Subsidies and tax breaks are a tried and true way of helping a developing industry get up on its feet.
One of the strategies to accelerate a transition to cleaner greener renewable energy sources is to subsidize research development, and production of renewable energy sources, such as wind power, solar power, geothermal, etc.
Free market advocates often say that the emerging renewable energy industry should not be subsidized. What is not widely know though, is that subsidies for well established fossil fuels exceed renewables by almost six to one.
Research by the Woodrow Wilson International Center for Scholars and the Environmental Law Institute reveals that the lion’s share of energy subsidies supported energy sources that emit high levels of greenhouse gases (GHGs). The study, which reviewed fossil fuel and energy subsidies for Fiscal Years 2002-2008, showed that the federal government spent about $70 billion on the fossil fuel industry, and about $12 billion on renewables. As the report points out:
Moreover, just a handful of tax breaks make up the largest portion of subsidies for fossil fuels, with the most significant of these, the Foreign Tax Credit, supporting the overseas production of oil. More than half of the subsidies for renewables are attributable to corn-based ethanol, the use of which, while decreasing American reliance on foreign oil, has generated concern about climate effects.These figures raise the question of whether scarce government funds might be better allocated to move the United States towards a low-carbon economy.
N.B. Carbon capture and storage is a developing technology that would allow coal-burning utilities to capture and store their carbon dioxide emissions. Although this technology does not make coal a renewable fuel, if successful it would reduce greenhouse gas emissions compared to coal plants that do not use this technology. The production and use of corn ethanol can generate significant greenhouse gas emissions. Recognizing that the production and use of corn-based ethanol may generate significant greenhouse gas emissions, the data depict renewable subsidies both with and without ethanol subsidies.
Fossil fuel extraction is increasingly toxic (e.g. fracking poisons public water systems) and environmentally destructive (e.g. gulf oil “spill”). And fossil fuel production seems to be hitting a Peak Oil wall. As production lags demand, we should expect oil and gas prices to rise precipitously. Subsidizing oil keeps us addicted to it.
Three of the top 5 biggest companies in the world are oil companies (Exxon, BP, Royal Dutch Shell). Rather than subsidize Big Oil profits and foreign oil nations, we should be taxing fossil fuels to reduce their use. Tax what we want to reduce, and subsidize what we want to increase. Tax what harms us, and subsidize what helps us. Use the taxes to fund R&D and development of a world class alternative energy industry.
Obviously, that means politicians will need to resist the monied special interests of the Big Oil lobby.
Long lines are forming at gas stations in China. Truck drivers now wait in line for hours to fill up on diesel fuel. What’s going on? The answer is not what you might think.
No, it’s not peak oil (at least not yet). And unlike the oil embargo of the seventies, where the middle east slowed down the flow of oil to industrial nations, China is able to purchase most the oil it needs (for now). No, in this case, the fuel shortages are self-inflicted.
China is, by some measures, the largest consumer of energy in the world and they are trying to reduce their consumption.
It takes a lot of energy to grow a modernizing society. To meet energy demand, China has been building power plants every week or two, many of them greenhouse gas emitting coal-fired plants. The damage to their environment, public health, and contribution to global pollution, CO2 emissions, and climate change are enormous. Reducing energy consumption will help slow and eventually lessen toxic impact.
Chinese leaders want to reduce their energy intensity, or the energy use per unit of GDP. Their goal is to reduce energy intensity by 20 percent from where it was five years ago.
To achieve this goal, China has implemented Draconian measures, including:
planned power outages
shutting down more than 2,000 outdated factories in heavy industry
turning off traffic lights in some areas
Small and medium business, unable to get special exceptions from party officials, are hardest hit by the power cutbacks. In frustrated response, entrepreneurial business owners are adapting by buying generators to make their own power. An unintended consequence: Generator prices are soaring, and factory owners have been stocking up on diesel fuel to power the generators, increasing demand for diesel fuel.
Wholesalers, betting on future price hikes, started storing diesel instead of selling it. Meanwhile diesel’s wholesale price, which is less tightly controlled by the state, started to soar and soon exceeded the retail price—so many gas stations could only sell diesel at a loss. There is also a basic shortage of supply: China’s diesel imports have soared and the country has announced a ban on diesel exports next year, according to reports.
