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Thanks to the reporting of Dexter Ford of the New York Times, we learn about the growing interest in electric motorcycle fabrication and racing. At the fabled Isle of Man racing circuit there was this year a one lap (37.73 mile) electric motorcycle race won by Team Agni, which mounted its own motors on a Suzuki sport bike chassis combined with 12 kWh of lithium polymer batteries. The winning bike averaged 87.4 mph through a course with hairpin turns, narrow roads as well as straightaways. By contrast the fastest circuit on a conventional motorcycle was this year an average of 131 mph.
Apparently, the Isle of Man has great symbolic importance in the motorcycle racing world as there are every year conventionally powered motorcycle races there on the same circuit called the TT or Tourist Trophy. The new race sanctioned by the official motorcycle racing body FIM, is called the TTXGP and the organizers are petitioning for the FIM to sanction a series of electric motorcycle races for 2010.
Electric motorcycles have already made a mark on motorcycle drag racing with the advent a couple years ago of the Killacycle which using A123 lithium phosphate batteries achieves 0-60mph in 0.97 seconds. The Killacycle achieved a world record for an electric vehicle for the quarter mile of 7.8 seconds with a speed at the end of 174 mph in October of last year.
Carbon Pricing is Just One Piece of the Puzzle: Towards a Comprehensive Climate and Energy Policy – Part 2 February 4, 2009Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, News and Events, Renewable Energy, Sustainable Thinking.
In Part 1, I called attention to the rapid shift in general economic policy in the last 6 months. I developed an outline of two distinct economic schools, one that holds up the ideal of a self-sufficient, self-regulating market and another that sees markets as having shortcomings that require government to supplement and regulate where the market fails. The first school might be called monetarist/supply-side and the second Keynesian with varying tendencies within that school. I highlighted how each of these schools is attached to a particular worldview or set of worldviews. The conflict within economics will necessarily have impacts on climate policy.
Reliance on Carbon Pricing: Hanging Onto an Idealized View of Markets?
Climate activists have been focused since the early 1990’s on instituting a cap and trade system that they feel, almost singlehandedly, would induce or compel economic actors to emit only up to a certain “cap” of greenhouse gas emissions. The Kyoto Protocol, ratified by 180 countries, is an attempt at an international cap and trade system. Both cap and trade and its near competitor, a carbon tax are “market-based” policy instruments that attempt to curb greenhouse gas emissions by assigning a price to greenhouse gases. The price will function as a signal (largely in the form of a disincentive) to market actors to change technologies and procedures to emit less carbon into the atmosphere. These policies are “market-based” because they rely on the pricing mechanism and allow market actors to decide how they reduce their emissions as opposed to more directive, so-called “command and control” regulations that tell market actors what exactly they must do. An environmentally-sensitized variation on the monetarist/free market worldview and policy orientation, the idea is that the private economic actors, mostly businesses, know best what to do if given the appropriate price signal.
Climate change concerns and a climate protection movement have emerged in the last two decades, an era of monetarist/free market dominance of economic policy and to a lesser extent the economics profession. Carbon taxes, though a tax and therefore viewed with suspicion by free market advocates, have a single “market-based” layer in introducing a carbon price into the calculations of market actors, a disincentive to which they can respond as they choose. Cap and trade systems add an additional carbon permit and offset trading market, in addition to introducing a (varying) price on carbon, so are doubly market-based. Despite these efforts made to introduce market-emulating mechanisms into environmental regulation, the political advocates of free markets are almost universally opposed to cap and trade, carbon taxes and direct regulation; they generally show themselves to be unconcerned about climate change and are more concerned about how any regulation will interfere with smooth and unhindered market functioning, which to them is the summum bonum (Latin for the highest ethical good).
Much discussion and dispute has been focused on the choice of which of the two main market-based instruments will do the heavy lifting in climate policy. The carbon tax assigns a price directly to carbon emissions and is levied directly by governments. It is relatively simple instrument, favored by many economists and some industries, but criticized by many climate activists who feel that it is insufficiently rigorous. Others have criticized a tax because it is politically unpalatable in an anti-tax era, still others because it does not in its initial designs utilize carbon trading. Despite this, two leaders in the climate protection movement, Al Gore and Jim Hansen, prefer an stringent carbon tax policy to the cap and trade systems proposed, though both have suggested that it should not represent a net increase in the overall tax burden by cutting other taxes or returning a dividend.
Carbon taxes and cap and trade can be distinguished as follows: the cap and trade system sets the amount of allowable GHG pollution and, if permits are auctioned rather than given away, the price follows from the cap; a carbon tax sets the price which would limit emissions via the amount of direct economic losses inflicted or fear thereof on economic actors. In a cap and trade systems, punitive fines and potential criminal proceedings can follow from exceeding the permitted amount of pollution. A lower cap produces fewer and therefore more expensive permits (in an auction) and a higher carbon tax inhibits emissions because of their increased expense thereby leading economic actors to lower levels of emissions.
The revenues from both permit auctions and the carbon tax can be directed any number of different ways: to offset or reduce other taxes, to be spent on carbon emissions reduction, or be returned to taxpayers in the form of a dividend. The latter idea is an effort to diminish the generally regressive income distribution effect of carbon pricing: the carbon price will, percentage-wise, through higher prices for energy and high-carbon intensity represent a higher portion of the budgets of lower income families more than upper-income ones. The latter system is called a “cap and dividend” or a carbon tax dividend. As it has been developed, the basic carbon pricing “concept” does not recommend or entail any particular use for the funds collected, therefore the diversity of proposals.
Despite the support of some renowned climate activists for the carbon tax, during the years of the Bush Presidency support for a cap and trade system with 100% auction of permits and a tight, progressively more restrictive cap, has been considered to be the mark of serious action to stem carbon emissions. The historical model for greenhouse gas cap and trade systems were the systems introduced in North America in 1990 to limit the emission of acid rain causing pollution from power plants, called SOx emissions. Designed explicitly as an experiment in market based regulation and an alternative to directive regulation of power plants by governments, these power plants were incentivized to adopt SOx scrubbing technology by being allowed to pollute up to the number of permits that they purchased in a permit auction. If the power utility was able to emit less than the permits they purchased, they could sell these permits to firms that polluted more at a profit, introducing, per the market-oriented theory behind the program design, a profit motive into the process of adopting the emissions scrubber technology.
