Green Building to Reduce Global Warming

Let the Revolution Begin:

House Produces Mammoth Draft of a Bill to Reform Energy Policy

April 6, 2009
In a week in which President Obama at the London G-20 meeting drowned out all else in the media, a comprehensive draft of an energy bill quietly emerged in the House and was virtually ignored.      A 648-page “discussion draft” titled the American Clean Energy and Security (ACES) Act, it would mandate alternative fuel use, set efficiency standards, introduce a cap-and-trade mechanism and unleash a host of green initiatives.
     A collaboration between Energy and Environment Subcommittee Chair Ed Markey (D-MA) and House Energy and Commerce Committee Chair Henry Waxman (D-CA), its four parts encompass clean energy, energy efficiency, global warming pollution reduction and the support for the industries and workers who would bring about a transformed future.
     With a Democratically-controlled Congress and a President who has made energy reform one of his trinity of objectives, along with health and education, the draft portends that the nation may finally be poised to take action against foreign oil dependence and climate warming after eight lost years of obstruction and backsliding. Highlights:

On a rising curve starting in 2012, electric utilities will need to produce 25% of their output from renewable fuels by 2025.
Demonstration projects for carbon capture and sequestration (CCS) would be funded as an attempt to find a way for the continued use of the nation’s vast coal reserves in producing energy.
Provisions for modernizing the electricity grid, from new transmission lines needed for wind power at one end all the way into the home at the other, calling for appliances and lighting to be made with smart grid capabilities, heightened efficiency standards and cost benefit improvements.
A low-carbon fuel standard to foster cleaner transportation fuels, plus funding for car companies to retool for electrically powered autos.
A move to “harmonize” fuel efficiency standards so that auto manufacturers will not need to deal with different rules in different states such as California.
Support to states that adopt advanced building efficiency codes.
An attempt to “enlist” power and natural gas companies to spur reduced energy use by their customers — and prove that their persuasion is working, saving 15% and 10% respectively by 2020.
The Environmental Protection Administration is charged to enter into agreements to prevent international deforestation.

The Main Event: Cap-and-Trade      It is the program for reducing the emission of greenhouse gases that is the major step and which will be the most hotly debated. Title III of the draft calls for “a market-based program for reducing global warming pollution from electric utilities, oil companies, large industrial sources and other covered entities that collectively are responsible for 85% of U.S. global warming emissions”. These entities would need each year to acquire permits to pollute — called “allowances” — with the national allocation of permits declining every year. With 2005 emissions as the benchmark, the allocation of permits would decline 3% by 2012, 20% by 2020, 42% by 2030 and 83% by 2050.
     Allowances would be tradable — entities that cannot meet the targets could buy in the marketplace additional pollution rights from entities that do not need them. Beyond that, a company would have the option of increasing its allowances by obtaining “offsets”. Often cited as examples are payments to retire land from deforestation or funding for planting CO2-consuming trees on empty land. There is to be an annual limit of two billion tons of such offsets to be put out for bid, rewarded in an even split between domestic and foreign recipients.
     Further, anticipating years in which overall demand for allowances bids up their price to make the cost of electricity unaffordable to industry and consumers, there would each year be a “strategic reserve” of allowances that could be added to the auction pool for the purpose of deflating their cost.
     “Unlimited banking” would permit any entity to carry-forward unused allowances to any number of future years, as well as the right to borrow allowances from the year ahead.
     The draft does not spell out how allowances would be allocated — what percentage of a year’s total would be allotted free to entities and how many each covered entity would get, versus the percentage of allowances from one year to the next that would be auctioned. “This issue will be addressed through discussion among Committee members”.
Easing the Transition There’s no question that the auction program would increase costs that industries and consumers would need to pass on to customers, but on the other side of the ledger those same costs are a vast pool of auction revenue that would not only fund the bill’s many programs, but could be rebated to those customers. The draft doesn’t dwell on the specifics, saying only that “a consumer assistance section remains to be provided”.
     Manufacturers themselves would be eligible for rebates if the added costs of allowances put them at a price disadvantage versus foreign competitors. The President himself would be given the authority to require foreign producers and their importers to buy allowances to cover the pollution they have generated in manufacturing their products.
Republican Opposition      Republicans in Congress were quick to voice opposition. Energy and Commerce member Joe Barton (R-TX) said it was “ignorant of the daily economic reality faced by working people”. House Minority Leader John Boehner (R-OH) claimed it would "raise energy taxes in the midst of a serious recession." Senator Joe Lieberman (I-CT) echoed industry claims by saying that the pollution targets "impose too much of a burden”.
     All seemingly chose to be unaware of the intended rebate programs that would nullify those cost increases. Instead Boehner, Senate Minority Leader Mitch McConnell (R-KY), and a total of eleven Republicans (tallied by a website called the Progress Report) recited a talking point supplied by the National Republican Congressional Committee, saying that the bill would cause “a light-switch tax that would cost every household $3,128 a year”. The phrase derives from an MIT study whose author says the figure is “wrong in so many ways it’s hard to begin…10 times the correct estimate”, because the entire projected cost of allocations was simply divided by households, as if none of the costs would be paid by industry.
     Democrats are certain that the huge transition to new fuels, the restructuring of the grid, conversion to electric vehicles, and so forth, will create new industries and new jobs — 7.8 million by 2030 predicts the Union of Concerned Scientists.
     Others have argued, some Democrats among them, that cap-and-trade is too complex, requiring emission monitoring of thousands of entities, and that a straightforward carbon tax would be far simpler and subject to less tampering (a PlanetWatch debate on the two schemes is found here).
     Ultimately, it was Barton who stated clearly the divide between those who prefer business as usual to reform when he said that the bill would "save the planet by sacrificing the economy." In this view, mankind’s transitory problem with the world’s economy is all-important; the health of mankind’s only planet is secondary.       - Stephen Wilson