China is walking a fine line between trying to restrain growth, and giving freedom the their citizens, who long for western super-consumer lifestyles. As China per capita income has soared, so has per capita energy consumption. The chart below shows income and energy use from 1968 through 2008, for the US, China, and India.
While the gas lines are largely due to China’s brute force energy policy aimed at efficiency, as the world recovers from the global recession, heavy energy users like the US, China and India will likely return to their pre-recession energy consumption levels, and we should expect to see higher fuel prices.
And as we enter firmly into the peak oil phase of oil production, shifting to renewable forms of energy will be more important than ever.
The most read article at the NY Times online yesterday was The U.S.S. Prius by Thomas Friedman. The thrust of the article centers around two brutal facts – we are fighting wars for oil, and wars consume a lot of oil. One of the tidbits mentioned toward the end of the article is that a gallon of gas costs up to $400 per gallon by the time it reaches the front lines. Moving beyond the economics, getting fuel to the front lines also costs lives. The U.S. military loses one soldier for every 24 fuel convoys it runs in Afghanistan.
Friedman observes “at a time when a fraudulent, anti-science campaign funded largely by Big Oil and Big Coal has blocked Congress from passing any clean energy/climate bill” the U.S. Navy and Marines are spearheading a strategy to make the military much more energy efficient. Friedman adds, “Unlike the Congress, which can be bought off by Big Oil and Big Coal, it is not so easy to tell the Marines that they can’t buy the solar power that could save lives.”
Ray Mabus, the Secretary of the Navy, has crafted a strategy to shift from oil to alternative energy, including, solar and biofuels. On Earth Day this year, the Navy flew a F/A-18 Super Hornet fighter jet powered by a 50-50 blend of conventional jet fuel and camelina aviation biofuel made from pressed mustard seeds.
And while congress favors boondogles like corn ethanol, which uses almost as much energy producing it as it yields:
The Navy will use only “third generation” biofuels. That means no ethanol made from corn because it doesn’t have enough energy density. The Navy is only testing fuels like camelina and algae that do not compete with food, that have a total end-to-end carbon footprint cleaner than fossil fuels and that can be grown in ways that will ultimately be cheaper than fossil fuels.
Mabus has also set a goal for the Navy to use alternative energy sources to provide 50 percent of the energy for all its war-fighting ships, planes, vehicles and shore installations by 2020.
About 60% of the oil we consume is imported from foreign nations – many of those nations are petro-dictatorships. As we shift to alternative fuels and energy, we can reduce our dependance on foreign oil.
Though many people are familiar with solar energy, innovations in the field of biofuels are less well known. Most vehicles run on liquid fossil fuels – gasoline and diesel. Biofuels, such as camelina, provide a cleaner greener alternative to fossil fuels. Camelina Sativa is a member of the mustard family, a distant relative to canola. Camelina can grow on land unsuitable for most food crops, especially arid lands. It has yields that are roughly double that of soy. Camelina can be grown in a rotation with wheat crops. Farmers who have followed a wheat-fallow pattern can switch to a wheat-camelina-wheat pattern, and produce up to 100 gallons of camelina oil per acre, while growing up to 15 percent more wheat. And once the oil is pressed from the seed, the leftover “mash” can be used as nutritious livestock feed.
We consume more oil for transportation than anything else. Innovations in transportation fuels will have the most impact on global energy consumption and associated emissions of climate-changing CO2.
Oil production is peaking and will become increasingly expensive. It’s time to support our transition to a cleaner, greener alternative energy.
The U.S. spends more money on potato chips than energy research and development. To restore US scientific and technical leadership, Congress needs to stop bashing science and taking money from Big Oil, and start investing in our energy future.
In California’s election, voter support for Prop 23 is waning. That’s good news, but the fight is not over. If you didn’t like Prop 23, you’re really not going to like Prop 26. Out of state Big Oil was backing Prop 23, and, seeing that as a lost cause, they are shifting their support to Prop 26.
Prop 26 is another Big Oil backed initiative. Prop 26 would make it more difficult for state and local government to impose mitigation fees on business activities that cause harm to the environment or public health and safety. For example, fees imposed on tobacco companies to fund health-related programs, on industries for toxic waste cleanup and on alcohol retailers for law enforcement. In other words, when companies do us harm, through increased pollution, health risk, toxic waste, and crime, Prop 26 shifts the cost of those problems to the tax payer, and away from those businesses that caused the problem.
