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.
While coal is considered the dirtiest fuel and also, because of relatively plentiful supply in the US, China and India, a major climate threat, natural gas has skated by the climate and energy activist community and energy regulators on a combination of clever marketing, dated scientific results, ubiquity, low emissions at combustion and the endemic “lesser-evil-ism” found in Big Green organizations that cluster around Washington. The major oil disaster in the Gulf has turned many of our attentions, including my own, to the problem of oil dependence and extraction. However, the misery/challenge doesn’t end there: natural gas is not a crutch that we can rely on to get us to the post-fossil fuel age.
We now have a (weak) energy bill in front of the US Senate which favors natural gas vehicles over electric vehicles, the latter being the future transportation option with an actual future. The choice in supposedly responsible circles has been redefined as a choice between fossil fuels or methods of extraction of these fuels, with natural gas operating as the default choice.
Unfortunately, natural gas advocacy has “breached the fortress” (if there ever was one) of the climate and energy community. As just one example, T. Boone Pickens has used his folksy charm and deep pockets to push his new business venture that claims to get America off “foreign oil” by switching heavy trucking and other vehicles to (compressed) natural gas fuel. Pickens, a Bush supporter in 2000 and 2004, has benefited from the pairing of wind energy with natural gas in his Pickens Plan, a combination which has gained him entree to influence in the new administration.
Natural gas appears as a compromise to those who see in readiness-to-compromise a virtue, a sign of maturity and responsibility. Of course the desire of some commentators and politicians to appear reasonable or realistic by befriending parts of the fossil fuel industry does not change geophysical reality or create, out of wishful thinking, a solid fossil fuel ally in the fight against climate chaos. It would be nice, for the sake of appearances, politics, and the scope of the technological challenge to have a fairly plentiful “bridge fuel” to the zero-carbon future. It would be nice if we didn’t have to remake our energy industry almost entirely. But natural gas, unfortunately, is failing in that role for a number of important reasons.
What are False Friends For?
I am not a big fan of anthropomorphizing inanimate objects or institutions because reality is often more complicated than these metaphors let on. However our relationship with natural gas is so complex that using the analogy of a human “friend” is helpful to draw out some of the dynamics and dimensions of our natural gas dependence.
False friends are a part of life but you cannot rely on them in the clinch; that’s why they are “false”. Though we don’t ordinarily think of ourselves in this way, many of us play or have played the role of a false friend to get by in social situations, or at least we have pretended to be friendlier with people than we actually are. False friends are commonplace in large group settings or hierarchical organizations where there is substantial competition. Most people do not have the luxury of entirely banning this type of friend from their circle of acquaintance or never-ever faking friendship with others. The impact of having false friends can range from no more than the need to exchange minor pleasantries with them to substantial personal loss if you come to rely on them “in a foxhole”. Very occasionally false friends turn out to be sociopaths, people who have no more conscience than hardened criminals, which means that they can be the actual cause of the damage to you or your loved ones.
In applying characteristics of these people to our use of natural gas, you can judge for yourself whether natural gas and the natural gas industry qualifies as a “false friend” and if so which type of false friend is it: indifferent and ordinarily self-interested or sociopathic?
1. Natural Gas Has a Misleading “Appearance” in Terms of Emissions and Environmental Impact
Natural gas has been marketed as a cleaner fuel and, yes at the point of combustion it is cleaner than coal or gasoline both in terms of “criteria pollutants” (sulfur oxides, nitrogen oxides, mercury) and in terms of carbon dioxide. However these statistics are based on conventional natural gas that historically, because of pressure in large underground reservoirs, has been easily extracted from wells. The “easy gas” is quickly becoming a thing of the past.
Almost all of the future growth in natural gas supply as well as replacement for the depletion of existing wells will come from unconventional sources like the “tight gas” that is extracted from small (“tight”) pockets in formations like the Marcellus Shale in the Northeastern US. As is chronicled in the new HBO special “Gasland” directed by Josh Fox, the process of “high volume, slick water hydraulic fracturing” or “hydrofracking” which breaks up these pockets in the shale has numerous environmental and health effects that are in themselves reasons to halt or at least heavily regulate this industry. Trucked into the drilling site, one to seven million gallons of water laced with a cocktail of chemicals is used as a hammer to open up pockets of gas trapped in the shale formation. This process is repeated multiple times during the life of the well, to re-fracture the shale bedrock and release more gas.
According to Fox’s research, over 1000 truck trips are involved in each drilling and fracking episode to transport water, chemicals and equipment, with the potential for as many as 18 re-frackings per well, each involving more than 600 truckloads. Unsurprisingly the fracking chemicals and gas end up in drinking water, as in one scene, a man lights up his tap water using a cigarette lighter. Josh Fox, the director of Gasland, has issued a call to action to support a moratorium on hydrofracking in New York State and on a national level the removal of the exemption from the Clean Water Act and other environmental regulations for the natural gas industry. These calls are based purely on the non-greenhouse gas environmental effects of hydrofracking.
Given the type of drilling, the number of wells, the abovementioned leakage into the water-table, the number of truck trips involved, the energy required to pump the fracking fluid, and the volatility of methane (largest constituent of natural gas), you would think that unconventional natural gas would also have significantly higher total carbon emissions than conventional natural gas. Looking at the potential greenhouse gas emissions from hydrofracking and in consideration of the 20-50 fold higher warming potential of methane relative to carbon dioxide, Robert Howarth of Cornell estimates conservatively that shale gas extraction and combustion has equivalent lifetime emissions to mountaintop removal coal mining and combustion which is more than twice that of conventional natural gas. Given the energy intensive nature of the fracking process, it wouldn’t surprise me if actual measurements of lifetime emissions per unit useful energy were higher than coal.
So the natural gas industry as well as lazy analysts of the environmental impacts of natural gas take the more optimistic figures from conventional gas and with it, try to sell America and others on the benefits of natural gas that increasingly is coming from sources that have many times the overall negative environmental impact of the “traditional” stuff. In addition, the energy yield from these sources is less, as more energy is expended per unit energy recovered: this will result eventually in higher prices as well.
2. Natural Gas Has “Fooled Your Friends”
As mentioned above natural gas has been given a pass by the climate and energy community. Renewable energy advocate and politically-connected blogger Joe Romm here sings the praises of natural gas conversions of coal fired power plants. Union of Concerned Scientists pretty much endorses natural gas use especially in fuel cells. Here the Environmental Defense Fund, an organization that is financed by many large scale polluters, has a commissioned a study that looks at reducing emissions from shale gas exploration as a technical problem for drillers not a problem of large-scale energy and environmental policy. Fuel cell manufacturers, like Bloom Energy, make fuel cells that theoretically could use biogas but in practice will be using natural gas; organizations have bought fuel cells as if they are a substantial environmental improvement over grid electricity meanwhile increasing their and our dependence on natural gas. All of the relevant climate measurement agencies and nonprofits have been making do with old emissions statistics about natural gas, assuming that this natural gas is simply captured at the wellhead after routine old-style exploration and drilling. Howarth’s estimate is one of the first attempts to analyze the global warming potential of unconventional natural gas, especially its lifecycle emissions. Why aren’t more scientists and advocacy organizations updating their emissions measurement estimates, environmental impact analyses, and policy recommendations?
3. Natural Gas Will Leave You in the Lurch
One thing about false friends is that they will abandon you at important times in your life not necessarily out of malice but simply out of disinterest. Every thinking person who makes energy policy, recommends procurement decisions, or orders natural gas service to a residence should know that natural gas could “leave us in the lurch” fairly quickly or at least become much more expensive. Gas wells deplete rapidly and the US conventional gas production is in terminal decline, as Exxon CEO Lee Raymond said in 2005. What remains is unconventional gas production like shale gas with its climate-altering and water-table-poisoning ways, as well as deepwater adventures like the recent BP disaster in the Gulf. Conservative estimates of shale gas put the supply at 7 years, far below the 100-year number pushed by the industry. It is remarkable how many assets with high fuel input requirements are being built now that depend on natural gas as their main fuel. It is almost as if regulators, the gas industry, and a few advocates are trying to create at some point in the not too distant future a huge seller’s market for natural gas or opportunities for energy traders to “enjoy” the volatility of the future natural gas market.
4. Questioning NG Supply Induces Paranoia: Natural Gas Use is Everywhere
Depending too much on false friends or thinking too much about them can lead to an anxiety state. Many of us have bought or designed homes that are crucially dependent on natural gas service. A vast majority of restaurants could not function without natural gas. With the decline of wood-burning, natural gas has come to replace our, perhaps genetically-rooted, attraction to flames in both useful and decorative functions. Many, “high efficiency” boilers for industrial and commercial heat applications depend on natural gas. Natural gas is used in the chemical and fertilizer industries as a raw material. Fast-ramping “peaker” electrical generation plants throughout the world are almost exclusively natural gas fired. Larger combined cycle gas-fired plants are considered the “state of the art” in electrical generation. Combined heat and power applications supported by some incentive schemes and counted as “renewable” in some renewable energy requirements are critically dependent on natural gas. Fuel cells for the most part are fueled by natural gas.
Some natural gas could be replaced by biogas but there is, at least intuitively, not nearly enough strategically located fermenting or decaying biota to replace the energy flow from fossil natural gas as we now consume it, the product of millions of years of biomass growth processed by geological forces over millions of years. While in developed consumer societies our consumption is dependent on a lot of biomass via food and fiber products, it would be difficult to find enough of the biomass waste from the production of those products to ferment into biogas and substitute for the heat energy of the natural gas that each of us relies upon to cook, heat water, power lights, and use in industry. Collecting biomass for this purpose is also an energy intensive process.