Carbon cap and trade systems are similar in design to SOx cap and trade systems but are many times larger in the scope of their application and also present market actors with a vastly larger number of possible choices to reduce or offset their emissions as compared to the SOx systems. The most rigorous cap and trade system uses 100% auction of pollution permits with a high reserve price and an aggressive overall pollution cap. The least aggressive gives out permits and has a “loose” or higher cap, which has been a criticism of the initial round of the Kyoto protocol. As compared to carbon taxes, a cap and trade system is much more complicated. However, there are hybrid systems that place pricing floors and caps on pollution permit prices, effectively offering a carbon price within a range, similar to a variable carbon tax.
Carbon Pricing and “Not Knowing” the Solutions
The premise of carbon pricing as a complete climate solution, as opposed to “command and control” regulation, is that regulators and the designers of a carbon pricing do not know the technological solutions to reducing carbon emissions, in keeping with the monetarist/free market tendency to view scientific knowledge as limited in scope and not generalizable. The market becomes a “black box” that produces innovation or favorable and/or efficient social results. In practical terms this could mean that designers of the policy are thought not to be cognizant of industry inside knowledge or that no one can know what the future will bring in terms of technological development. Entering into a carbon pricing system then means embarking on a technological and economic “voyage of discovery”.
If one believes that one knows or we know at least a portion of the technological solutions to reducing carbon emissions, carbon pricing would be in many instances a roundabout solution for supporting those solutions.
The Benefits and Limits of Carbon Pricing
In an era of lingering climate change denial and resistance by fossil fuel and industrial interests to change, the real consequences of carbon pricing policies have tended to be glossed over by its advocates. The thought has been “we must get this passed, no matter what”, “you’re for us or you’re against us”, or alternatively “this is the only politically realistic climate policy.” Usually these sentiments are applied to the more widely considered and discussed cap and trade systems.
Troubling though is the finding that these policies, in particular cap and trade systems, were selected because of allegiances to now-questioned but politically popular economic theories, rather than the real effectiveness of these policies. In a little noticed review, Gar Lipow has pointed out that straight “command and control” regulatory schemes in Germany and Italy reduced acid rain pollution far more than the US SOx cap and trade system upon which the Kyoto protocol and other cap and trade systems were based. In Germany SOx emissions fell 87%, in Italy 62%, while in the US in the same period they only fell 31%, with comparable disparities in the absolute levels of these pollutants on the two continents at the end of the study period (2001).
Furthermore, the notion that cap and trade systems spurred innovation has come under question by economists. Margaret Taylor in an analysis of patenting activity has found that patents related to emissions scrubbers for SOx were not significantly affected by the institution of cap and trade systems as opposed to a spate of other regulatory mechanisms worldwide. Studies have also shown that the costs to firms to reduce their SOx under a cap and trade systems as opposed to direct regulation were roughly equivalent.
If conventional regulation is simpler, about as costly, and substantially more effective than historical cap and trade systems, why the enthusiasm for cap and trade to tackle the far broader problem of carbon dioxide and GHG emissions? The coincidence of the now somewhat discredited political fashion for expanding market mechanisms to almost every social problem seems to account at least in part for the adoption of cap and trade systems during the market-focused 1990’s and early 2000’s.
Additionally the choice of cap and trade in the 1990’s may have seemed more justifiable out of a sense by international regulators of uncertainty about what the technological solutions to curbing carbon emissions might be. We have advanced since then in our understanding of workable technological solutions to reduce carbon emissions substantially, some which are now “marketable” and some of which require the help of supportive policies or regulations to make it on the markets. We have not arrived necessarily at definitive solutions for all technological carbon emissions reduction challenges but we have many adequate “starter” solutions.
Assessing the Benefits of Carbon Pricing
In our era of idealized and now somewhat disenchanted views of what markets are and how they function, it is difficult to make a neutral assessment of the benefits of carbon pricing especially cap and trade; in other words, we have a somewhat “bipolar” conception of markets and the self-interested behavior upon which they rest. Not only is this a matter of perception but a deep economic and sociological problem: we have no rigorous description of markets as institutions like other institutions so we tend to treat them as “sui generis”. If markets are unique it is more difficult to formulate how to reshape or re-energize them, if that is what is on the agenda.
Advocates of carbon pricing have tended to list the fact that cap and trade, in particular, is “market-based” as in-and-of-itself a recommendation of these instruments. If this is simply a matter of saying that it conforms to the monetarist economic fashion of the last three decades, then this is no longer such a recommendation, at least to many who are now viewing the economy of the recent past more critically. A finance-heavy economy dependent upon trading seems to have had more of a downside than its proponents and defenders would have had us believe.
Furthermore, beyond intellectual allegiances, if the trading element or market-based element was a signal to powerful economic interests that carbon regulation would potentially be a profitable instrument within some reasonable bounds this might be politically and ethically defensible. However if the rush to declare carbon regulations as market-based a signal that they might be corruptible instruments with the lure of windfall profits, this would appear unseemly and, in the end, defeat the purpose of carbon regulation, regulations that would raise energy and goods prices for all sectors within the economy.
Here I will attempt to abstract from the proposed structure of carbon pricing in both its carbon tax and cap and trade forms, the “socially useful” and politically defensible components of carbon pricing that go beyond theoretical commitment to the market mechanism:
- “Viral” – The influence of a carbon price could spread virally – as carbon pricing will be applied to energy and other basic goods, the price will effect all economic sectors and “work its way” into many unforeseen types of transactions that ultimately will influence carbon emissions.
- (Potentially) Global – A tradable carbon credit or permit could allow cross-border involvement and participation of less-developed countries in carbon sequestration and emissions reduction efforts (addressing the global nature of climate change).
- Incremental – Carbon pricing will encourage incremental changes based on the price level – carbon pricing then will encourage energy efficiency, behavior changes with approximately equivalent costs, land use change, bio-sequestration, and small to mid-sized capital investments
- Monetary – Carbon pricing is directly attached to money and financial calculations, the most compact decision-making form for individuals and organizations. I have proposed a much more complex decision making tool for big, high-level decisions but a simple price fits relatively snugly into most existing financial instruments like cash flows, net present value, etc.
- Quasi-universal equivalent or signifier – Related to “2” and “4”, the carbon price can allow comparison and trade of equivalents between unlike activities like afforestation, energy efficiency and renewable energy. They all would be assigned a monetary value according to their impact on carbon emissions.
