Green Project

Well, it's over.  The 2009 United Nations Climate Change Conference ended not with a bang, a whimper or a treaty but rather with something akin to a scream from developing countries--some like Tuvalu that may one day end up under water--whose objections to a plan cobbled together at the last minute prevented the conference from reaching a formal agreement.  Instead, the organizers "took note" of an accord forged by the US, China, India, South Africa and Brazil  that now lacks even the mild imprimateur of formal endorsement by the UN conference. 

And what of the Accord reached by those five countries that other countries may now sign onto?  Given the fear and loathing that broke out earlier in the week between the developed and developing nations that with disastrous logistics threatened to make Copenhagen the Seattle of climate change negotiations, it was as good an outcome as could have been hoped for by the end.  However, the deal struck--to commit to reduce emissions with transparent reporting--was far weaker than what appeared achievable earlier in the week let alone expectations for the conference.  It keeps the idea of a global climate change accord alive but just barely. 

In retrospect, the idea of forging an international agreement requiring the acceptance of every country on earth during the greatest global financial crisis since the Depression to deal with a crisis whose greatest effects may not be felt for decades, may have been overly ambitious.  The promise of a global agreement on climate change that began in Rio made sense for many reasons.  The atmosphere moves across the face of the globe so that gases emitted anywhere impact global weather.  However, the bar for concerted action--a global treaty with billions of zero sum dollars at stake--is clearly high.  It can take the US years to negotiate a tax treaty with a single county.  With the Accord a guide to a more formal agreement,  countries will work over the coming year toward a binding agreement in Mexico.  But in the wake of Copenhagen, action appears no closer than before and perhaps further.  The Accord does give President Obama something to show Congress to encourage action on climate change.  But what form should the action take?  The centerpiece of the House bill is, of course, a US cap and trade system.  Cap and trade has proved effective in lowering NOX emissions .  However, it is a mistake to view action on climate change and cap and trade as synonymous.  Europe has had cap and trade in place for several years and has not succeeded, for the most part in actually reducing emissions.  A cap and trade system like a carbon tax provides an incentive to adopt new technologies or change behavior to produce less carbon.  But it is only a means, not the end.

What is the end?  The end is new low or no carbon technologies that are the necessary and sufficient condition to lower greenhouse gas emissions.  Emissions will go down when electric cars powered by renewable electricity replace gasoline cars and industry, homes and business run not on carbon-intensive fuels but on clean, renewable energy.  While a cap and trade system or carbon tax would make high carbon technologies more expensive, the real long term goal is to lower the price of clean alternatives.  That means breakthrough technologies and disruptive innovation.

Fortunately, breakthrough innovation and transformative technologies are their own reward and do not depend--in the long term--on making carbon more expensive.  There are other ways to accelerate innovation.  In the context of electricity, a key task is to break down barriers blocking the uptake of clean technology.  One such barrier that will remain whatever happens to the price of carbon is the cumbersome process by which utilities, heavily regulated and incented to do the wrong thing, not the right, currently source--or don't source--clean technology and renewable power.

The good news is we still control our destiny since if the US can pioneer new technologies, not only will we reduce our own emissions, we will harvest the economic benefits of selling this technology to others.  Whatever happens in Congress with cap and trade and with international climate negotiations, it is vital that we move forward on accelerating clean innovation now and tear down barriers blocking the free flow of clean technologies and energy to market.

The New York Times "Wheels" blog delivers some interesting news on the Nissan “Leaf” (not sure about that name), the company’s new electric vehicle that is being introduced in Los Angeles today. 

The Leaf, an all-electric five-door hatchback, will have a 100-mile range, Nissan said.

Mr. Ghosn said last month, in introducing the Leaf at the Tokyo Motor Show, that the vehicle would be priced “competitively” compared with other cars its size. This has been estimated at $25,000 to $33,000. But the price won’t include the lithium-ion battery packs; those will be available for lease separately. The spent battery packs will be recycled by Nissan and reused.

