Green Project

In today's New York Times Week in Review, Bill Keller has a thoughtful look at recent events in China and Russia, and what might be called the end of the end of history. I thought Fareed Zakaria captured this sentiment best in his recent book when he described this new era of geopolitics with a simple powerful phrase - Americans are witnessing what he calls "the rise of the rest."

Perhaps after eight years of talk of Basra, Kabul and tax cuts, we will look back at this month as the month that Rip Van Winkle-like Americans woke from their conservative-induced slumber and began to see the 21st century as it is, not as portrayed by the Rovian/Chenesian fantasy of the last eight years.

Perhaps in no area is this new pragmatism more important than on what it means for our people here at home. The next President faces one domestic challenge more important than all the others - how to get wages and incomes rising again.

For most of the Bush era, the American economy performed well by traditional metrics. GDP, productivity, corporate profits and the stock market were strong. But despite this period of growth and strong productivity gains, the typical American family saw its annual income drop by about a $1,000 a year and the rate at which new jobs were created has been slower than any other recovery since the Depression. According to the laws of economics, it was not supposed to be possible to see robust growth in GDP and productivity and see incomes drop. In fact. it has never happened before in the modern economic history of the United States.

Every day Americans figured all this out long before coastal elites did. Our 2007 analysis of public opinion and the 2006 exit polls shows that it was the economy that drove the GOP from office much more than the war. As has been reported in many places, the American people are more unhappy with the state of the nation than anytime since the 1930s. The American people have understood for years that the people running their government has not turned their attention to the most important challenge they face in their own lives - making ends meet in a much more competitive globalized world. And small-bore solutions to this enormous challenge - off shore drilling, children's health insurance, raising the minimum wage, middle class tax cuts - will be treated as they have been treated by the American people these last few years - "that's nice, but where is the long-term, sustained, comprehensive plan big enough to actually improve our lives and the lives of our families?"

Led by Dr. Rob Shapiro, figuring all this out has been the primary focus of NDN's Globalization Initiative these last four years. I won't repeat the major recommendations from our project now, but offer three general observations:

1) It is critical that our political leaders explain to the American people that if we want to maintain our place in the world, and our standard of living, that we will have to "try harder." The rest of the world is rising, catching up, learning our game - as was the goal of foreign policy these last 60 years - and no longer can be seen as characters from an Indiana Jones movie. To compete in this world, this emerging world of the 21st century, we will have do more; invest more; modernize our infrastructure; lessen our dependence on expensive and dirty energy sources; make pensions and health care more portable and accessible; do more to equip our workers and kids with the modern skills they need to compete; accelerate innovation and the formation of "new businesses;" make our global economic liberalization strategies smarter and more modern...this new era must be seen as one of "investment" in a better future, and calls for an anachronistic politics of austerity must be rejected....

2) This economic and public opinion dynamic developed before the recent slowdown, credit crunch, housing crisis and energy/commodity price surge, and thus will not be solved by focusing on these recent developments in the economy. Because incomes went down during a period of sustained growth, the solutions offered by our leaders in the next few years must recognize that the traditional way we help Americans get ahead - by creating macroeconomic growth - is no longer guarenteed to improve the lives of every day people BECAUSE IT DID NOT WORK SO FAR IN THIS DECADE.

3) Given the enormity of this challenge, we here at NDN hope that helping Americans get ahead in this much more competitive world becomes the central focus of the elections this year. In several recent interviews, Senator Obama has said that his three priorities are Iraq, health care and climate change. Not so sure this is the best answer. He needs to be able say that he wants to be judged on whether he can raise Americans' standard of living, and then make doing so the central organizing principle of his campaign and Administration. I think a better response would be "I want to improve the lives of every day Americans who have worked so hard and gotten so little these last few years, and bring the troops home from Iraq." Or something like that.

A risky strategy some might say. For what happens if incomes don't rise? I think we already know the answer to that, as the GOP has shown us in recent years. If the standard of living of Americans don't improve in the next few years, the Democrats should expect to suffer the same fate as the GOP in this decade, and find themselves out of power. Unlike China and Russia, we still are a democracy, and as such, must make the fate of the people of the United States the central focus of our politics...

