Climate Change

“Half the cuts in greenhouse gas emissions needed to make the world safe can be achieved at a net profit to the global economy, a study has found.”  That’s how this article from today’s “Financial Times” leads.  (The threshold for “safe” is the 550 ppm of carbon dioxide in the atmosphere that the IPCC posits is the limit.  That’s about double the amount we had prior to the Industrial Revolution.)  Ceres, a coalition of institutional investors, commissioned the report by the McKinsey Global Institute.   Ceres’s president is quoted in the article:  “Efficiency is the fastest, cheapest way to reduce greenhouse gases and could bring large profits to the global economy.”  This graphic from the Swedish energy group, Vattenfall, underscores her contention.

You can access the full report online from the MGI - Curbing Global Energy Demand Growth: The Energy Productivity Opportunity.  You’ll find not only the report there, but a slideshow as well and a pretty good video from a recent event in which New Mexico Governor Bill Richardson, former US Secretary of Energy and recent presidential aspirant, is the keynote speaker and Diana Farrell, director of the MGI, presents the findings from their report.  There’s a good panel of experts discussing this after Farrell’s presentation.

The report asserts that “targeted policies can overcome the policy distortions and market imperfections that are currently acting as barriers to capturing higher levels of energy productivity.”  They go on to say “The obstacles that thwart improvements in energy productivity include information gaps, market-distorting subsidies, an inadequate financing infrastructure, and misaligned incentives. To overcome such barriers, policy makers must terminate distorted policies, make the price and use of energy more transparent, create new market-clearing and financing mechanisms, and selectively implement demand-side energy policies (such as new building codes and appliance standards) while also encouraging demand-side innovation by companies.”  In the category of “market-distorting subsidies” they might include the billions in dollars in tax breaks currently be enjoyed by the oil and gas industry and the eye-popping subsidies being given to ethanol production. 

This is hugely useful information and policy makers everywhere should embrace it.  The new energy law from Congress does incorporate a good number of important initiatives that the MGI report endorses.  Mile to go, though, miles to go ……

New Fund – Agence France-Presse reports G7 calls for investment to fight climate change.  “The United States, Japan and Britain have proposed setting up a multilateral fund involving the World Bank that would administer global aid and investment to help nations fight slash greenhouse gas emissions blamed for global warming.”  This follows on the announcement in January that I reported on here in which Japanese PM Fukuda made a $10 billion commitment and said:  “A carbon-free society can no longer be a mere fantasy.”  His finance minister and those from the U.K. and the U.S. had an op-ed in the “Financial Times” last week in which they called for “a fund to ensure the widespread adoption of clean technologies in the developing world.”  An eminently practical view is guiding this initiative.  “If energy consumption continues along the current path in developing countries,” the ministers wrote, “future development will have a greater impact on our climate. We have no choice but to help developing countries reduce the carbon footprint of development and make their economies climate change resilient.” 

Renewable Energy Tax Credits – I wrote on February 7 below about the failure of the Senate to include a vital tax credit program in the economic stimulus bill.  Well it appears that this issue is far from dead on The Hill.  In this story from Reuters, I, for one, am delighted to learn that Nancy Pelosi and other House Democratic leaders want to revive the legislation that would extend the existing credits past the end of this year and, at the same time, rescind the billions of dollars that the oil industry is receiving now, in an era of unprecedented profits for them. The “NY Times” unequivocally endorsed the idea of renewing the credits in this editorial from this past Sunday.  See No Surprises (Unfortunately) – Part Deux from December for more on the tax issue.

Congressional Investigation – Meanwhile, in another part of the House, and further to the story of the investigation I mentioned here early in January, House Oversight and Government Reform Committee Chairman Henry Waxman has issued subpoenas.  The “L.A. Times” reports here that Waxman “…wants the EPA to hand over documents related to its rejection of California’s request to impose stricter emission standards.”  Henry Waxman is a bulldog, make no mistake.  He’s also a hugely smart member of Congress and doesn’t go off half cocked.  Oh yeah, and he’s a passionate environmentalist. 

Economic Stimulus – In the U.S. Senate yesterday, they tried to get a vote on the economic stimulus package.  See this from the A.P.  The measure couldn’t get the votes necessary for cloture – the magic 60 necessary for a bill to be fully considered on the Senate floor.

