Cap and Trade: A Tangled Web of Good Intentions and Bad Policy – Part 1 October 26, 2009
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Transport, Renewable Energy.Tags: cap and trade, Carbon Pricing, carbon tax, Climate Policy, Energy Efficiency, Energy Policy, Renewable Energy
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I favor some of the more aggressive actions to avert climate catastrophe, actions which nevertheless do not compromise the continuity of human life and well-being. The climate which enabled our evolution as a species and the societies upon which we depend has almost no price attached to it. Averting this calamity, if we can, is the moral equivalent of war. As such it deserves the investment and political priorities that are accorded the military during a war, though the necessary moral and climate-science arguments for this level of investment have not been made clearly by leaders, especially in the US. In our Great Recession, a forward-looking policy to counter climate change would have much needed economic benefits and lay the foundation of the new economy that we are supposed to be building.
Unfortunately, the mental “real estate” of climate activists and politicians has been captured by a monumentally bad idea, a misapplication of an environmental regulatory system that encourages delay and irresponsibility in climate action rather than changing the course of our society’s use of energy and land. Whatever urgency is felt popularly or by leaders, the institutions that will arise from the cap and trade policy framework have a good chance of actually blocking more effective action on climate (more straightforward system of rules, incentives, disincentives, and direct investment), which makes the work of exposing its flaws not simply the matter of my or someone else’s political or economic preferences but one of life and death for future generations and the ecosystems upon which we depend. An unquestioning herd mentality has taken over and encouraged even some of our best social scientific minds, including Nobelist Paul Krugman, to issue statements of support for a policy inspired by an outdated political and economic fashion of which Krugman is himself one of the leading critics.
Somehow a connection is not being made between the monumental collapse of our financial systems over 13 months ago and the design of the twenty-year-old policy instrument to which so much unearned credence has been given. Fundamental to cap and trade is the hand-off of key responsibilities and agency (the ability to act) for cutting carbon emissions to a carbon derivatives trading market, an unnecessary gift to the hyper-caffeinated and overgrown trading sector of finance. Just this week, critics of the Obama Administration’s earlier weaker financial regulatory efforts are now feeling somewhat vindicated in seeing that the Administration is now stepping up its efforts to rein in financial engineering and trading-dominated finance. It is utterly baffling that people who are intelligent enough to design or just understand an over-complicated policy instrument like cap-and-trade have not made the connection between the origins of cap and trade and the vagaries of our financial system. For them, the cap and trade instrument is still wrapped in the mystique of trading-based markets, which outside the climate community have lost much of their appeal.
It is an open secret among people who actually work now in cutting emissions by implementing energy efficiency and renewable energy projects that cap and trade is at best a holding pattern if not a monumental roadblock to pushing ahead with deployment, investment and research in emissions reductions themselves. These voices, generally excluded from the political discussion, contradict the “line” that, for instance, the upcoming legislation from the US Congress centered around cap and trade is a “clean energy jobs bill” and is the very heart of a green economy. While cap and trade is complex, these criticisms come not from a lack of economic or even political understanding but from a realistic appraisal of how actual lower-carbon technology implementation decisions get made, an elementary business process which seems to have escaped study by the policy’s designers. Cap and trade is not too stringent or too effective but not nearly effective enough.
The fundamental problem with cap and trade is that it placates government leaders and activists with manifest good intentions while undermining the effectiveness of the only instruments which could realize those good intentions. Cap and trade inserts a layer of obfuscation and indirection into governments’ ability to make rules, implement programs, build public works, and levy taxes in a fair and transparent manner. On another level, it has a faulty microeconomics, inserting uncertainty about the value of emissions reductions to the businesses that will actually cut emissions via responding to the policy. While working with ineffectual or superficially “P.C.” policy instruments might be acceptable in other matters, in climate policy the massive open-air experiment that has been cap and trade over the past 15 years is an unfolding catastrophe. It is not unlike the Trojan Horse, in that cap and trade appears as a gift, yet gives the vandals or just climate do-nothings command of the citadel. Tragically, the barrage of criticism and invective from the loony political Right or from professional contrarians who have lost a sense of proportion, distracts well-intentioned lawmakers and their supporters from seeing the flaws of their chosen policy.
Cap and Trade in Summary
Briefly, the cap and trade systems under discussion are permit trading systems that attempt to limit emissions of greenhouse gases by allowing polluters to emit greenhouse gases to the amount for which they possess permits. Permits are either given away or auctioned off up to the amount of a society-wide or economic sector-wide “cap” determined by regulators, which is supposed to be “tightened” (meaning reduced) over the years, leading to the decades long equivalent of a game of musical chairs. Regulators, as is planned, will in the future remove “chairs” by reducing the number of permits available to the point where by 2050 there would only be permits for 20% of 1990 greenhouse gas emissions. The “trade” part happens when companies have excess permits, because of having polluted less or owning unneeded permits. They can sell these excess permits for a profit to companies that pollute more than the amount of permits that they own. There have been various attempts to re-brand cap and trade with a name that sounds somewhat less shady, like “market-based cap” etc..
Derived from the speculations of the economists Ronald Coase (1960) and Martin Weitzman (1974), cap and trade, also called emissions trading, was invented in the US in the late 1980’s and early 1990’s during the first Bush Administration as a way to avoid issuing so-called “command-and-control” environmental regulation by government (telling industry exactly what to do and monitoring it) or direct monetary penalties like pollution taxes. The original cap and trade system for acid rain pollution which is still in place in the US, has been declared responsible for reducing by 40% sulfur emissions (SOx) by coal-burning power plants in the period 1990-2004. However, during the same time period, European and Japanese regulators have been markedly more successful using traditional regulations in cutting the emissions of these same pollutants (65%) from power plants, revealing the cap and trade system to be the equivalent of a regulatory stunt: “See! Look Ma…no hands!” In a 2007 review of the results of emissions trading, Gar Lipow has led the way in calling into question the sales pitch for cap and trade.
As an example, the highly coal-dependent, heavily industrial Czech Republic went from in 1990 emitting two times the amount of SOx per capita as the US to in 2004 emitting approximately one-half the amount of SOx per capita as the US (UNECE report page 68). While most post-Communist societies have decreased all types of emissions substantially due de-industrialization, economic hard times, or adoption of modern emissions controls, the Czech Republic had in 2006 twice as much industry as a percentage of GDP and uses as a percentage of total energy supply twice as much coal as the US, revealing the US to be far from a leader in reducing acid rain pollution. Furthermore, the cap and trade system’s success has been aided in America by the accessibility of low-sulfur coal at an equivalent price to coal with higher sulfur content; Wyoming’s Powder River Basin coal deposits have been the “wind beneath the wings” of the US anti-acid rain program such as it is. From the perspective of these results, holding out the SOx regulatory system of the US as the pivotal policy to save the planet stretches credulity.
Cap and Trade and Greenhouse Gases
The road to applying cap and trade to climate change had a number of twists and turns. Before implementing a climate policy, in 1993 the newly-formed Clinton Administration had attempted to institute a BTU energy tax as a means of raising revenue but was rebuffed by Congress. The Administration considered this experience along with its frustrated health care reform effort a major early defeat that shaped later thoughts on policy and political strategy; these fateful events 16 years ago unfortunately have had inordinate effect on US and world climate policy since then.
The Clinton Administration subsequently in the negotiations surrounding the Kyoto treaty to limit greenhouse gas (GHG) emissions favored “flexibility” and helped engineer a consensus in favor of cap and trade and cross-border emissions swaps. While a “wonky” intellectual interest in emissions trading may have played a role, the Clinton Administration also thought that this policy would have domestic political benefits as a means to circumvent a policy that had the “tax” label or appeared to tell industry what exactly to do (direct regulation). Using cap and trade also was an effort to “reach across the aisle” as the first cap and trade system had been implemented under the Presidency of the first George Bush. In other areas of the economy, in tune with economic fashion of the 1980’s and 90’s, the Clinton Administration was as fascinated by markets as its Republican predecessors and, additionally, had a penchant for policy complexity, within which the notion of using a market to regulate other markets seemed almost commonsensical.
In 1998, despite pressing for cap and trade as the international GHG regulating instrument, the Clinton Administration compromised with an intransigent US Congress by not ratifying the Kyoto treaty, insisting that the developing world must be included in the regulation of greenhouse gases. The elaborate political ploy in using cap and trade failed as far as US politics were concerned. Other industrialized nations, most notably Europe and Japan, and the relevant UN bureaucracies continued developing the carbon market and cap and trade concept without direct US involvement during the later Clinton and Bush years. The Protocol went into effect in most industrial countries in 2005 after a lengthy period of negotiation and set-up.
While emissions have been cut in some countries, the experience of the first four years of international carbon regulation via cap and trade have not shown the instrument to be particularly capable of effecting meaningful reductions in carbon emissions. In the European Union Emissions Trading Scheme (EU ETS), affiliated with Kyoto, the effects of the economic downturn or a future upturn are making any evaluation of the effect of cap and trade on emissions a near impossibility. The use of carbon offsets originating in developing countries will further cloud the data. In its initial 3 year period (2005-2007), GHG emissions in the EU ETS went up by 1.9% with wide nation by nation variation ranging from Sweden (-20%) to Finland (+28.5%). Multiple reasons are possible for the wide span between countries and more generally many self-issued excuses are rampant because of the acknowledged complexity of the system; this was a “run-in period” etc. In 2008 there is missing data but it appears that a combination of the economic downturn and high energy prices (not necessarily attributable to a carbon price) led to a fall of GHG emissions of 3% from 2007 in the EU, which the managers of the EU-ETS attributed to the carbon “price signal” generated by the trading scheme. In the same period (2007-2008) without a national GHG cap and trade system, US emissions fell 2.8% for similar reasons, contradicting the claims of EU ETS managers that cap and trade had an effect in 2008. The net contribution of carbon trading to emissions reductions is still, 12 years after Kyoto, indistinguishable from “noise” in the data.
While it is universally agreed that “errors” were made in giving away too many permits in the initial round of Kyoto/EU-ETS, it is a strange repeat of these supposed errors that the now proposed US cap and trade system being debated in Congress will as of this writing also give away most of its permits for about the next decade. Furthermore the use of offsets, the (supposed) emissions cuts by others that are purchased on an international market because they are cheaper than internal investments, has been controversial both in design and in implementation. Whatever one’s view on carbon arbitrage (shopping around for the cheapest reductions around the world), it is universally agreed that offsets reduce pressure on the biggest polluters to take action now in reducing their own emissions. The notion of cap and trade being a system of indulgences for fossil fueled economies is further reinforced by this disturbing propensity of real-existing, as opposed to theoretical-ideal, GHG cap and trade systems to undermine themselves or soften their impact on the biggest sources of emissions.
In Copenhagen in December at COP15, the successor to the Kyoto process (2005-2012) is to be designed and most of the climate community is moving towards a new cap and trade-based treaty that activists hope will be more vigorous than the previous one. Yet the trenchant criticisms of cap and trade systems that emerge from economists, most notably William Nordhaus, and concerned economic actors on the ground are brushed aside by those congregated at these events who seem to feel that their good intentions can substitute for conscientious analysis. For instance, almost every economist, including cap and trade supporter Sir Nicholas Stern, has had to agree at one point or another that carbon taxation is more efficient than the baroque emissions trading systems we have built.
Furthermore, we in the US are put in the difficult position of being a laggard in a process that is based upon our own bad idea, and upon which we really never followed through in its original form. In a way, the Obama Administration is, as it may be doing with its Afghanistan policy, put in the position of fighting the last Democratic President’s war rather than designing a more future-looking policy; having defined the political choice as cap and trade or, as the Republican opposition to Obama would have it, no strong action on climate change, the Democrats and Obama should instead be looking for the way to a more effective climate policy. The cap and trade framework, a product of some tortured political logic from the Bush and Clinton years, has “captured” the discussion, limiting thought and discourse on what are the available instruments to avert this catastrophe.
In its defense, permit trading may be appropriate as a distribution mechanism though not a magical cure-all in certain environmental arenas, most particularly the regulation of fisheries. In many nations now “catch-shares” are allocated to fishers who can trade these shares with other fishers. However, the ultimate success of even this appropriate use is achieved by the government setting limits on the fishing industry, not by yielding to some invisible hand of a fabricated market: the total amount of the permits allowed would need to be determined beforehand with reference to study of the fishery by biologists unaffiliated with industry and fishing limits would need to be enforced by government regulators, albeit according to the number of permits that the fisher owns. The appropriateness of permit trading as a distributional mechanism in this instance is that
- one is trying to calibrate exploitation of a natural resource at a particular level rather than reduce it in one direction (lower is almost always going to be better with GHG emissions for the foreseeable future.
- The permit trading is a just a new layer inside an existing historical market for fish which have an intrinsic positive economic value for people but are not arbitrarily created by people (it’s “inelastic”). Pollution permits are on the other hand entirely an arbitrary creation of government(s), so the determination of a pollution price via the market is similar to playing a game of “guess what’s on my mind.”
- A simple intuitive equation can be made by all fishing market participants between a permit and a tradable object of recognized economic value, i.e. the fish.
All types of permit trading, whether of emissions or other, have provoked ethical controversy with regard to the selling of ownership shares to a public or natural common good. Despite these reservations, in the case of fisheries, fishers already have a longstanding tradition of claiming ownership of what they catch so permit trading represents not much of an innovation in resource ownership in fishing.
Why Cap and Trade is Bad News for Our Climate’s Future
There are a number of fundamental problems with cap and trade systems that are deeply embedded within the policy or its likely implementations, which suggest that working towards alternatives, even if they too are imperfect, is preferable. Remember, we do not have as many shots as we would like to deal with this problem, perhaps only one or one and a half, so a decades-long experiment with third-best policies is a foolish game. As Bill McKibben points out in a recent article, we cannot negotiate with non-human nature, unlike some other areas of policy. So we need to put in policies that are either “right” or that do not install roadblocks that would stand in the way of better solutions.
- Cap and trade puts a newly formed financial derivatives market (the carbon permit market) with all its potential for boom and bust cycles and manipulation by powerful and unaccountable players, in a position to distort the real market for low-carbon technology and land-use changes; the stimulation of this real market is the reason for its existence in the first place. Within the fabricated permit market, the profit-seeking activities of permit traders from the financial markets and industry will be able to exert a substantial amount of unintentional control over the real technology choices and solutions implemented to curb our emission and sequester carbon. These traders, as do all traders, have a vested interest in opacity, price variability, and information asymmetries that would enable them to achieve the highest profit levels for their firms. Permit trading may offer some of the highest returns on investment in a cap and trade-dominated climate action world, so financial players will defend these profit streams with all the considerable means at their disposal. These are the most likely candidates for the “Greek raiding party” in the belly of the Trojan Horse, though climate activists and bureaucrats wedded to cap-and-trade are co-responsible for opening up the “citadel”.
- As trading looks to be one of the more profitable areas of the carbon business but in itself does not cut emissions, the incentives in the policy are misaligned: the most profitable business within a carbon policy framework should be those lines of business that cut the most emissions either through selling new technologies or processes or implementing them. An unfortunate echo of the go-go 90’s in which it was conceived, activity of trading is given a role far beyond any real value it offers. On the level of businesses with real polluting assets, cap and trade will also reward those economic actors who are better permit-buying “game-payers” rather than those companies that invest most in emissions reductions. This type of reward structure has no place in climate policy.
- Non-cap-and-trade policies that determine a fixed price for carbon have the advantage of having as an “output” an acknowledged decision-making tool (a monetary amount) that is already historically integrated into every economic transaction. In permit trading, permit prices are only applicable to large economic actors and have only a “reflected” (and variable) monetary price after the net costs of the cap and trade outcome for that economic actor have been integrated into the pricing of their goods and services.
- A variable, uncertain carbon price that arises from market fluctuations and artifacts of the permit auctioning and trading system is not a clear, easily quantifiable incentive for firms and other real economic actors to make the long-term investments in capital equipment required to cut carbon emissions. A predictable carbon price (in the form of a tax or fee) over the long-term, albeit steeply increasing, would provide a much better incentive to make long-term investments that pay off over years. The “net present value” calculations that are the bedrock of investment decision-making depend on the projection of costs and benefits out into the future, which is nearly impossible using the rapid fluctuations and uncertainties of a carbon market.
- The salespeople of cap-and-trade claim falsely that the system gives policymakers “certainty” in terms of the amount emitted as compared to a price instrument like a tax/fee. As the study of existing cap and trade systems shows this certainty is illusory and gives leaders a false sense of security. To get this type of certainty in a cap and trade system, regulators would have to engage in some very harsh and disruptive administrative actions, like shutting down a power plant during the last 3 months of a year if its owners ran out of permits. Alternatively, the owners of the power plant could “borrow” permits from the next year’s allotment, only to create a direr threat for the next year, but the cap for the current year would have been broken. Again this is punishing players for not playing the permit “game” as smartly as others though not necessarily being the gravest offenders in terms of carbon-inefficiency or overall emissions.
- Buying permits from other firms at a higher cost will impose an undue burden on companies or organizations that need to scale up their operations and increase their emissions in the middle of a year in response to an increased demand for their products. A carbon tax will have no such punitive effects for unplanned growth as its cost will remain constant throughout the year and per unit produced.
- The carbon market does not differentiate between upstream and downstream emissions mitigation. “Upstream” means at the source of emissions, while “downstream” means either increasing efficiency of carbon-emitting energy use or absorbing emissions via land use changes. The efforts to make carbon emissions reductions appear as cheap as possible have tended to emphasize downstream solutions or projects in developing countries. However ultimately the main solution to slowing global warming is to eliminate emissions upstream which is currently more expensive, though downstream mitigation is always going to be necessary as well. A carbon policy that addresses upstream emissions immediately is preferable to one that waves a hand of resignation at business as usual in power generation and transport fuels because of initial cost issues.
- Cap and trade, because of its complexity, indirection and somewhat mystical faith in markets, has become the lingua franca of the climate action community and in so doing has shut down that community’s ability to critically examine the instrument itself or alternative, more effective instruments. The collective mental bandwidth that this instrument occupies has helped it to “suck in” many of the good intentions and attentions of politicians and activists, drawing their efforts away from other measures.
- Cap and trade obscures the vital role of government leadership, responsibility, regulation and direct investment from the public, the climate action community, and the leaders of government themselves. The successes of cap and trade systems such as they are, depend on either external factors independent of policy (economic downturns, low-sulfur coal deposits) or governmental actors setting stringent targets, operating the permit auction and trading system, and enforcing emissions goals. Yet, cap and trade’s sponsors and advocates continue to promote the fallacy that government is only playing an indirect role in its workings, as if this were a strength of the program. According to most of the expectations that have developed about government over the past millennium or so, there’s nothing wrong with governments taking a leading role in averting one of the greatest calamities we have ever faced. Government is the only institution that can represent and press for the realization of our society’s intention to save itself and the climate via implementation of low-carbon technologies and abstaining as a society from using up fossil fuels all at once. Attempts to hide the role of government paradoxically reinforce the position of advocates of a smaller government who can then point to the attempt soft-pedal as supporting evidence for their claims that government, especially “Big Government”, is “bad”. An honest assumption of responsibility by government would enable clearer, more transparent and more decisive policy moves and educational efforts about the dangers and opportunities for taking a sustainable path to economic development associated with climate change
- Instituting a cap and trade system because we, pro forma, must put a policy called a climate policy in place now or by December’s Copenhagen climate conference is worse than delaying a few months or a year to put in a better policy once our leaders have examined the alternatives with a more complete understanding of where they are going. The cap and trade systems now and soon to be developed already create considerable institutional and bureaucratic inertia and their own set of interest groups which are not so much incentivized to cut carbon emissions but to manage and justify the cumbersome system.
Any policy will have its strengths and weaknesses but cap and trade creates an economic, social scientific and political lattice-work at a distance from or interfering with the actual climate tasks ahead of us while blocking the way to better climate policy.
[In part 2 I will highlight what I think is the "fundamental challenge" of climate and energy politics and policy, look at the generic tasks that climate and energy policy is supposed to accomplish and suggest alternate route(s) that are more practical and will be infinitely more effective than cap and trade]
Carbon Pricing is Just One Piece of the Puzzle: Towards a Comprehensive Climate and Energy Policy – Part 5 (of 5) February 26, 2009
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Activism, Green Building, Renewable Energy, Sustainable Thinking.Tags: Cap and Trade System, carbon tax, Comprehensive Climate and Energy Policy, Electric Vehicles, Electrified Rail, Passive house, Utility Regulation
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In the first three parts of this long piece (one, two, three), I outlined how our economic common sense has changed since the economic crisis of late 2008; monetarism/supply-side economics has given way to some newer version of Keynesianism. I went on to claim that a primary focus on carbon pricing shows traces of the idealized vision of the market that one finds in the “free market” schools of economics; climate activists have pinned most of their hopes on carbon pricing to remedy the singular catastrophic market failure of unaccounted-for carbon emissions. In part 4, I pointed out that there are two other important market failures which block effective action on climate in the US and elsewhere. We then have the following list of market failures that are relevant to climate and energy policy:
- Externalization of costs of climate change attributable to carbon emissions
- Externalization of costs of infrastructure building and maintenance and high fixed capital costs of long-term private capital investment
- Deployment of capital intensive clean energy technologies
- Coordination of management and finance of upgrades to electric grid.
- Re-design and electrification of transport infrastructure
- Externalization of costs of scientific research and development
Outline of a Comprehensive Climate and Energy Policy
A comprehensive climate and energy policy is motivated by the emerging crisis in our climate, as fossil carbon in the atmosphere is unbalancing the self-regulatory processes of the climate system. Significant melting of Arctic and Antarctic ice sheets will increase the absorption of the sun's radiation and spur further warming.
A comprehensive climate and energy policy can allow for differentiated roles for national states, regional and local governments, and for private businesses and individuals with differing potential contributions to reducing carbon emissions and building a 21st century sustainable economy. Thus a view of economies as not just a uniform collection of individual actors responding to a pricing regime makes the picture more complex but also potentially more effective.
Assumptions
- A reversal in emissions trends is necessary within the next 5 years
- Sharp reductions in emissions are necessary within the next 10 years
- A “glide path” to zero net emissions needs to be entered into within the next 3 years, there is no time for commitment to new long-lasting infrastructure with incremental reductions.
- The US and the world population are generally not yet ready to pay anything more than a fraction of the externalized cost of current carbon emissions.
- Uncertainties and changes in economic theory and assumptions require an examination of the degree to which climate policy contains disputed assumptions about economic behavior change and investment behavior.
- Government policy and leaders have a key role in addressing failures of the market to respond to challenges both internal to and external to the market.
- Costs and benefits of government policies and expenditures must be adequately explained and accounted for by policymakers and political leaders.
- The economically stimulative effects and benefits of a comprehensive policy will either match or exceed its net costs for the United States, involving outlays and revenues in the area of several trillion dollars over the period of a decade.
