Green Project

New York City -- Amidst all the turmoil in financial markets and diminished prospects for the real economy, it may seem that growth is over for a while.  No asset class looks strong.  However, one sector is continuing to boom around the world, if not the United States, namely the construction of infrastructure. In China, Spain, Switzerland and Latin America, countries are building the foundation for their future growth and prosperity. A fascinating article in the current New Yorker by my friend Burkhard Bilger on worms, the futuristic tunneling machines used to build subways and tunnels, provides a fascinating, under-the-surface tour of rail tunnels through the Alps, subway systems in Spain and China, power lines, roadways and other infrastructure remaking the global econnomy. There is only one sad note in this engaging article. The boom in infrastructure is largely passing the United States by.

As Martin Herrenknecht, the founder of Herrenknecht AG, the largest tunneler in the world, likes to point out, for every skscraper that goes up in Malaysia or Dongtan, a subway must go down to bring the people in and out. Other tunnels must carry broadband connections, electricity, water and the sinews of a growing city.  Herrenknecht makes worms from as little as four inches in diameter to bore holes for conduit to hundreds of feet long and dozens of feet wide to bore through the Alps.  And his company has hundreds of huge projects underway.  Currently, he is helping Spain build three new subway systems and dramatically expand four others. In Switzerland, his worms are tunneling literally through the Alps to make that country--from a freight moving point of view--as flat as Holland.  China is building seven entirely new subway systems. The massive urbanization underway in Asia and the developing world is leaving as a by product a giant, state of the art physical plant that will enable those regions to compete ever more effectively in years ahead. With infrastructure development largely stalled in the United States amidst a disingenous obsession with lowering taxes on the rich, our physical plant has been left to age. The decline of our plant will be an increasing competitive disadvantage in years ahead.

The poor state of US infrastructure is all the more remarkable given that we have just emerged from a huge real estate bubble. But the recently ended boom proved to be more about financially re-engineering the debt placed on buildings than engineering buildings themselves. Indeed, the recent cycle saw far less commercial construction than typical cycles. And on the residential side, the absence of clean building or energy efficient standards means that the latest round of new units are hardly state of the art. Most tragically, an absence of effective local government and any federal leadership whatsoever means that the housing that did get built in the last eight years was put up ad hoc with little thought of the infrastructure needed to sustain it. It was founded on the quicksand of low energy price expectations and cozy relations among developers and local planners. The result is the costly sprawl we see every day in America that higher energy prices have made increasingly unsustainable.

It is not too late for America to get back into the infrastructure game. House Democrats are pushing against Republican opposition to a $50 billion second stimulus with a large infrastructure component. The Dodd-Hagel bill to create a national infrastructure bank is awaiting action in Congress. Legislation to promote green bulding standards--to build an efficient instead of inefficient physical plant is part of current energy proposals.

With economic activity now soft across the board, a new federal commitment to clean infrastructure could not be more timely.  An important task of the 21st century will be to retrofit or retire this energy inefficient, high carbon infrastructure and replace it with state-of -the-art, low carbon, energy efficient infrastructure.  And with capital on the sidelines looking for safe and secure investments, the capital is there notwithstanding financial turmoil.  Our current approach to infrastructure, however, is hindering our ability to make these critical investments in our future.

In the coming weeks and months, we at NDN are going to be talking about building clean infrastructure to jump start the slowing economy and pave the way for growth in the coming century, lest the United States fall further behind.

New York City -- According to the Wall Street Journal, Democratic staffers -- as they drafted new, comprehensive energy legislation last week behind closed doors -- could be heard chanting, "drill, drill, drill."  That's right: Democratic staffers.  And at yesterday's Senate Energy Summit, Republican Pete Domenici, a supporter of drilling made a telling observation about the new drilling mania: a few months ago, he noted, he was advising supporters not to use the word drilling, but instead to employ euphemisms like "exploration." In only a few months, drilling has not only become acceptable, it has become a drumbeat in Congress.  With drilling now headlining most of the energy bills percolating in the Democratic-controlled House and Senate, it is worth taking a moment to assess how we got to this strange point and what it means.

