Tag Archives: Climate Policy

Is OPEC Calling Peak Oil? Producers Shifting to Solar as Oil Price Slump Endures and Reserves Adjusted Downward

More than ever its clear that an oil based economy is not sustainable from a variety of perspectives, both ecologically and economically. Perhaps counterintuitively, these domains are not obverse to each another, but are interlocked facets of the how the earth sustains lifecycles. They are also twin indicators of humanity’s role in the stewardship of them.

Last week we saw the somewhat mind boggling announcement by Saudi Arabia that it planned to partially wean its economy from oil sales by 2020 and do so completely by 2030.  From Reuters on April 25:

The powerful young prince overseeing Saudi Arabia’s economy unveiled ambitious plans on Monday aimed at ending the kingdom’s “addiction” to oil and transforming it into a global investment power….His “Vision 2030” envisaged raising non-oil revenue to 600 billion riyals ($160 billion) by 2020 and 1 trillion riyals ($267 billion) by 2030 from 163.5 billion riyals ($43.6 billion) last year. But the plan gave few details on how this would be implemented, something that has bedeviled previous reforms….The 31-year-old prince gave assured answers to questions on the plan, and appeared to pitch his comments to appeal across the Saudi social spectrum, and in particular to young people, who face unemployment and an economic downturn despite their country’s oil wealth.

Many were of course skeptical. And while few details were given, the Saudi markets seemed to like the news as they rose by ~2.5% that day. Presumably this is because of publicly announced plans to sell public stakes in the Saudi state run Aramco. Do the Saudi’s think we are in Peak Oil?

Their neighbors in Dubai might think so as well. They are about to bring the world’s largest solar plant online which will provide electricity at 3 US cents per Kilowatt hour.

According to industry analyst Apricum:

All three lowest bids by themselves clearly set a new world record for the unsubsidized cost of solar electricity. A recent bid of 3.6 cents/kWh by Enel Green Power in Mexico did not include the value of additional green energy certificates. Solar tariffs in the USA now regularly dip below 3 cents/kWh, but these include a 30% tax incentive and other subsidies.

Phase 1 Mohammed bin Rashid Al Maktoum Solar Park 13-MW Source: First-Solar
Phase 1 Mohammed bin Rashid Al Maktoum Solar Park 13-MW Source: First-Solar

Twist number two was in an Oilprice.com post covering a scientific analysis of the the recent Global Energy Assessment by the International Institute of Applied Systems Analysis which finds that proven reserves are 50% lower than decades old conventional wisdom would have it:

According to Professor Michael Jefferson [of the ESCP Europe Business School] who spent nearly 20 years at Shell in various senior roles from head of planning in Europe to director of oil supply and trading, “the five major Middle East oil exporters altered the basis of their definition of ‘proved’ conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their ‘proved’ conventional oil reserves of some 435 billion barrels.”

Global reserves have been further inflated, he wrote in his study, by adding reserve figures from Venezuelan heavy oil and Canadian tar sands – despite the fact that they are “more difficult and costly to extract” and generally of “poorer quality” than conventional oil. This has brought up global reserve estimates by a further 440 billion barrels.

Predictions about the exact nature and timing and of the phase-out process for fossil fuels are premature. Yet, as the the developments above indicate, the pace of the transition away from fossil fuels to renewable energy sources continues to accelerate.

Earth Day 2016 — Beyond Paris & Accounting for All Carbon Emissions

Economist Paul Krugman, while referencing an upcoming carbon pricing piece by David Roberts (@drvox) writes that:

Econ 101 tells us that if you want to reduce emissions of a pollutant, the most efficient way to do that is to put a price on emissions, so that all possible routes to reduction are taken, and the marginal cost is the same for all routes. It’s a real insight, and has had positive impacts on real-world policy — cap-and-trade has worked very well at reducing acid rain.

Krugman goes on to argue that pricing may not be the only solution, it may even be even sub-optimal in some cases, and that regulatory solutions may well develop sooner than robust international carbon markets. He concludes a few paragraphs later:

The point is that just because Econ 101 makes a smart, counterintuitive point doesn’t make that point of central importance….

Yet, we know ex-post from acid rain cap and trade plans that cap and trade regimes deliver results. And we also know that regulatory capture undermines many anti-pollution rules with solar being among the biggest targets. Next, there is the fact that massive amounts of Carbon Pollution remain unaccounted for. So both market making and regulation must be moved forward deliberately.