It’s all about AB32
Prop 23 was all about gutting California’s AB32 law, which requires the state to cut emissions of carbon dioxide and other greenhouse gases 25 percent by 2020.
So what are oil companies worried about? Why are the pumping tens of millions of dollars into Prop 23 and Prop 26 initiatives?
As the chart below shows, California is on the front line in the transition to alternative fuel vehicles. The US consumes more oil for transportation, than anything else. No state is making the transition to alternative fuels faster than California.
While AB32 is bad news for out of state Big Oil, it’s good news for California’s cleantech industry and general economic and environmental health of the state. It creates new cleantech jobs and positions California to be a global leader in this emerging industry. And it’s good news for the world, which will benefit from California’s cleantech innovations, much the way it did with decades of hi-tech chip, computer and communications innovations that put Silicon Valley on the map.
From the chart below, we can see that Cleantech jobs in the California Bay Area are on a fast growth path. Silicon Valley is becoming Cleantech Valley.
As sustainable business thinker Andrew Winston recenlty said:
“One global economy, the clean one, is growing, and the global battle for the new jobs is on. Some countries – such as China, Germany, Spain, Portugal, and many others – are going after these jobs aggressively. The other part of the economy – the dead fuel economy – is not going to be a growth engine (with the important exception of natural gas, which may provide a useful, medium-term bridge to the future).”
Clean economy jobs are growing ten times faster than the statewide average. AB32 is driving that growth as we transition to a clean energy economy.
AB32 is largely funded by revenue from fees. As AB32 ramps up it will require the implementation and collection of significantly higher fees to fund the implementation and enforcement of the Air Resources Board’s (ARB) scoping plan to reduce greenhouse gas (GHG) emissions to 1990 levels by 2020. If Big Oil succeeds in passing Prop 26, they take the teeth out of AB32 and pass the cost of policing businesses to the tax payers. Voting NO on Prop 23 and Prop 26 keeps big business accountable when they do harm.
Prop 23 Support is Fading
California voters are catching on to the fact that Prop 23 was an initiative promoted and funded by out of state Big Oil companies.
Dan Morain at the Sacramento Bee writes:
Heading into the final two weeks before the Nov. 2 election, the main funders, Texas-based Valero and Tesoro oil companies, seem to have concluded it makes no sense to throw more of their oil-stained millions at the bad idea.
Yes-on-23 strategist Rick Claussen told me last week that there would be no final push unless backers came through with $10 million fast. The week came and went without an infusion.
Laura Campos, Director of Shareholder Activities at the Nathan Cummings Foundation, said that shareholders are “concerned Tesoro’s support for the highly controversial Proposition 23 could lead to a decrease in shareholder value by damaging the company’s reputation and negatively impacting the business environment in a state where Tesoro has significant operations.”
As oil company manipulation of California politics has gained public exposure, shareholders are concerned that voters will vote with their feet, and not shop at gas stations of the Prop 23 proponents.
KQED radio recently hosted a debate on Prop 26, between John Dunlap, a proponent of Prop. 26, and Lenny Goldberg, executive director of the California Tax Reform Association and an opponent of Prop. 26. A commenter on that debate summed it up nicely:
What Mr. Dunlap and the industries supporting Prop 26 are really trying to do is overturn a unanimous (7-0) California Supreme Court decision (the Sinclair case mentioned at the beginning of the show) that said fees can be charged to address public health, environmental or other social problems directly associated with the production or use of a product. These legitimate regulatory fees are not “hidden taxes” as the proponents suggest. What voters really have to decide is, was the Supreme Court correct in saying, essentially, the polluter pays for their pollution. The alternative is that the public pays through poorer health or through their tax dollar (either through higher taxes or shifting tax revenues away from other services like education and law enforcement).
As I mentioned above, AB32 fosters job growth as we transition to a cleantech economy. When Big Oil tries to gut AB32, they hurt the California economy. But more than that, by promoting Prop 26, they are thumbing their nose at the citizens of California and shunning their responsibility for their toxic industry. A paper by the California Alliance for Environmental Justice, “Toxic Twins”, provides examples of Tesoro and Valero – two major Big Oil proponents of Prop 23 – and their toxic corporate behavior in California.
