What Goes Down, Must Go Up?

by Richard T. Stuebi

as posted to Huffington Post

About 60 miles west of Cleveland, Cedar Point is world-renowned for its scary roller-coasters. However, Cedar Point has nothing on the oil markets.

At the turn of 2007/2008, oil was at the cusp of $100/barrel — a price that was considered a kind of mythical barrier, due to its three-digit numerology. Well, it took just a day or two into 2008 to broach that level, and by July, oil was approaching $150/barrrel — an increase of 50% in 6 months, and fully 6 times the levels that prevailed just 5 years previously in 2003.

Then, the bubble burst, violently: in just the six months since the summer, oil prices have collapsed, falling by about 75%, to below $40/barrel.

I am reminded of the classic Vince Lombardi film clip, in which he yells out incredulously from the sideline, “What the hell’s going on out here?” People ask me, as if I should know, because I’ve been involved in the energy industry for over two decades, but alas: I can’t figure it out. And, I’m not alone.

For instance, consider the December 10 presentation given by Matt Simmons in Houston. Simmons has impeccable credentials, having served as an analyst of the oil industry for nearly 40 years — and it seems as though he’s incredulous as to what he’s seeing.

Simmons laments (like many others of us) that the recent collapse in oil prices — as inexplicable as it’s been — is not a good thing. For Simmons and others in the oil industry, low oil prices have caused major investment projects to be deferred. For those of us more on the cleantech side of things, low oil prices cause the alternatives to oil to become less economically or financially attractive.

To Simmons, it is especially frustrating that the decline in oil prices have nothing to do with fundamental realities. Simmons notes that plummeting prices haven’t been driven by any material declines in global demand, backing this with the comment that “all signs still say [the oil market is] ‘very tight'” — admittedly cryptic, but Simmons has access to all sorts of data from innumerable sources in the oil industry worldwide.

After asking plaintively “why do we know so little about an issue so critical to our well-being?”, he pulls no punches with his stark conclusions: “Crude oil has peaked” and “Its future decline could be swift,” giving credence to his warning that “What goes down can come right back!”

The logic of his analysis suggests that oil prices cannot sustain for long at $40/barrel. Simmons has often said that oil at even $150/barrel is still incredibly cheap — 22 cents/cup — and that Americans really need to get a grip on how valuable the stuff is, and thus how expensive by all rights it really ought to be.

In an October 2008 report entitled “Ratcheting Down: Oil and the Global Credit Crisis”, Cambridge Energy Research Associates recently developed an estimated supply curve for the various sources of oil worldwide, and to achieve production rates at current levels of about 85 million barrels per day, CERA’s work indicates that prices of at least $100/barrel are eminently justifiable.

For you investors out there, all of this is good justification for making a bet on oil prices going up from current levels. Maybe you can make a killing.

At the societal level, though, the implications of peaking oil production are troubling. A really negative take on the prospects is offered by an open letter written by Nate Hagens to President Obama, posted on The Oil Drum, one of the most comprehensive resources concerning peak oil issues on the Web.

As for Simmons, he’s less hyperbolic than Mr. Hagens, but not a whole lot more optimistic. He invokes the perspectives of the new leadership at the International Energy Agency — “Current energy supply trends are patently unsustainable,” “Future of human prosperity depends on how we tackle our energy issues”, Consequences of policy/investment inaction are shocking”, “Massive investment required”, and “Time is running out and time to act is NOW!” — and closes his presentation by declaring that “‘Yes We Can’ solve this bleak energy future, but we now need to sprint into hasty retreat from our addiction to oil and gas.”

How comfortable are you in ignoring such well-substantiated warnings from an oil patch veteran like Simmons?

So, for those of you clamoring for low oil prices, at current levels or even lower, don’t bet on it. $40/barrel is likely to be an aberration.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.