Door to Door Cover: The Magnificent, Maddening, Mysterious World of Transportation
Door to Door
Cover: The Magnificent, Maddening, Mysterious World of Transportation

Continue reading Earth Day 2016 — Beyond Paris & Accounting for All Carbon Emissions

How much of climate change is our fault: Exxon and the marketing of doubt

By Walter Borden

Astrophysicist Adam Frank recently commented on NPR that climate change really is not really humanity’s fault. The crux of his argument is that while the science is settled that human activity has caused climate change, we really could not have known better. Clearly there is some real truth in this assertion. To quote from the article:

But here’s the crux of the issue: 150 years ago when we started building that fossil-fuel based civilization, we had no idea of what we were doing. We’d found this black goo seeping up from the ground and it turned out you could do awesome things with it. In the winter, you could burn it in a furnace and keep your house warm. In the summer, you could burn it in a power plant and use the electricity to keep your house cool. You could also burn it in an internal combustion engine and travel hundreds of miles in a single day. And all that electricity you were generating from the power plant? You could use that to keep the lights on at night and watch moving pictures of stuff happening on the other side of the planet.

 New Mexico's largest electric provider — the coal-fired San Juan Generating Station near Farmington — has been defending a plan to replace part of an aging coal-fired power plant with a mix of more coal, natural gas, nuclear and solar power. Susan Montoya Bryan/AP & NPR website.

New Mexico’s largest electric provider — the coal-fired San Juan Generating Station near Farmington — has been defending a plan to replace part of an aging coal-fired power plant with a mix of more coal, natural gas, nuclear and solar power.
Susan Montoya Bryan/AP & NPR website.

At the outset of large scale fossil fuel utilization and into the 20th century this point is fair. But we must consider the case of Exxon, for example has worked to undermine climate science including widespread dissemination of both its own scientific findings as well as those of other groups. According to the New York Times:

So, even as one in-house memo stated that “fossil fuels contribute most of the CO2” that was turning the earth into an overheated greenhouse, another memo showed that the company would seek to “emphasize the uncertainty in scientific conclusions.

 

Other major players in Big Oil very likely done same. And quite naturally politicians in the House Science Committee (under the chairmanship of Lamar Smith, R-TX) who take large contributions from Big Oil are using sweeping new congressional protocols modeled on the open-ended Benghazi hearings, to harass and intimidate climate researchers. Dr Frank argues that its time to go beyond narratives of greed. Maybe not quite yet. While we all strive to avoid ad hominem, it seems greed driven attacks risk damaging the basic process by which our nation funds basic research. As David Roberts points out in an very thorough post at Vox:

To be clear, Smith has not alleged any corruption, wrongdoing, or even bad science. He hasn’t alleged anything. Nor has he offered any justification for why he needs access to NOAA internal communications. The new rules mean that he no longer has to explain or justify himself to anyone. He’s just hoping to find something he can use.

So, while Dr. Frank’s point has merit, and invective isn’t likely to help much its important we understand its not other factors, and indeed putting profit before future generations apply now as well as to the late 20th century. Because as he stated:

That’s because the real truth is this: While triggering climate change might not be our fault, not doing everything we can about it now that we know it’s happening — that would be our fault. Worse, it would be our failure as a species.

Solar Power Usage in US and EU Builds, Policy Innovation Falters

By Walter Borden

Here at the midpoint of 2014, solar power technology continues its advance while its marketplace momentum builds. Economic policy and commercial efforts designed to induce commercial innovation must keep apace.  And there are pockets of progress in the political economics of deploying solar. Take for example this post from Clean Technica: “Solar Energy’s Quiet Invasion Into Professional Sports“. Or consider the Regional Greenhouse Gas Initiative (RGGI), a market-based regulatory program in the United States that reduces greenhouse gas emissions.

And in Germany, one of the world’s most important economies, phys.org reports, “The Fraunhofer ISE research institute has announced that Germany set a record high for solar use on June 9—on that day the country’s solar power output rose to 23.1 GW—50.6 percent of all electricity demand. The record occurred over a holiday, which meant less demand, but it still marks a major step forward for the world’s solar power leader.”

Key aspects of the report from our perspective:

  • Despite not having a generally sunny climate, Germany has been pushing solar energy, but not from the huge solar farms as seen in other countries. Other nations, like the United Kingdom, report the same.
  • The German government is on track to reduce greenhouse emissions from electric power generation from coal fired power plants while at the same time retiring its fleet of nuclear power plants (scheduled for closure by 2022).
  • The FRG aims for an energy mix of solar, wind and biomass; though solar has become the national leader according to most reports.

041514krugman1-blog480

Yet challenges remain, as phys.org also notes:

The move to solar has not been without its problems, of course. The government plans to lower or remove subsidies as soon as possible, and the demand for batteries to store all that home-grown electricity is outstripping supply causing a rise in prices. Also, it’s not clear what sort of role utilities will play going forward. Currently, many homeowners are reporting surplus energy production on sunny days which they sell to electric companies, which now find themselves having to store it for use during cloudy stretches.

There’s another problem though it’s not as obvious: the German government noted recently that almost seven million households in the country are living in energy poverty (defined as having to spend more than 10 percent of income on energy bills). The national energy program, Energiewende, has resulted in some transfer of wealth. Economists note that even with subsidies, it’s generally the wealthy and sometimes the middle class who can afford to put solar panels on top of their houses.  The poor continue to live off the grid paying taxes that provide the funds for the subsidies. There’s also some evidence that the country’s energy program is pushing energy costs higher overall, resulting in more electricity being produced by cheaper fossil fuels.

