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.
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I recently became acquainted with the work of Danny Harvey, Prof. of Geography and a climate scientist at U. Toronto. Over the last few years, Danny has been putting together a large-scale energy plan that might be called a Renewable Electron Economy, to which a portion of this website is devoted. I believe Danny’s work is invaluable because he presents a great deal of detail about a wide range of technological solutions and also links these to climate scenarios. His website has a series of extensive powerpoint files which provide you with a great overview of most of the relevant issues in the climate and energy debate with a strong technical and scientific grounding. The materials on his website are available for educational use and with permission for other uses. Upon my request, he has sent the announcement of his new two volume book “Energy and the New Reality” published by Earthscan to which the powerpoint slides are linked. The first volume concerns reducing energy demand through energy efficiency and the second volume with carbon-free sources of energy. I highly recommend that anyone with even a mild interest in climate and energy issues take a look at Danny’s work.
Two new books by Danny Harvey (Dept of Geography, University of Toronto),
Energy and the New Reality, Volume 1: Energy Efficiency and the Demand for Energy Services (Earthscan, UK, 614 pages)
Energy and the New Reality, Volume 2: Carbon-Free Energy Supply (Earthscan, UK, 576 pages),
comprehensively and critically assess what it would take to stabilize atmospheric CO2 concentration at no greater than 450 ppmv, and can be purchased through links on my website (given in the email signature).
Some of the key conclusions from these books are that
• it is still technically and economically feasible to cap CO2 at no more than 450 ppmv without replacing existing nuclear power capacity as it retires and without resorting to carbon capture and storage (CCS), although the latter could be – in combination with bioenergy – part of a strategy to more rapidly draw down atmospheric CO2 from its peak than would otherwise occur;
• nuclear energy and CCS would, at best, be too little too late, whereas reliable C-free energy systems can be built up on the required time frame and likely at no greater cost than nuclear energy or CCS; and
• we will almost certainly have to abandon our insistence on continuous economic growth above all else if we are to have a reasonable chance of avoiding eventual global ecological and social catastrophe.
Complimenting these books are powerpoint presentations (with figures, summary tables, and explanatory notes) for each chapter (a total of 1899 slides) that can be obtained either through the publisher’s website (www.earthscan.co.uk/?tabid=102427) or the author’s website (faculty.geog.utoronto.ca/Harvey/Harvey/index.htm). These powerpoint files would be a valuable resource even without purchasing the books, but if slides from them are used in any public presentations, the source of the figures (whether the author of the books or the original sources given with the figures) should be acknowledged.
Also posted on my author’s website are (1) pdfs of the table of contents and chapter highlights for each book, (2) pdfs of the summary (policy) chapters from each book, (3) the package of Excel files used to generate all of the energy demand and supply scenarios presented in the two books, (4) an Excel-based building stock turnover and energy demand model, (5) the FORTRAN code and input files that are also used in one step in generating the energy demand scenarios, and (6) the flyer for the books and a link to the publisher’s website for those who wish to purchase the books (for professors, complimentary copies can be obtained if the books are adopted as course textbooks).
The author’s website also contains an Excel package on climate and carbon-cycle modeling that will be part of the online material associated with the author’s chapter in the forthcoming book, “Environmental Modelling: Finding Simplicity in Complexity, 2nd Edition” (Wiley-Blackwell, John Wainwright and Mark Mulligan, eds.). CO2 emission output from the Energy Excel package can be conveniently pasted into the second Excel package and used to generate scenarios of global mean temperature change for a variety of easily-changed assumptions concerning climate sensitivity and the strength of various climate-carbon cycle and internal carbon cycle feedbacks.
FURTHER DETAILS ON THE EXCEL FILES AND FORTRAN CODE:
The idea behind posting the Excel files and FORTRAN code is to permit those who are so interested to generate their own scenarios with their own input assumptions concerning population, GDP per person, activity levels per person, and physical energy intensities for various energy end uses in 10 different geopolitical regions, as well as to generate scenarios for energy supply from various C-free energy sources. Outputs from these files include global demand for fuels and electricity, annual material and energy inputs required to build a new energy infrastructure, land requirements for bioenergy, and annual and cumulative CO2 emissions to 2100 (the CO2 emissions in turn were used as inputs to a coupled climate-carbon cycle model to produce the scenarios of global mean warming and ocean acidification that are given in ENR Volume 2). The FORTRAN code applies a building stock turnover model to 2 different energy sources (fuels and electricity) in two different building sectors (residential and commercial) in the 10 geopolitical regions, and uses as input the growth in regional building floor area as generated from the Excel demand scenarios, along with a variety of other inputs.
The stock turnover model has also been implemented in Excel for one generic fuel, building type and region for those who wish to adjust the inputs to a particular region and building type of interest so as to explore the impact of alternative assumptions concerning growth in total floor area, rates of building renovation and replacement, and the change over time in the total energy intensity (annual energy use per unit floor area) of new buildings and of newly-renovated buildings.
The climate-carbon cycle Excel package (subsequently referred to as the CCC package) has three parts. The first part contains a number of worksheets that explain the physics of climate change and the development and properties of simple climate and carbon cycle model components. The second part of the CCC package contains a highly-simplified representation of the energy demand and supply framework used in my two energy books. These give scenarios of global fossil fuel emissions of CO2. CCC package also has worksheets that give land use emissions of CO2 and total anthropogenic emissions of CH4, N2O and halocarbons (all subject to alteration). The impacts (radiative forcings) of tropospheric ozone and aerosols are computed in a manner that is roughly consistent with the fossil fuel and land use CO2 emissions. The third part of the CCC package contains a coupled climate-carbon cycle model (built from the components illustrated in Part 1) that is driven by the outputs from Part 2. The climate sensitivity and a number of carbon-cycle and climate-carbon cycle feedbacks can be specified (including the possibility of eventually catastrophic releases of CO2 and methane from permafrost regions beginning slowly at some user-specified threshold temperature change). The climate-carbon cycle model in the CCC package can be driven either with the fossil fuel CO2 emissions that are generated from Part 2 of the package, or with the CO2 emissions that are produced from the Excel package for the two energy books (these emissions can be pasted into the CCC package). In this way, those who are so interested can explore the range of possible impacts on climatic change (given uncertainty in climate sensitivity and climate-carbon cycle feedbacks) resulting from very specific assumptions concerning future population, economic growth, activity levels and physical energy intensities at the regional level, and in the rate of deployment of C-free energy supplies at the global scale.
Re: Oil Independence Some Signs of Progress May 21, 2010Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Transport.
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Today, the Obama Administration has shown some signs of recognizing the challenge of achieving Oil Independence. The Administration is mandating higher fuel efficiency standards than the 35.5 mpg CAFE, (corporate average fuel efficiency) standard proposed last month, with numbers upcoming. Furthermore, the Administration is mandating for the first time fuel efficiency standards for medium and heavy trucks. Apparently representatives from some of the large truck manufacturers like Volvo were there for the announcement as well as representatives from the major car manufacturers.
Additionally, there was announcement for further support for electric vehicles and vehicle infrastructure.
Though details are still sparse on these new efforts, it sounds like the Administration may be starting to realize that crisis management in the face of the Gulf oil spill cannot overshadow the long-term and even medium term project of getting off of oil.
I am hopeful that more substantive measures on this front as well as a full plan for the US to get off of oil will be announced soon. There is no time to waste!!
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.
My New Post/Article on Post-Copenhagen Ethics March 3, 2010Posted by Michael Hoexter in Climate Policy, Efficiency/Conservation, Energy Policy, Green Activism, Renewable Energy, Sustainable Thinking.
Tags: Carbon Pricing, carbon tax, Climate Policy, Energy Policy, Renewable Energy, Solar Energy, Sustainability
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Frustrated with the state of climate action both here in the US and at the COP15 meeting in December, I have been focusing on how to distill thinking about climate action to some simple rules. I came up with a longer piece that builds on the work of Donald Brown at the Climate Ethics Center at Penn State University.
I also have a PDF version here, which some may find easier to read or refer to.
Please read and comment!
Cap and Trade Derails Climate Ethics, the Motive Force of Carbon Mitigation – Part 1 November 18, 2009Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Transport, Renewable Energy.