5. Banishing Natural Gas from Our Lives Today or Tomorrow Is A Near Impossibility
Because false friends are difficult to avoid, many of us can’t decide today or tomorrow to only deal with people who have our best interests at heart. As natural gas is currently ubiquitous and has gotten a pass by regulators and parts of the climate action community, it is going to be a tough slog to re-design buildings, lifestyles, and industrial processes so that natural gas usage is reduced or eliminated within the next decades. This doesn’t mean that plans can’t be made now to radically reduce natural gas use but this would require a new orientation towards energy and towards energy planning.
Steps out of the Natural Gas “Relationship”
Because natural gas has so ingrained itself into our lives yet, according to this analysis, remains a “false friend”, it will take a good deal of work to “get out of the relationship”. Natural gas in the US is currently used for electricity generation (33.0% of end use), in industry (29.4% of end use), in residences (22.7% of end use), commercial buildings (14.8% of end use) and less than .001% for vehicle fuel.
To simply call for a moratorium on the most egregious practices of the natural gas industry is not going to solve the problem of our natural gas dependence, the primary driver of the ever riskier and dirtier search for fossil fuels: a comprehensive strategy is required.
A) Invest in technologies that reduce natural gas use substantially: – The science and art of replacing fossil fuel assets is still in the early stages of its development and the replacement of coal has been one of the main priorities of the climate action movement. However, I think I have made a strong argument here that an increasing fraction of natural gas used in North America and other areas of the world, has global warming impacts equivalent to the combustion of coal. Furthermore, this natural gas has very high local and regional environmental impacts. Finally this natural gas supply is on a longer time scale fundamentally unreliable, how long a time scale we don’t know.
- Continental Renewable Supergrid with Electrical Storage – A big project with many parts, of course, but running out of a critical energy source, irreversibly warming the climate and befouling large portions of the nation’s drinking water are big issues. Averaging out the intermittent energy from wind and solar over extended area of land can, interconnected by an electric grid, create a fairly even flow of electricity that can replace much of the predictable power that comes from fossil generation, both coal and natural gas. In addition, with fast-ramping battery or other electrical storage attached to this grid, the function of natural gas peaker plants can be replaced with what will become a much more elegant engineering solution.
- Concentrating Solar Thermal Electric Power with Thermal Storage (in dry, sunny areas) – These big plants that require electrical transmission and have local impacts on desert areas but, as stated above, our natural gas dependence is an unfolding environmental disaster. While CSTEP (CSP) plants require about 1% of their total energy use during operation to come from natural gas or potentially biogas to keep heat transfer fluids and turbines warm, they can directly replace natural gas electrical generation with thermal storage with the remaining 99% of their energy output. Some CSTEP plants are designed without storage to use natural gas as night-time power generation capacity and this does reduce natural gas use during the day. However this design of plant represents a greater benefit if it were to avoid the construction of a completely natural gas fired combined cycle plant. Used in the Andasol plants and other plants in Spain and planned for the Solana plant in Arizona, molten salt thermal energy storage adds value to CSTEP plants by enabling them to generate electricity into the evening as well as giving them the ability to schedule their production of electricity, as can natural gas and coal fired power plants.
- Solar thermal water heating, space heating and cooling – Rooftop solar thermal collectors are highly efficient means of using solar heat in almost every part of the world to pre-heat or provide tap-ready hot water. Additionally the solar thermal heat can be stored and used as radiant heat, the major area of projected growth in natural gas use. Finally, in larger scale installations, the heat from solar collectors can be used for solar cooling by the use of absorption chillers.
- Passive House/Building Design – Using incident solar radiation, body heat, and waste heat from appliances in combination with high levels of insulation, intelligent ventilation systems, and air-sealing, space-heating and cooling demand can be lowered in most climates by 80% or more, cutting into both residential and summertime electrical system demand for natural gas. The Passivhaus standard in Germany has now been met in 20,000 buildings in the European Union, with only a nominal increase in building costs. In the US, Passivhaus/passive house is starting to grow as are other low or net-zero energy building standards. While these buildings sometimes use natural gas as a back-up heat source, the standard at some point should turn to all-electric households which will simplify construction and enable buildings to generate no carbon emissions during building operation with all-renewable electricity.
- Concentrating solar thermal industrial process heat (in sunny dry climates) – Industrial process heat, a substantial portion of which is generated by natural gas and in a temperature range of 400C and under, can be supplied in sunny, dry climates by concentrating the sun using a linear Fresnel or parabolic trough collector and generating steam.
- Organic agriculture/reduce corn production and other fertilizer-intensive crops – Ammonia-based fertilizer to supplement soil nitrogen is a large contributor to natural gas demand worldwide. The natural gas is steam-reformed into hydrogen gas which reacts with nitrogen to form ammonia. Ammonia can be produced using renewable energy but overall demand for ammonia can be reduced greatly by eliminating large portions of the demand for this input. Corn is overproduced to produce bioethanol, which requires large fossil fuel inputs. A sustainable agricultural system and a sustainable biofuel system (no substitute for electric transportation) would have no fossil fuel inputs.
- High-efficiency electric induction cooktops – Electrical induction cooktops are 90% efficient and are considered by many cooks to be a superior technology to 50% efficient natural gas burners. In comparison to natural gas combustion in the home versus at a combined cycle power plant the emissions would be about equal. With low-carbon electricity, the induction cooktop has substantially less emissions and “future-proofs” the home. The decarbonization of the electrical grid is mandatory, so the installation of induction cooktops should simply function as a driver to continue updating electrical supply.
- Distributed generation with local electrical storage – Distributed solar photovoltaic arrays on rooftops alone can shave some of the peak generation needs in sunny climates where peak loads occur during the middle of the day. With the addition of local energy storage on the distribution grid, oversized distributed PV arrays can contribute to cutting natural gas demand from peak and load-following generators throughout the day and into the evening.
B) Phase-out all fossil fuel subsidies over a 5-year period worldwide. Reports now indicate that the fossil fuel industry receives worldwide ten times the subsidies that the renewable energy industry receives (including the unsustainable subsidies for biofuels).
C) Develop system of rules, performance-based incentives and disincentives plus government direct investment program that facilitates rapid build-out of the above infrastructure. Feed-in tariffs, a performance-based incentive, have proven to be the most aggressive and successful system for incentivizing renewable electricity generation. Specialized feed-in tariffs could be developed which offer extra incentives towards the development of renewable energy facilities that replace natural gas and coal generation. Renewable heat generation via biomass burning or solar thermal can also be incentivized using feed-in tariffs with the UK offering a pioneering program of these tariffs set to come into effect in April 2011. If such tariffs are set to profitably but effectively reduce natural gas use and are accompanied by facilitating local regulations the they will definitely reduce natural gas demand substantially. Changing building codes to promote or mandate near- and net-zero energy buildings inclusive of the Passive House standard. One of the pernicious effects of the deficit scare that is currently coursing its way through policy circles, is that it endangers government direct investment in infrastructure that is now needed to secure our energy supply by moving to renewable energy (and some nuclear) and electrify our transportation system. A carbon tax rather than a cap and trade system would also spur investment in non-carbon energy and energy-efficient assets.
D) Remove natural gas-fueled Combined Heat and Power and Fuel Cell Applications from designated “Renewable” standards and place them into Energy Efficiency Programs. Currently in some state renewable energy programs, combined heat and power and fuel cell applications are counted as “renewable”. This misleads as the building of new facilities with these devices powered by natural gas will generally increase natural gas demand. Luckily some fuel cells and combined heat and power facilities could use biogas as fuel but these would then need to be certified individually as renewable energy facilities according to their fuel mix.
E) Remove subsidies for corn ethanol and overproduction of corn – Corn, as noted above, is highly fertilizer intensive and one of the key drivers for the growth of corn production are subsidies and standards that promote the use of corn ethanol. Ethanol refineries use natural gas as process heat. Corn ethanol is in many estimations worse than petroleum.
F) Remove Clean Water Act and Clean Air Act exemptions for natural gas drilling to impose the full external costs of environmental remediation on this fuel source and provide legal justification for drilling moratoria. Gasland director Josh Fox provides links to action items in this area on the Gasland website.
G) Charge the US Department of Energy with developing a post-natural gas energy scenario.
H) Charge the US Department of Energy and the Environmental Protection Agency with a combined research program to estimate biogas potential and scenarios for sustainable bioethanol production without natural gas inputs and irrigation.
I) Remove Incentives for Natural Gas Vehicles — As should be obvious from the above, converting vehicles to natural gas and spurring demand for the gas is a foolish endeavor. Increasing our dependence on natural gas means increasing our dependence on unreliable supply and the external costs of natural gas exploration and extraction.
J) Accelerate Incentives and Investment in Electrifying Transportation — Also, as should be obvious from the above, we should continue our incentives for grid-attached, grid-optional, and battery electric vehicles and plug-in hybrids. I have a longer list of policy recommendations here in a comprehensive package of measures to deal with the oil crisis.
The Dimensions of the Challenge
To mix metaphors a little, natural gas has functioned as a mental and policy crutch for activists, engineers, and policymakers. We didn’t have to move immediately to the near zero and zero carbon infrastructure because at least there was natural gas….we thought. Focusing on coal or focusing on coal and oil was challenging enough.