The Times writes those last two sentences (emphasis added) as if leasing the battery packs is some kind of "catch" in the pricing. It's not. Rather, the battery pack and the electricity to charge it are analogs to gasoline in conventional vehicles, which is never sold with the car.

For this reason, Nissan is on to something with the battery leasing. Like Better Place, which is building infrastructure for electric vehicles (and is teamed up with Renault-Nissan), Nissan knows that the key is not to build a car with a battery for the same price as a conventional gasoline car. Rather, the key is building a battery-less car for the same price as a conventional car. And once that happens, because electricity is far cheaper than gasoline, all one has to do to beat conventional cars is make the lease cost of a battery plus the electricity costs competitive with the cost of gasoline over the same period (which is already a reality in many countries). Incorporating the battery and its cost into the vehicle is likely not the right way to go for so many reasons, but on the financing side the cost of actually making a car go is always an addition to the purchase cost. 

Fully electric cars have some way to go – charging infrastructure needs to be built out and standardized, battery costs still have to come down, and capacity should go up – but getting the cost structure right is crucial in creating this piece of the low-carbon economy. Electric vehicles will ultimately offer tremendous benefits to consumers, from price stability to never having to go to the gas station, and to the electricity system, as the aggregate storage capacity in batteries will provide a demand response capability. And while I might prefer a name that connotes a bit more strength, the Leaf is a nice step forward.

Over the weekend, Senators John Kerry and Lindsey Graham penned a joint op-ed in the New York Times that has made those of us who care about action on climate change pretty happy. The prospects of Republican support extending beyond the Snow-Collins duo to John McCain's best friend in the Senate this early in the process is exciting, to say the least. And the compromise that Graham wants isn't too far-fetched.

There is, however, one piece of the op-ed that has made many who understand that combating climate change is a multilateral challenge nervous:

Fourth, we cannot sacrifice another job to competitors overseas. China and India are among the many countries investing heavily in clean-energy technologies that will produce millions of jobs. There is no reason we should surrender our marketplace to countries that do not accept environmental standards. For this reason, we should consider a border tax on items produced in countries that avoid these standards. This is consistent with our obligations under the World Trade Organization and creates strong incentives for other countries to adopt tough environmental protections.

I agree that we can't sacrifice jobs to overseas competitors. Competitiveness is one of the best reasons to pass climate legislation that spurs innovation and deployment of a whole generation of low-carbon technologies domestically. That said, climate change is a pressing global challenge that inherently requires unprecedented levels of global cooperation, but the proposed punitive trade policies are expressly unilateral mechanisms. This is a policy mismatch that will not help us solve this challenge. 

If we want the developing world – from which the vast majority of emissions growth is expected in the coming decades – to be on board with creating a solution to climate change and to buy our climate-friendly goods, slapping a tariff on them right away is not the way to make friends and influence people. And it's not as if the United States has been leading on climate issues – Imagine the American response if Europeans had imposed these tariffs. I don't want to begin to imagine the retaliation that other nations may decide upon; what do we do if China and India – who already have high barriers to climate friendly technologies – decide that they're not quite high enough, especially for American goods?

Additionally, it's crucial to note that climate legislation already allots (as opposed to auctions) permits to energy intensive industries. Tariffs amount to a double correction. Here's leading international economist Jagdish Bhagwati at a recent NDN-New Policy Institute event speaking about the tariffs and the WTO compliance of a cap and trade regime:

Some important people are wary of or opposed to these tariffs: The head Intergovernmental Panel on Climate Change, Rajendra Pachauri, thinks they're a bad idea:

"This is a dangerous thing, and I think people in Congress must understand this," said Pachauri, who spoke with the AP after he addressed the National Press Club. "Please don't use this weapon. I'm afraid that those that have been pushing these provisions probably don’t realize that all of this can cause a major negative reaction," Pachauri added. "The United States has always stood for a free market system. … Legislation to move away from that principle is clearly counterproductive."

As does President Obama: 

At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there. There were a number of provisions that were already in place, prior to this last provision you talked about, to provide transitional assistance to heavy manufacturers. A lot of the offsets were outdated to those industries. I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries.