- Induces Action – changes in prices induce actions or the propensity to take action.
- Internalizing Carbon Externality – Of course, the main reason for the program, to attach to global warming gases an disincentive/incentive that creates a carbon market or carbon “line-item” in economic calculations.
The Limitations of Carbon Pricing
Even if we accept that policy is always co-produced by political and economic vogues and enthusiasms, there are troubling limits to relying exclusively or largely on carbon pricing to drive innovation or rapid deployment of clean technologies. Below are a listing of some questionable assumptions in and real constraints on carbon pricing.
1) “Private actors know best” – For one, the assumption that businesses and individuals will know which solutions will work best for them to reduce emissions is flawed. Most businesses will be following the recommendations of government sponsored studies of which technologies will work and which will not. Most businesses and families do not monitor and measure their GHG emissions as a matter of course, nor are they necessarily experts in the selection of new technologies, some of which will never have been deployed before on the market en masse. Furthermore, to become experts in the selection of technologies, firms will need to spend resources, potentially reduplicating the efforts of other firms, often outside the areas of their core competencies.
2) “Price signal will be clear” – As a result of the above, both cap and trade and carbon tax
systems will probably end up relying on large “look-up tables” of engineering analyses of different technologies and use some type of carbon emissions calculator to assess the degree to which they will be able to reduce greenhouse gases. The price “signal” will not be the original means by which firms will calibrate their efforts to reduce greenhouse gases but will instead be facing a series of capital investment decisions that will yield either discrete emissions reductions “equivalents” or a range of reductions depending upon their actual usage, which would need to be measured after the fact. Therefore the market in emissions will involve a series of translations of expected emissions reductions with actual reductions that independent monitors will verify. So the price signal will be felt over a period of time and will not be necessarily clear. Probably the most effective aspect of this signal would be the perception that in the future, economic losses will be very high as rises in the carbon price are anticipated, so the price signal may be most effective as a blunt instrument of fear.
3) Politically feasible carbon price is low – Almost all observers agree that carbon pricing, whether arrived at through permit auctions or via direct taxation, will not in the first years be particularly high. Expectations put pricing in the neighborhood of $15/tonne or less; the current worldwide price in the economic downturn is around $12/tonne . At this price level, some efforts to improve efficiency or purchase offsets will be inspired but the effect on energy prices will be minimal, the equivalent of 13 cents per gallon of gasoline or less. Most affected at this price level will be energy intensive industries which if subject to the carbon price will be incentivized to pursue energy efficiency measures. However at these low price levels not much action will occur though as a society we will start to “at least go in the right direction”. More impressive to businesses and private citizens would be the future threat of increases in this carbon price within the framework of an aggressively administered and supported program. Political sentiment may change enabling more aggressive and higher carbon pricing which will boost the effectiveness of the carbon price substantially.
4) “Economic actors already have choice on the solutions market” The market paradigm is effective in the short term if market actors have a choice between two significantly different alternatives in terms of their carbon emissions that are made attractive or even tenable investments with the aid of the carbon price. Exceptions to this requirement are costless conservation measures and changes in behavior. Solutions need to be “on the market” or emerging onto the market for the price to actually effect decisions. The hope and theory in carbon pricing is that innovators will be providing these solutions that respond to demand from people and companies suffering or anticipating suffering from paying more for emissions-intensive products and energy. Demand for product innovation could be driven just as well or in addition by other mechanisms including straight energy taxes, conventional regulations, positive incentives, or government investment. In many sectors and technology areas, currently a very low or zero carbon alternative technology is either a) not yet on the market, b) requires a very high carbon price to be made competitive or c) requires the presence of technological preconditions, i.e. infrastructure, for the cleaner technology to function as an equivalent to existing polluting technologies. We see this in many elements of building the renewable electron economy and/or the Repower America plan. The carbon pricing model seems most appropriate to increasing energy and resource efficiency, the marketing of offsets, land-use changes or encouraging some behavioral changes by individuals rather than new paradigm development or infrastructure change. Energy efficiency or carbon offsets (which can be packaged in increments) allow for the incremental approach in the world of actual emissions reductions that matches the gradual increase of the carbon price.
5) “Emitters are morally responsible for climate change” – While designers of carbon pricing schemes may deny that they are attaching a moral evaluation to the amount of carbon tax or pollution permits that a polluter pays, the market based system ultimately holds individual or individual corporate actors responsible for solutions and implies that the worst polluters will suffer the consequences of their polluting ways. Eventually some of the economic pain would be spread around but would depend upon the actions or inaction of the polluters. This focus on what I have called a “particulate” or atomized set of actors, denies the integrated or systemic view of an economy which demands certain products that historically have required carbon emissions. A strong ethical case can be made that those who demand goods and services that depend on fossil resources or GHG emissions are as responsible as the actual emitters. Co-responsibility through a systemic approach might augment or in some areas replace a model that turns on pinning responsibility on polluters. Both individual responsibility and societal co-responsibility should not be viewed as mutually exclusive alternatives.
6) Carbon price will fluctuate dramatically (cap and trade) – The instability of the carbon price under cap and trade will make long-term investments difficult because there will be substantial uncertainty about the costs over time of paying for permits or reducing emissions to be able to re-sell permits. Carbon prices, because of the economic slowdown and the dramatic drops in the price of fossil energy, have sunk from $30/tonne in the summer 0f 2008 to currently around $12/tonne. This will make calculating financial benefits of various emissions-reduction investments using instruments like net present value difficult if not impossible. Additionally, on the other side of permit auctions, if the proceeds of carbon auctions under cap and trade systems are used as a revenue source or dividend, it will be an unreliable revenue source. This will also make long-term investments that depend on revenues from carbon auctions difficult.
7) Carbon pricing is, like all boosts in energy prices, regressive – As are all energy-related taxes or fees, carbon pricing is regressive, meaning that the resulting changes in prices will effect the middle class and the poor more than the rich. There are a number of suggestions about how to remedy this including returning all the resulting revenues as a flat dividend to people or to replace regressive taxes like the payroll tax with carbon taxes. The dividend idea will mute the price signal of the carbon price to some degree for the less advantaged.
8) Non-specific and frontloaded promotion of more costly solutions – One of the intentions of carbon pricing is to “level the playing field” for renewable energy and other more expensive clean energy generation systems. However, the carbon price by raising the price of fossil fuels and contributing to raising the price of almost every good in society, will only spur the development of renewable energy at a high price level if purchasing decisions are made based largely on present or near-term cost. This is the equivalent of building a large and elaborate scaffolding around a tree to reach the top of it rather than using a ladder or a “bucket truck”.