But, given the twin challenges of environmental degradation (both local and global) and resource depletion, I don’t see any other way other than to choose to build with great rapidity zero and near-zero carbon infrastructure. Natural gas is not going to disappear from our lives any time soon, but we need to make strategic efforts to reduce our demand for it rapidly to conserve its use for only those vital tasks for which we currently have no feasible substitute. As I point out above, this list of vital tasks can be reduced substantially with good policy, hard work and prudent investment.
add a comment
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: carbon tax, Energy Policy, Oil Independence, rail electrification, Sustainability
A couple weeks ago, I sketched out an Oil Independence Plan for the United States that was based on a combined move to more efficient uses of petroleum as well as a much more aggressive move to oil- (and natural gas-) independent infrastructure, than is currently proposed in existing legislation in the US Congress. [Since posting that plan, Craig Severance has written an equally ambitious and more detailed plan which can seen here. I also didn’t reference Boone Pickens’ “Pickens Plan” which is an Oil Independence Plan that relies heavily on natural gas and tractor trailer trucks fueled by natural gas.] The most immediate motivation for such a plan, which we should have embarked upon 35 years ago anyway, was of course the oil disaster in the Gulf as well as the muted and unambitious response to that disaster by the Obama Administration. [There are now rumors that Sen Jeff Merkley may be producing a plan to reduce oil demand in the US which will be announced shortly]
I asserted in that post among other things that planning was a critical missing element in our policy arsenal and that only a plan, and not the cap (cap and dividend, cap and trade) instruments under consideration, would bring the necessary resources to bear in a timely manner. Not only has there been a failure to plan for the demise of oil as our primary transport fuel, there has been a fundamental failure to accept planning as part of the legitimate role of political leadership.
After outlining this plan in the same post, I identified 6 hurdles which President Obama or another future leader of such a plan to radically reduce our oil dependence would face. Those hurdles are:
- Market Idealization vs. Planning
- Deficit Worries and Hysteria
- Balancing the Interests of Stakeholders/Mixture of Public and Private Enterprise
- Many Americans’ Love of Expansive Resource Use
- The Biofuels Distraction
- Corporate Funding of and Influence in Politics
Two additional hurdles occurred to me but I felt these deserved their own post.
Hurdle #7: Unwillingness to Accept Inconveniences (or the Prospect of Inconvenience)
The economic history of the last 100 years in developed nations might be called the “March of Convenience” as activities that used to take hours, like procuring and preparing food or traveling to a nearby city, now take minutes. “Convenience” means the use of a device or the design of a way of life enables desires to be more easily fulfilled. Fossil fuels have had a critical role in powering almost all of the conveniences that we enjoy, either directly in automobiles or indirectly via a partly fossil-energy powered electric grid. Americans have led the way in the “March of Convenience”, adopting consumer devices on a mass scale more quickly than other countries, though in recent years we have lagged in many areas of consumer device adoption.
While Europeans, Japanese, and increasingly others in fast developing Asian countries, enjoy many conveniences that Americans do not (better public transportation for one), the American way of life is particularly dependent both on the automobile and the oil-powered delivery truck because of the structure of our towns and cities and the lack of oil-independent infrastructure. Convenience in America, has come to be defined by easy use of the automobile for either long or short trips to stores, work, and entertainment. The hundred year old trend in real estate development towards sprawl has kept Americans in most locations almost entirely dependent on the automobile. Additionally “just in time” supply of retail and wholesale goods has become a business practice that demands air freight or relatively energy-inefficient trucking transport for many locations that are not located on major rail lines.
The proposed Oil Independence plan as well as, in my estimation, the plan offered by Craig Severance, would involve a period of one to two decades (or longer) within which, for some trips, people might need to sacrifice some time or convenience in order to avoid using increasingly pricey and eventually scarce oil. This might mean waiting for others in a carpool or Internet-brokered ride-share, or taking bus service or using a shared van. It may take 25% or 50% more time to do certain tasks. For some people, the isolation of their cars is far preferable to any contact with others, so the notion of sharing space with others will be considered a major inconvenience. These people will, if they are able, pay a higher price for convenience, as the price of oil is bound to go up either via market forces or taxation or both. Nevertheless, in time, those who prefer self-driven solitary transport and have middle to high income will be able to buy battery electric vehicles or plug-in hybrids.
On the other hand, there are tradeoffs other than cost which eventually may become incentives for others not to use a self-driven vehicle: when one isn’t driving one can work, socialize or read using our increasingly multi-functional mobile communications devices and networks. The provision of workable transportation alternatives is key to the success of any of these plans. While some offer the hope of a “drop-in” solution for oil (a fully-realized battery electric vehicle infrastructure and fleet of tens of millions of BEVs) this is not likely to be scaled up in time to radically reduce our oil demand with no inconveniences. Depending on increased or the same level of convenience is a liability for a serious plan to get off oil before both its depletion, before more deepwater environmental disasters, as well as to avoid climate tipping points.
There are aspects of an Oil Independence Plan that typically will attract more attention and therefore funding, those which usually offer an increase in convenience for many transport users. A TGV or Shinkansen-class high speed rail network (>160mph average speed) (which is just one of the solutions in my and others’ Oil Independence Plans) represents a net increase in convenience over the status quo for most trips up to 500-600 miles. On high speed rail with Internet access, one is offered a more luxurious ride than either in a self-driven vehicle or experiencing the inconveniences of air travel. The less “sexy” 90 or 110 mph freight or passenger rail may be more difficult to “sell” because they do not in their design offer the promise of increased convenience over the status quo for those who are particularly devoted to automotive travel (where traffic isn’t a problem).
Another area where there is a fairly transition is where the charging or battery-swap infrastructure has been built for battery electric and plug-in hybrid vehicles. These will represent at least an equal level of convenience to gasoline powered vehicles for most local trips, though the technology is not as mature as that for electric rail.
Perhaps more frightening to politicians and to anxious consumers is the mere prospect of change of any kind in the relatively pampered automotive lifestyle that we currently inhabit with gas at somewhere around $3.00/gallon. The actual changes involved in an Oil Independence Plan will with time offer net benefits or at least a livable but more sustainable lifestyle but to those who are clinging to the “edge” or to office, any change seems frightening. The attack campaigns by elements of the political Right, by incumbent industries, or others who base their appeals on fear are almost pre-programmed for efforts that even suggest that people should loosen their grip on the steering wheel.
Some of these fears might be premised on a fear of strangers, “other people” in general or class prejudices. The automobile dominated lifestyle has enabled people to live in relative isolation from each other. Becoming used to dealing with and coordinating movement with others may be a challenge for some. . While the prospect of sharing rides or public transit is uncontroversial for some and almost a sign of personal virtue, at least in the way of advocacy, there are many, many Americans who are either horrified by this notion or would, when push comes to shove, resist having to enact these virtues rather than simply advocate them.
As with the other hurdles, leadership and planning are required to overcome this hurdle. Planning is going to be required to provide Americans with alternatives to automobile travel, per expansion of mass transit, as well as funding more novel systems like internet ride sharing or automated pod-cars. Higher gas prices, whether by market forces or by the imposition of taxes would drive the change faster but only a visionary and persuasive leader is going to be able to convince Americans to accept higher fuel taxes. The offense and defense against inevitable attacks from the anxious and the defenders of the status quo is to engage consumers/citizens/businesses in an epic quest to change our way of life and put it on more sustainable basis. The missing element is principled leadership in both speech and example which would ideally come from the President or another national leader. As it currently stands, the Presidency of Barack Obama has not attempted to engage in such a quest; partial or half-hearted movements towards these goals would expose leaders to attack from those who cling fearfully to present satisfactions and our way of life as it stands. The best defense in this case is offense and commitment to a better future.
Especially with a rise in the cost of fuel, businesses used to “just in time” delivery from distant suppliers may need to reconsider their business practices and inventory strategy. Long-distance rail freight may not in the first years be able to reproduce the speed of long-distance tractor-trailer trucks which can choose the most direct routes between supplier and buyers. For local delivery however, the transition to battery power is fairly easy for small and medium duty trucks with shorter ranges.
There are “Peak Oil” narratives, associated with figures like Richard Heinberg or James Howard Kunstler that based on an extreme version of this change in lifestyle, within which society becomes radically localized and many institutions collapse into a friendlier version of the world of “Mad Max”, the 1979 Australian film which portrayed a dystopian future. I don’t share the pessimism of some in the Peak Oil community but their arguments and warnings cannot be dismissed out of hand. With the cautious and unimaginative leadership shown in the last month here in the US, the likelihood of social collapse or at least a radically downsized society (an outcome which some would find a positive development) is higher rather than lower after a peak in oil production.
The largely mythical notion of a painless transition between one industrial and energy-related way of life and the next holds out the notion for policy makers that they just need to wait for innovation to deliver a new technology that offers only benefits and no tradeoffs. Economic historian Jeremy Greenwood chronicles how throughout the last two hundred years the acceptance of technologies that we consider to be superior happened over a period of decades in which there were struggles between interest groups and losses of economic benefits as well as gains from the new technologies. The fantasy of a “drop-in” technological replacement for the internal combustion engine continues to make it difficult for leaders to face hard choices.
Hurdle #8: Tax Aversion and the Retreat from an Ethic of Social Responsibility
Another hurdle to oil independence is tax aversion bordering on tax phobia. While, in the previous list of hurdles, I underlined the importance of public finance of transport and energy infrastructure, I left open the possibility that deficit spending would be the primary means of financing this infrastructure. I pointed this out only as a short-term fix during our current deep economic slump. In better times, tax financing will be crucial to keeping deficits and inflation in check. Taxes will need to rise on both the well-to-do and also the middle class as counseled by a growing group of economists that NY Times economic columnist David Leonhardt has grouped in his fictitious “Club Wagner”. Of course tax rates have at times been too high in certain places and times and levied unfairly upon certain activities or groups but now is not one of those times for most tax brackets and taxable entities in the US.