Tags: cap and trade, carbon tax, Energy Policy
In this 3-part post, I will outline how cap and trade’s composite structure contains within it fault lines that help defeat its and the climate action community’s goals. In this first part, I will sketch out the components of the cap and trade hybrid
Part 1. A Slow, Ineffective “Monstrous Hybrid” of a Climate and Energy Policy
The record of cap and trade (also called emissions trading) is not impressive despite the bulk of the instrument and its popularity with the current generation of policymakers, some corporate leaders and some activists. Even before it was applied to carbon dioxide emissions and the global warming problem, cap and trade’s use in the US to cut acid-rain forming emissions has only produced middling results (40% cuts) as compared to cuts elsewhere where traditional “command-and-control” environmental regulation was used (65% cuts). Furthermore the US acid rain cap and trade system had the benefit of the ready availability of new sources of low sulfur coal in the US as compared to a limited choices in types of coal in most other nations.
In the first 4 years of the implementation of cap and trade as a means to cut greenhouse gases (2005-present), it appears that reductions in emissions, where they have occurred, have been due to, or strongly conditioned by, factors other than participation in cap and trade. In the first 3 years of the European Union Emissions Trading Scheme or EU-ETS, Sweden for instance cut its emissions by 20% within regulated sectors (9% overall in a country with an already low level of per capita emissions) while neighboring Finland increased emissions by 28% within these sectors. The managers of the EU-ETS attributed an overall 3% reduction in emissions in 2008 to the EU-ETS’s “price signal” yet the US without a significant cap and trade system nationwide decreased emissions by almost the same amount (2.8%); the role of the massive economic downturn of 2008 would seem to far outweigh the effect of emissions trading. While most agree now that too many permits were given away or sold too cheaply in the early stages of these cap and trade schemes, there will always be a way to find justifications for failure in such a complex system by pointing to the failures or misalignment of one part or another. To date, beyond general economic conditions, the actual cutting of emissions as an intentional activity can be attributed to what I am calling below “Climate Keynesianism” rather than as a response to carbon pricing or permit regulation.
Cap and trade systems are not only marginally effective to ineffective but are also hugely cumbersome to implement at a time when we have at most a decade to make serious cuts in our emissions. It took 7 years after the ratification of the Kyoto treaty (1998) before the cap and trade systems were implemented (2005), which to date, 12 years after the 1997 Kyoto meeting, have not achieved noticeable cuts in emissions. If our political leaders and climate action communities believe that implementing a cap and trade system will be largely responsible for cutting emissions, they and we will soon be in hot water.
I have proposed elsewhere two (1, 2) more effective policy frameworks for cutting greenhouse gas emissions that are based for the most part on more reliable and time-tested methods for implementing technological change and shaping our behavior, which include government energy efficiency and renewable energy programs (Climate Keynesianism), disincentives like taxes or fees, and market incentives. There is literally no excuse to hang onto the cap and trade instrument given the stakes involved and its unimpressive record of accomplishment.
Primacy, Sunk Costs, and US Political History Outweigh the Facts
The most obvious reason that people who nominally care about the climate’s future cling to cap and trade is that it is the first worldwide regulatory framework. The “primacy effect” is the observation that we as human beings hold onto the first bits of information that we receive and assign importance to them beyond their actual truth value or relevance. Many attempts at communication and persuasion use the primacy effect by placing more important information before other information. Information that comes first often establishes the communicative “frame” or context against which succeeding bits of information are then evaluated.
As the first international carbon mitigation policy, cap and trade has enjoyed the benefit of primacy: the definition of action on climate change has in the minds of many come to mean instituting a cap and trade system, no other options are considered. In order to interrupt cap and trade’s primacy effect and arrive at a better solution, we need to circle back to the logical point before one would select ANY climate policy and define what the fundamental tasks of climate policy are in general, keeping in mind our current and emerging set of technological solutions. I have attempted to do the latter recently here. Without understanding what climate policy must do independent of any particular policy instrument, we cannot evaluate our current policies nor arrive at new ones.
In addition, cap and trade already has benefited to the detriment of more effective instruments, from sunk costs in that bureaucracies have been erected, labor, time, money, and political capital have been spent in building up the idea of cap and trade as the sole or best climate policy solution. I am sorry for this effort, some of which is wasted, but this is no reason not to retool or dismantle some of these investments as they have been built on a faulty foundation. That several thousand mostly well-intentioned people around the world have already invested a good deal of their time within the Kyoto system and affiliates is no reason for them not to turn to a more effective system, learning, as it were, from their experience. It is a choice between ego and the future of our planet.
Currently in the US, the momentum behind cap and trade-based Congressional bills has the “benefit” of fixation by a large number of environmental organizations and advocates upon cap and trade as the sole instrument. President Obama, perhaps influenced by the idealized view of markets at the University of Chicago where he taught, gravitated to the cap and trade idea as a solution to global warming. In these matters, he would have had few alternative sources of information from US environmental groups. Particularly set on cap and trade is, for instance, the Environmental Defense Fund, whose materials on cap and trade read like a sales prospectus for markets as an institution rather than defense of the environment. The confusion between celebrating the policy instrument and achieving the policy goal is rampant among those who are trying to “make the sale” of this cumbersome policy behemoth.
The choice of cap and trade as the international regulatory framework for greenhouse gases speaks also to the inordinate influence of the US and internal US politics on the course of events. Cap and trade was invented in the US as a means to avoid either environmental taxes or direct regulation, in conformance to US political preferences in the immediate post-Reagan era. As during the 1990’s, the world’s only superpower and still its predominant military power, the US has pressed the world to share its view of the global warming problem and the surrounding politics. Unfortunately political power and influence does not always yield the most effective policy framework even with substantial backing by that power.
With Kyoto we have the additional complication that the US partially withdrew its support for the framework in midstream, as the US Congress led by the Republican opposition to the then Clinton Administration, refused to ratify the treaty in 1998. Given its denial of the importance of global warming, there remained no chance that the Bush Administration would press for Kyoto’s instatement. Among veterans of the Clinton Administration who now surround our current President Obama, some may feel the need to vindicate their political choices and Administration after 8 to 10 years of exile from the international cap and trade process. The hope seems to be that simply turning up the volume on cap and trade via US participation will admit the US to the circle of climate-virtuous nations and/or transform that process into an effective greenhouse gas regulation regime.
Many key activists and officials have become personally associated with cap and trade so are not as free as others might be to criticize what they have helped institute. Al Gore, who is genuinely and deeply concerned about the future of the planet, was for a time advocating for a carbon tax though not campaigning against cap and trade. Since then, with the new Obama Administration gravitating towards the cap and trade instrument, he has said that he is for both cap and trade and a carbon tax.
“Make Only Big Mistakes”
In addition to these more understandable reasons for hanging on to cap and trade, there are also some “sharp practices” involved in selling the instrument to the public and the climate community. In politics and business there is a school of strategy that is focused on the “sale” to such a degree that long-term value, quality, and effectiveness are sacrificed just to “move product” or “pass the bill”. One strategy/tactic in the toolbox of people who are focused on the sale above all else is to make only large scale mistakes, which are usually easier to get away with than small errors. The reasons for this are four-fold:
- If you are presenting people with an entire, new (but deeply flawed) self-referential system, you are able to reframe objections to and doubts about it according to the newly presented system rather than to received norms. This is the benefit of “reframing” a debate and insisting on your framing of it when challenged.
- People feel unqualified to criticize something they can barely comprehend that in its design and presentation seems to be the product of wealth, power, and intelligence.
- Conversely, a competing more effective framework that is more easily grasped can be dismissed by critics for small errors or points of personal disagreement with what they already know or feel comfortable with.
- “The Emperor’s New Clothes” – pointing out major errors that call into question the competence or reality-basis of others puts critics into the uncomfortable position where some of the negativity you are attributing to the other is cast back upon you. People will have difficulty believing that upstanding members of a community can singly or as a group be so misleading or misled.
Cap and trade is a very, very big mistake so one can find many, many angles, without trying too hard, to criticize it. I have too many options in choosing approaches to its deficiencies and I am a person who does not particularly enjoy writing this type of criticism; historically my focus has been on offering solutions. Unfortunately cap and trade’s self-reinforcing system of assumptions have protected those “inside” the system from seeing what’s wrong. Furthermore, a number of people including myself have offered alternatives to cap and trade that are readily available and, in many cases, already in practice in some form but these are now not yet recognized or validated as “big picture” climate policy.