Keith Johnson, of the Wall Street Journal’s Environmental Capital blog, has a solid summary of where the media narrative on drilling sits: Republicans are winning the battle. This narrative is backed by a new Rasmussen poll that has 64 percent of Americans supporting offshore drilling, and 42 percent seeing it as the "best way to reduce oil prices." Rasmussen also tells us that Americans believe McCain wants to find more sources of energy, while they believe that Obama cares more for limiting energy use. Unsurprisingly then, Americans two-thirds of Americans side with McCain’s approach.

The New Republic’s editors make some interesting but debatable points today about how the narrative has gotten to this point, arguing that blaming speculators and going after oil companies may not have been the best plan of attack. TNR also argues that the Obama and Pelosi shift toward allowing more offshore drilling in a compromise bill that would also include support for renewables and efficiency was the second losing move in this argument, and that Democrats’ inability to debunk the drilling idea in the minds of voters was troubling.

As I argued yesterday, the shift on drilling will not be a big deal, and will likely remove drilling as a wedge issue into the fall. The more important voter perception is that Americans believe that Obama cares about energy austerity while McCain wants to do everything he can to increase production. (His actions don’t bear this out, but perception is what matters.)

Whether drilling specifically will be a voting issue is unknown, and this is likely a case where Republicans are winning the battle on drilling but setting themselves up to lose the war on energy as a whole. However, being portrayed as promoting austere energy use is extremely dangerous for Democrats. Obama has already begun to recast the debate on energy about investing in a clean energy economy, which is forward looking, as opposed to the McCain Republican petro-economy of the past, one that, as Michael Moynihan notes, continues to have dangerous ramifications in foreign policy.

At the end of the day, the most important argument to make and win is that energy policy is central to the economy: energy to power the economy, energy impacting American households and families through gas, home heating, and overall prices, and energy jobs and investment allowing average Americans to enjoy the broad-based prosperity they knew in the 1990’s, but that disappeared in the Bush administration. Transitioning to a clean energy economy will not be simple or easy, but, done responsibly, it is a key to future prosperity. Americans already feel austerity in their pocketbooks; being perceived as asking them to feel it in their energy use is not in Democrats' interests, especially when the better option of investing in a clean energy economy exists.

New York City - The reappearance of a belligerent Russia on the world stage, buoyed by high oil prices and newfound wealth, would appear to signal a new era in global politics. For anyone still clinging to the idea of the unipolar moment, the spectacle of Nicholas Sarkozy brokering a deal between Russia and Georgia, shows that the moment of a single superpower is probably over, and something like a return to the era of the Great Powers, at best, or the Cold War, at worst may be in store--absent real U.S. leadership to the contrary.

Nor is it an accident that high oil prices have ushered in the return of authoritarianism to the global stage. Securing and maintaining oil wealth has never been pretty or conducive to democracy. The huge payoff from controlling the wealth has always encouraged factions to vie for its control and, once they obtain it, quash opposition. So it was throughout Central Asia during the years of the Great Game and remains today, not only in Russia, but also in Saudi Arabia, Iran and even Venezuela. From Putin to Ahmadinejad to Chavez, oil-emboldened strongmen are again asserting their power.

However, as glamorous as unbounded oil wealth inevitably seems, it equally comes at a tremendous cost that in a modern economy, can entirely cancel out its benefits. That is because through the phenomenon of Dutch Disease--the phenomenon noted in Holland after the discovery of North Sea oil, it has an incontrovertible tendency to undermine the rest of a nation's economy. The high profits obtainable through oil, gas, or indeed any valuable commodity, tend to make other industries non-competitive by driving up costs. This is the dark cloud that threatens Russia's future.

Indeed, as Philip Stepens notes in today's Financial Times, Russia faces a raft of deep-seated economic problems that belie her new found swagger. Russia is losing population at an alarming rate due to low birth rates. Infrastructure is crumbling. And the corruption problems that have plagued her for decades have only grown worse as she has become more dependent on oil and gas revenues. Indeed, Russia's decision yesterday to suspend Robert Dudley, the British head of its TNK-BP oil venture, for trumped up reasons, testifies to the absence of the rule of law, likely continued capital flight, and corruption that still characterizes commercial dealings in the country.