Tax paying and voting are the two main pillars of what ordinary citizens can to do to express a sense of group or social responsibility, the idea that “we are in this together”. Attacking tax-paying in general as an evil in itself, as has become common, is an almost direct attack on a spirit of national or group responsibility. Excessively high taxes can stifle individual initiative but excessively low taxes can fray the ability of a society to meet large scale group challenges requiring government investment. Unfortunately there is no generally agreed-upon economic model of how to set optimal tax rates that accommodates both of these concerns, so tax rates are raised and lowered according to changes in political fashion and power dynamics.
In addition to being a source of funding, the aversive effect of tax is also one of the stronger mechanisms we have to shape our own group behavior via the use of incentives and disincentives. Pigovian, a.k.a. “sin” taxes, are means of limiting the use of resources or engaging in activities which are not illegal but are considered to have high social costs. Many conservative economists prefer Pigovian taxes to income taxes under the rubric “tax what you don’t want”. A significant carbon tax would be one of the most efficient means to limit carbon emissions and fuel taxes of sufficiently high levels curtail the use of various fuels.
To enact significant new Pigovian taxes, these too require a sense of social solidarity or at least a broad social agreement that some activity should be limited at some initial or ongoing monetary cost to society. One of the key weapons we have in reducing oil consumption is to levy higher taxes on oil. Ian Parry of Resources for the Future rightly points out that, like an upstream carbon tax, oil should be taxed at the well-head rather than downstream as a fuel tax. While a upstream carbon tax is preferable as it would include oil, natural gas and coal for addressing GHG emissions, relative to a simple gasoline tax an oil tax has greater coverage as it also would start the search for alternatives to oil in industrial processes and home heating, which makes up 23% and 5% of oil demand respectively.
We have just gone through a 30 year period in the US within which income tax rates have been cut dramatically, particularly on the wealthiest Americans, justified with reference to the largely discredited theories of Arthur Laffer (that tax cuts increase government revenues via economic growth) as well as supply-side, “trickle-down” theories associated with highly influential “Reaganomics” associated with his first budget director David Stockman. The accumulation of private wealth and therefore productive investment was thought to be smothered by the top level marginal tax rates of post-WWII America; by allowing rich people to accumulate more wealth it was thought that more would be invested and the economy would grow. Progressive taxation (the taxation of the wealthiest at a higher rate than the less wealthy) and taxation in general have been treated as taboo and as damaging to the economy since the political triumph of Reaganism. The raising of taxes even slightly became highly politicized as the ideal of a low-taxation, small government society has remained the implicit ideal for politicians in both political parties. Despite the small government ideal, government has continued to grow though often in ways that are not the social welfare driven “Big Government” that the followers of Reagan have attempted to pillory. Furthermore savings rates, one of the advertised benefits of lower taxes, have continued to plummet in the US.
The American economy has grown in this period of low taxation but these increases have come largely in the service sector and particularly in financial services. Low taxation, in combination with a trade policy that undermines domestic production relative to other countries has led to super-consumption, massive increases in private and public debt, trade deficits, investment in and inflation of the value of real estate, and speculative excess in paper assets. The economic booms of the 1990’s and the early 2000’s that low-tax advocates like to point out as benefits of reduced tax rates has come at the expense of manufacturing capacity, at least in the US.
While taxes are never popular, almost no one stands up now in favor of taxes, despite professed concern about deficits. Every politician believes that if they were to be the one to raise taxes, they would lose the next election. With some justification, American taxpayers under 65 feel that they don’t get much benefit from taxes, as there is no comprehensive universal social programs other than for elderly people. The government spends money on an elaborate military, the world’s gendarme, which offers few direct benefits to Americans domestically. American industrial and trade policy has allowed jobs to be off-shored, so the government has not exactly stood at the side of the American worker. President Obama’s health reforms will not be tax-funded with the exception of the expansion of Medicaid, which again biases America’s social spending in favor of distinct disadvantaged groups rather than as a generalized universal principle of social solidarity.
Both the Pigovian side of (oil and carbon) taxation as well as the revenue generation component are critical for a rapid reduction in oil demand. An ambitious leader, I’m hoping President Obama, would have to tackle this by “reversing the ethical valence” of popular perceptions of tax-paying and thereby also some of its emotional valence. To do this, he would need to discuss tax paying as an expression of social responsibility, social solidarity, and responsibility to the future, not merely as a subtraction of monetary funds from one’s perceived economic well-being. To date, the President has tended to reinforce the individualized ethical framework of the low-tax world-view by continual efforts to court those who believe only in individual private initiatives rather than social initiatives. This “pragmatism” continues to undermine Americans’ fragile sense of social solidarity.
Eight hurdles: Too Many?
While six substantial hurdles was a lot, eight hurdles is even more. Is it too much to ask of us, our government and President to meet this challenge?
In my mind, this is the matter of, as mentioned above, a “reality principle” that cannot be ignored, so hurdles must be overcome no matter how many of them exist.
However, the path is somewhat easier than my presentation of these as individual free-standing hurdles would suggest. Many of these hurdles “stand in bunches” or can be surmounted if our leaders adopt a new stance. Leaders attempting to push the US off its oil addiction need to invoke the following general principles, which in turn will allow these hurdles to be taken as groups:
- Re-affirm our sense of social solidarity and social responsibility
- Emphasize social and individual resilience over sensitivity to minor hardships like carbon or oil taxes, hassles of coordinating transportation with others over self-driven automobile centered transportation.
- Affirm the role of government as a tool for the realization of national ambitions and the necessary backstop for market failures
Within this context, many of the eight hurdles become easily surmountable if the “general case” has been made for these principles.
We can reduce our dependence on oil with sufficient coordinated effort. With this effort will come a great sense of accomplishment in an era where it had been thought that this kind of challenge was no longer part of the American Dream.
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.
Evaluating Climate and Energy Proposals Under Two Conditions: High and Low Voter Concern May 13, 2010Posted by Michael Hoexter in Climate Policy, Energy Policy, Sustainable Thinking.
1 comment so far
After months of deliberation, Senators Kerry and Lieberman have introduced the Senate’s version of the climate and energy bill, the American Power Act, that Obama requested from both Houses of Congress last year. The Senate version has some of the more objectionable cap and trade provisions of the Waxman-Markey/ACES bill altered to remove the giveaway to financial carbon traders by instituting a more regulated cap and dividend system. The bill shows the influence of Sen. Maria Cantwell and Susan Collins’ CLEAR proposal as well as Jim Hansen’s fee and dividend proposal (and perhaps, who knows, my criticisms of cap and trade here and here). A good summary of the bill and comparisons to ACES can be found here at Grist.org.
What remains is still not nearly as strong an instrument to stimulate clean energy investment as fixed, ascending fee or tax per tonne on carbon but it, at least in its current unamended form, seems to recognize the danger of outsourcing the setting of the carbon price to an unaccountable market. The starting price on carbon proposed operates within a trading range in the first year of $12 to $25 per tonne with the floor rising by 3% plus inflation while the ceiling rises 5% plus inflation. The widening gap between the floor and the ceiling will create a great deal of uncertainty for investors about the exact value of an emissions-reducing investment: that investment will, at least in its carbon component represent a range of values that may be anywhere between a conservative base value to almost three times that value. The price and the yearly increases involved are also extremely modest representing a price floor of $13.91 plus inflation and a price ceiling of $31.91 five years after the beginning of the program. This represents at maximum an approximate addition of $.11-$.27/gallon of gas in carbon fees after 5 years which is a relative “flea bite” for users of petroleum.
The American Council for an Energy Efficient Economy finds that the bill will not offer the same level consumer benefits in terms of energy efficiency rebates and programs as did the ACES bill.
Erich Pica of Friends of the Earth warns of the curtailing of the powers of the EPA under the Clean Air Act, which would be superseded for GHGs by the passage of this act. Many in the environmental movement feel that the expansion of the Clean Air Act by the Supreme Court’s Endangerment finding would allow the EPA via direct regulation to curtail emissions as an emergency measure. The Kerry-Lieberman bill keeps the EPA in the game as the administrator of warming gas emissions but constrained by the dictates of the bill itself.
The bill focuses on large incumbent stakeholders with ample provisions for coal with CCS and some nuclear power. A national renewable energy standard is mentioned by not specified in the documents I have seen.
As with the ACES bill, the near term targets are lax with a 17% reduction from 2005 levels targeted by 2020, with steeper reductions required to reach the 2030 goal of 42% and finally to 83% by 2050.
Overall Impression of Kerry Lieberman (So Far)
As Kerry admits in his Grist post, this is not a bill for “true believers” among which he includes himself. He argues instead that this is a bill tuned to the political realities of the Senate. The bill in some sense is a hodgepodge of ideas about what Senators think when they think “clean energy” but puts off aggressive moves to push even those ideas (like nuclear energy and coal CCS) until an indeterminate point in the future when these Senators will in all probability be retired from the Senate or dead. The draft bill does not “push” anybody very hard… there is very little urgency in it.
Most aspects of climate and energy proposals have been “sanded down” in this proposal. The rough edges of the cap and trade instrument have been “filed off” putting in its place a less objectionable instrument that, at least with its current low price collar and slow rate of ascent in the carbon price, will only slowly stimulate clean energy investments.