The exertion of more moral energy and political power upon the cap and trade instrument, as many climate activists counsel, will not yield substantially better results because the instrument itself is fractured and divided both against itself and against the real intended goals of concerned activists and political leaders. For one, it actually diffuses or defeats that moral energy rather than concentrating it for better use on the right targets.
Cap and Trade as a Monstrous Hybrid
Cap and trade is, even in climate activists’ “fantasy version” with 100% permit auction, tight caps, and no offsets, a third-best or worse climate policy for a number of reasons. It is, appropriating the framework of William McDonough, the inventor of “cradle-to-cradle” certification, a “monstrous hybrid” of a policy that is also ineffective (I have no idea what McDonough’s personal view is on this policy and am not pretending to represent it here). In McDonough’s typology, a “monstrous hybrid” is a material or product that cannot be redesigned, re-used or recycled after its initial life. An example of a monstrous hybrid is the modern disposable razor or razor cartridges which have metal bonded to plastic and in most circumstances has to be thrown out rather than recycled.
Cap and trade is like physical monstrous hybrids in that it is cumbersome, will install classes of stakeholders that are incentivized only to maintain its systems, and that it will be difficult to adapt it to changing circumstances as McDonough would with a physical product in his cradle-to-cradle process. Unlike eminently reusable cradle-to-cradle product components it doesn’t “play well with others” tending instead to dominate the policy landscape without concomitant good results to justify its expanding breadth.
I am however expanding McDonough’s usage of the word by adding “ineffective” to “monstrous hybrid”, because the hybridization has not improved the object’s initial usefulness, the whole purpose of creating a hybrid. One of today’s disposable razor cartridges offer a closer and safer shave than the metal razors of old, for instance, so is highly useful in its first life. In cap and trade, the hybrid nature of the policy does not help it to do its work. Its constituent parts are joined together but do not produce results that are an addition of or, better yet, a multiplication of their separate contributions. The “monstrosity” of the cap and trade hybrid is magnified by its poor results to date, comparative disadvantages to other policy frameworks, its unearned hegemony over climate policy thought, and the inconceivably high costs for its failure or ineffectiveness.
Parts of the Hybrid
Cap and trade has four business interfaces, the parts that are supposed to interact with the world and reduce carbon emissions:
- a (derived) carbon price,
- permit regulation,
- a competitive bidding and trading market for permits with accompanying profits and losses
- a statement of intent to reduce emissions via the cap
In the real world, besides economic contraction (which also reduces emissions though with unfortunate side-effects), emissions will be reduced when economic actors the world around use energy more efficiently, use clean non-emitting sources of energy, and build up stored carbon in the biosphere through conservation, changes in agricultural and silvicultural techniques. Here is how the components of cap and trade are supposed to effect these changes:
- The carbon price is supposed to be a disincentive to using carbon emitting fuels, an incentive to using fossil energy more efficiently, an incentive for the sequestration of carbon in land use changes and an incentive to switching to non-emitting energy production; as I have documented elsewhere a carbon tax or fee is a far more effective means of representing the cost of carbon to investors and consumers (rather than traders), as the price will be less variable and not be mediated via the gyrations of the carbon permit market.
- Permit regulation is the control mechanism of the level of emissions as well as the “mint” of the carbon emissions “currency”. It is supposed to represent the bulwark of the cap and trade system against dishonest dealing or invalid permits. In addition, via permit regulation will come the issuance of the ultimate “stop” command via the cap on the total amount of carbon pollution. Many, many critics of cap and trade or specific implementations of cap and trade have pointed out the severe flaws involved in using carbon offsets (permits/credits from elsewhere) which undermine the validity and honesty of permits, as well as undermine the entire cap and trade system’s effect on polluters in developed countries. Even if offsets were to be regulated in a satisfactory manner, the enforcement of the ultimate cap by regulators will always be “loose” in that enforcement actions will seem arbitrary relative to emissions intensity and be economically disruptive. Direct regulation, inclusive of coal moratoria, is a far simpler, more rational, and more forceful means to backstop price regulation and achieve emissions targets.
- Cap and trade’s permit trading markets are supposed to create a competitive environment where firms profit by some combination of cutting emissions and clever permit buying and selling. The profit motive is intended to spur firms to emit less to enable resale of permits. However, overall, there is a disincentive to overachieve too much in that at some point reselling permits becomes more profitable than further investment in low carbon technology; the policy creates an emissions “set-point” rather than a push towards carbon neutrality. Furthermore, if emissions are cut in one place, they are allowed in another up to the cap. In alternative policy frameworks there is no need for an analogue to the permit trading market.
- The setting of the cap, a statement of intent, is kind of a “carbon pledge” which may inspire action or at least give off the impression that action is being taken. The cap is also supposed to function in an international arena as a diplomatic and trading bargaining chip. As alternatives, there are other means of declaring goals that are paired with more effective instruments, with better track records. The statement of intent is politically seductive as it gives politicians and activists a sense of virtue that distracts them from the flaws of the policy’s 3 other parts, if they are able to discern them. Also the metaphor of the “cap” has a physicality to it that is betrayed by the policy’s deep flaws.
Dysfunctional Interactions between Cap and Trade’s Components
A “hybrid” is the melding of two or more components into a new synthesis that supposedly is more functional or better than the original components. In the case of cap and trade, the components actually interfere with each other leading to results that are far less than the sum of its parts.
- The regulation of emissions in quantities by permit interferes with the carbon pricing component as well as with the operations of firms in general. Firms cannot predict exactly how much they will emit and their projections may change during the course of a year. Furthermore over- or under-buying permits will change the cost of emissions for the firm. These technicalities distract from investment in emissions reductions or overall decreases in the carbon intensity of production. The amount of real emissions of any firm will always have a different size of “grain” and timing than that of the permits or their auctioning schedule, imposing additional administrative costs.
- The trading and auction markets interfere with the carbon price by introducing variability into the price, making calculations of long-term benefits from cutting emissions extremely difficult. It is these calculations that lead to investments in low carbon technologies which are the desired outcome of the policy in the first place. Demand for permits, the ultimate determinant of the price, has at best a tangential relationship with what the carbon price is supposed to measure: the damage or mitigation costs to emit carbon.
- As I noted previously in another piece, the carbon price will not act as a signal of coming administrative action if a firm runs out of permits and threatens to violate the cap. Administrative action will either be endlessly postponed or will come as an arbitrary punishment for failing to buy enough permits with damages to many of the firm’s customers. For this reason, cap and trade systems have been incredibly lax in the way they distribute permits.
- The declaration of the cap as a carbon pledge to mobilize voluntary action to cut emissions interferes with itself in this function and is interfered with by permit regulation and the trading market. Once someone “overachieves” their permit allocation, it is rational for them to sell their left-over permits, allowing others to pollute more at a price. Permit trading is about establishing an emissions “set point” not pushing emissions down towards zero.
Almost all of this is avoidable if another (set of) policy instruments is chosen. The design of more effective policies in a rapid and productive manner is not that difficult if we dispense with the cap and trade format.
Cap and Trade: A Tangled Web… A Project-Based Alternative – Part 4 November 5, 2009Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Transport, Renewable Energy.
Tags: cap and trade, Carbon Pricing, carbon tax, CSP, Electric Grid, electric transmission, Electric Vehicles, energy storage, Feed In Tariffs, Project-based Policy, rail electrification, Solar Energy, Wind Energy
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In the first two parts (part 1 and part 2) of this post, I discussed cap and trade as well-intentioned but a fundamental misapplication of the permit trading policy framework. I also went on to identify 11 basic elements of any climate policy regardless of instrument. In the third part, I describe a package of mostly familiar policies that integrated together will have a far more profound effect on emissions that the cap and trade system. In this, the last part, I offer a second alternative to cap and trade which I believe is the most aggressive and secure approach to cutting emissions, though does not exclude elements of the package in part 3.