What’s this got to do with climate change you ask?  Good question.  One of the missing components from the energy legislation signed into law in December was the extension of tax credits beyond 2008 for the renewable energy industries.  The Senate Finance Committee heeded the call and included a renewal in the economic stimulus package that was sent to the full Senate.  The American Wind Energy Association has been trumpeting the need for this and has voiced its concern for 75,000 U.S. jobs that would be at risk “…solely as a result of the decline in wind energy investment.”  They further calculate that tens of thousands of additional jobs will be threatened because of similar slowdowns in other renewable energy industries.  See their statement from January 30 lauding the action of the Finance Committee and their release from February 4 of a report calculating the potential for loss of  “116,000 U.S. jobs and nearly $19 billion in U.S. investment” in just one year if the tax credits are not renewed.  I’d say this fits in with the economic stimulus package, wouldn’t you?

But, surprise, surprise, the Senate Republican leadership pulled out all the stops and killed the package.  To be fair, the target was not the tax credit extension per se, but based on past experience such as keeping the Renewable Portfolio Standard out of the energy bill as well as keeping the rescission of tax breaks for the oil & gas industry and renewable tax credits out, I’d say the Republican leadership was perfectly happy to have the tax credits go down with the ship.  (For further background, see Senate Energy Update and any number of other posts from December on the legislation.) 

Green Energy Industry – The “NY Times” had a good story recently on how the industry’s doing in California.  The short answer:  very well, thank you.  The boom is  “…the product of billions of dollars in investment and mountains of enthusiasm.”  I’ve written about this boom any number of times here, including how venture capital is seeking projects all over the place.  One of the students in my climate change class was opining that there are no good environmental stories.  I told her and will continue to tell you that there are hundreds of good stories, with more every day. 

Trillions for Renewables! – Trillion has a nice ring to it, don’t you think?  An article in the “S.F. Chronicle” – Trillions likely to boost clean energy technology - Rising fuel costs, global warming spur investment – is about a new report from Cambridge Energy Research Associates, a consultancy headed by Daniel Yergin, a longtime energy expert who has done some very solid work over the years.  Yergin, quoted in the article, says:  “We are seeing a major shift in public opinion.  This is providing a vital impetus that is moving clean technology across the great divide of cost, proven results, scale and maturity that has separated it from markets served by mainstream technologies.”  There is, according to CERA, a worldwide “bubbling” of clean energy activity.  CERA’s press release on the study, “Crossing the Divide: The Future of Clean Energy,” quotes Robert LaCount, head of CERA’s Climate Change and Clean Energy Group.  “The rapidly advancing new paradigms of climate change, energy security, and policy implementation and cooperation among the United States, the European Union, China and others will produce a broad range of opportunities, risks and pitfalls as the modern energy industry increasingly moves to adopt clean technologies that will be part of the alternative, low-carbon pathway to the energy future.” 

Pinch me.  Am I dreaming?

And one has to wonder how soon will the people so desperately trying in Congress and elsewhere to block this kind of progress be swept away by history?  Not soon enough for me.

Insurance Losses – I’ve written about the insurance industry’s concerns about climate change several times before – see “Insurance Industry” here for instance.  See also the webpage on climate change for Lloyd’s of London.

Here’s an article from “Forbes” that hits the point home further.  “Natural disasters wrought by climate change have a staggering price tag, and it’s growing.”  The story cites a report from Munich Re, the world’s second-largest reinsurer. They have a comprehensive accounting of the past year and losses internationally.  In their release, Munich Re quotes one of their board members:  “All the facts indicate that losses caused by weather-related natural catastrophes will continue to rise. As a leading reinsurer, we are ready to deal with this. Ultimately, however, it is society as a whole which bears the cost – in the form of higher insurance premiums or infrastructure repairs financed by taxes. That is why speedy international action is needed. In addition, climate protection can bring huge economic opportunities, thanks to new technologies and increased energy efficiency.” Opportunity – that’s a word that I continue to love.

Important fact to remember:  You don’t get more hard-nosed when it comes to the bottom line than these folks.  It doesn’t hurt to keep the bottom line in mind while we keep pushing for progress.

Wind Power – Here are two reports worth noting, the first echoing what I reported about China’s burgeoning renewables manufacturing sector in the last post below.  The head of the Global Wind Energy Council (GWEC) told Reuters here:  “We’d expect that the domestic Chinese manufacturers will have an annual production capacity of about 10 gigawatts per year…by the end of 2009.” 

Meanwhile, German Company to Build Massive Wind Farm in Australia is the story from the German news service “DW-World.”  This complex will “…generate enough electricity for 400,000 homes and save greenhouse gas emissions of three million tons of carbon dioxide annually.” 

Global Climate Change and U.S. Law – That’s the title of a new book from the American Bar Assn.  The book “…provides comprehensive coverage of the country’s law as it relates to global climate change.”  It’s edited by Michael Gerrard, one of the most knowledgeable and experienced environmental lawyers in the country.  Here’s a blurb from Bruce Babbitt, former governor of Arizona, Interior Secretary under President Clinton, and a candidate for President himself in 1988.  (I had the chance to work on that campaign and, let me tell you, he would’ve been a fantastic President.)  But Babbitt’s review of the book:  “Creative legal engineering will be needed to address this problem. This book, written by many of the country’s leading environmental scholars and practitioners, provides an invaluable start on this process. It’s a must read for any serious lawyer or policymaker in the field.”  Go here at the ABA website for much more information about the book. 