9) Unintended suppression of economic activity with poor calibration – If emissions reduction or energy efficiency technology is not ready or not affordable, there may be a net reduction in economic activity. This would reduce emissions but not as intended by cap and trade or carbon tax policy designers. There could be sector by sector systems that calibrate to a given market but this would defeat some of the intentions of a price on carbon and would increase complexity considerably. Business interests which want to do nothing about climate will use this as an excuse to try to delay or stop climate legislation.
10) Ties climate policy and activism to the downside of climate change – The theory of carbon pricing is so relentlessly focused on the downside of climate change that it is left open what positive emissions-reducing activities would be funded by revenues from either a carbon tax or cap and trade auctions; the negative, punitive effect of the price signal alone is supposed to suffice. Disincentives outweigh incentives in carbon pricing systems; carbon pricing is designed to say “stop” to polluters (us). The negativity of this policy instrument is a political liability, as popular support for taking steps to address climate change is key in designing an effective policy.
11) Assumes symmetry of opposites between problem and remedy – The mechanism of carbon pricing is structured as an economic force that is both symmetrically arrayed against and opposed to the emission of GHGs into the atmosphere. Carbon pricing is so relentlessly focused on emissions themselves that it may blind leaders and market actors to the possibility that the remedy for carbon emissions may be assymetrical with the problem itself. The solution may “reframe” the problem rather simply remain focused on the problem itself alone. For instance, related to “8” above, the remedy may be to invent new positive reasons to take action on climate and change our way of producing goods and services. While it is hoped in carbon pricing that the black box of the market will produce this new positive post-carbon society, there are reasons to believe that a more directive approach in certain areas may be necessary, especially with the tight timeframe given to us by climate scientists.
12) Technological innovation often originates outside of the market – The idealization of market mechanisms has attributed much innovation to the market when, in fact, non-market mechanisms have shepherded much technical innovation to the prototype stage or further. The market is treated by those who idealize it as a magical innovation “black box”. While fame and fortune are clear motivations for many innovators, the initial contexts or financing sources of innovation are often in government run laboratories or grants to university or industry scientists and engineers. With large capital goods, it is difficult for innovation to occur without the sponsorship, support, or regulatory approval of government. The presence “somewhere” of a market outlet for innovative ideas is often important but the market is not as much the site of innovation that was assumed in the context of the idealized market phenomenon.
13) Value of third-party carbon traders unclear (cap and trade) – If we accept the idealized picture of the market, the role of third-party traders add liquidity to markets. However if we view markets as one mechanism among a number, third-party carbon traders may lead to businesses either paying too much or too little for permits and add to carbon permit price volatility. Additionally, the potential for bad or disengaged market actors manipulating markets increases, interfering with the ability of businesses to make long-term investments in carbon reduction technologies.
14) “No one is in control” (cap and trade) – A cap and trade system sets up a complex system that is mandated by governments but runs in parallel to them and if it fails in some way, direct intervention is difficult; the carbon market is supposed to run on its own. Within the monetarist/free market worldview (amended to include the carbon emissions externality) the notion that “no one is in control” is a good thing, seeing that this frustrates what this group feels to be the power-hungry ambitions of governments. However, if we shift to the Keynesian or some “not anti-Keynesian” view that some government direction and regulation is necessary, the need for someone to be “at the switches” may be desirable in regulating carbon policy. This would speak for a carbon tax system, which could be changed quickly by legislative motion or executive fiat to better calibrate it.
Given the above, the carbon pricing instrument looks more limited in its scope of application than is usually discussed. Carbon pricing has some potential but expectations need to be tempered. As we shall see, a combination of a number of instruments is going to be more effective than loading every expectation onto carbon pricing policy.
In Part III, we will look at crucial market failures that are not adequately addressed by carbon pricing.
‘Nuther Action Alert for US Readers: Renewable Energy Support December 4, 2007Posted by Michael Hoexter in Efficiency/Conservation, Green Activism, News and Events, Renewable Energy.
Tags: Production Tax Credits, Renewable Energy, Solar Energy, US Congress, Wind Energy
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Luckily, and in part through the work of Nancy Pelosi, the Renewable Energy provisions have gotten back into the Energy Bills and now it’s time for Congress to vote on them. What is contained in these bills is the bare minimum support that renewable energy projects need in the form of tax credits and a national Renewable Portfolio Standard.
Solar Nation, the activist organization in favor of solar energy, has a neat little gizmo that sends the letter of support to your congresspeople. It’s just about a minute of your time to keep the US, kinda sorta in line with the intentions that most of us have to depend more on renewable sources of energy. We are lagging many of our European friends in this regard, so we need all the help we can get.
US Readers: Action Alert – Renewable Energy Support Endangered November 14, 2007Posted by Michael Hoexter in Green Activism, News and Events, Renewable Energy.
Tags: 2007 Energy Act, Legislative Action, Policy, Production Tax Credit, Renewable Energy, Renewable Portfolio Standard, RPS, US Congress
The climate of short-sighted compromise and legislative solipsism in the US Congress is endangering important provisions of the 2007 Energy Bill that was supposed to put US Energy policy on a new footing. Subsidies for gas and oil exploration were to be cut while renewable energy was to get new support in the form of a national Renewable Portfolio Standard/RPS (rule that utilities need to supply a certain percentage of their energy from renewable energy) and production tax credits for renewable energy generated, a key incentive to renewable energy investors.
The US House of Representatives has passed two bills: HR 3221 (the New Direction for Energy Independence) and HR 2776 (the Renewable Energy and Energy Conservation Tax Act) but they need to be jointly passed by both House and Senate to become law. These bills jointly would see a transfer of the $23 billion subsidy of the fossil fuel industry to renewable energy projects. Over the weekend, rumor has it that the renewable energy provisions of these bills will be cut, including the tax credits and RPS provisions.
While these bills are not the absolutely ideal ways to promote renewable energy (a feed-in tariff is most effective as witnessed by the growth of renewable energy investment in Europe) they are good starts. Also, the US Southeast with diffuse sunlight and low wind speeds will need extra technical and policy help in developing a renewable infrastructure and/or means of investing in renewable energy outside the region. For Southeasterners, biomass to electricity with carbon capture (carbon negative) might be a way to get extra credit for renewable electric generation capacity in those states that actually subtracts existing carbon from the atmosphere.