Reset and Start Over:

Energy Dept. Cancels Clean Coal Development

Four years into a project to develop the technologies needed to arrive at "clean coal" designs for the nation's electricity plants, the Department of Energy has pulled the plug, blaming higher cost projections as the reason.
     The 275-megawatt prototype plant was designed to convert coal into gas, strip and bury the mineral's carbon dioxide content, and then burn the gas to produce electricity. Called the FutureGen Alliance, the DOE had signed on to pick up 74% of its tab, with a consortium of 13 private utilities funding the rest.
     Six weeks ago, Mattoon, a town in downstate Illinois, had been selected for the site, edging out three other finalists, two of them from Texas. Senator Richard Durbin (D, IL) called the rug-pull a "cruel deception". Some Illinois congressmen, irate over the loss of jobs the project would bring to the state, expressed doubt that the plan would have been scrapped had Texas been chosen. As far as we know, none voiced concern for setbacks in developing ways to burn coal free of CO2 emissions.
     Cost estimates for the experimental plant had risen to $1.8 billion from $1 billion, but Michael Mudd, the head of the alliance, says all but $300 million is attributable to inflation. Moreover, the private utility consortium has said it would cover the non-inflation differential. And just two days before the cancellation, President Bush proposed a 25% budget increase for coal technology to $648 million in his State of the Union speech saying, "Let us find new technologies that can generate coal power while capturing carbon emissions". Was Cost the Real Reason?      These seeming contradictions raise questions of whether cost is the real culprit. The first of any complex technology
U.S. Dept. of Energy
Rendering of the plant to have been built at Mattoon, IL.

will assuredly cost more than its replicas, and a prototype yields invaluable lessons, so cost should not usually be the primary concern. Perhaps the real reason for cancellation was that the DOE, which has taken four years only now to reach the point of putting shovel to ground, recognized that it had fallen badly behind, and cost was made the face-saving scapegoat. Administration officials argued that the project was badly flawed and that the "easy" thing to do would have been to let it run into the administration, when its cancellation would have provided a chance for them to make political hay.
     Environmental groups that want to see an end to all coal-fired plants cheered the cancellation, in the belief that wind and solar can somehow provide for the nation's growing energy needs. We do not share that view. But if the U.S. is ever to reduce its oil addiction, it must explore every alternative, including how to make its inexhaustible coal reserves somehow usable.
Energy Shortages on the Way      Uncertainty over whether legislation regulating carbon emissions is likely and what form it may take has caused the utilities industry to forestall building some 50 plants in 20 states. Nationwide electricity shortages are just over  the horizon.
      Importantly, some recent developments offer hope that coal can be made into fuel without requiring complex and expensive "capture and sequestration" of CO2. The DoD, as earlier reported in our air force story, has a program, called CBTL, for taking coal to fuel, using biomass to absorb the CO2. It seems likely that if the "clean coal" question cannot be resolved — and soon — we can look forward to a nuclear future.
      - Stephen Wilson

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Red Ink vs. the Green Revolution:

Detours on the Road to the Energy Future?