Project-Based Carbon Mitigation Policy (PCMP): A Heterodox Climate Policy Framework
I’ve redesigned an approach that is not entirely new but has been sidelined in current high-level climate and energy policy discussions. I’m calling it Project-Based Carbon Mitigation Policy– PCMP. Instead of or in addition to starting with an abstraction like a carbon price, PCMP starts with specific large-scale regional, national or global projects that with greater than 95% probability will cut emissions substantially within the next few years; these projects implement technologies and processes that are known to directly replace fossil fuel use, directly reduce demand for fossil fuel or, with some agreed-upon degree of certainty, sequester carbon emissions. A goal and timeline are set for the reductions based on the implementation of that technology or process then PCMP reverse-engineers the economic and social policies that will enable the project to take place in a timely manner. PCMP does not exclude nor discourage the use of abstractions like price mechanisms and society-wide or global targets but it starts with the security and relative certainty of projects that are technology- and process-based, supervised by some responsible party or regulator, and funded. PCMP may end up being a route to a set of policies very much like the Comprehensive policy discussed in Part 3. A PCMP policy approach also openly acknowledges the role of government leadership in achieving carbon emissions reduction goals, an attitude which has been shunned in recent history in the US and elsewhere.
Viewing projects as the fundamental element of policy also allows necessary supporting infrastructure that facilitate many types of emissions reduction to become the object and focus of high-level climate policy. Build out of the electric grid and electrification of transport are key to a zero emissions industrial/post-industrial society though, due to the variable carbon intensity of electricity production their exact contribution as separate individual projects cannot be quantified. A combined approach linking low- or zero-carbon electrical generation with electrification of transport would qualify as PCMP projects.
Carbon mitigation projects based on tested technologies and processes are the only assured means of cutting emissions, along with their supporting infrastructure. Carbon pricing may influence projects to be initiated but the projects themselves are the primary building blocks of policy. The focus on what might be called “secondary” or tertiary levels of climate policy has, in my observation, interfered with or at least obscured the importance of these primary on-the-ground projects.
The most directive end of the PCMP project spectrum would be a government program, funded by tax revenue, that uses “command-and-control” to push through a project that is vital to our ultimate survival as a society implemented either by government contractors or via government employees. On the other end of the spectrum in terms of directiveness are rulings, changes in tax law, and the institution of technology and process standards that will tweak existing market behavior. A PCMP project will have a target emissions reduction by a certain date; optimistic goals should be shunned in favor of “worst case” scenarios to ensure that goals are met or exceeded. Incentives should be aligned for the project leaders, whether they be public or private employees, if they achieve or, better, exceed emissions targets.
Many existing government programs in the area of environmental protection already are project-based policies in that an existing technology, set of technologies or process is chosen for implementation but, to date, not taking the next step to target specific carbon emissions reductions. In the US, we have a number of house weatherization programs including a grant program for low-income homeowners and rebate programs for other homeowners. To convert these into PCMP programs, one would need to make specific greenhouse gas mitigation goals and a timeline, tuning the policy instruments to achieve these reductions along the stated time line. However, the notion behind the PCMP concept is that policies that support one or another project may be generalized to a sector-wide or economy-wide policy or have knock-on effects. National policies or international agreements would be “reverse-engineered” to support key projects as priorities.
Project-based Policy, Infrastructure and Synergies between Technologies
The building of new infrastructure or its supervision, key to carbon mitigation, almost always falls to government, which undertakes the building of infrastructure on a project by project basis. The emphasis on market solutions to climate change, which focuses on influencing the decision-making of individual market actors ignores the fact that most infrastructure is built by government planning and programs that anticipate rather than respond to economic demand. One way to understand the sequence of events in building infrastructure is perhaps best summarized by the line: “build it and they will come”. Within this Hollywood formulation, what is captured is the ability of physical infrastructure to create or support markets as well as influence behavior beyond the influence of prices and goods for sale.
The carbon price signal, either the clear carbon tax version or the muddied cap and trade variety, will not by itself initiate the building of new infrastructure in a timely manner, especially if we consider the politically likely (low) level of the carbon price in the next few years. Even if we look to the history of infrastructure for market behavior shaping infrastructure (“Go West, young man” and the US railroads), in the face of catastrophic climate change we are looking at an accelerated implementation of new infrastructure as replacements for serviceable but polluting infrastructure, requiring a pro-active government role that anticipates rather than responds to trends and price signals.
In addition, basing policy on or limiting policy discussion to carbon pricing alone has been a way to say: “we don’t know what the solutions will be”. However, besides ignoring the key role of infrastructure, this is, at this point in history, disingenuous and more importantly time-wasting. As I have pointed out in two posts I wrote over a year ago, we now have about 24 technologies or processes that together could cut carbon emissions by at least 90%. These technologies and processes ranged from CSP with storage, internetworked wind powerwith hydroelectric storage, transport electrification, afforestation, to even voluntary (partial) veganism. Eventually much celebrated technologies like building-integrated photovoltaics will also play a major role. Other, more “traditional” climate policies that may be established more generally like a carbon price may aid the implementation of a PCMP policy but the combination of a carbon price and PCMP projects will achieve emissions reductions most rapidly. The project-based approach starts with a core of concrete intended outcomes in the way of realized projects but then welcomes and expects follow-on effects both from the realization of these projects and from the facilitating generalized policies like a carbon tax or fee.
Many of the gains associated with the most powerful of the 24 technologies, with a couple exceptions, are based on synergies between different technologies, not the solo implementation of those technologies. The impact of electric vehicles on total emissions varies a great deal depending on the type of generation that is used in a particular area of the globe. A carbon price will help urge this process on but will not of itself incentivize the creation of these synergies.
In renewable electricity generation there are some synergies between technologies, for instance between hydroelectric storage and wind power, which would need to be integrated in a planned manner across numbers of jurisdictions. These synergies between technologies can only be realized rapidly via integrated resource planning with adequate financing. Grid operators have already engaged in integrated resource planning anyway throughout the over 100 year history of the electric grid. Linking this planning with carbon mitigation is a step towards the PCMP policy framework.
Prospective PCMP Projects (US)
PCMP Example #1: CSP with Storage
One of the few standalone, scalable renewable energy technologies that can directly replace fossil electricity generation one-for-one is Concentrating Solar Thermal Electric Power (CSP) with thermal energy storage (TES). With sufficient transmission and judicious siting, CSP with storage could supply almost all the world’s energy using a small percentage of the area of the world’s deserts. DESERTEC which is a large CSP investment and policy project for Africa, the Middle East, and Europe, could be configured as a PCMP with specific targets for replacing fossil generation.
The example PCMP project below applying CSP with thermal storage provides close to certainty in emissions reductions and can be accelerated with increased funding. This contrasts dramatically with the lack of control over emissions under carbon pricing alone inclusive of cap and trade with its false “certainty”. Effective carbon pricing would catalyze this type of development but would not “cause” it as would a targeted program focused on implementation of the technology.
CSP with TES – American Southwest/West of Mississippi
Region: 6 US States (California, Arizona, Nevada, Utah, New Mexico, Texas) – Replace Energy Production in 19 Western US States.
Emissions Reductions Source: Replace fossil electricity production by specified gas and coal power plants by 241 million MWh/annum by 2020 in the WECC, SPP, MRO and ERCOT grids (50% natural gas/50% coal) without addition of new fossil generation. By 2030 replace 1200 million MWh/annum fossil generation in NERC.
Technology: Concentrating Solar Thermal Electric Power with Storage (Capacity factors from 35% to 70%) - 50GW installed by 2020, 250 GW installed by 2030 – mean capacity factor >50%. Formation of CSP industrial base to replace fossil generation.
Target CO2 Emissions reductions from 2007 baseline: 181 million metric tonnes C02/annum by 2020, 905 million metric tonnes CO2/annum by 2030.
Finance mechanisms: guaranteed $.10/kWh rates (inflation adjusted) for 20 years for electricity sales plus $(2 + capacity factor/.25)/W (2010-2013), $(0.5 + capacity factor/.25)/W (2014-2017), $(capacity factor/.50)/W (2018-2020) innovation grant funded through carbon tax/fee (adjusted for the effect of the 30% Investment Tax Credit). Favorable tax treatment for mothballing and early retirement of fossil generation.
Project Team: US DOE responsible leading industry stakeholder committee (US EPA, Fish and Wildlife, plant developers, utilities, grid operators, state and local political leaders, environmental advocates).
Supporting national and international policies:
- Carbon tax/fee facilitates implementation.