So, please, US readers, call your Senators and Congresspeople! Here is the legislative action page of the website of the American Wind Energy association:
And here is the website of Solar Nation with a similar feature:
You can read more about the bills here:
I’ve been devoting this blog for the last 4 months to talking about the “electron economy”, how most of our energy needs can be satisfied by using electricity and electrical devices with minimal damage to the planet and our future well-being. I am somewhere in the middle of my series of posts on the technical, marketing and political issues related to clean electric power and efficient electrical devices but a string of events in the real world and the world of ideas has highlighted for me the need to change terminology. Rather than advocate for an “electron economy” I am raising the stakes in the nomenclature department by adding the word “renewable” or “clean” (with and without parentheses) to the “electron economy” catch phrase. So henceforth I might use “renewable electron economy”, “clean electron economy”, “(renewable) electron economy” and “(clean) electron economy” interchangeably.
Ulf Bossel, the fuel cell engineer and sustainable energy advocate who invented the electron economy phrase and concept, brought an analysis of the relative energy efficiencies to bear on the choice of hydrogen, biofuels or electricity. He concluded based on electricity’s overall efficiency and availability of renewable sources of electricity that an electric energy delivery and conversion system would be the only system that has a reasonable chance of being the energy backbone of a future carbon-neutral economy. Biofuels and energy recovery from waste would be parts of a clean energy economy but would play smaller roles. Electricity has not enjoyed some of the marketing hype of biofuels or hydrogen but is the solution to most of the energy questions that are raised by climate change.
I’ve adopted the electron economy concept but have come to realize that forces and tendencies in the fossil fuel industries (primarily the coal industry), the electric power generation and electric manufacturers industries might easily twist the concept to serve shortsighted goals that increase our dependence on fossil fuels. As conceived by Ulf Bossel and adapted by myself, the electron economy concept has at its heart the use of contemporary renewable energy flux, not that of the Jurassic period, to generate electricity.
In the United States and in other coal-rich countries in an age of uncertain petroleum and calls for energy independence, coal will continue to function like crack (cocaine) for electricity generators, electricity consumers, and legislators who leave carbon emissions out of the picture. This was brought home graphically by recent attempts by the coal lobby in the United States to get support from Congress for subsidies for Coal to Liquid (CTL) as a substitute for petroleum. As I’ve discussed earlier, coal is the most carbon-intensive means of generating electricity, much more than even petroleum or natural gas, so coal to liquids will compound our climate woes while, as it is intended, reducing oil imports.
On the marketing front, General Electric has brought down its green marketing credentials a notch in my book by linking its Ecomagination brand with coal: in its latest commercial we see a lump of coal with legs claiming to the words of an old country song that it “will be a diamond someday”. Investigation on General Electric’s website indicates that this is the public face for Integrated Gasification Combined Cycle (IGCC) coal power plants. On the website there are some slightly misleading claims that IGCC will reduce carbon dioxide emissions without adding that to reduce carbon dioxide emissions one would have to integrate an IGCC plant with, as they say in the car business, an optional carbon capture technology AND an optional carbon sequestration repository like an old salt mine (CCS). IGCC in and of itself will not reduce carbon emissions and those two options limit the siting of IGCC plants and raise the technical challenges and costs of use considerably. As of this moment in time, there are no existing large scale coal powered plants that are sequestering carbon dioxide.
Though I’m quite sure an IGCC plant would be a big contract for GE and I accept that coal with carbon capture and storage may play a transitional role to a fully renewable energy economy, not adding that carbon capture is an additional set of steps dumbs down the message unnecessarily. Furthermore, General Electric has an already established business in wind and hydroelectric turbines as well as photovoltaic that are in and of themselves carbon neutral means of generating electricity. Why not push ahead with innovations as well as publicity in these areas? General Electric, if it continues to position itself well, will be a key player in the renewable electron economy and will profit handsomely from efforts to mitigate carbon emissions and increase energy efficiency. To advertise IGCC in this manner tends to further an “addiction to coal” and coal-generated electricity.
Jeff Goodell in his recent book “Big Coal” now in paperback, highlights how important coal producers are to the US electric industry and by extension to power consumers. With the US’s substantial coal reserves and the political power of coal producers and coal producing states, there exists a considerable danger that we will continue to rely on coal long past the time that we have the capability to generate electricity much more cleanly and even more cheaply. These coal advocates are also underestimating the inevitable price that carbon-dioxide emissions will carry.
A movement towards a moratorium on coal power plants without CCS is gaining momentum as now at least one of the 2008 US Presidential candidates (John Edwards) supports it as well as, as one might expect, Al Gore and the Live Earth initiative. Other candidates, like Barack Obama, have flirted with Big Coal though now appear to be backing down. The Democratic leaders of the US House and Senate, Nancy Pelosi and Harry Reid, just recently signed Al Gore’s Live Earth pledge that calls for a moratorium on coal without carbon capture.
It is in this context that calling for a positive solution, for a renewable electron economy to be built, shows the way for government, stakeholders in the electric industry and investors, to direct their energies in an effective way. Just calling for an “electron economy” with the renewable or clean portion assumed, underestimates the power of inertia as well as motivated opposition to solving the climate crisis by shutting down or transforming certain industry segments in favor of others.
To create a renewable electron economy is doable within 25 years, with substantial reductions in our emissions within 10 years. But we need to act now within our industries, our personal lives, through investments of time and money and through exercising political influence. Al Gore’s Live Earth Pledge is one place to start:
In the upcoming weeks, I will continue to sketch the future of energy and how concretely we can take steps now to reduce our carbon footprints through building the renewable electron economy.
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A quick post to call attention to two recent electron economy related news items:
1) You’ve probably read in your local paper, on the web or on TV about the MIT researchers that have figured out a way to light up an electric light bulb without plugging it in by beaming power to the light over a distance of 7 feet. The researchers call the invention “WiTricity” after with the now familiar “Wifi” concept. The researchers have used the magnetic resonance of a copper loop embedded in the wall of the room to send the energy to the lightbulb. The researchers claim that the process is 40% efficient meaning that it is about half as efficient as rechargeable batteries and less than half as efficient than plugging into a wall socket.