“Traditional” Regulation (partially addresses “Market Failure 1”)
The power sector is particularly used to and suited to traditional regulation as the building and maintenance of power plants is highly regulated in almost every country in the world. New regulations are sometimes feared and resisted but enough pressure and negotiation can make most rules effective in ways that are more difficult in other economic sectors.
If governments can and at times must take a leadership role in managing the economy, they can do so in part by imposing laws that are in our long-term benefit. Especially if ample consideration is made of the resulting costs and administrative overhead required to implement laws and new rules, these new rules can remove long-standing barriers to making progress in the area of energy, energy efficiency and climate protections.
We have seen that carbon pricing was proposed as a means of avoiding some of the supposed bureaucratic drawbacks of traditional regulation. As it turns out in the case of sulphur dioxide that traditional regulation that dictated the installation of emissions scrubbers was, in some countries, more effective than the US cap and trade system in reducing acid rain pollution. In addition to a fascination with a particular partial economic model, relying on carbon pricing alone might be simply an abdication of the authority of government in the face of resistance by industry. Sometimes leaders need to “put their foot down”, if there is an overwhelming case to be made for new rules made and administered wisely.
- Coal Plant Moratorium – The primary regulation that must be a part of a comprehensive climate and energy policy is a moratorium on new coal-fired power plants without carbon capture and sequestration. If power utilities find this onerous, they must lobby for regulations and subsidies that make this possible for them on all levels of their businesses. There is no time to wait for the erection of a carbon pricing system to “suggest” that this should happen through an array of artfully calibrated disincentives.
- Utility Revenue Decoupling – An additional key regulation that is often overlooked is decoupling the revenues of investor-owned power utilities from the amount of energy sales, which is the regulatory regime in California. This allows power utilities to participate in energy efficiency projects as it carries with it a fairly significant financial incentive for them to cut energy use by end users as they receive higher power rates the subsequent year from the public utilities commission if they have achieved their goals.
- National Building Codes that Meet or Exceed California Title 24 – California has led the nation in energy efficiency requirements for new buildings and renovations with its Title 24 standard. A much more ambitious standard that would require a revolution in the home construction and renovation industry in the US would be to adopt the passive house standard in which space conditioning costs are slashed by 80 to 90%. Additionally “smart codes” may help urban planners and developers site and build buildings and communities with lower total energy requirements by developing “in-fill”.
- National Renewable Electricity Standard (as Target) - The adoption of a percentage minimum renewable energy for the national electric grid- is productive as long as it is
- ambitious (25% or greater by 2020),
- paired with substantial finance support for renewable energy,
- a rising percentage of renewable energy projects are built as replacements for fossil resources (dispatchable or synchronous with power demand)
- is pro-rated based on renewable resource base per region thereby balancing risk between regions dependent on their resource wealth.
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This "passive house" in Germany uses high performance windows, very tight construction, super-insulation, and a high-throughput ventilation system that keeps indoor air fresh without the need for much re-heating or re-cooling. Sunlight, heat from appliances, and people keep these houses warm on all but the coldest days and shading, insulation and the ventilation system keeps out hot air in the summer. Building or renovating homes and commercial buildings to passive house standards in the US would slash heating and cooling costs by 80% or more.
National Energy Efficiency Standards – Utilities and government can be mandated to cut energy use by an aggressive percentage per 4 year period (10-15%). As in California, a portion of electric rates collected can be used to pay for a portion of the efficiency upgrades in the form of rebates. Additionally the Energy Star program and minimum efficiency standards for hard goods should be expanded and made more aggressive. A carbon price can hasten the implementation of an efficiency standard by raising the price of energy.
- Aggressive Auto Efficiency Standard (CAFE) - Without high fuel prices, auto efficiency standards are difficult to impose as buyers tend to demand larger, less efficient vehicles. Still, an efficiency standard can create targets based on engineering best practices that may help automakers plan their auto line as well as function as a public expression of intent.
From a position of government authority but responsiveness about the imposed costs and implementation path, governments can generate new direct regulations that may be as effective or more effective than existing instruments. If we believe that government has a regulatory role in financial markets, it makes sense to consider how effective rule-making by the government has in the past and can continue to spur economic progress in the area of energy.
Effective Carbon Pricing (partially addresses “Market Failure 1”)
If we take away the expectation that carbon pricing will across the board address all key issues related to a future looking carbon policy, we can more easily define the parameters that would make a carbon pricing system effective. A carbon pricing model assumes a market of independent actors who have choices to make as to how to structure their business and private lives, which the price will influence to emit less carbon. Secondarily, depending on a still unfinished political process, the collected revenues may either function to displace other taxes, return a dividend or finance clean energy projects. The following then should be criteria by which the effectiveness of a carbon pricing policy should be judged (all carbon pricing systems will not qualify for every criterion):
- Noticeably effects the price of fossil energy, carbon intensive products, carbon emitting activities and land-use practices whether in or outside the current market. Must inflict some economic “pain” in its first edition in order to be effective and this pain has to have information value for market participants.
- Through this pricing. increases the desirability of lower or non-carbon emitting activities and products
- Enables effective choice of a broadening category of lower carbon alternatives on economic grounds alone
- Signals a will to curb carbon emissions among the leadership, and additionally inspiring voluntary “above and beyond” cuts in carbon emissions.
- Creates a competition between carbon emitters to emit less than their peers.
- Generates a revenue stream and incentive structure for allowing movement towards or maintenance of carbon sequestering land use practices
- Enables an international trade in or regulation of trade of carbon equivalents
- Would dampen or eliminate price volatility in the carbon price to enable effective investment planning on the basis of the carbon price and/or the revenues generated therefrom.
- Progressively raises carbon price in a planned sequence to exert pressure for further emissions cuts.
- Creates or energizes the market for carbon-emissions reducing innovations, spurring research and development.
- Is directly adjustable by regulators/legislators to enable the system to learn from experience.
- Is not so onerous to the taxpayers/consumers that it becomes politically vulnerable (this is partly a function of public outreach about the link between climate change, carbon pricing, and economic development as well as design of the system)
Carbon Pricing Instruments
At a House Ways and Means committee hearing earlier today, the options associated with carbon pricing instruments were not fully laid out for lawmakers to review the interlocking parts and options available. The packages that were presented were “cap and investment” and “tax and dividend”…these are not the only options, policymakers can mix and match depending on how they weight the above criteria.
Pricing Determination and Administration
- Carbon Tax
Grover Norquist, inspired by Ronald Reagan, is one of the most influential anti-tax activists in the United States. Attitudes about the value and meaning of taxation have a had profound impact on the formulation of climate policies, including the selection of an instrument to administer the carbon price. The success of libertarians like Norquist in branding taxation as an almost total loss to individuals and their wealth has until recently been almost total.
- Cap and Trade – There are many variations to cap and trade — it is an exceedingly complex instrument and outlining all permutations goes beyond the scope of this analysis.
- Full Auction of Permits
- Partial Auction/Partial give-away
- Full give-away of permits (no price)
- “Hybrid” Cap and Trade (Price Ceiling and Floor for Permits) – a hybrid of a cap and trade and a carbon tax stabilizing the carbon price in a range.
The selection of the carbon price administration mechanism will emerge from political negotiations between the different interest groups involved.
Revenue Distribution
Any of the above instruments can be mated with any combination of the below mechanisms to distribute the revenue from either permit auctions or tax collection. There is no inherent relationship of the carbon tax or the cap and trade systems with any particular means to use the resulting funds collected.
- Carbon-Emissions Mitigating Investment – devotes the proceeds of the program to emissions reduction
- Partial or Complete Dividend – attempts to soften the effect of rising energy and goods prices by returning revenue on a per capita basis
- Displacement of other Taxes/Revenue Streams – phasing out a payroll or other taxes by using carbon revenues.
- Need-based Dividend or Investment – focal efforts to soften the impact of carbon pricing by either a dividend mechanism or targeted investment in energy efficiency for the neediest.
The selection of the distribution mechanism has everything to do with the political design of the ultimate carbon pricing program and how it is introduced to voters and consumers. The potential complexity of both the resulting instrument and the process by which we will arrive there makes reliance only on carbon pricing a politically risky maneuver for people who are concerned about protecting the climate.
Design, Fund, Incentivize Zero- and Lower Carbon Infrastructure and Fixed Capital Investment (Addresses Market Failure “2”)
While it would have been preferable for governments to have engaged in a full scale “countercyclical” policy of collecting tax revenue during the boom years of the last few decades to reduce debt, we are now facing a period in which it is “do or die” for economies to stimulate demand, restructure their financial systems, and halt the slide into a Global Great Depression II. Engaging in deficit spending to build or expand existing infrastructure to halt rising carbon emissions is a worthwhile cause to risk future inflation for current and mid-term economic and environmental benefits. Some private capital may be organized to build some of this infrastructure but with significant
The Obama Administration's stimulus package has already found a "shovel-ready" renewable energy infrastructure project in building out the transmission system of the federally owned Bonneville Power Administration to serve new wind farms in the Northwest. Bonneville is one of a number of federal agencies that already own transmission leading from the system of federally owned dams in the West. Bonneville's transmission system will most probably form part of the basis of the National Unified Smart Grid, which in all probability will be part government owned and partly owned by private investors.
Different countries and regions have different infrastructure needs but for the US the following projects would add value to communities as well as represent a significant economic stimulus. China is currently pushing ahead with a much more aggressive infrastructure program than the US, including rail building. The selection of projects should be based on transparent criteria that include both needs assessment and short, medium and long-term cost/benefit analysis:
- Build an electrified passenger and freight rail network for the US
- Create a national rail plan that allows efficient co-mingling of freight and passenger rail along existing and new, non-HSR rail lines
- Grade separate existing rail lines (with multiple positive externalities associated) in high traffic areas.
- Build a high speed rail (HSR) network along high traffic corridors
- Incentivize and create the regulatory structures to build a National Unified Smart Grid to link renewable energy zones to demand centers; most likely there will be a mixture of public and private ownership of transmission.
- Incentivize the building of renewable electric generators through secure, premium wholesale electricity rates (Renewable Energy Payments).
- Rebate and tax credit incentives for energy efficiency upgrades to existing buildings.
- Incentivize the building of clean energy storage through incentivizing non-fossil grid ancillary services.
- While preserving or extending existing levels of mass transit service, electrify high traffic bus routes.
- Incentivize building of electric vehicle fast charge and trickle charge networks in cooperation with municipalities and utilities.
Increase funding for Clean Energy Research and Development (addresses Market Failure 3)
While the federal government has continued to fund clean energy research even through the Bush Administration, an increase in funding for research into renewable energy technologies, clean energy storage, sustainable biofuel alternatives, and cleaner, more efficient nuclear technologies are important to see if we can “leapfrog” existing technologies or reduce costs in the building of clean energy infrastructure. Some have suggested budgets ranging from $3 billion to as much as $40 billion per year as a means of expanding scientific exploration, creativity and innovation in the area of clean energy. If there is a reasonable chance that an innovation can open a new source of clean energy or increase the efficiency or cost-effectiveness of existing options, we should not hesitate to pursue it. On the other hand, oversight over these budgets should keep the focus on what can pay off within the next ten to fifteen years.
The Principle of Non-Perfectability
While very simple systems may reach something called “perfection”, complex systems, including living things, social and economic systems, and the earth’s climate will never be “perfected”. The advocates of self-regulating markets tended to treat markets as a “pure” or perfect social institution. In chronicling so many market failures and needed programs to remedy them, I am not suggesting that policy will “perfect” the market or be able to completely address these market failures.
Purpose of a Comprehensive Policy
The purpose of this piece is to outline what a revised, reality-based economic and political framework for understanding both the course of previous energy and climate policy and the trajectory for effective future policy will look like. The lore of a self-sufficient, self-regulating market put policymakers and clean energy advocates on the defensive and narrowed the focus largely to transforming the actions of individual market actors. In response, efforts were made to “perfect” the market through a carbon price. If we are to create a reality-based set of policy instruments we have to face facts both about the nature of economic models and the physical realities on which they are supposed to act. I am supportive of the Repower America program, but feel it does not fill out enough the actual mechanisms by which it would achieve its ambitious goals, therefore the proposed framework. A comprehensive climate and energy policy addresses both flaws in systemic functioning and problems of incentives and disincentives that cause individual market actors to continue to ignore the very serious consequences of anthropogenic warming.
Carbon Pricing is Just One Piece of the Puzzle: Towards a Comprehensive Climate and Energy Policy – Part 4 February 20, 2009
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Building, Green Transport, Renewable Energy, Sustainable Thinking.2 comments
Why Not Bring Positive Externalities Into Market Pricing?
Evidence of the power of renewable energy incentives can be found in California's San Gorgonio and Altamont Passes, where the generous PURPA standard offer contracts of the 1980's created an attractive business opportunity for project developers. Most of California's wind generation portfolio still dates from that period, despite advances in turbine technology. Newer feed in tariffs based on the standard offer model will be better calibrated to the needs of the current power generation market and will help states and utilities achieve their renewable energy generation goals.
One of the limitations of carbon pricing is that, as a support for renewable energy or other clean generation technologies, it is a roundabout and scattered means of “leveling the playing field”. Energy markets that still enjoy the climate-altering bonanza of fossil fuels are generally less excited from a narrow utilitarian perspective about renewable energy without heavy policy support, excepting in some areas large onshore wind projects. One of the motivations in carbon pricing is to level the field by attaching so significant a carbon price to fossil fuels that renewable energy will be competitive with or gain a market advantage over fossil fuels. As renewable electric generation technologies in general require some form of storage to generate energy in a way that is exactly equivalent or superior to fossil resources as well as perhaps new infrastructure like transmission, the cost of accessory technologies would also need to be accounted for in order to truly level the playing field. This carbon price would need, in the case of some renewable technologies, to be at least one order of magnitude higher than we expect that price to be (expectations run between $10 to $20/tonne CO2).
The price gap between sources of renewable energy and fossil energy has to do both with the sunk costs of an economy built around fossil fuels plus the comparative physics of renewable vs. fossil energy. Renewable energy is generally diffuse, except in some extreme locations; otherwise, if it were not diffuse, most living creatures would not have been able to evolve in such a high-energy and therefore harsh. To capture large swaths of renewable energy requires the building of large facilities that then concentrate or store the energy for use. These large facilities mean that renewable energy generators require a large up front investment that ultimately, if planned right, returns many times the amount of energy and money that was invested in it but over a period of years. To surmount this hurdle requires a commitment on the part of policymakers and regulators to renewable energy that operates in a longer time frame than that dictated by fluctuations in the energy markets. In addition, most renewable energy comes in the form of an energy flow rather than an energy store, which is the form of fossil and nuclear fuels. Tapping into energy flows to do useful work requires a different engineering orientation as well as additional energy storage devices.
Energy markets, represented by energy traders and energy consumers, remain relatively unmoved by these technical and physical challenges related to the price gap between fossil and clean functional replacements for fossil generators. The focus of markets is upon the current availability and pricing of energy assets, products and services. For a longer term view of energy whether fossil, nuclear or renewable to be incorporated into markets almost invariably requires the support and direction of government, either through subsidy or regulations. The recent drop in oil prices due to the economic downturn has endangered and postponed plans to build renewable generators, as even with the current tax incentives, these investments look less attractive than business as usual. As with many capital intensive industries, investors need assurances that the long-term investment in large and expensive facilities will pay off over a period of decades.
While a full accounting of the negative externalities of fossil fuel use would put renewable energy in a very favorable light, the sudden application of these costs to the entire economy that is dependent on fossil fuels for 85% of its energy would penalize most energy users severely and disrupt the economy in ways that are not intended by even the advocates of an aggressive carbon pricing regime. Historically, policymakers have attempted to incentivize renewable energy development by rewarding renewable energy developers with incentives that can viewed as way to price in at least some of the positive externalities related to renewable energy: notably its clean-ness, local or regional origin and its sustainability.
Most studies of the relative cost of various carbon emissions reductions solutions place renewable energy at a significantly higher level than many readily available energy efficiency technologies that under many circumstances now pay for themselves without any aid. So a carbon price that is designed to level the playing field for some energy efficiency measures, would be far lower than one that made renewable energy projects “win” over existing or even some new fossil resources. The exception to this are large onshore wind projects that would receive a substantial boost from a lower carbon price, though wind alone cannot, at least with our current technology, fully displace fossil resources.
The foreseeable initial carbon price will also not yet spur some of the more aggressive energy efficiency measures in the area of space conditioning, which accounts for 30% of total energy use in the US. Ground source heat pumps and solar adsorption cooling are technologies that can radically reduce building energy use but currently offer paybacks in the region of 8 to 12 years depending on the space conditioning load of the building and the climatic zone. For some building owners these are already affordable but may require an additional incentive for them to consider a new technology. Again, leveling the playing field for these promising technology through disincentivizing fossil fuels may not lead the market to embrace a new paradigm without incentives.
The price of electricity is determined through a process of negotiation between public utilities commissions and utilities or via an internal pricing determination by a publicly owned utility under the supervision of a political board. In deregulated markets these negotiations yield a methodology for determining prices on the wholesale electricity market. More and more regions of the country and world are looking for ways to pay for sustainable energy through the electric rate structure.
The most direct method of incentivizing renewable energy development is by creating a wholesale electricity rate structure that assigns higher and more secure long-term value to energy generated by different renewable technologies, allowing project developers to get financing for their large upfront fixed capital costs. The renewable energy payment systems, also called “feed in tariffs” are one means by which legislators and power system regulators have rewarded renewable energy generators for their positive attributes. Most often, however, the form of this reward is not by enumerating and pricing the specific positive externalities but by using the formula “cost of generation plus a reasonable profit” averaged across an industry at a given point in time. “Cost plus reasonable profit” is the formula used for building large one-of-a-kind structures either in power generation or construction that because of their uniqueness cannot find a workable price via the market. The security of this arrangement, guaranteeing them a premium rate for their electricity generated over a period of 20 years, enables project developers to at least survive and with greater cost efficiency to thrive as businesses. The fixed premium rate allows for cost recovery plus a reasonable profit on the initial investment in the renewable energy facility.
The additional cost of the premium payments are pooled among all electricity ratepayers which raises electricity costs slightly. However, this rise in electricity rates can also have the virtuous effect of encouraging more energy efficiency, so a renewable energy payment system can create a virtuous economic circle.
Other methods of incentivizing renewable energy development have proved to be less reliable. Tax credits that have been part of the US toolkit to incentivize renewable energy on and off for 30 years have provided some help but have varied in their effectiveness, in part because they draw on revenue from other parts of government budgets which can lead to disputes about which program deserves to be cut in favor of favorable tax treatment for renewable energy. Furthermore, these credits have not had the same stimulative effect as feed in tariffs to jump starting a renewable energy industry. With the current financial crisis, there is also a major shortfall of tax equity, meaning a dropoff in firms and investors that have made their money elsewhere and seek investments in renewable energy as a tax benefit. If tax benefits are to continue providing an incentivizing effect for renewable energy, other credit instruments like a federally guaranteed renewable energy bank or renewable energy payment systems would need to pick up this shortfall.
Another area where positive externalities can be brought into the market by policy is in the introduction of zero emissions vehicles to the road, most notably electric vehicles. The initial investment in batteries as opposed to a gas tank, as with renewable energy, adds a sizeable increment to the cost of a vehicle despite its overall lower cost of ownership. Proposals that offer tax credits or rebates to individuals and businesses that lower this hurdle would again be offering a payment for a positive externality that the market currently does not recognize. Current economic stimulus packages proposed by the Obama administration as well as the US Senate, include tax incentives for electric vehicles calibrated to the amount of all-electric range these vehicles offer.
Ground source (a.k.a. geothermal) heat pumps, like the appliances above in combination with a long loop of tubing in the ground, use one half to one third the energy of conventional furnaces and air conditioning, generate domestic hot water, while running on electricity alone. While the appliance itself is not that expensive the digging or drilling of the ground loop makes the cost of the system substantially more than conventional units. As this represents a paradigm shift in heating and cooling, rebate programs by utilities or governments can help build a still small industry.
In the area of energy efficiency, rebates for new technologies have also proved to be a means to generate new markets for somewhat more costly technologies with positive externalities. California’s energy efficiency rebate program has helped that state level its per capita energy use over the last 30 years and has helped drive the US market for energy efficient devices and innovation.
The relentless focus of policy on a disincentive (the carbon price) ignores key aspects of human psychology within which a combination of incentives and disincentives enables optimal learning rather than the simple application of either one or the other. The current low ranking of climate change in polls of people’s concerns during the current downturn may have something to do with the general message of restraint that has been paired with climate change rather than opportunity and hope. If we think about it, children raised only on disincentives (guilt, shame or punishments) or only on incentives (praise, bribes) are likely to end up twisted or lacking self-discipline in ways that are myriad and complex. Beyond what can be achieved through information, persuasion and expressions of intent, a coherent mixture of carrot and stick approaches seems commonsensical to healthy growth and learning. As we are entering a new world in transforming the basic energy foundation of our economy from carbon to non-carbon sources and energy use constraint, we and our economic growth engines stand in ways like children before our own demand for energy and the need to change it. Surely we should apply our best understanding to this task and not just one fraction of what we know.
A Comprehensive Climate and Energy Policy
If we turn our focus from a singular catastrophic market failure to multiple market failures, the form and timing of climate and energy policy initiatives will start to match more closely the actual physical array of assets with which actual real economies are currently working. The notion of a singular market failure, however huge, bears with it the unspoken assumption (not necessarily a belief of Nicholas Stern) that markets are otherwise self-sufficient and well-functioning. We have seen that in fact markets, along with their strengths, are, in most sober assessments of economic history, failure-prone or critically dependent on non-market institutions in a number of areas, some which were outlined earlier. To some, this sounds like heresy but this sensitivity to criticism of markets is more a function of the recent tendency towards hagiography of the market mechanisms rather than the product of a honest effort to balance their benefits and weaknesses.
The monocular or central focus on carbon pricing as a climate policy has borne the traces of the neo-classical economic “tail” wagging the climate and energy “dog”. An allegiance to an economic theory that overvalues market mechanisms has seemed to have shaped climate policy more than a consideration of the on-the-ground facts. The notion of the singular market failure leads to the overvaluation of carbon pricing as the prime means to achieve a carbon neutral society. As we are now experiencing a sea change in our economic common sense, it makes sense to revise climate policy in response to this sea change.
Rather than simply a choice between political preferences or allegiances, there is a concrete difference in how these economic theories and by extension the resulting policy instruments interact with the target of their regulations and investments. A carbon pricing system acts upon the economy as a series of individual (inclusive of corporations as “individuals”) actors or “atoms” which respond to the price signal in their own unique ways. A policy orientation that seeks to re-engineer and re-organize economic systems like infrastructure that requires the coordination and cooperation of individual actors and “parts” of the system, interacts with the world as ensembles of actors rather than a series of independent individual actors. A dogmatic allegiance to the monetarist/supply side view prohibits or proscribes the latter orientation. A realistic assessment of the tasks ahead will require both kinds of orientation to the world built into climate policy.