To Support or Not to Support?
Stance #1: Unconditional Support
To show support this means calling your Senator, blogging in support of it, commenting on blogs and on the Internet in support of it, organizing demonstrations, etc. Large environmental and other supporting groups are running TV ads that call for support of KL/ACES as a “Clean Energy Jobs Bill”. Unconditional support means in the end that you don’t really care so much what happens with the individual provisions of the bill during amendment only that it is a “climate and energy” policy sponsored by people you either trust, want to support, or to whom you want to ingratiate yourself. For large environmental groups, their organizational logic “defaults to” support of big environmental packages, which they may have had a hand in drafting. Some people feel that this is a “do or die” bill that must be passed, even if they don’t like provisions in it: they believe that there will be no future opportunities to pass a climate bill in the US. I don’t see it this way and I don’t offer unconditional support for this bill.
Stance #2: Conditional Support
If you offer your conditional support you would be pressing for one or two provisions to be changed and then the bill would be OK. There are a lot of luke-warm provisions in it and if you have a particular provision that you feel passionately about, you should write in to your Senator and urge that they change that provision. A more difficult conditional support stance to have would be to pick multiple elements that need changing. Conditional support involves enough self-belief to think that you can change the bill by voicing your opinion or being the leader of an organization that already has an activist network. Conditional support could mean demonstrating, letter writing, blogging, meeting with Senators, etc. For me, a lot of bill is very weak, so I am not sure if conditional support makes sense. On the other hand, I need to sit with it longer to see if I feel that as a whole the bill offers progress with perhaps a modification and could be “shed” or be substantially reformed under different political conditions.
Stance #3: Principled Opposition (in favor of other action)
This means opposing the bill on grounds of insufficiency and as a sell-out to or a reinforcement of the position of the fossil fuel interests. If you provide a specific bill or action plan as an alternative to what is proposed, I think this can be a productive strategy. If you are just saying no, never, then this is maybe less productive. On the other hand if you can get a lot of “no-nevers” together and cause a ruckus in public or maybe even online about how insufficient the bill is you will also have an effect, perhaps strengthening the bill. On the other hand, saying “no never” with no suggestion of a workable alternative, can lead to reactionary stasis, as may happen in certain NIMBY conflicts.
Presidential Support or Lack Thereof
Many unconditional supporters of these bills (ACES or KL) point out that a key ingredient in the success of these or any reform bill is if the President is involved in promoting the bill. Currently it is not clear that President Obama will make a major push for a climate and energy bill especially one that contains even the suggestion of continuing offshore drilling. He is able to talk a good game as an aside in many of his speeches but he would need to show a willingness to get combative with opponents to make a difference. Conditional support by the President (in a behind the scenes manner) in combination with a show of unconditional support publicly, might either improve OR weaken the bill depending on the true commitments of the President.
Positioning the Bill(s) in the Real, Outside-the-Beltway, World
As I am clearly ambivalent about this bill, as are many, I think it makes the most sense to position the bill in the real world outside Washington politics, both psychological/political and Geophysical/Technological to gain a clearer understanding of how inside-the-Beltway political reality can interact with real reality.
KL and Geophysical/Technological Reality
The bill, as was ACES, is a meager and in parts misguided response to the challenges of climate change and energy independence. It’s goal of 17% reduction of 2005 emissions by 2020 is laughably unambitious (30-35% is doable but would require a WWII style mobilization) and is insufficient in attempting to avoid tipping points and warming below 3 C.
The bill’s economic engine for stimulating low carbon investment creates too much uncertainty for investors and consumers about the carbon-related value of investments while not offering a rapid enough ascension of the carbon price that stimulates decisive movement to low- and zero-carbon within the critical near future. Its energy efficiency standards are weak, while energy efficiency could provide a lot of early reductions in emissions; net or near net-zero buildings should be the national building standard for new buildings by 2020, representing already a small cost increment in Europe over conventional construction.
Kerry has promised “realer” offsets but the offset mechanism has had a checkered history and functions as a release valve in achieving emissions reductions goals.
Technologically, the bill ignores most of the means of getting off oil, including electrification of rail transport as well as encourages more offshore oil drilling. The bill operates within the “economic fantasy” that domestically produced oil will make a significant difference in oil prices or supply in the US, when it will simply go onto the world market.
The bill ignores the rapid deployment of renewable energy which is the fastest way to deploy low-carbon generation. It also doesn’t explicitly offer a research, test and certification program for breeder reactors and innovations in the nuclear fuel cycle. It passes over an aggressive large-scale renewables plan in favor of courting votes from coal-state Senators by giving the never-likely-to-succeed coal CCS technology (working against entropy to compress and inject waste carbon dioxide from coal combustion into the earth, permanently). It doesn’t contain a Big Solar Plan or a Big Wind Plan, within which 10’s of GW of generators can be put on line within a few years.
The most interesting but vague part of the bill are the “fast mitigation” solutions involving black carbon and super-GHGs which probably could be made very stringent given that they would evoke very little resistance from Republicans.
In general the bill seems to be using a political principle of compromise with officeholders, many of whom don’t “believe in” global warming, rather than technological, social scientific and natural scientific principles for determining which technologies it will support and how aggressively it will support them. The bill then fails if matched with the task at hand.
Modifier: “Reformability” of the Bill
Even if one believes that the bill is insufficient, one could support the bill if one has a theory that the bill can be modified to match or nearly match technological and scientific reality at a later date. I’m calling this “reformability”, which is an attempt to put into one word what has been batted about throughout this year among supporters of various political reforms by the Obama Administration. Others may want to use a different word. In any case, the idea is that it is better to put a “placeholder” bill into place and fill it with better stuff as time goes on. The example often given is Social Security, which was expanded numerous times since its inception in 1935. This is a very long argument with many examples to give but I wouldn’t say that every bill is “reformable” even if it attempt to achieve laudable goals.
With a basically sound structure, I agree that it is possible that targets (numbers) can be changed and increased. Offsets could be excluded and other rules could be changed. On the other hand this bill shores up the role of the incumbent industries in the energy business, including no rigorous efforts to stop oil addiction.
I think, as Kerry acknowledges, that if the bill is truly insufficient that more explicit monitoring and review measures need to be put in place with regard to both emissions, climate effects, and the policy’s effects on oil imports. Perhaps a bi-yearly review on all these fronts needs to be put in, rather than left to faith and good will. Building in “reformability”, especially in an acknowledged weak bill makes sense.
KL and Outside-the-Beltway Political/Psychological Reality
Unconditional supporters of the efforts on climate of Congress and the Obama Administration in the last two years, I think , overlook an important boundary condition of current proposals: they are being proposed during a time when most of the American electorate has much more pressing concerns and in many cases could care less about climate and energy. Until recently gas prices had descended substantially from their historic highs in the summer of 2008 and we have also had reduced concern about global warming, under an avalanche of “skeptical” attacks on climate science.
Furthermore, in my opinion, activists groups and Congressional leaders have for the last 15 years wedded themselves to the cap and trade instrument which was a needlessly complex and ultimately ineffective tool to address GHGs. Activism in the area of global warming has become professionalized and in part corrupted by funding from polluter organizations. While the public may not know all the details, there is no clear understandable “story” that emerges from the movement that also explains how policies actually work. This is in part because activists themselves don’t understand how the policies would actually work in the real world.
So proposing solutions that are marginally effective to ineffective in the context of a disjointed movement and low voter concern looks different than proposing these same solutions with high voter concern and even activism.
The public also can be concerned but also misinformed so in a situation where there is high voter concern, policies may be proposed and enacted that are wrongheaded. Last summer offshore drilling was considered by many to be a workable solution for energy, while currently not so much anymore. It is the duty of specialist organizations and public educators to make sure that the public is as well informed as possible so that when there is greater concern, one arrives at
KL under Low Voter Concern
In the context of chronic Low Voter Concern about issues of energy and global warming, a “professionals and politicians only” climate and energy policy with substantial giveaways to the strongest energy lobbies is about the best you can do in a political system under the sway of powerful lobbies. The politicians and their allies in non-profit organizations will attempt to structure policy according to how they think the policy should work but with awareness that not many politicians can risk either voter or lobbyist anger. Ideally in conditions of Low Voter Concern you get weakened versions of what, with greater voter support, could be strong policies. Alternatively you could pass bills that deal with parts of the climate and energy package a targeted manner, for instance, an energy efficiency bill, which might stir less opposition.
In a condition of chronic Low Voter Concern, Kerry-Lieberman might be considered adequate with some modifications. It does not introduce the financial industry as a co-regulator of the carbon pricing system, so this bit of stupidity in ACES is no longer in the bill. However it could still be strengthened even without a great deal of voter scrutiny as suggested above.
Kerry-Lieberman works best as an exercise for political and industry insiders on showing that they have some form of “will” to do “something” about climate and energy with the caveat that massive compromises have been struck with industries and politicians that could care less or have very little understanding about climate change and energy independence. It also may send some signals to investors that are “on the fence” about various green investments that they might consider some version of those investments in the next decade. It does not decisively re-orient the economy.
KL under High Voter Concern
In the context of High Voter Concern about global warming and/or oil dependency, Kerry Lieberman as currently proposed is completely inadequate. If voters were demanding timely solutions to our oil dependence or rapid action on global warming, Kerry Lieberman would be considered to be highly unambitious and a potential roadblock to better solutions. Furthermore, if voters believed, independent of a climate and energy concerns that such a bill should jumpstart a generally sluggish economy, Kerry Lieberman as proposed would not produce enough of an immediate economic effect.