The immediate trigger of the drilling mania were the McCain ads for drilling and the chanting of "Drill, Baby Drill" at the Republican Convention. On the Democratic side, strategists had meanwhile come to the conclusion that while drilling would neither help energy independence nor lower prices, given the traction it was gaining among the public, it might be good politics to make it less of a partisan issue.  When Senator Obama himself came out in favor of conscientious drilling, drilling became okay for Democrats to support. 

The real question, however, is why the American people have found the idea of drilling so powerful.  For the new drilling mania has come at the expense of the ideal of building a carbon free energy future as championed by Al Gore in his Moon Shot speech in August and as recently as last year, more or less by all three Presidential candidates, Senators Obama, Clinton and McCain.  Surely, fossil fuel prices are volatile and have been steadily rising for years (though they dropped 30% in the last 60 says, due in part to the pricking of a speculative bubble.)  Surely, the United States pays a heavy strategic price for our dependence on products produced by some of our least favorite countries.  And surely, fossil fuels are harming the earth's climate, probably contributing to storms such as Gustav and Ike.  Senator McCain recognized last summer that drilling was a political winner and began a wholesale retreat from his original energy positions.  But only part of the explanation for drilling mania is the relentless Republican messaging.

At the root of the primitive appeal of drill, drill, drill is a desire to return to our oil-soaked past.  While Americans seemed ready to flirt with renewables, with push coming to shove, they have sought the safety and security of the girl who brung us to the party: oil. There is only one problem with this desire to return to the inexpensive, American produced oil and gas of our past.  It is fantasy. 

At yesterday's hearing, Shell President Marvin Vodum frankly admitted that currently there are only 30 deep water rigs on earth and every one is already in use.  No new exploration will be even theoretically possible until new rigs are built.  He estimated that in 10 years the number of these expensive, high-tech rigs might double or triple. Still, the idea that 30 or even 70 more offshore rigs over the next decade will make America energy independent or have any impact on the price of oil is absurd.  The oil that lies deep offshore, a mile or more below the surface of the ocean, is more difficult and expensive to tap by several orders of magnitude than the oil that brung us to the party.  Oil industry executives acknowledge this and also know that opening up more of America's coastline and Alaska for drilling is something they have to be for but the idea won't yield a penny of net revenue--what they are in business to produce--for years.  What they really seek is relief from litigation of projects and Vodum led with this in his testimony.  But that doesn't have the emotional appeal of drill, drill drill. 

Is there any harm in a little old time affection for the fuel of the past?  Yes, if it interferes with our commitment to developing the fuels and economy of our future.  There is a huge new opportunity for all Americans in renewable energy.  A new report suggests it may produce millions of high paid jobs.  Rededicating ourself to oil, frankly, interferes with this critical transition.

The thrust of the compromise being pressed by the bi-partisan Gang of Ten, now 20, is that energy needs in the future will be diverse and we must do all of the above, oil, nuclear and renewables.  With respect to the need for diverse sources they are right.  However, the all-of-the-above approach, while it may garner votes, avoids the hard choices in allocating what are ultimately scarce taxpayer dollars between the new and old energy alternatives.

As Senator Dorgan and others observed, subsidies for oil and nuclear energy in the form of exploration credits and insurance for the nuclear industry vastly exceed that for renewables.  The incumbent technologies with their large constituencies have stable, long term subsidies in place whereas wind and solar energy have suffered from on again, off again, support.  That must change.  And, of course, as we learned last week, relations between oil companies and federal overseers at the Department of the Interior, are more than cozy (involving outright payola.)

In the next week, it is likely that legislation will come to the floor.  While drilling is likely to be part of the package, it is vitally important that Congress keeps in mind the real goal here, to wean ourselves off of dirty fuels and build the low carbon economy of the future.

