Energy Independence

Senator Bingaman Delivers Climate Address to NDN

This morning, Sen. Jeff Bingaman, Chairman of the Senate Energy and Natural Resources Committee, delivered an address on climate change at an NDN Green Project event. The speech laid out his vision for how to address climate change through uniform, workable, flexible and realistic cap and trade legislation that focuses on reducing greenhouse gasses and encouraging investment in the technology necessary to reform our energy system.

In introducing Chairman Bingaman, NDN Green Project Director Michael Moynihan pointed toBingaman the critical need to transition to a post-carbon economy, a challenge driven home to Americans every day by soaring gasoline prices.

Entitled, "Finding the Path Forward on Climate Legislation," the speech was a truly important step in enunciating a view of how to responsibly tackle climate change. As the Senate recovers from the aftermath of the Lieberman-Warner debate and looks forward to the next Congress, full statements of principles from key leaders on climate and energy, such as the one today by Senator Bingaman, will be crucial to stimulating the necessary debate to pass effective legislation.

From Senator Bingaman’s introduction to his remarks:

A little over a month ago, on June 6, the Senate failed to invoke cloture on the Lieberman-Warner Climate Security Act. That vote ended any realistic prospect we had of dealing with the problems of climate change in any comprehensive way in this Congress.

From one perspective, the relatively short debate that we had in the Senate on the measure was a disappointment. No substantive amendments were considered or had action taken on them. Despite the tremendous amount of effort put into developing the bill by the sponsors -- Senators Lieberman, Warner, and Boxer – much of the debate was on the generalities of dealing with climate change and not on the specific merits of any particular part of their proposal.

Looked at another way, though, last month’s debate demonstrated an important transition that is underway in Congress. Congress has moved beyond a debate on the science of global climate change. We are now starting a much more difficult debate – one on how best to construct a mandatory regulatory regime to mitigate global climate change.

No one expected that last month’s legislative process would produce a law that would be enacted this year. For one thing, the President issued a statement declaring that he would veto such a law. More importantly, many of us are still trying to master the complexities of this issue, in terms of its multiple effects on the global ecosystem and the global economy, as well as its multiple effects on both the environment and the economy here in the United States.

One thing is clear at this point. Any proposal to seriously address the challenges of responding to climate change will require sustained action -- and a sustained commitment to keep taking increasingly more stringent actions -- over the course of many years.

To approach this issue responsibly, it is important for us to understand two things about the scale of the global challenge of climate change. First, we need to understand the scale of the problem. Second, we need to understand the scale of the system we have -- for producing and using energy -- to change in order to deal with the problem.

We have to keep our eye on both these issues of scale. On the one hand, if we fail to recognize how enormous and urgent the problem of climate change is, we will fail in our responsibility to act sensibly and soon. On the other hand, if we fail to recognize how enormous and difficult a task it is to change our energy system, we may embark on a course of action without making clear from the start the potential sacrifices involved.

As Senator Bingaman notes, the transition to the post-carbon economy will not be simple; the scale of this transformation is vast. By embracing the changes necessary in our energy system as an opportunity to develop a truly competitive and innovative 21st century economy, and by understanding that energy reform is part of any sound economic policy going forward, America can put itself on a path toward sound energy, climate, and economic future.

To view Senator Bingaman’s full remarks, click here.

Energy and Climate Take Center State in Campaign

It's official, energy is now at the very heart of the 2008 Presidential election. While it is unfortunate that it took $4 gas prices, America, all the way to oilman T. Boone Pickens (except, of course, for President Bush), has woken up to a new energy reality. The RNC has responded with "balance," a $3 million ad buy coming on the heels of an ad series from the McCain campaign touting his energy security credentials.


McCain has chosen to make energy security his central issue in this year's campaign. And, while his policies do not match his rhetoric - drilling offshore and suspending the gas tax would do nothing "now" to lower energy prices and would ultimately exacerbate climate change - he has seized what is now the number one issue of the campaign and one of the only issues he has a shot on, running ads in battleground states and forcing Obama to respond. The ad is especially ironic as it features the Republican Party criticizing the Democratic candidate for President for being "just the party line" in a year in which Democrats have a 10 to 15 point party ID advantage.