So certainly it is a legitimate concern on the part of American businesses that they are not disadvantaged vis-a-vis their global competitors. Now, keep in mind, European industries are looking at an even more ambitious approach than we are. And they obviously have confidence that they can compete internationally under a regime that controls carbons. I think the Chinese are starting to move in the direction of recognizing that the future requires them to take a clean energy approach. In fact, in some ways they're already ahead of us -- on fuel efficiency standards, for example, they've moved beyond where we've moved on this.

There are going to be a series of negotiations around this and I am very mindful of wanting to make sure that there's a level playing field internationally. I think there may be other ways of doing it than with a tariff approach.

I'm excited that the chances for getting climate change legislation through the Senate have grown, I just don't want to see them destroy the chances for multilateral climate action. Both are important for American competitiveness, jobs, and the creation of a low-carbon economy.

Yesterday, NDN hosted three experts in the automobile industry to discuss the future of clean transportation. NDN Green Project Director Michael Moynihan moderated this wide-ranging and well attended discussion, the video of which can be found below.

Kim Hill, the Associate Director of Research at the Center for Automotive Research and the Director of the Sustainable Transportation and Communities Group, spoke about a recent study he conducted on the economic impact ATT’s shift to a more efficient vehicle fleet. The short version: the conversion to CNG and hybrid vehicles saved fuel and money and created jobs. The detailed study can be found here.

Mike Granoff, the Head of Oil Independence Policies for Better Place, the first service provider for electric cars, building infrastructure, software and the user interfaces to make electric cars available for mass adoption, spoke about the Better Place vision and business model and updated us on Better Place's progress. During the session, he mentioned the video of the battery swap station at work, which can be found here on the Better Place website. 

Finally, Dr. Kathryn Clay, the Director of Research for the Alliance of Automobile Manufacturers spoke about the industry's efforts to innovate to cut greenhouse gas emissions and the regulatory environment around those efforts. More on the Auto Alliance can be found here.

Here's the video of the full session:

One of the most important pieces for the future of transportation, energy, and climate is how we power automobiles. An interesting piece from the Wall Street Journal's "Environmental Capital" blog discusses a new study on the future of global oil supplies:

Here's an intriguing thought: Global oil supplies are indeed set to peak within a few years, and no, that is not bullish for oil. Quite the contrary—it will spell the end of the "oil age."

That's the take from Deutsche Bank's new report, "The Peak Oil Market." In a nutshell: The oil industry chronically under invests in finding new supplies, exemplified both by Big Oil’s recent love of share buybacks and under-investment by big oil-producing nations. That spells a looming supply crunch.

That will send oil to $175 a barrel by 2016—and will simultaneously put the final nail in oil's coffin and send prices plummeting back to $70 by 2030. That’s because there's an even more important "peak" moment on the horizon: A global peak in oil demand. That has already begun in the world’s biggest oil-consuming nation, Deutsche Bank notes:

US demand is the key. It is the last market-priced, oil inefficient, major oil consumer. We believe Obama’s environmental agenda, the bankruptcy of the US auto industry, the war in Iraq, and global oil supply challenges have dovetailed to spell the end of the oil era.

The big driver? The coming-of-age of electric and hybrid vehicles, which promise massive fuel-economy gains for short-hop commuting but which so far have not been economic.

Peak Oil, which used to be dismissed by many as kind of wacky theory (even though the idea was originally formulated by an oil company geologist), seems to have arrived firmly in the mainstream with the likes of Deutsche Bank onboard. Some argue that the arrival of peak oil will generate a massive shock to civilization, but, true or not, it will certainly be a game-changer that necessitates and speeds the deployment of new technologies. So if the Peak Oil believers are right, it's incumbent on us to start investing in these technologies today: Oil prices spikes have generally been economically problematic – or worse – some have triggered recessions.

For more on the "coming-of-age of electric and hybrid vehicles" and the general future of clean transportation and automaking, join us at NDN at noon today for Insights into the future of Clean Transportation, which will showcase speakers from the Center for Automobile Research, the Auto Alliance, and Better Place. If you can't make it, watch the event live online. 