- Infrastructure: Renewable energy “smart”/supergrid
- Guaranteed Rates for Renewable Energy
- Contracting with Stakeholders for Greenhouse Gas Reduction Targets
- Special Master to Determine Compensation for Retired or Semi-retired Fossil Power Plants
PCMP Example #2: Combined Renewable Energy Power Plants
A combined renewable power plant connects a diverse set of renewable generators that together produce electricity according to the demands of grid operators and ultimately grid users. More complex than CSP with storage, this technology is still emerging though simply a matter of organizing existing technologies via smart, renewable-energy oriented transmission network.
Combined Renewable Power Plants – US
Region: All US States (can be generalized to almost any region of the world)
Emissions Reductions Source: Replace fossil electricity production by specified gas and coal power plants by 241 million MWh/annum by 2025 in NERC grids (50% natural gas/50% coal) without addition of new fossil generation. By 2035 replacing 1200 million MWh/annum in NERC.
Technologies: Wind, Solar (CSP, PV), HydroelectricGeothermal, Marine/Wave Energy, Biomass, internetworked generators to load centers, “smart” grid management technologies.
Target CO2 Emissions reductions from 2007 baseline: 181 million metric tonnes C02 by 2025, 905 million metric tonnes CO2 by 2035.
Finance Mechanisms: Bundled wholesale feed-in-tariffs with performance bonuses based on load-responsiveness of combined renewable power plants. Amount of tariffs as yet undetermined and would vary with renewable resource intensity.
Project Team: US DOE responsible leading industry stakeholder committee (US EPA, Fish and Wildlife, plant developers, utilities, grid operators, state and local political leaders, environmental advocates).
Supporting National and International Policies:
- Carbon tax/fee facilitates implementation.
- Infrastructure: Renewable energy “smart”/supergrid
- Guaranteed rates for renewable energy/feed-in tariffs
- Contracting with stakeholders for GHG reduction targets
- Special master to determine compensation for retired or semi-retired fossil power plants
PCMP Example #3: Home Weatherization
The US Department of Energy has a goal of weatherizing over 1 million homes as part of the 2009 American Recovery and Reinvestment Act, a.k.a. the 2009 stimulus package. This investment of $8 billion dollars is divided between $5 billion for grants via the states to weatherize homes of low-income homeowners and $3 billion dollars for rebates to other homeowners for weatherization upgrades to homes. The low-income grant program will limit grants to $6500 worth of work per home.
A review of the standard weatherization packages in 2002, indicates that the full package that would cost in the area of $5000-$6500 could cut from up to 7.5 metric tonnes of carbon emissions per year per house in high emissions/high heating demand areas like the Midwest, in particularly inefficient houses. In areas with lesser heating and cooling demands, like the Western US, the savings would be maximally 2 tonnes for an inefficient older, small single-family dwelling but the price tag would only be in the order of $2500/home.
However looking at the components of these packages there are certain measures that have much higher carbon reduction return on investment than others, most notably air sealing, programmable thermostat installation, water heater resets, low flow shower heads, and compact fluorescent lighting. An additional reduced package of these high impact measures would cost from $1000 to $1500 per home leading to emissions reductions of about 2 metric tonnes on average, to as many as 3.4 metric tonnes. It is possible to design then a “rapid” first-pass program of reducing emissions that would triple or quadruple the number of homes visited per unit expenditure. Later, a second program could revisit these homes to address the remaining issues like inefficient refrigerators, furnaces, insulation and water heaters that have substantial returns in reducing carbon but are more expensive.
In a few years time, we may have better measures based on among other things passive house technology, which may enable “deep energy retrofits” of existing houses that enable greater energy and emissions cuts with similar or lesser investment. In these cases, PCMP projects such as this one can revise their targets upwards.
Accelerated Home Weatherization Program with Carbon Targets
Region: All US States (start with high heating/high cooling areas)
Emissions Reductions Source: Reduce domestic combustion of fuel oil, natural gas, reduce domestic demand for electricity, especially at baseload.
Technologies: Building envelope air sealing technologies, insulation, high efficiency fluorescent lamps, refrigerators, water heaters, furnaces, programmable thermostats.
Target CO2 Emissions reductions from 2007 baseline: 60 million metric tonnes by 2020 from 30 million homes, 120 million metric tonnes by 2030 from 60 million homes.
Finance Mechanisms: Tax revenues fund low-income homeowner/renter grants (up to $6500 per home) and consumer rebates for energy efficiency upgrades.
Project Team: US DOE and state weatherization programs, utility officials.
Supporting National and International Policies:
- Carbon tax/fee funds and facilitates implementation.
- Contracting with stakeholders for greenhouse gas reduction targets
- Decoupling investor-owned utility income from energy sales
- National and state mandates for energy efficiency
- Green building and energy efficiency certifications/standards
A PCMP project once it is approved, organized and financed can move immediately to the generation of detailed design, operational plans and the begin of construction or implementation. The reverse engineering portion comes in figuring out how to get to the point where the technologies or processes can be implemented. The key difference between a PCMP (aided perhaps by other policies) and a policy that essentially remains entirely agnostic about solutions is that a PCMP adds a stated intention and tasks a skilled project team to achieve a concrete material change in the processes that generate greenhouse gases. Then policy is built partially around that intention and the project team that is tasked with realizing that intention.
The PCMP approach is I believe the most aggressive and gives those who will be ultimately held responsible for protecting the climate, the world’s governments, maximal ability to accelerate efforts if needed. To achieve the very ambitious 350 ppm goal and follow the “Emergency Pathway”, the PCMP approach would have the best chance.
Good Intentions Alone No Longer Suffice
Cap and trade has been a convenient mechanism for politicians to avoid fundamental but necessary conflicts while giving themselves and others the impression that they are “doing something” about climate change. As the first international climate policy, it has attracted a community of people that have seen it as the sole alternative to inaction, therefore undeservedly has become a magnet for the good intentions of both the uninformed and the somewhat-better informed. The “cap” is a reassuring physical metaphor that suggests a level of control over emissions which, as I have demonstrated, the policy itself undermines. As cap and trade appears to address 5 of the 11 domains of climate policy, it is seductive for politicians to try to set up a “one stop shop” as a means to address the climate and energy problem.
However, there are much better policy frameworks out there of which I have shown two examples. Cap and trade’s fatal ability to insulate the ultimate decision-makers from the process of pushing for emissions cuts on the ground can be avoided in a number of ways. Above, I demonstrated a project-based policy framework that I called PCMP, which builds policy from the ground up and puts at the center the key role of developing zero-carbon infrastructure in addition to price-based instruments that influence investment and behavior. Or, in part 3, I showed how it is possible to implement a nine-part composite of simpler but synergistic policies that is more flexible, will be more effective, and ultimately more comprehensible to the public at large than cap and trade. Crucially this set of policies does not give away or obfuscate governments’ responsibility to protect society and the environment.
The cap and trade policy is a twisted remnant of a political era in which government was supposed to pretend that it wasn’t really government. It has fooled no one except some of its supporters. Government must be decisively and centrally involved in the implementation of carbon policy and there must be a rapid re-discovery of the value of good government in leading society through difficult times. Furthermore cap and trade as an instrument contains within it an open invitation for corruption and “capture” by powerful financial interests with few incentives to make concrete investments in the energy or land-use future. Any effective climate policy must establish clear guidelines and openly acknowledge government’s supervisory role in the transition to a new energy economy. I wish there were more shades of grey in this regard, but there aren’t.
No set of policies is, however, a magic bullet if there is not strong popular support for decisive action on climate and popular acknowledgement of the necessity for government’s leadership role. As it currently stands in the United States, the public still is woefully misinformed about climate, with for instance, a prominent pair of columnists for the New York Times perpetuating “global cooling” myths in their latest book. Against this background, climate policy appears to be a partisan affair rather than actions of the human community as broadly defined as possible that are based on our best science. If cap and trade is presented as the only alternative, this further undermines the cause of climate action and government responsibility because of the fundamental flaws in the policy. The equation of cap and trade with good intentions on climate action must be irrevocably broken.
Ultimately, political leaders must campaign with passion for the future of our planet and our societies, with empathy for the economically downtrodden and dispirited, informing the public about the alternatives available to minimize the impact of our two century fossil fuel bacchanal. Within the context of a better informed citizenry, only then can an effective climate and energy policy truly take effect, though the time to start on both campaigns is now.