People-Oriented Development

By John Addison. Enlightened communities are in the transition from being car-centric to being people-centric. Homes, public transportation, and businesses that serve neighborhoods are designed in close proximity. A people-oriented development often has a rapid transit station at its center, or at least a bus stop that is frequently served. Nearest to the station are higher density apartments and condos. Streets are alive with people and convenient shops. A short walk from the station is less density and single family homes. Walking is the easiest way to get around.
While the sprawl of many cities forces long commutes, there are three United States cities where at least 30 percent of employment is within 3 miles of the central business district: New York, San Francisco, and Portland. In these cities, people find it easy to take light rail or buses between work and home. A surprising number walk. For those that drive, they save by traveling fewer miles.
As David Niebauer pointed out in his article about REDD, deforestation is a major contributor of GHG. Suburban sprawl leads to deforestation and to loss of land needed for agriculture.
In California, there is a strong interest in integrating transportation planning, regional development, and climate solution planning. Last week, 240 leaders of government, private industry, and non-profit leaders converged at CALSTART’s Target 2030 conference. Vehicles, fuels, and transportation planning were themes for many speakers and discussions.
Shelley Poticha, CEO of Reconnecting America, sited the statistic that if someone can walk to transit, they are 5 times more likely to use public transit and only drive half the miles of those who cannot walk to transit. Reconnecting America works with real estate developers and transit agencies to develop more housing within walking distance from transit, services, and shopping.
Mary Nichols, Chairwoman, California Air Resources Board, took center stage as a key executive in implementing California’s Climate Solutions law – one of the world’s most comprehensive approaches to reducing global warming. Some of the implementations are complex, such as the low carbon fuel standard. Other solutions are more straightforward. She observed that California could reduce its petroleum consumption by 5 percent if everyone walked an extra half-mile daily instead of covering the distance in a car.
Some cities with intelligent urban planning make it easy for people to live near work, friends, and fun. Portland has limited the boundaries of the city and invested in rapid transit. The results are impressive. The citizens of Portland save $2.6 billion per year, estimates economist Joe Cortright, Senior Fellow with The Brookings Institute.
Learning from the success of cities such as Portland, California passed a law (SB 375) requiring regions to develop integrated urban and transportation plans that reduce long commutes and reduce regional greenhouse gas emissions.
Michael McKeever, Executive Director, Sacramento Area Council of Governments, identified a major opportunity for Boomers who want smaller homes with more community services. Fifty percent of new California home sales could be for this target market.
Baby Boomers, specifically 78 million Americans born between 1946 and 1964, are starting to shift to work that requires less travel and provides more fulfillment. Some will retire in the next few years; most will reinvent how they live and earn money. Millions of these Boomers will accelerate the shift to new urbanization as they move from the suburbs to cities. Freed from the demands of needing individual cars for long daily commutes to work, they will discover that it is easier to live “car-light” or car free in a city.
New urban development could create millions of jobs in construction, public transportation, and infrastructure. Making it a reality is not easy. California is facing a $40 billion budget deficit, creating tough choices such as new gasoline or sales tax, or major cuts in education, health care, and emergency services. The 480 cities which need to plan for the future lack funds for comprehensive planning. More urban density requires infrastructure upgrades from sewer pipes to reliable electric grids.
City living is not for everyone. Many prefer to raise families in the suburbs with their dream homes inside gated communities and their jobs located miles away. In the suburbs, the environmentally conscious share rides in hybrid vehicles, work at home at least a day per week, and are clever about letting their fingers do the walking. Others enjoy rural living near communities oriented around farming, ranching, mountains, and water.
Sixty-five percent of Americans live in the top 100 metropolitan areas. In cities, millions find work and play convenient. Some estimate that two-thirds of the urban areas that will exist in 2030 do not exist today. This gives us an incredible opportunity to develop in a sustainable way with near-zero emission transportation.
As I interviewed countless people, gathering their stories and ideas for Save Gas, Save the Planet, urbanites delivered a consistent message – people living in cities burn less gas and cause less global warming than those living in suburbs and rural areas. In cities, trips to grocery stores, friends, and work are often done by walking. Light rail and bus service is predictable and fast in cities. In cities, everything is closer together.

Copyright © 2009 John Addison. This article includes excerpts from John’s new book – Save Gas, Save the Planet – to be published on March 25, 2009. John Addison publishes the Clean Fleet Report. Last year, John and his wife moved from suburbia to the city, living 2 blocks from public transportation, now John’s primary mode of travel.

Current Status of REDD

By David Niebauer

The Center for International Forestry Research (CIFOR), a forest policy think tank, recently (December 2008) released a report on the proposed REDD (reducing emissions from deforestation and degradation) mechanism for slowing climate change.