Dec 12,'08
When he said “Give me chastity and continence, but not yet” more than a millennium ago, St. Augustine didn’t know he would be describing the West’s sudden reticence to solve the 21st Century’s energy problems.
     But his plea to God has cropped up repeatedly on editorial pages as nations rationalize postponing climate change action yet again, while they shift their attention to a global economic collapse. Money is as scarce as jobs and fuel is cheap again, so the Planet will just have to wait.
      President Obama, though, is so far sticking to his campaign promises. Assuming Congress goes along, he will press for enactment of a cap-and-trade program, but even that is postponed. In the wake of a month that saw a colossal as schools, sewer systems, mass transit and light rail, the electrical grid, and weatherizing buildings for efficient heating and cooling.
      Trouble is, the sale of pollution permits under the cap-and-trade framework of a climate bill was to have paid for the green revolution of alternatives to fossil fuels. Its delay means that Mr. Obama’s newly announced program adds nothing but cost to what is already projected to be a $1 trillion budget deficit next year.
      But will Congress go along? Lawmakers figure the job rescue plan could run from $400 billion to $700 billion and that on top of massive bailouts in the financial sector. Those opposed to the Obama plan say that infrastructure work takes too long to get started. Governors at their recent annual conference strongly disagreed: they say there is $136 billion in road, bridge, water projects; $8 billion in transit systems; and about $26 billion in retrofitting of public buildings for energy efficiency — all ready to go if only there were financing.
     As for the greening of America, skeptics are wary of putting the government in the role of picking which technologies should win, invoking President Jimmy Carter’s failed “synfuels” program in the late 70s, and, for that matter, Congress’s over-the-top corn ethanol mandate today. The Bush administration and conservative economists have opposed direct involvement because it supports development of technologies that cannot compete in a free market.
     This begs the question of what happens if we do nothing? The sudden plunge in oil from $144 a barrel to prices in the $30s has again dried up sales of green energy suppliers. The credit crisis is starving the entrepreneurial companies that are pioneering in alternative energy. Cheap fuel has caused even billionaire T. Boone Pickens to halt his giant wind farm project. If the U.S. never deals with stabilizing the price of energy — setting a minimum price for gasoline for example, and using the differential to fund alternatives — the tail of free market ideology will continue to wag the dog.
Later Could Be Never      Proponents argue that now is the ideal time to use government stimulants to make huge investments in green technology, both for use in this country and to build a dominate export industry — before it’s too late. They ask how are we going to compete with the rest of the world if we do not subsidize new technologies? How else could European companies have become world leaders in wind and solar power generation? Germany’s $240 billion renewable-energy industry expects by 2020 to employ more than their auto industry. By 2020 Britain intends to spend $100 billion on 7,000 wind machines. Already it is foreign companies taking over in America. Two Spanish companies – Iberdrola Renovables and EDP Renovaveis – are the second and third largest wind energy producers in the U.S. behind Florida Power and Light.
     Those who disagree with direct government intervention, but who do want action, favor imposing a price on pollution as the best way to push America toward a clean energy future, which is what cap-and-trade would do. Those against burdening the energy utilities say that it is no time to raise costs for the industry to pass on to consumers — except that part of the revenues anticipated under cap-and-trade would go to relieving energy costs for hard-pressed homeowners and small businesses. Passage of a cap-and-trade bill in Congress is anyone’s guess. The first attempt failed miserably this past June, a victim of irrelevant parliamentary maneuvering and huge cost projections. Republican chieftains flocked to Georgia to ensure a runoff win for Saxby Chambliss, giving them a 41st seat in the Senate, enough to thwart a vote on such a bill if they all band together.
Another Industry Slipping Away      And so, nothing is certain. Except that, thanks to prolonged inaction, the U.S. is already a second-tier country in clean energy development. Do we intend to give up altogether on manufacturing and the research that leads to it? Newt Gingrich called Obama’s plan “pious hope” in a Newsweek interview. Then, failing to note the contradiction, at the same time despaired that the U.S. has fallen behind. “There's a very high likelihood that the technology that goes around the world and earns royalties will be Chinese”.
     Ultimately, it is a national security issue, as Obama continually points out. He cites our repeating cycles of “shock and trance” — we forgot the shock of the 70s embargo and gas lines when the cheap gas of the 80s sent us into a trance, and now are rapidly forgetting the shock of $4.00 gasoline as prices drop below $2.00 a gallon. Once again, the hazardous reliance on foreign oil has receded from the headlines, yet oil prices will inexorably rise again owing to demand from the rising middle class in India and China. The need for economic stimulus coupled with the need to develop a new energy future presents a rare opportunity to combine the two, but will we take it?
     In a New York Times interview, Yvo de Boer, executive secretary of the U.N. Framework Convention of Climate Change, said, “I don’t think anyone will show the stupidity to focus on the short term and ignore the long-term issue because these decisions will be with us for 30 years.” We can only hope the United States doesn’t continue to prove him wrong.
      - Stephen Wilson

House Passes Climate Bill:

Will the U.S. Finally Do the Right Thing?

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insurmountable, sending President Obama to Copenhagen for the world global warming treaty deliberations in December with the same old empty portfolio of the Bush years.
     But let’s pretend for a moment that a blinding light appears above the Senate chambers and all assembled decide that they have been assigned God’s work to save Earth and the bill is passed as is. It calls for utilities to produce 20 percent of their electricity from renewables — wind, solar, geothermal, hydro — or by efficiency measures by 2020. It would distribute billions for the development of electric autos, clean coal research, and alternative fuels. But the tsunami that will make the biggest waves in the Senate is cap-and –trade. Its clampdown is meant to cut carbon dioxide emissions from electrical utilities and industries from about 7 billion metric tons per year today to 4 billion by 2035 and by 83% come 2050. (There are more particulars in our earlier article here)
     Standing in its path are senators who are persuaded that cap-and-trade will cost voters money and lose votes, even though the impartial Congressional Budget Office figures that to be $175 a year added to utility bills, and that not until 2020. Other senators are concerned that the bill will cost jobs as companies outsource to other countries to avoid added costs,

even though those added costs are thought to be minor, and who ignore other aspects of the bill that are intended to create whole new industries.


     But no sooner did the bill clear the House than President Obama made its passage more difficult in the Senate by coming out against the bill's trade sanctions whereby tariffs can be opposed on imports from countries that do nothing to control the emissions that produced them. That plays to the greatest concerns of the mid-country senators: that American goods will be made more expensive and jobs will be lost to other countries.
It makes the odds longer that the U.S. will finally decide to face the future. And if we don't, it’s now or never. As Al Gore said in his blog, “There is no backup plan”.       - Stephen Wilson

Whether from Congress or the EPA Some Form of Emission Control Finally Looks Likely