Oil wealth always tends to contain the seeds of its own destruction. Were it not so, countries like Iran, Venezuela and Mexico would dominate the global economy. Thus, Russia is riding high for now. However, with her econmomy increasingly dependent on oil and gas, a drop in prices would have strong and swift effects. Russia, herself, would benefit in the long term from diversification away from oil but this is a goal that has always eluded those who worship at the altar of oil.

From a U.S. strategic point of view, shifting energy consumption away from oil and gas toward renewable energy that is not tied to any one geographic locations can, thus have important strategic as well as economic benefits.

In the surprise of the 110th Congress, it turns out that the pro-drilling position taken by many Congressional Republicans and their presumptive nominee for President may actually have been – gasp – election year politics. The 'Gang of 10,' a group of five Democrat and five Republican Senators, has offered a compromise proposal that would contain both incentives for energy efficiency provisions and a limited expansion of offshore drilling. Barack Obama has said that he would support such an expansion as part of a broader energy bill, and Speaker Nancy Pelosi has said she may allow a vote as long as a bill includes renewable energy and environmental safeguard provisions, but many Congressional Republicans, including Senate Minority Leader Mitch McConnell, are opposed to the bill.

According to the Wall Street Journal:

Republicans have used the offshore-drilling issue to paint Democrats as out of touch with ordinary Americans and beholden to environmental groups that oppose any relaxation of the current drilling ban. Arizona Sen. John McCain, the Republican's likely presidential nominee, has made Sen. Obama's opposition to offshore drilling a feature in recent ads critical of his Democratic rival.

But the drilling issue could lose its power as an electoral wedge if both parties agree to the concept put forward by a group of Republicans and Democrats. Their proposal would open additional acreage in the Gulf of Mexico off Florida's western coast to drilling, and also allow Virginia, North Carolina, South Carolina and Georgia to "opt in" to drilling off their shores if their legislatures approve.

The plan would also raise billions of dollars for conservation and energy-efficiency programs partly by making oil companies no longer eligible for a manufacturing tax credit and repealing other tax breaks. Some estimates have put the potential savings from such a move at $13 billion over 10 years.

Some conservatives worry that a deal would remove party differences on what they otherwise see as one of the Republicans' best issues for winning over voters in the November election. Conservative radio-show host Rush Limbaugh has accused the Republicans who favor the compromise of giving a "gift" to Sen. Obama and other Democrats seeking election this fall.

Among many Republicans, "there's a desire to not solve this problem" of gridlock over energy policy, said one of the Republicans supporting the compromise, Sen. Bob Corker of Tennessee. Sen. Corker added that "many people in the Republican Party are missing the point that this is a strong pro-[oil] production bill" and that Republican leaders "made a mistake" by not immediately endorsing it.

This proposal epitomizes the 'all of the above' solution that John McCain and his Republican allies in the Senate claim they support – expanding drilling and investing in energy efficiency and renewable energy. Sadly, only five have actually acted.

McConnell’s line about "objections to the proposal to eliminate the oil companies' eligibility for a tax credit" is part of his growing charade of election year intransigence. The oil industry receives tremendous direct and indirect subsidies from the federal government; meanwhile McConnell refuses to allow for a straight up or down vote for much smaller tax credits on renewables.

McCain, too, has said that he could not support the bill because it "would raise taxes;" he has since changed to a more 'wait and see' approach. For someone running for president on a supposed record of bucking his party on energy policy, this is certainly not the type of proactive leadership one would expect. (Thomas Freidman calls out McCain today for his lack of action on energy and quotes Suntech America President Roger Efird, one of NDN's panelists from our August 1 event on "Energy and the American Way of Life.")

There is only one conclusion to draw: McCain and Republican opposition to this proposal – which should serve as an important bipartisan step toward some sort of action on energy policy – is nothing more than an attempt to maintain a loosening grasp on drilling as a wedge issue in an election year. By refusing to lend his support to this compromise, McCain and his Republican Party owe America an explanation of what energy reform they are actually for, because behind the pretty windmills in McCain’s ads, there’s no substance.

New York City -- Perhaps at no point in his failed presidency, probably the worst in American history, did President Bush look more out of touch than sitting at the Olympics in Communist China as did fellow guest, Vladimir Putin, also watching the festivities was presiding over the invasion of democratic Georgia. Having not so recently invaded a country himself, Bush's moral authority was at a low. But contributing to the aura of self-interested incompetence suffused with a dose of cnyicism was his acquiescence to a vastly diminished American presence in the world.