The Senators and/or Congress would under High Voter Concern need to go back to the drawing board and produce a bill with more aggressive targets and more specific solutions that would cut emissions in the next 5 to 10 years. I believe such a bill would involve asking for more financial sacrifice and potential lifestyle change in exchange for positive movement on warming and energy. Such a “trade off” between goals would be possible with true leadership coming from the Administration and Congress.
If the public were both concerned and also misinformed there would need to be period of politicians and activists attempting to educate the public about really workable solutions prior to the enactment of bills. The Tea Party phenomenon is a example of voters with high concern but also, for the most part, badly informed about the issues that they protest about.
Voter Concern as of Mid-May 2010
With the oil spill in the Gulf and rising oil prices, voters may be moving from what might be called Low Concern to a higher level of concern about energy. Certainly other oil spills, in particular the 1969 Santa Barbara spill, have galvanized public opinion about environmental issues. Additionally we have been experiencing in the US some freakish weather this spring and may be facing a record year in temperatures with an El Nino coming on top of a secular warming trend.
Within a short while, it may be that voters will demand more concrete and direct solutions to environmental and energy problems than are contained in Kerry Lieberman. At this point, then it would be a mistake to press Kerry Lieberman on the public as THE solution to these problems. There are conflicting results from opinion polls that suggest a decrease or continued high support for offshore drilling.
Whether or not it is this year and at this time that the public becomes more concerned about energy and climate, it is only a matter of time before they do as events unfold both in the climate system and in the oil markets. Even if shore communities are not as badly impacted by the Deepwater Horizon spill as anticipated, it makes sense to prepare for the post-oil future (more on this in the next post).
Roles for Climate and Energy Activists and Ethically Motivated Politicians
If we are moving towards an era where the broader public is genuinely looking for climate and energy solutions, I believe it is the duty of climate and energy activists and ethically motivated politicians to provide complete and understandable solutions. By educating the public about the options and placing high demands on policymakers, we institute policies that are at the maximum feasible limit of what can be done today, with more action promised for tomorrow.
We are seeing this currently in financial reform, where a confluence of events has broken open the consensus that nothing substantive would be done. Now we are seeing Senators voting nearly unanimously to institute changes in financial regulation that are close to what most economists are saying is required. The fight is fierce, especially with lobbyists, and not yet over, but there is progress.
In order for a bill like Kerry Lieberman or similar to be truly meaningful, those parts of the bill that are just the continuation of “Business as Usual” need to be reduced or eliminated and those parts that are on the right path need to be strengthened markedly.
In the next post, I will offer a vision of what a science-based, rational response to the oil spill would look like. It might be considered too ambitious by some but such is the role I am choosing in this discussion.
Tags: Climate Policy, Energy Policy, Renewable Energy, Solar Energy
add a comment
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
add a comment
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: An Unserious Policy Framework.. Towards a Serious Climate Policy – Part 2 December 13, 2009Posted by Michael Hoexter in Climate Policy, Energy Policy, Sustainable Thinking.
1 comment so far
In part I, I made the general case for cap and trade as an unserious policy framework that inserts extraneous elements into pricing carbon that threaten the whole enterprise. I generated general definitions of seriousness and unseriousness and applied them to cap and trade and its market mechanisms.
Dimensions of Cap and Trade’s Unseriousness: Four Aspects
There are a number of aspects of cap and trade’s fundamental unseriousness that apply to specific actors involved in the framework. On one level the designers of cap and trade had an intellectually speculative distance from their subject matter which suggests that the policy has many characteristics of an economic “thought experiment”. On another, more obvious level, polluters are encouraged to view the process of obtaining a price on carbon as a game which needs to be played both at government sponsored auctions and in a trading market. Finally there are invitations, explicitly and implicitly, for third-party financial speculators to become involved in carbon trading markets in search of trading profits.
1. Scientific Unseriousness
The formulation of emissions trading was an effort by social scientists, political operatives, and activists to make environmental regulations acceptable within the US economic policy framework of the 1980’s and 90’s that exaggerated the power of markets to do social good. Within this historical timeframe, regulators and government officials were to approach powerful economic interests solicitously and without the conviction that they were defending the common good. Government became the junior partner in regulation, an attitude which has led us to so much grief in the financial sector. If applied to issues that were a matter of “improving environmental quality” or even the regulation of human-to-human affairs, the unseriousness of the policy would remain a matter of regulatory or political “taste”. However, in dealing with the unique and largely irreversible damage to the climate system as a whole, the unseriousness of cap and trade becomes catastrophic.
There is a fundamental disconnect between the emissions trading instrument and the domain of action in which that instrument is supposed to act. While economists have a long history of misrecognizing their models of reality with reality itself (most notably the recent models that did not see the huge asset bubble pre-2008), it appears in cap and trade that this tradition continues with potentially disastrous effects. Modeling that one MIGHT be able to “cap” global warming pollution by regulating quantities of emissions by selling and trading permits is not the same thing as providing substantial evidence that this would actually work better than the alternatives. And given the potential that we would be irreversibly altering the biosphere, we need to be choosing from the best tools available. I will allow that cap and trade could theoretically, using it’s particularly arbitrary administrative component, achieve its targets in an ungainly and economically damaging way but this is not relying on its much discussed carbon market component.
The sole supposed success story for emissions trading, the US acid-rain cap and trade system, has not been as successful as direct regulation of emissions in Europe and Japan in reducing sulphur dioxide the main acid rain causing pollutant. Why turn away from what works better for vague or insubstantial reasons? The unseriousness of arguments for cap and trade is that they are “selling” the idea that one could avoid more traditional government-led ways of controlling emissions and effecting social change. When one “sells” an idea in the sciences, one overlooks elements of reality that falsify or do not support one’s hypothesis.
One of the prime selling arguments for cap and trade is that it is supposedly a more economical way to cut emissions per tonne, for which I have not yet seen a serious, comparative study. However this argument for cap and trade, if it has any truth in it at all, overlooks the entire point of carbon mitigation: to cut emissions radically, securely and fast to avoid major catastrophes. The costs of NOT achieving carbon emissions goals is that whatever incremental costs within reason are associated with another instrument (direct regulation or taxation) are well worth playing if those instruments are going to get us there faster and more reliably. This argument is always left out by cap and trade advocates who continue harping on “least cost” solutions. In this context any instrument that is more reliable or faster than cap and trade would appear to be much more valuable.
The constant and alarming repetition of the “least cost” doctrine as a fundamental value in discussions of carbon mitigation is also a sign of how distant the designers and advocates of the cap and trade policy are from the actual physical and business domain where emissions are cut. Many of the large scale cuts in emissions in the area of energy and transportation will be infrastructure projects or high quality durable goods that are meant to last 10 to 50 years. In this domain “least cost” bids do not necessarily win the job because of concerns by project commissioners/buyers for the financial viability of the constructors and the quality of the resulting product with which they will live for decades. So “least cost” excludes most of the large-scale emissions cuts that can happen within a period of 3 to 10 years. The building of infrastructure falls almost entirely out of the orthodoxy of climate economics which assumes an undifferentiated, infinitely divisible mass of carbon mitigation measures which can be efficiently and effectively filtered almost entirely via cost, leaving aside their appurtenance to a given emissions source.
The means by which carbon pricing, of which cap and trade is one type, will transform energy use is to send a “price signal” to owners of polluting facilities to invest in technologies that cut these emissions. As discussed above cap and trade sends a signal of relatively poor quality as compared to a carbon tax, as it makes it difficult to predict the price of carbon into the next 5 or 10 years. This is crucial from the point of view of making the long-term investments needed to cut carbon emissions. So the touted equivalence between cap and trade and carbon taxation which is sometimes uttered by the current generation of environmental economists, is misleading when one considers the type of investments required to actually cut emissions on a firm-by-firm basis.
Cap and trade is actually a hybrid instrument, the mixture of a price and a permit regulatory instrument with an administrative component. By mixing these two components, cap and trade appears to offer a “one stop shop” to government officials. However in “mashing together” these two types of instrument, the quality of both components is substantially degraded: carbon taxes/fees are a much better price instrument and direct regulation and rulemaking, if funded, are far more effective and rational than cap and trade’s administrative measures that will either concern themselves with permit fraud or arbitrary shut down of facilities that have no more permits.
Finally and perhaps most difficult to appreciate is that cap and trade translates the problem domain (carbon mitigation) into it’s own language, foreclosing the possibility for insiders and potentially outsiders to examine how it is doing. This might be called “cap-and-trade solipsism.” While there is a long tradition in economics and other social sciences in inventing special use languages and terminology, cap and trade’s language makes everything within this domain a problem of markets and its own artificial market structures to a degree that impedes more general understanding and ultimately troubleshooting or comparison between alternatives. Recently I exchanged a series of comments with a gentleman who persisted in returning the discussion to one of “allowance prices” when I was bringing up a comparison between cap and trade and carbon tax. The inability or unwillingness to use a generic framework means discussions become distorted. There is large-scale epistemological issue for the social sciences here that unfortunately needs to be resolved simultaneously with improving climate policy. Put in other words, “quality control” in the social sciences is very difficult to put into action because of their fragmented structure.