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say in what those rules will be. Which would be fine with Ms Jackson. Both the EPA and President Obama prefer that Congress take action rather than the executive branch operate by regulatory fiat. A Congressional imprimatur would represent a more public consensus and be less subject to inevitable and drawn out challenges in the courts.
     In support of a law suit brought by states and environmental groups to force the EPA to regulate greenhouse gases under the Clean Air Act, the Supreme Court in 2007 ordered the EPA to come up with an “endangerment finding”. That it did, determining that greenhouse gases are indeed injurious to the public and offering up a regulatory package to curb vehicle emissions. But the Bush White House would not acknowledge its existence by the device of literally refusing to open its e-mail.
     It had been a campaign pledge of ex-President Bush to regulate carbon emissions, but that was reversed immediately upon his taking office when Cheney took over the energy portfolio. The previous administration instead spent eight years relaxing the rules for power and coal companies, and a compliant Congress for six years never gave a thought to climate. (Symbolically, the 100-year-old power plant that heats Congress emits the most carbon dioxide of any Washington DC facility).
Make Up for Eight Lost Years      The Obama administration, in contrast, sprinted from the gate immediately after inauguration. One of the new president’s first acts was to instruct the EPA to allow California to set its own fuel efficiency standards, which the Bush camp had denied. About one-tenth of the Obama stimulus package — $80 billion — goes toward various programs to develop alternative energy sources, weatherproof homes, modernize the energy grid, and advance cleaner forms of transportation.
     But of vastly greater scope, Mr. Obama has repeatedly expressed his desire for Congress to pass a climate bill that includes control of greenhouse emissions by a cap-and-trade scheme. The leaders of both houses of Congress have agreed to bring cap-and-trade to the floor for a vote this year, and the House has already come up with a comprehensive bill that includes cap-and-trade and far more, as we have reported.
     Lobbyists for business and Republicans are strongly opposed, saying that this will put people out of work and raise costs, which will in turn make America’s products non-competitive in world markets, and impose hardships on the public in the midst of severe economic distress. House Republican leader from Ohio John Boehner is representative: “Let’s just be honest and call it a carbon tax that will increase taxes on all Americans who drive a car, who have a job, who turn on a light switch, pure and simple”.
Near-Sighted      It is a position that is continually preoccupied with business, with cost, with momentary concerns and predicaments, and is blindered against the damage that mankind is inflicting

on the planet that portends a potentially catastrophic future.
     As for those costs, PointCarbon, an energy consultancy, says that fuel prices would rise 6% and electricity by 7% at first, rising gradually thereafter.
     But Congressional members of either party from states where coal fuels the power plants are nevertheless lining up against such a bill, saying their constituents will be especially burdened. The coal-fired power plants in states such as Kentucky and Indiana will need to buy more pollution “allowances” than plants elsewhere that run on less-polluting natural gas or are nuclear. Industry executives from midwestern states say consumers could see rate hikes 40% higher. Considering that the added cost would at first come only from paying for rights to pollute, with that cost measured against the entire cost of plant operations, it is a claim that seems wildly exaggerated for the purpose of lining up public support for doing nothing.
New Habits = Cost Savings      Most or all of any household cost increase can be rolled back easily when America looks at its future electricity bill and decides to switch to efficient lighting, turn off the many household televisions when no one is watching, use ceiling fans on all but the hottest summer days, and kill the sleep states on their appliances by putting them on true on/off power strips.
     But, of course, the Obama administration and presumably Congress intend for some of the estimated $645 billion income from auctioning pollution “allowance” auctions over the next ten years to be returned to lower income consumers, eliminating the hardship of learning those new habits.
     And they argue that new restrictions won’t cost jobs; they will create jobs in the new green industries – reduced-cost solar, homefront-built wind machines, advances in battery technology -- that the United States desperately needs if it is not to be left far behind the rest of the world.
So, How Much, How Soon?      Note that our headline says “likely”. A chorus of those who would like to preserve the status quo are telling the president he is trying to accomplish too much too fast for 535 Senate and Congress members and their combined staffs of thousands to accomplish. There are signs that, because of the EPA stepping in as a stopgap, President Obama may choose to spend his political capital on health reform rather than cap-and-trade.
     The world gathers in Copenhagen in December to decide what should replace the Kyoto Protocol, which expires in 2012. A slowdown means that instead of going to Copenhagen in December boasting passage of a major climate bill, President Obama may instead have only a couple of EPA rulings in his pocket – what the Economist magazine calls “a fig leaf” – with the world once again despairing that the American democracy is just plain dysfunctional.
      - Stephen Wilson

Did a Math Error Really Kill the Nation’s Sole Sequestration Project?

March 24, 2009
FutureGen was the name of a pilot project that was to serve as a prototype for power plant sequestration of the carbon dioxide released by the burning of coal. But a year ago, four years into the project — the only one in the nation — the Bush administration cancelled it, saying that it would cost too much.
     Now comes a report to Congress by the Government Accountability Office that says the Energy Department made an entry level math error in that cost estimate. By using dollars that factored in expected inflation rather than constant dollars across the life of the project — a difference of $1.3 billion versus $1.8 billion — the Department made a $500 million mistake.
     The United States has a virtually unlimited supply of coal, the dirtiest of the fossil fuels. FutureGen was to have paved the technological path for future power plants to burn coal with the environmental consequences buried in the ground. Some of the cost of

FutureGen was to have come from foreign governments including China, which is building coal-burning power plants at a rapid clip, and whose involvement represented an important technology transfer to enlist China in the fight against global warming. Filling the void of the FutureGen cancellation? Nothing.
     Bart Gordon, a Democrat from Tennessee who chairs the House Science Committee that ordered up the report from the GAO, called it “math illiteracy on a grand scale”. But the committee staff found internal correspondence that showed that principals at the Bush Energy Department were looking for ways to kill the project, leading to suspicion that the math error was deliberate.
     The Obama Energy Department may renew the project, but the time lost by the previous administration is expected to retard progress in this technology by an estimated ten years. Our original story is here.
      - Stephen Wilson