Obama's response, "New Energy," debunks the RNC/McCain promise of action "now," announces the Obama plan, and actually has some particulars that would make a difference in both energy prices and climate change:

The fact that energy and climate change are at the center of this election, with a sitting President who does not even acknowledge any real need to act on climate change, represents a fundamental shift away from Bush politics and the Bush era. The candidate who wins this election will be the one who shows the American people they best understand it.

Tomorrow morning at 8a.m. in room 325 of the Russell Senate Office Building, NDN will host Senate Energy and Natural Resources Chairman Jeff Bingaman for an address on climate change. This is the first in a series of events this month from the NDN Green Project's effort to understand this new energy and economic era. For more information on this event and to RSVP, click here.

Zakaria: Power Failures

In a Newsweek Op-Ed yesterday, Fareed Zakaria rails against current American climate and energy policy (or lack thereof) in the context of this week’s G-8 in Hokkaido, Japan.

Whether it's Barack Obama or John McCain who enters the White House in January, the new president could well find his approval ratings sliding fast. The increasingly grim economic news is likely to overshadow all else. Britain's prime minister, Gordon Brown, is already experiencing this reality. While most of the British media would argue (vigorously) that Brown's low poll ratings relate to his charisma, or lack thereof, he is also clearly suffering the political effects of economic malaise.

Like the United States, Britain is going through a credit crunch, a financial crisis and a housing collapse all at the same time. Brown, however, argues that the central problem is skyrocketing food and fuel prices—"that's what hurts the average family most," he said in a conversation last Tuesday. Brown said he hoped that the Group of Eight countries would take them on at its summit in Hokkaido, Japan, this week. "The great challenge for the G-8 is, can we coordinate policies to prevent crises. In the 1980s, we had currency coordination. But with finance globalized, that's not the challenge of the present," he said. "The new problem, worldwide, is energy. We need to coordinate our energy policies."

Brown argues that even in the short- and medium-term, the G-8 countries could do something. "The market assumes that demand will always increase, and in a circumstance of constrained supply, that means prices rise. But we can send a signal that demand is going to moderate, that we are serious about efficiency and alternative energy sources. But it would have to be a clear signal sent by all the major consuming countries."

Last month, Britain laid out plans to generate 35 percent of its electricity needs from renewables by 2020—up from 5 percent now. The country is already the world's largest generator of wind power (with mostly off-shore turbines) and plans to generate 60 times current levels in 12 years. It has also cleared regulations to increase nuclear energy. "You cannot get to a new energy mix without a substantial rise in nuclear power," Brown said.

The contrast with Washington is blinding. George Bush still has not made a serious speech, announced a serious plan or presented Congress with a serious set of laws to move the country toward new energy sources. With oil prices at their highest levels since the discovery of oil (even in inflation-adjusted dollars), and with their rise threatening to push the country and the world toward 1970s-style stagflation—he hasn't brought himself do it. And while we stand pat, the rest of the world is moving. In a recent ranking of countries for environmental performance, jointly produced by Yale and Columbia universities, the United States came in 39th, well behind every other advanced industrial country. (Germany ranked 13, Britain 14 and Japan 21.)

Washington's inaction also stands in contrast to intense activity in the private sector, fascinatingly described in Fred Krupp and Miriam Horn's new book, "Earth: The Sequel." Krupp heads the Environmental Defense Fund, but this is not a gloomy global warming tirade. It's an optimistic account of the progress being made by American industry in renewable energy. The authors explore every new technology, from solar to wind to geothermal, and introduce the men and women who are inventing the future.

But they would be the first to point out that, even though American research labs are rising to the challenge, government action remains vital. The idea that government should "stay out" is meaningless. It is in knee-deep already; energy is a highly regulated industry. In fact, it's notable that we have low productivity and runaway inflation in two crucial areas these days—food and fuel. Both have been nationalized, protected or subsidized by governments around the world for decades. A host of regulatory and legal barriers make renewable and small-scale energy production less attractive, profitable and manageable than it could be. But Krupp and Horn focus on the central policy change that the United States needs to make—enacting a cap on carbon. America is the only developed country that does not put a price on carbon.