The report, titled “Moving ahead with REDD: Issues, Options and Implications”, (the “Report”) reviews the challenges facing REDD and makes policy recommendations to make the mechanism more agreeable to climate negotiators.

It is estimated that emissions from deforestation and forest degradation in developing countries constitute approximately 20 percent (20%) of the total global emission of greenhouse gases annually. A system that would reward developing countries for reducing emissions from deforestation and forest degradation through the carbon offset mechanism currently being implemented under the Kyoto Protocols has great appeal. Numerous obstacles exist, however, that need to be overcome before a REDD program can be undertaken on a global scale. This article will review some of those obstacles and provide some insight into the prospects for REDD in a post-2012 climate regime.

Cost

Cost is always an important consideration, but in terms of “bang for the buck” an effective functioning REDD program would appear to have advantages over other mitigation options. The Report cites cost estimates that range from USD 7 to 28 billion per year for cutting deforestation levels in half. Initially, much of this would have to come from public funding to build out capacity, but eventually the sale of carbon credits could easily defray all of the costs while continuing to pay for the reduced emissions over time. Funds could also be generated through auctioning of emission allowances or from a tax on carbon trading.

Leakage

The Report uses a hypothetical to describe the leakage problem:

“…a farm-level payment for environmental services (PES) programme may reward the landowner for not deforesting the PES-enrolled forest plot A during five years. However, if the owner shifted all planned deforestation from plot A to another, non PES-enrolled plot B, mitigation would be entirely offset by leakage or ‘displacement of emissions’, as the phenomenon is called in the Bali Action Plan (Thirteenth Session of the Conference of the Parties-COP 13). If the landowner further used all PES funds to buy chainsaws to enable additional clearing and cattle to graze on the land, medium-run leakage may well exceed 100 percent of mitigation – implying leakage also has a time dimension, depending on how quickly economic and biophysical processes work. Conversely, if the landowner invested the money in ecotourism or agroforestry and stopped all clearing, leakage would be reversed, crowding in off-site mitigation gains beyond target plot A.”

Because climate change is a global phenomenon, leakage may occur at any geographic level. For example, even though Annex I countries are reducing emissions through implementation of the Kyoto cap and trade mechanism, if those emitting activities are simply moved to non-Annex I countries, leakage occurs and the emission reduction “gains” are illusory.

Leakage in the REDD context is an especially vexing problem and will need to be managed, not controlled entirely. Monitoring and setting realistic parameters appears to be the best approach. However, even if leakage is safely quantifiable through monitoring, the Report indicates that it may still be advisable to discount benefits from any REDD program or bank ‘reserve credits’, ensuring that only net emission reductions are rewarded.

Ensuring Permanence and Assigning Liability

The Report asks these fundamental questions about any REDD program: “How can we make sure that a forest area saved today will not be destroyed tomorrow? Who should be held liable if that happened? How can REDD contracts and financial mechanisms be designed to ensure permanence?”

There are numerous risks to permanence and various proposals to mitigate these risks. The Report lists the following risk areas: natural/ecological (fires, etc.); climate change-related (climate change itself my bring with it yet-unknown risks); demand-side (demand for agricultural crops may outweigh the price paid for carbon sequestration); failure of project partners (financial or otherwise); and political (change of political structure, corruption, etc.).

Proposed mitigation, or “liability management” as it is termed in the Report, is as complex and varied as are the risks. The solutions range from making credits temporary until permanence can be guaranteed, to commercial insurance, to some form of shared liability with developed (Annex I) countries.

Clearly, in order to generate fungible REDD credits that could be traded with other allowances and offsets will require a solution to the risk of impermanence that is uniquely relevant to avoided deforestation credits. While complex, solutions are available that would put REDD on an equal footing with other certifiable emission reduction projects.

Monitor, Report, Verify

The Report points out that carbon offsets are excluded from forestry projects under the current regime largely because of the difficulty in monitoring, reporting and verifying (MRV) actual reductions in emissions. The authors of the Report make a case that advances in the application of remote sensing technologies combined with new accounting methodologies open the way to eventual REDD implementation.

Like other areas of REDD, there are a number of challenges to adopting effective MRV standards. In most cases, repeated monitoring is needed to ensure all forest changes are accounted for. Competing accounting methodologies exist on a scale from lower accuracy and lower cost to higher accuracy and higher cost. Ultimately, any system will need to combine measurements of changes in forest area with carbon density values with an acceptable and consistent level of accuracy.