As this is an early stage prototype, one can only imagine that future designs will substantially increase the amount of energy transfered to the object rather than dissipated in the process of sending it. Wireless transfer of energy is not unknown with focused microwave transmission but these are thought to be hazardous to human health. The claim is that magnetic resonance unlike intense microwave radiation, does not affect human health adversely. Witricity is a special case of magnetic induction similar to the process that is used to heat pots and pans on induction stovetops. The novelty of Witricity is the distance and relative efficiency of the transfer.
While we are not yet powering our cars using WiTricity and condemning the electric cord to the dustbin of history, the ease with which electric appliances and vehicles will be powered will increase in the future. We should not wait for these ultra-easy ways to transfer electric energy to develop electric transport and other applications, but developments such as this and quick charging batteries make objections to electric transport seem all the more antiquated.
2) PG&E, the farsighted electric utility in Northern California, has made a preliminary commitment to buy used hybrid and electric vehicle batteries once they are removed from use by the manufacturers. As a demonstration, they now have a battery from a wrecked Prius in the basement of their headquarters which is connected to the grid. While these batteries may no longer have the same capacity as they had when they were new, they will function as electric storage facilities to help respond to peak demand and eventually allow for the grid to use more variable power generation sources such as wind and sun. (I haven’t yet introduced stationary storage in my series but here is a preview)
In one step, PG&E has provided a possible answer to two different open issues related to renewable energy sources and to electric transport: storing and distributing electric power on demand AND how to reuse old batteries from the growing fleet of electric drive vehicles. An aftermarket for rechargeable batteries is thus formed: the replacement of their batteries for upgrades or repair becomes that much more economical. These are further signs of a virtuous circle linking renewable energy and electric transport.
Market Landscape 2007: Is Green the New Common Sense? June 10, 2007Posted by Michael Hoexter in Green Marketing, News and Events.
Taking a break from my series on the electron economy, I wanted to share some impressions from the changing market and media landscape.
In the last couple months, I’ve noted some products, media and pronouncements that for me signal a, perhaps permanent, turn in corporate and government affairs towards green. I am wondering if this means that green is (part of) a new common sense for most people and markets not just one of a number of flavors, a personal choice or (small) market segment.
One encounter for me was in the cereal aisle at the local Safeway, the national chain of supermarkets that does not carry as many “specialty” product lines as Whole Foods or supermarkets with a specific ethnic identity. Now I don’t usually get my cereal at Safeway, so this was, relatively speaking, terra incognita. In any case, on this trip, among the offerings of (usually way too sugary) cereals I saw the icons of my childhood transformed!! Yes…transformed!! Kellogg’s Rice Krispies and Raisin Bran were present in their familiar blue and purple boxes with a difference…these iconic boxes had a large green banner declaring them to be “Kellogg’s Organic”. I noted that nearby there was a stock of regular Kellogg’s cereal including regular non-organic Rice Krispies and Raisin Bran. I feel though that I had just personally witnessed a sea-change in American marketing.
People forget that Kellogg’s and breakfast cereal in general actually started as part of late 19th century health food movement. So it there is something of a fit between Kelloggs launch of Kelloggs Organics last year and its corporate heritage. On the other hand, the timing may be a sign of our current times, in that organic has been around for a couple decades already. Safeway itself had rolled out its own house-brand organic cereal line last year. Some of the trend into organics has to do with the specifics of the food business; the success and expansion of Whole Foods as well as the search for slightly better profit margins than one usually finds in the grocery sector. There may be something more at work.
As Raisin Bran used to be my favorite, I went out a bought a box of Organic Raisin Bran to “test”. It was good and as it turns out, less sweet than the conventional variety. Still a little too sweet for my current tastes but apparently trying to avoid the excesses of one of the other negatives of the American food industry, excessive use of sweeteners.
Another sign of the greening of major American manufacturers and retailers could be found on TV a month back. In, perhaps its Earth Day (in America its in late April) ad campaign, Walmart touted its organic cotton pajamas for women, a change up from the usual price-cut message of its consumer ads. In a previous post, I applauded, despite concerns about Walmart’s potential to dilute the standard, Walmart’s initiative in the area of organic food. The rapid advance into organic clothing was surprising to me in that organic cotton is still uncommon in almost all major clothing lines in the US, so it seems that Walmart has now leapfrogged some of the more expensive clothing manufacturers. In my mind, organic clothing, more than food, still was in the “premium” category.
As it turns out, Walmart, according to its website is now the largest purchaser of organic cotton in the world. As conventional cotton is a major polluter, Walmart’s leadership in this area is a boon to the environment and a challenge to its more upscale competitors. While organic cotton is fairly common now in baby clothing, Walmart’s influence may help spur the general clothing industry and fiber growers to go organic.
There are many other indications of a changed climate with regard to sustainability. Media campaigns require less investment than new product lines and there are ample examples of “green” in the media. My cable provider, Comcast, has been advertising in its regular cable channels a new line of free animated videos on its on-demand feed channel, Channel 1, called “The Unsustainables”. Produced by Sustainlane, an online interactive green business directory, the 4 minute videos are fun and portray a group of people “stumbling” into the future. What is different about this video series when compared with typical public service announcements is that the message is hidden in a (usually) funny story or character quirk. The Unsustainables sometimes “get it right” and sometimes they don’t but we are encouraged to laugh along with them. The positive public service information is sometimes spoken by a character who is casting aspersions on that very information for all-too-human reasons.
I’m encouraged by the style and creativity that goes into these animated videos and the light touch. Sometimes, though, the message may get lost in the effort to be too subtle and non-judgmental. Nevertheless, if the “Unsustainables” get enough shots at communicating the message, I’m quite sure some of it can get through.
Finally, one of the least “environmental” of contemporary political figures in the US, George W. Bush has started to allow for the reality of climate change in his public pronouncements. We had the “addicted to oil” speech last year but now it seems like the last holdouts are being pulled along in some of their public pronouncements. Current differences with the G8 may cloud this picture of a universal consensus…
So do you think that green and sustainability are now an inevitability for marketers and public figures? If you get a chance, let us know what it looks like from your standpoint, market area, etc.
Energy and Materials Efficiency: Shortcut to Sustainability or Postponing Hard Choices? February 19, 2007Posted by Michael Hoexter in Efficiency/Conservation, News and Events, Sustainable Thinking.