Getting Real About the Energy Gamble

January 6,'09
With oil reserves getting tighter, resource-rich countries becoming more aggressive and climate change prompting louder and broader calls for action, President Barack Obama has promised to invest $150 billion "strategically" to build a clean energy future for America over the next 10 years — and create 5 million new jobs.
      Somehow, he needs to show the country how to hit a perfect trifecta of economy, ecology and employment — placing his bets quickly to build momentum, and overcoming political and bureaucratic machinery decades in the making.
      His vision compels and inspires: Millions of people working in sophisticated clean tech manufacturing plants. Harvesting, transporting and processing biofuel feedstock. Deploying grid-capable wind and solar farms. Building transmission infrastructure and smart-grid technology. Installing photovoltaic panels and insulation for homes, offices and schools.
      We need all of this, and we need it soon. But please, when Congress considers Obama's stimulus package,
can we make it happen without having to watch a bad rerun from the late 1970s?
      In the Carter era, $20 billion in taxpayer money (worth $66 billion today) went into research and development for synthetic fuels, energy performance for buildings, fuel cells and clean coal. Almost all of these projects, thanks largely to political interference, failed.
      Government can do many things well, but impersonating venture capitalists isn't one of them.
      The biggest lever moving the world of clean tech, rarely discussed with much candor, is government subsidies. Whether you call them reliable incentives or taxpayer dollars depends on whether you're getting them or not.
      Well-intended subsidies to release new technologies and industries amount to betting on horses before you know which end goes into the gate.
      Over the decades, we've learned that the government has a terrible track record picking winners with public money. In the 1980s, this practice was known as industrial policy, almost forgotten but now oddly coming back, like a sitcom too painful to watch.
      The Soviets tried industrial policy. Japan tried it. We tried it. It didn't work.
      Is it working now? At the risk of tipping over some sacred cows:
      Highly hyped and subsidized hydrogen cars rely on the most impractical fuel on the planet. Beyond the estimated $2 trillion we'd need to build production infrastructure and filling stations, hydrogen is the most co-dependent atom on Earth (it just hates to be alone). The energy needed to pry it from water, compress it into tanks and then convert it into electricity in a fuel cell wipes out 80 percent of its energy at the axle. That energy has to come from somewhere - like a coal-fired power plant. Not to mention the energy needed to truck hydrogen to filling stations. If they existed.
      Heavily subsidized corn ethanol generates far more carbon than it saves. Intended or not, almost all biofuel production leads to new land being cleared, directly or indirectly — which (whether scrubland or rain forest) releases 93 times the volume of greenhouse gas saved by fuel from that land, according to a Nature Conservancy scientist published in the journal Science.
      None of this is to suggest we can't do better. But hydrogen cars are 80 percent energy-inefficient and 100 percent unaffordable. And biofuels cause 93 times more global warming than gasoline. Take lines like that out of context, and they sound like Ronald Reagan calling ketchup a vegetable. But such is the state of our subsidized knowledge, as of now.
      How many times have we looked back, appalled by everything we thought we knew about energy and the environment?
      Right now, biofuels based on algae look promising. Plug-in electric hybrids look like winners. But please, Mr. President, don't invest our estimated $150 billion — or the $15 billion down payment proposed this
Continued next column


month — "strategically" (as the campaign suggested) into nascent clean and renewable-energy options.
      Set aggressive goals and support carefully regulated markets that respond to demand from real customers, and pricing from real providers — not to those engineered by lobbyists and legislators. That will create jobs that last.
      Your administration will make history in many ways. May it be the first to create an integrated energy and environmental strategy for America. Managed well, both of those priorities can support rather than impede economic growth and real job creation.

A Blueprint for the President
     Instead of placing sketchy bets with public money, the administration might consider a few suggestions:

Subsidies:
     To start leveling the field, phase out and eliminate subsidies and tax breaks for oil companies (begin there; coal comes later). The subsidies were established - and meant to be temporary — in an era when that industry needed help. Oil now gets larger tax incentives relative to its size than any other U.S. industry. It's time to roll them back, not escalate subsidies for alternative fuels in a multi-front bidding war.
     Don't shift subsidies from fossil fuels to the wide range of alternatives contending for market share. That will be impossibly politicized and ultimately ineffective. Argue from both principle and pragmatism to eliminate energy subsidies entirely. Investors will be relieved of a singular uncertainty ("Will we get this break next year?") that plagues decision-making, given continually moving prices.

Emissions:
     Set an aggressive but achievable national target capping carbon emissions for 2012, not just 2050. Then create a market for tradable permits for CO2 emissions, the way we did for sulfur dioxide in 1990. (Remember acid rain? It's gone.) Don't give those permits away to select industries like party favors, the way Europe initially did. A market spares government the impossibly political task of "pricing" carbon, which a carbon tax would require, and would demonstrate real progress quickly.

Gas prices:
     Put a tax floor under gas prices to keep them at around $3 per gallon, to keep the market focused on fuel efficiency, and provide means-tested vouchers for rural and low-income families. Use the resulting revenue to subsidize consumers for the purchase of alternative energy and efficiency measures that rise to a reasonable, verifiable standard. Rather than subsidizing one industry or technology over another, which burns public money and enriches lobbyists, let the customer decide.