A Policy Orientation Commensurate with the Task
Prior to the industrial use of fossil energy, most exosomatic energy came from animal power supplemented in some contexts by river power and wind power. Creating a highly-developed post-carbon economy in most locations around the globe will involve entering into a "4th" industrial revolution; it's not simply a matter of "unplugging" from fossil sources and plugging into clean sources.
Changing our ways of using energy and land is a huge task, a task that advocates have for some understandable reasons attempted to minimize. Exosomatic energy, energy that comes from non-food sources like fossil fuels, nuclear fuels and renewable energy, has been the primary support for economic development over the course of the various industrial revolutions of the last two centuries. Up to a certain, fairly high, minimum of energy use, economic development and wealth correlates with exosomatic energy use. The heroic narrative of increased technological sophistication and human ingenuity has hidden the brute facts of rising consumption of what have been largely fossil fuels. That one person can now do the work of fifty or one hundred manual laborers has everything to do with the continuous availability of concentrated energy products or services at a fairly low price. Our economic system is also based on an agricultural, food and fiber system that not only is highly dependent on fossil fuels but also uses land in ways that do not conserve the soil or stabilize atmospheric concentrations of greenhouse gases.
The scientists who have documented our contribution to a changing climate have endured much criticism for suggesting that the energy and land-use foundations of our economy are endangering the long-term sustainability of the earth. However, understandably, they have not also wanted or been able at one fell swoop to outline how we might reverse the political and economic orientation of our society, which at the time was praising markets and the pursuit of narrow self-interest perhaps leavened with voluntary charitable or altruistic acts. Both Al Gore and Jim Hansen, the two main targets of much criticism and scorn, have made the goals we have increasingly clear but have, in my opinion, at times held back from exploring the scale and extent of the work and expenditure needed to do an “energy transplant” on our society from dirty to clean energy sources.
If in fact, the future of the world and all of what might be considered human wealth depends on reducing carbon emissions, isn’t it worth it for us to pay something towards that goal? Policy recommendations should reflect the seriousness of that goal and a recognition that most people should contribute something towards that goal, as it benefits them. Policy suggestions that minimize the cost or need for participation by a majority of the population in building this new energy basis for our societies are selling people short.
Public Expenditures…for What?
Roosevelt signs the extension of the Lend Lease program in 1943. Most commentators agree that the Great Depression was ended by the massive spending program and mobilization that was World War II. It remains to be seen whether we will be able to pull ourselves out of the current economic downturn with current levels of government spending or whether we would need to declare a full-scale "Green Energy War" as has John Geesman.
Currently it appears as though as a nation we will spend somewhere between one and four trillion dollars to bail out the banking system after it rushed earlier this decade to take advantage of some highly risky opportunities to make a profit. Yes, borrowers are also partly to blame for buying houses which they couldn’t afford, but financial common sense had been sacrificed several years before by the leaders of the financial system and by regulators who did not believe in regulation. We may never see concrete results from this massive expenditure of tax payer dollars only that we may have prevented a full-scale collapse of the financial system and economy into chaos.
An even more controversial area to discuss is the degree to which the government should commit resources to the already overweighted housing sector, now in a deep crisis. Not only has the economy expanded in the area of finance but also became overly dependent on housing and real estate before the big crash of 2008. Many Americans were simply not earning enough money to afford the homes that were being built or sold in the last few years of the bubble. Should a large portion of our public assets be committed to propping up home values beyond the ability of Americans to pay for those homes through income from other sectors of the economy? A balance may need to be struck between managing the crisis, future housing needs, real estate as investment, and non-housing sectors of the economy.
On the other hand, a transformation of our energy and transport system will boost an underweighted area of our economy. I have termed the US historical relationship with energy, the “Cheap Energy Contract” which restricts the amount of money that the energy sector can charge per unit energy; to build a clean energy economy quickly, there will need to be revenue from a variety of sources in excess of what we currently spend to build the useful infrastructure required. Industrial and construction jobs, far from being part of our past, may become again part of what helps bring living wages and buying power back to the American consumer, independent of commercial and residential real estate and finance sectors.
Furthermore, our infrastructure is deteriorating and as noted in Part III, inadequate to the task of reducing carbon emissions. There is no other way to pay for some of this infrastructure other than through public funds and it will serve the public and other businesses well to have a better rail system, a cleaner electricity and energy system, and avoiding dependence on the fossil fuel roller-coaster. Therefore everything speaks for a substantial commitment of public funds to these public goods which support the economy as a whole, especially now that we are in search of the economic solutions to our dire situation. In the end, the amount of
A Climate and Energy Policy for the Committed and the Indifferent
Currently climate change ranks as one of the last concerns in polls of American public opinion, despite the commitment of the Obama administration to take steps towards reducing carbon dioxide emissions. The task then for both climate activists and the new Administration is then to construct a climate policy that, in addition to educating the public about the dangers of continued unchecked carbon emissions, makes it worthwhile for people to care about climate change.
An important element of the existing climate action proposals is that they both try to lower their profiles in terms of fiscal impact and rely largely on “negative reinforcement” or punishment of “bad behavior” in relationship to emitting carbon. While the small minority of the population that is appropriately terrified of the effects of climate change or has enough financial liquidity to pay the penalties is accepting of these disincentives, the vast majority either doesn’t understand the proposals or is worried about their impact on their personal finances. A vocal minority opposes any and all climate regulations or regulations in general, and are increasingly a force to be acknowledged in passing but not taken into consideration in formulating effective policy.
What I am calling a “Comprehensive Climate and Energy Policy” is designed then to be an instrument that addresses the concerns of the vast majority of people who care about their communities and families but is not yet predicated on an overwhelming concern for the climate. A Comprehensive Climate and Energy Policy, relying on both incentives and disincentives, will help address the more pressing concerns of Americans as well as be a more effective means to achieve many of the goals of the climate action community. Including areas where there is overlap between the goals of these communities can help create momentum for our economy in general and in particular, towards an economy that emits less carbon into the atmosphere.
At Mesalands Community College in New Mexico, students study wind energy and turbine maintenance using a single utility scale wind turbine erected for training purposes. For there to be a successful and long-lasting green jobs movement, there will need to be more training facilities such as this for skilled workers and engineering students.
The Green Jobs movement, led by among others Van Jones, has pioneered this approach to climate policy with an emphasis on the jobs generated by building a new clean energy infrastructure. One of the products of a Comprehensive Climate and Energy Policy would be the stable domestic jobs that Jones and others have called for.
If general economic theory needs to borrow from Keynes as well as neoclassical economics, shapers of climate and energy strategy may be then freer to choose the appropriate instruments for the many tasks related to building a post-carbon economy. In a society dependent upon market exchange of goods and services, economic policy and with it climate and energy policy are meant to address failures within the spontaneous commerce of markets to deliver goods and services that are vital for economic and social wellbeing.
We have located here not one but approximately three and half market failures that are relevant to climate and energy policy which specifically address the challenges related to our upcoming climate and energy challenges in the US.
Market Failures
- Externalizes costs of climate change attributable to carbon emissions
- Externalizes costs of infrastructure building and maintenance and high fixed capital costs of long-term private capital investment
- Deployment of capital intensive clean energy technologies
- Coordination of management and finance of upgrades to electric grid.
- Re-design and electrification of transport infrastructure
- Externalizes costs of scientific research and development
Rather than subsume all of these challenges under “1”, a comprehensive climate and energy policy is able to flexibly address the existing challenges in a given context by applying measures where needed to reduce carbon emissions with the goal of a carbon neutral society
The value of a comprehensive policy becomes clear if we look at national differences in emissions level, infrastructure and other sunk costs, and overall level of economic development. In Switzerland, for instance, per capita carbon emissions are approximately one quarter of those in the US. Much more densely populated, Switzerland already possesses an almost entirely electrified rail network and adequate public transportation in many of their cities and towns. Electricity in Switzerland is generated largely via hydro and nuclear. Already possessing an infrastructure than can be configured for lower or zero-carbon emissions, a carbon pricing regime may help Swiss consumers and businesses utilize that infrastructure even more efficiently and use energy more efficiently. By contrast, the United States has a long way to go in building an infrastructure with a similar capability.
Following the American and European model of economic development is problematic for India and other densely populated, rapidly industrializing nations not only from the point of view of carbon emissions. India has some of the world's worst traffic, even when a majority of the population cannot afford cars or other motorized conveyances. The Indian government will need to take a leadership role in figuring out a way a more prosperous citizenry can enjoy some of the freedoms afforded by increased wealth without impairing the quality of life of other Indians, including the building of the appropriate infrastructure.
With 4 times the population of the US and 150 times the population of Switzerland, India possesses still different challenges as it is both a rapidly industrializing and a less-developed country depending on region, economic sector and social class. India has a per capita emissions level one quarter of that of Switzerland and one sixteenth that of the US but because of its massive and growing population is starting to contribute substantially to overall worldwide carbon emissions. The Indian government and the world development community would like to see the average Indian make substantial strides in terms of their overall welfare and use of services with a stable level and even a decrease in net per capital carbon emissions. In the last few years before the current downturn, there has been a move by the rapidly growing Indian middle class to emulate the petroleum and energy consuming ways of the West including the use of petroleum-fueled automobiles. Because of its high population density, it would make sense for India to build a potentially zero-carbon electric public transport system, as there would be literally no physical space in India to build a car culture like that of North America, even if all those vehicles were zero emissions. Carbon pricing alone will neither inspire nor finance such a massive undertaking. On the other hand, within the carbon trading system, some projects have been built as part of the “Clean Development Mechanism” and some version of this may remain a source of investment for projects that can show a quick reduction in carbon emissions.
The “hard problem” of rapidly industrializing and less developed countries becomes a little easier if we don’t assume that governments in those countries are passive bystanders or simply funnels for a global carbon pricing regime. The Indian government, as will other governments, need to devise national and regional strategies that rely on public was well as private funding of low- and zero-carbon facilities.
Carbon Pricing is Just One Piece of the Puzzle: Towards a Comprehensive Climate and Energy Policy – Part 2 February 4, 2009
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, News and Events, Renewable Energy, Sustainable Thinking.8 comments
In Part 1, I called attention to the rapid shift in general economic policy in the last 6 months. I developed an outline of two distinct economic schools, one that holds up the ideal of a self-sufficient, self-regulating market and another that sees markets as having shortcomings that require government to supplement and regulate where the market fails. The first school might be called monetarist/supply-side and the second Keynesian with varying tendencies within that school. I highlighted how each of these schools is attached to a particular worldview or set of worldviews. The conflict within economics will necessarily have impacts on climate policy.
Reliance on Carbon Pricing: Hanging Onto an Idealized View of Markets?
The Scottish inventor, James Watt, invented the steam engine, powered by coal, in the 1760's and 1770's. At that point in time, coal had already a long history as a heat source. Most accounts of the history of the industrial revolution and of modern economies downplay the importance of fossil fuels in spurring economic growth and the modern economy and focus on changes in end-use technologies. A post-carbon economy will require a revolution in our thinking about and focus on energy and how it is sourced.
Climate activists have been focused since the early 1990’s on instituting a cap and trade system that they feel, almost singlehandedly, would induce or compel economic actors to emit only up to a certain “cap” of greenhouse gas emissions. The Kyoto Protocol, ratified by 180 countries, is an attempt at an international cap and trade system. Both cap and trade and its near competitor, a carbon tax are “market-based” policy instruments that attempt to curb greenhouse gas emissions by assigning a price to greenhouse gases. The price will function as a signal (largely in the form of a disincentive) to market actors to change technologies and procedures to emit less carbon into the atmosphere. These policies are “market-based” because they rely on the pricing mechanism and allow market actors to decide how they reduce their emissions as opposed to more directive, so-called “command and control” regulations that tell market actors what exactly they must do. An environmentally-sensitized variation on the monetarist/free market worldview and policy orientation, the idea is that the private economic actors, mostly businesses, know best what to do if given the appropriate price signal.
Climate change concerns and a climate protection movement have emerged in the last two decades, an era of monetarist/free market dominance of economic policy and to a lesser extent the economics profession. Carbon taxes, though a tax and therefore viewed with suspicion by free market advocates, have a single “market-based” layer in introducing a carbon price into the calculations of market actors, a disincentive to which they can respond as they choose. Cap and trade systems add an additional carbon permit and offset trading market, in addition to introducing a (varying) price on carbon, so are doubly market-based. Despite these efforts made to introduce market-emulating mechanisms into environmental regulation, the political advocates of free markets are almost universally opposed to cap and trade, carbon taxes and direct regulation; they generally show themselves to be unconcerned about climate change and are more concerned about how any regulation will interfere with smooth and unhindered market functioning, which to them is the summum bonum (Latin for the highest ethical good).
Much discussion and dispute has been focused on the choice of which of the two main market-based instruments will do the heavy lifting in climate policy. The carbon tax assigns a price directly to carbon emissions and is levied directly by governments. It is relatively simple instrument, favored by many economists and some industries, but criticized by many climate activists who feel that it is insufficiently rigorous. Others have criticized a tax because it is politically unpalatable in an anti-tax era, still others because it does not in its initial designs utilize carbon trading. Despite this, two leaders in the climate protection movement, Al Gore and Jim Hansen, prefer an stringent carbon tax policy to the cap and trade systems proposed, though both have suggested that it should not represent a net increase in the overall tax burden by cutting other taxes or returning a dividend.
Carbon taxes and cap and trade can be distinguished as follows: the cap and trade system sets the amount of allowable GHG pollution and, if permits are auctioned rather than given away, the price follows from the cap; a carbon tax sets the price which would limit emissions via the amount of direct economic losses inflicted or fear thereof on economic actors. In a cap and trade systems, punitive fines and potential criminal proceedings can follow from exceeding the permitted amount of pollution. A lower cap produces fewer and therefore more expensive permits (in an auction) and a higher carbon tax inhibits emissions because of their increased expense thereby leading economic actors to lower levels of emissions.
The revenues from both permit auctions and the carbon tax can be directed any number of different ways: to offset or reduce other taxes, to be spent on carbon emissions reduction, or be returned to taxpayers in the form of a dividend. The latter idea is an effort to diminish the generally regressive income distribution effect of carbon pricing: the carbon price will, percentage-wise, through higher prices for energy and high-carbon intensity represent a higher portion of the budgets of lower income families more than upper-income ones. The latter system is called a “cap and dividend” or a carbon tax dividend. As it has been developed, the basic carbon pricing “concept” does not recommend or entail any particular use for the funds collected, therefore the diversity of proposals.
Cap and trade regulations were originally applied as a way to incentivize power utilities to install sulphur dioxide emissions scrubbers on their coal fired power plants, like the unit attached to the smokestack above. While these emission scrubbers sometimes cost upwards of $1 billion, more than the original cost of some power plants, they significantly reduce acid rain but do not reduce carbon dioxide emissions. Ultimately the joint cost of complying with regulations and the technology itself is borne by utility ratepayers through increases in the cost of electricity, which ends up being an indirect route to pay for the positive externality of less acid rain.
Despite the support of some renowned climate activists for the carbon tax, during the years of the Bush Presidency support for a cap and trade system with 100% auction of permits and a tight, progressively more restrictive cap, has been considered to be the mark of serious action to stem carbon emissions. The historical model for greenhouse gas cap and trade systems were the systems introduced in North America in 1990 to limit the emission of acid rain causing pollution from power plants, called SOx emissions. Designed explicitly as an experiment in market based regulation and an alternative to directive regulation of power plants by governments, these power plants were incentivized to adopt SOx scrubbing technology by being allowed to pollute up to the number of permits that they purchased in a permit auction. If the power utility was able to emit less than the permits they purchased, they could sell these permits to firms that polluted more at a profit, introducing, per the market-oriented theory behind the program design, a profit motive into the process of adopting the emissions scrubber technology.
Carbon cap and trade systems are similar in design to SOx cap and trade systems but are many times larger in the scope of their application and also present market actors with a vastly larger number of possible choices to reduce or offset their emissions as compared to the SOx systems. The most rigorous cap and trade system uses 100% auction of pollution permits with a high reserve price and an aggressive overall pollution cap. The least aggressive gives out permits and has a “loose” or higher cap, which has been a criticism of the initial round of the Kyoto protocol. As compared to carbon taxes, a cap and trade system is much more complicated. However, there are hybrid systems that place pricing floors and caps on pollution permit prices, effectively offering a carbon price within a range, similar to a variable carbon tax.
Carbon Pricing and “Not Knowing” the Solutions
The premise of carbon pricing as a complete climate solution, as opposed to “command and control” regulation, is that regulators and the designers of a carbon pricing do not know the technological solutions to reducing carbon emissions, in keeping with the monetarist/free market tendency to view scientific knowledge as limited in scope and not generalizable. The market becomes a “black box” that produces innovation or favorable and/or efficient social results. In practical terms this could mean that designers of the policy are thought not to be cognizant of industry inside knowledge or that no one can know what the future will bring in terms of technological development. Entering into a carbon pricing system then means embarking on a technological and economic “voyage of discovery”.
If one believes that one knows or we know at least a portion of the technological solutions to reducing carbon emissions, carbon pricing would be in many instances a roundabout solution for supporting those solutions.
The Benefits and Limits of Carbon Pricing
In an era of lingering climate change denial and resistance by fossil fuel and industrial interests to change, the real consequences of carbon pricing policies have tended to be glossed over by its advocates. The thought has been “we must get this passed, no matter what”, “you’re for us or you’re against us”, or alternatively “this is the only politically realistic climate policy.” Usually these sentiments are applied to the more widely considered and discussed cap and trade systems.
Troubling though is the finding that these policies, in particular cap and trade systems, were selected because of allegiances to now-questioned but politically popular economic theories, rather than the real effectiveness of these policies. In a little noticed review, Gar Lipow has pointed out that straight “command and control” regulatory schemes in Germany and Italy reduced acid rain pollution far more than the US SOx cap and trade system upon which the Kyoto protocol and other cap and trade systems were based. In Germany SOx emissions fell 87%, in Italy 62%, while in the US in the same period they only fell 31%, with comparable disparities in the absolute levels of these pollutants on the two continents at the end of the study period (2001).
Furthermore, the notion that cap and trade systems spurred innovation has come under question by economists. Margaret Taylor in an analysis of patenting activity has found that patents related to emissions scrubbers for SOx were not significantly affected by the institution of cap and trade systems as opposed to a spate of other regulatory mechanisms worldwide. Studies have also shown that the costs to firms to reduce their SOx under a cap and trade systems as opposed to direct regulation were roughly equivalent.
If conventional regulation is simpler, about as costly, and substantially more effective than historical cap and trade systems, why the enthusiasm for cap and trade to tackle the far broader problem of carbon dioxide and GHG emissions? The coincidence of the now somewhat discredited political fashion for expanding market mechanisms to almost every social problem seems to account at least in part for the adoption of cap and trade systems during the market-focused 1990’s and early 2000’s.
Additionally the choice of cap and trade in the 1990’s may have seemed more justifiable out of a sense by international regulators of uncertainty about what the technological solutions to curbing carbon emissions might be. We have advanced since then in our understanding of workable technological solutions to reduce carbon emissions substantially, some which are now “marketable” and some of which require the help of supportive policies or regulations to make it on the markets. We have not arrived necessarily at definitive solutions for all technological carbon emissions reduction challenges but we have many adequate “starter” solutions.
Assessing the Benefits of Carbon Pricing
The Kyoto cap and trade system's Clean Development Mechanism or CDM, enables organizations from richer countries to fund carbon emissions reductions efforts in less developed countries to "offset" that organization's domestic emissions. At this project in Karnataka, India, field wastes are collected and used to generate electricity and heat, which otherwise would decompose in the fields. CDM has been an area of controversy because some CDM offsets have either not represented real emissions reductions or those projects were not truly "additional", meaning they would not have happened otherwise.
In our era of idealized and now somewhat disenchanted views of what markets are and how they function, it is difficult to make a neutral assessment of the benefits of carbon pricing especially cap and trade; in other words, we have a somewhat “bipolar” conception of markets and the self-interested behavior upon which they rest. Not only is this a matter of perception but a deep economic and sociological problem: we have no rigorous description of markets as institutions like other institutions so we tend to treat them as “sui generis”. If markets are unique it is more difficult to formulate how to reshape or re-energize them, if that is what is on the agenda.
Advocates of carbon pricing have tended to list the fact that cap and trade, in particular, is “market-based” as in-and-of-itself a recommendation of these instruments. If this is simply a matter of saying that it conforms to the monetarist economic fashion of the last three decades, then this is no longer such a recommendation, at least to many who are now viewing the economy of the recent past more critically. A finance-heavy economy dependent upon trading seems to have had more of a downside than its proponents and defenders would have had us believe.
Furthermore, beyond intellectual allegiances, if the trading element or market-based element was a signal to powerful economic interests that carbon regulation would potentially be a profitable instrument within some reasonable bounds this might be politically and ethically defensible. However if the rush to declare carbon regulations as market-based a signal that they might be corruptible instruments with the lure of windfall profits, this would appear unseemly and, in the end, defeat the purpose of carbon regulation, regulations that would raise energy and goods prices for all sectors within the economy.
Here I will attempt to abstract from the proposed structure of carbon pricing in both its carbon tax and cap and trade forms, the “socially useful” and politically defensible components of carbon pricing that go beyond theoretical commitment to the market mechanism:
- “Viral” – The influence of a carbon price could spread virally – as carbon pricing will be applied to energy and other basic goods, the price will effect all economic sectors and “work its way” into many unforeseen types of transactions that ultimately will influence carbon emissions.
- (Potentially) Global – A tradable carbon credit or permit could allow cross-border involvement and participation of less-developed countries in carbon sequestration and emissions reduction efforts (addressing the global nature of climate change).
- Incremental – Carbon pricing will encourage incremental changes based on the price level - carbon pricing then will encourage energy efficiency, behavior changes with approximately equivalent costs, land use change, bio-sequestration, and small to mid-sized capital investments
- Monetary – Carbon pricing is directly attached to money and financial calculations, the most compact decision-making form for individuals and organizations. I have proposed a much more complex decision making tool for big, high-level decisions but a simple price fits relatively snugly into most existing financial instruments like cash flows, net present value, etc.
- Quasi-universal equivalent or signifier – Related to “2” and “4”, the carbon price can allow comparison and trade of equivalents between unlike activities like afforestation, energy efficiency and renewable energy. They all would be assigned a monetary value according to their impact on carbon emissions.
- Induces Action – changes in prices induce actions or the propensity to take action.
- Internalizing Carbon Externality – Of course, the main reason for the program, to attach to global warming gases an disincentive/incentive that creates a carbon market or carbon “line-item” in economic calculations.
The Limitations of Carbon Pricing
Even if we accept that policy is always co-produced by political and economic vogues and enthusiasms, there are troubling limits to relying exclusively or largely on carbon pricing to drive innovation or rapid deployment of clean technologies. Below are a listing of some questionable assumptions in and real constraints on carbon pricing.
