Dan Kammen: On Climate Change and Renewable Energy

At a recent Crossroads Lecture, energy policy expert Daniel Kammen spoke about Energizing the Low-Carbon Future. His presentation is timely – climate change has been on the public mind as hurricane superstorm Sandy devastated New York, New Jersey, and beyond. Though we would all agree that energy is an essential part of our daily life, Americans spend more money on potato chips than on energy research and development. Dan has a deep nuanced understanding of where we are at, and where we need to go, to build a clean, sustainable energy future.

In the presentation below, Dr. Kammen explores innovations in, and barriers to, building renewable energy systems worldwide – from villages to large regional economies.  He discusses tools already available, and others needed, to speed the transition to a sustainable planet. Daniel Kammen is Professor in the Energy and Resources Group (ERG), Professor of Public Policy in the Goldman School of Public Policy at the University of California, Berkeley. He is also the founding Director of the Renewable and Appropriate Energy Laboratory (RAEL). Kammen advises the World Bank, and the Presidents Committee on Science and Technology (PCAST), and is a member of the Intergovernmental Panel on Climate Change (Working Group III and the Special Report on Technology Transfer).

Dan spoke for about an hour, followed by a 35 minute question and answer session. The Q&A session has some great questions and discussion.

Dan talked about cleantech jobs, the economic benefits of transitioning to renewable energy, climate change, coal, natural gas, arctic sea ice loss, peak oil, the real cost of coal and other high-carbon sources of energy, solar energy, and energy storage.  One of my favorite quotes:

When you are spending your funds buying fuels as a fraction of the cost of the technology, it’s a very different equation than when you are investing in people, training, new companies, and intellectual capital. [And so, for example] if you buy a gas turbine, 70 percent of the money that will go in to that, over its lifetime, is not going to be for human resources and hardware, it’s to buy fuel. If you buy renewable energy and energy efficiency, while we have a problem of needing to find ways to amortize up-front costs, you are investing in people, companies, and innovation.

Jobs created, per dollar invested, are consistently higher for cleantech jobs versus old fossil fuel based energy sources. Economist Robert Solow, in his Nobel prize winning work on the drivers of economic growth, demonstrated that about 75 to 80 percent of the growth in US output per worker was attributable to technical progress and innovation.  Transitioning to renewable forms of energy will provide strong stimulus to our economy, while reducing public health and environmental costs associated with dirty coal and oil pollution.

cleantech renewable energy conservation jobs chart
(source: Political Economy Research Institute, University of Massachusetts Amherst)

After Dan Kammen finished overviewing climate change and energy issues, he highlighted several case studies that featured renewable energy and low-carbon energy production implementations for small (personal), medium (community) and large (national) installations.  Watch the video above for more.

Recommended Reading

Climate Change

Energy

 

What’s Causing the Long Lines at Gas Stations in China?

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 energy intensityChina 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
China save energy cartoon
A black-sleeved arm marked "Energy Target" presses down on little official yelling "I have to apply the brakes and save energy!" (source: Xinhua News Agency)

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.

To make matters worse, according to the Financial Time

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.

Energy Consumption and Income for US, China, and India
Per Capita Income and Energy Consumption in China, India and the US (source: BP’s Statistical Review of World Energy 2010, IMF)

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.

Recommended Reading

The Real Population Problem by Jay Kimball

China: The Next Superconsumer? by Jay Kimball

Beijing Power Consumption Hits Historic Peak During Extreme Heat Wave by Jay Kimball

German Military Study Warns of Potential Energy Crisis by Jay Kimball

GOP Rep. Bob Inglis On Climate Change

Watch this video. It’s encouraging to see a Republican politician take a risk, saying climate change is a serious problem and the US needs to become a leader in innovating solutions.

Yesterday morning, at a House subcommittee hearing on climate change, outgoing Republican representative Bob Inglis challenged his Republican colleagues to stop mocking scientists, get busy tackling climate change, and put the US in a leadership position on innovating solutions.

From Think Progress

A ThinkProgress analysis found that 50 percent of the incoming freshman GOP class deny the existence of manmade climate change, while a shocking 86 percent are opposed to any legislation to address climate change that increases government revenue. Meanwhile, all of the Republicans vying to chair the House Energy Committee — which handles climate and energy issues — in the new Congress are climate change deniers. They include Rep. Joe Barton (R-TX), who infamously apologized to BP shortly after the company’s catastrophic oil spill in the Gulf of Mexico this summer.