Instead of basing the world’s most important policy instrument upon social scientific principles that have been shown again and again to alter consumer and investor behavior (clear incentives, clear and stable disincentives [taxes, fees, and rules], funded mandates, public investment), the choice has been made over and over again by people who should know better to go with the “thought experiment” that was assumed to have political benefits but has turned out to be less effective and terribly cumbersome as a policy. These supposed political benefits also by implication undermine the only stance that is going to significantly reduce emissions: that government action backed by the ethical concern of leaders and the public will impose direct limits on and help restructure our energy use system. If, according to cap and trade’s philosophy, the market is “doing it by itself” then the public should “stand back” and let the market do its work. This is a recipe for nothing getting done in the area of substantial emissions cuts.
2. Unseriousness for Politicians
As implied above, cap and trade kicks the political can of responsibility for climate protection “down the road” or “passes the buck” to markets or a future generation of politicians that will have to name a price for carbon mitigation. The declaration of the cap is the political “candy” with which politicians can claim an easy virtue for themselves without naming costs. In instituting a cap and trade framework, no leader is fully committing to regulating industry and consumer wants in the name of climate protection. An effective climate policy simply cannot “pass the buck”. Cap and trade institutionalizes “buck passing” via deferral to carbon markets, via the use of offsets and by not naming a price on carbon at the outset. The declaration of the cap, which is largely symbolic because if ambitious it is unenforceable, remains a fig-leaf behind which no pressure or commitment of public or consumer funds is required.
As I have argued here, and in conformance to the fears of many opponents of action on climate change, there is no getting around a strong role for government in transforming our fossil fuel-using habits; cap and trade, at least within the US context, furthers the myth that government is secondary to the process of carbon mitigation, which carbon markets will do better. If we take SOx regulation as an example, a far simpler task, this will definitely not be the case. Furthermore achieving carbon neutrality will mean lots of new public or government-incentivized investment in public goods like electric train lines, electric transmission and various large and small public works projects. To soft-pedal government is a mistake from the outset if you are serious about carbon mitigation.
Within this context there may be a differential perception of cap and trade when viewed in societies with a long history of government social welfare, higher taxes including energy taxes, and an across-the-political spectrum agreement that the government regulation is OK. To Europeans, for instance, cap and trade is just another regulatory program (that was supposed to be more acceptable to the Americans) that of course involves costs and raising the price of energy (like many European taxes), blending in with other initiatives. In the American context, cap and trade is supposed to circumvent government’s role and also promise no or negligible costs. Cap and trade might appear to be more acceptable in a context where government has a greater role in setting energy prices, planning infrastructure and there is already a fairly high level of taxation.
Ultimately government leaders will need to take responsibility for leading carbon mitigation efforts inclusive of the associated frustrations and transformations of old habits for business and consumers. While individual citizens taking responsibility for their own carbon footprints will also be crucial, leaders must lead and provide the matrix within which lower carbon choices are not acts of social and economic exile. As open as possible a discussion and confrontation with the costs and dislocations associated with this process is not only desirable but entirely necessary. Cap and trade, wherever the myth of market self-sufficiency is strong, undermines the development of a political discourse where both leaders and the public at large can examine the costs and benefits to action on climate change.
3. Unseriousness for Polluters
The cap and trade policy with its indirection, use of market “games”, and generally lax goals in implementation sends the message to polluters that they shouldn’t take climate change too seriously. The fundamental problem with cap and trade is that not only is it often in actual implementation a “sweet deal” for large polluters but it distracts them, with its market game playing (auctions, trading, permit allocation debates, offsets) from the serious tasks facing them in making their businesses largely carbon neutral within a couple decades. Auctions and trading are supposed to tap into the competitive mindset of businesspeople and are efforts to “come over to their side of the table”. While none of this is necessarily as trivial a game as football or baseball, the insertion of these elements into cap and trade are extraneous to pricing carbon and then letting businesspeople make decisions about how to reduce their carbon costs. The assumption is made that somehow, perhaps due to short attention spans or a lack of interest in the actual technological and processual challenges in cutting emissions that one would in some sense patronize businesses by creating a carbon “House of Games” from cloth from the (paper trading aspects) of the business world.
Furthermore, the notion that via carbon markets polluters would seek any “least cost” solution to mitigating carbon erases any notion of duty to innovate and stanch one’s own emissions, which might involve perhaps developing a small research and testing function within one’s organization. The policy, in reiterating what already is the mission of businesses, to reduce their costs, aligns itself with a price oriented rather than a process-oriented approach to emissions controls. The diversion of the market for pollution credits makes the job of mitigating carbon relatively “unserious” for the largest emitters.
4. Unseriousness for Financial Markets
One of the major challenges for many nations currently is to create an environment where long-term infrastructure and capital investment can thrive, especially for the purpose of transforming energy use. The US economy in particular has deindustrialized considerably and has a decaying infrastructure that is heavily dependent upon fossil fuels of both the imported (oil) and the domestic (coal and natural gas) kinds. The serious challenge associated with climate change is making the investment in this type of infrastructure and real energy and transport capital more attractive than the more speculative financial instruments based largely on paper rather than real assets which have dominated finance over the last 25 years.
Some economists and critics of the financial excesses of the last decades have called for finance to be made boring (again), meaning less financial engineering and, among other things, more financing of real engineering projects. The carbon permit market and the potential for the generation of various carbon derivatives opens another lucrative market for financial firms to make the quicker buck by trading rather than becoming involved in a long-term lending relationship with industrial and project development firms. On Wall Street, it has been an almost non-stop financial “party” over the last few decades as financial rewards have outstripped any meaningful economic value that this work has created.
Cap and trade then works against more general financial reform efforts that attempt to constrain banking and reduce the attractions of trading in favor of productive investments that create real jobs (and cut emissions) in the wider economy. The trading component of cap and trade and the creation of a new tradable financial abstraction and property right works almost diametrically against the process by which capital would be funneled towards long-term investments in things like wind farms, concentrating solar thermal farms, transmission, electric vehicle charging stations, etc. To trade is the financial “candy” that allows for high returns to traders within short time frames.
Common Feature of Cap and Trade’s Unseriousness
Cap and trade in its scientific attitude, orientation to politics, financial market design, and permit regulation all have one commonality: the cap and trade system inserts one or more extraneous elements that do not serve the purpose of cutting emissions or increasing the overall efficiency of the system. In most cases this “stop” along the way to achieving the goal is some form of “visit” to the carbon market before the actual job of cutting emissions or financing the emissions cutting projects can occur. The insertion of the carbon market into the process impedes rather than enhances the process of cutting emissions as this inserts variability and the structure of the permit market and its many superfluous stakeholders into the emissions cutting process.
The insertion of extraneous stakeholders into the process of cutting emissions means that there are people who have already developed financial interests in a status quo that will not accelerate emission cutting but will keep it only at a low boil, as they seek profits from price variability. These stakeholders will try to extract profits from the differences between “buy” and “sell” prices without much oversight or necessitate the erection of an additional regulatory structure WITHIN the cap and trade structure. As we have as yet not even succeeded in regulating the already existing derivatives market in the broader economy, why should be we be optimistic, as the salespeople of cap and trade will respond, that we would succeed in regulating this market, if the will is even there, once we have set up a structure that insures that variability? The stupidity of this altogether avoidable situation is mind-boggling.
Some take this to the extreme and say that profit-making itself is wrong or make various efforts to accuse others of making profit off doing good, as a way to impugn their characters. Instead, profit needs to be made for delivering real value rather than thoughtlessly offering a massive new lease on life to the overblown financial trading sector at a time that we can ill afford it. An ill-informed, undifferentiated endorsement of all profit-making leads to the giveaway of the planet’s biosphere to a coalition of extremely short-sighted people, while a condemnation of all profit-making insures that the value of efficiently run businesses will be excluded from the discussion.
“Carbon finance” despite its novelty, moors our financial system in the past rather than propels it into the future. Carbon finance interferes with an orientation towards investment in real assets that cut carbon by offering the “carrot” to financial firms of greater profits from trading carbon derivatives. Maybe with more time or a flusher economic system we could afford to play around with trading markets and carbon but we literally do not have the time anymore.
A “serious” carbon policy removes the extraneous elements because, frankly, we don’t have time to play around with someone’s intellectual hobby horse or third-parties’ wishes to extract excess trading profits from a transaction between two other parties. So-called “carbon finance” is not the same thing as project finance or venture investment. We need finance and investment with reasonable returns on investment without the “sweetening” for financial players of the trading profits associated with carbon trading.
Why is Cap and Trade’s Unseriousness Invisible or Tolerable to Well-Meaning Folk?
Even in an environment of skepticism about financial derivatives, cap and trade seems to have escaped critical scrutiny by people concerned about the climate. Paul Krugman, for instance, who is highly critical of how Wall Street has been regulated, puts out an occasional Op-Ed or blog post that supports cap and trade. Joe Romm, a blogger who wrote a good deal last year on his blog about a “global Ponzi scheme” and “rip-offsets”, has as of this year almost nothing critical to say about cap and trade. Even if writers and bloggers have reasons of personal political position or paychecks involved in exempting this instrument from any meaningful critical gaze, the equation of cap and trade with action on climate is widespread in the mainstream environmental movement and in liberal circles. Why is this so?
There are components to the “invisibility cloak” that makes it more likely that climate activists and politicians continue to support cap and trade despite (perhaps) knowing better.
1) Consumer Society and Unseriousness
A feature of wealthier consumer societies is that we have become used to pushing away or avoiding difficulties by moving on to the next product or fashion. After all, President George W. Bush after the 9/11 terrorist attacks recommended that people “go shopping” as a way to fight the terrorists. While at the time this seemed somewhat logical (keeping the economy going), it remained a superficial response to the dynamics that led to 9/11.