1) “Private actors know best” – For one, the assumption that businesses and individuals will know which solutions will work best for them to reduce emissions is flawed. Most businesses will be following the recommendations of government sponsored studies of which technologies will work and which will not. Most businesses and families do not monitor and measure their GHG emissions as a matter of course, nor are they necessarily experts in the selection of new technologies, some of which will never have been deployed before on the market en masse. Furthermore, to become experts in the selection of technologies, firms will need to spend resources, potentially reduplicating the efforts of other firms, often outside the areas of their core competencies.
2) “Price signal will be clear” – As a result of the above, both cap and trade and carbon tax
The price of goods and services is one of the primary attributes that influence buying decisions. A lower price means that buyers do not have to sacrifice as many other buying opportunities for the purchase in question. In a small segment of premium goods, a higher price may signal to some potential buyers higher quality or prestige. The hope in carbon pricing is that lower emissions goods and services will succeed in the marketplace against goods and services that represent higher carbon emissions.
systems will probably end up relying on large “look-up tables” of engineering analyses of different technologies and use some type of carbon emissions calculator to assess the degree to which they will be able to reduce greenhouse gases. The price “signal” will not be the original means by which firms will calibrate their efforts to reduce greenhouse gases but will instead be facing a series of capital investment decisions that will yield either discrete emissions reductions “equivalents” or a range of reductions depending upon their actual usage, which would need to be measured after the fact. Therefore the market in emissions will involve a series of translations of expected emissions reductions with actual reductions that independent monitors will verify. So the price signal will be felt over a period of time and will not be necessarily clear. Probably the most effective aspect of this signal would be the perception that in the future, economic losses will be very high as rises in the carbon price are anticipated, so the price signal may be most effective as a blunt instrument of fear.
3) Politically feasible carbon price is low - Almost all observers agree that carbon pricing, whether arrived at through permit auctions or via direct taxation, will not in the first years be particularly high. Expectations put pricing in the neighborhood of $15/tonne or less; the current worldwide price in the economic downturn is around $12/tonne . At this price level, some efforts to improve efficiency or purchase offsets will be inspired but the effect on energy prices will be minimal, the equivalent of 13 cents per gallon of gasoline or less. Most affected at this price level will be energy intensive industries which if subject to the carbon price will be incentivized to pursue energy efficiency measures. However at these low price levels not much action will occur though as a society we will start to “at least go in the right direction”. More impressive to businesses and private citizens would be the future threat of increases in this carbon price within the framework of an aggressively administered and supported program. Political sentiment may change enabling more aggressive and higher carbon pricing which will boost the effectiveness of the carbon price substantially.
4) “Economic actors already have choice on the solutions market” The market paradigm is effective in the short term if market actors have a choice between two significantly different alternatives in terms of their carbon emissions that are made attractive or even tenable investments with the aid of the carbon price. Exceptions to this requirement are costless conservation measures and changes in behavior. Solutions need to be “on the market” or emerging onto the market for the price to actually effect decisions. The hope and theory in carbon pricing is that innovators will be providing these solutions that respond to demand from people and companies suffering or anticipating suffering from paying more for emissions-intensive products and energy. Demand for product innovation could be driven just as well or in addition by other mechanisms including straight energy taxes, conventional regulations, positive incentives, or government investment. In many sectors and technology areas, currently a very low or zero carbon alternative technology is either a) not yet on the market, b) requires a very high carbon price to be made competitive or c) requires the presence of technological preconditions, i.e. infrastructure, for the cleaner technology to function as an equivalent to existing polluting technologies. We see this in many elements of building the renewable electron economy and/or the Repower America plan. The carbon pricing model seems most appropriate to increasing energy and resource efficiency, the marketing of offsets, land-use changes or encouraging some behavioral changes by individuals rather than new paradigm development or infrastructure change. Energy efficiency or carbon offsets (which can be packaged in increments) allow for the incremental approach in the world of actual emissions reductions that matches the gradual increase of the carbon price.
5) “Emitters are morally responsible for climate change” – While designers of carbon pricing schemes may deny that they are attaching a moral evaluation to the amount of carbon tax or pollution permits that a polluter pays, the market based system ultimately holds individual or individual corporate actors responsible for solutions and implies that the worst polluters will suffer the consequences of their polluting ways. Eventually some of the economic pain would be spread around but would depend upon the actions or inaction of the polluters. This focus on what I have called a “particulate” or atomized set of actors, denies the integrated or systemic view of an economy which demands certain products that historically have required carbon emissions. A strong ethical case can be made that those who demand goods and services that depend on fossil resources or GHG emissions are as responsible as the actual emitters. Co-responsibility through a systemic approach might augment or in some areas replace a model that turns on pinning responsibility on polluters. Both individual responsibility and societal co-responsibility should not be viewed as mutually exclusive alternatives.
6) Carbon price will fluctuate dramatically (cap and trade) – The instability of the carbon price under cap and trade will make long-term investments difficult because there will be substantial uncertainty about the costs over time of paying for permits or reducing emissions to be able to re-sell permits. Carbon prices, because of the economic slowdown and the dramatic drops in the price of fossil energy, have sunk from $30/tonne in the summer 0f 2008 to currently around $12/tonne. This will make calculating financial benefits of various emissions-reduction investments using instruments like net present value difficult if not impossible. Additionally, on the other side of permit auctions, if the proceeds of carbon auctions under cap and trade systems are used as a revenue source or dividend, it will be an unreliable revenue source. This will also make long-term investments that depend on revenues from carbon auctions difficult.
7) Carbon pricing is, like all boosts in energy prices, regressive – As are all energy-related taxes or fees, carbon pricing is regressive, meaning that the resulting changes in prices will effect the middle class and the poor more than the rich. There are a number of suggestions about how to remedy this including returning all the resulting revenues as a flat dividend to people or to replace regressive taxes like the payroll tax with carbon taxes. The dividend idea will mute the price signal of the carbon price to some degree for the less advantaged.
8) Non-specific and frontloaded promotion of more costly solutions – One of the intentions of carbon pricing is to “level the playing field” for renewable energy and other more expensive clean energy generation systems. However, the carbon price by raising the price of fossil fuels and contributing to raising the price of almost every good in society, will only spur the development of renewable energy at a high price level if purchasing decisions are made based largely on present or near-term cost. This is the equivalent of building a large and elaborate scaffolding around a tree to reach the top of it rather than using a ladder or a “bucket truck”.
9) Unintended suppression of economic activity with poor calibration – If emissions reduction or energy efficiency technology is not ready or not affordable, there may be a net reduction in economic activity. This would reduce emissions but not as intended by cap and trade or carbon tax policy designers. There could be sector by sector systems that calibrate to a given market but this would defeat some of the intentions of a price on carbon and would increase complexity considerably. Business interests which want to do nothing about climate will use this as an excuse to try to delay or stop climate legislation.
10) Ties climate policy and activism to the downside of climate change – The theory of carbon pricing is so relentlessly focused on the downside of climate change that it is left open what positive emissions-reducing activities would be funded by revenues from either a carbon tax or cap and trade auctions; the negative, punitive effect of the price signal alone is supposed to suffice. Disincentives outweigh incentives in carbon pricing systems; carbon pricing is designed to say “stop” to polluters (us). The negativity of this policy instrument is a political liability, as popular support for taking steps to address climate change is key in designing an effective policy.
11) Assumes symmetry of opposites between problem and remedy – The mechanism of carbon pricing is structured as an economic force that is both symmetrically arrayed against and opposed to the emission of GHGs into the atmosphere. Carbon pricing is so relentlessly focused on emissions themselves that it may blind leaders and market actors to the possibility that the remedy for carbon emissions may be assymetrical with the problem itself. The solution may “reframe” the problem rather simply remain focused on the problem itself alone. For instance, related to “8” above, the remedy may be to invent new positive reasons to take action on climate and change our way of producing goods and services. While it is hoped in carbon pricing that the black box of the market will produce this new positive post-carbon society, there are reasons to believe that a more directive approach in certain areas may be necessary, especially with the tight timeframe given to us by climate scientists.
Lawrence Berkeley National Laboratory is one of a series of research laboratories funded in part or in full by the government, that have produced many scientific and technological innovations. In the innovation process, the market seems to have a greater role in the latter stages of development of scientific and technological ideas.
12) Technological innovation often originates outside of the market – The idealization of market mechanisms has attributed much innovation to the market when, in fact, non-market mechanisms have shepherded much technical innovation to the prototype stage or further. The market is treated by those who idealize it as a magical innovation “black box”. While fame and fortune are clear motivations for many innovators, the initial contexts or financing sources of innovation are often in government run laboratories or grants to university or industry scientists and engineers. With large capital goods, it is difficult for innovation to occur without the sponsorship, support, or regulatory approval of government. The presence “somewhere” of a market outlet for innovative ideas is often important but the market is not as much the site of innovation that was assumed in the context of the idealized market phenomenon.
13) Value of third-party carbon traders unclear (cap and trade) – If we accept the idealized picture of the market, the role of third-party traders add liquidity to markets. However if we view markets as one mechanism among a number, third-party carbon traders may lead to businesses either paying too much or too little for permits and add to carbon permit price volatility. Additionally, the potential for bad or disengaged market actors manipulating markets increases, interfering with the ability of businesses to make long-term investments in carbon reduction technologies.
14) “No one is in control” (cap and trade) – A cap and trade system sets up a complex system that is mandated by governments but runs in parallel to them and if it fails in some way, direct intervention is difficult; the carbon market is supposed to run on its own. Within the monetarist/free market worldview (amended to include the carbon emissions externality) the notion that “no one is in control” is a good thing, seeing that this frustrates what this group feels to be the power-hungry ambitions of governments. However, if we shift to the Keynesian or some “not anti-Keynesian” view that some government direction and regulation is necessary, the need for someone to be “at the switches” may be desirable in regulating carbon policy. This would speak for a carbon tax system, which could be changed quickly by legislative motion or executive fiat to better calibrate it.
Given the above, the carbon pricing instrument looks more limited in its scope of application than is usually discussed. Carbon pricing has some potential but expectations need to be tempered. As we shall see, a combination of a number of instruments is going to be more effective than loading every expectation onto carbon pricing policy.
In Part III, we will look at crucial market failures that are not adequately addressed by carbon pricing.
Carbon Pricing (Cap and Trade/Carbon Tax) is Just One Piece of the Puzzle: Towards a Comprehensive Climate and Energy Policy – Part 1 January 26, 2009
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Renewable Energy, Sustainable Thinking.7 comments
Sir Nicholas Stern was commissioned by the British Government to assess the economic impacts of climate change and the costs associated with mitigating carbon emissions. The Stern Review remains the most comprehensive economic study of climate change.
In 2006 in the Stern Review on the Economics of Climate Change, the economist Sir Nicholas Stern called climate change, “the greatest market failure the world has seen.” Throughout the almost 20 year history of climate policy, some economists and climate policy designers have attempted to remedy this failure by assigning a price to carbon emissions thereby bringing this negative externality (to the market) into the reckoning of market actors. However I believe the primary focus on carbon pricing ignores certain fundamental realities of economies, of technological development and of physics which will lead to frustration as we try to reach some very ambitious climate and economic goals by 2020 and 2050.
As then President-elect Barack Obama said in a speech to the nation, our economy will not recover if we rely on “worn out dogmas of the past”. Despite the recent emergence of the first proposals for cap and trade systems in the US, a monocular focus on pricing carbon bears many traces of past economic orthodoxies, which are now under revision in light of very recent events. The resistance to carbon pricing on the part of the Bush administration and deniers of climate change has obscured the fact that this policy instrument hovers just a little bit above and to one side of some of the main economic and energy challenges facing us in the next decade. In other words, the enemy (cap and trade) of my enemy (deniers), from the point of view of climate activists, is not necessarily always a friend.
Much of the risk involved in designing a long-range policy that is intended to have a discrete physical impact on our atmosphere and climate has to do with lack of certainty within economic theories, particular as regards the benefits and limits of market mechanisms. We, and economists, can’t seem to be able to make up our minds about the appropriate types of interaction between public and private actors within a prosperous and, now a carbon-emission-reducing, economy. While some see the range of choices as a sign of our freedom and part of the “fun” of disputes in economic and political discourse, if we are choosing among partial or even false ideas and if the conflict itself causes distortions in our understanding, we are in trouble. Do we need to choose between the “magic of the market” and beneficent government-sponsored programs? Or is the picture more complex, less packagable into sound-bites, but reality-based?
Crisis of the Self-Regulating Market Ideal
The bankruptcy of 150 year old investment bank Lehman Brothers in September 2008 shocked the financial world and has led to a dramatic restructuring of the financial industry both voluntarily and with government assistance.
In the last several months there has been a sudden and complete about-face in the direction of economic policy actions with regard to the rightness of government’s role in the economy. Conceptual development and informed deliberation about this sudden spate of impromptu regulations and huge expenditures has lagged far behind the actions themselves. Faced with the collapse of major banks and other financial institutions, the conservative Bush Administration and governments around the world suddenly intervened massively in areas of the economy in ways which months before were inconceivable. While perhaps the US President most ideologically committed to the notion that markets can regulate themselves, George Bush in his last few months in office oversaw the expenditure of hundreds of billions of taxpayer money to prop up the economy in moves that have socialized economic risk for many large corporations. These ill-coordinated moves may have nevertheless prevented or at least delayed a slide into pure economic chaos.
A sign of a sea change in economic thinking can be observed in the mild mea culpa’s of Alan Greenspan, the retired head of the US federal reserve bank who had been seen as one of the principle architects of a hands-off market policy by the US government with much influence abroad. While previously a believer in the stabilizing effect of financial derivatives and limiting government regulation of finance, Greenspan recently expressed surprise that lenders had not acted in their own best self-interest by refusing to issue or buy risky loans and loan packages. Dominant in economics and economic policy since the late 1970’s, Greenspan was only the latest dean of the so-called monetarist school which advocates maximal market self-regulation, a tradition that includes economists Milton Friedman and Friedrich von Hayek. Another self-regulating market philosophy, called supply-side economics, also came to have a highly influential role in the United States and elsewhere, which emphasized that simply cutting business and upper-income taxes and decreasing government spending on social welfare would increase private investment and therefore the supply of desirable goods, spurring, in turn, economic growth.
Common among advocates and theorists of self-regulating markets, a.k.a. monetarists and supply-siders, are assumptions that people are more rational and economic information is more accurate than they and it actually are. The recent housing bubble progressed and mushroomed to enormous size resting largely on these assumptions, as borrowers, lenders, securitizing firms, insurers and rating agencies created a self-reinforcing circle of denial of the downsides and risks involved. These views may have been held sincerely, even naively, by some or, for others. as part of a self-interested calculus in which it was OK to assume the best if one also quickly divested oneself of responsibility for or connection with the consequences of risky decisions.
While there is now a large experimental literature in the newer field of behavioral economics that has shown that people are not nearly as rational as self-regulating market theory assumes, the assumption that people are most often protective of their best interests is contained in the numerous policy recommendations and statements by politicians, from the Bush Administration but also Administrations past. The call that the best economic stimulus is always putting more money in private hands via tax cuts or tax rebates, rests on the assumption that these economic actors will always, in all contexts, alone and in aggregate, act in their best interest and in that of the entire economy. In other words, the idea is that economic surpluses are always best left or rapidly returned to individual or corporate actors in markets rather than remain part of a government spending program, however efficient or well-regarded.
Friedrich von Hayek, a leader of the Austrian School of Economics, one of the prominent "free market" schools of economics, did not think of himself as a conservative but a "liberal" in the European sense; he saw as his main opponents Communism and Keynesian economics. His work was inspirational to Margaret Thatcher, one of the promoters of the new libertarian vogue in economics in the mid 1970's.
In another, conflicting account of the financial collapse, true believers in a totally unregulated and unsubsidized private market, libertarians, contend that the current economic situation is in fact caused by too much regulation and the socialization of risk prior to the credit crunch. Criticizing both the Bush administration and its Democratic critics, these libertarians point out how various companies knew they were “too big to fail” and made risky financial bets on the assumption that they would be bailed out or could in the end rely on government to save them. The Bush administration may have flirted with this more radical policy orientation in allowing Lehman Brothers to fail in September only to become terrified of the resulting credit crunch.
Libertarian advocates of a “pure” market, claim that a consistent, hands-off approach would have better results, helping all corporations and individuals learn to become more responsible market actors. As we have had no governments that adhere to this vision in power in recent memory, it is difficult to say what the consequences would be but in all probability we would see, as happened in the latter half of the 19th Century when laissez faire policies were the norm, an even more extreme polarization of wealth, more pronounced boom and bust cycles, and more rampant environmental degradation without the intermediation of regulation and government programs. There is no room in the “pure” market view for pricing in market externalities, as market actors are thought to be in full command of all economically-relevant issues and information. For some reason, the military and military spending are exempted from this same scrutiny by these commentators, perhaps because there are no private market alternatives to these institutions.
Revived and Updated Keynesianism: A Rush Delivery
John Maynard Keynes was the most influential economist of the mid-20th Century, credited with supplying the theory that helped explain how market economies emerged from the Great Depression. While dissatisfaction with Keynesianism peaked in the 1970's and 1980's in political circles, the Keynesian approach is credited with lengthening the periods of economic growth and shortening recessions in post-WWII economies.
The economic school which the latest crop of monetarists and other “free market” advocates reacted against was Keynesianism, which ruled Western economic discourse from the mid 1930’s to the 1970’s. Based on the work of the British economist John Maynard Keynes, the climate of opinion that is Keynesianism believes that government involvement in the economy and in particular government spending is necessary to balance the tendencies of the market towards boom and bust. Keynesians believe that regulation of market actors by government is in many cases warranted. Keynesians in general support some form of social welfare spending, with those to the political left supporting a comprehensive social safety net paid through tax revenue.
Inequality is not only a moral problem to Keynesians but also, in Keynes’s words, a “magneto” (kinetic-mechanical) economic problem leading to insufficient overall demand for goods in economic downturns, demand that needs to be stimulated by loosening monetary policy, direct government spending, including public works programs and unemployment insurance. People with relatively less means tend to spend more of their money as a percentage of their income than the rich, who by virtue of being rich, cannot or can choose not to spend so much and still survive. Keynes observed and theorized that people prefer to hold onto their liquid assets (to save) during economic downturns and the concomitant deflationary period, reducing overall economic activity and further exacerbating the recession. This is one aspect of what is called people’s “liquidity preference”.
From a vocal fringe that has had inordinate influence on popular economic discourse for three decades, libertarians contend that Keynesianism has remained the philosophy of government economic policy even during the Bush Administration despite its talking up of the virtues of the market and private initiative. From this radical perspective, all who interfere with the market are Keynesians or “socialists”, therefore erasing the differences between the regulatory policies of the Bush Administration and what we imagine to the policies of the beginnings of the Obama Administration or the Roosevelt, Eisenhower, and Johnson Administrations of the past. This accusation also overlooks the fact that Keynesianism is itself an effort to preserve capitalism rather than supplant it with another economic system.
Important for this discussion is Keynesianism’s agnosticism towards some forms of economic planning especially as applied to areas of public investment like infrastructure. In the Cold War confrontation with the Soviet Union, planning was thought to be an attribute of Soviet style economies yet in the US, federal, state and local governments continued to plan to manage their own investments and budgets. With the rise of the libertarian ideal in the 1980s, planning was considered to be inefficient or a “taboo”, as the play of market forces was thought to be the optimal solution to all economic problems. If we re-emerge into an era where public funds are once again used to build infrastructure or invest in other public goods, the need for planning once again comes to the fore despite the ideological wars that have surrounded the term. As a sure sign that the rush away from planning has now “bottomed-out”, one hears lifelong capitalist and conservative T. Boone Pickens now publicly lamenting the lack of planning in the area of energy in the US over the past 40 years.
While before the collapse of 2008 and monetarism/supply-side’s precipitous fall from grace, public praise in recent decades for Keynes and Keynesianism was hard to find, we now find ourselves in an era when economists and the public are engaging in a crash study course of the works of Keynes and notable Keynesians like John Kenneth Galbraith. Most significantly, President Obama quoted Keynes almost exactly in his inaugural address by citing that our productive capacity remains underutilized in this financial downturn. Paul Krugman, the recent Nobelist in Economics, has become one of the most vocal advocates for a rediscovery of Keynes in the US, using his influential op-ed pieces and blog at the New York Times to revive interest in a positive relationship to targeted government involvement in the economy. One needn’t however look to a left-leaning economist like Krugman or political leaders to find voices that recommend that government needs to do more to regulate the extremes of the business cycle and business practice, as billionaires Warren Buffett and George Soros have for the last several years questioned the existing hands-off policy.
The Works Progress Administration or WPA was one of Roosevelt's New Deal programs that functioned as a fiscal stimulus, training workers and putting them to work on public works projects. Conservatives argue that the WPA and other New Deal programs were ineffective and lengthened the Great Depression while liberal economists claim that they were insufficiently large and stimulative in comparison to the WWII mobilization which ultimately ended the Great Depression.
In current debates, the key arguments are around the role of so-called “fiscal stimulus” to the economy, as opposed to “monetary policy”, as well as the size and duration of that fiscal stimulus. Fiscal stimulus means the government spends money out of its budgets (fiscal) to stimulate economic demand and jumpstart the economy, rather than rely solely on adjusting interest rates. In the years in which Keynesianism was in the political and. to a lesser degree, academic doghouse, fiscal stimulus was considered to be taboo and dangerously inflationary. Using fiscal stimulus can lead to deficit spending, meaning governments running up their deficits and risking decreasing the value of the national currency. Opposition to the stimulus package proposed by President Obama will draw liberally from these criticisms and fears. Economic blogs are rife now with discussions of the potential effects and risks associated with large stimulus programs.
“Monetary policy” usually involves the adjustment of interest rates by central banks, the instrument which has been periodically used throughout the period of monetarism’s dominance of economic discourse. With interest rates currently effectively at zero, monetary policy has no more stimulus to offer to the economy. While in this crisis most commentators on economic policy accept the need for fiscal stimulus of some kind, there are key arguments and decisions to be made about the duration of the fiscal stimulus or direct government involvement in the economy. Is this fiscal spending an emergency measure or part of a new economic common sense?
The responses to our economic crisis that President Obama has announced so far come largely from the Keynesian playbook even though he has not surrounded himself with economic advisors that historically have advocated nor are known for their emphasis on government investment and regulation. From outside Obama’s inner circle, Krugman, former Secretary of Labor Robert Reich, and economic commentator Bob Kuttner have praised the direction of policy but criticized the amount of fiscal stimulus that Obama has proposed, saying that the stimulus amounts will not cover the shortfall in economic activity expected to be caused by the downturn. The calculation of exactly how much stimulus is needed and for how long is a crucial affair, depending largely on one’s theory of how government should act in the economy in a downturn and, just as importantly, during normal economic times.