Although it appears that the immediate Russian strike was triggered by a Georgian action against South Ossetia, the Olympic timing that placed Bush in the Chinese stands as Russian tanks rolled was tailor-made for Vladimir Putin. Pumped up with new oil and gas wealth extracted directly from Europe and the United States, Putin could not have found a better stage to announce his reassertion of Soviet imperial ambitions.

Now as President Bush and his team prepare to leave office, it is left to the rest of us to figure out how to resurrect an America that has been unnecessarily and artificially weakened--economically, militarily and strategically by this oil friendly Administration.

Indeed, oil and natural gas wealth is responsible for virtually all of the hubris on display from Putin like the other petro-strongmen who currently threaten the world's security. And oil and gas revenues are fueling the rebirth of authoritarianism--a point discussed trenchantly by Chrystia Freeland in today's Financial Times.

There should be no mistaking, at this point, that oil and gas wealth is a direct threat to the future security of the West. Thus it should be equally clear that a national commitment to developing alternative fuels must be a central element of American economic and security policy. To be sure, this transfer cannot take place overnight. But neither economically nor strategically, can the United States--or Europe--or other free countries allow themselves to remain dependent on the oil states.

As I have written before, a national program to change how we get our energy should include the following:

• Immediate passage of tax credits for renwable fuels such as the solar investment tax credit and production tas credit which benefits wind power;
• Acclerated development of new and impore energy storage and other advanced energy technologies;
• A renewable electricity standard;
• Legislation and tax credits to take older gas-guzzling vehicles off the road (as suggested by Jack Hidary and recently, Alan Blinder);
• Tax credits to encourage energy savings; and
• Investments in mass transportation and smart growth to lower energy demand across our society.

As major changes in energy consumption in the last few months --sparked by high gas prices--have shown, Americans can adjust. But we cannot leave this transition up to the whims of the market.

Most important of all is that these measures not be viewed independently as elective items but rather as part of a vital national commitment to free ourselves from what has become an unacceptable dependence on fossil fuels.

The alternative--acquiescence to a world run by oil-emboldened strongmen--is simply unacceptable.

An article in today’s New York Times by Stephanie Rosenbloom discusses the growing trend of the nation’s largest retailers putting solar panels on their roof in order to appear green, but mainly to save on their electricity bills.

In recent months, chains including Wal-Mart Stores, Kohl’s, Safeway and Whole Foods Market have installed solar panels on roofs of their stores to generate electricity on a large scale. One reason they are racing is to beat a Dec. 31 deadline to gain tax advantages for these projects.

So far, most chains have outfitted fewer than 10 percent of their stores. Over the long run, assuming Congress renews a favorable tax provision and more states offer incentives, the chains promise a solar construction program that would ultimately put panels atop almost every big store in the country.
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Wal-Mart, the nation’s largest retailer, has 17 stores and distribution centers with solar panels in operation or in the testing phase. It plans to add them soon to five more stores. People at the chain are considering a far larger program that would put panels and other renewable technologies at hundreds of stores.

"It’s going to be the Wal-Marts of the world that will buy these things over acres and make a difference," said Roger G. Little, chairman and chief executive of the Spire Corporation, a Boston company that provides solar equipment.

Analysts are not sure how much power the rooftop projects could ultimately produce, but they say it could be enough to help shave total electricity demand. In many communities, stores are among the biggest energy users. Depending on location and weather, the solar panels generate 10 to 40 percent of the power a store needs.

If Wal-Mart eventually covered the roofs of all its Sam’s Club and Wal-Mart locations with solar panels, figures from the company show that the resulting solar acreage would roughly equal the size of Manhattan, an island of 23 square miles.

As the story notes, these retailers are working to beat the Dec. 31 expiration of the Solar Investment Tax Credit, which, if it expires, will devastate the solar industry. These retailers, along with energy experts and economists, have stressed that long term financial stability is crucial to ensuring investment in renewable technology. These stores are to be congratulated for understanding both the advantage offered to their bottom lines by investing in this technology and the positive impacts of helping achieve scale in the solar market.

Thomas Friedman over the weekend also discussed Denmark’s energy policy – one of complete energy independence, and the lessons Americans can learn from it.

