Tuesday, December 02, 2008

Take This Crisis

The refrain that I heard this morning from Fareed Zakaria about taking advantage of crisis was not actually intended to apply to energy. It seems appropriate though, as the economy spirals downward. We should never let fossil fuels grip our prosperity as they recently did. Prices of everything that requires transportation, as well as getting to work, bit deeply into everyone's standard of living. That is in hiatus for now, but increasing scarcity of gasoline and heating oil has impressed us with its inevitability, and the effects that will have.

What the country needs at the moment is investment in our own industry, producing jobs. There is no industry we need to promote more urgently than alternative energy production and utilization.

A post on green energy that I ran into this morning presented some sound ideas, and some I have problems with.

Even before the recent crisis and subsequent financial-industry bailout, deficit hawks Robert Rubin and Lawrence Summers, who served as Clinton's treasury secretaries, publicly said that because the deficit is a smaller percentage of gross domestic product today than it was in 1992, some deficit is justified. Now Washington is under intense pressure to take a much more active role in the economy. And with a high demand for safe U.S. Treasury bonds, the cost of borrowing is low.

Deficit spending and direct government investment in the economy are in. Balanced budgets and obeisance to markets are out. Faced with a global liquidity crisis and a deep and potentially prolonged recession, government has become the investor of last resort. Congress may close tax loopholes and allow the Bush tax credits to expire, but the prospects for any kind of broad-based energy or carbon tax, or serious auctioning of pollution rights, are extremely poor. Given the recent chaos in the financial markets, Congress is unlikely to turn over the nation's energy and transportation economies to the same Wall Street firms that brought us credit-default swaps and financial derivatives.
Many greens and progressives worry that this investment approach would result in more public money going to technologies they don't like, namely nuclear, corn ethanol, and "clean coal." But nuclear and corn ethanol already get very large subsidies, a situation that cap-and-trade wouldn't change, whereas an investment-centered approach would deliver far greater funding for renewables, the poor stepchildren of energy policy. While there is no such thing as "clean coal," given its impact on mountains and rivers, most energy experts believe that, as the world triples its energy consumption between now and 2050, coal will remain a large component of our energy supply. Few countries will be in a hurry to dismantle coal plants, but they might retrofit them with cheap technology to capture and store carbon emissions. And that technology may help us to build inexpensive stand-alone "air capture" machines to vacuum emissions from the ambient air -- prototypes of which are already up and running.

Obama has long advocated a $150 billion clean-energy investment program, which he has proposed to pay for through carbon auctions. But on the stump and in the debates, he spent most of his time talking about his proposed investments and almost none talking about carbon auctions. Given the severity of the recession, the funds for Obama's clean-energy plan are more likely to come from deficit spending. This will strike many greens as a flawed approach to reducing carbon emissions, because, they argue, without a carbon cap or tax, there is no certainty that investments in clean-energy technologies will actually reduce emissions.

But carbon caps and taxes hardly guarantee a decline in emissions. Despite ratifying the Kyoto Accord, which included binding caps, few nations have actually reduced their emissions at all, and global emissions growth has substantially increased. That's because virtually every nation that has established carbon caps has also included measures, either overtly or covertly, to reduce the cost of compliance, which renders the caps largely symbolic. Carbon caps have failed to reduce emissions all over the world because fossil-fuel alternatives are still much more expensive than current polluting energy sources, and voters and policy-makers are not willing to make fossil fuels so expensive that clean-energy alternatives are economically viable. If we succeed in developing the right new technologies, it might pave the way for a future cap or carbon-pricing approach that would cause less hardship and thus actually work.

Since the early 1990s, environmentalists have argued the opposite -- that once the government established caps or a price for carbon, polluting industries would quickly find an inexpensive way to comply, as they did in the case of acid rain and chlorofluorocarbons (CFCs). But in fact, efforts to negotiate a phase-out of CFCs failed repeatedly until the chemical company DuPont developed a low-cost alternative. Only then was an agreement achieved. And the cap-and-trade program to reduce sulfur-dioxide emissions was able to do so at costs significantly below early estimates because low-sulfur coal became widely available in the years just prior to the passage of the relevant Clean Air Act amendments in 1990.

Coal may remain with us for awhile, but the faster we get wind and wave technology into production, the cleaner our air will remain. The maiming industry of coal production needs to end, as well.

While we are transitting to clean energy, cleaning up what we have at the moment may be necessary, as deficits will be. Putting an end to pollution should definitely be mandated as we progress toward full use of alternative energy sources. The production of jobs is a very positive factor in the transit process as well.

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