For more on out of state big oil, and a comprehensive list of backers of Prop 23, see Oil Change International’s excellent interactive map for info on who is funding Prop 23.
David and Goliath
I leave you with this inspiring video of Joel Francis, a Senior at Cal State LA. Joel challenges the Goliath of Big Oil – multi-billionaire Charles Koch, of Koch Industries – to a debate. Koch is one of the major contributors to Prop 23, along with a variety of other initiatives and politicians working against a transition to a clean energy economy.
In Joel’s challenge, he says:
“Mr. Koch, I get that you and your corporation don’t want to be part of our clean energy future. That’s your free market choice. But that doesn’t mean you get to wreck its development for everyone else.”
There is an age old attempt going on, of companies indirectly trying to shape the public understanding of key issues.
Let’s make sure we all do our homework.
Time just posted a good article on European Big Oil companies funding climate skeptics, that relates to all this. It’s worth reading.
And with elections across the country in their final days, if you want to see if your representatives are receiving money from big oil, check out http://dirtyenergymoney.org/.
For more on the California’s Prop 23 initiative, see:
Keywords: Masdar, zero carbon city, UAE, United Arab Emirates, peak oil, climate change, global warming, electric cars
Masdar, the world’s first zero-carbon city, pokes a sustainable finger in the eye of the oil-addicted west. Masdar, created by the United Arab Emirates (UAE) government, is an ultra-sustainable city growing up in the desert outside of Abu Dhabi.
The irony of this:
The oil-addicted west consumes vast amounts of oil, funding the middle east’s oil-free sustainability initiatives.
As the US contines the love affair with gas guzzling SUVs, Masdar outlaws combustion-engine vehicles, replacing them with a network of electric cars.
As western powers bicker over global warming details, Masdar shades itself from the warming world with rooftop arrays of solar panels.
Partnering with MIT, Masdar’s Institute of Science and Technology offers programs in science and engineering with a focus on sustainability and renewable energy.
The Masdar development (detailed below) is designed by the British architect Norman Foster. In an interview with Time’s Bryan Walsh, you can feel Fosters frustration:
“It shows there is another side of this place that is totally unexpected. I think that as you read about some of this in Western newspapers, you’ll be shocked. Your immediate reaction would be, Why aren’t we doing this? We’re expanding London, and we’re just repeating the old model of sprawl. Why elsewhere is there not one experiment like this? Why not in the U.S., with its total dependence on oil? Why can’t this collective of European wisdom and power create a similar initiative? I have to ask myself, Why is this initiative, which in urban terms is the most progressive, radical thing happening anywhere, happening here?”
The oil-rich UAE isn’t doing this because they can – they are doing it because they must. Masdar is a model city for the hotter, less secure, walled-city future of a post-petroleum climate-changed world.
The UAE, with just 4.5 million people, but billions in oil money, has funded a rapidly expanding infrastructure. As a country matures, their social complexity increases, along with energy consumption. It takes vast energy to build and operate cities. And Dubai, at the heart of the UAE has become an icon of conspicuous consumption. They already consume more natural gas than they can produce, becoming a net importer to feed the need for electricity. Hence Masdar’s emphasis on solar power.
Using GapMinder’s Trendalyzer with energy consumption data from BP’s Statistical Review of World Energy 2010 and income data from the IMF, we can see some powerful trends unfolding in the UAE. (N.B. data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, per capita energy use in tonnes of oil equivalent).
Note UAE’s (the green line) stunning near vertical increase in per capita energy consumption over the past 20 years.
With an eye to their future, as global oil production peaks (middle east oil experts predict 2014), the UAE is laying the foundation for a sustainable future.
Highlights of In Arabian Desert, a Sustainable City Rises
Architecture critic Nicolai Ourousoff reports on Masdar in the New York Times:
Designed by Foster & Partners, a firm known for feats of technological wizardry, the city, called Masdar, would be a perfect square, nearly a mile on each side, raised on a 23-foot-high base to capture desert breezes. Beneath its labyrinth of pedestrian streets, a fleet of driverless electric cars would navigate silently through dimly lit tunnels.