Energy poverty is also a problem in the US.  As states like Ohio abruptly suspend widely popular solar power policies, working poor, middle class families, and businesses see expenses rise. Manufacturers like Honda and Whirlpool joined consumers in opposing Ohio Governor Kasich’s executive order to freeze its program. Additional side-effects weigh on taxpayers.  As more coal is used public health suffers resulting in rising health care costs, and water treatment costs increase too which is also true of  fracking for natural gas. These costs are passed along disproportionately to small businesses hurting them as well as working families. Continue reading Solar Power Usage in US and EU Builds, Policy Innovation Falters

The Prius Paradox Paradox: Rebound Effects Are Relative

Walter Borden

WILL money saved from using clean technology simply be spent on using    more energy? Jevons paradox (or the Jevons effect) is named for economist William Stanley Jevons.  In the 1860’s, he observed that technologically driven increases in the efficiency of coal-use increased coal consumption in a wide range of industries. Counter-intuitively to some, he argued that technological improvements could not be relied upon to reduce fuel consumption. Buyers simply use the savings to buy more energy. Such rebound effects as a batch of recent research reveals, are at work in energy markets yet are often overdetermined and misunderstood. Their occurrence suggests the need for carbon taxes in order to price environmental risk in energy costs. The basic logic of such taxes was sketched out in the 1920’s by another economist, Arthur C. Pigou, as the Pigovian Tax. He argued that landowners who allow their rabbits to overbreed and spill over to neighboring land, therefore damaging  crops, have a financial responsibility for the damage. Such activity, often uncorrected by markets, is seen as a market failure. So its remedy is a tax or law to protect the rights of neighboring landowners.

Interest in both is keen among policymakers, thinktankers, bankers, and the general public as the tension between energy demand  and supply increases. Pollution, global warming, declining oil reserves, and increasing demand for energy in the neoliberalized global marketplace underlie both the interest and the tension.

To the extent that they are at work, Jevons rebound effects in a system vary based on the scale of the market considered. For example Richard York of the University of Oregon finds:

A fundamental, generally implicit, assumption of the Intergovernmental Panel on Climate Change reports and many energy analysts is that each unit of energy supplied by non-fossil-fuel sources takes the place of a unit of energy supplied by fossil-fuel sources 1, 2, 3, 4. However, owing to the complexity of economic systems and human behaviour, it is often the case that changes aimed at reducing one type of resource consumption, either through improvements in efficiency of use or by developing substitutes, do not lead to the intended outcome when net effects are considered.

Dr. York’s work appears to reveal an instantiation of the effect.  Across most nations of the world, developed and developing, he reports an average pattern, “…over the past fifty years is one where each unit of total national energy use from non-fossil-fuel sources displaced less than one-quarter of a unit of fossil-fuel energy use. When looking at electricity specifically, the displacement of each unit of electricity generated by non-fossil-fuel sources is less than one-tenth of a unit of fossil-fuel-generated electricity.”

These conclusions put a useful empirical foundation under recommendations found in Google.org’s clean energy innovation study: meaningful suppression of fossil fuel consumption requires adaptation of mainstream energy policy. Also looking at the international scale, Grist.org published a chart this week titled The mind-boggling rise in Asian coal consumption shown as Exhibit 1.

Chinese Coal Consumption vs. Developed World
Exhibit 1: Chinese Coal Consumption vs. Developed World. Source: grist.org

Coal going unconsumed in the U.S. is being burned with little scrubbing in China and India, further arguing for the need to decarbonize via international agreements. Liberalized trade (neoliberalism) needs alignment with a flow of trade that balances externalities – pollution – created by exchanges of resources and capital. This also complements York’s finding: shifts to renewables will be inconsequential if the total decarbonization rate isn’t decelerated, that is, if amounts are merely shifted from one market to another.

When Rebound Effects Are Perceived But Not Found

Then there is the contention of the paradox at work in driver behavior popularized as the ‘Prius Effect” in sources such as Conundrum and the Wall Street Journal. Their argument is that Prius owners drive more and thus erase their net carbon and energy savings for the system. However, the work of Ken Gillingham of Yale University and analysis from CO2 Scorecard show Prius owners rack up comparatively the same vehicle mileage as non-Prius owners.

This Prius Fallacy has a dual premise: Prius drivers drive more because they are paying less for gas, and/or they use their savings on carbon-intensive goods and activities.

Gillingham’s micro-dataset on personal automobiles contains information – further analyzed by Thinkprogess – which refutes premise one as the scale of the consumer. The plot in Exhibit-2 shows no significant difference in Vehicle Miles Traveled (VMT) by Prius owners vs. the rest of  California’s drivers. (For those interested in statistical details on the data and diagnostic regression Thinkprogess’ analysis is worth a good study). Prof. Matthew Kahn of  UCLA writing in the Christian Science Monitor reinforces these conclusions.