Tags: Energy Efficiency, energy sustainability, Materials efficiency, paradox of efficiency, utility maximization, William Stanley Jevons
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News of last few weeks points to a building consensus in the U.S., historically the home of cheap energy and profligate energy waste, that energy efficiency is not only a good thing but it is the next good thing. President G.W. Bush, not the most consistent or far-sighted advocate of green technology, has ventured in the 2007 State of the Union address that CAFÉ standards might be raised to increase fuel efficiency, albeit in a not particularly aggressive way. Bush, in subsequent remarks, has trotted out his plans to increase our energy efficiency primarily as part of the effort to reduce foreign entanglements but also, in a first for his Administration, to deal with “climate change”. Almost any business leader who ventures to talk about climate change and corporate responsibility will now cite energy efficiency as one, if not THE, prime strategy for addressing the emissions of greenhouse gases. There is now a storm of marketing efforts in the home building market pushing the efficiency aspect of materials, systems. On a personal note, I am currently working on a project related to energy efficiency in commercial kitchens, which I will discuss in a later post.
In the catalog of the aspects of sustainability I created (blog posts of October 10th and 12th), I placed what I called “Efficiency/Conservation” as the 4th most central aspect of ecological sustainability:
- Balanced exchange between humanity and nature
- (Holistic) Systems thinking (“everything is connected”)
- Long Time-horizon/Responsibility for the future
- Greener Innovation and Invention
- Biomimicry and Biophilia
- Linking and Valuing the Local and the Global
As a practice, particularly on an organizational or corporate level, energy and materials efficiency takes on a much larger role, as they are concepts that can be measured and practiced on a day-to-day basis. The potential measurability of efficiency is an advantage for its usage in regulations, and establishing attainable social and corporate goals.
Though the central concepts in sustainability in my catalogue, “Balanced Relationship with Nature” and a “Holistic Systems View” of life and work, may yield fundamental insights into what is or isn’t sustainable on a global scale, Efficiency and Conservation have a powerful ally from the world of contemporary business and economics: Efficiency is one of the central characteristics of a profitable enterprise. Businesses and other organizations responsive to a purpose or goal have priorities that rival efficiency in importance but it is near the top of the list.
In business, efficiency is not solely energy and materials efficiency but it is also time, labor, and cost efficiency. These efficiencies can compete with one another in some projects and project areas but can also work together with each other in other areas and at other times. Time efficiency often necessitates the use of energy intensive means of transporting goods, like the use of airfreight or air travel. Materials efficiency might mean manual separation of waste materials and therefore not be as labor and cost efficient as old-fashioned waste removal. Sustainable businesses will need to balance the costs associated with raising the priority of material and energy efficiency over other competing efficiency goals.
Efficiency, unlike “balance with nature” or “holistic thinking”, can be measured fairly easily, especially when describing a machine or fairly simple physical process. Efficiency is sometimes used as an umbrella concept for the related concept of efficacy, which describes whether and how much of a desired effect is produced with a given input.
In this case, the units do not have to be the same, so we can get familiar terms like “miles per gallon” or, in Europe, “liters of petrol per 100km traveled” (which flips the equation on its head as less liters is more efficacious than more liters).
A stricter definition of efficiency in scientific and engineering terms measures the input and output in the same units (energy units usually). If the input and output are measured in the same units, you are able to determine the percentage efficiency of the system or device by multiplying by 100.
With materials efficiency, there is currently less publicity than with energy efficiency as it seems less central to the looming climate crisis. Materials efficiency also varies more from one application and economic sector to another. A multidimensional measure of materials efficiency might include the following aspects: percentage of new material, percentage reused/recycled material, water used in production and transport, percentage organic or non-toxic production process, proximity of material origin (really closer to energy efficiency and other concepts). but lately more attention has been paid to the amount of water required to grow crops or other desirable outcomes
When we start to look at more complex processes that involve people and a complex set of variables, measuring efficiency/efficacy becomes more complicated and diverse. Many analytic instruments in economics and finance are trying to get at efficiency/efficacy using monetary and other variables as part of the equation.
Efficiency and Maximizing Economic Utility
“Utility maximization” is economists’ best description for what drives economic activity: the compound effect of human desires and needs tempered by their varying ability to be realized in any given situation. “Utility” is the black box of economics, describing what people want from each other and the earth and how they push forward in trying to get some of what they desire realized. The word “utility” is adopted from the classical utilitarian philosophers who founded the economic profession by theorizing about and eventually studying what drove people to work and trade with each other. Economists avoid where possible defining what utility is and instead accept it as a given.
The measurement of efficiency also leaves out of the picture, evaluative judgment about what is desired. “Useful work” or “effectiveness” are accepted as givens or defined by others. The torque provided by an engine or motor or the heat provided by a furnace is the purpose for constructing these gadgets in the first place, so it is fairly non-controversial to accept the output of torque or heat as the one desired and desirable outcome for these devices. Efficiency then is one route to utility maximization, especially when the costs of that maximization are factored into the ultimate utility equation.
The agnostic nature of efficiency with regard to ultimate ends meshes well with businesses’ ultimate goal to serve the ends of their customers and stockholders and not to exercise evaluative judgment about those ends. While inspiration and creativity are important in ultimate business success, efficiency in execution is a prime pre-occupation for departments as diverse as finance and operations, contributing a great deal to ultimate success and competitiveness.
The Paradox of Efficiency
Increasing materials and energy efficiency then sounds like a paradise for a greener sustainable economy that is not too unlike our current one. By increasing our energy and materials efficiency we can then continue to serve an unlimited growth in (economic) utility for growing numbers of people throughout the world.
But wait…there is a well-established literature that has found that rising efficiency does not slow consumption of energy or material resources. Called the paradox of efficiency or the Jevons paradox after 19th century economist William Stanley Jevons, it seems that increased resource efficiency lowers the cost of a good or service and then people use it more. Examples include the increase in jet fuel consumption despite rising airplane efficiency as well as the steady increases in fuel consumption in the US over the last few decades despite overall efficiency gains in engines. Some advocates of sustainable transport planning are even opposed to instituting efficiency standards for automobiles, instead seeking to limit demand by increasing the cost of automobile use through congestion charges, fuel taxes, automobile insurance that is pro-rated for automobile usage.
Does a greener economy entail then a limitation of demand, tinkering with utility’s “black box”, to stop people from eating up the planet with their urge to consume? Is an emphasis on efficiency too easy, encouraging a postponement and a devaluation of the hard choices we need to make between essential, sustainable economic activities and frivolous, wasteful ones?