Tags: cap and trade, carbon tax, Electric Vehicles, Feed In Tariffs, Infrastructure, rail electrification, Renewable Energy
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In Part 1, I offered a critique of cap and trade in its existing implementations and located key flaws which make it highly unlikely that it will achieve its emissions reduction goals, even if somehow it is strengthened. In part 2, I highlighted two problematic aspects of cap and trade and then went on to examine what are the fundamental challenges of climate policy. Then I offered a list of the general features of any effective climate policy.
Turning to positive solutions rather than criticsms, I will offer here two main options, the first one mainstream and the second heterodox and project-based; both of which are easily configured for quicker and more certain emissions reductions than via cap and trade.
Comprehensive Climate and Energy Policy Package with Carbon Tax/Fee
Climate policy has emerged with a focus on markets and changing market behavior (ignoring infrastructure development to a large degree), so the “mainstream” approach below would also transparently give responsible parties control over the process. While the “one-stop shop” aspect of cap and trade overextends this already misapplied policy, a package of interacting measures that are, with fairly straightforward calibrations, guaranteed to cut emissions quickly can easily be put together. The below policy package avoids handing off climate and energy policy to an unaccountable carbon market and invite undue influence by financial traders. It also has the potential to be much more effective than a cap and trade centered policies. On the other hand it is “market-based” in that it relies on the more accurate carbon tax/fee price signal to shape market behavior rather than cap and trade’s muddy signal.
1) Emissions-Reduction Path with Targets: Set an emissions-reduction path with target goal posts (2015, 2020, 2025, etc.): Not the reassuring “cap” metaphor but an analog to the cap without the false reassurances that it contains. The target or path could be expressed in terms of an average carbon-intensity for economic activity that yields the same path. Using a carbon-intensity target allows adjustments to be made so efforts to cut emissions do not shut down industries before they are able to transition to lower carbon alternatives. I would recommend the “emergency pathway” as defined by Greenhouse Development Rights that uses the 350 parts per million carbon dioxide target, though others may object to its ambitious goals.
2) Carbon Fee or Tax: Set a carbon price in the form of a carbon fee or tax fixed but rising year by year that will, according to at first estimates and then experience, reduce emissions along the path. If the tax does not yield the necessary cuts, increases in the tax/fee levels will be accelerated. A tax or fee enables companies to calculate the value of carbon emissions and make the actual investments that will cut emissions rather than deal with a broad range of expected carbon permit values, as would result from cap and trade.
- Calibration - A carbon tax would be calibrated to achieve the emissions targets along the path in bullet “1″ though overachieving will be encouraged. If tax levels inflict damage on economic well-being or capacity, tax levels may be reduced, though it is to be expected that there will be periods in which some economic pain will be inflicted by the tax to encourage better economic decision-making and innovation. Expectations need to be set from the outset that some pain is involved in transitioning to a more sustainable economy, though excessive pain is to be avoided.
- Revenue stream – There are arguments among tax/fee advocates (as well as cap and trade advocates for the revenues from permit auctions) about where the revenues should go. Here are my recommendations:
- One third of the carbon tax revenues should be used to dampen the effects of the costs of rising energy prices on the poorest, preferably via energy efficiency upgrades to housing (modeled on weatherization programs).
- One third should be used to help fund infrastructure that enables a zero carbon future (electric trains, electric transmission)
- One third will go into a international carbon trust which will fund development products, changed agricultural practices, forest maintenance and growth efforts with strict performance standards and baseline assumptions.
- Exemptions and Credits – Some argue against any exemptions and credits, seeing a flat tax as simpler. However, I, as an example, believe taxing certain activities that cut carbon is counterproductive. Additionally I want to show that it is possible to develop and regulate cross-border certified emissions reduction credits in a tax system if such a credit sub-system ends up being desirable. I believe however that these necessary accommodations to the complexity of the situation are much more transparent and can lead to more productive dispute resolution than via the arcana of the trading system.
- It makes no sense to levy the full carbon tax level on the very infrastructure projects that lead to carbon neutrality. If a construction project embeds fossil emissions in a zero-emission technology (electrification of a train system, renewable energy infrastructure), then the emissions from construction equipment or concrete making for that project should be at least partially exempt. Alternatively there could be a percentage exemption depending on the level of carbon reduction achieved (coal to natural gas conversions).
- Just as with the current offset market it might be made possible to sell certified emissions-reduction credits that represent emissions reductions in other areas or other countries. These credits would need to be rigorously certified and limited to only a certain fraction of carbon tax liability.
3) International Agreements - Utilizing existing international institutions, nations around the world can come to agreements on both monetary fees for carbon emissions and overall emissions reduction targets. The addition of a monetary amount will force action by governments and businesses more rapidly than the abstractions of the carbon market. Agreements will focus on:
- Worldwide Emissions Targets and Path
- International Carbon Price(s) – Calibrated to achieving emissions targets, the international carbon price will be closer to actual microeconomic decision-making than permit pricing system of cap and trade. Choices are either a unitary price or a development-adjusted price depending on level of development. Some countries may be more “entitled” to pollute given their lesser historical contribution to total atmospheric concentrations of carbon. On the other hand, despite an “entitlement” to pollute more, some developing countries may want to go “cold turkey” and use the higher carbon tariff of the developed countries to spur sustainable development at home.
- Carbon tariff regime – with differential taxation in different countries, countries would levy tariffs upon importation either up to the amount of the unitary international carbon price or up to the amount of the development-adjusted carbon price. While this contradicts “free trade” orthodoxy, under an international agreement there should be no problem in levying this type of tariff. The WTO can be outfitted to handle disputes and generating agreements carbon tariffs and integrating climate policy with trade.
- International Standards and Best Practices – Agreement on standards, certifications, and grading systems for energy efficiency and low emissions technologies (see below)
4) Zero-Carbon Infrastructure Development– While the Obama Administration has embarked on pieces of this, a full-scale climate policy would front-load spending, including deficit spending, on building zero-carbon infrastructure and energy generation. The main source of funding would come from tax revenues and use fees. This area is largely neglected by the cap and trade instrument.
- Renewable Energy Supergrids and regional grids - Link high renewable energy areas with demand centers via development of a HVDC and where appropriate high voltage AC transmission.
- Renewable Energy Zones - Expedite environmental impact studies for high value renewable energy zones with strong sun, wind, geothermal resouces.
- Feed-in-Tariffs – Funding of private, community and household investment in renewable energy generators via clean energy surcharges to electric bills.
- Electric Freight Transport System
- Grade-separate and improve existing freight railbeds
- Add additional tracks to high traffic railbeds to allow more rail freight
- Electrify all high and moderate traffic rail routes
- Electric Passenger Transport System
- Build high speed rail backbone
- Enable improved track-sharing between freight and passenger traffic for lower-traffic routes.
- Build electrified bus and tram routes in high density/high-traffic city environments.
- Electric Vehicle Recharge Infrastructure
- Trickle charge (220V and lower) public charge network
- Battery-swap infrastructure
- Fast-charge (480V and higher) public charge network
5) Best Practices, Certifications, Standards and Rulemaking- Develop for most economic sectors, a set of best practices and standards that are based on cutting emissions as well as other elements of sustainable development (conservation of the earth’s natural wealth). Standards would be either voluntary or mandatory depending on the level of imposed costs of meeting these standards by market participants and the existence of alternatives to meet the overall goals of the standards. Rigorous standards like the passive house standard should be encouraged as well as graded standards that represent a “path” to carbon neutral solutions. In certain vital areas, standards may be come laws to rule out certain practices that are simply unacceptable. An example of the latter could be a moratorium on new coal power plants.
6) International Afforestation Program - Using revenue streams from carbon fees and tariffs, generate local solutions to maintaining living biomass. Carbon taxes or other disincentives may be levied on activities that release excess carbon into the atmosphere.
7) International Agricultural Carbon Sequestration Program - Using revenue streams from carbon fees, incentivize low-emission, high sequestration variants of agriculture and food practices. In the future, once a baseline for carbon sequestration may be achieved, carbon taxes may be levied on high emission forms of agriculture.
8) Black Carbon Reduction Program – One of the more tractable climate problems though still a challenge is to introduce existing emissions control technology or develop alternatives to combustion of hydrocarbons and biomass that produce soot or black carbon. We already have most of the technology to limit soot emissions from internal combustion engines and factories. More challenging is coming up with culturally-acceptable solutions for cooking with wood in less developed countries.