Meanwhile, LexisNexis has opened an impressive Environmental Law & Climate Change Center.  There’s a very well done webinar available on “Evaluating Global Warming Impacts under NEPA and State Environmental Review Statutes,” lots of news items, and a cornucopia of resources on environmental law.

Andrew Revkin had a sobering article in the “NY Times” on Sunday - As China Goes, So Goes Global Warming.  First of all, with all of the hoopla surrounding the meetings in Bali, Revkin puts it nicely in perspective:  “The Bali achievement? Two more years of talks.”

More to the point, though, is the fact that we really do seem to be in a headlong rush towards the cliff internationally with our GHG emissions.  Revkin writes:  “Richard Richels, an economist at the Electric Power Research Institute, helped produce an ominous forecast: even if the established industrial powers turned off every power plant and car right now, unless there are changes in policy in poorer countries the concentration of carbon dioxide in the atmosphere could still reach 450 parts per million — a level deemed unacceptably dangerous by many scientists — by 2070. (If no one does anything, that threshold is reached in 2040.)” 

What that means is that if China, India, Brazil and the rest of the very rapidly industrializing world don’t find a better way, then we are in for the direst of futures.  As Ross Perot might say:  “End of story.” 

What’s the answer?  Answers – plural – is more likely.  Leapfrog technologies and technology transfer are two approaches.  I’ve mentioned “leapfrogging” here and here, and Revkin references the importance of R&D and “transferring” new technologies to developing economies:  “That is why several dozen top-flight climate and energy experts sent a letter this month to members of Congress and the presidential candidates seeking a tenfold rise in the federal budget for energy research, now about $3 billion a year.”  (See also Revkin’s terrific blog, DotEarth.)

I’ve also mentioned “price signals” such as the cap-and-trade approach and the carbon tax at numerous points along the way here.  See several posts at Business and Economics.

Here’s another take on this – and it seems very promising to me, unlettered as I may be as an economist – from Yale professor Judith Chevalier:  a tax on carbon consumption.  So, if you can’t get China or some other recalcitrant to restrain GHG emissions through some international protocol (to which the Bali meetings were supposed to point the way), then take it out of their exchequer by creating barriers to products created in high-GHG economies.  Reward the producers who make products that are more earth friendly.  Given the manufacturing output now, and the fact that some of these economies will be exporting bigger, higher value products, like cars, before long, then this is a serious incentive to lower their GHG output.  An economic policy analyst at one of the leading environmental organizations, Environmental Defense, called this a good idea.  See A Carbon Cap That Starts in Washington.  She references particularly the work of the Tyndall Centre for Climate Change Research in this regard.  This is a deep-thinking group of folks working on climate solutions. 

As of Friday, December 7, a day which will live in infamy because of the Senate Republicans’ unwillingness to overcome the undue influence of the special interests of the electric utility and oil & gas industries (in cahoots with three Democrats), the renewable portfolio standard of 15% and the tax revisions providing $21 billion in revenue to support renewables looked as if they would be stripped from the superb energy package that had come over from the House.  (See No Surprises (Unfortunately) below.)  A frustrated Rep. Rahm Emanuel said last week:  “As an amateur student of constitutional history and as a member of Congress, I have come to the conclusion that the Senate was a historic mistake.”  (I wrote about this at The Hill in July.)   

Now we hear that the Senate is indeed going to strip the 15% RPS but leave the tax provisions substantially intact.  See U.S. Senate Democrats to revive energy bill from the “Detroit Free Press” today.  Ranking Energy and Natural Resources Committee member, Pete Domenici, warns, however, that “It’s a wasted time and effort to pass a bill with $21 billion in taxes.  The president will say ‘I told you not to do it.’”

Here’s a little inside baseball on how the Senate came to abandon the RPS from a veteran energy beat reporter at “U.S. News & World Report.”

The U.S. government seems to be making a truly constructive move on climate change for a change.  The Office of the U.S. Trade Representative announced an agreement today between the U.S. and the E.U. proposing “…eliminating tariff and non-tariff barriers to environmental goods and services, particularly clean energy technologies.”  Trade Representative Susan Schwab will go to Bali to the Trade Ministers meeting there to recommend that the WTO incorporate this proposal.  According to “…data on environmental indicators available from the World Bank and World Resources Institute, countries that trade more environmental goods either have less pollution or consume energy more efficiently, or both.”