"I have observed that in all other countries, including in America, people are complaining about how prices of [gasoline] are going up,” Denmark’s prime minister, Anders Fogh Rasmussen, told me. “The cure is not to reduce the price, but, on the contrary, to raise it even higher to break our addiction to oil. We are going to introduce a new tax reform in the direction of even higher taxation on energy and the revenue generated on that will be used to cut taxes on personal income — so we will improve incentives to work and improve incentives to save energy and develop renewable energy."

Because it was smart taxes and incentives that spurred Danish energy companies to innovate, Ditlev Engel, the president of Vestas — Denmark’s and the world’s biggest wind turbine company — told me that he simply can’t understand how the U.S. Congress could have just failed to extend the production tax credits for wind development in America.

Why should you care?

"We’ve had 35 new competitors coming out of China in the last 18 months," said Engel, "and not one out of the U.S."

Finally, Al Gore’s We Campaign is out with a new ad that will air tonight during the Olympics:

The broad consensus that has developed around renewable energy in general and solar in particular, from Al Gore to Wal-Mart, demonstrates that America is ready for action and leadership. Creating a low-carbon economy needs to be the (not "a") top priority of the next President’s administration, and Congress should be taking steps in that direction when it returns from recess. Continuing our energy policy – one that allows for, at the moment, conflict over South Ossetia, to affect our energy needs – when better options exist, is patently absurd.

For more on the development of solar power as a major economic opportunity for America, be sure to read NDN Green Project Director Michael Moynihan’s new paper entitled Solar Energy, the Case for Action.

U.S. Sen. Barack Obama's ad that will air during the Olympics is called "Hands" and presents an optimistic vision of the green technologies that will promote economic growth in the coming decades. This is a important vision for America's economic future, and the fact that this vision is taking center state during the Olympics speaks volumes about the significance placed on it by Obama. Take a look:

The ad comes on the same day that The Climate Group, an independent non-profit based in the UK, releases a report on "China's Green Revolution." The report argues that China has become a global leader in renewable energy technology production and is seizing the low-carbon economic opportunity.

From a press release from The Climate Group:

Despite its coal-dependent economy, the report reveals Chinese government and businesses have embarked on a Clean Revolution that has already made it a world leader in the manufacture of solar photo-voltaic technology (Solar PV) where its six biggest solar companies have a combined market value of over USD $15 billion.

China is also set to become the world’s leading manufacturer of wind turbines, with production capacity expected to reach 10GW per year by the end of 2009, and is competing aggressively in other low carbon markets including solar water heaters, energy efficient home appliances, and rechargeable batteries.

Steve Howard, CEO of The Climate Group says: "For too long, many governments, businesses and individuals have been wary of committing to action on climate change because they perceive that China – the world’s largest emitter – is doing little to address the issue. However, the reality is that China’s government is beginning to unleash a low carbon dragon which will power its future growth, development and energy security objectives."

Changhua Wu, China Director, The Climate Group, says: "Far from ignoring climate change, Chinese leaders have already committed to improving energy efficiency and scaling up the growth of low carbon industries. China is beginning to pull its weight on climate change and the targets and policies in place are in line with those being taken by ‘leading’ countries like the UK and Germany."

Investment in renewable energy in China - almost USD $12 billion in 2007 - is almost level with world leader Germany as a percentage of GDP. Stronger policies from the Chinese government are creating increased demand for low carbon investment and China will require a further USD $398 billion (USD $33billion per year) to meet its 2020 renewable energy goals.

Steve Howard says: "China’s current trajectory will ensure it remains a strategic global hub for low carbon investment, innovation and growth over coming decades."

Eight years of ignoring climate change and the economic opportunity presented by creating a low-carbon economy have put America behind Europe and now possibly China. The vision presented in Obama's new ad, mated with good policy, has the potential to take advantage of America's innate economic advantages and help us become a leader, not a laggard, in the 21st century energy economy.

Yesterday, I wrote about the changes in living habits created by Americans responding to high energy prices. Today, FT has a great picture and audio story entitled "Shanghai's suburban rebellion." The story, reported and narrated by Geoff Dyer, describes a developing suburban middle class whose lifestyle - and therefore energy use patterns - will look remarkably familiar to Americans. Gated communities and personal automobile ownership are sought after commodities, consumerism has taken off, and the model of urban living - working near where one works - is no longer the desired norm.