Proceeds:
     Return the majority of those carbon permit and gas tax proceeds directly to families, to spend or save as they will, based on honest market signals. With just two exceptions:
     1. Invest in infrastructure, especially the power lines needed to get grid-capable electricity out of the southwestern deserts. The feds can handle this.
     2. For basic research and development, send block grants to the states to fund universities and research consortia. That's where the brains are, where ideas contend and where venture money is ever-vigilant. Make those federal dollars local. They'll figure it out.
     Let carefully regulated entrepreneurial markets — both consumer and commercial — take it from there.

- Mark D. Lange A former presidential speechwriter, Mark is a regular contrib- utor to the San Francisco Chronicle and the Christian Science Monitor

Will the Economic Monsoon Doom Renewables?

Oil at $144 a barrel hurt Americans who had bought the wrong sort of vehicle and were paying $100 to fill the tank, but it had the virtue of jump-starting a flurry of innovation as ventures sought to produce fuel from everything from algae to wood chips to bacteria. The media came up with a diet of what editors call “gee whiz” stories almost daily about yet another start-up aiming to produce a 100 mile per gallon car or capture the desert sun to power yet another 100,000 homes.
     For a moment there, last spring and early summer, Americans even began driving  less. The sale of hybrid autos spiked while consumers fled from SUVs, with 32% less moving off the lots than in 2007 when gasoline prices peaked.
Gone Is the Wind?
     What’s to happen to that progress, now that worldwide economies have swooned? Stock prices of green technology companies have plunged even further than other market segments; funding for energy start-ups has all but evaporated. Their prospects are now reeling from the financial meltdown, the credit squeeze and the drop to cheaper gasoline that hurts the economics of alternative fuels. Natural gas, too, has settled at a price that makes wind uneconomical for generating electricity, and makes solar “unfathomably expensive” as one financial firm executive put it.
     With trillions going to banks and insurance companies, will the mix of subsidies, mandates and venture capital essential to launching a new energy economy simply dry up? A tally of all U.S. government interventions puts a far more unfathomable $7.8 trillion on the table. True, only part of this consists of outright money transfers to financial institutions; the rest are guarantees that may never be needed. On top of that, the deficit for the coming year is forecast to be a trillion dollars. The Democrats’ pay-as-you-go that would have insisted on saving here what is to be spent there is long gone.
     So the question is whether there will be any money left for those government programs that were to reduce dependence on foreign oil and cut our carbon contribution to global warming. As they say to keep you from changing the channel…
The Answer May Surprise You       Even conservative economists are sounding Keynesian, saying that this is no time for an austerity program. Put another way, we are so deep in a hole, maybe it won’t make much of a difference if we dig further. It’s a question of what we are mining for.
     The next president needs to concentrate on jobs. If the government’s idea of a job program is to teach laid-off auto workers how to repair air conditioners, America will be left out in the cold. In our last “issue” we argued that Stimulus II should put the nation to work not just rebuilding its crumbling infrastructure but must “allocate resources to promote the development of new fuels and energy technology” [that article here]. But Stimulus II is a one-off (okay, two-off). What we argue here is that we should take that proposition much further.
     With so much manufacturing sent offshore, and a nation turned into shoppers rather than makers, it is time for a course correction. We have watched one after another industry slip away over recent decades – first electronics, then autos, even industries that we invented, such as the personal computer. Are we going to let that happen again?
Another Outsourced Industry?      We are already well along. Europe is far ahead of the U.S. in renewables. Germany already employs 250,000 in its $240 billion renewable energy sector; wind produces 19% of Denmark’s electricity and is home to Vestas, the world’s premier wind turbine company; Spain is buying our energy companies, and so on.
     Neither the marketplace nor the
Continued next column

Two for the Price of One:

Done Right, Stimulus Dollars Would Create Jobs and Save Energy Simultaneously

January 28,'09
The House first voted down a substitute stimulus package consisting entirely of still further tax cuts for individuals and businesses. Not a single Republican then voted for the bill that ultimately passed because it comprised only one-third tax cuts and two-thirds spending.
     Indirect as they are, economists disagree on the extent to which tax cuts create jobs. One thing is certain: tax cuts do nothing for the millions who have lost their jobs and have no income. Given that the economic crisis facing President Obama is the result of a failure of leadership at the national government, on Wall Street and in corporate America, shouldn’t the economic stimulus package of the new administration address the extreme income inequity in our society by creating new jobs, reducing the cost of living for working class Americans and reducing our dependency on fossil fuels?
     The hardest hit by the economic tsunami are working class families and the poor. And during this time of year, families in economic trouble are also faced with rising heating oil or natural gas prices, forcing them to cut expenditures on food or medical care, especially in the Midwest and Northeast. While there are government subsidies to reduce the cost of heating oil for low income families, they are inadequate.
     If lower middle class Americans own cars, they are usually older gas guzzlers which they cannot afford to replace. Since they have to commute further to their places of work, they are disproportionately affected by rising fuel prices or increasing fees for public transit, if available.
     Since the President not only wants to stimulate the economy but also put Americans back to work and reduce our dependence on fossil fuels, what matters most are the portions of the bill that will make middle and lower middle class homes more energy efficient. Not only would they eliminate the cost of heating subsidies, but they would provide jobs for semi-skilled workers employed by local contractors to install insulation. Installing attic or wall insulation, or retrofitting older homes with dual-glaze windows is not that complicated or expensive, and combined with automatic thermostats, will reduce fuel consumption and costs. Some states and public utilities already offer tax credits or rebates for installing more efficient appliances or insulation. A federal program would make these available to all Americans.
     Another cost-effective energy saver would be the replacement of 24/7 tank water heaters with on-demand, tankless models. Once properly insulated, and equipped with a more efficient hot water system, the consumption of heating fuel would decline not just for one year, but for the lifetime of the home, and would add value to the property. The benefits are also year-around since a well insulated house also stays cool on hot summer days and reduces the need for air conditioning. Homeowners can also install a radiant barrier, made out of perforated aluminum fabric, over the insulation in an attic, which reflects the heat back through the roof so that it does not enter the attic or living space. Ceiling fans, by circulating the air in a living area, also reduce the need for air conditioning.
     Although installing solar panels to generate electricity and heat water would provide long term benefits to owners and the society alike, the cost of panels and their installation is often beyond the income of working class families, and of course, they are more efficient in sunnier areas of the country. While subsidizing the development of more efficient solar and wind technology should be part of any economic stimulus and long term energy plan, the impact on energy costs will not be as immediate and the subsidies will probably go to large companies, not local installers or workers.
     Since much of the new energy technology is coming from small startups, however, a federal program to stimulate new technology should recognize and reward their contributions to improving energy efficiency. If we do not foster the development of renewable energy technology at home, we will end up importing it from Europe or Asia.
     While state and local governments should continue to subsidize solar and wind-powered energy systems for businesses and residences, and encourage the development of more fuel efficient cars, they could achieve more immediate economic, social and environmental benefits from making American homes more energy efficient. This also includes encouraging the purchase of more efficient appliances to further reduce home energy consumption, either through tax credits, or providing incentives to trade in old, inefficient appliances, or to replace old heating systems.
     Likewise, the tax credit for purchasing hybrids is a good idea, but the cost of most, including Toyota’s Prius, at $22,000 for a pre-owned Prius, is a substantial investment and beyond the disposal income of most working-class families. Meanwhile, the value of their old gas guzzlers depreciates while they have to spend a disproportionate amount of their monthly income to fuel their gas tanks. Why not subsidize or provide a credit for any vehicle which gets over 30 miles to the gallon, even if entirely gas fueled, while providing incentives to take older and unsafe cars off the road?
     Americans of all social classes voted for President Obama, but if he lives up to the promises of change and hope, his economic stimulus package should include proven methods of creating new jobs for working Americans, which studies show, spend most of their income in their communities, helping to stimulate local businesses. On the other hand, bailouts to financial institutions which behaved irresponsibly, or to large manufacturers which made poor decisions or moved their manufacturing offshore, will not address the problem of putting Americans back to work and stimulating local economies. Besides the decline in confidence and lack of capital, part of the economic crisis is also the result of an alarming income disparity in America, which any comprehensive stimulus package should address.
     The upgrading of our infrastructure is long overdue, and while better bridges, safer freeways, an improved electric grid and more extensive public transit are desperately needed, they will take time to design and complete, whereas improving the energy efficiency of homes, schools and public buildings by installing insulation or better heating systems could be jump-started immediately, thereby creating thousands of new jobs and businesses, reducing energy costs and making us less dependent on fossil fuels, while lowering carbon emissions.
      - Tony White

U.S. population will invent, develop or support clean technology unless there is an economic case. Some countries can do it by fiat, but apparently not ours, even under single party control.
     Therefore, the only way (so far devised) for charging everyone the cost inherent in their carbon footprint is cap-and-trade, under which gasoline will go back to $4 or more, and coal-fired plants will not survive without improvements. If the new administration recognizes this, and funds it, we could even benefit from this meltdown.
      President Obama plans to create five million new jobs by investing $150 billion over the next ten years “to catalyze private efforts to build a clean energy future”. The money would come from a cap-and-trade scheme imposed on the power industry, and here lies the potential for America to reconfigure its future.
     The first attempt at cap-and-trade went nowhere in the Senate last year, a victim of partisan squabbling over irrelevancies (judicial appointments, would you believe). That bill, Lieberman-Warner, would largely give away credits to the power industry now, and auction them in later years. (Each credit allows an electric utility a quantum of CO2 pollution it may need beyond its “cap” if its power plants are of the smoke-belching model; a modern plant may not need all of its allocation and can “trade” the excess for money to an unreconstructed, coal-fired leviathan).
     Obama’s intentions are different. He wants to auction carbon credits at the outset, rather than start the program by handing them out free. Giving credits away is a large reason Kyoto has not been successful in Europe; the free pollution permits never took on much value, meaning that their cost did not induce plants to cut pollution.
     True, any attempt to impose a new cost burden on an industry may be a tough sell in Congress owing to harsh economic times, even though richly deserved. For decades the power utilities have used subterfuge to avoid upgrades to plants, even after requirements of the Clean Air Act of 1970 were relaxed. The Clinton-era EPA was finally driven to sue 51 plants to force compliance, only to have the Bush administration drop the suits. Having avoided conversion costs for decades, the power companies can hardly now say they are being singled out.
Redistributing Energy Wealth      But the auction revenue of Obama’s plan is key. Cap-and-trade is a long term energy policy that would replace the fits and starts of subsidies like those for solar and wind that have sunset provisions preventing industry from anything resembling sensible planning. Guaranteed a steady flow of funding, America could put its innovative talents to work to develop non-polluting vehicles, higher capacity batteries, cellulosic ethanol methodology, a mix of non-petroleum fuels, cost-effective solar, an upgraded electrical grid to carry wind power, and the big money needed to attempt capturing power plan carbon.
     It’s not a new idea. Building this new industry was what Gore was advocating before he became a candidate in 2000 (and then inexplicably dropped the subject during his campaign). With energy prices drooping and an economy in deep decline, it may seem counter-intuitive, but this is precisely the moment when America should invest in alternative energy’s “all of the above” so as to steal a march on foreign competition and emerge stronger when the recession lifts. This is where PlanetWatch maintains the job emphasis should be directed. This is how America should re-start its economic engine. It holds out the promise of a broad new industry that would return manufacturing jobs to the U.S. and give the nation a technology that it could export to the world.
      - Stephen Wilson

Opportunity Knocks:

Another Stimulus Package, But Stimulating What?