Imagine if President Bush were to announce at the G-8 summit that the United States would institute a cap on emissions. We would instantly have the world's largest carbon market and it would, instantly, change the price of clean energy. It would unleash a tsunami of economic activity in renewables that could, over time, give American productivity the next big boost it needs. It would, of course, also quickly send a signal to the market about future demand for oil, which would in turn affect the price.

But somehow I don't think that's what Bush is going to say in Hokkaido this week.

Zakaria is right to suggest that America do what much of the rest of the world seems to know we must: restore American leadership globally by comprehensively tackling climate change and reforming energy policy. He also knows that by doing so, we will address demand for fossil fuels, and fundamentally alter the current energy and economic paradigms. Solutions to the energy and climate dilemmas are not, as some argue, mutually exclusive. Rather, creating a prosperous 21st century depends on understanding that they can be one in the same. The private sector has figured this out, and is making a lot of money while doing so. Let’s see if the government can’t get the picture too.

Sen. Bingaman to Address Climate Change Tomorrow; NDN's Green Summer

As climate change, energy prices, and the impact of the “Third Oil Shock” on the American and global economies continue to make front page news every day and change the way we live, NDN’s Green Project is excited to announce a series of events and thought-provoking papers examining these critical issues over the next month.

Building on previous work in the green space, including a forum in New York City entitled, Understanding the Cleantech Investment Opportunity, and talks by energy expert Amory Lovins and electric car innovator Shai Agassi, NDN’s upcoming Green Project will be offering some thoughts on intellectual underpinnings for building the post-carbon economy.

NDN Green ProjectWe kick off this important and timely series on Wednesday, July 9, on Capitol Hill with U.S. Sen. Jeff Bingaman (NM), Chairman of the U.S. Senate Committee on Energy and Natural Resources and one of our nation's foremost leaders on energy, who has chosen NDN to host his next address on climate change. This event will start at 8 a.m. in 325 Russell Senate Office Building. Click here to RSVP.

NDN will also be releasing an important new paper by NDN Green Project Director Michael Moynihan entitled, Solar Power: The Case for Action. In this paper, Moynihan places solar energy in the context of major changes needed to our energy policies, including how to reinvent our national economy to cope with high energy prices and increase our technological competitiveness in a post-carbon future.

On Wednesday, July 16, Dr. Robert J. Shapiro, Chairman of the NDN Globalization Initiative, will host a lunch for the NDN community on his new paper, Addressing Climate Change without Impairing the U.S. Economy: The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief, which details a strategy for implementing a carbon tax and using 90 percent of the revenue to cut the payroll tax. The lunch will be held at 12:30 p.m. at NDN: 729 15th St. NW, 1st floor. For more information or to RSVP, contact Kevin VanderMolen at or 202-384-1216.

On Saturday, July 19, in Austin, Texas, Michael Moynihan will join NDN President Simon Rosenberg and Andrei Cherny at Netroots Nation in speaking on A New Era of Possibility—Looking at America's Role in the World after the Bush Presidency.

Finally, NDN has an event in the works to examine the impact of high energy prices on such important elements of the economy as the auto industry, transportation, aviation, the exurbs and, indeed, the American Way of Life. Please stay posted for more details.

Do not miss these events that together will help develop our understanding of the impact of climate change and energy policy on our nation. To read NDN’s latest thinking on these issues, check out the Green Project blog.

GM on the Ropes, an Israeli Air Strike? and Peering Inside the Black Box of the Oil Companies

New York.  Signs that the Third Oil Shock is beginning to do real damage to the economy were evident in GM's close below $10 yesterday, its lowest level since 1954, that drove stocks in to solid bear territory.  Jobs also declined sharply.  The impact of high fuel prices is sure to be a major topic around grills this Fourth of July as people drive or fly to be with friends.  Here is the latest on GM and the economy.

The Financial Times has an interesting story showcasing the shadow boxing now taking place between various actors around a potential Israeli raid on Iran's nuclear reactors that some expect this fall. The US Chairman of the Joint Chiefs of Staff worried publicy about opening up a third front in the region in addition to Iraq and Afghanistan while Iran made it known it would retaliate by blocking off oil routes.  Israel recently conducted maneuvers that some viewed as a trial run for a raid. 