9) International Technical and Scientific Cooperation – Create the equivalent of an international energy and climate research fund that supplements the work being done on national levels towards specific technical solutions to emissions. Could develop in conjunction with IPCC WG III. One area of research should be emergency measures like geo-engineering.
If adopted as a package, the above measures address all 11 generic elements of carbon policy and have none of the 10 drawbacks of cap and trade. This approach transparently identifies governments as the responsible parties for reducing carbon emissions. This comprehensive climate and energy policy does not interfere with their ability to respond to changing climate circumstances and removes unaccountable financial markets from the core of climate policy.
Tags: cap and trade, carbon tax, Energy Efficiency, Energy Policy, Energy Pricing, Sustainability
In the first part of this post I identified 10 features of cap and trade, the favored climate policy of many policy elites at this point in time, that make the policy ineffectual. I outlined how cap and trade was sold to America and the world based on faulty assumptions as well as its superficial political appeal to the then Clinton Administration. Contrary to the story told in climate activist and sympathetic policy circles, cap and trade has been comparatively ineffective as a means to reduce emissions of either SOx or GHGs. I argue that this is a structural problem with cap and trade, not a mistake in implementation.
The Gulf Between Gutlessness and “All the Guts in the World”
Cap and trade is a hybrid policy, the mixture of a price mechanism and permit regulation. In theory, the three “motors” of cap and trade are the economic pain caused by having to buy permits (or the anticipation thereof), the profit gained by market participants in exploiting the permit and pollution troubles of others, or the prospect of running out of permits and being subject to some penalty inclusive of actual “police action” on the part of regulators. As with any permitting system, permits are meaningless without the threat of, potentially, monetary and criminal penalties. For instance, fish and game wardens need to be able to stop hunters and fishermen from taking animals for which they do not have permits.
However, cap and trade systems hide and, it appears infinitely, postpone the moment where regulators would have to essentially shut down the operations of various industrial or power generation facilities because they no longer possess permits to pollute (which they would have to do to operate using their current technology). For instance if a financially troubled power utility or plant operator ran out of permits on November 5, to meet the cap regulators would have to shut down one or more power plants until January 1. This might mean blackouts and brownouts to homes, businesses and, of course, hospitals. It would therefore take “all the guts in the world” for a regulator or government to enforce the cap, standing down the cries of people who will have to live with no or extremely unreliable electricity. Yes the notions of “banking and borrowing” permits are meant to reassure system users that this day of reckoning will never come. Yet this process undermines the power of the permits and the firmness of the cap.
Furthermore, at the point when this theoretical moment of enforcement might occur, the net effect would actually show the regulators/government in a very negative light because punishment might come as a consequence of a lack of “clever” permit-market behavior on the part of the power plant operators. Their power plants may be no more carbon intensive than the next but they may simply have been outfoxed by other permit buyers or various manipulators of the permit market. In this case, the punishment will seem arbitrary.
So we can now understand the design and behavior of the designers of real existing cap and trade systems a little better by recognizing this disjuncture between the lax disbursement of permits (Kyoto/EU-ETS and current Congressional bills), the various softening and smoothing mechanisms (banking and borrowing) and the need for some kind of real enforcement of the cap. It would subvert the politics of the policy to actually meet the cap through the harsh regulation that would almost certainly never happen or would be largely meaningless within the cap and trade framework.
While regulatory and political guts will be required to meet the climate change challenge, the imposition of harsh measures should be seen far in advance to allow adequate time for polluters to take action to cut emissions. Cap and trade’s framework does not allow for this type of lead-time before administrative measures are taken.
True Belief in Markets vs. a Baroque Policy Mess
As you might glean from how I write about these matters, I am no market absolutist nor believer in the efficient market hypothesis (EMH) which assumes exclusively rational information processing by market participants in aggregate. I think it is more reasonable to assume that people can be both economically rational and economically irrational or can alternate between the two at different times or in different contexts. Economists are also coming around to realizing how central irrationality is in our economic behavior: there has now been about a decade of behavioral economic research as well as the coming to grips with the fact that our recent crash was in part caused by a belief in the almost total predominance of rational, utility-maximizing economic behavior.
Whatever the balance of rationality and irrationality in human economic behavior, cap and trade (or carbon taxation/fees) with good justification attempts to mobilize the economic rationality of individual market actors in the service of climate protection by introducing a carbon price that will influence procurement and operations decisions. Rational economic man (or woman), according to the theory, only needs the information of price to make rational, optimal decisions. In cap and trade, the carbon price and market is supposed to be the link between merely pro-forma climate action in the form of permit giveaways/postponement of action by regulators and the theoretical, never-to-be-activated harsh punishments for exceeding the cap. Polluters are supposed to know that they are in trouble when they start paying more and more for polluting, sending to them a signal, the price signal that they need to change their operations. Rather than the impingement of some set of rules upon the company’s operations, the price is going to tell that economic actor “how much” it will be worth it for them to do something, so they can make an rational choice among a range of options.
The most productive use of a price signal will be if firms anticipate the economic pain caused by the signal before it gets expensive for them; once they are in trouble and overpaying for permits they will have less of an ability to make expensive long-term investments, especially if they are an emission-intensive business like power generation or cement making. With cap and trade, there may be sudden surprises in the carbon markets which will put firms into trouble even with adequate planning.
I’ve already outlined how flawed cap and trade is in generating the price signal due to the variability of the carbon price that results both via auctioning and via permit trading. In both cases there will be a lot of market “noise” related to how much people think something is worth rather than what it is worth fundamentally in terms of the climate. The “how much” will be almost impossible to calculate accurately under cap and trade as conceived and as urged by climate action groups that believe in cap and trade with all permits auctioned off as the gold standard of climate regulation. This will make investment decision making tools like net present value difficult to use as you cannot calculate the negative cash flows into the future that are attributable to the carbon price. This is not because net present value (NPV) is more environmentally insensitive than any other investment tool: it’s just sloppy policy-making to defeat the purpose for which you are instituting a policy! Cap and trade would have to invent its own more baroque micro-economics and corporate finance tools that will always be more inefficient and fault-prone than using a simple price signal and NPV.
So if true belief in markets and economic rationality of individual market actors is fundamental, then a carbon tax or fee that is correlated directly with the amount of carbon or global warming potential (dealing with more powerful greenhouse gases than carbon dioxide) emitted is the clearest, most predictable price signal. Cap and trade’s baroque double decker market structure is like a climate policy that has been thought up by an overeager 5-year-old who gleefully stacks markets on top of markets because it seems more “market-like”. Having one “meta-market” emit the carbon price to the real market for carbon emissions reduction solutions is a bad idea. An excess of markets in this case does not encourage rational economic behavior on the part of individual market actors.
“It’s All that We Have”: Making Do is not Good Enough
A number of commentators, bloggers, and politicians critical of the state of climate policy nevertheless hang on to cap and trade. Some agree with some of my criticisms while others might find my foregoing criticisms gratuitous or simply giving aid and comfort to climate deniers. Or, even if they are frightened of the monumental hand-off of responsibility that is contained within the cap and trade system, they might feel that so much political capital has been spent on cap and trade that it must be defended as the embodiment of climate policy itself.
Below, I will suggest that in fact we have a wealth of choice in the area of climate policy, almost all of which will be more effective and efficient than cap and trade. For one, governments around the world including the Obama Administration are taking action in other areas that do not deal with carbon pricing or trading of permits or credits/offsets. You could say that governments that openly advocate a cap and trade system might be seen as also hedging their bets. Secondly, it will be fairly easy to replace cap and trade with an ensemble of different measures or a carbon tax with any number of features. If history is any guide, other countries have implemented a carbon tax within months rather than the years long efforts to install cap and trade systems.
It pains me that so many people many of them good-hearted and well-intentioned have expended political capital and reputations on such a faulty instrument. In their own defense, depending on their social scientific or business backgrounds, they could not necessarily have known differently. However, that is no reason to stay with an instrument that has a high probability of gumming up the wheels on climate action rather than speeding it up.
Before describing alternatives to cap and trade, I want to first outline what I think the tasks are that the policy needs to address. Without a common vocabulary for these tasks, stripped of bias towards a particular policy instrument, you, the reader, won’t be able to evaluate whether these are substantially better than what we have already. In most cases I am not reinventing the wheel, but simply observing and compiling what I see is out there already.
