2 Emissions reductions from 2007 baseline: 181 million metric tonnes C02/annum by 2020, 905 million metric tonnes CO2/annum by 2030.
Finance mechanisms: guaranteed $.10/kWh rates (inflation adjusted) for 20 years for electricity sales plus $(2 + capacity factor/.25)/W (2010-2013), $(0.5 + capacity factor/.25)/W (2014-2017), $(capacity factor/.50)/W (2018-2020) innovation grant funded through carbon tax/fee (adjusted for the effect of the 30% Investment Tax Credit). Favorable tax treatment for mothballing and early retirement of fossil generation.
Project Team: US DOE responsible leading industry stakeholder committee (US EPA, Fish and Wildlife, plant developers, utilities, grid operators, state and local political leaders, environmental advocates).
Supporting national and international policies:
- Carbon tax/fee facilitates implementation.
- Infrastructure: Renewable energy “smart”/supergrid
- Guaranteed Rates for Renewable Energy
- Contracting with Stakeholders for Greenhouse Gas Reduction Targets
- Special Master to Determine Compensation for Retired or Semi-retired Fossil Power Plants
PCMP Example #2: Combined Renewable Energy Power Plants
A combined renewable power plant connects a diverse set of renewable generators that together produce electricity according to the demands of grid operators and ultimately grid users. More complex than CSP with storage, this technology is still emerging though simply a matter of organizing existing technologies via smart, renewable-energy oriented transmission network.
Combined Renewable Power Plants – US
Region: All US States (can be generalized to almost any region of the world)
Emissions Reductions Source: Replace fossil electricity production by specified gas and coal power plants by 241 million MWh/annum by 2025 in NERC grids (50% natural gas/50% coal) without addition of new fossil generation. By 2035 replacing 1200 million MWh/annum in NERC.
Technologies: Wind, Solar (CSP, PV), HydroelectricGeothermal, Marine/Wave Energy, Biomass, internetworked generators to load centers, “smart” grid management technologies.
Target CO2 Emissions reductions from 2007 baseline: 181 million metric tonnes C02 by 2025, 905 million metric tonnes CO2 by 2035.
Finance Mechanisms: Bundled wholesale feed-in-tariffs with performance bonuses based on load-responsiveness of combined renewable power plants. Amount of tariffs as yet undetermined and would vary with renewable resource intensity.
Project Team: US DOE responsible leading industry stakeholder committee (US EPA, Fish and Wildlife, plant developers, utilities, grid operators, state and local political leaders, environmental advocates).
Supporting National and International Policies:
- Carbon tax/fee facilitates implementation.
- Infrastructure: Renewable energy “smart”/supergrid
- Guaranteed rates for renewable energy/feed-in tariffs
- Contracting with stakeholders for GHG reduction targets
- Special master to determine compensation for retired or semi-retired fossil power plants
PCMP Example #3: Home Weatherization
The US Department of Energy has a goal of weatherizing over 1 million homes as part of the 2009 American Recovery and Reinvestment Act, a.k.a. the 2009 stimulus package. This investment of $8 billion dollars is divided between $5 billion for grants via the states to weatherize homes of low-income homeowners and $3 billion dollars for rebates to other homeowners for weatherization upgrades to homes. The low-income grant program will limit grants to $6500 worth of work per home.
A review of the standard weatherization packages in 2002, indicates that the full package that would cost in the area of $5000-$6500 could cut from up to 7.5 metric tonnes of carbon emissions per year per house in high emissions/high heating demand areas like the Midwest, in particularly inefficient houses. In areas with lesser heating and cooling demands, like the Western US, the savings would be maximally 2 tonnes for an inefficient older, small single-family dwelling but the price tag would only be in the order of $2500/home.
However looking at the components of these packages there are certain measures that have much higher carbon reduction return on investment than others, most notably air sealing, programmable thermostat installation, water heater resets, low flow shower heads, and compact fluorescent lighting. An additional reduced package of these high impact measures would cost from $1000 to $1500 per home leading to emissions reductions of about 2 metric tonnes on average, to as many as 3.4 metric tonnes. It is possible to design then a “rapid” first-pass program of reducing emissions that would triple or quadruple the number of homes visited per unit expenditure. Later, a second program could revisit these homes to address the remaining issues like inefficient refrigerators, furnaces, insulation and water heaters that have substantial returns in reducing carbon but are more expensive.
In a few years time, we may have better measures based on among other things passive house technology, which may enable “deep energy retrofits” of existing houses that enable greater energy and emissions cuts with similar or lesser investment. In these cases, PCMP projects such as this one can revise their targets upwards.