With Friday's revelation from the Director of the White House Office of Energy and Climate Policy Carol Browner that President Obama's signature finding its way onto a climate bill was "not going to happen" prior to Copenhagen, it's time to go to Plan B to get the most out of the international conference. Although the US may not be leading on what many consider the most important piece of limiting climate harming emissions, there are still other areas in which we can show leadership.

One place to start is by building on something the G-20 did: a global agreement on the phase-out of fossil fuel subsidies. Taking the agreement from that smaller group and getting buy-in from additional nations (most of whom were obviously not at the G-20), would be helpful. Additional teeth should be put into such an agreement, such as an actual timeline – the current one is a somewhat laughable “medium term.” America can lead by acknowledging that our subsidies to fossil fuel industries easily outpace those given to clean technology and commit to changing that.

For many developing countries, fuel subsidies are something of a prisoner’s dilemma and policy trap. Governments artificially lower prices via subsidy thereby increasing demand – when, if nation’s acted in concert to eliminate these subsidies – markets would see to diminished demand and a lower world price. (Of course subsidies for low-income and vulnerable populations would remain appropriate.) Copenhagen is the perfect place to agree to such an outcome. 

There are other important ideas, some of which we'll be writing about and advocating in the coming months before Copenhagen. Domestically, a Renewable Electricity Standard and strong clean technology incentives are an achievable necessity. A robust agenda for reforming our electricity markets and slow-moving utilities is also a conversation we can begin.

Internationally, a Global Environmental Organization that adequately represents rising powers and developing nations and that builds and guards the structure and rules for the complicated climate regime, as Ed Gresser advocated in the latest Democracy Journal, is another good idea. And, as you'll be hearing about more in the near future, an agreement to remove the significant barriers to the global deployment of clean technology and environmental services is crucial. 

President Obama will be in a difficult position – he is in the right place on the issue, but the Senate is bogged down with healthcare, and getting to 60 on climate is not a forgone conclusion anyway. His team will therefore have to prepare a robust agenda of demonstrable accomplishments that showcases American leadership and gets the most out of this important conference.

For more on preparing for Copenhagen, check out the Washington Post, where NDN Globalization Initiative Chair Dr. Robert Shapiro continues his advocacy for a carbon tax. 

For those of you who have followed NDN for a while, television's must-watch shows hosted familiar faces last night. Jon Stewart hosted Vali Nasr, a professor at the Tufts University and adviser to Richard Holbrooke. Nasr was promoting his new book, Forces of Fortune: The Rise of the New Muslim Middle Class and What It Will Mean for Our World, which sounds like an important entry into the newly forming canon of books on the "rise of the rest." Simon interviewed Nasr, the footage of which can be found below the Stewart interview. 

Beneath that, you can find Shai Agassi, the founder of Better Place. An electric car startup that seeks to radically change transportation, Agassi appeared at NDN's "Moment of Transformation" conference last year. His appearance on Colbert last night is a good update on their progress. 

Nasr on the Daily Show:

Simon interviews Nasr:

Agassi on the Colbert Report:

Agassi at "A Moment of Transformation:"

Experience shows that an important key to growing a vibrant renewable energy sector is a strong domestic market. Germany’s feed-in tariffs have helped it become a world leader in solar energy production. China has long been focusing on building their domestic renewable energy industries, and just announced they are upping their efforts to build domestic renewable demand. 

From the AP's coverage of the U.N. Summit on Climate Change:

Chinese President Hu Jintao said his nation will continue to take "determined" action. He laid out new plans for extending China's energy-saving programs and targets for reducing "by a notable margin" the "intensity" of its carbon pollution — carbon dioxide emission increases as related to economic growth.

He said China would greatly boost its forest cover, "climate-friendly technologies" and use 15 percent of its energy from renewable sources by 2020.