The Fundamental Challenge of Climate Policy
The fundamental challenge facing governments, climate activists, green-oriented businesses, and concerned citizens is a neat intersection between a massive policy challenge and a massive political challenge of the early 21st Century. Policy and politics are not always so closely intermingled but in this case they run for historical reasons very closely together.
Instituting cap and trade rather than more effective policies is a bad idea spawned of an era in which government was supposed to become more “market-like” in all matters. We have discovered in so many areas of life that this philosophy of government is flawed, despite continuing political disagreements around this issue in governments around the world. Our current generation of politicians got elected by taking one stance or another (but mostly one stance) on the either/or proposition of whether government or markets were “better”. Markets unregulated, as it turns out, encourage short term thinking and satisfaction of immediate appetites. Fortunately or unfortunately, to face the future threat of climate change, a revision of government’s distinctive place vis-à-vis regulation of markets and our own appetites is required.
Climate policy has the unenviable task of
- saying “stop” to our impulses to overuse fossil fuels and overexploit the world’s forests and soils,
- directing, under constant political attack, substantial streams of public and private investment to building a new energy and energy-use system and
- changing our patterns of land use to fix more carbon in plants and soil.
This places government, and government is the only instrument up to the task, at loggerheads with citizens’ and businesses’ impulses to use more and more energy (and non-renewable natural resources), as cheaply as possible with a disregard for the negative consequences. While ideally such policies would enact a form of “aikido” on our wishes, using the momentum of our wants for more and better stuff to instead be used to transform society for good, there still needs to be a firm boundary and governmental “center of gravity” that is clear to all (otherwise it cannot perform aikido on anything). In the end, what is required is the return of government’s legitimate role and moral authority to set this type of reasonable limit and redirect energies that would otherwise go elsewhere.
The analogy of speeding on the highway can bring this closer to our personal experience. Without traffic cops, many of us, including myself, would drive too fast, increasing the possibility of fatal accidents; furthermore automakers have tended to put whatever mechanical efficiency gains that come from among other devices, turbochargers, into making cars more powerful and “fun to drive” than into gains in mileage. Yes, there are those of us with a conscience or without the interest in driving fast but we cannot count on these forces alone to curb fast driving, especially given the powerful automobiles to which we now have access. The police who catch speeders are not very popular but, if they avoid corruption and are not subject to absurd ideological attack, they maintain moral authority and can do their job.
Fossil fuel use (or wanton deforestation) is similar to the propensity to speed in that it offers us and our economy an easy way to satisfy our wants without regard for the long-term consequences. Fossil fuels are notably energy dense and we in most developed or in oil-rich countries do not pay nearly enough for them given their social and environmental costs. In an uncharacteristic moment of clarity within his Presidency, George W. Bush put his finger on it when he said that “America is addicted to oil”. As in addiction, only firm limits and sometimes harsh measures are able to stop the addict from re-using the drug he or she desires. The authority of government to intervene (double entendre!) in the domestic economy has been over the past 30 year undermined by an ongoing political barrage that suggests that government has less legitimacy and moral authority than the market. Cap and trade is an effort to wrap government in the faux moral authority of the market, as promoted by the market fundamentalist creed of the last 3 decades. The market unregulated, as it turns out, is amoral, not caring that much about long term consequences. Markets are not “bad” or essentially immoral, they just are tools that lately have been called on to do tasks to which they are ill-suited. As even Alan Greenspan now attests, they have been fundamentally misunderstood most notably by him and by many others.
Especially in the US but also abroad, governments, in order to do their work, must re-establish moral legitimacy in many areas of domestic policy which have been thrown into question by our decades-long experiment in market fundamentalism. The substance of the politics surrounding cap and trade is largely about the moral authority of government to restructure our energy system and secondarily about the legitimacy of natural science. The content of this moral legitimacy is that government can when functioning well, represent the general or common interest in making and enforcing rules, collecting taxes, and spending that revenue for the purpose of maintaining and improving the future viability of the nation. Even more so in the area of climate change, which will mean over a period of a decade or two, dramatic changes in at least three sectors of our economy, governments’ moral legitimacy needs to be well established to effect whatever policy is chosen.
Cap and trade’s “prospectus” (a.k.a. political sales pitch) suggests that government can after declaring a “cap” essentially recede into the background, while the “hand” of the permit trading market does its work. Its superficial political attraction is that it reinforces the pre-existing “rap” that government is “bad’ or ineffective and the market is “good” and effective. However, to work in any shape or form, climate regulation and policy, including cap and trade systems such as they are, is going to need government action in spades. So, cap and trade sets up its advocates for a long-term political defeat: even if a weakened form of it passes, people will ultimately start to wonder why there is so much government involved in cap and trade (and so ineffectually at that). Maybe its advocates believe that “people know” that cap and trade is really just another government regulatory program and won’t feel betrayed; given the state of civic understanding of government’s role, I believe they are sorely misinformed.
Ultimately the leaders of government(s) are going to need to take responsibility for protecting their people and the environment from substantial degradation via curbing our own emissions of greenhouse gases. The language and parallel institutions of cap and trade interfere directly with the process of by which government leaders would take responsibility, suggesting that automatic processes will “take care of themselves” via the invisible hand of the carbon permit market. I have demonstrated that such an invisible hand will play tricks with the policy itself compromising its effectiveness. Both the policy in its pure form and even more so efforts to curb its tendencies will create a baroque structure that does not work directly and efficiently on the basic tasks that are required to reduce carbon emissions rapidly within a decade.
The Basic Elements of Climate and Energy Policy
To open up the field of alternatives to cap and trade, as well as understand cap and trade better in context, we need to understand what the generic tasks of any climate and energy policy would be. A comprehensive climate and energy policy has most of these elements independent of policy instrument choice:
- Disincentives for (or rules against) the use of fossil fuels, leading either immediately to switching to virtually carbon neutral fuels/energy sources or vastly more efficient use of fossil fuels prior to switching to carbon neutral energy.
- Incentives for private investors to build carbon neutral electric generation and carbon-neutral energy storage as replacements for fossil electric generation.
- Incentives for vastly more efficient energy use of all types in transportation, buildings and industrial processes (or conversely disincentives to “waste energy”).
- Provision of or facilitating the financing of site- and regionally-specific public goods that lead to carbon neutral energy use (electric transmission, electrification of railways, build out of railways, electric vehicle recharging networks).
- Revenue sources for financing public goods and incentive programs that enable a society to cut emissions.
- Incentives for maintaining and increasing carbon sequestration in land use in agriculture, silviculture and in forest preserves.
- Disincentives for (or rules against) the release of sequestered carbon in land, vegetation, and sea.
- Reduce black carbon emissions via introducing emissions controls or alternatives to biomass combustion or other black carbon sources.
- Develop, identify and institute standards for lower- and zero-emissions technologies and processes.
- Generate regional and national plans based on better and best practices to curb emissions
- Fund basic climate and energy research
There is no single policy that does all of these tasks well nor will some policy package address all of them. We see that cap and trade is an attempt to address a number of them with a single instrument, most particularly numbers 1, 3, 5, and 6. As we have indicated cap and trade’s inherent laxness and unclear carbon price signal interfere with 1 and 3 (energy efficiency, fuel switching, and restriction of fossil fuel use). It does offer to join these efforts with 6, which has spurred interest in the developing world. Again there have been difficulties in establishing whether funded carbon sinks/offsets needed the funding and also run into problems with 7, the release of carbon once sequestered. Would development projects need to pay the money back if the forest they are leaving to grow is cut down by them or someone else?
The temptation of policy makers, in their first take on a climate policy to lump a number of concerns together is understandable, especially if climate policy, in relative terms, has been a low priority. However cap and trade has been extremely cumbersome to set up and ineffective or marginally effective in each of these areas with a high probability of continued problems given its long list of inherent flaws. Moving to or at least seriously considering any one of a number of alternatives is advisable given cap and trade’s ability to block other policies and clog governmental channels. Furthermore translating our thinking about climate into its terms limits our ability to imagine other scenarios that will work much better. In every one of these categories there is a more effective instrument than cap and trade, meaning that we of necessity must move to a multiple instrument platform because of cap and trade’s lack of effectiveness as well its (and any instrument’s) lack of comprehensiveness.
I will offer here (in the next part) two main directions, one mainstream and the other “heterodox”, that both will achieve more quickly and easily emissions reductions than cap and trade.