Norman Foster, the firm’s principal partner, has blended high-tech design and ancient construction practices into an intriguing model for a sustainable community, in a country whose oil money allows it to build almost anything, even as pressure grows to prepare for the day the wells run dry. And he has worked in an alluring social vision, in which local tradition and the drive toward modernization are no longer in conflict — a vision that, at first glance, seems to brim with hope.
But his design also reflects the gated-community mentality that has been spreading like a cancer around the globe for decades. Its utopian purity, and its isolation from the life of the real city next door, are grounded in the belief — accepted by most people today, it seems — that the only way to create a truly harmonious community, green or otherwise, is to cut it off from the world at large.
He began with a meticulous study of old Arab settlements, including the ancient citadel of Aleppo in Syria and the mud-brick apartment towers of Shibam in Yemen, which date from the 16th century. “The point,” he said in an interview in New York, “was to go back and understand the fundamentals,” how these communities had been made livable in a region where the air can feel as hot as 150 degrees.Among the findings his office made was that settlements were often built on high ground, not only for defensive reasons but also to take advantage of the stronger winds. Some also used tall, hollow “wind towers” to funnel air down to street level. And the narrowness of the streets — which were almost always at an angle to the sun’s east-west trajectory, to maximize shade — accelerated airflow through the city.
With the help of environmental consultants, Mr. Foster’s team estimated that by combining such approaches, they could make Masdar feel as much as 70 degrees cooler. In so doing, they could more than halve the amount of electricity needed to run the city. Of the power that is used, 90 percent is expected to be solar, and the rest generated by incinerating waste (which produces far less carbon than piling it up in dumps). The city itself will be treated as a kind of continuing experiment, with researchers and engineers regularly analyzing its performance, fine-tuning as they go along.
But Mr. Foster’s most radical move was the way he dealt with one of the most vexing urban design challenges of the past century: what to do with the car. Not only did he close Masdar entirely to combustion-engine vehicles, he buried their replacement — his network of electric cars — underneath the city. Then, to further reinforce the purity of his vision, he located almost all of the heavy-duty service functions — a 54-acre photovoltaic field and incineration and water treatment plants — outside the city.
It’s only as people arrive at their destination that they will become aware of the degree to which everything has been engineered for high-function, low-consumption performance. The station’s elevators have been tucked discreetly out of sight to encourage use of a concrete staircase that corkscrews to the surface. And on reaching the streets — which were pretty breezy the day I visited — the only way to get around is on foot. (This is not only a matter of sustainability; Mr. Foster’s on-site partner, Austin Relton, told me that obesity has become a significant health issue in this part of the Arab world, largely because almost everyone drives to avoid the heat.)
The buildings that have gone up so far come in two contrasting styles. Laboratories devoted to developing new forms of sustainable energy and affiliated with the Massachusetts Institute of Technology are housed in big concrete structures that are clad in pillowlike panels of ethylene-tetrafluoroethylene, a super-strong translucent plastic that has become fashionable in contemporary architecture circles for its sleek look and durability. Inside, big open floor slabs are designed for maximum flexibility.
The residential buildings, which for now will mostly house professors, students and their families, use a more traditional architectural vocabulary.
What Masdar really represents, in fact, is the crystallization of another global phenomenon: the growing division of the world into refined, high-end enclaves and vast formless ghettos where issues like sustainability have little immediate relevance.
Norm Augustine, former chairman and CEO of Lockheed Martin
Ursula Burns, CEO of Xerox
John Doerr, partner at Kleiner Perkins Caufield & Byers
Bill Gates, chairman and former CEO of Microsoft
Chad Holliday, chairman of Bank of America and former chairman and CEO of DuPont
Jeff Immelt, chairman and CEO of GE
Tim Solso, chairman and CEO of Cummins Inc.
The US is the largest consumer of energy in the world. The American Energy Innovation Council makes the case that there is a pressing need for energy innovation, and we need to invest in that innovation.
Though energy is a key strategic component of any countries wellbeing, US energy R&D spending has been in decline.
Though the US is the worlds largest energy consumer, it spends less on energy R&D than China, France, Japan and Korea.
The council’s recommendations:
Create an independent national energy strategy board
Invest $16 billion per year in clean energy innovation
Create Centers of Excellence with strong domain expertise
Fund ARPA-E at $1 billion per year
Establish and fund a New Energy Challenge Program to build large-scale pilot projects