So in these cases when consumers switch from conventional cars to a fuel-efficient hybrids a meaningful reduction in gasoline consumption – up to 430 gallons per year for an owner who switches from an SUV— is also observed.

Continue reading The Prius Paradox Paradox: Rebound Effects Are Relative

Green Lighting Growth: Climate Patriot Bonds and Carbon Taxes

By Walter Borden

   Green Bonds, Carbon Taxes, and Market Failures

THE gathering dangers of global warming for life necessitate that humanity collapse its dependency on fossil fuel energy (FFE).  Ecological fiduciary responsibility requires shifting balance from political restraint to action. The challenges of managing a drawdown of FFE’s in concert with economic security, while significant, are often exaggerated. Recent research and analysis show that oil and coal-fired power plants exact pollution damages larger than the economic value they add. For example, accounting for the gross external damages (GED) from coal would add ~17.8¢ per kilowatt-hour (kWh) of electricity generated.  In 2012, German utilities will obtain rooftop solar on long-term contracts for ~23¢/kWh.  Large projects will receive just 18.7¢/kWh.  This makes it very likely that solar electricity will be cheaper than that from coal by late 2013 in Germany.  And as a result of California’s clean air bill A.B. 32 it will not be far behind. It is clear that GED considerations further strengthen the economic argument for decarbonizing our economy and that the trend of lower cost cleaner energy is accelerating. This can be contrasted with growing purchase and societal costs, often going unpaid, of FFEs.

What would a program similar to the Germany’s do for market and external costs in the U.S. market? More abundant sunshine in the many areas of the US (29% in Minneapolis and up to 70% in Los Angeles) makes parity with Germany easily attainable.  Americans could buy solar energy on long-term contract fors 18.6 ¢/kWh in Minneapolis and just 15.4 ¢/kWh in Los Angeles, taking into account only current subsidies.  Factor in the federal 30% solar tax credit, and solar could be had for 14.3¢/kWh in Minneapolis and 11.8 ¢/kWh in Los Angeles.

Impediments remain to growing solar as percentage of US energy sources. For example GEDs and Energy Return on Energy Invested (EROEI) of solar modules are different. Solar cells are built in Europe with its mix of electricity generation of nuclear, wind and other sources and must be compared to building  solar cells in China, which has mostly coal-generated electricity and higher GEDs.  A more robust body of research for Life Cycle Analyses (LCA) of solar plants is needed  as they are increasingly built at scale.

Solar Array Based on the Fibonacci Sequence. Public Domain.

But, what about financing and scaling across the US? The existential   challenges of deploying renewable energy (RE) sources to address global warming can be met like those of the Great Depression, World War II, and space exploration:  21st century versions of War Bonds and Patriot Taxes integrated with coherent public-private partnerships to develop RE sources and infrastructure. Two of the world’s largest economies in Germany and California are leading the way. Yet fossil fuel marketers still dominate the debate contending that higher (FFE) prices hurt the public economy and that renewables are impractical despite the evidence to the contrary.

Ambitious politicians assure the public they can control the cost of energy and low energy prices. They argue that there is no need or, indeed, no substantial benefit from clean energy investment subsidies but support  ~12x more subsidies for FFE over RE . Meanwhile, public investment in RE projects that benefit the economy and ecology are to be found everywhere, and financial, technological, and policy innovations instantiate sustainable growth. Both Germany and California are ahead of schedule for supply from their RE investments. Yet Germany is planning to cut its subsidies via its Feed-In-Tariff (FIT) while RE plants in California come online. So more hard work to implement policy to accelerate deployment and remove market barriers lies ahead. Continue reading Green Lighting Growth: Climate Patriot Bonds and Carbon Taxes

Position Statement: Heed Scientific Consensus, Decarbonize Economy, Pair Policy Innovations with Technological Breakthroughs

By Walter Borden

Science and Sustainability

We at Fund Balance are concerned that the only mention of climate change in President Barack Obama’s 2012 State of the Union address was “The differences in this chamber may be too deep right now to pass a comprehensive plan to fight climate change.”

President Obama, State of the Union address 2012.

The U.S. National Academy of Sciences states, “The world is heating up and humans are primarily responsible. Impacts are already apparent and will increase.” Greenhouse gas (GHG) induced climate change is a clear and present threat to our civilization and way of life. Its continued politicization is dangerous. We accept the consensus of the world’s scientific community which is summarized well by the American Chemical Society:

Careful and comprehensive scientific assessments have clearly demonstrated that the Earth’s climate system is changing in response to growing atmospheric burdens of greenhouse gases (GHGs) and absorbing aerosol particles. (IPCC, 2007) Climate change is occurring, is caused largely by human activities, and poses significant risks for—and in many cases is already affecting—a broad range of human and natural systems. (NRC, 2010a) The potential threats are serious and actions are required to mitigate climate change risks and to adapt to deleterious climate change impacts that probably cannot be avoided. (NRC, 2010b, c).