Here’s the transcript of Rep. Bob Inglis remarks, to the House subcommittee hearing on climate change

I’m very excited to be here Mr. Chairman, because this is on the record. And it’s a wonderful thing about Congressional hearings — they’re on the record. Kim Beaszley who’s Australia’s ambassador to the United States tells me that when he runs into a climate skeptic, he says to them, “Make sure to say that very publicly, because I want our grandchildren to read what you said and what I said. And so, we’re on the record, and our grandchildren, or great-grandchildren, are going to read. And so some are here suggesting to those children that here’s a deal: Your child is sick — this is what Tom Friedman gave me this great analogy yesterday — Your child is sick. 98 doctors say treat him this way. Two say no, this other way is the way to go. I’ll go with the two. You’re taking a big risk with those kids. Because 98 of the doctors say, “Do this thing,” two say, “Do the other.” So, it’s on the record.

And we’re here with important decision to be made. And I would also suggest to my Free Enterprise colleagues — especially conservatives here — whether you think it’s all a bunch of hooey, what we’ve talked about in this committee, the Chinese don’t. And they plan on eating our lunch in this next century. They plan on innovating around these problems, and selling to us, and the rest of the world, the technology that’ll lead the 21st century. So we may just press the pause button here for several years, but China is pressing the fast-forward button. And as a result, if we wake up in several years and we say, “geez, this didn’t work very well for us. The two doctors didn’t turn out to be so right. 98 might have been the ones to listen to.” then what we’ll find is we’re way behind those Chinese folks. ‘Cuz you know, if you got a certain number of geniuses in the population — if you’re one in a million in China, there’s 1300 of you. And you know what?

They plan on leading the future. So whether you — if you’re a free enterprise conservative here — just think: it’s a bunch of hooey, this science is a bunch of hooey. But if you miss the commercial opportunity, you’ve really missed something. And so, I think it’s great to be here on the record. I think it’s great to see the opportunity we’ve got ahead of us. And, I also — since this is sort of a swan song for me and Mr. Barrett I’d encourage scientists who are listening out there to get ready for the hearings that are coming up in the next Congress. Those will be difficult hearings for climate scientists. But, I would encourage you to welcome those as fabulous opportunities to teach.

Recommended Reading

Topic: Climate Change

Warmer Temperatures in China to Reduce Crop Yields

Shilong Piao of the Center of Climate Research at Beijing University has published a paper in Nature, reported on by Reuters:

With the climate set to get warmer from greenhouse gases, Chinese scientists predicted on Thursday that freshwater for agriculture will shrink further in China, reducing crop yields in the years ahead.

This story illustrates the typical cause and effect unfolding round the world as the world grows warmer. Food production will be challenged by water scarcity, warmer climate fostering crop pests, and reduced protein in plants. For related posts see:

Climate Change May Reduce Protein in Crops

Climate Change, Food, and Wildfires

Highlights of the article Warmer temperatures in China to reduce crop yields

In a paper published in Nature, they said the temperature in China had gone up by 1.2 degrees Celsius since 1960 and will increase by another 1 to 5 degrees Celsius by 2100.

“Such a pronounced summer warming would inevitably enhance evapo-transpiration, increasing the risk of water shortage for agriculture,” wrote the researchers, led by Shilong Piao of the Center of Climate Research at Beijing University.

“Climate change may induce a net yield reduction of 13 percent by 2050.”

They forecast that rice yields would decrease by 4 to 14 percent, wheat by 2 to 20 percent and maize by zero to 23 percent by the middle of the 21st century.

China only has 7 percent of the world’s arable land, but needs to feed 22 percent of the world’s population. Although its total water resource is huge in absolute terms, it is only 25 percent of the per capita world average.

Its climate has also become drier in the north, which holds 18 percent of the total water resource and 65 percent of total arable land, they added.

Apart from shrinking already scarce water supplies, higher temperatures have also led to the spread of pests, they said.

“Countrywide, a 4.5 percent reduction in wheat yields is attributed to rising temperatures over the period 1979-2000,” the researchers wrote.

China’s agriculture minister said in July that China faced a formidable task in meeting demand for grains such as rice, wheat and corn in the next 10 years.

China last year harvested a record 530.82 million tonnes of grain, but will need to increase annual supply by at least 4 million tonnes for the next decde to feed a population expected to hit 1.39 billion in 2015 from 1.32 billion at the end of 2008.

Growth Versus Consumerism

Keywords: growth, consumption, GDP, global economy, China, India, consumerism

Robert Reich wrote a thoughtful article on Why Growth is Good. Highlights of the article are below. In it, he differentiates between growth and consumption.

Growth is really about the capacity of a nation to produce everything that’s wanted and needed by its inhabitants. That includes better stewardship of the environment as well as improved public health and better schools.