The role of tax breaks within President Obama’s proposed stimulus is hotly disputed among politicians and within the economic profession and is an area of compromise with the monetarist camp. Monetarists believe that private economic actors, individuals and businesses, will know best what to do with tax monies, and believe that money in their individual pockets will be most effective in stimulating the economy. Keynesians are more conscious of the liquidity trap, where economic uncertainty to the downside leads people to save and not spend. Data collected about the tax rebate of 2008 indicate that the Keynesians in this matter may be right: people tended to pay existing bills or saved the rebate rather than spend it on new purchases. This data point may not be enough to persuade believers in monetarist or supply-side ideals that government can spend social surpluses wisely and effectively outside of the areas of which monetarists approve: defense spending and administering the legal system.
It is not yet clear whether President Obama and for that matter other world leaders are “re-embracing” the notion that government has a rightful place in both good times and bad times in delivering services directly to citizens, building infrastructure, and creating new markets deemed socially useful. It is safe to say that at least some forms of regulation and government oversight are now considered to be desirable on an ongoing basis, so there is a partial move towards the Keynesian playbook worldwide.
Comparing the Monetarist/Supply-Side and the Keynesian Worldviews
Brownian motion is the random movement in all directions of particles and molecules in a stationary fluid, the result of their random collisions. In a more general philosophical sense, the monetarist/neoclassical model of economies sees economies as composites of independently moving economic actors that respond to forces like supply and demand (price). For these economists, government interventions would constrain or direct these economic actors interfering with their, in the free market view, optimal, natural distribution through their interactions.
These crucial decisions about the economy are based on conflicts in worldviews that underlie the choice of a “free market” vs. a Keynesian approach to economic problems. The various flavors of monetarist and supply-side worldview see economic reality as a composite of “particulate” atoms; actors that act independently and uniformly in their own self interest, more often than not competing with each other. The expansion of the role of markets implies that competition between economic actors is not only the “state of nature” but is universal, necessary and salutary; cooperation is achieved on a case-by-case contractual basis. “Free market” economics which had its heyday among the monied classes prior to the 1929 stock market crash, became in the 1980’s, a populist view, as the notion that people “know what to do with their money” rather than surrender some in taxes flattered people, both the rich and the aspiring-to-be-rich, that they knew better than the government. To maintain the political appeal of freeing the market from regulation, there was an ongoing campaign to downgrade and some would say malign the competency of government to handle money and deliver services. In this worldview, the government is characterized as a covert profit-seeking and overt and covert power-mad entity that wishes to expand itself and enrich itself through intervening in the economy.
The Keynesian world view is more of a climate of opinion than an organized theory and is therefore more difficult to characterize and condense. Keynesianism sees that economic actors come in a number of types, public and private. Also in Keynesianism, there is a legitimate place for the roles of regulator and not-profit-seeking entities like the government to play in the economy; in this view of the world, there is the potential for multiple complementary or cooperative roles rather than the competition of all actors with each other. Because of this complementarity, it is possible to imagine that new systems like infrastructure can be built within the economy with the sponsorship or leadership of government. It is more likely to speak of “systems” and to take a systemic view of the economy or sectors within the economy from a Keynesian point of view.
Keynesianism also offers a larger set of strategy alternatives within macroeconomics (the management of national and global economies) and therefore for political leaders and regulators; this set includes the regulation of the money supply, the monetarists’ main concern and policy tool but goes beyond monetary policy. In the Keynesian view, it is conceivable to imagine that government officials and politicians as well as other economic and political actors could be motivated by impulses other than profit-seeking or narrow self-interest. Therefore in this view, government officials might actually be both motivated to do good and to create value in the economy. To free market advocates, this is all merely a façade covering to them the “real” intentions of government described above, i.e. the acquisition of more power and money.
This French national health ID card entitles the insured to reimbursement for 70% of medical services, with many very expensive life saving procedures covered 100%. Through a process of negotiation, the French have worked out a system of universal health insurance regulated by but not administered by the French government, which effectively defines a wide set of medical procedures and services as "needs" or entitlements rather than "wants". Universal publicly-financed primary and secondary education in the US in effect defines education up to the 12th grade as an entitlement.
There is also a crucial difference in how each camp classifies human desires, which is not simply a matter of academic or philosophical interest for economists and for policy makers. Monetarists and laissez-faire oriented political actors are inclined to lump all desires into the category of “wants” as does conventional neoclassical economics. A theoretical entirely unregulated market system would tend to treat all desires as optional and discretionary. The health care proposals put forward, for instance, by the McCain campaign last year, suggested that people could treat health care expenditure as part of each person’s or family’s individual discretionary budget and would compete with other wants and spending. In Keynesianism, though also an heir to the neoclassical tradition, it is possible for government to except certain activities from being treated simply as another “want” in the marketplace by mandating programs that for instance guarantee pensions, health care, etc. In this way, there is a recognition of “needs” or as they are sometimes called “entitlements” rather than simply a category which mixes all “wants” together. Free market advocates recognize that entitlement programs exist but view them as sub-optimal departures from a philosophy that views all desires as optional.
The two worldviews also diverge in the valuation placed on human knowledge, science and forethought. Monetarists and other free-market advocates tend to see human knowledge as fatally flawed when extended beyond a personal or local orbit and requiring the turn of events or experience to validate the rightness of any bit of knowledge or understanding. Even then that knowledge is thought to be mostly of temporary or local value. Keynesians may share some of this utilitarian view but additionally are more likely to view science and accumulated human knowledge as having some validity through time and space and therefore potentially the basis for action for the common good now or in the future. These fundamental differences in philosophy lead to radically different valuations of natural science and the ability for us to plan aspects of our future based on current knowledge and projections into the future.
The “mixedness” and diversity of the Keynesian playbook and worldview, which might be a strength in giving governments a greater range of policy choices, has also been a political liability for it in comparison to the relatively simple message of monetarists and supply-siders, as broadcast by Ronald Reagan, Margaret Thatcher and their successors. In the Keynesian world there is not such a stark division between economic good and evil, while in monetarist and supply-side views, the bad government folk are almost always the economic enemy. Keynesians, who range from just right of center to left-liberal and social democratic, have not developed the compact political message that their monetarist critics have been able to project.
The Obama Administration has shown signs that it is aware of the challenges of re-creating a positive role for government in the economy after three decades, in which many elected officials heaped negatives onto the government that they were supposedly leading. The creation of a Chief Performance Officer position to which President Obama has appointed Nancy Killefer, indicates that Obama wants government institutions to become more economically efficient. Contained within at least its conceptualization is the belief in a positive good to be delivered by government which can and should be delivered better. Under a number of previous Administrations, we might imagine that someone in this position would be focused only on cutting budgets and, with that, services. We are hoping that this new Administration can deliver on the promise of better, not necessarily less, government services delivered more cost-effectively, perhaps developing a self-disciplined Keynesian approach to government’s role.
The qualitative characterizations of these two worldviews are not simply “hand-waving” arguments but form the basis for concrete policies that involve investments of billions of dollars on a regular basis as well as quite different legal frameworks that govern economic activity. How people believe people and social and economic institutions behave and select the essential truths of and goods in social and economic life turns out to be more than simply a philosophical argument.
Part II will continue by describing the economic assumptions and designs of proposed carbon pricing systems.
Energy Efficiency and Energy Conservation in the Renewable Electron Economy: Summary for Policymakers Part 4 October 19, 2008
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Renewable Energy, Sustainable Thinking.Tags: Amory Lovins, Art Rosenfeld, Efficient Lighting, Gifford Pinchot, Green Building, Ground Source Heat Pumps, Heat pumps, LEED, Passive buildings, Rate Decoupling, Rebate Policies, Renewable Electron Economy, Superinsulation, Utility Regulation
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In the first three parts of this series for policymakers I have reviewed how we can fairly rapidly transfer our transport energy demand from exhaustible fossil fuels to renewably generated electricity, how that electricity can be generated, and what policy instruments are available to help build the Renewable Electron Economy. We have determined that this undertaking will require substantial investment and increased overall expenditure for energy and transport yet will be not nearly as expensive as continuation of the status quo. However, a key factor in achieving the most ambitious climate protection and energy independence goals, is the rapid implementation of energy saving techniques and technologies, which are facilitated by the use of a selection of key devices, most of which are driven by electricity.
Energy Conservation and Energy Efficiency
Viewing along with his father the waste of natural resources in the 19th Century US, Gifford Pinchot (1865-1946) was one of the founders of the movement towards conservation of natural resources. Coining the term the "conservation ethic", Pinchot was the first leader of the US Forest Service, appointed by Theodore Roosevelt.
Most analysts acknowledge that the least expensive and most rapid route to meet the first several “tranches” of our carbon emissions reduction and energy independence goals is by avoiding having to generate as much electricity or drill for as much fossil fuel for transportation in the first place. Energy efficiency (EE) and energy conservation are different but related concepts, though they are often confused. Energy efficiency means that users of powered devices can get the same enjoyment or use out of a more efficient device that uses less energy. Energy conservation is a planful pattern of human action by which energy use is avoided. Energy efficiency and energy conservation can be more or less linked together. As a concrete day-to-day measure, energy efficiency is considered to be more effective than energy conservation because once a device is installed, it takes the choice to waste energy out of the hands of people, while conservation requires human effort and choice. On the other hand, the value of energy efficiency is enhanced and its implementation facilitated by an pre-existing ethic of energy conservation that may permeate a society as a whole; investors and governments are more likely to prioritize energy efficiency investments if they believe that resources are valuable, limited and ought to be conserved.
The importance of an ethic of conservation in promoting both energy efficiency and renewable energy has been underplayed in part because of the political defeat of Jimmy Carter in 1980, who was the most powerful public figure in recent memory to actively promote energy efficiency and resource conservation. Historian and political commentator Andrew Bacevich has contrasted unpopularity of Carter’s image as a prudent conservator of resources versus the then more attractive image of the swashbuckling Ronald Reagan who painted the picture of an America of infinite resources and prosperity. Bacevich sees Reagan as the “prophet of profligacy” an attitude, because of Reagan’s political influence to this day, that has colored the American view of the ethic of conservation. At the moment we seem to be at a turning point against this decades long stereotyping of the pursuit of conservation, where green is fashionable and oil companies are declaring in expensive TV commercials that conservation is an imperative.
While on a national level, support for energy efficiency has been inconsistent, California’s state government has since the initial oil shocks of the 1970′s developed a set of energy efficiency regulations of utilities and building standards that remain the state of the art within the US. California’s energy use per capita has remained steady since the 1970′s due to a successful energy regulatory environment and despite rising population in hotter areas of the state away from the temperate coast. Some of the early, fairly easy national measures for energy efficiency can be achieved by adopting wholesale or revised versions of California’s regulatory culture.
Energy Efficiency: Generating “Negawatts”
Energy efficiency is a measurable quantity, a percentage of energy or work that results from energy that is input into a process. Efficiency is expressed as a percentage between 0 and 100; e.g. a (very efficient) process with 95% efficiency converts 95% of the energy input into useful work.
The energy guru Amory Lovins coined the term “negawatts” to describe how gains in energy efficiency can avoid the production of large quantities of energy, meaning “avoided megawatts”. Lovins likes to call energy efficiency and negawatts “the free lunch that you’re paid to eat”. Highly influential, Lovins is relentlessly up-beat about how energy efficiency is a sound business and product design practice, though his enthusiasm downplays the challenges facing energy efficiency in the American context where energy is still relatively cheap. While in Europe and Japan, the higher cost of energy facilitates investment in energy efficiency without incentives, in the US, systems of incentives have been necessary, most notably successful in California, to encourage significant adoption of energy efficiency measures.
One can compare the price of negawatts to megawatts as a decision-making tool. A modern power natural gas power plant can cost somewhere around $2500/kilowatt of power to build. The cost of power from this plant can, in addition, rise as the price of the fuel (inevitably) goes up. On the other hand, an efficient lighting project, especially where there is a substantial leap downward in wattage between old and new fixtures, can cost around $1000/kilowatt, fuel “included”, which will in effect becomes cheaper as the price of power rises (or conversely, the return on investment will accelerate). Not all energy efficiency projects are as inexpensive but the same principle applies that as the price of power goes up, the return on investment on an installed energy efficiency project gets more favorable.
If energy efficiency and new clean generation are not played off as an “either/or” proposition, the extra expense of new clean generation will spur energy efficiency investment, as the higher per kilowatt-hour costs of a new technology will make investment in energy efficiency all the more attractive. More efficient use of energy will in turn lower the overall costs of building a new clean infrastructure as less generation capacity will need to be built. The interplay between new clean generation and energy efficiency then will function as a “virtuous circle”.
Utility Revenue Decoupling and Energy Efficiency
California Energy Commissioner Art Rosenfeld is sometimes called the "father" of energy efficiency in California. A trained physicist, Rosenfeld in the 1970's realized that many of the energy challenges facing the US could be met by increasing the efficiency of devices and processes. Many of the efficiency programs in California were devised or influenced by Rosenfeld, whose current interests include "cool-colored" materials and designing HVAC systems with local climatic conditions in mind.
In 1982, to align the interests of the investor-owned utilities with the State of California’s goal to increase energy efficiency, the California Public Utilities Commission created an innovative system by which utilities would not suffer decreases in revenue by reducing power sales. The decoupling of utility revenues mandated that utilities invest a certain amount in energy efficiency programs, usually through rebates for energy efficient devices and device installation, yet allowed the utilities to recover lost revenues from these reductions in power sales by increases in power rates the subsequent years. These increases, in turn, facilitated further investments in energy efficiency as higher power costs spurred power end users to put more money into more efficient end-use devices. California has higher power costs than surrounding states but power use has remained around 7500 kWh per year per person since 1977 as power use has risen throughout the United States to an average of 12,000 kWh per year.
Utilities under decoupling regulation have found that investment in energy efficiency is a way for them to avoid or postpone large scale capital investments in new power contracts or transmission and distribution infrastructure. Northern California’s large investor owned utility PG&E for instance has invested three times as much in energy efficiency as is mandated by the state for just these reasons. In addition, investment in energy efficiency is good public relations in an era in which being green is considered a public virtue.
Recent policy proposals including that of the Barack Obama campaign to increase energy efficiency throughout the US suggest making revenue decoupling a national requirement for all utility regulatory structures.
Green Design: Guiding Natural Energy Flows
Making a statement about green design, the Alberici construction company of Missouri built their new headquarters as one of the highest scoring LEED Platinum buildings. The architects re-used the shell of a 50 year old manufacturing and office facility, orienting the new facades of the rebuilt structure towards the south to capture more winter sun and optimized natural ventilation flows to increase energy efficiency and improve indoor air quality.
Energy supply in a renewable electron economy means tapping into natural energy flows or gradients and using them to generate electricity to power useful devices. But what if those currents of natural energy and material flow had desirable uses in their stronger, unconverted natural forms? As we have already established, renewable generators are, at least with current technology, not inexpensive and like most electric generators, convert only a fraction (from 10 to 40%) of the primary energy they receive into electricity.
One way to think of green design and building principles is that they are able to route natural energy flows to serve a desired human end, avoiding the losses and expense associated with converting the energy into a new form, like electricity. For instance the heat from sunlight or from the bodily warmth of people and animals can be used to keep the interior of buildings warm during the winter with the proper materials and construction. Or natural light can be used to light the interior of buildings through windows and skylights or through new fiber-optic daylighting systems and solar tubes. Wind can be used to cool a building through wind towers in hot dry climates. An awareness of these natural flows and gradients is one of the most important tools of the green architect or designer.
Advanced materials also allow green buildings to work against natural energy flows if so intended by the building’s designers or occupants to keep a space warm or cold, dark or light. Superinsulation and advanced window technologies allow buildings to use almost no energy to maintain comfortable interior temperatures with minimal heating or cooling energy required. Older technologies like straw-bale design and adobe walls can have a similar effect in declaring our intention to keep a space warm or cool, fighting against the entropic tendency for heat and moisture to evenly disperse across natural barriers. Pre-fabricated building and building parts allow for more precise design tolerances and tighter buildings as factory construction is more precise than what can occur on site.
Near-zero, Net-Zero and Plus-Energy Buildings
While green building encompasses more than a focus on energy usage, reducing the energy use and attributable greenhouse gas emissions of buildings is one of the key concerns of green builders today, contributing for instance approximately one-third of the potential points to the LEED green building rating systems. Near zero energy buildings are achieved with the application of efficient building technologies, green building principles and some on-site renewable energy generators, most often solar PV panels. However, a near-zero energy residential building can also be achieved exclusively through the application of hyperefficient building technologies without on-site renewable energy capture and generation.
Superinsulation is a characteristic of most near, net- and plus-energy buildings. In these infrared thermograms, the passive building on the right is emitting much less heat than the ordinary building on the left as it is more tightly constructed and has walls with a much higher insulation value; this allows the passive building to use 15% of the energy of ordinary buildings to heat, cool and ventilate.
One building system that can produce near zero energy buildings are “passive” buildings or houses that use ambient energy from the sun to be heated in the winter and cool from the upper layers of the ground to remain cool in the summer. Passive houses or buildings are super-insulated and use an air-to-air heat exchanger (driven by small electric motors) to preheat or pre-cool incoming air with exhaust air thereby keeping interior air fresh while preserving the desired interior temperature. A passive house can use 15% of the energy of a non-passive house for space-conditioning; furthermore, the heat given off by lighting can contribute significantly to the warmth of the house in the winter leading to a two-for-one effect.
Building closer to the ground or using thick earthen or naturally insulated walls can in almost all climates reduce the need for space conditioning, as the temperature of the ground and groundwater remains fairly constant relative to the air temperature. Also the introduction of walls or floors as thermal masses gives architects another tool to reduce building energy usage by storing heat or “cool” in these masses for slow release later on. The “Earthships” by New Mexico architect Mike Reynolds, use the thermal mass of thick walls and thoughtful design in relationship to their environment to reduce or eliminate the need for space conditioning. A new technology, borehole thermal energy storage or BTES, is a means to use installations of thermal masses in the ground to store the heat of the sun during the summer which remarkably 6 to 9 months later is still available during the winter to heat buildings and other processes.
This net zero energy building in Los Angeles, the Audubon Center at Debs Park, has an innovative system of rooftop solar thermal collectors and absorption cooling which use solar heated water to both heat and cool the well-insulated interior space (also a LEED Platinum building).
To push beyond near-zero energy threshold, net-zero and plus-energy buildings require the application, sometimes liberally, of PV or wind turbine technologies to cover the internal uses of energy in the building, even as the buildings exchanges energy with the local utility via the grid. The mix of building efficiency vs. on-site power generation technologies will be influenced by the relative cost of these technologies, the uses of the building (residential, office, industrial), the local climate, the intentions and commitments of the builders and owners, and renewable energy resources available. It may be more inexpensive at one point in time or place to apply efficient building technologies but at a point of diminishing returns, the purchase of PV panels or an on-site wind turbine may become the most feasible option. With more power usage per square foot, to achieve net zero or plus-energy, requires of necessity more on-site generation. Compared to the building techniques of the last couple centuries that depend on energy subsidy from coal, gas, oil or wood for comfort and functionality, using current and emerging building technologies in new buildings makes it easier to approach the net-zero energy ideal.
Electricity and Energy Efficiency Retrofits of Existing Buildings
Reaching the extremes of energy efficiency is easier in new construction using the latest or revived ancient energy efficient techniques. One key policy measure for enhancing the future energy efficiency of buildings are national building standards that may be based on California’s Title 24, a system by which new construction is pushed to become more efficient with every successive generation of buildings. Just as in its utility laws, California now has 3 decades of experience in designing effective building laws from which most other states and the national government can draw in designing a broader system.
However for the next half a century or so, wherever we live, we will be living with many buildings that were built without much regard for their energy use. Many of these buildings can be made tighter and better insulated but will only in rare cases achieve the standards of hyperefficient new construction.
Buildings typically now draw their energy from a combination of wholesale generated electricity from the grid, piped-in natural gas, propane from tanks, and occasionally wood and wood pellets. It is unfortunate that fossil fuels predominate in this mix. As it turns out, if more buildings used electricity for more of their daily operations, building energy use could be halved for most energy intensive tasks. Furthermore, as the Renewable Electron Economy concept suggests, electrical energy which once came from fossil sources can be generated by renewable electric generators, thereby giving all-electric buildings the potential to be carbon neutral in their operations now or at some point in the future.
Furthermore, as we do not have the luxury of building an entire new building stock of near zero and net zero buildings from the ground up, high efficiency electric appliances and systems are fairly easy retrofits for existing buildings, though to implement these on a large scale sometimes requires an incentive structure to facilitate the move.
Heat Pumps: Ground Source, Hybrid Air/Ground, Air Source and BTES Linked
About 60% of the 40% of total US energy consumption (meaning 24% of total energy use) attributable to buldings is used by heating, ventilation and cooling systems, a.k.a space conditioning or HVAC, and water heating. Even in severe climates, this amount can be cut to half or less of current usage by the use of more efficient HVAC technologies most of which require only electricity as its energy input. Daily combustion of fossil fuels for space conditioning can be eliminated in most climates by the use of (electrically-driven) heat pumps that can pull heat out of or put heat into spaces as desired by building users. Heat pumps in combination with fans and water pumps distribute heat or cool either using an air-duct or a fluid-based radiant heat or cool distribution system in a building, thus can substitute for both an air conditioning and a heating system. Heat pumps operate using the same principle as a refrigerator but unlike a refrigerator can also work in reverse. Not only can energy use be cut by using properly designed heat pumps but dependence on natural gas and heating oil can be eliminated for space conditioning, allowing at some point in the future all energy for a building to come from renewable electric generators.
A ground source heat pump is a refrigerator sized appliance inside a building that either extracts heat from or pushes heat into the ground through a heat exchange fluid. The pictured configuration shows vertical boreholes through which a precisely engineered length of flexible pipe for the heat exchange fluid for that building's cooling and heating load is threaded.
The most efficient, though highest price heat pumps used for space conditioning are ground source and groundwater source heat pumps (GSHPs) that use the substantial thermal mass, conductivity, and consistent year-round temperature of the ground or groundwater as either the heat source or the heat sink. The expense of GSHPs comes from the need to build a ground loop by trenching or by drilling boreholes several hundred feet deep through which a tube with a heat transfer fluid is drawn. The size of the GSHP’s ground loop has to do with the heating and cooling load and the soil characteristics. Sometimes called geothermal or geoexchange heat pumps, they can also use the excess heat that is extracted from the building or the ground to heat some of the hot water used in the building, though one could build a dedicated ground-source water heating loop as well for consistent all-year hot water heating.
GSHPs can reduce the energy needed to cool by half and to heat a house by as much as two-thirds with the energy requirements purely electric: the fan, compressor, and pump energy required to circulate the heat exchange fluid, extract the heat and distribute the heat or cool throughout the building. However, to reduce the size of the ground loop and therefore expense, it makes sense to tighten up and insulate the house.