As the Congress moves closer to bipartisan energy legislation, John McCain is nowhere to be found. Instead his campaign – on the one issue that was supposed to separate him from Bush – is clinging to the old energy paradigm. It's hard to believe, but John McCain is now more out of touch than most of the Republican members of the U.S. Senate.

Bipartisan energy legislation, discussed today at the U.S. Senate’s energy summit, has gained momentum through the work of the "Gang of 10/16/22," and now looks to be one of three proposals that will come up in the Senate next week. (The House is also at work on bipartisan legislation.)

U.S. Sen. Barack Obama has said he is willing to accept a compromise on drilling to advance energy legislation that includes provisions for the expansion of renewable energy and efficiency. McCain, meanwhile, is stuck in a dogmatic anti-tax fuzz. Left behind by much of his party, McCain unwilling to compromise, show up to vote, or take any sort of stand to help make moves on energy.

Meanwhile, the bottom half of the McCain ticket has pledged to try to move him toward drilling in ANWR, which shouldn’t be hard since he only recently moved away from an opposition to drilling in the OCS to a wholehearted, singular support of it, and since he looks to be moving away from supporting Cap and Trade climate legislation.

This move away from Cap and Trade isn’t a surprise, as coming up with a serious energy policy doesn’t seem to be a goal of his ticket. Since his VP candidate knows more about energy than just about anyone else, and doesn’t believe climate change is man made – despite her absurd claims on television last night that she had never said that – John McCain owes American voters a big clarification as to where he stands on energy.

It looks like he may get the chance next week. Will he step up to plate and vote, or will his old, no show ways get left in the dust by Democrats and Republicans alike? Next week, when John McCain finds himself looking to the right on energy and only seeing James "Global Warming is a hoax" Inhofe, he’ll find himself running on empty. (Unless Jackson Browne sues him again.)

Last night, House Leadership came together on a package that dramatically expands both offshore drilling and renewable energy. The bill is designed, as NDN Green Project Director Michael Moynihan writes, to be palatable to Republicans, as it gives them almost all of what they want on drilling.

The comprehensive package, as described by the E&E Daily (subscription required):

The drilling provisions are part of a broad package that includes a repeal of oil industry tax breaks for major companies, new renewable energy mandates and investments, a new fund to speed deployment of carbon control technology, and many other measures.

Have no doubts, this is a moment of truth for Republicans in the House. (Next week, Republicans in the Senate will likely get a similar opportunity.) If Republicans truly are for an "all of the above" energy solution, this package is their chance to vote for one.

If Republicans continue their obstructionism on actually achieving anything on energy by nitpicking at this legislation, they, and not the Democratic Congress, will be responsible for failing to lower energy prices, failing to break America’s dependence on foreign energy, failing to confront climate change, and failing to harness the clean energy economic opportunity.

New York City--As used in Washington, the term "silly season" means what happens to government in an election year.  Legislation becomes almost impossible to pass, politicians grow more disingenuous than usual.  And no one does anything without assessing how it plays politically.  When one party controls Congress, the other may decide to prevent any action to create the appearance of a "Do Nothing" Congress.  As both the House and Senate now prepare to debate energy legislation once again--perhaps as soon as tomorrow or on Monday--the question is are we stuck in the silly season or is there a real chance for legislation to move forward.  

While exacerbated by it being an election year, in a sense, the failure of the government to take any meaningful action on energy this year despite a full fledged energy crisis is a textbook example in how markets move faster than government.  Since January, the price of oil climbed from about 100 up to 150 and then dropped back down to just over 100 where it closed last night.  During the interim, America experienced a mini oil shock--not as severe as those in the 1970s because prices have come down--but severe enough.  $4 dollar and up a gallon gas this summer shocked the economy, driving real changes in behavior that so far are sticking.  Americans are driving lass, taking mass transit more and are no longer buying gas guzzling cars.  Some of the changes can't be reversed.  The car companies shuttered plants making SUVS and are retooling to make hybrids or high efficiency cars.  Airlines cut routes, hiked fares and are only now staunching the flow of red ink that began this summer.  And what did government do during all this drama?  Nothing.  Nada.