A couple years ago I wrote an article – Nobel Laureate Joseph Stiglitz on Sustainability and Growth – in which Stiglitz talked about the idea that “we grow what we measure.” Here’s an exerpt from the end of that article that I think is relevant to Reich’s article:

For me, what Stiglitz is getting at is:  We grow what we measure (GDP), and because we are measuring the wrong stuff, we are growing wrong. It seems to be in our DNA to want to “grow,” but like a garden, don’t we have a choice about what we grow?  Are there ways we can grow our economy that restore abundance rather than consume it? What are the essential things to measure so that we are growing good things?

Using ecological footprint data from Global Footprint Network we can see the current state of consumption for North America and the rest of the world. American per capita consumption is legend. China and India are adopting their own versions of American-style consumerism. All nations are bumping up against the limits of the earth to provide what is needed for growth. We are collectively challenged to find new ways to grow, more lightly, in ways that restore rather than deplete.

Global Ecological Footprint

N.B. The width of bar proportional to population in associated region. Ecological Footprint accounts estimate how many Earths were needed to meet the resource requirements of humanity for each year since 1961, when complete UN statistics became available. Resource demand (Ecological Footprint) for the world as a whole is the product of population times per capita consumption, and reflects both the level of consumption and the efficiency with which resources are turned into consumption products. Resource supply (biocapacity) varies each year with ecosystem management, agricultural practices (such as fertilizer use and irrigation), ecosystem degradation, and weather.
 
This global assessment shows how the size of the human enterprise compared to the biosphere, and to what extent humanity is in ecological overshoot. Overshoot is possible in the short-term because humanity can liquidate its ecological capital rather than living off annual yields.

Highlights from Robert Reich’s Why Growth is Good

Economic growth is slowing in the United States. It’s also slowing in Japan, France, Britain, Italy, Spain, and Canada. It’s even slowing in China. And it’s likely to be slowing soon in Germany.

If governments keep hacking away at their budgets while consumers almost everywhere are becoming more cautious about spending, global demand will shrink to the point where a worldwide dip is inevitable.

You might ask yourself: So what? Why do we need more economic growth anyway? Aren’t we ruining the planet with all this growth — destroying forests, polluting oceans and rivers, and spewing carbon into the atmosphere at a rate that’s already causing climate chaos? Let’s just stop filling our homes with so much stuff.

The answer is economic growth isn’t just about more stuff. Growth is different from consumerism. Growth is really about the capacity of a nation to produce everything that’s wanted and needed by its inhabitants. That includes better stewardship of the environment as well as improved public health and better schools. (The Gross Domestic Product is a crude way of gauging this but it’s a guide. Nations with high and growing GDPs have more overall capacity; those with low or slowing GDPs have less.)

Poorer countries tend to be more polluted than richer ones because they don’t have the capacity both to keep their people fed and clothed and also to keep their land, air and water clean. Infant mortality is higher and life spans shorter because they don’t have enough to immunize against diseases, prevent them from spreading, and cure the sick.

In their quest for resources rich nations (and corporations) have too often devastated poor ones – destroying their forests, eroding their land, and fouling their water. This is intolerable, but it isn’t an indictment of growth itself. Growth doesn’t depend on plunder. Rich nations have the capacity to extract resources responsibly. That they don’t is a measure of their irresponsibility and the weakness of international law.

How a nation chooses to use its productive capacity – how it defines its needs and wants — is a different matter. As China becomes a richer nation it can devote more of its capacity to its environment and to its own consumers, for example.

The United States has the largest capacity in the world. But relative to other rich nations it chooses to devote a larger proportion of that capacity to consumer goods, health care, and the military. And it uses comparatively less to support people who are unemployed or destitute, pay for non-carbon fuels, keep people healthy, and provide aid to the rest of the world. Slower growth will mean even more competition among these goals.

Faster growth greases the way toward more equal opportunity and a wider distribution of gains. The wealthy more easily accept a smaller share of the gains because they can still come out ahead of where they were before. Simultaneously, the middle class more willingly pays taxes to support public improvements like a cleaner environment and stronger safety nets. It’s a virtuous cycle. We had one during the Great Prosperity the lasted from 1947 to the early 1970s.

Slower growth has the reverse effect. Because economic gains are small, the wealthy fight harder to maintain their share. The middle class, already burdened by high unemployment and flat or dropping wages, fights ever more furiously against any additional burdens, including tax increases to support public improvements. The poor are left worse off than before. It’s a vicious cycle. We’ve been in one most of the last thirty years.

No one should celebrate slow growth. If we’re entering into a period of even slower growth, the consequences could be worse.