That 15 percent renewable energy by 2020 sounds like a Renewable Electricity Standard. It also sounds similar to the one in the ACES bill that passed the House in June, which mandates 20 percent renewables by 2020, but that generally allows for 5 percent of that to come from energy efficiency (which it undoubtedly will, as efficiency is way cheaper than renewables). In fact, the ACES standard can be weakened even further, all the way down to 12 percent renewables in some cases.

So now China's ahead of the United States, and, even if we pass ACES as is, will have a comparable or slightly stronger RES in an economy whose energy use (and therefore said sector) will grow much faster over the next decade than America's will. We'll have the price signal that cap and trade offers, but it’s not nearly as strong as it could be. (China is unwilling to agree to cap emissions and certainly won't ahead of the U.S.) 

Much of the opposition to domestic climate change regimes comes of the idea that American action on climate without China going along hurts the U.S. economy and does nothing to slow climate change. Now, basically the opposite could play out. With China stepping up on an RES and limited movement from the U.S. Congress toward passing a strong climate bill, some Americans seem willing to let China take a leadership role on perhaps the most pressing global governance challenge of the young century and develop an export-capable renewable energy sector that passes ours, thereby surrendering a high potential economic sector to world's most important rising power.

New York City - With President Obama's speech today before the UN meeting on climate change, convened by UN Secretary General Ban Ki-Moon, the release of excerpts from an IEA report on the climate Sunday and climate on the agenda at the G-20 meeting in Pittsburgh, this week has shaped up as a remarkable one in climate discussions.  On Sunday, the IEA released sections from its forth coming Energy Outlook  that are remarkably optimistic about the climate.  Today, President Obama gave a forceful--if thematic--speech to the UN--notable more than anything else for the reversal of US policy on the climate that his presidency brings relative to his predecessor.  And later in the week, the G-20 will take up the issue anew after failing to make major progress in London.  All of this is happening with Copenhagen now just around the corner.  At this point, it is worth taking stock of where the world is on what Sir David King has dubbed the hot topic.

First, the IEA report in its suprisingly positive findings shows above all, that action on climate change is within our reach.  The IEA found that the EU effort on climate has succeded more than previously thought.  It also praises China for its efforts and the US for improving fuel economy  Most notable, however, is the huge decline in emissions that has evidently accompanied the current recession.  The sharp dropoff in emissions shows that the word can cut emissions dramatically over a period of months and still survive.  In effect, it sets a boundary.  Obviousy, we don't want to see unemployment at 10% in the US in order to lower emissions.  But it shows that a lower emissions world is attainable. In fact, we are living it right now. 

The President's speech, though criticized by some environmentalists for lacking specifics, in my mind hit the right notes and reverses one of the troubling elements of much of the discussion before.  While noting that the developed world needs to do more, the President also called the developing world to account.  This strikes a slightly different note than many dicussions up to now that have reprised the poverty debate with the developing world asking for aid and the developed world expressing guilt over previous sins.  Climate change discussions--though they touch on issues of development--are not about equity between North and South but rather the survival of the planet.  Progress on saving the climate cannot be about apologizing for the last century of industrialization.  That was a necessary phase of economic development that although it raised living standards first in the developed world, in effect, paved the way for industrialization everywhere.  Nor was industrialization in the west a free ride for the workers who toiled in factories or even those who enjoyed its fruit as the high mortality of the indsutrial wage and bloody 20th Century attest.  The developing world although slower to industrialize in many ways inherits the technology, transportation network and markets created by the developed world's industrialization.  And developing countries have an even greater stake in addressing climate change because they stand to suffer disproportionately from rising sea levels, disruption of food supplies, extreme weather and other potential consequences of a hotter planet.  The President was right to call on the developing countries to be as serious as the developed ones about facing this issue.

The discussions underway at the UN and those that will be part of the G20 process, however, are not moving at the pace that anyone would like.  Although President Obama took pains to mention the passage of climate change legislation in the House, he could not point to a unifed American position as our basis for international negotiation.  The simple fact is that there is a very real possibility that a comprehensive global agreement on global greenhouse gas emissions will not be ready by Copenhagen.