The proposal builds on the work of a new report from the World Bank:  International Trade and Climate Change: Economic, Legal, and Institutional Perspectives.  The report finds that “…a multilateral liberalization of renewable energy sources or an agreement to remove fossil fuel subsidies would equally serve climate change objectives.”

I would suggest the former idea is feasible, not the latter.  I don’t mean to suggest that we are entering the realm of political fantasy, at least as far as the United States goes, but if the WTO nations can’t find agreement on removing $300 billion in annual supports to the U.S., E.U., and Japan’s farmers – in order to free up a trillion dollars worth of agricultural output by the developing world – then how can anyone expect to close up the candy shop at the U.S. Treasury that the oil, gas and coal folks have been shopping from for many long years?  Witness the brouhaha that removing $16 billion in tax breaks the oil and gas industry are getting now – while oil’s selling at nearly $100 a barrel – then consider how easy it would be to knock even more of the subsidies they enjoy out of the picture.  (See “Denial Of Oil And Gas Tax Benefits” at the House of Representatives’ tax portion of the proposed congressional energy bill.  This good bit of legislation is under heavy fire, though, from the industry and the White House, so the Congressional leadership may jettison it.)

But more power to the U.S. and E.U. trade mandarins if they can, as the World Bank suggests, increase trade in climate and clean energy technologies an additional 7-14 percent annually by removing tariffs and non-tariff barriers.

Meanwhile, in what might be construed as a hopeful (but not necessarily realistic) headline, the “Environmental News Service” claims Fossil Fuels’ Free Ride Is Over.  The ENS reports that at the American Council On Renewable Energy’s fourth annual conference, participants all agreed that “the day of reckoning is long overdue” for a carbon price.  Conferees included a representative from British Petroleum, their Group VP for Alternative Energy.  She’s got a reasonable argument, but …. you can judge.  Go here for a number of the conferees’ presentations, including the one from the BP rep.

The Energy Bills – First, before we get to the reading opportunities, there are rumors in the blogosphere that Nancy Pelosi and Harry Reid are going to offer up the renewable portfolio standard and renewable tax credits as sacrificial lambs to the gods of fossil fuel and nuclear power.  See Bye, bye, Ms. Renewable Pie from the excellent “Grist Mill” and News Alert: If You Love Renewable Energy, It’s Time to Freak Out from the “Huffington Post.”  The American Wind Energy Assn. is so concerned that it’s sending out an action alert asking people to tell their Senators to keep these critical components of a progressive energy bill in! 

Pelosi has said publicly that she wants this legislation voted on soon.  See Pelosi to push for vote on energy bill from UPI.  As always, stay tuned.

World Energy Picture – The International Energy Agency issued their annual report this past week on the state of the world’s energy.  In the executive summary, we learn that demand for energy is continuing to rise steeply, driven in large part by the wildly burgeoning economies of India and China, and that “the world faces a fossil energy future to 2030.” 

The “Financial Times” has a really useful ongoing, “in-depth” section on energy security, and they covered the IEA story this week:  IEA sounds alarm over huge energy demands.  They also reported that the Asian energy focus shifts to renewables going “…well beyond the International Energy Agency’s expectations.”  Let’s hope so.

The “FT” – which I must say is an extraordinary news organization – has still more coverage of energy in this special report.  (You can register for a finite number of articles for free, or an unlimited amount for a fee – go here.)  The special report has over 20 articles on everything from wind to nukes, and covering areas from India, Russia and China to Venezuela and the Middle East. 

Tar Sands – The incomparable Betsy Kolbert has an article in this week’s “New Yorker,”  Unconventional Crude on Canada’s tar-sand boom.  Unfortunately, you actually have to buy this at the newstand.  Anything she writes is worth the cost of the magazine.  (If you have access to a library database and want to wait a few weeks, you’ll be able to get it there.)

Biofuels – Meanwhile, back at the “FT,” there was a compelling little op-ed by the director of the Center for International Development at Harvard, Ricardo Hausman, saying how “biofuels are set to transform the global economy.”  You can see his op-ed and sign up to ask him a question online this coming week if you go here.

“The Business of Green” – The “NY Times” had a special section this past week that has a number of great articles on, among other things,  a carbon tax versus cap-and-trade (something I’ve been covering here recently), nanoscience and energy, and nimbyism on nuclear waste. Finally, there’s also now a blog on the Business of Green from the “NYT’s” sister paper, the “International Herald Tribune,” and Dot Earth from the Times reporter, Andrew Revkin. 

(I referenced Revkin and his new blog in Important Miscellany, my post from Oct. 31.)

There’s lots and lots of great reading out there.  Set aside a couple of hours and settle in to catch up on some of this material.