Air-source heat pumps or hybrid air/ground heat pumps are less expensive than a ground source unit because they either have no ground loop (air-source) or a much shorter ground loop (hybrid). Less efficient than ground source units, these heat pumps are however good choices for milder climates and are improvements over electric resistance, oil and natural gas heat. Air source and air/ground heat pumps as well can be used to heat hot water further reducing the need for natural gas. For passive houses, the remaining heating and cooling load that cannot be fulfilled through passive means can be supplemented a number of ways but some use a micro ground loop under the house to extract and expel heat from the house may suffice, given the superinsulated nature of the house.
With the advent of borehole thermal energy storage, electric heat pumps can be used to deposit or extract heat from the seasonal thermal energy store, which will, in some applications, reduce the amount of energy required to condition buildings. These pumps do not require a compressor, thereby reducing the energy requirement for BTES.
Efficient (Gourmet) Electric Kitchens: Induction Cooktops and Electric Infrared Grilling
While space conditioning and water heating together account for 60% of the energy used by buildings in the US, another example of where a new electric technology can make substantial contributions to lowering building energy use is in the 4% of building energy used in cooking. Popular in Europe and growing in popularity in the US, magnetic induction cooking uses the induction effect of a high frequency magnet to heat the metal of a steel or iron pan or pot, thereby avoiding heating the surrounding air or the stovetop itself. Induction cooktops use 84% of the energy input to heat food as compared to 40% for gas or 70% for electric resistance cooktops. Furthermore induction cooktops are more minutely controllable, quicker, and safer as the cookware gets hot but the stove doesn’t.
GE demonstrates one of the favorable characteristics of induction cooktops through showing how ice-cubes do not melt as water boils on adjacent part of the induction cooking surface: only the metal cookware gets hot not the cooking surface. Induction cooking is also notably fast and precise.
The efficiency of induction cooktops combined with their functional advantages over gas will help electric cooktops and thereby all-electric kitchens gain market share over gas, which has been favored by demanding home cooks and chefs. The complaint that some chefs have that they cannot see the power and heat-setting of an induction cooktop as compared to gas can be easily overcome with the invention of a simple visual indicator of the power level for an induction stove.
While the attraction to open flames remains for many a signature of the cooking process, in the world of renewable fuels, charcoal and wood firing still produce the desirable flames, glow, chars and flavors that people have enjoyed for millenia. However, those in the grilling world who seek more convenience and less smoke for daily use, now prize the new infrared grilling technology, which can be fueled with natural gas, propane and now electric elements. The latter electric infrared grills can use renewably generated electricity and are easily controllable and more efficient than their fossil fuel equivalents. The further development and distribution of electric infrared grilling technology will allow all-electric cooking to reproduce or exceed the cooking results from fossil fuels with the same convenience.
While these issues may seem small, opting out of and eventually shutting down natural gas distribution to households and commercial kitchens without a decrease in end-user utility can help buildings become carbon neutral more quickly. Furthermore, the development of more efficient and cost-effective electricity-driven sources of heat can replace the use of natural gas for industrial processes which account for 8% of US total energy use.
Key Technologies for More Energy Efficient, Carbon Neutral Living
Including those mentioned above, listed below are some of the key technologies that will help us achieve energy independence and carbon neutrality more quickly.
1) Heat pumps: ground source, air source, hybrid and with bore hole thermal energy storage
2) Super-glass (low emissivity, selectively coated, insulated) and super-windows
3) High-R Insulation and structural insulated panels
4) Efficient Fluorescent and Efficient LED Lighting
5) Fiber-optic solar lighting and advanced skylights for daylighting
6) Intelligent building, lighting, and appliance controls
7) Light-colored and “cool-colored” building and paving materials (that reduce the heat island effect of the built environment and building heat loads)
’8) Solar thermal water and space heating
9) Variable Frequency Drives (electronically adjusting pump and fan speeds to energy demand)
10) Weatherproofing and tighter building envelope standards (with testing)
11) Radiant heating (using water rather than air as the heat transfer medium in a building)
12) Induction cooktops, convection ovens and electric infrared grilling
Quality Assurance and Certification in Energy Efficiency
More so than in the generation of electricity or extraction of energy, the implementation of energy efficient technologies either through the private market or through government programs requires extensive testing by government or trusted 3rd party agencies to make sure that promised energy savings will be realized by a new technology. The potential for fraud in promising “more for less” or for improper installation of a technology requires oversight by both private and public regulators. Paired with the decoupling of utility revenues combined with a mandate to invest in energy efficiency, power utilities have an interest in monitoring the effectiveness of energy efficiency measures.
Energy Efficiency in Transport: Short term and Long-Term Solutions
One of the key features of the Renewable Electron Economy is the replacement of petroleum with electricity as the energy carrier for transportation. However this transfer will take place at varying speeds depending on the future cost and availability of petroleum as well as political support for electrification of transportation. Petroleum and natural gas will be around for at least a decade or two in force and in vestiges in the following decades. Increasing the efficiency of internal combustion drive vehicles will have a role even as we transition to vastly more efficient electric transport.
One of the motivations to transfer transport energy to electricity is the staggering increase in efficiency that electric motors represent over petroleum and natural-gas fueled internal combustion engines: the 90% efficiency of electric motors contrasts favorably with the 25-30% efficiency of the modern internal combustion engine. A vehicle of similar mass and design would have 3 or more times the mileage as an electric vehicle rather than a traditional petroleum-burning car.
Short-term Solutions
In the first installment of this mini-series, I compiled a list of short-term solutions related to how we can reduce vehicle miles traveled rapidly by the more efficient operation of both our autonomous and public vehicle infrastructure and the use of information technologies. Below are some specific measures that can be applied to vehicles themselves.
Vehicle Lightweighting
Aptera, with their revolutionary Typ-1, is radically restyling passenger vehicles to save weight and energy. Though classified as a motorcycle, Aptera has targeted exceeding passenger car safety standards in their design.
While the internal combustion engine is near the end of its development trajectory, a number of innovators in the area of vehicle materials are attempting to show that the use of lightweight body materials such as carbon fiber can reduce conventional vehicle mass substantially without endangering vehicle safety. Amory Lovins has long championed the use of carbon fiber to double vehicle efficiency, claiming that bulky vehicles with advanced lightweight materials could have . The German company Loremo and the American company Aptera have also suggested radical, lightweight vehicle designs as ways to create hyperefficient vehicles that would either have a small internal combustion or an electric motor.
Vehicle Efficiency Standards and Automaker Penalties vs. Gas Taxes
Mandating vehicle efficiency standards has been an uphill battle in the US, requiring American automakers to work against their own design culture and the tendencies of American auto buyers to prefer large and powerful vehicles in an environment of cheap and abundant petroleum. While vehicle efficiency standards are, in the culture of environmental reform and public virtue, viewed to be a necessity to impress on upon both automakers and the public that optimality of fuel efficiency, higher gas taxes in Japan and European countries have been a far more effective means of compelling automakers and auto buyers to conserve energy and choose more efficient vehicles.
If US legislators and environmental pressure groups are at all serious about encouraging gasoline powered vehicles to use gasoline more wisely, they will need to challenge the Cheap Energy Contract with substantial rises in fuel taxes. This will take more courage on the part of these actors as simply asking for higher fuel efficiency standards puts the onus on automakers to lead the market. While the shortsightedness of US automakers is truly lamentable, legislators so far have not succeeded in transforming that culture through vehicle efficiency mandates. Those who cite the current success of Toyota and other foreign car makers vis-à-vis US makers forget that, among other things, the headquarters of these companies are in countries with fuel that costs at least twice as much as it does in the US. Fuel efficiency standards require US automakers to lead the efficiency charge, which requires them to occupy a position of moral and environmental leadership without the aide of high fuel prices.
A compromise that avoids some of the negative political fallout of an across the board gas tax hike is a varying tax surcharge that keeps the price of fuel above a certain level blocking efforts by oil producers to artificially lower prices or to smooth over the effects of temporary drops in demand. This fuel “price floor” would be explainable to constituents who should at some point understand that the movement to higher fuel prices is inevitable and energy efficiency in transport socially desirable.
Longer-term Measure: Shifting to Electric Drive
As discussed in the first installment of this series, the shift to electric drive is by far the most effective means of conserving energy resources. The current generation of hybrids use electric motors to provide an assist for relatively inefficient gasoline internal combustion engines. Plug in hybrids and electric vehicles have the potential to double or treble the efficiency of automobile drivetrains.
Price Signals and Energy Efficiency
Just as with the finance of new clean energy generation technologies, the price of energy is key in spurring energy efficiency investment and energy conservation. As indicated above, price signals are some of the most effective ways to spur private parties to cut their energy use; the implementation of those price signals through policy instruments needs to proceed at an urgent pace yet not so rapidly as to encourage backlash against the necessary efforts that we all must undertake to help preserve a favorable climate. Carbon taxes, fees and cap and trade systems will in all likelihood serve to spur investment in energy efficiency, though the degree to which they do will depend on the level of the resulting carbon price as well as the ultimate efficiency of the chosen mechanism. These instruments will in their early stages in all probability be more effective in spurring energy efficiency investments than they will in stimulating the building of new clean electricity generation as the relative cost of the latter is in many cases too high.
The (Renewable) Electron Economy as the Solution to the Oil Crisis: A Summary for Policymakers – I August 4, 2008
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Transport, Sustainable Thinking.Tags: 2008 Election, Barack Obama, battery, electric transport, Electric Vehicles, Energy Policy, Green Transport, John McCain, Plug In Hybrids, Presidential Election, rail electrification, Renewable Electron Economy, Transport Policy, trolleybuses
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Lines formed at gas stations during the 1973 OPEC oil embargo. In the near future, rationing is more likely to take the form of high prices rather than through limits on consumption.
This is the first in a short series on how we can build an energy future based on our best science and no longer critically dependent upon exhaustible and polluting fossil fuels.
Too often, discussions of our future energy system simply reflect the current array of political forces in Washington or the novelty-hungry attention of the media and not the long-term viability of technologies and proposed solutions. As the price of oil is the most pressing issue from a short-term perspective, I am starting this series of policy briefs with how the energy used in transport on land can be transferred from liquid fossil fuels to cleanly generated electricity; in the second part I will address how we can create the conditions for powering the grid in the post-fossil fuel era.
Oil Supply: Speculation and Long-Term Trends
We can all now agree that it has been the ultimate in shortsightedness to continue building a society founded upon burning ever increasing amounts of easily exhaustible resources. Not only is it highly visible petroleum at the pump but, behind the scenes, the vital energy for agriculture and freight transport that now depend upon the output of oil wells, mostly located abroad. In the US in particular, we have had a twenty-five year hiatus in facing this reality through political, cultural and corporate resistance to change, which means that Americans are starting the race far behind the starting line. In addition, as it turns out, the burning of these fossil resources alters the global climate and creates local pollution and health problems. There are other ills and challenges in our world but currently fossil fuel addiction is one of the most pressing but also, fortunately, soluble problems.
Talk of a speculative bubble in oil is a distraction from the fundamental reality of a widening gap between increasing transport energy demand and static or dwindling supply of liquid hydrocarbons. Those who put their faith in speculation as the driver of punitively high oil prices come from two divergent camps. Some are wedded to the energy status quo by a conservative, jaded view of energy alternatives and function as defenders of the fossil fuel energy industry establishment (the business commentator Larry Kudlow comes to mind). A more surprising group are populists and left-leaning analysts who always use the formula “qui bono” (who benefits) to locate the responsible parties for any social ill. These critics of oil companies and oil sheiks continue to promote the illusion of an endlessly abundant and forgiving Nature, which is despoiled not by our combined global thirst for energy but solely by a thin layer of greedy profiteers, who can be punished or pushed aside thereby making the problem go away. We can safely expect oil to continue to climb in price even if we are now currently in a period where emotions have driven prices higher than actual supplies would warrant as some continue to profit from the price run-up.
Beyond speculation, suggestions that we can drill and refine our way out of the inevitable decline of oil that we have known for a long time to be in finite supply anyway, function as populist pandering or as short-term profit-maximizing calculus by parts of the oil industry. Members of the latter group, in a profits-over-ethics mode, would like us to continue to depend on oil as long as it is profitable for oil producers, which will be the case until a fundamental break with petroleum use in transportation is organized; obviously scarcer but more expensive oil will continue to be a cash cow unless a new post-oil transport system has been built. There is fundamental conflict between backward-looking portions of the petroleum industry and the general health of our economy and environment, a conflict which must be decisively resolved by policymakers and the voting and buying public in favor of new, cleaner energy sources in the next few years.
On the other hand, realistically, oil production and supply will need to remain a concern for a few more decades, yielding a very delicate but extremely important political challenge. On the political side, Republican Presidential candidate John McCain has relied on common wishes that more domestic oil production through offshore drilling will somehow eliminate or significantly soften the inevitable price spiral upward. Such drilling will only have an impact 10 years hence at a point when worldwide demand will have still further outstripped supply and prices will be in a comparative sense stratospheric. Not quite drawing a clear political front on this issue, Barack Obama has lately been attempting to accommodate the popular appeal of offshore drilling by suggesting that new drilling would support energy alternatives.
Oilman T. Boone Pickens has turned his attention to natural gas and wind
Natural gas with its lower carbon dioxide emissions per unit energy is occasionally touted as an “alternative” fuel but it too can easily be exhausted; in fact, production in natural gas wells tapers off very rapidly as compared to its solid and liquid fossil brethren, making price spikes and shortages all the more likely in a turn to natural gas. The stock-picker Jim Cramer praises natural gas as an investment and T. Boone Pickens, in his new heavily marketed energy plan, trumpets it as an automotive fuel, as we are sure to use more of this dwindling lower-carbon resource, but it is not a sustainable alternative to oil. Relying on natural gas as a climate or energy solution is the modern definition of a Faustian bargain: highly profitable for some but costly for most economic sectors, our society as a whole and our atmosphere.
Differentiating Short-Term and Long-Term Solutions
Depending on oil has discouraged planning in the area of energy and transportation.
The impulse to jump on the natural gas or intensified oil exploration bandwagons will distract policymakers by confusing short-term and longer-term solutions. Fluctuations in supply of these hydrocarbons may create a temporary plateau in prices but no enduring relief. In the short-term, within the next two or three years, steps can be taken to ameliorate what may be, in the energy and transport areas, a grim period. It is here that I part company with some of the doom-and-gloom predictions about economic collapse that originate from some Peak Oil enthusiasts. While I agree with some of the more pessimistic predictions about oil and natural gas supply and pricing, there are short-term, rapidly deployable solutions at least for passenger travel and some freight that will soften the blow.
Effective short-term solutions include
- Fiscal support for intensified operations by existing public transport – Federal and state governments will need to help local and regional transit agencies to increase their schedules to serve more riders without raising ticket prices substantially.
- Development of Internet- and cellphone-based ride sharing businesses and services. Local development of van-pooling services also enabled by Internet and cellphone-networks.
- Development of transport centers or nodes for public transit and ride sharing with municipal and regional oversight to increase efficiency and security.
- Opening of lanes of local streets to lower speed vehicles including neighborhood electric vehicles, scooters and bicycles.
- Designating space or facilities in buses and trains for small freight hand trucks and bicycles.
- Development of transport demand study tools using the Internet to fine-tune and coordinate transport policy and new transportation businesses
These solutions will not provide the same level of spur-of- the-moment convenience as we might find in the recently past era of cheap fossil fuels and widespread personal vehicle ownership. The transport of medium and larger quantities of freight will also require more capital intensive, longer-term solutions. Nor will these short-term solutions provide the same utility of future innovations in electric vehicles and an EV public and quick-charging infrastructure. Some, used to traveling in their own personal space, will not avail themselves of these stopgap options until they feel more economic pain through still higher gas prices.
The Five Transport Energy Solutions and One Imperative
There are five fundamental options to move into a post-oil, post-natural gas energy world and one imperative:
- Imperative A: End-Use Energy Efficiency and Conservation. We will have to invest less in new energy supply if we get more from the energy we use (efficiency) as well as act and plan in a way that recognizes the limited nature of natural resources (conservation). The electron economy scenarios have the greatest potential for end-use energy efficiency. The short-term measures above will also increase efficiency.
- The Renewable Electron Economy: electric vehicles, stationary devices, and new electric transport infrastructure powered by electric generators using renewable energy and the associated energy storage challenge.
- The Nuclear Electron Economy: electric vehicles, stationary devices, and new electric transport infrastructure powered by electric generators using nuclear energy (with or without fuel reprocessing), with associated security risks, waste and dependence upon fissionable fuel supply.
- The Coal CCS Electron Economy: electric vehicles, devices and new electric transport infrastructure powered by electric generators using coal with carbon capture and sequestration, a technological “maybe” dependent upon coal supply.
- The Coal to Liquid (CTL) Transport Economy: converting coal to liquids (sometimes via the Fischer-Tropsch process), burned in internal combustion engines leading to climate disaster and resource exhaustion.
- The Biofuel Transport Economy: Aggressive expansion of unregulated biofuel production for land transport will almost certainly lead to ecological and social disaster. Biofuels, sustainably produced, especially from wastes, will have a niche in aviation and marine propulsion.
Sub-option for Solutions 1, 2 and 3: The Hydrogen Economy is parasitic on the Electron Economies, reducing net usable energy by two-thirds for the purpose of having a compact liquid/gaseous fuel extracted by energy-consuming electrolysis. A Hydrogen Economy therefore requires a 2 to 3 fold increase in the amount of and therefore the capital investment in the required clean electric infrastructure to support renewably produced hydrogen. (There are currently even more expensive renewable ways to extract hydrogen from water using very high concentrations of sunlight that do not use electricity as an intermediary).
Any of these five transport energy supply solutions will be made much more feasible if aggressive end-use efficiency measures are pursued in parallel; therefore the imperative of energy efficiency.
Narrowing the Field
To simplify matters, we can eliminate options “4” and “5” as the costs of climate, ecological, and social disaster outweigh the benefits of a supply of liquid fuel that is not petroleum-based. Analyses that only consider liquid fuels divert the debate , intentionally or unknowingly, from more promising solutions; it is astounding how some commentators can discuss these options as if a continued supply of liquid fuel for transport was somehow worth enormous ecological and human sacrifice.
Lamborghini easily converted this gas guzzling Gallardo to use ethanol yet producing biofuel from food crops for such a car has, in most analyses, shown more negative than positive ecological and economic effects .
Building on early optimism about biofuels from environmentalists, the biofuel lobby, unfortunately, has a great deal of influence in the United States. This is a truly tragic state of affairs in American politics, as many farmers and farm-state politicians have tied their political and economic hopes to this option. Biofuel mandates have pushed up the price of crops and created an incentive to plant and overplant corn as well as other potential biofuel crops. As fuel prices push up food prices, these prices are further elevated by the transfer of prime farmland from food production to fuel production. Without cutting biofuel incentives and mandates, there will be no countervailing influence to conserve the soil or return land to food production. Talk of cellulosic ethanol or other future innovations in biofuel production function currently as an entering wedge for the current unsustainable variety.
The only savior for biofuels is a rigorous eco-certification program that excludes the conversion of food crops to fuels, mandates soil and water conservation, and privileges the use of waste streams for fuel. Under such an international eco-certification program, biofuels will have a role as clean marine, aerospace and specialized land transport fuels.
Luckily, the coal-to-liquids option has few advocates and so far little political support. If however, petroleum prices continue to rise and so-called “skeptics” of global warming continue to be well represented in the US Government, there may be various support schemes for coal-to-liquid that are inserted into legislation. Unlike the biofuels solution, coal to liquids would “work” to move a large group of vehicles for a few decades not unlike our current vehicle fleet, but with enormous climate sacrifice as it represents an increase in carbon emissions over even the current sorry state of affairs.
In the next installment of this series, I will explore which of the three electron economy scenarios will predominate. As each scenario varies only in the manner in which electricity is supplied, i.e. generated, and not used, the below recommendations about how to create a secure post-oil transport system using electricity could apply to all three.
Getting Off Oil: A Three-Pronged Approach
Oil is far from an “evil” but an undervalued resource that has been squandered on tasks that could be much more efficiently achieved through the use of electric drive transport. Cheap oil has enabled individual and family mobility and autonomy at a low price but these uses now compete with more critical uses of oil in commerce, industry, and agriculture. As we shall see with greater investment in electric transport and infrastructure an equivalent level of mobility in most arenas can be achieved through electric drive transport. Electricity can be generated via a number of different methods, some of which are sustainable and have low or zero emissions.
- Electrified Rail and Roadways – In the last few months, decisions have been made in Washington to spend billions of dollars on bailing out financial institutions that made the wrong bets in the housing and housing securities markets in search of guaranteed or higher than average profits. To get off oil, we will need to make public and private investments in productive assets that
This European high speed train receives its power through the overhead catenary wires.
enable transport to be powered by electricity, a much more durable and secure investment. Electrification of railways and key roadways, first in urban centers and then interurban roads, will allow trains, freight and large passenger vehicles to function independently of oil supply. As electric or dual mode locomotives on electrified rights of way are more capable than the majority locomotives in the US, the diesel electrics, fairly inexpensive sets of financial incentives may be sufficient to encourage private railways to electrify. Compared to the other electric options, electrification of rail and local roadways is the most highly developed and highest capacity electric transport option, though the least publicized in an age fixated on new technology. This option has slipped under the radar, as, for instance, Andy Grove, the Intel co-founder and now an advocate of the electrification of transportation, omitted to mention this option in his recent Washington Post editorial on the subject.
- Plug-in Hybrids/Extended Range Electric Vehicles – The most likely substitutes for small and medium sized vehicles used mostly for local trips but with some longer-distance usage are PHEVs/EREVs such as the upcoming Chevy Volt. In their simplest configuration, these vehicles will be driven by an electric motor that can propel the vehicle for as many as 40 to 60 miles on
GM's Chevy Volt will be one of the first production Plug-In Hybrids which GM is calling an "Extended Range Electric Vehicle" or EREV
stored grid electricity (therefore the “plug-in” part) in a medium-sized battery and can switch seamlessly to using petroleum or other liquid fuels from its conventional fuel tank to run either a generator or small engine to propel the vehicle on longer trips. PHEVs will benefit from new generations of batteries that are more compact than lead acid; however a future revolution in battery and quick charge technology may narrow the scope of usefulness for PHEVs. Many auto manufacturers are now planning or actually developing PHEV models, including GM and Toyota. PHEVs in wide deployment could reduce petroleum usage by as much as 60 to 70%.
- Battery Electric Vehicles/Battery Exchange and Quick Charge Infrastructure – A new generation of battery electric vehicles are now being developed with lithium ion batteries that can have ranges of up to 250 miles or can completely recharge within 10 minutes. The Tesla Roadster, a high end sports car with a 225 mile range is just being delivered to customers; Tesla’s British competitor with a 160 mile range, the Lightning GT, will recharge in 10 minutes from a 480 volt outlet, making its recharge time approach liquid refueling times. Tesla, Renault-Nissan, and Mitsubishi are all planning
The Introduction of the Tesla Roadster has sparked a revival of interest in electric cars by many major carmakers as well as by start ups.
mid-market or economy electric vehicles with varying ranges all using higher energy-to-weight ratio batteries than lead-acid batteries. Other makers are making short-range vehicles for lower speed city use with the older lead-acid battery technologies. Some are planning to build quick charge or battery swap infrastructure to allow electric vehicles to travel unrestrictedly with short charging or swap stops. As is, battery electrics with even traditional lead-acid batteries can do many important tasks that are now the province of petroleum-powered vehicles.