The authors of the Report point out that many developing countries lack access to data as well as the technical infrastructure and capacity for consistent, transparent data analysis and management. It may take 10 years or more to build up this capacity, although a transition period with varying levels of participation will likely emerge.

REDD at Poznan and Beyond

There was some hope that an agreement of the parties at COP-14 in Poznan would get the REDD mechanism on track for inclusion into the framework that will succeed the Kyoto Protocol after 2012. For the most part, these hopes were not realized. Although a provisional agreement was reached to include forests in future climate treaties, the agreement fell short of expectations. See “Deal on Forests Falls Short”.

The provisional agreement failed to mention indigenous rights (an important political issue still to be resolved), took no strong position on biodiversity and did not include peatlands, which are large carbon sinks. It is also still not clear whether “net” or “gross” emissions will be assessed: a “net” approach would make it possible for some countries to continue chopping down existing forests and replacing them by planting new trees. Such a process would lead to large-scale loss of habitat and biodiversity.

Conclusion

There are many obstacles, both technical and political, to a REDD program that would effectively reduce emissions from deforestation and degradation of forests. The need from a global warming perspective is acute and the problems won’t be easily resolved. The general consensus from those close to the talks seems to be that while REDD can and should be included in future climate mechanisms, much work still needs to be done.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.niebauer.net.

Financing the Fifth Fuel

by Richard T. Stuebi

Jim Rogers, the CEO of Duke Energy (NYSE: DUK), has been widely touting the phrase “the fifth fuel” as a synonym for energy efficiency.

As many analyses have shown again and again, such as the very prominent 2008 work of the McKinsey Global Institute, the most cost-effective approach for reducing emissions is afforded by increased emphasis on energy efficiency. Indeed, the impressive legacy of the Rocky Mountain Institute is based largely on the now 30-year-old observation by its founder Amory Lovins that energy efficiency is often less costly than supplying an additional increment of energy — irrespective of any mandate to reduce emissions.

So, if energy efficiency is so great, why isn’t it more widely pursued? This is the central question posed by the January 12 issue of Time, with a lengthy cover story exploring why energy efficiency is so underexploited.

Certainly, one of the key reasons is that energy efficiency seems so, well, boring. Compared to the sizzle of solar panels or wind turbines, or even the old-school industrial aesthetic of oil rigs and coal mines, efficiency is invisible: you can’t see what you don’t consume. It’s hard for most of us to get passionate about the lack of something. Weak public enthusiasm for energy efficiency is no doubt a major factor in coining the phrase “fifth fuel”, to put it on par with energy forms that people can relate to.

Beyond psychology and semantics, though, the bigger impediment to energy efficiency has often been finance. Economically-prudent energy efficiency options often don’t get implemented either because the benefits (in the form of cash savings on energy bills) don’t accrue to those who pay the costs for building upgrades, or because the savings take a few years to pay off — and clients either won’t or can’t afford to make such an investment.

Creative financing mechanisms are necessary to close these gaps. Thankfully, new financing approaches are increasingly emerging that aim to bridge the market failures that have heretofore thwarted full capture of the potential offered by energy efficiency.

For instance, the City of Berkeley has implemented its FIRST (Financing Initiative for Renewable and Solar Technology) program, which enables property owners to finance energy efficiency (and solar) installations via a 20-year surcharge on the building’s property tax bills. In Milwaukee, the Center on Wisconsin Strategy is similarly organizing a 2009 pilot launch of the ME2 (Milwaukee Energy Efficiency) Initiative, which involves charging for energy efficiency retrofits on energy bills via a rider that is linked to the building’s utility service meter.

In both cases, energy efficiency adoption should become much more compelling to many more clients, because the cost associated with the energy efficiency investment is amortized over 20 years at lower interest rates than most customers would be able to obtain on their own. This will create only a very small periodic payment, while leading to immediate and substantial monthly savings on energy expenditures.

I would expect that these models, and others, for financing the fifth fuel will become more commonplace in the coming years, as the imperative for more aggressive pursuit of energy efficiency becomes stronger with each passing day.

We should begin anticipating that eventually the biggest problem with these approaches will be answering the “too good to be true” perception. After all, who in their right mind would turn down the opportunity to save money instantly, without any cash outlay?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.

Peak Phosphorus – Commence Urine Recyling on Space Station Earth

First there was “Peak Oil’, then there was talk of ‘Peak Water’, but ‘Peak Phosphorus’, may trump them all as a sustainability issue without rival.

Fact: Phosphorus is a non-renewable resource for which there is no substitute.

Phosphorus is the currency of energy in every living cell. Our ability to provide enough food to feed the human population is dependent on the use of artificial fertilizers, which contain phosphorus. While nitrogen is abundant in the atmosphere (- it just takes lots of energy to capture it!), phosphorus is mined at just a handful of locations worldwide.

You can substitute renewable energy for oil and gas. But no other mineral can take the place of phosphorus. There is no substitute for water either, but the water cycle constantly provides us with ‘new’ fresh water, granted not always where we want it, when we want it and in the quantities in which we would like, but there is a fundamental recycling system there. And if you have enough energy, two thirds of the planet is covered in it and you can take the salt out of it. There is no such ‘re-cycling system’ with phosphorus and the natural resources which are limited are being depleted. The timing for Peak phosphorus may be 50 years out, or a hundred and fifty years, but as with peak oil, it’s not a question of if, but when. There has already been considerable volatility in Phosphorus markets in the past year, possibly related more to volatility in the energy market and this has trickled through into food prices.

Currently we mine it, use it and disperse it widely across the planet, much of it ending up in our rivers, lakes and oceans. Large portions of the earth’s oceans are now ‘dead zones’ and this is largely due to nutrient enrichment. It’s the classic example of too much of a good thing. When you see green lakes and algal blooms, this is nutrient enrichment.

Phosphorus was discovered in the 17th century by Alchemist’s trying to find the ‘Philosophers Stone, applied under peoples finger nails as a form of medieval torture, used in matches and explosives, and Post World War II its use in both pesticides and fertilizers has been hugely important in increasing global agricultural output. For an interesting treatise on the topic check out The 13th Element: The Sordid Tale of Murder, Fire, and Phosphorus.

The Clean Tech Opportunity
So where is the Clean Tech angle on this? It’s in Phosphorus recycling and phosphorus recovery technologies. There are a number of companies focused on developing technologies to extract phosphorus and produce fertilizer products. Sweden and Germany are leading the way on promoting phosphorus recycling. Sweden for example has mandated that 60% of phosphorus must be recovered at its wastewater treatment plants by 2015 and the UK is also promoting phosphorus recycling. Every municipal wastewater treatment plant is potentially a ‘phosphorus mine’. Agricultural and industrial waste streams are also potential ‘mines’.

The mining may also start in your own home with source separation of urine and solids. The basic idea is simple: urine accounts for only 1% of the total volume of wastewater, but it contains up to 80% of all the nutrients. If it is processed separately, wastewater treatment plants can be reduced in size, water protection can be improved, and nutrients can be recycled. The Europeans are certainly leading the way in this area, in Switzerland trials with NoMix toilets have been quite successful. Apparently the majority of the Swiss people interviewed said they had no problem with it, even the men, who had to sit down to spend a penny! It may sound more like something more likely to be used on the NASA Space Station, but then again, we’re all on a Space Station, just a slightly bigger more populated one.
Paul O’Callaghan is the founding CEO of the Clean Tech development consultancy O2 Environmental. Paul lectures on Sustainable Energy at the BC Institute of Technology. He is a Director with Ionic Water Technologies and an industry expert reviewer for Sustainable Development Technology Canada.

The Three Prongs of the “Green” Energy Stimulus Package

The much-touted economic stimulus package is expected to be in the range of $675 billion to $775 billion. It includes $300 billion in temporary tax cuts for individuals and businesses and a big expansion of safety-net programs like unemployment insurance. It includes more money for highways, schools and other public infrastructure; more money for “green” energy projects; and more money to help state governments pay for health care and education. Estimates are that the “green” portion of the stimulus package could reach $100 billion over two years.

What “green” energy projects are we talking about here? What technologies are likely to be funded?

It appears that the new administration and Congress are set to launch a three-pronged green energy attack. These three prongs would include: alternative energy production, upgrading the electricity distribution system and public works energy efficiency.

Alternative Energy Production

Obama has stated that he intends to double the production of alternative energy in the next three years.

Renewable energy from wind, solar, and geothermal is currently about 24,000 megawatts, which represents about 1 percent of all power generation in the country.

An Obama transition aide has said that doubling renewable-energy production in the United States is possible through a combination of loan guarantees and, ultimately, a national renewable portfolio standard (RPS). During the campaign, Obama had advocated a national RPS at 10 percent by 2012 and 25 percent renewable energy by 2025. The American Council on Renewable Energy has issued a call to action to its 600 members to develop plans on how to meet Obama’s ambitious energy production goals.

The estimate is that new wind energy production will account for about 20,000+ megawatts, while solar and geothermal will account for the other 4,000 megawatts.

Electricity Grid Upgrade

Upgrading the electricity distribution system is the second prong of the attack. By equipping the grid with communications network–the essence of smart grid technology–utilities can run the power grid more efficiently and consumers can get information to help lower energy usage.

Obama recently stated that part of the stimulus package will be spent on “updating the way we get our electricity by starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation. It means expanding broadband lines across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world.”

Smart energy grids would allow real-time monitoring of a customer’s energy use through Internet technology. Proponents of a national smart grid say it would likely result in decreased electricity use, allow energy companies to more efficiently distribute electricity, and encourage homeowners to install alternative energy generators such as solar panels and sell their excess energy back to the grid.

Public Works Energy Efficiency

The major push in the energy efficiency arena appears to be a public works project aimed at retrofitting federal government buildings. In a recent radio address, Obama stated: “First, we will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs.”

Modernizing federal buildings appears to be a cost effective use of stimulus package funds, which should serve to provide a number of low-tech jobs as well.

While the debate will undoubtedly continue on how best to spend economic stimulus funds, these three areas appear to be the primary focus of the “green” portion of any such package.

The Appraisal

by Heather Rae
for cleantechblog.com

A homeowner who recently relocated from New Jersey to one of the swishier towns of Maine asked me last week, in the context of his search for a home energy renovator in the State, ‘why is Maine so far behind?’

That same day, a friend delicately offered, in the midst of admiring my taste in a wood burning stove and counseling me on my life, ‘you’re at the beginning of something that hasn’t really caught on yet.’ She was refering to home energy renovations.

My mood mercurial around this topic of tightening up homes, Matthew Wald’s informative article “Emphasis on Weatherization Represents Shift on Energy Costs” in the New York Times brought a twinkle of promise.

Yet, it was just this past week when the results of an appraisal on my renovated home arrived by mail. (The upside to the downside of this latest financial debacle is the opportunity to refinance at a lower rate and take out some cash to pay for that new wood burning stove…or insulating the attic roof…maybe better yet, use the dough for a trip to Asia to visit family; it’s been a rough year. Then again, with employment — even in the “green” sector — an unknown, the money will likely be parked in a bank account.)

The house appraiser was an attractive, communicative and intelligent, middle-aged woman. I showed her the air sealant and insulation in the basement with its moisture-remediating rubberized floor covering. I described how the roof over the bay windows had been rebuilt and filled with air sealant and insulation to stop the air flow between the floors of the balloon frame and add thermal resistance. With a Vanna White wave at the new Rinnai energy efficient on-demand water heater, I described how the old leaky electric water heater and the leaky ductwork for the old furnace had been heaved, along with the furnace which was replaced with a Monitor. I told the appraiser I was directing money to reducing energy demand in the house, rather than on increasing energy supply. I noted that the new refrigerator and the new high-end dual fuel stove were energy efficient. Where once were window weights, I fingered over the cavities that are now filled with foam. These improvements should result in “deep energy” savings. The appraiser was concerned about the interior doors that I still have yet to scrape, sand, paint and rehang…and the old windows that will be refurbished (not replaced) as time goes on. She said the house is pretty. (It is.) I should have mentioned that there would be a test to measure the reduced air infiltration from the improvements — that along with the other improvements translates into energy and carbon savings. Though it might not have mattered a whit.

Matthew Wald’s article describes the sleuthing skills of building evaluators very well (“Call is CSI: Thermal Police”). He writes of the macro upsides of tightening up homes: reduction of carbon dioxide emissions and relief for the national energy grids. But when it comes to the micro upsides of weatherization (what it might mean to the homeowner needing assistance in financing the energy improvements), the article takes the common veer into the world of low-income weatherization and federal funding of those programs. The segue is so deft, I reread the article a few times to pinpoint the detour. A similar detour is found in Senators Snowe and Feinstein letter to President-Elect Obama urging tax credits for energy efficiency in the built environment.

The road not taken seriously enough is weatherization for everybody else, those who do NOT qualify for low-income programs. What of weatherization (or home performance or whole-house energy renovations or whatever you like to call it) for the middle class — my class with its sinking wages and layoffs? I am no stranger to it…or the enormity of tightening up a leaky old house, financially, emotionally and physically — or the turning of the stomach at the site of the oil bill.

Maine has a robust program under the community action programs and financing through the State’s housing authority to weatherize homes of the poorest (a designation that was expanded by the governor to include more families.) In a recent study by Efficiency Maine, 82% of the 80 new homes evaluated throughout the State on energy performance failed to meet the International Energy Conservation Code.

Before the New Jersey transplant called, another man had called to ask if the State had any rebates or incentives for insulating a home. The answer has always been easy: no, there aren’t any. I direct these callers to Database of State Incentives for Renewables & Efficiencies and Tax Incentives Assistance Project rather than follow closely the policy twists and turns of legislators near and far. I hear rumors of all kinds, but as yet, the answer is still, no, there are no incentives or rebates for energy efficiency measures from the State.

In the “Improvements” section of my home appraisal, under “Additional features (special energy efficient items, etc)” the appraiser wrote: “Open deck (7×27), covered entry porch & attached barn (15×27). No addditional value considered for woodstove due to being considered personal property.” Not one word about the energy efficiency improvements — nor that the old wood stove is leaky and extremely inefficient.

I feared the appraisal would not account for the money dumped into the house, spent to upgrade plumbing, heating, electrical and structure — many with “green” elements. It barely did: One of the many downsides of this latest financial debacle is falling real estate prices, reflected in the appraised value.

The energy-efficiency improvements might have found a home in an energy-efficient mortgage. These mortgages were rolled out beginning the fall of 2008, but my lender, a large State-based bank, never mentioned them. The efficacy of “EEMs” in achieving “deep energy” savings is being questioned in other parts of the country.

I described the appraisal to the man who called looking for insulation rebates; he said that the energy improvements will make a difference at time of sale. I can only hope.

The Catholic Church has been in the news recently, defending its treatment of Gallileo, a man who dared to assert heliocentricity as fact in the halls of theology. Give our addiction to oil the weight of theology, and an analogy to the man with a telescope is apt. We are all at the beginning of something that hasn’t really caught on yet — and it challenges nearly everything in which we have had faith.

2010 Prius Delivers Record Mileage and Accelerates Plug-in Plans

By John Addison. Toyota achieves a record 50 miles per gallon with the new 2010 Prius, which just made its formal debut at the North American International Auto Show. This article also covers Toyota’s latest plug-in hybrid and EV announcements.

Since the Prius was first went on sale in Japan in 1997, continuous improvements have been made. My 2002 Prius has a combined EPA rating of 41, and that has been its actual mileage. Newer models are rated at 46 mpg. The new 2010 should be rated at 50 miles per gallon, or better. Toyota

In addition to normal driving, Prius now comes with three selectable modes – EV, Eco and Power – to accommodate a wide range of driving conditions.

Hybrid components like the inverter, motor, and generator are now smaller and lighter. The new midsized 2010 Prius improves fuel efficiency with a 0.25 coefficient of drag making it the world’s most aerodynamic production vehicle. Hybrid components like the inverter, motor, and generator are now smaller and lighter. The new beltless 1.8-liter, 4-cylinder gas engine with 98 horsepower, runs at lower RPMs at highway speeds for better fuel efficiency and improved uphill performance. An exhaust heat recovery system, exhaust gas recirculation, and an electric water pump contribute to a more efficient hybrid system with a net horsepower rating of 134.

An exciting new option is the solar moonroof using Kyocera PV that automatically powers a ventilation system on hot days. This system allows fresh air to circulate into the vehicle, cooling down the cabin so that the A/C doesn’t have to work as hard, conserving battery power. The solar roof will be paired with a remote air-conditioning system that is the first in the world to run on battery power alone. LED head lamps are another exciting energy saving option.