For some excellent reading on this subject, check out the Recommended Reading section on Sustainable Business, Government, and Community. I especially found useful Lester Brown’s Plan B 4.0 and Jeffrey Sachs’ Common Wealth.

China Manufacturing and Transport Cost Showing Sharp Rise – Trends and Implications for Business

Keywords: China, manufacturing cost, transport cost, Credit Suisse, jobs, per capita income

There is growing concern among U.S. and European companies that higher China manufacturing and transport cost, coupled with an inability to push through price increases due to the weak economy, will pressure profit margins in 2011. This according to a Credit Suisse report citing their survey of mostly private consumer, industrial and technology companies that source products from China. An article in Reuters provides details – highlights below.

This should not come as a surprise to anyone that is observing the trends in China around per capita income and consumption. China is becoming America – fast. Before we know it, we will be bringing jobs back here to the US. You might think that jobs would migrate to India or Southeast Asia next, and there will be some of that, but the inflation occurring in China will happen to those countries too as they move up the income and consumption curve. 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 (N.B. data presented for 1965 through 2008, 1 year steps, circle area proportional to population size, energy use in tonnes of oil equivalent):

Energy Consumption and Income for US, China, and India
Per Capita Income and Energy Consumption in China, India and the US

And with increasing resource scarcity (water, energy, food) and climate change, those regions will likely be challenged by social tensions or state instability (see National Intelligence Assessment on the National Security Implications of Global Climate Change to 2030 by US Director of National Intelligence in Recommended Reading). With all this to consider, we encourage companies to take the long view as they evolve their manufacturing strategy.

Highlights from China costs may surprise investors–Credit Suisse

  • Credit Suisse, which said it sees the risk of very limited pricing power for consumer companies next year amid tepid economic growth, found 40 percent of respondents are “very worried” or “extremely worried” about wage pressure in China; 29 percent are very or extremely worried about transport costs; and 18 percent are so about the rising yuan currency.
  • About 40 percent of executives said their costs on Chinese-sourced goods are up at least 6 percent from a year ago, with nearly a third reporting a double-digit increase. The survey polled 28 firms with annual sales of at least $500 million that rely on China for a portion of their goods sold.
  • Nearly half of respondents said it is “not easy at all” to relocate sourcing from China and two-thirds say they could increase prices somewhat, but would likely lose profit margin.
  • China’s explosive economic growth has pushed up manufacturing wages nearly fourfold over the past decade. The average worker earns about $3,900 a year, up from about $1,900 in 2005 and just over $1,000 a year in 2000. Wages are expected to rise further, reflecting emerging labor shortages.
  • The pace of wage increases, currently around 13 percent a year, could accelerate, Rochon said. With U.S. wages flat or down, the difference in costs is narrowing, especially as transport costs — and times — go up.
  • Containership fleets, eager to cut capacity, save fuel and raise prices, have slowed ships crossing the Pacific by about 50 percent. More inventory is sitting on the ocean.
  • Factoring in currency, wages and transport, the hit to earnings could be substantial for some companies, Rochon said.
  • Credit Suisse posits a worst-case scenario in which costs rise 20 percent with no ability to pass on higher prices. Under that scenario, 2011 earnings per share (EPS) would be reduced by about 60 percent at Maidenform Brands Inc and by some 70 percent at Jones Apparel Group Inc.
  • Giant retailers like Target Corp and Macy’s Inc would see about a 40-percent hit to 2011 earnings. On the other hand, a stronger currency and rising living standards in China could benefit companies that sell to Chinese consumers, such as Yum Brands Inc and McDonald’s Corp, the report said.
  • The biggest risks are not to makers of high-margin, easy-to-ship products like Apple Inc’s iPads, or to labor-intensive, high-volume manufacturers like clothing companies, which can move operations. Rather it is companies in the middle that are the most exposed, such as low-priced retailer Dollar Tree Inc with about 40 percent of goods sourced from China, according to Credit Suisse.
  • Current Wall Street estimates call for Dollar Tree to earn $3.35 per share in fiscal 2011, according to Thomson Reuters I/B/E/S. That would fall to $2.24 if costs rose 20 percent with some pricing power, and EPS would be only $1.67 without pricing power, the report estimates.
  • Some companies have already responded. General Electric Co, for example, has moved production of its hot water heaters to Kentucky from China, partly as a reaction to cost.
  • Large industrial companies like GE, Cummins Inc and Emerson Electric Co would see 2011 EPS reduced by 10 percent or more under the adverse scenario.
  • Electrical machinery and equipment were the top U.S. imports from China at $73 billion, though the report notes many industrial companies manufacture in China for the local market and are able to move production elsewhere.