One of the strengths of this three-pronged approach is that it does not hang its hat on any one technology, distributing risk between three paths. Also by acknowledging the uses of existing battery technology and on-grid transport options, the plan doesn’t depend crucially on innovation in batteries or chargers and their manufacture yet also would take advantage of the opportunities offered by these technologies and their future path of development.
Towards the Post-Oil Society
The tripartite approach allows our society to cut oil demand and dependence substantially within a decade, much more quickly than a sole reliance on electrification of the autonomous vehicle fleet through sales of battery-electric and plug in hybrid vehicles. Combining these vehicles with the already well-proven and easily scalable technology of vehicles that use trolley poles or a pantograph to draw power from the grid while in motion, allows policy makers to take a leadership role when required to supplement the emerging market for personal or corporately owned electric vehicles. Most world leaders with a future orientation recognize a global energy crisis of enormous proportions where electric transport has a crucial role. In an under-publicized speech, British Prime Minister Gordon Brown already sees in electrification of transportation both a business opportunity for the UK and a more general solution to living in a post-oil world.
Advances in battery and ultracapacitor technology and manufacturing technologies are inevitable but the timing of their widespread adoption will substantially lag demand for them. Insistent demands by concerned consumers that Tesla Motors or another manufacturer create in the next few years a battery electric vehicle that is
The secretive Texas company EEStor is claiming that it will produce a revolutionary electric energy storage device, though it has continued to push out the timeline for commercialization.
priced at the level of gasoline powered economy cars are as of today wishful thinking. Batteries, however, will remain far more advanced and widely available than hydrogen and hydrogen fuel cells. Though hydrogen may have a future role, the focus on hydrogen by policymakers and automakers has functioned as a distraction from electric technology, the clear next generation in powering transport. Unfortunately commercial interests that a decade ago wanted to delay the emergence of electric transport, held onto hydrogen as the next thing to, seemingly, prolong the era of profitable petroleum powered vehicles.
The tripartite strategy allows policy makers to respond more immediately to the demand for oil alternatives by implementing programs that build out grid-powered transportation infrastructure for freight and passenger traffic using “off the shelf” technologies. Policymakers can create incentive packages, issue bonds or levy taxes for the necessary work to keep America moving. Incentives for private companies to invest in electric transport infrastructure can be designed. Beyond its easy scalability requiring few to no technical advances, powering vehicles directly from the grid is highly efficient because power is used directly after generation rather than diminished a fraction through charging and discharging a battery. Using that extra fraction of power for the convenience of storage is well worth it in many contexts but is not necessary for all transport tasks.
Building Electrified Rights of Way
There are now a number of plans emerging on a national, continental and local level to electrify transportation in part. Alan Drake, a contributor to a number of energy and transport websites, has devised a plan to electrify 36,000 miles of vital freight
Most of America's rail freight is moved by diesel locomotives on non-electrified tracks; with an electrified train system the energy of trains braking could be captured for use by other trains.
railways in the US and increase the speed of rail freight; higher speed freight allows an easier commingling of freight and passenger traffic on the rails. A high speed (electric) passenger rail line is now being proposed in California to link San Diego and Los Angeles with San Francisco and Sacramento. Public transit advocates have created visions of how various cities could be transformed with expanded subway or light rail networks, many of which unfortunately require larger per mile investments than simply electrifying existing rails and roadways.
Building of new heavy and lighter rail infrastructure is inevitable but a rapid start to electrification will work with existing rights of way, tracks and roadways. As an exercise, imagine your own local area or, as the America 2050 plan calls it your larger “megaregion” and visualize where are the highest traffic areas where we could rapidly transfer people and freight from petroleum dependent to electric transport.
An Example: Moving the Northern California Megaregion off of Oil
In the America 2050 plan, there are two California Megaregions with the Northern shown here in green, the Southern in ochre.
The Northern California megaregion, in which I live, extends over a huge square of land centered on one side on San Francisco, San Jose and Oakland, approximately 250 180 miles per side extending into northern Nevada. The size of this region and the sprawl within it has been enabled by cheap petroleum transport energy despite its foundations in the pre-oil era. On the other hand, Northern California is better prepared than many areas of the Western and Midwestern US to transition to an electricity-based transport system because of existing investments in concentrated freight and passenger transport and some denser core and corridor areas of residence and business. The transition will be more challenging for the “Arizona Sun Corridor”, the “Piedmont Atlantic” and the “Florida” megaregions with their still greater sprawl and dispersion of economic activity.
An inventory of existing electric transport assets in the Northern California megaregion yields the following:
- the highly successful regional BART (Bay Area Rapid Transit) system, a 3rd-rail driven commuter rail system for which there have been several expansion plans, that are now again made more likely.
- Three light rail systems in the City of San Francisco, in the City of Sacramento and in the Santa Clara Valley around San Jose.
- A trolleybus system in the city of San Francisco
- The venerable San Francisco cable car
These electric transport assets are largely focused at the traditional center of the area San Francisco and are currently designed for passengers and their hand-carried freight. There are however multiple existing non-electrified rail assets in the region for passengers and freight running on freight companies rights of way. These include:
- the Caltrain commuter train on the Union Pacific right of way from San Francisco to San Jose and Gilroy
- the Capitol Corridor regional trains from Oakland to Sacramento
- the ACE train from San Jose to Stockton
- Amtrak service linking major centers in the megaregion as well as tying the megaregion to the Southern California and Cascadia megaregions to the north and south.
- Freight rail service on the many active railways on both major trunk and also spur lines throughout the region serving industrial and commercial customers.
Electrifying many of these existing routes would further insulate Northern California from dependence upon oil markets. In addtion, the region’s Metropolitan Transportation Commission’s rail plan, announced in 2007, recommends track expansion in addition to that needed by the statewide High Speed Rail proposal. In this plan are efforts to separate out where possible freight and passenger rail to allow each to proceed on its own most efficient schedule. Grade separating rail in densely populated areas is an additional expense that with higher traffic becomes an enormous boost in the quality of life and quality of rail service. While as of last year these recommendations may have seemed like pie in the sky to some, events in the oil markets have made such efforts an ever higher priority.
Less expensive per mile and more rapidly deployed are electrified roadway systems,
While the wealthy and tech-friendly Santa Clara Valley around San Jose will probably lead the nation in the adoption of private electric cars, building 5 or 6 new electrified rights of way for trolleybus or light rail will insulate the operations of the Valley's public transit authority from the oil markets.
now used with trolleybuses but capable of accommodating dual mode electric trucks outfitted with trolley poles or pantographs. Focusing on passenger traffic, the Northern California megaregion can supplement the railed systems of travel by building at least one electrified lane for trolleybus traffic on major thoroughfares, connecting with rail transport resources. A listing of these routes for the Northern California megaregion would extend perhaps to 50 major street routes of 10 to 30 miles in length and would supplement existing rail infrastructure. These trolleybus routes can either be operated as Bus Rapid Transit in a segregated lane or can commingle with other traffic, part of the flexible appeal of trolleybuses. In addition trolleybuses can operate in residential neighborhoods in the evening and at night without disturbing residents. Almost any bus route could be electrified, though it makes sense to start with the highest traffic routes.
Once any strategy of electrification is recognized as the primary means of powering ground transport, blue ribbon panels of technical, financial and transport analysts can be convened to determine what mix of rail and roadway electrification systems might best serve to fulfill our current and anticipated future transport needs. One of the priorities of the next Administration ought to be a study of long-distance roadway electrification versus the building out of electrified railway networks inclusive of the expense of improvement of existing railbeds and building new sets of parallel tracks in high traffic areas. Another factor involved in these studies would be the anticipated rate of improvement in mobile energy storage technologies and their manufacture.
PRT advocates believe that people will prefer traveling in private pods routed automatically to their selected destination station on the PRT network
Another electrified alternative is Personal Rapid Transit or PRT. Still an emerging concept, PRT may use either electrified rights of way or batteries in an automated system of electric “taxis” on guideways. A large PRT system would be unthinkable without advanced information technology and highly reliable automated controls. PRT advocates claim an overall lower environmental impact for their technology over traditional mass transit. PRT critics believe that no PRT system will be able to handle rush hour traffic volumes. The first true PRT system is being built for use at London’s Heathrow airport.
The grouping of shared and rent-able forms of transport around the main transport arteries and stations will further increase the utility and efficiency of the transport system. In France, there are free shared bicycle services clustered around transport hubs (Velib) and there are also proposals to introduce a shared electric car service with similar depots scattered around French cities. Van pool and ride-sharing services can grow based on determining where are the centers of transport demand and need.
Electrification of high traffic rights of way is one of the top priorities for both national security and energy security. Alan Drake, in focusing on the already-profitable freight business and rights of way, proposes that minimal federal incentives can stimulate large private investment in electrifying tracks owned by the large railway companies. Publicly owned rails or roadways would require debt financing or budgeting for construction directly from tax revenues for local, state or federal governments.
Promoting Battery and Plug-In Hybrid Electric Vehicles
Governments can play a key role in promoting electric vehicles by buying electric vehicles en masse and helping develop battery electric and plug-in hybrid electric fleets and fleet systems. With current technology, battery electric trucks could already function as postal delivery trucks. Beyond the gasoline hybrid, government service vehicles should be mandated to be electric or PHEV/EREVs with few exceptions. As is proposed in a recent bill in Congress, government can offer tax incentives or rebates to individuals and corporations for buying individual or fleets of electric vehicles. Government can also provide the test bed for developing quick-charge and battery swap systems, especially with fleet vehicles.
Public trickle charge locations at 110/220 volts, quick-charge stations at 480volts and battery exchange infrastructure are another area where local, state and national policy can make a difference. The standardization of public charge plugs, for instance, will allow electric vehicle manufacturers to make vehicles with a higher value to the end consumer, by allowing any vehicle to charge at any public charging station. Government and industry may also need to standardize the battery pack-to-vehicle interface to allow interoperability between more battery packs and more electric vehicles with battery pack exchange capability. Low-interest loans may also enable electric utilities and property owners to install an electric account-linked or pay-per-charge vehicle charging infrastructure of the near future in multifamily dwellings and paid parking structures.
Aviation, Marine and Special Use Fuels
The energy density (the energy content to weight ratio) and energy storage capacity of liquid hydrocarbons will remain for the foreseeable future vital for ships, aviation, remote environments and applications where the substantial heat byproduct of an internal combustion engine is desirable. In these contexts, petroleum products will continue to be dominant until we have developed ways to produce bio- or synthetic fuels that do not substantially interrupt food supplies, exhaust water supplies, or endanger the fertility of soils. Luckily, our use of petroleum as a transport fuel is driven five to one by on-land use, so we will reduce our petroleum demand and our greenhouse gas emissions by transitioning to the Renewable Electron Economy as rapidly as possible.
Concentrated and Smarter Settlement Patterns
"Peak Oilers" predict with steep rises in oil prices that suburbia will depopulate and collapse.
Those who have long predicted a rapid escalation in oil prices with severe social and economic effects, when and if they turn to advocating solutions, suggest that ultimately a post-oil society will have a stronger community focus than the anomie of suburban and widely dispersed rural settlements. James Howard Kunstler, who envisions the collapse of suburbia after a catastrophic rise in oil prices, advocates for what might be called a new urbanism or smart growth, where people live in more tightly concentrated but humanely designed cities and towns.
There is however a contradictory current within the same group which suggests that people will need to become more self-reliant, growing their own food, preparing to become more self-sufficient autonomous units that do not require petroleum-based transportation to live. Such a current would suggest that people would use land in a more distributed manner, allowing for larger garden plots around living spaces perhaps leading to an new survivalist agrarianism.
The two contrasting scenarios proposed are based on two different notions of what is ultimately a more resource and energy efficient way to live: more concentrated settlement is built around more efficient consumption while somewhat more distributed settlement suggests that production and consumption should co-exist in the same space. It is unknown the degree to which one or the other of these visions will predominate in the near and medium-term futures.
The tripartite approach to electrifying transport concentrates some transport tasks along main electrified rights of way while leaving open the degree to which people and the machines they operate can range off of the grid using batteries or liquid fuels. Demand for transport and goods traffic along these main corridors will remain high even in times of crisis or in a theoretically more dispersed population of part-time farmers. Neither more efficient consumption nor a commingling of consumption and production is necessarily favored. I have explored in one installment of my series on the Renewable Electron Economy the possibility for farmers to use electricity to do many farming tasks that are now petroleum dependent.
In any case, it is premature to predict massive internal migrations and collapse of whole economies as oil prices continue to climb, especially if these three paths towards electrifying land transportation are pursued aggressively and effectively by government and industry in the next few years. Additionally short-term measures to increase the efficiency of our transport system as outlined above can be implemented rapidly by a combination of public agencies and private companies that recognize the opportunity to provide people with more effective and more efficient transport choices even in an era of more expensive energy.
4 More Climate Saving Technologies April 13, 2008
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Renewable Energy.Tags: Climate Protection, Geoexchange, Geothermal Power, Global Warming Solutions, Ground Source Heat Pumps, HVDC, hydroelectricity, Transmission
7 comments
I realize I overlooked in my last post some technologies that will also play a major role in cutting our GHG emissions. This is an oversight on my part. I am not claiming that these 4 additional technologies will lead to more overall GHG reductions if we fully deploy the 20 listed in the first post (I arrived at a figure of approximately 93.7% reductions over 2000 emissions) but they deepen the choices and reiterate the contention of many in the anti-global warming movement that exploratory research is nice but not necessary to cut emissions substantially. More importantly, technologies already exist or will emerge, so the original list is not meant to be exhaustive or final.
Geothermal electric power – “Heat farming” from the heat of earth’s crust and mantle. currently geothermal electric power is restricted to certain hot zones such as Iceland, parts of the western US, Italy and Australia, but an emerging technology called EGS (enhanced geothermal systems) which drills holes deep into the the heat of the lower bedrock will allow geothermal to extend its range to almost any location on earth. Advocates of EGS are asking for $1 billion of research into this technology but additionally, regulatory incentives will drive drillers, currently concentrating on oil drilling to participate with EGS plant developers. (>4% GHG reduction)
Hydroelectricity/Pumped Storage – While the building of hydroelectric dams played a key role in galvanizing the early environmental movement and still provoke strong pro and con feelings, the emergence of global warming as one of the main concerns for the well being of planetary eco-systems has raised the profile of hydroelectricity. Some are unwilling to consider hydroelectricity at all as an option but this fundamentalist position must be reconsidered in light of newer technologies that are more conservative of river environments. Existing dams without hydroelectric facilities can be made productive of power, while new small and medium size dams can be constructed in ways that interfere much less than traditional large hydroelectric dams. Hydroelectricity is one of the higher quality sources of electricity and can integrate well with intermittent renewables. Pumped storage is one of the key storage media other than CSP with thermal storage that can balance energy production with energy demand. (>5% GHG reduction)
Ground Source Heat Pumps – Ground source heat pumps are an existing technology that cut heating and cooling costs by 60 to 75%. Expensive as a retrofit, the additional cost of trenching or bore holes can be reduced when installed with the foundation during new construction. (>6% GHG reduction)
High Voltage Transmission - A much overlooked and sometimes hated part of our landscape, the direct current version (HVDC/HVAC) is a more compact, more environmentally friendly, and more efficient version. No GHG emissions are directly attributable to HVDC/HVAC but transmission will allow widely dispersed renewable electricity generators to coordinate and supply electric demand. Transmission allows the most of the top renewable generators to serve electricity demand. (enables >59% GHG reduction with renewable generators)
These can all be described as existing or emerging. However, the EGS system still requires a good deal of rather capital intensive development, so EGS gives partial support to the contention of the “Dangerous Assumptions” authors that research is required for carbon neutral technologies to become available, however it also highlights the need for a market incentive to drive the development and deployment of that particular technology. A temporary premium price per kWh for an EGS plant would, for instance, array market forces behind the development and eventual deployment of EGS plants. This is however, among the 24 technologies in this list one of the few in which R&D is a pre-requisite to deployment.
20 Technologies to Save the Climate: Are Breakthroughs Mandatory or Icing on the Cake? April 9, 2008
Posted by Michael Hoexter in Efficiency/Conservation, Energy Policy, Green Building, Green Marketing, Green Transport, Renewable Energy, Sustainable Thinking.Tags: Commercialization, Energy Policy, IPCC, Renewable Energy, Research and Development, Technology
1 comment so far
(With this post I’m skipping a little ahead of my series on the Renewable Electron Economy but policy debates are starting to heat up as we head into the election year. )
A recent controversy has sprung up around the criticisms of the UN’s Intergovernmental Panel on Climate Change (IPCC) by a group of fairly well-known analysts, who say the IPCC has severely underestimated the need for heavy investment in basic technology research to solve the climate crisis. In a piece called “Dangerous Assumptions” written for Nature magazine’s Commentary section, Roger Pielke Jr, Tom Wigley and Christopher Green say that “enormous advances in energy technology” will be needed to stabilize carbon levels in the atmosphere at somewhere near the target 450 ppm or below. This contradicts assertions by the Nobel Prize winning body of climate scientists that in fact we already have or soon will have the technology we need to reduce our carbon emissions to acceptable levels. Al Gore, who is due to expand upon his ideas for global warming solutions in upcoming months, has reiterated recently that we already have the technology that we need to meet the climate challenge.
In response to the Nature piece, Joe Romm, on his blog, Climate Progress, has written that Pielke Jr et al. are an example of a species that he calls “delayer-1000s” by which he means that these are people who would allow carbon dioxide concentrations to slide up to 1000 ppm or more than double current levels. Romm, a former Deputy Sec’y of Energy in the Clinton Administration, whose current mission is to popularize climate science and solutions to climate change is not averse to painting a vivid picture of what might happen under various climate scenarios. One would expect no less from the author of “Hell and High Water”, a view of what climate change has in store for us.
Romm has pointed out that Pielke and the physicist Marty Hoffert who has staked out a similar position are both affiliated with the Breakthrough Institute. As readers of this blog may remember, the Breakthrough Institute is the brainchild of controversial critics of the environmental movement, Michael Shellenberger and Ted Nordhaus who declared the “Death of Environmentalism” a few years ago. Romm has been critical of Shellenberger and Nordhaus for their propensity to attack the environmental movement and to advocate, long term research projects in ways that at least divert attention from taking immediate action on global warming. Their institute, after all, is named “BreakThrough” the point being they want to inspire government to invest heavily in long-range scientific research that they hope might lead to those technological breakthroughs.
The Big Question: Do We Have the Technology?
All personal disputes aside, the main question that is dividing Romm, Gore, the IPCC on the one hand and Pielke et. al. Hoffert, Shellenberger & Nordhaus and perhaps Google in its RE<C form on the other, is whether we, with our current technology or technologies that are in the research pipeline, can build essentially carbon neutral societies the world over within a period of approximately three to four decades. Three decades is a long time, so the notion that technology might be “frozen” at the current state of development is perhaps the first red herring that this controversy generates; within three decades new technologies will emerge in some form or other whether we have a policy for it or not. No one is suggesting that we NOT invest in research and development, though we are starting in the US at a point where much can be improved upon in the area of clean technology research.
The “Dangerous Assumption” that these critics of the IPCC are decrying is that a normal rate of technological improvement is inadequate to the task of cutting GHGs by 80% or more. Their favored policy recommendation is to have the (US) government invest massively in long-range research projects that contrasts with their critics’ emphasis on policies that speed the deployment of existing technologies. They make little positive mention of policy tools like carbon pricing or feed-in tariffs that are designed to speed the development of existing technology. The implication is that those who suggest policy drivers for deploying current technology are naïve and operating under a “dangerous assumption”. Another favored criticism that Shellenberger and Nordhaus tend to level at their opponents is that their opponents are acting/talking like the (tired, ineffective) environmental movement. Romm believes that those who support the Breakthrough concept are devaluing if not opposing immediate policy recommendations that target current technologies and current technology use.
What then is the current set of technologies that we already have or can expect to have within the next decade? I will give my account below of current and emerging technologies and list what their advantages are for reducing carbon emissions. The analysis below is represented in chart form <== or here. Following the Renewable Electron Economy scenario that I believe has the highest probability of success, I have ordered these in approximately descending order of overall carbon emissions reduction potential. Note that the order of these is approximately the reverse of the famous Vattenfall-McKinsey chart which lists the least expensive options first; here the keystone technologies of a completely carbon neutral economy come first, some of which are currently more expensive. (I am italicizing technologies in this list that overlap with previous listings in terms of their GHG reduction potential; I am putting those technologies that can act as carbon sinks in bold):
1) Combination renewable energy power plants – emerging technology that coordinates intermittent and periodic renewable electric generators (wind, wave, tidal, and solar photovoltaic or CSP without storage) with dispatchable renewables (biomass, hydroelectric, CSP with storage, and pumped hydroelectric) to serve electric load. (59% GHG reduction potential)
2) Concentrating solar thermal power (CSP) with 6 to 18 hours of thermal storage – existing and emerging technology can reduce coal use for electricity generation by 85%-90% in areas up to 2500 miles away from the world’s deserts. (45% GHG reduction potential)
3) Photovoltaic cells – existing and emerging technology that is deployable in distributed energy, remote settings. (25% GHG reduction potential)
4) Forest preservation, restoration and expansion – existing and emerging technology to fix atmospheric and newly emitted carbon dioxide; reduce emissions from deforestation. (>18.2% GHG reduction potential)
5) Wind turbines – existing technology that may be able to cover as much as 33% of electricity demand with appropriate grid integration. (15% GHG reduction potential)
6) Modularized construction of buildings with ultra-high efficiency/Passivhaus concept – reduction of 85% of space conditioning energy use. (12% GHG reduction potential)
7) Electrification of Rails and Roadways – Rail and road electrification is an existing technology that can be extended to more large vehicle traffic in regional and intercity routes (11% GHG reduction potential)
8 ) Biomass pyrolysis and biocoal burial – an emerging technology that generates a bio-oil and carbon rich “bio-coal” or charcoal that when buried fixes carbon for hundreds of years. Reduces production of energy from biomass in exchange for fixing carbon. Biocoal can act as a soil enrichment. (>10% GHG Reduction potential)
9) Batteries/Ultracapacitors with 200 Wh/kg energy density or greater/variety of chemistries – allow 90% of local and regional traffic to be electrified reducing transport energy use by 70% or greater (>9% GHG Reduction potential)
10) Biomass-fired power plants- an existing technology that with carbon capture could act as a carbon sink; dispatchable and can back up wind or solar generators. Require policy regulation to ensure non-competition with agriculture for food. (6% GHG Reduction potential)
11) Vehicle Recharge Infrastructure – existing infrastructure in detached houses, emerging in public areas; emerging quick charge infrastructure. Enables battery electric vehicles or plug in hybrids to extend all-battery range indefinitely (4% GHG Reduction potential)
12) Voluntary Veganism – vegans eat no animal products so if people go on a vegan diet for 5 days/week or more we would reduce a massive amount of GHGs. The figures from WRI I used attribute 5.1% GHGs to livestock but I have seen figures as high as 18% of global GHGs are attributable to livestock. Numerous environmental benefits are attributable to plant-only agriculture though there is and will be massive resistance to forgoing meat and milk products (including from me). I quite like meat and cheese though I did have a pretty tasty vegan meal at Café Gratitude not too long ago; this technology can be further developed by chefs and by consumers. (>4% GHG reduction)
13) High efficiency lighting/daylighting – High efficiency fluorescent lighting, daylighting, tubular skylights are here, LEDs and fiber optic daylighting are emerging cutting >75% of lighting energy over incandescents (4% GHG reduction potential)
14) Sustainable biofuels – Cellulosic ethanol is an emerging technology – because of our current liquid fuels paradigm much touted and over-hyped. To be sustainable require strict policy oversight or voluntary certification – in the Renewable Electron Economy would fuel air and sea transport along with bio-oil. (3% GHG reduction potential)
15) Wave and tidal power – Existing and emerging RE generation technologies (3% GHG reduction potential)
16) Electric Arc Heating/Biocoal – Electric arc furnaces already are used in melting steel scrap and a similar principle or biomass substitutes could be used in high temperature industrial applications in place of coal and natural gas (2% GHG reduction potential)
17) Magnetic Induction Heating – Existing technology allows for hyperefficient stovetop cooking with electricity; future applications may allow for more efficient electric ovens. (1.75% GHG reduction potential)
18) Syngas waste to energy – Generation of a syngas from municipal waste avoids the formation of dioxins and other toxins; emerging technology can reduce waste by 95% entirely avoiding methane emissions (substituting less potent carbon dioxide) and reducing the need for landfill space except for separated toxic metals, producing dispatchable electricity from the combustion of the syngas in a gas turbine (>1.5% GHG reduction potential).