Yesterday, the FT ran another interesting story on Shell Oil.  In the US debate over what to do about high oil prices--drill in the Arctic, force the oil companies to explore the federal land they already lease and so forth--conspiciously absent are the views of the oil companies.  They are the Black Box of the question, keeping a low profile with the public while funding immense lobbying and advertising campaigns behind the scenes.  Their views are presumably known to Dick Cheney and the Bush Administration but whether they are dictating policy to the Republicans or the Republicans are just messaging on their issue is an open question.  The FT article gives an interesting glimpse into one company, Shell and the challenges it is facing as Nigerian rebels step up their attacks on facilities in the oil-rich Forcados River delta and now Nigeria's offshore platforms.  Shell's overall production is declining as Nigerian oil which had been rising until the violence fails to compensate for declining North Sea oil.  Shell's story, if representative, suggests that oil is slowly running out around the world and growing harder to find.  Paradoxical, then, that profits have never been higher.  And, there is something odd about the way that oil is inevitably interwined with voilence--what in the 19th Century was called the Great Game when the players were Russia and England vying for oil around the Caspian Sea.  It is past time to move onto fuels that do not provoke constant wars.

No Country for Old Mavericks

The last couple weeks have seen copious coverage of John McCain's inconsistency on energy policy. These discrepancies have been noted with some curiousity, but with a series of ads on energy security, McCain is clearly attempting to assume the energy security mantle in this campaign, and perhaps it is worth taking greater notice of them. After all, climate change is his signature "maverick" issue - the main issue that he claims not to follow President Bush on.

The problem is that his biggest maverick endorsers - those that he can use to paint himself as bipartisan (or as putting "Country First," his new slogan) - don't really agree with him on his maverick issue. Arnold Schwarzenegger, one of the most progressive executives in the country on energy issues and a McCain endorser, criticized McCain's offshore drilling plan as "blowing smoke." From the Los Angeles Times:

Gov. Arnold Schwarzenegger made a veiled swipe at Republican presidential hopeful John McCain on Thursday when he said at a climate conference here that anyone suggesting offshore oil drilling could bring down gas prices was "blowing smoke."

The remark was also a dig at his host, Florida Gov. Charlie Crist, who riled environmentalists, tourism promoters and the state's political leaders on both sides of the aisle last week when he voiced support for McCain's proposal to lift bans on exploring for oil off the coasts of California, Florida and the Eastern Seaboard.

From his podium at the conference, Schwarzenegger said, "Politicians have been throwing around all kinds of ideas in response to the skyrocketing energy prices, from the rethinking of nuclear power to pushing biofuels and more renewables and ending the ban on offshore drilling," Schwarzenegger said. "But anyone who tells you this would bring down gas prices any time soon is blowing smoke."

Another issue McCain faces is that Joe Lieberman, sponsor of the leading climate change legislation in the Senate this year, supports McCain, but John McCain's climate change goals are far more modest than Lieberman's legislation. In fact, McCain skipped the Senate vote on the issue, and indicated that he did not support the legislation.

So, if McCain is a maverick on energy, why don't his two signature maverick endorsers - both leaders on his signature maverick issue - agree with him on fundamental aspects of that very issue?

US Sen. Jeff Bingaman to Deliver Major Address on Climate Change to NDN

NDN’s Green Project is pleased to announce that one of the U.S. Senate’s most well-regarded leaders, U.S. Sen. Jeff Bingaman (NM), Chairman of the Energy and Natural Resources Committee, is scheduled on Wednesday, July 9, to deliver a major policy address on climate change to the NDN community.

As Chairman of the Energy and Natural Resources Committee, Sen. Bingaman has been a strong voice for addressing our nation's energy challenges through reducing America’s reliance on fossil fuels, cutting greenhouse gas emissions and increasing investment in innovation and technology necessary to build a clean energy future.

Chairman Bingaman's speech is scheduled for 8 a.m. in Room 325 of the Russell Senate Office Building, in Washington, DC.

Sen. Bingaman has been a long-time friend of NDN and has supported the missions and goals of NDN throughout the years.

NDN’s Green Project is a program of the Globalization Initiative that seeks to develop the legislative and regulatory framework to address climate change, enhance energy security, and accelerate the development of green technologies to promote economic growth.