In one sense, this all might be an argument for laissez faire economics.  The price signal of $4/gallon gas worked.  Demand dropped leading to a price correction.  It is hard to see how legislation if any had passed would have made things better in the short term.  And, indeed, legislation is a clumsy tool for short term objectives.

For the long term, however, one would think that Congress might have interpreted a 50% spike in prices at the pump as a signal to do something to avoid or at least mitigate the type of shock we encountered.  For example, one would think at a minimum Congress would have extended renewable tax credits to develop alternative energy sources to oil.  But Congress did not.  Majority Leader Harry Reid brought up the Investment Tax Credit eight times and Republicans blocked cloture on as many occasions. 

Lest anyone think we can leave it all up to the market, Opec's decision yesterday to cut production to make sure oil does not drop below 100 per barrel, shows that this is not all about the market.  There is such a think as a huge government controlled, anti-American cartel plunk in the middle of the oil market, controlling supply if not demand.  Thus while legislation is not the answer for short term problems, a renewed energy policy is vital to America's long term economic and strategic objectives.

The legislation likely to move to the floor tomorrow in the House and next week in the Senate has been crafted specifically to attract Republican votes.  It contains generous provisions for off shore drilling.  In addition, it has impoortant initiatives to reduce dependence on oil over the long term such as the critical extension of existing renewable tax credits, green building standards, a tax credit for weatherization, commodities market reform and incentives for oil companies to accelerate drilling on federal lands.  However, if those who want to make Congress appear to be doing nothing win out over those who want it to do something, this effort will suffer the same fate as the previous energy initiatives this year.

There is, however, a potential way to break the log jam.

This election season is unusual in featuring two Members of the Senate at the head of their respective tickets.  Both presumably want action on energy.  And as the leaders of their party, both should be able to unite their parties to break the logjam.  The legislation now has the drilling that Senator McCain wants and the support for alternatives he says he wants as well.  It also contains support for renewable energy at the heart of Senator Obama's energy plan.

Accordingly, I am calling on Senator McCain to bring his party together to support comprehensive legislation and on Senator Obama to do the same.  If the party leaders marshall their troops there is no reason we cannot see real action on energy even during the silly season.

A new intelligence report, discussed yesterday by Thomas Fingar, the top analyst in the American intelligence community, outlines the challenges the next president will face. In the midst of debates about lipstick on pigs and other such nonsense, it’s important to consider what some of these challenges may be.

According to an article from today’s Washington Post about the report, the next President will lead an era through which American dominance and the significance of military power will diminish, as will the roles of international institutions. This shift, which comes as a result of globalization, and, as the article points out, is described by Fareed Zakaria as not the "decline of America, but rather about the rise of everyone else."

Climate change, energy security, and immigration policies will also figure heavily into the challenges the next president will face:

The predicted shift toward a less U.S.-centric world will come at a time when the planet is facing a growing environmental crisis, caused largely by climate change, Fingar said. By 2025, droughts, food shortages and scarcity of fresh water will plague large swaths of the globe, from northern China to the Horn of Africa.
…

Floods and droughts will trigger mass migrations and political upheaval in many parts of the developing world. But among industrialized states, declining birthrates will create new economic stresses as populations become grayer. In China, Japan and Europe, the ratio of working adults to seniors "begins to approach one to three," he said.

The United States will fare better than many other industrial powers, in part because it is relatively more open to immigration. Newcomers will inject into the U.S. economy a vitality that will be absent in much of Europe and Japan -- countries that are "on a good day, highly chauvinistic," he said.

"We are just about alone in terms of the highly developed countries that will continue to have demographic growth sufficient to ensure continued economic growth," Fingar said.