As a strategy in and of itself, increased materials and energy efficiency is insufficient to arrive at a sustainable economy. Still it is an indispensable tool AMONG OTHERS for to help us to create a more sustainable society. Increasing efficiency is about eliminating wastefulness, one of the prime characteristics of an unsustainable economy.
However, increased energy and materials efficiency is not a panacea…the paradox of efficiency shows us that left by itself efficiency only serves to cheapen goods and services that then boost overall consumption on a macro-economic level, especially in a world where the vast majority of the world’s population is now hoping to enjoy the luxuries now restricted to the wasteful few in the US and other industrialized countries.
In the area of energy, increased efficiency CAN potentially lighten the burden which a new cleaner energy infrastructure centered on renewable energy sources like wind, solar, biomass and ocean energy would power. Efficient energy conversion devices (like more efficient motors and heat sources) and regulating and reducing per-person and overall energy demand will allow us to reach a carbon neutral economy sooner. In the area of materials, lower materials use per “unit” utility will allow people to gain similar or greater satisfaction of their wants with less impact on the world as a whole.
Beyond decreasing the overall cost to the planet of each of our individual satisfactions, even as we grow in number and in expectations, we will need to continue developing new, cleaner sources of energy and materials. An efficient use of gasoline or other fossil fuels still increases overall carbon emissions if increasing numbers of people hop into cars that run more cheaply. Shifting to an electricity based economy powered largely or entirely by renewables, would lead to massive decrease in our carbon emissions and dependence on fossil fuels. Efficiency in and of itself cannot shift use to such an economy but, as it turns out, useful work performed by electric devices is in most cases more efficient than the same work done by heat engines fueled by fossil fuels. The shift to renewables and electricity requires a paradigm shift and to some degree a power shift among industry sectors and activities.
Energy efficiency is a point where many can agree but we may also need to step into more controversial areas that involve re-thinking what we value and demand from others and from the natural world. More on this in future posts.
“Syriana” and the BP Pipeline Controversy August 14, 2006Posted by Michael Hoexter in News and Events.
Tags: , BP, British Petroleum, Pipeline, Syriana
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This week I finally got around to renting “Syriana” on DVD. “Syriana”, multiply nominated for the Oscars last year, is the latest movie by Stephen Gaghan, the writer/director of “Traffic” which was also recognized with numerous awards. George Clooney stars, as do Matt Damon, Christopher Plummer and numerous fine actors; Steven Soderbergh and Clooney were among the producers.
I had wanted to see Syriana because among other things, it is supposed to give us a very detailed view of the interplay of oil and politics in Washington and the Middle East. I also had thought that the movie would be exposing the “bad guys” at work, those who are keeping us beholden to a retrograde energy policy.
First a summary of the plot (no spoilers here really): George Clooney is a CIA operative near the end of his career involved in operations in the Mideast, including in Iran. He is a dutiful officer but is an outsider in the agency. Concurrently, oil executives are attempting a merger of two major oil companies with the help of a law firm with multiple connections in the energy industry. In still a third plot, an American energy analyst in Geneva is involved in the royal succession plans in a oil producing country. And finally, two Pakistani oil workers are followed as they struggle to make ends meet in the same oil producing country. The plots intermingle to some degree though there is no neat bow tied around them.
In terms of my review of the picture, I think it was an excellent film, though I think that we needed a little more backstory in among other subplots the lawyer’s involvement with the merger. The lawyer remained a little bit of a cipher even though there were attempts at an exposition of that plotline.
I was surprised by among other things, how complex the picture that emerges of the forces and people involved in the energy business. More so than “Traffic”, in “Syriana” Gaghan as much as possible is trying to portray (dramatically of course) the workings of oil without judgment. So a stereotyped exposé with “good” and “evil” forces it was largely not. Most characters are different shades of grey though we tend to sympathize with some characters more than others.
In one of the DVD extras, called “Make a Change, Make a Difference”, the call is for reduced consumption of oil but there are no fingers pointed at the corporations. In fact they are even cited for providing what we demand. The dominant metaphor then at least in the political take home message is that of an oil addiction which we or our representatives will countenance any and all corruption to supply the substance to which we are addicted.
It just so happens that this week that BP has come under fire for failure to maintain one of the pipelines that brings oil from Alaska to the lower 48 states.
Just to summarize the controversy, it appears that there is significant corrosion in one of the pipelines that BP maintains. An ombudsman for pipeline workers has said that BP failed to act on his warnings two years ago that a technical procedure (called “pigging”) was not being done with the proper frequency. He says that BP officials viewed him as a problem rather than listening to his warnings. BP denies neglect but is willing to learn from the experience. Congressional hearings have been scheduled in BP’s practices.
Well can we apply the take home message of Syriana to BP? Is BP simply responding to the multiple stakeholders in its business in the best way it can? Are we simply oil addicts complaining that our dealer is late with the next fix?
Well, if you have been reading my blog, you might suspect that I have a vested interest in making light of BP’s troubles: in my last posting I was holding up BP as an example of a greener oil company. And I am not alone in noting that among the major oil companies, BP is one of the “greener” ones.
Then the story of the BP pipeline is a sobering wake-up if we are about to declare a new era of clean energy has begun. BP still makes a vast majority of its money from selling petroleum. Maybe investments that might have gone into upgrading and maintaining “old” assets like oilfields have been diverted into more forward-looking projects. If that is not the case with BP, it might very well be the case in the future when diversified energy companies (traditional oil among them) are attempting to transition to a cleaner energy portfolio. Others will say that the substantial profits that oil companies are currently accruing should be plowed into making the transition work. But shareholders and oil company analysts will most likely complain and punish oil companies that risk current profits for future unknowns.
I think then that it is reasonable that oversight bodies and whistleblowers do their jobs to insure that oil companies perform better and do not harm the environment when there is a choice in the matter. But the overwhelming reality, as pointed out by “Syriana” is that we are asking these companies to deliver energy to us cheaply and also reward their shareholders. Even the most enlightened of these companies will be forced into some compromises in one area or another to minimally satisfy all parties.
New clean technology companies, new laws and new technological breakthroughs will speed a greening of the energy delivery companies and force a better deal to be struck in these areas of compromise. But oil and a petroleum fueled economy remains a dirty business…but it is also, at least for the moment, our business too.