While we can pillory ex-President Bush for his awkward paean to consumerism, the attitude that simply a change of scenery or of product will make a world of difference is deeply embedded in the wealthier societies of the world. Therefore in this context, a “shopping” or market model for reducing emissions fits right in: cap and trade suggests that polluters are simply shopping for the “best buy” on the emissions reductions market, which, according to the global free trade ideal, should extend around the world.
Participants, and I include myself in this, in consumer society often become “unserious” people, in the sense that we are often preoccupied by largely trivial distinctions between products and services and questions of our own social identities. Public information systems and mass media that make the most of the latest scandals and inconsequential aspects of celebrity personalities add to the trivialization of choice. Cap and trade’s lack of seriousness blends in within this context.
2) Normalization of Derivative Trading-Based Finance
Trading financial instruments involves not seriously committing to a project or firm but simply trying to “work the spread” between buy and sell over a short period of time. There is a generation of people under 45 or 50 who grew up in a time when banking and finance came to be represented by the “glamorous” lifestyles and reputations of bankers/traders or the individualized pursuit of wealth of the day-trader. This generation compresses or misrecognizes the difference between investment and financial trading, having no memory of a different time when banking was largely “boring” and involved long-term commitments between financiers and borrowers. The abstract and individually isolated nature of financial trading hides the externalities (damages to others) created by a trading-dominated financial system.
Cap and trade’s design is a product of the confusion of these two functions of financial markets and misapplies a trading instrument where an investment instrument is actually needed. I can imagine that younger supporters of cap and trade have difficulty imagining a finance sector that sees its primary duty as issuing long-term loans rather than being involved in fast-paced swaps and trades.
3) Decline of an Ethic of Justified Profit-Making
In earlier periods in the economic history of capitalism there developed in some circles an ethic of justified profit-making: that one needed in some way to show that one had delivered a certain product or service with which one’s wealth became defined. This allowed the new social class of business owners to find a reason to feel superior to those who simply inherited their wealth or collected rent from large inherited landholdings. What Max Weber, called the “Protestant work ethic” (that is recently being disputed as being exclusively associated with Protestant portions of early Europe) helped define the mixture of ownership of productive assets (capital) and the entrepreneur’s work which promoted in the business owner a sense of virtue while risking committing the ancient sin of greed.
However, in the periodic speculative bubbles that have marked the history of our economic system, the relationship between entrepreneurial risk-taking in real enterprises and amounts of profit becomes frayed. In these periods, profits from trading relatively overpriced assets or paper derivatives of those assets can outstrip those earned by real entrepreneurs. James Galbraith has suggested that there exist a class of economic “predators” that thrive in speculative bubbles by their talent at locating opportunities to make what in other eras would be considered to be unearned profits.
In our current era, we are just beginning to hear calls for something like ethical profit-making, where the ethics is not simply inserted by association with a nominal cause or label attached to enterprise (“green” capitalism) but to the actual mechanism by which rewards are dispersed to individuals. Was risk taken? Was the product or service useful and/or socially useful? Was the compensation scheme just? In advanced industrial countries like the US, that have deindustrialized, more people are asking the question whether an “industrial policy” or systematic reform of the finance system will redirect capital to productive uses.
As outlined above, cap and trade, while it has a green veneer, creates a massive structure for targeting and achieving trading profits that are not compensation for a useful product or service. In the cap and trade framework those who profit the most will be not those who cut the most emissions either via innovation, efficiency or implementation.
As the policy’s designers have normalized a financial trading-led economic system they have developed a conception of business profit that does not distinguish between profit from investment and entrepreneurial risk and profits from exploiting asymmetrical information in trading markets.
4) Climate Economics is Tied to Monetarist Ways of Thinking
The economics of climate change has emerged in an era when monetarism had become the new orthodoxy in economics. Most practitioners of climate economics are focused to an excessive degree upon setting a price on carbon rather than also looking at the specific technological and infrastructure challenges associated with addressing climate change. A Keynesian approach to economics, which had fallen out of favor in the 80’s and 90’s, enables economists to appreciate the vital role of government investment and leadership, though it doesn’t deliver any ready-made solutions in the area of climate change (in part because it is underdeveloped through recent neglect). In this context, making the sole choice of policy between two carbon pricing instruments, cap and trade and carbon taxation, flattens some of the differences between the two instruments (though in an objective analysis still favors carbon taxation). Additional benefits of carbon taxes or fees, that they can complement or do not interfere so much with other policies, are left out of the picture.
5) Knowledge Gap Regarding Relevant Business Investment Decision Making Processes
There is a knowledge gap among the designers of policy, its supporters and those who will actually use the policy to make investment decisions in the domain of energy efficiency and business process reform. The economists who theorize about cap and trade and the environmental advocates of the policy do not in general have business experience and neither do political decision makers. Critical knowledge of how capital investment decisions are evaluated within businesses has evaded the notice of most of the policy designers, including the basic cash-flow analysis tools, like NPV and IRR. Many of the business leaders who endorse cap and trade and may be consulted by political leaders are not necessarily motivated to help policy designers to create the most aggressive or most effective policies. Engineers who understand which measures are relevant to their industries might not have been consulted by either one or the other of these groups. So those who are motivated to cut emissions do not know how the microeconomics works and they don’t communicate regularly with those who know something about the technical challenges and available equipment.
6) Expectations of a Machiavellian Politics
Speaking mostly of the US, but also taking into account its outsized influence on climate policy, sincere supporters of cap and trade see themselves faced with what amounts to be a false choice: support any proposal labeled “climate policy”, which unfortunately has been indentified largely with the cap and trade instrument, or implicitly support the rabid denial of climate change coming from opponents of any and all action to stem GHG emissions. In the US at least this type of choice between principles and pragmatism is particularly stark as negotiations often start with the liberal-left having taken it’s principled position off the table from the start.
While the political Right, which has historically been opposed to action on climate change, has often made proposals that start with their “first principles”, reformers from the center and the left in the US have made political careers lately by starting from a position of compromise or even appeasement. The successes of the Clinton Administration such as they were, were based on policy efforts that sacrificed principle from the beginning of the negotiation rather than in the middle. Even if we assume, in a democracy, that no one gets exactly what they want, we find that this self-censorship on the part of the liberal or Left side of the spectrum has, along with massive infusions of money from wealthy interest groups, truncated the scope of reform proposals and narrowed public political discussion. Unfortunately, the current Obama Administration has inherited some of the Clinton Administration’s emphasis on strategy that divorces itself from principle.
In such an atmosphere, the actual policy proposals for reform become tailored more for communication with an “inside politics” and lobbyist audience rather than the population at large. It is now common for the press and officials to generate a public discourse of “do-ability” without the need to explain why the focus on legislative success will concretely help the broader public. Political leaders and journalists want to be “insiders” and the public is expected to acknowledge that their interests may take a back seat in public discussion and in enacted policy. If one expects policy and politics to be about the self-preservation of political careers, cap and trade blends in, not for the success that it promises but it’s structure that remains impenetrable to all but the inside stakeholders.
Dimensions of Serious Climate Policy
While elsewhere I have offered summaries of two sets of policies and one overarching meta-economic framework for effective (serious) climate policy, here I will offer another point of entry into why I think climate policy needs a thoroughgoing revision. If we accept that we are in serious situation, an emergency, certain approaches are appropriate while others are not appropriate at all and should be left off the table. I believe looking at climate policy through the lens of “seriousness” or otherwise can reveal important dimensions of policy. While I believe I have offered two and half serious climate policies, I do not want these principles to suggest that these are the only possible serious climate policies
A serious climate policy
- Can cut greenhouse gas emissions with the highest (or close to the highest) level of rapidity without endangering economic development in the long term.
- Can be implemented (started) rapidly
- Recognizes and builds on existing emissions-reducing technology
- Tracks and promotes promising emerging technologies
- Supports energy research and innovation but does not hold policy hostage to unknown future breakthroughs.
- Aligns incentives (self-interest) to the greatest degree possible with cutting emissions.
- Excludes extraneous, non-climate related concerns from the core of the policy insofar as they may slow or undermine the most rapid action on climate; resist
- Can be adjusted to cut more or less emissions
- Draws strength from and mobilizes the “moral sentiments” and our sense of duty to each other and to the future.
- Enables transparent and equitable negotiations about global obligations and the price of climate change action between nations
- Prioritizes stanching the largest sources of emissions (coal-fired electrical power, tropical deforestation, fossil-fueled transport) from day one of the enactment of policy.
- Considers “emergency” measures that may lead to more rapid mitigation or cooling effects, inclusive of research into so-called “geo-engineering”.
- Addresses the balance between expenditures for aid for climate adaptation and expenditures for climate mitigation
- Increases the attractiveness of longer term investments in emissions reductions and sustainability.
- Addresses black carbon emissions nationally and internationally.
Wishlist for COP15
As COP15 is proceeding apace this week, I wanted to put out a wishlist for the outcome of that event as relates to a serious climate policy. Minds may already be made up and I am just one voice but here it goes:
- Commit to ambitious targets (30% over 1990 emissions by 2020 for industrialized nations, reduce deforestation related emissions by 90% by 2020)
- Do not commit to emissions trading as the means to achieve these goals
- Create a standing international committee to evaluate the institution of a price-based international instrument or other, perhaps project-based, alternatives to cap and trade
- Commit to a science- and evidence-based approach to policy