NDN’s Green Project Hosts Senate Energy and Natural Resources Chairman Jeff Bingaman for Major Policy Address
325 Russell Senate Office Building
Wednesday, July 9
8 a.m.
Click here to RSVP

The Third Oil Shock: To Raise or Not to Raise

The decision by the Fed yesterday to leave rates unchanged--despite inflationary pressures from soaring oil prices on the one hand and a weakening economy on the other, testifies to the conundrum an oil shock creates. There are, in essence, two possible choices when a shock sends prices soaring. One is to raise rates to squeeze the inflation out of the economy. The other is to allow the inflation. Neither is a pleasant option. However, they have quite different consequences.

To see the potential impact of either policy, one only needs to look at the first two oil shocks in the 1970s, for each exemplifies one approach.

The First Oil Shock in 1973, was a watershed in economic history. The immediate trigger was the Yom Kippur war pitting Israel against Egypt and Syria. However, the pre-conditions for the spike were already present in the decision of Nixon to take the US dollar off the gold standard in 1971 which allowed the dollar to depreciate reducing the revenues of oil producers combined with the failure of the Seven Sisters oil companies to cut a deal with the still-docile oil producing nations on revenues. In October, when war broke out, what we now call OPEC announced it had become a cartel and blocked oil shipments to countries supporting Israel, ie the US, Europe and Japan, causing prices to spike.

Accustomed to getting endless oil for practically nothing--it was western companies like BP and Mobil after all that had dug the oil wells in the desert--the West went into a panic. In the US, daylight savings time was suspended, gas rationing went into place and auto races were cancelled. The US economy went into recession. In due course, the CAFE standads came into being in 1975 and Americans began buying small Japanese cars.

However, faced with this challenge, central bankers decided not to raise interest rates and, in fact, to cut them once the economy tanked, allowing the economy to inflate. The result was what we now call stagflation, a stagnant economy combined with inflation that cut stock prices in half. Stagflation characaterized the 70s in the US and in Europe set the stage for the drive for a European Union to combat eurosclerosis.

Fast forward to 1979, the year of the Second Oil Shock. This time, the trigger was the Iranian revolution and subsequent invasion of Iran by Iraq that cut production in both countries by about 6.5 million per day. This time, however, the West reacted in a far different manner. As inflation soared, Central Bankers decided to face it straight on and take the bitter medicine of monetarism. Fed Chairman Paul Volker began raising rates until they rose into the double digits.

The result was another recession. However, the Fed kept the heat on, leaving rates high through 1981 and putting the economy through the proverbial wringer. By 1984, inflation had been wrung out of the economy and the US finished its conversion frrm an industrial to a post-industrial economy This transition involved the shuttering of the steel industry, the shipping industry, the old electronics industry and much of America's industrial base. However, in its wake emerged the post-industrial US economy of finance and technology that characterized the expansions of the 1980s and 1990s.

Two shocks; two courses of action; two outcomes: stagflation, or wrenching restructuring of the economy.

Of the two, the latter was the more painful but ultimately the better choice. However, it marked the end of one era of American economic and social history and the beginning of a new one.

Are we at a similar juncture in history? Quite possibly. If the world really faces up to the new demand for energy, we may be looking at the end of the high carbon economy and the beginning of a new, low carbon one. But the change will be momentous.

On the other hand, the alternative, putting off the reckoning and allowing staglation to emerge may be easier in the short run but may only delay the inevitable.

In addition to interest rate policy, whether the world gets serious about lowering carbon emissions and makes the needed investments in renewable energies are also important questions that will determine the shape and pain of the needed adjustment.

Right now it's too early to predict how the world will react to the third oil shock, but without real backbone and leadership, 1970s style staglation appears to be the outcome toward which the US is slouching



Dr. Robert Shapiro Unveils Paper on Tax Shift to Combat Climate Change

On Monday at the National Press Club, I attended an event put together by the U.S. Climate Task Force, which is chaired by Dr. Robert J. Shapiro, also Chair of NDN’s Globalization Initiative. At this event, Dr. Shapiro released his paper entitled, Addressing Climate Change without Impairing the U.S. Economy: The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief, which details a strategy for implementing a carbon tax and using 90 percent of the revenue to cut the payroll tax. (The remaining 10 percent would be used to fund research, development, and deployment of clean technology). The end effect would be to combat climate change while limiting the economic burden and increasing the political salability of such a solution to climate change.