Dealing with the effects of globalization, confronting climate change, and formulating a rational immigration policy have been hallmarks of NDN’s economic narrative. For more on how to confront these challenges and make globalization work for all Americans, visit NDN’s Globalization Initiative page, and visit the Hispanic Strategy Center’s page for more on NDN’s immigration work, including a brand new poll.

On Morning Joe today, MSNBC’s panel got into some of these issues, and how they do (or don't) play into the state of the election. Take a look:

New York City - The issue of energy was hardly absent from the Republican convention this week or from the McCain campaign this summer.  If anything, it has been a centerpiece, from the chants of Drill Baby Drill during Rudy Giuliani's keynote speech to images of windmills fluttering in and out of slides and television commercials to the mantra of energy independence to renewed calls for nuclear power.  What has been missing, however, is consistency or internal logic to this message.  In fact, a fundamental complication has bedeviled almost all the discussion of energy this year, namely the conflation of the issue of high energy prices with those of energy independence and climate change.  They are not the same issues nor are their policy implications the same.

Consider the following question which in many ways is a Rorschach test of one's true policy priorities.  Is the collapse of gas prices, now down by almost a third in the last month, good or bad?

Since lower prices mean more money for families, and support for a shaky economy, from an economic standpoint, lower prices ought to be good. On the other hand, since lower prices also mean more gas consumption and therefore more consumption of foreign oil as well as more carbon in the atmosphere, one must conclude that from an energy independence and environmental standpoint, lower prices are bad.

Most people--including the Republicans in Minneapolis--would like to have it both ways: lower energy prices as well as energy independence and a better environment.  But to hope to achieve that, it is first necessary to be intellectually honest about what policy choices are likely to have what consequences.

From a purely economic point of view, more energy is better. Drilling offshore and in Alaska, investing in solar energy and building nuclear plants all have the potential to reduce the cost of energy by increasing supply. 

On the other hand, from an energy indpendence and environmental point of view, the source of energy is what matters. Drilling offshore and in Alaska might marginally reduce dependence on foreign oil but it will also clearly increase carbon emissions.  And to the extent it lowers prices, it might actually hook America even more on foreign oil!  More nuclear plants will reduce emissions and increase energy independence but only by creating huge environmental risks.  Only renewable energy such as wind, solar and biofuel technologies has the ability to lower prices, help the environment and create energy independence.  Unfortunately, while the Republicans have been showing windmills in their ads, they made clear in Minneapolis that renewables come third behind drilling and nuclear power.

The fact is that lower energy prices combined with energy independence and help for our ailing planet can only come about through a conversion of our entire energy infrastructure from one based on dirty fuel sources such as oil to one based on clean, renewable technologies.  Building out what Thomas Friedman is calling the ET or Environmental Technology infrastructure is a massive economic opportunity that can accomplish the three goals of lowering prices, achieiving energy independence and fighting climate change.  But subsidizing oil exploration through friendly government leasing and tax credits will only slow down this conversion while subsidizing nuclear energy would divert scarce investment capital.

It should not be surprising that there are many who still cling nostalgically to oil and gasoline, the fuels that powered America through the 20th Century.  After all, America has had a long love affair with gas.  Our entire self identity is bound up in images of fast cars, filling stations and the roar of gasoline engines.  We began by pumping it ourselves.  Then we pumped it in other countries when America was the dominant industrial power and the people inhabiting the desert sands where we drilled rode on camels and horses.  Those days are over.  The overseas wells have been nationalized by governments less and less friendly to ours.  And the oil that remains in America and off our shores is increasingly hard and expensive to find.  No matter how much we may harken back to the past, we have to wake up and smell the coffee. 

Nuclear energy is no panacaea either.  Besides the obvious safety risks, the lack of an acceptable place to store spent fuel rods and the lack of trained engineers that will take ten years to remedy, the cost of building a nuclear plant has soared so that nuclear is no longer financible as a private venture.  Only huge government loan guarantees and subsidies could revive nuclear power.  And if we are going to spend billions on a technology fraught with so many environmental issues, why wouldn't we spend a fraction of that to renew the solar Investment Tax Credit and wind Production Tax Credits to drive renewable prices below that of fossil fuels.  