We further acknowledge and accept the conclusions of our medical community. The American Medical Association (AMA) urges that we as a society confront the health issues of climate change now.

Scientific evidence shows that the world’s climate is changing and that the results have public health consequences. The AMA is working to ensure that physicians and others in health care understand the rise in climate-related illnesses and injuries so they can prepare and respond to them. The Association also is promoting environmentally responsible practices that would reduce waste and energy consumption.

We see that escalating carbon emissions are seriously damaging our oceans depleting them of oxygen and acidification. Carbon dioxide emissions caused by human activities over the last century have increased the acidity of the world’s oceans far beyond the range of natural variations, which may significantly impair the ability of marine organisms to live. We realize that rapid deforestation increasingly impedes nature’s ability to buffer carbon dioxide concentrations in our atmosphere and thus keep our air suitable for breathing.

The time is now for President Obama and Congress to heed science and pursue evidence based policy formation in addressing the real and gathering dangers of Climate Change. Putting a price on carbon is a critical first step.

Continue reading Position Statement: Heed Scientific Consensus, Decarbonize Economy, Pair Policy Innovations with Technological Breakthroughs

Cap and Trade is Dead, Long Live Cap and Trade

With Proposition 23 in California defeated, the hard and important work on Cap and Trade in the United States can begin again. Advancing the Western Climate Initiative (WCI) will be critical in building a framework in North America for Cap and Trade policy. “A cap-and-trade system is a market-based mechanism that uses market principles to achieve emissions reduction. A core component of a greenhouse gas cap-and-trade program is that an emitter must turn in one ‘allowance’ for every metric ton of carbon dioxide equivalent (CO2) that they emit.” As so defined on the WCI website. As the Great West and Canada agree, Cap and Trade is an important first step in creating a framework for Sustainable Finance initiatives.

Source: carbontax.org

Well-funded efforts aimed at shaping public discourse labeling Cap and Trade an “energy tax” obscure debate amongst voters in North America.  Much of these funds come from abroad, from sources less interested in creating jobs in North America than extracting its resources. BP, for example, was generous in its contributions to the Tea Party. If it is a tax at all it is a Pollution Tax. Though it is much more a fee exercised on industries that withdraw essential resources from civilization and return them in degraded form. These resources are part of the public domain and when they are removed from the public trust and diminished, the public should be compensated.

And it is not axiomatic that green jobs and sustainable finance mean net job loss. Indeed, quite the opposite as California and China continue to demonstrate.

Major European financial institutions and policy making bodies lead in advancing Cap and Trade, as well as the broader goal of sustainable finance. Yet clearly there are coordinated European-based attempts to influence U.S. elections in favor of Pollution Rights advocates. A recent report used information from the Open Secrets.org database to track what it labeled Europe’s biggest polluters efforts to influence the U.S. midterm elections: “The European companies are funding almost exclusively Senate candidates who have been outspoken in their opposition to comprehensive climate policy in the US and candidates who actively deny the scientific consensus that climate change is happening and is caused by people.” This report lists BP, BASF, Bayer and Solvay as having made contributions.

Such funding is not restricted to European donations. A report by ThinkProgress, tracked donations to the U.S. Chamber of Commerce from a number of Indian and Middle Eastern oil, coal and electricity companies.

All the while much of the manufactured hysteria about Cap and Trade systems misses the real point. Market based efforts to curb pollution, combat acid rain, and offset global warming, represent merely incremental steps towards sustainable economies and finance. Limited supplies of accessible Carbon will be needed for much more than just fuel. Hence society will need to prioritize its usage and deployment.

There is also another side to the proverbial coin of foreign efforts to hinder Cap and Trade. As Thomas Friedman notes in WikiChina in writing a fictional cable from U.S. based Chinese diplomats back to Beijing: “Most of the Republicans just elected to Congress do not believe what their scientists tell them about man-made climate change. America’s politicians are mostly lawyers — not engineers or scientists like ours — so they’ll just say crazy things about science and nobody calls them on it. It’s good. It means they will not support any bill to spur clean energy innovation, which is central to our next five-year plan. And this ensures that our efforts to dominate the wind, solar, nuclear and electric car industries will not be challenged by America.”

So while China continues to dump Carbon on the US, it is quickly consolidating its lead in some of the most lucrative technology and financial markets for the coming decades. One could be forgiven in wondering if they too, might have an interest in keeping the US electorate in the dark about Cap and Trade and sustainable finance. As per our last post, George Schultz’s business thesis may have more facets than meet the eye as well.

Big Oil Fights Clean Tech in California

As we reach the end of the first decade of the 21st century, some dangerous misconceptions linger from the 20th. Two of which are that global warming is not happening and that it is not primarily a man-made phenomenon. While factors such as Solar Irradiance clearly have secondary and significant impacts, emission of heat trapping gases from human activity, coupled with wide scale deforestation of the Earth, compromise Gaia’s ability to manage such rapid change.

While that debate is settled one indication remains constant: Climate Crisis involving the rapid acceleration of Earth temperatures is real. And for the purposes of this post fighting it does not necessitate sacrificing employment in industrialized nations. In fact, an opposite case merits presentation.

Fire fighters battling oil tank fire at Union Oil refinery in Wilmington, Calif., 1951

This past summer anticipation of the political season overwhelmed common sense. Prominent Republican Senators Lindsay Graham and John McCain retreated from support for Cap and Trade legislation eyeing mid-term elections no doubt feeling pressure from Smog Lobby financiers and pollution advocates such as Koch Industries. Many politicians abandoned their support for the legislation in efforts to distance themselves from President Obama or please mainstream media king Fox News. A very informative post-mortem can be found in Ryan Lizza’s  As the World Burns in last week’s New Yorker.

Once again into the breech is California. As the innovation pacesetter, it leads in the national debate regarding policy formulation around the Climate Crisis and is poised to set pace for the rest of the country. In California many Republicans are fighting against Proposition 23, which aims to halt the State’s bold Assembly Bill 32 (A.B. 32) legislation aimed at creating a clean-tech economic factor. Meanwhile Representative Darryl Issa threatens to re-open the so-called “Climategate” hearings if the GOP regains control of the House of Representatives.

Prominent and distinguished conservatives such as George Schultz back Governor Arnold Schwarzenegger in his battle against Big Oil. Two Texas oil companies with refineries in California, along with pollution rights financiers Koch Industries, fund a campaign to halt California’s landmark laws designed to slow global warming and promote clean energy innovation. These would require refiners to install state-of-the-art emission-control tools. Opponents of Assembly Bill 32 assert that the installation of such technology would not create any jobs. Yet, the State of California reckons that green technology creates the most jobs right now in California, 10 times more than any other sector.

In addition, former Secretary Schultz begs to differ with the Smog Lobby, “Prop 23 is designed to kill by indefinite postponement California’s effort to clean up the environment…This effort is financed heavily by money from out of state. You have to conclude that the financiers are less concerned about California than they are about the fact that if we get something that is working here to clean up the air and launch a clean-tech industry, it will go national and maybe international. So the stakes are high. I hope we can win here and send a message to the whole country that it’s time to put aside partisan politics and get an energy bill out of Washington.”

Since President Obama and Congress have failed to pass a clean energy bill, California’s laws are our nation’s best hope to stimulate clean-tech in America – and the job creation it would entail.

Prop 23 proposes to suspend implementation of A.B. 32 until California achieves four consecutive quarters of unemployment below 5.5 percent. The unemployment rate is currently above 12 percent. This is misleading. A.B. 32 was designed to reduce greenhouse gases to 1990 levels by 2020 and was supported by Republicans, Democrats, businesses and environmentalists. Prop 23’s provision requiring a 5.5 percent unemployment rate is deceptive because in the last 40 years California has rarely produced an unemployment rate below 5.5 percent for four consecutive quarters, hence the real intent is to kill clean air policy in California.

To quote Dan Becker, the director of the Safe Climate Campaign, “Now that industry and their friends in Congress have blocked progress there, the hope for action moves to the states and the Environmental Protection Agency… polluter lobbyists are tight on our heels. They’ve offered Senate amendments to block the E.P.A. from using the Clean Air Act to cut power plant pollution. Since that failed, they are trying to block California from moving forward. … If the people of California see through the misrepresentations of the oil industry, it throws climate denialism off the tracks and opens the door for a return to a science-based approach to the climate. It would be a triumph for the National Academy of Sciences over the National Academy of Fraud.”

Energy chemist Nate Lewis of Cal tech states, “The real joke is thinking that if California suspends its climate laws that Mother Nature will also take a timeout….We can wait to solve this problem as long as we want…But Nature is balancing its books every day. It was a record 113 degrees in Los Angeles the other day. There are laws of politics and laws of physics. Only the latter can’t be repealed.”

To put a fine point on the fact that much debate on climate change is manufactured, one need only look at what Republican spin-meister, Frank Luntz, noted in a memo to George W. Bush in 2002.  “The scientific debate is closing [against us] but not yet closed. There is still a window of opportunity to challenge the science…Voters believe that there is no consensus about global warming within the scientific community. Should the public come to believe that the scientific issues are settled, their views about global warming will change accordingly. Therefore, you need to continue to make the lack of scientific certainty a primary issue in the debate, and defer to scientists and other experts in the field.”

But Mother Nature and the Chinese are not going to wait around for American political cycles.  Let’s close with a quote from The Governator. “And they [Big Oil] are very deceptive when they say they want to go and create more jobs in California,….Since when has [an] oil company ever been interested in jobs? Let’s be honest. If they really are interested in jobs, they would want to protect A.B. 32….”

Editors Note: Many of the quotes and uncited sources in the last half this post are adapted from Thomas Friedman’s excellent piece in the October 5th, 2010 edition of the New York Times “The Governator vs. Big Oil”.

Capital Preservation: Protecting the Ocean’s Collapsing Fisheries

Mainstream media coverage of the critical depletion of key fish populations – and the serious economic threat it represents – echoes a key refrain at Fund Balance. Time Magazine covers how climate change is warming oceans and thus reducing their ability to support life, and CNN.com has a post by Fedele Bauccio addressing ways to halt overfishing.

Blue Fin Tuna

In addition the U.N. recently released new findings and recommendations for how humanity can decelerate the rapid depletion of the ocean’s biological capital.  Some key points:

  • Blue Fin Tuna populations have dropped by 83% in the past 30 years.
  • The annual 27 billion dollars in government subsidies to fishing, mostly in rich countries, is misguided since the entire value of fish caught is only 85 billion dollars.
  • As a result, fishing fleet capacity is 50 to 60 percent higher than it should be.
  • About 20 million workers will be displaced by ending these subsidies and thus retraining will be required.
  • Fish populations can rebound quickly if no-fishing zones are expanded and their limits enforced; for example, by allowing tuna to live twice as long as they currently do, they are able on average to produce twice as many eggs.

We hope that the ongoing Gulf Coast disaster heralds a new time – one where:

  • The false dichotomy between ecology and economy in the public mind is finally eliminated.
  • Government and industry realize that an environment where pollution and unchecked exploitation are controlled and tightly regulated is an environment that supports healthy economic growth.
  • People and governments vigorously address the fact that Climate Change is not the only impact of fossil fuel extraction and combustion, and that “market-based” strategies like cap and trade must be combined with other, precautionary and complementary policies.
  • The public consciousness is imprinted permanently with the understanding that drawing down capital at a rate that exceeds one’s ability to replace it is economic and biological folly at best and suicide at worst, whether of banks or fisheries.

Climate, Rainforests, Treasuries and Central Banks

There is an important synergy emerging in principle between the London Accord, the World Bank, Central Banks and the Prince of Wales’ Rainforests Project. We recently learned that the World Bank is already working with the Rainforests Project to improve financing and investment opportunities in protected, living rainforests.

We encourage the Rainforests Project and the World Bank to work closely with the London Accord to move UK and International Treasuries and Central Banks, to adopt, issue and purchase climate, environment and socially responsible index-linked bonds.

The London Accord idea, as sketched out admirably in the Environmental Finance February Issue, is to issue sovereign bonds whose coupon rate is linked to climate and ESG policies. It’s pretty simple in practice: fail to meet your climate targets and your interest rate goes up. This type of market signal would allow investors in clean technologies, carbon offset projects and other climate mitigation and adapation businesses to hedge against government inaction and inspire governments, as the article suggests, to live up to their promises. In general, it helps to create a financial playing field tilted in favor of clean, green businesses, a prospect that would be cause for global celebration.

The April 2009 G20 communique was remarkable for its emphasis on climate, green jobs and a recovery powered by sustainable principles and business practice. Its concluding point was that: “We reaffirm our commitment to address the threat of irreversible climate change, based on the principle of common but differentiated responsibilities, and to reach agreement at the UN Climate Change conference in Copenhagen in December 2009.”

Because of their influence on the G20 agreement and implementation, the Bank for International Settlements and the Financial Stability Board need to get involved. We all benefit if they will just take the time to more intimately familiarize themselves with the work of the London Accord, the World Bank and the Rainforests Project on these types of issues.

Reading through the London Accord’s remarkable research, it has occurred to me that Central Banks might well have to be the first movers on this front. As the largest purchasers of government debt, it may be up to them to signal to governments that they would be interested in these types of securities.

Some are despondent after Copenhagen, concerned that the pace of change is insufficient to address looming challenges. Constructive engagement with the central banking community may well prove instrumental to persuading sovereign nations of the wisdom (costs) of failing to confront climate change, the business issue of the millenium according to those at Davos. We can’t wait for them, but neither can we afford to ignore them.

Economic, Ecological Concerns Converge

One hears frequently these days that eco-nomic needs trump eco-logical ones in the public mind – especially here in early 2010. But it is increasingly hard to see a difference between the two at all.

Tanya Ott’s recent coverage on WBHM reporting on the challenges the city of Anniston, Alabama has faced is instructive. A large military base, Fort McLellan, closed there in 1995. The city was largely dependent on the revenue this installation created. Then came wide-spread land devaluation as a result of PCB contamination in the surrounding waterways. Next there was national publicity over local resistance to the incineration of deadly nerve gases left over from the military installation.

That was not the last chapter in the story. Ms. Ott notes how arts and humanities-based activities are leading the way toward the revitalization of downtown Anniston. This process also includes uncovering a formerly paved-over creek that runs through downtown.