The proposal is fascinating, and the event, which featured a panel of climate change experts, was equally so. The take-away from the event was that putting a price on carbon is obviously crucial to combating climate change, and that returning the money collected by a carbon-pricing scheme through a reduction in the payroll tax is an innovative and progressive idea. Internationally, it is crucial for the U.S. to lead in the effort to combat climate change, especially because any agreement will need to bring the developing world on board. China’s carbon emissions have already surpassed America’s, and will only continue to grow. Tackling the prevalent use of coal and providing consumers with alternative forms of energy, in large part through increased investment in research, development, and deployment of low-carbon sources, must also be central to confronting climate change.

Climate Wire (subscription req’d), had this to say about Dr. Shapiro’s proposal:

As energy prices climb higher, even the most environmentally minded politicians have shied away from the tax, deeming it to be too much of a political landmine.

The tax would start out at $14 per ton in 2010 and rise to $50 per ton in 2030. Most of the revenue generated -- projected to be about $4 trillion over 20 years -- would cycle back into the economy, primarily through a cut in the payroll tax.

"We are reducing one tax and applying a second tax. The reason is, we want to encourage one kind of behavior and discourage another kind of behavior," explained Robert Shapiro, chairman of the U.S. Climate Task Force and a co-author of the new report. "This is not the imposition of a tax -- this is a tax shift."

Here is NDN’s press release endorsing Dr. Shapiro’s paper:


The U.S. Climate Task Force yesterday released an important paper in the debate over how to address climate change and global warming entitled, Addressing Climate Change without Impairing the U.S. Economy:The Economics and Environmental Science of Combining a Carbon-Based Tax and Tax Relief.

Authored by Dr. Robert Shapiro, former Under Secretary of Commerce for Economic Affairs in the second Clinton Administration and Chairman of NDN’s Globalization Initiative, and economists Dr. Nam Pham and Dr. Arun Malik, the paper represents a valuable addition to the literature on potential policy solutions to the problem of carbon emissions.

NDN strongly endorses the report’s bold recommendation to put a price on carbon and supports the report's central idea that a well-crafted carbon tax, combined with a reduction in the payroll tax, has the potential to staunch the release of greenhouse gases without harming the economy and will promote job creation. In endorsing this carbon tax proposal, NDN remains committed to the effort to develop comprehensive climate change legislation that accomplishes the goal of reducing carbon emissions through a tax on carbon, a cap and trade system, a cap and dividend system, or some combination of the above.

A number of countries and localities have adopted a carbon tax to help stem greenhouse gas emissions. Such a tax, however, can increase costs to energy or industrial consumers and potentially impose a drag on economic growth. Using computer simulations that employ the U.S. Department of Energy’s energy consumption and pricing model, Dr. Shapiro’s paper makes the important point that how this tax revenue is recycled through the economy is critical to the effect of the tax on the American people.

Using carbon tax revenue to reduce the payroll tax helps to mitigate the impact on the economy by increasing disposable incomes of working families and reducing what is, in effect, currently a disincentive to employment. While the payroll tax has historically played a critical role in funding Social Security, it is levied as a tax on wages. So, reducing the tax and any future increases likely required to accommodate an aging workforce helps to promote employment. And by tying the payroll tax deduction to the revenue to be gained from putting a price on carbon, Dr. Shapiro’s proposal offers a way to limit carbon emissions without lowering economic growth.

“The idea of balancing a carbon tax with a reduction in the payroll tax is appealing because it has the potential to put a price on carbon without lowering economic growth,” said NDN Green Project Director Michael Moynihan.

Moynihan added that NDN will continue to work with the U.S. Congress, the presidential campaigns, the U.S. Climate Task Force, the clean technology community, the environmental community, industry and other interested stakeholders in meeting the important challenge of climate change.

Energy is Number One

A Gallup Poll released today shows that energy and gas prices are considered by more Americans to be extremely important than any other issue in the Presidential election.

Additionally, 19 percent more Americans believe that Barack Obama would be better able to handle energy issues. He leads John McCain 47 - 28. For more of NDN's Green Project work on energy security and climate change, click here.

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