Entries Tagged as 'environment'

Extreme Weather: A Climate Change Wake Up Call?

May 31st, 2011 at 9:50 pm 18 Comments

Bill McKibben, cure founder of the global climate campaign 350.org, health recently wrote an op-ed for the Washington Post titled A link between climate change and Joplin tornadoes? Never!

Using rather effective sarcasm, McKibben makes the case that the spate of recent extreme weather events should be a wake-up call on the urgency of addressing climate change. He correctly points out that climate scientists have been predicting for years that carbon loading in our atmosphere will create droughts, floods and other extreme weather events.

Does that scientific concurrence absolutely prove cause and effect? No, but it does distinguish McKibben’s hysterics from those of climate deniers who point to every cold snap or snowstorm as evidence that global warming is a hoax.

Because “climate” represents long-term trends, and day-to-day weather relies on multiple variables, it is wrong to say that any one weather event or abnormal season either proves or disproves climate change. However, weather trends that are demonstrated over time, and that track with other well-documented scientific evidence, should indeed be a wake-up call. We ignore them at our own peril.

The more important question that McKibben’s op-ed begs is: How much evidence will it take to convince the American public and its elected representatives that action on climate change is warranted?

It is hard to imagine that most Americans who have been watching news reports over the past few months of numerous extreme weather events—the unusually powerful tornadoes wreaking havoc across much of the South and Midwest, the record-breaking flooding along the Mississippi River, the extreme droughts in the Southwest, and the record snowfalls in the Midwest and Northeast—have not begun to suspect that something is amiss and that climate change may be responsible.

The problem is that action to address climate change not only requires the belief that it is happening; it also requires the belief that we can do something about it. This is where the climate change deniers—along with some narrowly focused folks in the oil and coal industries—do their most damage.

As the deniers’ assertion that climate change is a hoax begins to falter under the weight of reality, they have begun to pivot to the argument that climate change is a natural occurrence that mankind cannot alter, only adapt to. It is an argument designed to lull people into a state of complacency—similar to the tactics totalitarian regimes use to lull their subjects into passivity and government dependency.

Perhaps President Reagan recognized such tactics when he rejected the arguments of those who were trying to forestall action to address another climate problem, ozone depletion. He consulted with climate scientists, looked honestly at the evidence, accepted mankind’s role, and took prudent action to solve the problem.

Reagan faced ozone depletion with the same clear-eyed realism that he faced the threats posed by the Soviet Union and communism.

In an interview last year, Reagan’s Secretary of State George Shultz recalled that the President believed action on ozone depletion was necessary because he recognized the huge potential for damage. Shultz noted that Reagan viewed acting on the best available science in the same light as taking out an insurance policy.

Reagan’s leadership resulted in the Montreal Protocol Treaty, which began the phase out of chlorofluorocarbons.  Today the threat from ozone depletion is greatly diminished and our stratospheric ozone layer is healing.

Reagan once said, “Facts are stubborn things.”

With today’s climate threat, let’s hope that like Reagan, we are wise enough to face the facts honestly—and courageous enough to accept our responsibility to act.

Christie’s Climate Change Straight Talk

May 27th, 2011 at 5:41 am 31 Comments

Chris Christie has pulled New Jersey out of the Regional Greenhouse Gas Initiative, or “Reggie,” the power plant cap-and-trade program that covers NJ and nine other Northeastern states.

Left-leaning environmental groups are framing Christie’s pullout as a bag of pander candy to delight ideologues for whom climate denialism is a litmus test for any potential GOP presidential candidate.

That’s not what Christie is doing. Christie is not a climate denier. He did not put on a tinfoil hat and rant about scientists plotting world domination. He is not polishing apples for the Koch Brothers and Big Coal. He did not buy a ticket to fly Air Inhofe.

Much of what Christie said about climate change at today’s news conference was only mentioned in passing by the press. His remarks deserve a wider airing.

Such as: “Climate change is real and it’s impacting our state. There’s undeniable data that CO2 levels and other greenhouse gases in our atmosphere are increasing.”

And this: “When you have over 90 percent of the world’s scientists who study this stating that climate change is occurring and humans play a contributing role, it’s time to defer to the experts.”

And this: “We have an obligation to reduce our greenhouse gas emissions.”

Christie concluded that Reggie is not effective for getting the job done. He didn’t conclude that the job is not worth doing.

In fact, given that Pennsylvania is not part of Reggie, Christie fears that clean power plants in New Jersey could be aced out in the regional power market by “dirty Pennsylvania coal plants,” three of which Christie’s administration has sued in federal court for wafting pollution into the Garden State.

The pugnacious governor put emphasis on the word “dirty,” as if pushing back at PA for all the Jersey jokes they tell on the west side of the Delaware River.

There’s more than one way to kill the climate change snake.

An alternative that Christie prefers is to scale up cleaner energy. Last year, he signed bipartisan legislation to support development of 1,000 megawatts of offshore wind energy, including financial assistance for component manufacturers.

The state has sent the Interior Department a list of areas in federal waters off New Jersey that ought to be considered for deepwater wind energy leases. In the Northeast, offshore is where the richest wind energy resources are found.

Christie also has pushed back against the “drill, baby, drill” dogma that is touted as a magical answer for energy security and high fuel prices. He doesn’t want to see any drilling rigs off New Jersey or off the coasts of nearby states, such as Virginia, where a blowout could smear the Jersey Shore with tourist-repelling brown goo.

Reasonable people can debate the right mix of incentives and standards for spurring replacement of dirty energy with cleaner alternatives.

That’s the sort of debate that Republicans and Democrats should have. Christie deserves credit for taking part.

Americans Tuning Out Climate Change

May 22nd, 2011 at 2:19 pm 24 Comments

According to a recent Gallup poll, thumb Americans are less concerned about climate change than in the past.  Has the environmental movement dropped the ball on keeping the issue in the public eye?

The poll reports:

Americans continue to express less concern about global warming than they have in the past, generic with 51% saying they worry a great deal or fair amount about the problem — although attitudes appear to have stabilized compared with last year. That current level of worry compares with 66% just three years ago, mind and is only one percentage point higher than the low Gallup measured in 1997.

There are any number of theories that explain why Americans seem less interested in this issue now than they were in the days when Al Gore told inconvenient truths. Perhaps the protracted recession has pushed all other concerns from the minds of most Americans. Perhaps the effort by the conservative/libertarian pundit class to add doubt and scorn to the political environment surrounding this issue has had an effect.

Or, perhaps, it’s because there is no sustained media effort by the environmental movement to keep its ideas in the political forefront. Gore’s movie helped to push the conversation in the eco-conscious direction, but it obviously wasn’t enough.

We simply do not have an ideologically focused green media in the United States. The environmental movement is at risk of dying out in this country if eco-conscious people don’t borrow a few tactics from their adversaries in the conservative/libertarian pundit class.

The critics of today’s environmental movement are sustained by a conservative media apparatus specifically created to keep the right’s ideas in perpetual prominence. Conservatives had a compelling interest in building this media empire, as they believed their contenders were too often getting adverse rulings from biased referees in the arena of ideas.

It’s not enough to complain about this conservative media apparatus, to attack it for peddling misinformation about climate science, to denounce it for its smears of those concerned about this issue. Why not replicate the right’s tactics? Why not work to build up an environmental media apparatus geared to promoting green policy initiatives and obtaining specific political outcomes?

Clearly, environmentalists can no longer rely upon the mainstream media to devote sufficient time to these issues. As economist Bruce Bartlett noted in 2009:

[The mainstream press] no longer has the resources to pay reporters to look into things deeply and write about issues authoritatively. Reporters even at the best newspapers often seem like glorified bloggers who get their basic facts from the Internet instead of their own research, substitute speed for thoroughness and accuracy, and have no time to become experts on the subjects they cover because they are covering the waterfront. And since television news has always depended upon newspapers as their basic sources of material, the decline of newspaper reporting led inevitably to a decline in television reporting.

Bartlett was speaking of progressives generally, not environmentalists specifically, when he noted, “I think they need to abandon the mainstream media and create their own alternative media just as conservatives have done. That will help redress the imbalance that now exists in the media which benefits conservatives.” However, his advice is critical for environmentalists in particular.

No movement can survive for long if its core issues are not constantly reinforced in the American political conscience. Conservatives understand this: it’s why we have right-leaning think tanks, pro-Republican publications, Rush Limbaugh, Fox News. These entities may be a source of irritation for environmentalists—but why can’t they be a source of inspiration?

It’s long past time for the environmental movement to focus on its own political sustainability—to push for nationally syndicated commercial radio shows dealing with green issues, to lobby for wider distribution of documentaries on our planet’s peril, to subject the hardcore climate deniers to the same sort of public rebuke Van Jones was subjected to in 2009, to convert the environmental movement into an interest group that politicians from both parties are profoundly reluctant to antagonize.

Americans’ decreasing concern for green issues should increase the motivation of environmentalists to press harder to integrate their concerns into the national discourse. After President Lyndon Johnson destroyed Senator Barry Goldwater in the 1964 election, it seemed that Americans weren’t interested in conservatism either. The outcome of that election galvanized the American right, which spent the next four decades working to ensure that the products from their idea factories were always on the average American’s shopping list.

The green movement needs to study what worked for the conservative movement, and use those same tactics to regain the political momentum they’ve lost. Of course, environmentalists have to move much faster than conservatives did decades ago. With the physical and political climate deteriorating, environmentalists must make the ironic choice to turn up the heat.

Don’t Pick on Big Oil For Having Big Profits

May 18th, 2011 at 12:07 am 33 Comments

Repeal the so-called subsidies to oil and gas? Ostensibly this is a punitive measure that targets oil companies for the rise in the price of gasoline at the pump, doctor even though most gas stations are independently owned, unhealthy and need to make a profit in their businesses.

First of all, these are not subsidies per se.  Rather they are tax breaks aimed at the entire manufacturing industry — a category that includes oil & gas – and which can be broken down into four components, only one of which is specifically targeted to the industry.  (It also is the least significant.)

  • Domestic manufacturing tax deduction– $1.7 billion.  This is a tax deduction given to every manufacturer in the US as an incentive to keep manufacturing facilities in the United States.
  • Percentage depletion allowance — $1 billion.  Any business can write down the cost of its capital equipment.  Oil in the ground is treated as capital equipment.  Again, all companies get it, not just oil companies.
  • Foreign tax credit– $850 million.  All companies get credit for taxes they pay to other countries, not just oil companies.
  • Intangible drilling costs — $780 million.  As opposed to over the life of an investment, the oil industry is allowed to write-down drilling credits in year one.  This is the only “subsidy” that treats oil companies differently than the rest of the manufacturing world.

So what are we talking about here?  A total annual savings to the federal government of $4.3 billion?  (And this assumes no negative economic impact which is hardly a guarantee.)  This is enough money to run the government for less than ten hours.

If you want to have a debate about all subsidies (tax breaks) then by all means let’s.  But to single out one industry because its product happens to be in demand and as such it had the temerity to make a profit, is ludicrous and irresponsible.  It is targeting people who are in the wrong business as far as politics is concerned because they happen to be in the right business as far as demand for their product goes.  “Big oil” is more than just CEOs in a corner office.  A company like Exxon-Mobile employs 82,000 people worldwide in all capacities from rig workers, to truckers, to geologists, surveyors, mechanics, pilots, schedulers, traders, cooks, pipeline workers, marketers, mid-level managers, etc. These are honest, hardworking people who are providing for their families while supplying world’s energy needs.  Is it a crime that they get paid for their services?  Apparently on Capitol Hill it is.

And yet, those same evil oil companies pay enormous taxes that far outweigh any tax breaks.  Exxon alone paid $8 billion in taxes in just the first quarter.  This is twice as much as the entire industry receives in annual subsidies.  Yes, say our politicians, but look at Exxon’s profits.  No company should be allowed to make $10.5 billion in profits while American drivers are getting squeezed at the pump. Oh? Who exactly decides what is enough?  Chuck Schumer?  Obama’s energy czar? Exxon provides a product that the world needs. One we cannot live without in fact.  And for every dollar they make in gross profits, they pay forty-three cents in taxes.  In fact, the oil & gas industry averages roughly a 9.5% profit margin, placing it down at number 23 in the list of profitable businesses.

In case you’re curious, breweries are number one at 26% profit margin.  Yet I have never seen Pete Coors raising his right hand before a bloviating committee and Lord knows I need beer as much as gasoline!  If big oil is “gouging” us, then other industries are positively robbing us blind.  Industries that average higher profit margins than oil & gas include: applications software (22.7%), cigarettes (17.4%), railroads (12.9%) and wireless communications (11.1%).

A company like Exxon puts up big numbers because it is a very big company valued at roughly $396 billion.  $18 billion is well within expectations of a successful enterprise of such scope and size.  And they do not sit on this cash.  Almost three-fourths of their after-tax profits are poured back into exploration and drilling.  They must constantly be seeking out and delivering more energy for the consumer whose insatiable appetite continues to grow globally.

I find it fascinating that many who rail against “greedy big oil” probably do so on their iPads.  Apple’s market cap is now an astounding $305 billion.  And its profit margin is a whopping 21%: double Exxon’s. Steve Jobs is far more wealthy than Exxon CEO Rex Tillerson.   How come?  Well, one reason is that an Apple iPad 2 currently sells for $729.  Yet its actual cost to make with Chinese workers [who take home a mere $185 per month] is $293, which means a gross margin of 54%.

So who is really the “gouger”?  Exxon or Apple?   Why is multi-billionaire Steven Jobs not in front of Congress explaining himself?  Because, like his oil counterparts, he shouldn’t have to.  He makes a product that people are willing to pay an exorbitant sum relative to its manufacturing cost to possess.  And one can argue that we need iPads a lot less than we need energy.

I notice that coffee futures have come off in the past few weeks yet Starbucks hasn’t reduced the price of a venti skim latte mocha chi-chi foo-foo cinnamon two pump steamer.  Should we have the boys in the van abduct Howard Schulze and drag him before the committee to explain his 9.7% profit margins that partly resulted from hiking prices 25 cents on some drinks when the coffee futures went up, but not giving us back that quarter when the market sold off?  Of course not…

Clearly what is happening in Congress is a shameful attempt at laying the blame for their own inability to cope with the rise of prices across the board, and energy in particular, even though Washington’s policies from a decade of loose money, to sitting idle while we grew ever more dependent on overseas fossil fuels, to cordoning off huge deposits of domestic crude in our own waters and backyards are far more to blame than any CEOs.  It may be politically expedient to finger-point at “big oil” for committing the cardinal sin of doing their jobs well and showing a profit (while ignoring the true ‘gougers’ in the higher profit sectors). But it makes for poor policy, and an astounding waste of taxpayer resources.

Clearly what is happening in Congress is a shameful attempt at laying the blame for their own inability to cope with the rise of prices across the board.

Obama’s Cynical Drilling Drive

May 16th, 2011 at 4:45 pm 20 Comments

What President Obama’s Saturday radio address should have said:

“My fellow Americans. Today, I am directing the Department of the Interior to conduct annual lease sales in the National Petroleum Reserve-Alaska.

“This is a transparently political move. My order will not reduce gasoline prices this year or next year. However, if you believe that my action today will help lower gasoline prices, your misplaced belief might improve my chances for re-election next year. That’s important.

“Just so you know, gasoline prices are a function of crude oil prices, which are set in a worldwide market. Even if additional oil from northern Alaska came on the market this year – which it won’t – it wouldn’t add enough supply to the global market to drive prices down significantly.

“You should also know that oil companies producing new oil from Alaska will not give Americans a discount because I was kind enough to order up more production in America. They will sell that oil at the world price. That world price will largely determine the price of gasoline that you pay. If rising Chinese demand causes the world oil price to rise, gasoline prices will rise also. That’s just tough cookies, folks.

“My Republican friends in Congress will probably dismiss my transparently political move as too little, too late. That’s OK, but I would ask them to acknowledge that they too are trying to hoodwink the voters with glib statements that more domestic drilling is an easy answer to high gasoline prices.

“Oil dependence is a strategic liability. As long as we’re heavily dependent on oil, our economy will be vulnerable to price spikes and our security will be at risk. However, Congress and I are not likely to do much about this until after the next election, or after the  following election. Hey, that’s just politics.

“Meanwhile, I hope you have great vacation plans for summer. Better budget more money to keep your gas tank filled. There is nothing that I or Congress can do this year to help you. Thanks for listening.”

Toronto’s Elephants Need to Head South

May 13th, 2011 at 6:33 pm 1 Comment

A recent column by the inimitable Joe Warmington, illness scolded that “phony American activists” were seeking to “hijack” the elephants at Toronto Zoo and send them to an elephant sanctuary in Tennessee.

Joe’s heart is in the right place – but I think he is wrong.

One doesn’t have to be a “politically-correct wacko” (Joe’s term) to realize that the elephant exhibit at the zoo is haywire. There are three elephants, recipe Thika, Toka and Iringa, confined to a 40-square meter pen in winter, and a paddock outside in summer.

A disquieting reality is that four elephants have died in the last five years, and seven since 1984. Most were under 40 years old.

Even zoo people acknowledge that Toronto’s climate is not conducive to elephants, especially as they grow older and become arthritic. Detroit’s zoo decided in 2004 to no longer exhibit elephants because of Michigan’s cold winters and the lack of an “appropriate physical and social environment” for captive elephants.

Three Toronto Zoo elephants died within 14 months –Tara, Tessa and Tequila. Each death was a traumatic shock for zoo staff who were attached to the animals, recognized their individual personalities, and regarded them as friends.

Everyone connected with the zoo knows something has to be done as the three remaining elephants are growing older. Estimates range from $15 to $30 million to build suitable facilities, and that sort of money simply isn’t available.

An alternative is to donate the elephants to an elephant sanctuary in Tennessee, where  a couple of dozen “retired” circus and zoo elephants roam freely on 2,700 acres of forest and bush, with no daily visitors to stare at them.

The cost of shipping the elephants is estimated at $30,000 to $50,000. Another issue is whether being moved would endanger the elephants.

Rob Laidlaw, executive director of Zoocheck (not my favorite group) is on record saying it “should be a red flag” that zoo elephants are dying at around age 40 – middle age for an elephant. The respectable Association of Zoos and Aquariums (AZA) says Toronto Zoo should phase out its elephants.

For those who care about the welfare of elephants (as opposed to the voyeurism of the public), the sanctuary in Tennessee seems a natural.

Another who frets about Toronto’s three elephants is former game-show host Bob Barker (of The Price is Right fame) who flew to Toronto to persuade the zoo’s directors to ship the elephants to a sanctuary in California, “because Toronto is too cold for elephants.”

Barker has apparently spent some $1.5 million in rescuing elephants, and if Toronto were to agree to his proposal he’d pay for their transportation. Crunch time is looming for the zoo’s directors, on what to do about their elephants.

While there’s a reluctance to deny Torontonians the chance to see elephants, a more serious concern is the elephants themselves – nomadic, social animals who need lots of space and the company of their own kind.

There have already been reports that Toronto’s three elephants show signs of distress and mental anxiety, confined as they are to an unnaturally small space, without sufficient interaction with other elephants.

The elephant sanctuary in Tennessee seems to have no downside. It is sustained by donations from people who like the idea of aging elephants in retirement, without worries or concerns. So what if the public cannot stare at them?

If $15 million isn’t available for the elephants in Toronto, perhaps letting them retire in Tennessee or California is the best option, and would be doing the right thing.

Climate Change Policy Won’t Prevent Twister Deaths

May 13th, 2011 at 9:57 am 17 Comments

By any reasonable measure, the windstorms that ravaged the South in April present a massive tragedy: the most disaster-caused deaths in a single day since 9/11 and more deadly than all but three post-World War II natural disasters. Communities will mourn, ponder what-ifs, and rebuild. Federal, state, and local authorities as well as dozens of community organizations will do everything they can to help those now left without homes, neighbors, and loved ones. And many of those involved in the public policy debate over global climate change will use the storms to push for agendas that they support anyway.  In particular, groups that favor controls on carbon emissions will point to research showing that such emissions could produce the conditions that cause tornadoes; groups that oppose restrictions will point out that strong tornadoes have become less frequent in recent decades by some measures. And the debate will rage on. For all of the argument, there’s a good case that climate change and its politics should have nothing to do with the way America responds to tornado activity.

Here are the facts: the United States’ overall response to tornadoes through stronger building standards, better technology, and improved insurance practices has made the nation much safer. Even with the recent deaths taken into account, total death rates from tornadoes have dropped every decade since accurate statistics are available in the early 20th century and have fallen at least 80 percent in all: more than as many as a thousand died from tornadoes in a typical year in the early 20th century while few years in the 00s saw more than 100 deaths. If America wants to make sure the tragedy doesn’t repeat itself, continuing efforts to improve building, technology and insurance—not an emphasis on climate change—will save the most lives.

Building standards around the country have made most buildings in tornado-prone areas much safer over the past century. Tying roofs to house frames so they won’t blow away, required in many wind-storm prone areas, means that even people who fail to take shelter in basements will usually remain safe when storms roll through. Siding secured directly to home frames rather than simply nailed on also helps. But these efforts aren’t as widespread as they should be; most houses predate standards that require them. Buildings all across the country need reinforcement.

While strengthening building standards simply represents commonsense, developing better technology has saved even more lives. Some developments like Doppler weather radars that convey information about the velocity of funnel clouds have obvious direct applications to tornado forecasting. But even bigger declines in tornado deaths have happened as a result of broadly useful technologies like radio broadcasts that allow for advance warning and automatic gas line shutoffs that prevent storm-caused fires.   But there is more to do. For example, although smartphone technology makes it possible to send most people severe weather alerts for their exact locations (current tornado warnings cover huge areas so many ignore them), there’s no system that actually does so.

Lastly, insurance, although less directly, has also saved many lives. Over the past several decades, most states have moved towards “open competition” systems for setting insurance rates that let market forces rather than government agencies determine what people pay for insurance. These prices convey information about safety because people who live in dangerous places pay more. But this trend, like the others, could still go farther. Although the sheer number of factors involved with tornado damage makes it nearly impossible to draw firm conclusions, it’s interesting to note that the states with the most damage—North Carolina, Alabama, and Mississippi—have not historically allowed for much choice for flexibility in their insurance markets.

In short, we have good evidence for what works. The climate change debate matters quite a lot in many areas of public policy. But the evidence about what has worked to deal with tornadoes indicates that public policy should focus on things other than climate change if we want to make America safer against severe windstorms.

The Dems’ Big Oil Tax Break Trap

May 11th, 2011 at 3:22 am 26 Comments

Senate Democrats are circulating a bill to cinch up oil company tax loopholes and use the resulting revenue to pay down the deficit.

The bill would take aim at the “Big 5″ – BP, Chevron, Shell, Exxon, and ConocoPhillips – by tinkering with foreign tax credits, dumping manufacturing and intangible drilling expense deductions, terminating the percentage depletion allowance, ending deepwater royalty relief, and requiring the Big 5 to capitalize costs for injectants used to squeeze more oil out of wells.

Several observations are in order.

First, reducing the deficit is not the goal of this bill. Gotcha politics is. Harry Reid et. al. have brewed up a cow splat for dogmatically anti-tax Republicans to step into, so they can be portrayed in next year’s fun-filled TV ads as coddling Big Oil and voting against deficit reduction.

Second, some Republicans seem willing to oblige, as they dutifully repeat shopworn talking points that putting the arm on oil companies for more tax revenues inevitably would discourage drilling and drive up gas prices.

In the world outside talk show sound bites, however, the impact of ending oil industry tax preferences likely would be small potatoes. Price, not tax, is the dominant consideration guiding exploration and production decisions.

In 2009 Senate testimony, a Resources for the Future research fellow estimated that eliminating oil industry tax preferences would raise fuel costs for the average American by $1.40 per year – approximately equivalent to one cup of really bad coffee – and cause domestic oil production to crash by a whopping 0.36 percent.

Third, the energy subsidies argument too often devolves into a tiresome ritual of the pot commenting on the kettle’s color choices. Democrats moan about fossil fuel tax dodges, Republicans whine about handouts for renewables, and neither side indulges the voters with an intelligent discussion about what the federal government’s energy policy should be and how taxes and other fiscal tools could best be employed to carry it out.

In truth, all forms of energy are subsidized to some degree. Not one energy resource – oil, gas, coal, nuclear, renewables, or energy efficiency – exists in an Ayn Rand fantasyland, free of federal favors, be they tax preferences, R&D support, loan guarantees, insurance, or other assorted forms of largesse.

That’s not necessarily bad. The trick is to identify the role that tax preferences and other forms of subsidy should play, if any, in a country that needs to tighten its belt, rationalize the tax code, and secure clean, reliable, and affordable energy. That discussion, not gotcha games, should be what we’re seeing from Congress.

Selling Green Tech to Wall Street

May 5th, 2011 at 12:37 pm 2 Comments

Tuesday’s hearing of the Senate Energy and Natural Resources Committee saw remarkable harmony regarding legislation to give the federal government a financing and risk management toolbox for helping emerging energy technologies cross the financial “valley of death” between a good idea in the lab to a toehold in the market.

Both a Clintonista who once headed the Department of Energy’s (DOE) efficiency and renewables office and an energy maven from the U.S. Chamber of Commerce thought that a bill establishing a Clean Energy Deployment Administration (CEDA) is a good idea.

So do ENR Chairman Jeff Bingaman and ranking member Lisa Murkowski. CEDA was included in the bipartisan energy bill that ENR sent to the floor in the last Congress. That’s as far as it went, thanks to Harry Reid’s stumbling and bumbling on energy legislation during the 111th Congress.

CEDA would be a quasi-independent agency within DOE that would have various financial and risk management tools at its disposal – loans, loan guarantees, and insurance, for example – to shepherd nascent energy technologies across the “valley of death,” so they can scale up, prove themselves, and convince wary financial markets that the technologies make economic sense and developers can pay back loans and offer a return to equity investors.

Dan Reicher, who founded a private equity firm to invest in clean energy after leaving DOE’s Office of Energy Efficiency and Renewable Energy, colorfully told the committee what the valley of death is like. It’s pretty gruesome.

“It was in my role at this firm – traveling down the (research, development, and deployment) pathway – that I first peered into the Valley of Death. Littering the valley floor are the remains of hundreds – perhaps thousands – of abandoned energy projects. Projects based on exciting technologies backed by DOE or venture capital firms. Technologies that worked well in pilot or demonstration plants but died trying to get to commercial scale. And we saw advanced technologies of all sorts, from wind, solar, biomass and geothermal, to breakthrough coal and natural gas, to nuclear power and beyond. We and most other private equity firms simply couldn’t shoulder the risk inherent in the initial commercial scale-up of an energy technology, where a project – a single project – can cost hundreds of millions or even billions of dollars.”

What did Reicher’s firm end up funding? Mostly corn ethanol breweries. Not exactly cutting edge.

So what, a Randian libertarian might respond. That’s the way the market works. If the newbie technologies are too risky for private capital, let ‘em die. The free market is all-knowing and all-powerful.

No, it isn’t, said Christopher Guith, VP of the U.S. Chamber of Commerce’s Institute for 21st Century Energy. “Clean energy technologies face multiple structural inefficiencies in financial markets,” Guith told the committee. He offered three examples:

There are financing bottlenecks – as an old joke in technology development circles goes, bankers love to help developers finance their second projects.

Markets don’t account fully for societal costs, such as pollution.

Finally, there is technological lock-in. America’s energy economy is optimized for conventional energy sources that have their pros and cons – e.g. cheap but dirty coal and energy-rich oil purchased from manipulative cartel potentates.

Both Guith and Reicher argued that the environmental, economic, and security benefits of deploying clean energy technologies are worth setting up a federal agency that could provide safe passage through the valley of death.

With broad support, chances are good that ENR will report out legislation establishing CEDA in the next few weeks. Whether the bill could cross the political valley of death on the Senate floor and the canyon in the House remains an open question.

Can the GOP Break Its Oil Addiction?

April 29th, 2011 at 11:44 pm 50 Comments

The problem with intellectual inconsistency is that it usually comes back to bite you. The House Republican leadership is getting a painful lesson in this regard because of their longstanding support for subsidizing the oil industry.

This largess—billions of dollars in special tax breaks and subsidies—has suddenly become a liability for a party that has made fiscal responsibility the centerpiece of its policy agenda.

The first sign of trouble came courtesy of a recent ABC news interview with House Speaker John Boehner (R-OH). Put on the spot, Boehner had trouble defending the oil subsidies saying “I don’t think the big oil companies need to have the oil depletion allowances…We need to control spending…And they ought to be paying their fair share.”

It was a good response for someone properly focused on getting spending under control. Unfortunately, the Speaker started backtracking from the statement as soon as he remembered that the President and other Democrats support ending these subsidies.

As Boehner was backtracking and Republicans were circling the wagons in defense of oil subsidies, Exxon and Shell reported huge quarterly profits that were up over 60 percent from the same period last year. Exxon reported $10.6 billion in profits for the quarter and Shell reported $8.78 billion.

In light of those profits, the GOP mantra that removing the subsidies and special breaks would result in a higher price at the pump sounds more like the utterings of a blackmail victim than it does lawmakers focused on sound public policy.

As Boehner and company were probably hoping the issue would go away, news surfaced that House Budget Committee Chairman Paul Ryan (R-WI) had expressed support for ending oil subsidies at a recent town hall meeting. When asked about oil industry tax breaks Ryan said:

We’re talking about reforming the safety net, the welfare system. We also want to get rid of corporate welfare. And corporate welfare goes to agribusiness companies, to energy companies, financial services companies. So we propose to repeal all of that.

It will be interesting to see if Republicans can be persuaded to go along with such a proposal—particularly in light of the campaign cash oil interests ply them with and the insistence by libertarian radicals like Grover Norquist that ending any tax break, regardless if it has outlived its original purpose, amounts to a tax increase.

For anyone who is truly in favor of the free market and fiscal responsibility, special corporate tax breaks and subsidies should not be the norm, nor should they be championed as the functional equivalent of lower across the board tax rates.

Special corporate subsidies and tax breaks, to the extent that they are used at all, should be temporary and targeted towards a very specific policy goal that is in the nation’s long-term interest—such as giving breaks to jumpstart renewable energy and new technologies, or encourage energy conservation.

If Republicans can garner the courage to make a clean break from their habit of subsidizing oil companies, they will not only strike a blow for intellectual consistency, but they will be helping our nation to break its oil addiction and give cleaner, more domestically available, alternative fuels a fair chance to compete in the market place.

If not, its special interest driven contortions will repel voters—just as they did in 2006.