While not many of us have billions to invest, billionaires like Warren Buffet are making large investments in blue chip firms, not only helping them with an infusion of capital but also receiving the most favorable terms. Whether you are interested in stocks or real estate, there are some great opportunities for investors who have money to spare, though no one knows when the market for equities or property will bottom out.
     The verdict is also not out on how the current financial crisis will affect government and private efforts to become more energy efficient and independent through the development of new and cleaner domestic sources of energy and the reduction of overall energy consumption and carbon emissions. From the business perspective, the major motivation for going green is reducing operating costs and having a reliable supply of energy. The public interest is served by a cleaner environment, cheaper domestic sources of energy, the elimination of our dependency on imported fuels, a reduction in an oversized military budget used to protect access to foreign oil sources, and perhaps, most importantly, curing our addiction to fossil fuels and reducing our contribution to global warming.
     Although investment in new renewable energy projects may increase in the United States this year over last year, thanks to projects already in the pipeline, there is a legitimate fear that there will be less venture capital available for new or ongoing projects because of the economic downturn. Already some wind energy and ethanol projects have been delayed due to a lack of fresh capital, while lower oil and gas prices, combined with a declining economy, may undermine the progress made over the last few years. The Obama administration will also face unprecedented budget deficits and will have to establish priorities for future spending. Why Not Energy Technology?      Since the Congress and Federal Reserve Chairman Bernanke are proposing an infusion of capital as an economic stimulus to create jobs, what better time or opportunity to allocate resources to promote the development of new fuels and energy technology, all of which would encourage investment in new or existing firms and create thousands of new jobs? Instead of importing solar panels from Japan or wind turbines from Germany or Denmark, American companies could be subsidized to research and develop new technologies for domestic use and export. This would help to revive the manufacturing sector and provide good, well-paying jobs in a distressed economy.
University of California Study      Case in point: A recent study by the University of California proves conclusively that the energy efficiency movement in California has already created thousands of new jobs. By concentrating on using in state energy sources, wealth has been kept in the state, thereby creating a multiplier effect in terms of job creation. After 30 years, these energy policies, the study concluded, have created 1.5 million new jobs with a payroll of over $45 million and saved consumers $56 billion in energy costs. By reducing energy expenditures, consumers spent their savings on other things, thereby spreading income and employment across the economy. While there have been job losses in other energy sectors, 50 new jobs have been created for every one lost.
     Although these figures are impressive, they assume a static condition of technology and overlook the potential of energy innovations, which will not only increase energy efficiency, but also have the potential of providing employment for many more workers. This approach also contrasts with the view of those economists who emphasize the costs of developing new technologies or sequestering carbon emissions from coal-burning plants, while ignoring the employment opportunities in a new and expanding economic sector.
Create the Jobs of the Future      Since the Democratic controlled Congress and the President are now in agreement that another economic stimulus package is needed to revive the economy and reduce unemployment, it makes sense to invest public funds in the research and development of new energy sources and technologies, as well as the construction of a more efficient electric grid system to transmit electricity from renewable, but remote, sources of power. Public and private investment in new energy sources and more energy-efficient cars, public transit, rail, and green homes in better planned communities will reduce our dependency on foreign sources, lower the cost of energy, stimulate the economy, create thousands of new jobs, and protect our planet.
     Since one of the major criticisms of the recently passed “rescue” plan was that it would compensate wealthy CEOs and their companies, an economic stimulus that fosters new companies in new industries would create jobs for working class Americans. Since employees of these companies will most likely spend their income and savings from reduced energy costs, the stimulus will be spread throughout the economy. If significant savings in energy are achieved through the new technology or conservation, the economy would receive an additional boost. Because recent increases in prices have been attributed to rising energy costs, reducing those costs would also slow inflation.
     Although the repair and modernization of our national infrastructure should also have the highest priority, investments in energy efficiency would probably have a greater immediate economic impact and provide more new jobs. Following eight years of inaction by the federal government, it could be part of a new long-term national energy policy that would also address the issue of reducing carbon emissions and slowing the rate of climate change.
     Hopefully, this massive energy project would not just hand out subsidies to large corporations, but would seek out promising startups or individual entrepreneurs who need funds to develop their ideas into viable energy-saving products or services. As most studies show and presidential candidates agree, small or medium size companies provide the bulk of new jobs every year and tend to be more innovative. Propping up Detroit might save some jobs in the short term, but given recent performances, it would not be an investment in our country’s future, unless directed specifically to the production of energy-efficient or emissions-free vehicles.
     Given our economic woes and deficits, there will be an inclination to proceed cautiously and postpone the adoption of a new aggressive energy strategy until the economy recovers, but this is also a rare opportunity when both parties and most national leaders agree that we need an economic stimulus which includes job creation. By investing in energy efficiency, we would not only create thousands of new jobs and stimulate the economy, we would also be protecting our country’s and the planet’s future.
- Tony White