Just as American political behavior change due to lifestyle, so too, does China's. Dyer speaks about a community near Shanghai that does not try to involve itself in politics, but becomes politically active only when a much maligned maglev train is slated to be routed near their luxury apartments and vocally nationalist due to protests abroad in the lead-up to the Olympics. China's economy and politics will be thrown under the microscope over the next two weeks; these four minutes of photos and narration documenting an important trend that will affect the politics, economics, and energy use of the world's most populous nation and largest carbon emitter are worth taking a look at.

An article entitled, "Gas Prices Apply Brakes To Suburban Migration," by Eric M. Weiss in yesterday’s Washington Post details some of the ways in which high energy prices are changing the way Americans are choosing to live. These prices have the potential to shift the fundamental development and land use paradigms that have shaped American society for the second half of the 20th Century. In other words, the American Dream of moving to the suburbs or, a more recent phenomenon, the exurbs, could be going by the wayside.

Cheap oil, which helped push the American Dream away from the city center, isn't so cheap anymore. As more and more families reconsider their dreams, land-use experts are beginning to ask whether $4-a-gallon gas is enough to change the way Americans have thought for half a century about where they live.

"We've passed that tipping point," U.S. Transportation Secretary Mary Peters said.

Since the end of World War II, government policy has funded and encouraged the suburban lifestyle, subsidizing highways while starving mass transit and keeping gas taxes much lower than in some other countries.

Americans couldn't wait to trade in the cramped city apartments of the Kramdens and Ricardos for the lush lawns of the Bradys. Local land-use policies kept housing densities low, pushing development to the periphery of metropolitan regions and forcing families who wanted their dream house to accept long commutes and a lack of any real transportation choices other than getting behind the wheel.

Even the way the government pays for roads and transit is dependent on gas taxes, which is effective only if Americans keep driving.

"There is a whole confluence of government policies -- tax, spending, regulatory and administrative -- that have subsidized sprawl," said Bruce Katz, director of the Metropolitan Policy Program at the Brookings Institution. A gallon of gasoline costs more than $8 in Britain, Germany, France and Belgium, according to the U.S. Department of Energy. Much of the price difference is due to higher taxes.
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But there's been a radical shift in recent months. Americans drove 9.6 billion fewer highway miles in May than a year earlier. In the Washington area and elsewhere, mass transit ridership is setting records. Last year, transit trips nationwide topped 10.3 billion, a 50-year high.

Home prices in the far suburbs, such as Prince William and Loudoun counties, have collapsed; those in the District and inner suburbs have stayed the same or increased. A recent survey of real estate agents by Coldwell Banker found an increased interest in urban living because of the high cost of commuting.

Brookings says transportation costs are now second only to housing as a percentage of the household budget, with food a distant third.

The people are leading the revolution, but land-use experts wonder whether a government policy so etched into the American fabric will follow.

"When people bought homes, they punched the numbers and said can we afford the mortgage payment and taxes," Katz said. "This new paradigm is going to have families being more deliberate about the cost of transportation spending and energy costs. That's a new phenomenon in the United States. That will be the change that will change development patterns."

On Friday, August 1, at a panel on Energy and the American Way of Life, NDN heard from Shyam Kannan and Greg Kats, both of whom discussed this very subject and touched on the policies, practices, and technologies that can bring about changes in buildings and land use that can reduce energy use – combating both high energy prices and climate change.

What this article doesn’t mention are the secondary effects these changes will have on society. If more people are moving into cities, urban policies will have to change, urban schools will have to improve, and infrastructure and services will be rethought.

These new living patterns also have the potential to fundamentally alter American politics. How and where one lives is a tremendously important factor in the formation of values and voting behavior. In other words, people who live in cities vote differently from people who live in rural and exurban America. If suburban and exurban migration truly becomes a thing of the past, so will the more than half century of politics that goes with it.

As U.S. Sen. Barack Obama releases his new energy plan this week, the Obama campaign is out with two new ads on energy. Both hit U.S. Sen. John McCain on his energy policies and ties to oil companies and lay out parts of Obama's new plan.

The Obama campaign released "Pocket" yesterday:

According to Politico.com's Ben Smith, "National Priority" has been airing in battleground states for about a week, but was not released to the press: