Energywise

Is Obama just another neo-Keynesian or a follower of the emerging school of ecological economics?

Ecological economics attempts to assign a positive value to goods and services that promote the well being of the planet and a negative one to those that degrade it. This unapologetically values-oriented approach to the hitherto dismal science is gaining real currency in the post carbon world. Ecological economists (among them former World Bank economist Herman Daly and University of Vermont Gund Institute Director Robert Costanza ) advocate for replacing "Gross Domestic Product" with the "Genuine Progress Indicator." Says Costanza in a recent paper, â''True development should be defined in terms of the improvement of sustainable quality of life, not merely improvement in material consumption.â''

In a recent posting on the Post Carbon Institute website, â''Economists without a Clue,â'' peak oil theorist and ecological economics proponent Richard Heinberg maintains that old- school free marketeers and their neo-Keynesians counterparts are currently in a battle to shape policy responses to the current financial crisis. Neither one is on the right track, according to Heinberg. In a second posting, â''Transport: Time to Think Outside the Metal Box,â'' he warns that while we should be concerned about the welfare of the workers who depend on failing US auto manufacturers, pouring money into the industry to build yet more cars, however fuel efficient, is a suboptimum redeployment of scarce resources.

President elect Obama is now pushing for â''$50 million in loan guarantees to help the auto industry retool, develop new battery technologies and produce the next generation of fuel efficient cars here in America.â'' Heinberg counters:

â''Autoworkers do need jobs, but propping up a failing 20th century industry is a waste of money at this point. Public transit, urban redesign, and low-cost community rideshare programs will help far more in the long run.â''

Will a true ecological economist find his or her way into Obamaâ''s inner circle?

We will know when we see a truly holistic, post-Keynesian solution to the domestic auto industry crisis emerge from the new administration, one that redirects resources away from the old car culture and into mass transit infrastructure, equipment and technologies.

As expected, Obama yesterday, Dec. 15, formally announced his selections for Energy, EPA, the White House Council on Environmental Quality, and â''climate czar,â'' a new position in the executive office. In addition, itâ''s understood that his Interior nomination will be Ken Salazar, a deeply rooted Coloradan who the New York Times has described as a conservationist and staunch opponent of oil shale development on public lands. Regarding his choice for Energy, the Nobelist Stephen Chu, Joseph Romm agrees with my emphasis on Chuâ''s background as director of Lawrence Berkeley Laboratory, but doubles me.

On his list of five reasons for hailing Chuâ''s selection enthusiastically, Romm gives him both #2 and #3 for LBL, for his mastery of energy politics AND his mastery of energy technology. However, Romm--a former top Energy Department official who now is one of the best energy bloggers around--says the most important single reason for liking Chu is his emphatic skepticism about the concept of clean coal.

On that theme, watch this space for more reflections soon . . .

Today, Dec. 12, the European Council of Ministers reaffirmed the unionâ''s general objectives of reducing carbon emissions 20 percent and increasing reliance on green energy by 20 percent, both by 2020, and adopted new rules for its controversial carbon trading system. The decisions met with some relief that a consensus was reached at all, but also with considerable consternation about the concessions made to some of the continentâ''s top emitters of carbon dioxide. Critical commentary has centered on those concessions, without, however, focusing on what is arguably the most fundamental issue of all.

You might suppose--this is what I once supposed, anyway--that given the European Unionâ''s notoriously bureaucratic decision making and its so-called democratic deficit that carbon emissions permits would be issued top-down, in conformity with Europeâ''s commitments under the Kyoto Protocol and its own 2020 agenda. That is, you might suppose that since Europe has pledged to reduce its carbon emissions 20 percent by 2020, that it would adopt a schedule of carbon permits such that, by 2020, there would be enough permits to cover only 80 percent of what the EU countries were emitting in 1990. That way, assuming corresponding measures were taken in the automotive sector--say a 40 percent hike in gasoline taxes to induce a 20 percent reduction in gasoline usage--Europe would attain its 2020 carbon reduction goal almost by definition.

But no, thatâ''s not the way it works, because that kind of system would not have been politically sellable, even among supposedly democracy-deficient Europeans. This is how it works: the European Commission invites each participating country to submit a plan saying how many permits it feels it will need to issue in a given period; then the commission wheedles and cajoles, hoping to get the countries to reduce the number of permits they have to give out. The general results of this are by now well known. In the first phase of the trading program, many too many permits were issued, so that carbon prices were much too low, no real reduction in emissions resulted, and big electricity producers and industrial emitters reaped windfall profits. In Germany, as the New York Times reported this week, electricity companies ended up getting 3 percent more permits for the period 2005-7 rather than 3 percent fewer. RWE, the countryâ''s largest electricity company and Europeâ''s biggest recipient of permits, ended up emitting 158 million tons of CO2 in 2007, compared with 120 million tons in 2005.

It ill behooves Americans, who have let their Federal government do nothing constructive to reduce carbon emissions for the last ten years, to criticize Europe for shortcomings in the way they are trying to meet their climate goals. But the Europeans themselves are being plenty critical. Across the political spectrum, the European press greeted todayâ''s news with concern, to put it politely. â''Buckling to Business Lobbyâ'' was the headline in Switzerlandâ''s Neue Zuercher Zeiting, one of Europeâ''s top business-oriented newspapers. Franceâ''s Le Figaro took a less jaundiced view, calling the agreement â''historic.â'' But Munichâ''s liberal Sueddeutsche Zeitung asked in a prominent commentary whether the EUâ''s compromises had put its goals in question. Taking a cue from that newspaper, Parisâ''s leftish Le Monde quoted a skeptical take on the agreement by, of all people, the climate counselor to Germanyâ''s chancellor. In some eyes, Angela Merkel had gone from being â''the climate chancellorâ'' to a â''climate fossil.â''

Almost all critical commentary has focused on the concessions made to big cement, chemicals, and steel manufacturers, who will receive emissions permits free until 2020, instead of having to buy them at auction like most everybody else, and to Polandâ''s electrical utilities, who rely almost entirely on carbon-intense lignite coal. How is it, asked a German commentator trenchantly, that the biggest emitters of carbon are getting the big breaks, while itâ''s the little emitters who have to pay full price for the right to emit?

Thatâ''s a good question, but an even better one, in my opinion, is whether the whole procedure for setting emission limits and issuing permits needs to be revisited. Would it not be better, especially as the world moves into its next big round of climate negotiations, for the European countries to give Brussels full authority to determine how many permits in total will be auctioned or issued? That way, and perhaps that way only, Europe will be in a position to retain the leadership position in climate that itâ''s occupied for the last ten years.

As things stand, European countriesâ'' success at reducing emissions has been very uneven. In aggregate, the EUâ''s record since Kyoto is considerably superior to that of the United States or Canada. But especially in the last decade, there are many individual countries and regions in Europe that have done much worse.

Biofuels have really taken a beating this year in the court of public opinion, as concerns mounted over the impact of biofuel production on everything from biodiversity to food prices to water supplies. IEEE Spectrum reader Luc Rolland of Preston, England captured the sense of disillusionment in his letter to the editors this summer: "Valuing biofuel is very controversialâ''it impoverishes developing countries, and the true energy cost of biofuel is not worth it."

But there are low-hanging fruit that respond to all of Rolland's concerns. Today, at MIT's TechReview.com, I take a look at the biofuel that appears to hang the lowest: dimethyl ether produced via gasification of black liquor. That's quite a mouthful, so let's define our terms:

• black liquor: the blend of caustic inorganic chemicals and dissolved wood generated in pulp and paper mills
• gasification: subjected to high heat and pressure, organic matter breaks down into a stream of principally hydrogen and carbon monoxide called syngas that can be catalytically reassembled into chemicals and fuels
• dimethyl ether or DME: a clean-burning substitute for diesel fuel and liquid petroleum gas (LPG) that's easily synthesized from syngas

Note that this is very similar in principle to the synthesis of methanol via coal gasification. In fact methanol is an intermediate in the synthesis of DME. Production of both methanol and DME from coal is exploding in China, and provides substantial local air quality benefits.

Gasifying black liquor to generate DME, or bio-DME for short, adds ecological and climate benefits, which is why the European Renew study released in July called it one of "the most advanced concepts for fuel production." Net conversion efficiency on a lifecycle basis of 69%, the highest for any biofuel, means that for every hectare of agricultural production this fuel delivers the biggest energy bang. Greenhouse gas emissions, meanwhile, are on the order of 1/20th that of conventional diesel.

Bio-DME alone will not render personal transportation sustainable. Gasification of all of the black liquor generated in US mills would supply enough DME to displace just 3% of total fuel demand in the U.S., according to Jonas Rudberg, CEO of Swedish biomass gasification developer Chemrec. (For Canada, which has a higher pulp to car ratio, bio-DME could satisfy 7%).

But bio-DME's potential looks much larger if one views it as a forerunner to broader application of gasification to solid biomass feedstocks such as switchgrass. Solid biomass tends to gum up gasification plants, as Germany's Choren Industries may be learning as it seeks to start up its 18 million liter/year biomass-to-diesel gasification plant. Mass application of black liquor gasification would invariably accelerate the diffusion of the technology.

If it does, biomass gasification could deliver more than a fifth of Europe's transport fuel by 2030 according to Volvo Group, which is coordinating a European bio-DME R&D consortium. Of course, how low all that fruit will hang remains to be seen.

For more on bio-DME, see "Taking Pulp to the Pump".

Nuclear power as an alternative energy option for New York State was debated at a public forum organized by the New York League of Conservation Voters at New York University today. Actually there wasnâ''t much of a debate since it was apparent that no one on the panel thought that new nuclear power was in New York Stateâ''s short-term future. Even the nuclear industryâ''s representative, Mary Quillian-Helms, had to admit that new nuclear generation is not likely to be coming to New York State any time soon or to any of the Northeast states for that matter.

Roughly 19 percent of New Yorkâ''s electricity is currently generated by nuclear power, versus 26 percent nationally. New York is home to 6 nuclear reactors at 4 power plants and the contract for the unpopular Indian Point 2 plant located in my home county of Westchester is set to expire in 2013. It speaks volumes that Article X of the New York State Energy Law allowing the state to override local concerns on siting power plants was allowed to expire. Local interests have clearly spoken although Quillian-Helms of the Nuclear Energy Institute did maintain that the people of Oswego County, New Yorkâ''home to two nuclear power stationsâ''are big fans of nuclear power and would like to see more built in their county.

Peter Bradford, a former member of the Nuclear Regulatory Commission and former chairman of the New York Public Service Commission, said point blank that the cost of building nuclear power precludes new buildout in New York State. He noted that the state regulators have not forgotten the bad old days of huge nuclear power plant cost overruns. James Asselstine, senior high-grade utility analyst at Barclays Capital and another ex Nuclear Regulatory Commission member, noted that there are formidable financial challenges to building new nuclear power plants in both regulated and competitive marketsâ''with estimates to build between $4000 and $8000 per kilowatt. Jared Snyder, Assistant Commissioner for Air, Climate Change and Energy for the NYS Department of Environmental Conservation, said that until the nuclear industry can resolve safety issues, including how to dispose of spent fuel rods, nuclear will not be a major player in the carbon solution.

Still the very determinedly upbeat Quillian-Helms countered that the long term future for nuclear power will be bright especially when proposed national cap and trade legislation gets enacted. Even taking into account its carbon footprint, including manufacturing and the uranium mining processes associated with nuclear power, nuclear compares favorably with wind and solar when measured in terms of carbon grams per kilowatt hour. Edwin Lyman, of the Union of Concerned Scientists, had to agree in a backhanded way. A cap and trade system, he admits, will fail to factor in the potential external â''costsâ'' that worry the anti-nuclear movement. No financial engineer, for example, has yet figured out how to put a price tag on the chance of uranium enrichment being modified to produce nuclear weaponry or the catastrophic implications for human life and the environment of spent fuel rod contamination.

President-elect Obama is expected to soon name his top energy and environment officials, consisting of an eminent physicist and energy specialist to head the Department of Energy, a former top New Jersey official as EPA administrator, and a former EPA administrator and close confidante of Al Gore as his chief White House adviser on climate and energy. Collectively and individually, the appointments send a message that Obama means business. Plainly, he has picked people who know their jobs and can hit the ground running.

Physicist Stephen Chu will not be the first scientist to head DOE, but he will be the first Nobelist, which itself sends a message. The son of Chinese immigrants, Chu comes from a family in which every member has been more accomplished than the next, exhibiting an aggregate achievement motivation thatâ''s off the charts. After studying at Rochester and the University of California, Berkeley, and teaching briefly at Berkeley, Chu joined Bell Laboratories in 1978. At that time Bell Labs was still the undisputed top laboratory in the world in physical science, a place where â''the joy and excitement of doing science permeated the halls,â'' as he said in his Nobel autobiography. In 1983 he became head of the quantum electronics research department at Bell, and soon embarked, with Art Ashkin at AT&Tâ''s Holmdel lab, on a program of experimentation that led to their devising a method of cooling and trapping atoms with laser beams. In 1987 Chu left Bell Labs for Stanford, and in 2004 he became director of Lawrence Berkeley Laboratory.

Itâ''s Chuâ''s leadership of LBL thatâ''s of really decisive importance. The laboratory is a world leader in research on green technology, energy policy, and climate, which means that Chu already knows what works, whatâ''s plausible, and what could work some day. He will be able to start adjusting R&D priorities accordingly, as soon as heâ''s in office. Chu was a member of the blue ribbon advisory group that suggested creating a counterpart to ARPA at DOE, ARPA-E.

The rather flashy Chu has been stealing most of the thunder in most initial reports on Obamaâ''s energy team, but the other appointees also are not chopped liver, as we say in New York City. Lisa P. Jackson served as New Jerseyâ''s top environmental official and, most recently, as Governor Corzineâ''s chief of staff. During her years with the state government, New Jersey distinguished itself by implementing an exemplary system of reverse electricity metering and by facing difficult energy issues squarely in the eye.

As reported today in The Washington Post, Jackson â''grew up in the Ninth Ward [of New Orleans], the poor and largely black neighborhood devastated by Hurricane Katrina. Jackson's mother, stepfather and godmother fled the city as the 2005 storm approached. A few months later, in her swearing-in speech as New Jersey's environmental chief, Jackson said the devastation wrought by Katrina put her environmental work in a new perspective.â'¿ Environmentalists in New Jersey describe Jackson as a pragmatic but consistent ally who has pushed Corzine to adopt a greener stance during his time in office. In the summer of 2007, Corzine signed the Global Warming Response Act, an ambitious climate measure that pledges to cut the state's greenhouse gas emissions 20 percent by 2020 and 80 percent by 2050.â''

Nancy Sutley, who will head the Council on Environmental Quality, brings similar credentials from California, where she has served in a succession of senior-level jobs involving energy and the environment. But CEQ is a relatively modest operation and so Sutley will likely play second fiddle to Carol Browner, the former EPA chief who will be Obamaâ''s White House adviser on energy and climate, in a newly created position. Of the nominees and appointees, Browner is the most controversial. Though capable, well informed, and aggressive, she came under criticism in the Clinton years for unnecessarily politicizing EPA and EPA policy, including from people within EPA.

The World Bank has issued a report this week that takes a much darker view of the future than that in a recent report from the International Energy Agency, which indicated that strong economic growth would soon resume, driving oil prices back higher as wellâ''along, possibly, with prices in general. The World Bankâ''s Global Economic Prospects report, to the contrary, concludes that the global commodity boom of the last five years is over, period. That means for at least the next year or two, sharp declines in world trade and little or no growth in production, and eventually a rebound of the oil price to $75, not the $100 the IEA forecast.

Though the bankâ''s report is much more pessimistic than most other recent reviews, it may not be pessimistic enough. It predicts that the volume of world trade will decline 2.1 percent next year and yet developing countries will still register net growth averaging 4.5 percent. Why would that be?

As reported in a number of environment-minded blogs, the Bank of America has announced it will no longer make loans to coal mining companies that get more than half their coal from mountaintop stripping operations. The decision, hailed by the NRDCâ''s Rob Perks on the organizationâ''s Switchboard site and at Josephâ''s Rommâ''s ClimateProgress, may well outweigh in importance the Bush Administrationâ''s midnight-hour decision to loosen rules governing where strippers can deposit their debris. Though some might quip that the U.S. banking system is itself lamer than a lame duck, Bank of America is generally expected to play a bigger role than ever in the years ahead.

Two years ago, after much agonizing, my wife and I decided to replace our very old oil furnace with a natural gas fired boiler. We didnâ''t like the idea of making ourselves so utterly dependent on our gas company, but the local one had a good reputation, and gas promised to be cleaner and lower-carbon, if not actually cheaper. So we made the switch. Before we even had turned the new furnace on and well before the ink was dry on the contract we learned that our company had been taken over by a foreign company whose main responsibility is ownership and management of a far-away countryâ''s electricity grid. We were not pleased.

The first shock came at the end of our first winter season with the new furnace, with the arrival of a bill from the new company saying that we owed them several thousand dollars, to be paid immediately. We had reached a balanced billing arrangement with the companyâ''s predecessor and had been making monthly payments for nearly a year. The new company provided no explanation for the unexpected cost overrun and now, six months and two indignant letters later, it still has provided no explanation. Just a series of peremptory mailings telling us to pay up or face the consequences.

The second shock came this week when we noticed a peculiar smell in the house. Upon calling our company, which let it be said did send somebody over promptly, we learned from the technician that our chimney was defective, requiring him by law to turn off our entire gas supplyâ''leaving us not only without heat, but without hot water and a working stove as well. When we called the company to point out that our contract with its predecessor had required them to take care of any chimney problems when they installed the furnace, we found ourselves dealing with a different branch of the companyâ''its services division, now separated from its gas distribution division, so as to assure competition in services, presumably. The services division accepted responsibility for the situation and promised to send somebody over the next morning, leaving us without heat for one of the first cold winter nights.

When the second technician arrived the next morning he found no serious problem with the chimney after all. Being from a different division, however, he lacked authority to turn our gas back on. A couple of tempestuous phone calls with his boss followed, in which the two of us read relevant parts of the installation contract to each other over the phone, in an unharmonious two-part crescendo. Now disclaiming any legal responsibility, the man nonetheless agreed to send an independent chimney specialist over to assess the situation.

When that company arrived later in the day, it found the chimney badly needed a cleaning, but also saw no reason why the gas had to be turned off in the first place. But of course it also lacked authority to turn the gas back on. After one more cold day in the house and the purchase of an electrical space heater, men from the distribution company finally showed up in the late evening. They were reluctant to turn the gas back on, because whatever the problem was that the first technician had identified, it apparently had not been addressed. After considerable wheedling by my wifeâ''thankfully without exchange of money or other favorsâ''the men finally agreed to turn the gas back on.

A $3,200 improvement of the chimney soon followed, something the original gas company was supposed to have taken care of when it first installed the new boiler. But thatâ''s another story.

You donâ''t need to hear that story to share my nostalgia for the days when, if you had a problem with your furnace, one person from one company showed up, told you what the problem was, and fixed it.

A recent report by Friends of the Earth and BankTrack, a global network that monitors commercial and investment banks, evaluates measures taken in China to encourage more green-friendly investment. â''In the past year and a half,â'' says the report, â''Chinaâ''s Ministry of Environmental Protection has launched a series of green finance policies that mark an entirely new way of addressing environmental degradation in China, and are proving to be the most powerful factor spurring and influencing sustainable finance in China today.â'' Though Chinaâ''s Green Credit Policy has so far been limited in scope, initially just barring lending to 38 companies, â''the policy has been strengthened by additional policies and tools from financial regulators, green initiatives promoted by international banks, and advocacy from Chinese non-governmental organizations.â''

In the course of big government bailouts of Chinese banks in the late 1990s, FoE contributors to the report have commented, financial institutions were forced to adopt more prudent lending practices, including consideration of environmental impacts. Overall, however, â''Chinese banks still lag behind international best practice for environmental credit risk management systems, public reporting, and stakeholder engagement.â'' Still, the reports finds â''that there has been significant progress in the development of sustainable finance in China, including the creation of influential regulations, internal bank compliance mechanisms, and some public reporting.â''

For example, a new green IPO policy requires companies in polluting or energy-intensive industries to disclose environmental information and allow for a public comment period before selling stock.