On the policy front, various campaign officials for local and federal offices insist that jobs matter more than the environment in the vox populi and voting booth.  A recent article in the Demopolis Times on concerns over coal ash disposal indicates that wastewater from coal fired plants might not just be a NIMBY (not in my backyard) issue. Rather it may well indicate that yet another zone in the Black Belt is starting to question the long-term cost/benefit analysis of energy consumption that produces toxic water:

“While the Tennessee Valley Authority’s cleanup has removed much of the ash from the river, the arsenic- and mercury-laced muck or its watery discharge has been moving by rail and truck through three states to at least six different sites. Some of it may end up as far away as Louisiana.

At every stop along the route, new environmental concerns pop up. The coal-ash muck is laden with heavy metals linked to cancer, and the U.S. Environmental Protection Agency is considering declaring coal ash hazardous.

“I’m really concerned about my health,” said retiree James Gibbs, 53, who lives near a west-central Alabama landfill that is taking the ash. “I want to plant a garden. I’m concerned about it getting in the soil.” Gibbs said that since last summer there has been a “bad odor, like a natural gas odor.”

After the spill, the TVA started sending as many as 17,000 rail carloads of ash almost 350 miles south to the landfill in Uniontown, Ala. At least 160 rail shipments have gone out from the cleanup site, said TVA spokeswoman Barbara Martocci.

Since the EPA approved that plan, unusually heavy rain – including about 25 inches from November through February – has forced the landfill to deal with up to 100,000 gallons a day of tainted water.

The landfill operators first sent it to wastewater treatment plants – a common way that landfills deal with excess liquid – in two nearby Alabama cities, Marion and Demopolis…”

Birmingham’s Green Building Focus, mentioned in last week’s blog for their Green Industrial Real Estate Project, has just announced their second Green Building Focus Conference and Expo to be held in Birmingham, Alabama this August 24-26. Such activity exemplifies economic opportunity emerging from ecologic planning.

A Call for Holistic Climate Policy

by Leland Lehrman

This cartoon, from the front cover of the February 2010 issue of Funny Times, describes the Fund Balance position with respect to Climate Change. We acknowledge that there remains uncertainty in the scientific community about the extent to which anthropogenic CO2 emissions drive global temperature increases. We also regret the polarization of the discussion and the slide into judgmental invective that has accompanied the debate on both sides.

However, we cannot deny the observation that modern mankind does have adverse macroimpacts on the environment. The evidence on this subject is not open to question. From the Pacific Garbage Patch to acid rain to Chernobyl to the dead zone in the Gulf of Mexico, human pollution has damaged Mother Earth in catastrophic ways. It is not difficult to understand global climate change as the emergent property of the various regional macro changes that are already well-known.

Therefore, as the cartoon suggests, the issue of CO2 and anthropogenic warming may well be an esoteric, even moot point. The precautionary principle will require most well-intentioned people to acknowledge the need to restrict global pollution, and not just CO2. Furthermore, the principles guiding the global environmental community, vulnerable as they may be to subversion, are good in and of themselves, and do not require scientific consensus on anthropogenic global warming to warrant action.

It is regrettable that the international scientific community has chosen to focus on CO2 to the exclusion of all the other major impacts of modern techno-industrial civilization. The overemphasis on this one often innocuous molecule has allowed the proponents of global climate action to appear simplistic, propagandistic and even self-interested. Those who overly focus on a cap and trade system that would personally enrich themselves must be recruited to a more holistic regulatory and capital markets strategy that is based on holistic science and balanced capital markets incentivization. Such a system would include taxes, policies and accounting rules on an equal footing with capital markets strategies like cap and trade.

To this end, we call upon the international political, financial and scientific community to reframe the global climate change debate in more holistic terms. A successful regulatory regime will adequately account for the role of other global warming gases, other toxins and other adverse aspects of human ecological impact. Only a holistic approach – which also acknowledges the impact of solar cycles – will achieve a scientific consensus and produce the kind of international system which takes into account all externalities. All “externalities” must be put back on the balance sheet of global industry and investment,  such that capital and trade flows move naturally towards truly clean and green businesses.

Climate Issues, Sustainability Cross Party Lines

magnoliaThere are more signs recently of the climate crisis, sustainable industry, and ecosystem repair issues crossing party lines and effecting change in Red States and rural areas. Tanya Ott reports from WBHM in Birmingham, Alabama about “tree-hugging conservatives” in Magnolia Springs, the reclamation of a wetlands and a burgeoning eco-tourism industry.  Read the story or listen to podcast here.

Writing in The New York Times, Thomas Friedman quotes Senator Lindsay Graham: “I have been to enough college campuses to know if you are 30 or younger this climate issue is not a debate. It’s a value. These young people grew up with recycling and a sensitivity to the environment — and the world will be better off for it. They are not brainwashed. … From a Republican point of view, we should buy into it and embrace it and not belittle them.”

In addition, the Times reports on a natural gas power plant in Indiantown Florida integrating an array of solar panels within its infrastructure. To quote the Times “It is an experiment in whether conventional power generation can be married with renewable power in a way that lowers costs and spares the environment.” It’s an interesting report addressing the challenges involved in scaling clean renewable supply along with issues of storage and transmission.