In short, the Republicans did the causes of lower gas prices, energy independence and a healthier planet few favors at the convention.  However, the good news is that while renewables are not at the top of their list, they are at least, on the list. 

That means there is the potential for common action.  In the weeks ahead, both parties should reach across the aisle to pass bi-partisan legislation to extend the renewable tax credits, pass a national renewable electricity standard and accelerate the rollout of the environmental technologies that in contrast to either oil or nuclear power, can power American prosperity in the 21st Century if only we have the sense to pursue them.

If John McCain was just another go-along partisan politician, he never would have led the fight to fix our broken immigration system or to do something about global warming.

With his choice of Sarah Palin — the Alaska governor who has advocated drilling in the Arctic National Wildlife Refuge and does not believe mankind is playing any role in climate change — for vice president, John McCain has completed his makeover from the greenest Republican to run for president to just another representative of big oil.

Given the fact that Senator McCain deliberately avoided voting on all eight attempts to pass a bill extending the vital tax credits and production subsidies to expand our wind and solar industries, and given his support for lowering the gasoline tax in a reckless giveaway that would only promote more gasoline consumption and intensify our addiction to oil, and given his desire to make more oil-drilling, not innovation around renewable energy, the centerpiece of his energy policy — in an effort to mislead voters that support for drilling today would translate into lower prices at the pump today — McCain has forfeited any claim to be a green candidate.

New Rule: You can't put a windmill in your campaign ad if you voted against every single bill that might lead someone to build one.

Electric car pioneer Shai Agassi is on the cover of this month's Wired, with a story on "The Future of the Electric Car." Shai's innovative and impressive solution is already underway in Israel, and the story is worth a read. Click on the picture for more.

For the last month, the McCain campaign has drilled away at energy as the decisive "separate from Bush and make Obama look bad in the process issue" in the election. McCain’s ads first trumpeted his commitment to cap and trade and later whacked Obama on drilling. His ads pointed to a mythical "electricity tax," and, despite obvious errors, hypocrisies, contradictions, and outright lies, conventional wisdom decided that McCain had won the debate on drilling.

With McCain’s four word key position of "drill here, drill now" exhausted, Obama, as the New York Times covered today, pivoted his message to the economic well being of everyday people. His second Olympic ad focused completely on his economic plan (the first focused on building an energy economy).

In case you haven’t caught Olympic fever and seen it, "Three Bedroom Ranch:"

Then today, John McCain had a moment that played right into Obama’s hands. McCain forgot – in the midst of a housing crisis – how many houses he owned. As I briefly mentioned earlier today, the Obama campaign quickly turned an ad around, noting how out of touch McCain was with everyday people.

McCain will have two, already begun, responses: he will continue to go negative on Obama, moving from a celebrity attack to a politics of association line of attack, and he will try to move the debate back to the issues he feels good about: national security and energy. This strategy has two small problems and one big problem for McCain. First, king oilman Dick Cheney is speaking at the Republican National Convention a week and a half from now – not exactly the backdrop McCain wants on energy. Second, timetable is now an agreed upon word for the end of America’s engagement in Iraq, the proposed Democratic solution.

The really big problem for McCain is that, while some think offshore drilling is nice, and others may care about foreign policy, Americans, in large part, see the economy as the overwhelmingly dominant issue. The McCain responses to his housing uber-gaffe – all personal attacks – do not get away from the fact that their candidate, a man who has spent 26 years in Washington, thinks the level of being rich is having five million dollars, and is extraordinarily wealthy, is no doubt out of touch with the lives of everyday Americans.

If this narrative sticks, if Obama can convince everyday Americans that he is focused on them, and if Obama can close on this message, it is hard to see Obama losing, because, despite all this supposedly bad polling and this supposedly bad month, Obama is still ahead.