If that is the case, however, as the IEA repot makes clear, that does not mean all is lost.  Rather, the US like China and, indeed, all countries needs to move forward on the many other fronts available to address the problem of greenhouse gas emissions.  Since the recent interruption of growth was, we all hope, temporary, as I have written before the answer ultimately must be technology.  In order to incent the private sector to accelerate the rollout of low carbon technologies, government needs to put the right policies in place.  That means improving fuel economy, building more efficient buildings and creating a new, smarter, more open electricity network to spur a renewable revolution. 

Regardless of what happens this week in New York and Pittsburgh, or what happens in Copenhagen the problem of climate change will not be solved in a day a month or a year, but only through the consistent application of private industry and government in all their actions to introducing that technology.  That is the real imperative underlying this week's focus on climate change.  And it must be the real goal of a wide range of policy efforts going forward whether the world secures a comprehensive agreement or not.

As the New York Times reports today in an editorial, the decision of Senators Kerry and Boxer to put off introduction of their climate bill until the end of the month is likely to push Congressional action on climate change that much further into the future.  With the fate of health care legislation in doubt, there is little appetite for moving climate change legislation to the floor.  However, as the Times also points out, that does not mean all is lost.  The EPA is moving forward on rules to regulate carbon dioxide as a greenhouse gas.  Perhaps even more importantly, however, the Senate has already passed legislation to create a renewable electricity standard.  Indeed both the Senate and House have passed numerous provisions--that while not as dramatic as putting a price on carbon--attack the climate problem in important ways.

The current situation highlights the fact that while putting a price on carbon through a cap and trade system or carbon tax--as France just announced it will do next year--has achieved symbolic status as a litmus test for seriously addressing climate problem, it is only one policy tool.  Indeed, as the EU's experience with cap and trade (and carbon taxes in Finland, Sweden and Denmark) shows, there is no silver bullet for reducing emissions.  There are policies.  And all of these policies ultimately must accomplish the same thing: accelerate the development and use of new, cleaner technologies.

Assuming continuing growth of human civilization, only new low emissions technologies that replace carbon intensive ones can sustain growth without warming the planet.  Conservation--getting by with less--is helpful in the short term.  So is reforestation.  Over the long term, however, as population grows and living standards rise, forests will be cut and emmissions rise, leaving new technologies as the only long term answer. 

The appeal of putting a price on carbon is that by internalizing the social costs of emissions, it lets the market select the best way to reduce them.  The difficulty, as the EU has discovered, is that allocating the right to pollute or even crafting a fair and harmonized carbon tax is an inherently political process that provides a golden opportunity to free ride on the reductions of others.  Since climate change is something taking place over decades, governments have an even greater opportunity than usual to postpone pain.  To date, Europe's success in reducing emissions through cap and trade has been real but modest and its efforts offset by exploding emissions from India and China. 

This does not mean that cap and trade is not a good idea: only that is just one tool in the shed.  Which brings us to alternative approaches. 

Europe has had success with a feed in tarriff to encourage deployment of renewable energy.  The US equivalent of tax credits has been useful though less transformative.  A renewable electricity standard such as that in the EU and those already passed in separate bills in the House and Senate will also help replace carbon intensive energy with renewable energy. 
 
However, there is an additional problem.  While building is going green--most new large commercial buildings are seeking Leeds certification, power generation is changing far more slowly.  The reason is its regulated status.  While the telecom industry is now turning over its entire network infrastructure every five years at a cost of billions and consumer businesses must continually invest in new products and technologies to stay in place, heavily regulated power utilities face no real competition and, instead, major barriers to innovation.

True, regulated utilities normally earn a guaranteed rate of return on investment which, all things being equal, should incent them to make new investments.  However, they also require the approval of regulators whose mission, above all, is to contain costs to consumers.  A consumer preference for renewable energy rarely expresses itself in the market since consumers don't get to choose their source of power. In  short, the structure of the utility industry is currently blocking the renewable revolution.

I support prompt action on cap and trade as one tool to address the climate problem. However, as valuable as it is, it is one tool of many.  Regardless of how quickly this tool becomes available, it is important to take all of the other steps available to accelerate investments in clean technologies.