19) Methane harvest from sewage – capturing methane to generate power or fuel vehicles from sewage (CH4 to CO2) (>1.0% GHG reduction potential)
20) Enhanced telecommunication technologies/holographic presence – reducing business travel by 75% – extension of Internet/videoconferencing capabilities. (>0.5% GHG reduction potential).
These by the standards of 2008 exciting but in no way futuristic technologies deployed on a global scale have the potential to reduce our GHG emissions by at least 93.7% with little effect on end user “utility”. The most significant change in end use, and perhaps the most challenging, is the voluntary (or incentivized) reduction in the use of animal products.
The conclusion then to be derived from this analysis is that we do not NEED radical new technologies to reduce GHGs very substantially, especially if we follow the Renewable Electron Economy model and are willing to invest as a government AND a society in clean technology. Such innovations might be nice to reduce costs or ease the transition but they are not necessary.
Therefore it would seem that Pielke et al. and their supporters’ assertions would seem to be more lobbying for gee-whiz science projects rather than scientific analysis.
Potential Criticisms of This Model
1) I am using year 2000 data that may be no longer reflective of current emissions or future trends.
a. Response: These technologies are mostly highly scaleable so that more or less of them could be deployed in response to changes in GHG emissions profile
2) Veganism is a substantial sacrifice for most inhabitants of the developed and rapidly developing worlds
a. Response: If this is a planetary emergency, some sacrifice of personal utility may eventually seem like a rational response. Even if people choose a reduced meat/dairy diet, which will have substantial GHG benefits, they will not lose the taste experience or dietary benefits of these foods. This remains by no means a high tech or inaccessible solution and culinary giants might even improve the technology through inventive use of vegan ingredients.
3) The numbers I am using for GHG reductions are guesstimates.
a. Response: Each of these technologies substantially reduces GHGs in each of the major acknowledged GHG sectors; most can be scaled up or down with fairly wide latitude, even accounting for a 30% increase in global population.
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Do These Roads Diverge?
If what I have laid out here is anywhere close to being a realistic assessment of existing and emerging technologies, the course of action is pretty obvious: get as many of these technologies in deployment as soon as possible. Pricing may be higher in the beginning, which could be shouldered by richer countries but then economies of scale in manufacture will bring many or all of these within reach of some of the rapidly developing countries that are the focus of concern.
I believe the strongest policy combination is some form of carbon pricing with the addition of performance based incentives, such as feed in tariffs to promote key technologies more rapidly than the politically acceptable carbon price will allow.
Research and development is not excluded from any policy recommendation but the emphasis on technology investment almost to the exclusion of contemporary policy drivers is a curious phenomenon. Research and development, be it at current levels or at levels 50 or 100 times as high, is a traditional role for the US government and is no departure from business as usual.
Will an Emphasis on R&D Lead to Delay?
Rather than resort to name-calling, there is a very serious issue here that has been lent extra urgency by the publicity lent to Pielke’s/Breakthrough’s position through its publication in the prestigious Nature journal.
As I state above, Breakthrough/Pielke are packaging their position as heterodox and daring when in fact it is a simple restatement of a very common position that the US government has occupied throughout the last half century: the funder of basic and applied research in the sciences and energy. Maybe the AMOUNTS that Pielke/Breakthrough are asking for are larger and are applied to a new theme (solutions to climate change) but the format and relationship of government to constituency are the same.
The folk at Nature may have felt that as it is a plea for more money for research it is a natural fit for their science journal. However, they may not have been in a position to evaluate how uninspired the Pielke piece is in terms of its actual policy recommendations.
Nordhaus and Shellenberger, the founders of BreakThrough, seem to be laboring under the belief that their advocacy of more money for research is a break from the past and perhaps it is a break from THEIR past. They have made a great deal of their differences of opinion with leaders of the environmental movement and, in a way, are more likely to discount anything that agrees with the consensus of that movement. Thus they are able to occasionally get publicity from the wider media world as they “turn state’s evidence” against their former colleagues. In a way, Joe Romm, by attacking Nordhaus and Shellenberger is continuing to play into this game.
Whatever their motivation, if someone were to consult Nordhaus and Shellenberger as policy experts, they would get the distinct sense that all the action is with R&D investment and carbon focused policy instruments are at best dull necessities.
If a policymaker came away with that impression, I believe there would be a lost opportunity to create policy drivers that incentivize accelerated deployment of existing technologies.
Apollo Project or Liberty Ships?
Furthermore, there is a tiresome formula into which the S&N recommendations as well as the public face of Google’s RE<C fall into: that technology advances are about what might be called ecstatic gee-whiz moments of wonder, of dramatic breakthroughs. The microelectronics and the biotechnology revolutions have, I believe, spoiled the public, investors and commentators into thinking that innovations occur in an accelerating crescendo. A study of renewable energy flux, along with its synchronization and storage problems leads us to the conclusion that the creation of large industrial scale operations to build large numbers of renewable generators and install them more efficiently will be a much bigger portion of the renewable energy revolution than the micro-world of molecules and atoms. Yes, there are admirable and elegant designs and inventions that have already occurred and that will occur in the future, but there will also need to be large scale deployment and manufacturing in a way that hasn’t been seen here since the second world war.
In a way, the beguiling high-tech metaphor of the Apollo Project, which Nordhaus, Shellenberger and others drew upon in founding the Apollo Alliance, is a little misleading. Apollo rockets were one or two of a kind, though obviously some of the technologies were later commercialized in larger numbers. What we are talking about more is the far more profound and economically stimulative wartime mobilization of WWII where one had both a Manhattan project going on and the broad participation of the population in accelerated wartime production. In fact, as impressive as some of the achievements of the Apollo project were, the manufacturing techniques that enabled shipyard workers to build a complete Liberty Ship, on average in 42 days through pre-fabricated assembly of ship parts will be just as or even more crucial than more glamorous inventions of the past half century.
To drive this scale of production, there will not only need to be government involvement but also stimulation of private actors through regulation and market incentives to move this process forward. To push all of the action off on R&D and government spending is not to grasp the need to drive change, in the most effective and forward-thinking way, in the entire economy.
With adequate information about the dangers AND opportunities we face both economically and ecologically, more and more people will realize that cleaner and better energy and energy services will need to be paid for. While Romm seems to shy away from embracing the fundamental break with what I call the Cheap Energy Contract, Nordhaus and Shellenberger are still obeisant to the assumption that people in the US will not be willing to pay more for energy in order that it become both a source of employment and profit for them and their neighbors and free us from some of the geopolitical problems we have blundered into.
I believe this attitude of remaining entirely supine in front of our own wishes for cheap stuff is unsustainable for us as an economy; eventually we will need to be willing to or required to pay each other for our work and pay for a cleaner environment rather than continue to pay more and more for our fossil fuel addiction.
Exchange with Phil Timmons Re: the Electric Farm April 7, 2008
Posted by Michael Hoexter in Efficiency/Conservation, Renewable Energy, Sustainable Thinking.Tags: Agricultural Equipment, batteries, Electric Farm, Mobile Energy Storage, Phil Timmons, tractors
1 comment so far
I wanted to alert readers of this blog to an interesting exchange I had a few weeks back with Phil Timmons on my posts on the Electric Farm from last November. I appreciate Phil’s expertise in this area and willingness to think out of the box about the practical equipment requirements that face farmers (and miners). Given the ongoing price spikes in food and oil, I am hoping that the Electric Farm concept gets some more attention. If interest grows among farmers, engineers and tinkerers we might be able to get more minds working on the problem of developing a sustainable but machine-assisted agriculture, where farmers can either generate their own energy for machines on the farm or draw energy from a increasingly clean grid.
I’m reposting the exchange below:
Phil Timmons:
Hello,
Read this story after finding a link to the earlier first part. Thought the first was an excellent overview.
I am an EE working on utility scale RE projects, and from prior life experience, electric farming is of particular interest.
Just as observation — it seems this follow-on story falls in the Electric Vehicle “battery trap.”
Why the assumption that it would be needed or desired to operate the equipment on batteries? That tends to be very lossy — first in charging the battery, and then in recovery of the energy from the battery.
Electricity tends to be dynamic and likes to be used as it is generated. Have you began any studies into non-battery farming applications, or have any interest in that?
Thanks for your efforts, I think you are doing very good work.
By: Phil Timmons on March 11, 2008
at 7:40 pm
Phil,
The point of the Electric Farm concept and the Renewable Electron Economy idea is that you are using batteries to power devices for a number of reasons outlined below. The Electric Farm wouldn’t be electric without batteries, though I suppose that a PHEV or multifuel tractor are suitable transitional vehicles.
The 15% round-trip loss of batteries charging and discharging I don’t consider to be very significant in comparison to the energy losses associated with competing fuel cycles. With biofuels or petrodiesel you lose 70% of your energy to heat in the engine which doesn’t even include the highly inefficient process of turning sunlight into biofuels via plants (as well as all the other issues associated therewith) which contains perhaps 0.5% of the original solar energy in it. The hydrogen fuel cycle loses 65-75% of the original energy of the renewable electricity and hydrogen has its storage problems as well.
So if we are to create a sustainable, affordable, mechanized agriculture, we will either need to prioritize and subsidize the use of petroleum in ag until the point when batteries and RE comes down a lot in price, or certain brave souls and companies will start pioneering the use of electric drive tractors fueled by renewable electricity. It will help if there emerges a discipline called “agro-ergonomy” which studies and reduces the amount of mechanical work per unit crop output, thereby reducing the amount of mechanical energy required to produce food (no- and low-till organic ag would be starts). It could be that we become so clever in our use of mechanical energy to farm and biofuels progress to the point where we won’t need much of them to cultivate food. But you will still be able to do many times more work with less of an ecological footprint with electric tractors and renewably generated electricity, stored in batteries that will be more energy dense than the current crop.
By: Michael Hoexter on March 11, 2008
at 9:57 pm
Phil Timmons:
I guess I am still lost on the MUST-HAVE-BATTERIES dogma. (or bio-fuel for that matter).
Sorry, but I did not see any reasoned connection between converting available electric power to battery stored power and then converting it back to electric power just to use the electric power that was present to begin with. Does doing that make sense to you?
Not only are the losses (already mentioned present), but the start-up costs are much higher for including those batteries, as well as long term maintenance and replacement as they are limited life equipment.
Like I said, I think you started hard on the right track with citing the local generation of renewable energy to power equipment. That is great. But to not just use the power directly while it is there does not make sense. To borrow an old farming phrase — Make hay while the sun shines.
Your targeted numbers — 250 kW for example — is an excellent farm scaled application. (btw, while the exact math may say that is over 300 hp, in practice we do not budget much more than 1 hp per kW.) 250 kW / 250 HP is a reasonable output from an acre of solar thermal electric generation — which already is cheaper than coal — not talking PV, but rather solar thermal.
So sitting one acre aside can run all the power consumed by 100’s of acres. If this is roof mounted, a couple of large barns, as well as housing and garages can be placed under this.
So that 250 HP can easily run irrigation during solar prime time, as well as most other equipment during other times.
Maybe the battery thinking is from being sort of stuck on a model of equipment that goes round and round and back and forth across a field? As you may know center pivots (irrigation) and linear irrigation already do that with electric drive and no batteries.
Further, large scale electric equipment does not need batteries by virtue of its size, either. I have worked with 1500 hp draglines (large shovel cranes that could eat a whole farm in a day) and these use no batteries — just cord connections from line power.
While I can see the use of some battery vehicles to zip hither and yon (have put an forklift drive motor on a small tractor, myself, and run it both by cord and batteries), to do the mass grunt work with batteries is not real sensible to me when straight up direct power (DC or AC) is available.
Maybe this is a concept conversion thing we are stuck on? Sort of like a farmer of old looking over a modern tractor to figure out where the hay and oats go in? (still thinking in “horse” mode).
Electric farming would not need or probably even want to have equipment that was designed and optimized around petrol in a post-oil world, any more than one would want or need a harness or whip to drive a tractor.
But if you are interested in doing an exploratory essay on methods for profitable post-oil, all electric farming without batteries, I would be happy to help.
By: Phil Timmons on March 12, 2008
at 6:22 am
Phil,
Thank you for your out of the box thinking. It may very well be that electric farming implements or vehicles will be able to remain plugged in as they do their work. I have seen pictures of old Soviet farm equipment that uses trolleybus style poles on overhead wires.
Staying plugged in may be an option for some farms or types of farming but in other settings it may soon require too much electrical infrastructure built around some fields.
Also, I think commercial farmers would have a lot to say about the inability to use energy when the sun ISN’T shining. Our agriculture has evolved both under animal and now fossil fuel energy inputs to be able to work at night or under poor light conditions. At harvest or planting time, some farmers will work around the clock. There are so many timing issues involved that I wouldn’t want to dictate to farmers when they would have to use energy. There are going to be a lot of crop losses if farmers can’t use their machines whenever they need them.
Batteries (or a grid connection if the implements /vehicles can remain plugged in) will be well worth the investment. As I point out in my essay, the extra weight of batteries can be used as ballast for pulling heavy loads: now tractor operators need to add weights when they need extra traction. Plus having a stack of batteries connected to the grid will give farmers an additional source of income to help stabilize the grid (selling ancillary services) or store cheap nighttime wind power from neighboring wind farms. So, while I can see that you engaging in a thought experiment, my sense of the future indicates lots of electric energy storage. On the other hand, experimenting with different task requirements with different energy requirements will continue to occur, perhaps minimizing the need for storage.
So, I don’t see the emphasis on batteries as a lack of imagination or a fixation: the functionality they offer is well worth the 10-15% charge-discharge energy loss they represent.
Still, you may well yet invent the grid-tied farming systems of the future, I would assume in close collaboration with commercial farmers!
By: Michael Hoexter on March 13, 2008
at 6:06 am
Phil Timmons responds:
Hey Michael, interesting discussion, thanks.
Used to do commercial farming back a life-time ago. Corn, wheat and soybeans.
Can’t remotely take credit for any invention in this regard, just observation of another industry that tends to use non-battery electric power day or night, in 24 hour operations, year around, with all sorts of weather (far more demanding than farming).
Mining.
Typically mining operation have far more material moved, are far more remote than most farms, and much larger footprints. (all challenges to full electric power). But the typical mine operation uses almost all electric — either self-grid or commercial grid operations.
Electric mine cars trains for underground, dragline shovels above ground, and conveyors and electric trains above ground. Even the typical large Terex dump trucks (diesel) that we tend to associate in popular culture with mining (sort of like tractors are associated with farming) are used less and less, and now only until the conveyor(s) (all electric) get built.
Like I was mentioning above, a solar thermal electric system (and again NOT PV) of about one acre produces power to more than cover the heaviest use by most farming applications. Most of the year would just be sending power up to the grid. During times of heavy operation or off-hours the farm can draw from the grid. But when looking at electric power sales versus electric power costs, that should be a net money maker for the farm, as well.
=============
I know the following is not your issue, but for other readers, I probably need to jump into some myth busting at this point . . .
There is no electricity shortage in the US. At most there is a time of use issue. Only during times of “peak” use do we come close to using what is available. Peak in the market I design for – Texas and the West – only happens in the middle of Summer, in the middle to late afternoon. Everyone has on the Air Conditioning. And that is it. We turn on all the Gas plants and hydro in addition to the base load coal and nuke plants and run them into early evening while the day cools down.
Most of the time, there is so much base-load power available that entire coal plants are shut down and taken off line for rebuilds in the Spring and Fall, when electric power use drops.
The sham “need to build more nukes” you hear from folks with no knowledge of the power industry is ALL marketing hype being mindless repeated. The proposals for building of new nukes are that it would 80% government funding. Not only costs more, but takes years and years to build. This is a huge welfare program for the contractors/builders. Costs more to operate and then leaves a mess to clean up, as well. Build, operate and then clean up – all losses.
There are lots (and LOTS) of surplus electricity on the grid. Base load power is cheap to buy and there are large discounts to use it off-peak. Solar thermal electricity produces best during the peak use – the methods discussed here would put MORE power on the grid during peak and only consume from the grid during off peak.
With that out of the way . . . back towards what drives all the tractor and energy use on the typical crop farm . . .
================
Creation of the seedbed.
The need for a good seed bed is what drives the use of a plow. A mold board plow flips the dirt like a slow motion wave breaking along a sea shore. This places weeds and organics at the bottom of the wave to compost, and fresh dirt to the top. For tmi — http://en.wikipedia.org/wiki/Plow
The entire mold-board plow system is what created the need for the high pulling power for the high traction and high power tractor. Often a tractor is described in draw bar horse power – which is essentially its pulling power. An interesting aside — the “traction” portion of the word Tractor is now what we now totally associate with farming just as somewhere around 100 years ago, draft horses would have been totally associated with pulling plows (hence “horse power”).
The rest of the seedbed creation — After the mold board plow turns over the soil, a disk harrow is pulled over it to break up the clumps, and then a wide “drag” is pulled to smooth the soil to plant seeds. So that is typically four passes across the field just to get the seeds in the ground.
The “lite” version uses what is called a chisel plow that is a one pass plow to break up the top of the soil, followed by a drag and then planting. Again that is covered in the wiki article.
But in al that, it is the high traction / pulling power tractor is needed for plowing that is driving the methods – which are modeled after the horse methods they replaced. The other implements are made wider and wider to attempt to efficiently use all that horse power available.
There are a couple of alternatives to using this method to create a seedbed. Like you mentioned the Soviets did have some creativity. Even using surplus Army tanks (high power and high traction) to pull plows.
One alternative to tractors I have seen from the Soviet era was a cable pulling method that would drag a plow across a field to a stationary winch. The winch was moved down the edge of the field, so the motive device was required to only be mobile in one dimension. A present day electric grid application of this may be to run a power line down the edge of the field to power the winch and pick the power from the line as the winch moved along.
Current US farming does something like the cable pull method in a system called “travelers” for irrigation. An anchored cable is pulled onto a winch on a mobile wagon-mounted irrigation water gun. The power of the pumped water pulls the cable onto the wagon, moving it across the field while dragging a large water hose behind. These are often electric (grid) powered via a motor and pump which provides the water pressure that makes the whole system work.
A method that I am looking at for total electric (non battery) creation of seed bed is use of tiller/cultivator methods – and yes, this is typical small garden method, but there are commercial farm tractor methods of using tillers – here is an example — http://www.riouxinc.com/BushHogTiller.htm
As these require mostly rotational power – and not traction power, like a plow – they are well suited to be turned by electric motors. As they churn and pass through the soil they create a seed bed that is suitable for planting, and a planter can pass along behind in the same travel. This does the entire 4 pass (plow, disk, drag and plant) in one pass.
I am looking at mounting large scale electric motor powered tillers on a frame like a center pivot, with electric motor wheels – again like a center pivot. So all this could be done while using no batteries, hydrocarbon based fuel, nor bio-fuel, just electric line power, either produced at the site or from the grid, with the power coming down the frame.
After planting comes fertilizing, irrigation and cultivating (mechanical removal of weeds) if desired. As you are probably familiar center pivots and other style irrigators, you can probably see that using liquid fertilizer can directly deliver fertilizer to the field without use of petrol, bio-fuel or batteries. Again just line power driving the pump and drive wheels.
Mechanical cultivation is one area I can see use of small battery power tractors such as you are discussing, however, with current planting methods and weed herbicides, this is not often done in commodity grain crops anymore.
And then finally getting the crop out of the field. The largest challenge with a combine/harvester is tire floatation – or bearing of the weight — on the soft field surface – not really a power or traction issue. Adding battery weight to this would not be a good thing.
It is often the weight of the grain being collected on board that bumps the limits of design capacity. A 300 bushel grain tank holds 9 tons. (300 bu. X 60 lbs/bu = 18,000 lbs = 9 tons).
I recall one Thanksgiving Day some years ago — working 23 hours straight as a Canadian blizzard was bearing down on us. Only stopping to refuel and grab some turkey and keep going. What forced the situation were wet fields and the weight of the combine would sink and get stuck in the mud. We had to wait until the ground froze and then beat the snow. Finished the last hour as snow was blowing in about horizontal in a 40 mph wind.
But what drove all that fun was the equipment and the methods used – which is still about the same today — 25 years later.
A method I am pondering for this is again using the center pivot style frame with small grain heads (the front end of a combine) attached, feeding a cylinder (the part of the combine that breaks the grain from the shell or cob) and then vacuum/blowing the grain back to a central collection point down the structural pipe that would normally be used to provide water out along the irrigator. Again, no petrol, bio-fuels, or batteries required. This keeps the weight of the collected grain back at central storage area, rather than being hauled around the field.
If folks really really wanted to use the conventional tractor methods, I have considered some options for that as well – one could take an old Steiger and put a 200 to 400 HP industrial electric motor in it in place of the diesel and have a super tractor for about 1/5 the cost of a new diesel. Run it from dragline cable – like the mine shovels discussed above, and off you go. That would last for decades and save its cost many times over in the (non) use of fuel.