Accelerated Home Weatherization Program with Carbon Targets
Region: All US States (start with high heating/high cooling areas)
Emissions Reductions Source: Reduce domestic combustion of fuel oil, natural gas, reduce domestic demand for electricity, especially at baseload.
Technologies: Building envelope air sealing technologies, insulation, high efficiency fluorescent lamps, refrigerators, water heaters, furnaces, programmable thermostats.
Target CO2 Emissions reductions from 2007 baseline: 60 million metric tonnes by 2020 from 30 million homes, 120 million metric tonnes by 2030 from 60 million homes.
Finance Mechanisms: Tax revenues fund low-income homeowner/renter grants (up to $6500 per home) and consumer rebates for energy efficiency upgrades.
Project Team: US DOE and state weatherization programs, utility officials.
Supporting National and International Policies:
- Carbon tax/fee funds and facilitates implementation.
- Contracting with stakeholders for greenhouse gas reduction targets
- Decoupling investor-owned utility income from energy sales
- National and state mandates for energy efficiency
- Green building and energy efficiency certifications/standards
A PCMP project once it is approved, organized and financed can move immediately to the generation of detailed design, operational plans and the begin of construction or implementation. The reverse engineering portion comes in figuring out how to get to the point where the technologies or processes can be implemented. The key difference between a PCMP (aided perhaps by other policies) and a policy that essentially remains entirely agnostic about solutions is that a PCMP adds a stated intention and tasks a skilled project team to achieve a concrete material change in the processes that generate greenhouse gases. Then policy is built partially around that intention and the project team that is tasked with realizing that intention.
The PCMP approach is I believe the most aggressive and gives those who will be ultimately held responsible for protecting the climate, the world’s governments, maximal ability to accelerate efforts if needed. To achieve the very ambitious 350 ppm goal and follow the “Emergency Pathway”, the PCMP approach would have the best chance.
Good Intentions Alone No Longer Suffice
Cap and trade has been a convenient mechanism for politicians to avoid fundamental but necessary conflicts while giving themselves and others the impression that they are “doing something” about climate change. As the first international climate policy, it has attracted a community of people that have seen it as the sole alternative to inaction, therefore undeservedly has become a magnet for the good intentions of both the uninformed and the somewhat-better informed. The “cap” is a reassuring physical metaphor that suggests a level of control over emissions which, as I have demonstrated, the policy itself undermines. As cap and trade appears to address 5 of the 11 domains of climate policy, it is seductive for politicians to try to set up a “one stop shop” as a means to address the climate and energy problem.
However, there are much better policy frameworks out there of which I have shown two examples. Cap and trade’s fatal ability to insulate the ultimate decision-makers from the process of pushing for emissions cuts on the ground can be avoided in a number of ways. Above, I demonstrated a project-based policy framework that I called PCMP, which builds policy from the ground up and puts at the center the key role of developing zero-carbon infrastructure in addition to price-based instruments that influence investment and behavior. Or, in part 3, I showed how it is possible to implement a nine-part composite of simpler but synergistic policies that is more flexible, will be more effective, and ultimately more comprehensible to the public at large than cap and trade. Crucially this set of policies does not give away or obfuscate governments’ responsibility to protect society and the environment.
The cap and trade policy is a twisted remnant of a political era in which government was supposed to pretend that it wasn’t really government. It has fooled no one except some of its supporters. Government must be decisively and centrally involved in the implementation of carbon policy and there must be a rapid re-discovery of the value of good government in leading society through difficult times. Furthermore cap and trade as an instrument contains within it an open invitation for corruption and “capture” by powerful financial interests with few incentives to make concrete investments in the energy or land-use future. Any effective climate policy must establish clear guidelines and openly acknowledge government’s supervisory role in the transition to a new energy economy. I wish there were more shades of grey in this regard, but there aren’t.
No set of policies is, however, a magic bullet if there is not strong popular support for decisive action on climate and popular acknowledgement of the necessity for government’s leadership role. As it currently stands in the United States, the public still is woefully misinformed about climate, with for instance, a prominent pair of columnists for the New York Times perpetuating “global cooling” myths in their latest book. Against this background, climate policy appears to be a partisan affair rather than actions of the human community as broadly defined as possible that are based on our best science. If cap and trade is presented as the only alternative, this further undermines the cause of climate action and government responsibility because of the fundamental flaws in the policy. The equation of cap and trade with good intentions on climate action must be irrevocably broken.
Ultimately, political leaders must campaign with passion for the future of our planet and our societies, with empathy for the economically downtrodden and dispirited, informing the public about the alternatives available to minimize the impact of our two century fossil fuel bacchanal. Within the context of a better informed citizenry, only then can an effective climate and energy policy truly take effect, though the time to start on both campaigns is now.