The Prius will face increased competition. The new Honda Insight 4-door sedan, 5-seater, with an Ecological Drive Assist System is expected to be priced for thousands less than the Prius. Honda will start selling the Insight in North America in spring 2009. The Insight will have a combined EPA rating of 41 miles per gallon, over 20 percent less than the 2010 Prius.

The new Ford Fusion Hybrid midsize 4-door sedan will be on sale in the US this next spring, with an EPA certified 41 mpg rating in the city and 36 mpg on the highway. The Fusion Hybrid and Mercury Milan Hybrid may travel up to 47 miles per hour in pure electric mode. The Advanced Intake Variable Cam Timing allows the Fusion and Milan hybrids to more seamlessly transition between gas and electric modes.

Toyota is also accelerating its roll-out of plug-in hybrids. Beginning in late 2009, Toyota will start global delivery of 500 Prius plug-in hybrids powered by lithium-ion batteries. Of these initial vehicles, 150 will be placed with U.S. lease-fleet customers.

The first-generation lithium-ion batteries powering these plug-in hybrids will be built on an assembly line at Toyota’s Panasonic EV Energy Company battery plant, a joint-venture production facility in which Toyota owns 60 percent equity. During its development, the new Prius was designed and engineered to package either the lithium-ion battery pack with plug-in capability, or the nickel-metal hydride battery for the conventional gas-electric system.

Toyota plans to make a hybrid drive system optional on all vehicles by 2020. At the North American International Auto Show, Toyota confirmed its plan to launch a battery-electric vehicle (BEV) by 2012. The FT-EV concept shares its platform with the revolutionary-new iQ urban commuter vehicle. Toyota continues to give customers an increasingly exciting selection of fuel-efficient hybrids, plug-in hybrids, and electric vehicles.

John Addison publishes the Clean Fleet Report. His new book – Save Gas, Save the Planet – goes on sale March 25.

Abu Dhabi Do

by Richard T. Stuebi

In the middle of the Middle East, built upon riches generated from the region’s vast oil supplies, the city-state of Abu Dhabi is turning to the future.

Abu Dhabi sees that petroleum is a finite game, and that its future success (and the planet’s) depends upon moving onto the next game.

So, in the middle of the desert, Abu Dhabi is building a new city called Masdar. As discussed in an article in the December 6 issue of the Economist, the Masdar Initiative was launched in 2006 to pursue “solutions to some of mankind’s most pressing issues: energy security, climate change and truly sustainable human development.”

The goal of Masdar is to become an innovation center and applied test-bed for environmentally-friendly technologies, with a goal of housing 50,000 people and 1500 businesses at a zero carbon footprint. Abu Dhabi is pulling out all the stops, with a $15 billion commitment to bringing Masdar to fruition.

Clearly, Abu Dhabi is intent on getting good visibility with Masdar. The city is also profiled in an article in the November 24 issue of Forbes (a good issue, incidentally, entitled “Energy + Genius”, focused solely on energy topics), and an article in the September/October Technology Review shows how Masdar is collaborating closely with MIT to create the Masdar Institute of Science and Technology (MIST). Later this month, Abu Dhabi will be hosting the World Future Energy Summit, including a long-list of high-profile speakers.

It seems to me like something of a PR blitz, so one must be at least a little skeptical if Masdar is more hype than reality. However, if Abu Dhabi is able to achieve even a quarter of what they aspire to with Masdar, then it will definitely be a significant step forward for cleantech.

More broadly, if a desert-based city can become close-to-sustainable, then civilization in more temperate climes has a good long-term future.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director of Early Stage Partners.

Soil Carbon from Rangelands in the US

Written by Karla BellgravatarcloseAuthor: Karla Bell Name: Karla Bell
Site: http://www.carbonflow.com
About: Pragmatic Environmentalist and Entrepreneur

A long time pragmatic environmentalist, Karla is probably best known as the driving force behind developing the Green aspect of the Olympics starting with the first Green Olympic Games in Sydney, while working for Greenpeace in the Atmosphere and Energy campaign. She has since been an advisor to both the public and private sector on green infrastructure and emissions trading, and has been a proponent of the need to bring transparency and automation to help scale emissions trading markets.

Born in Fiji, Karla holds an undergraduate degree from Macquarie University in Sydney and is a Senior Research Fellow at the Royal College of Art in London on Sustainable Development. Karla is a co-founder of Carbonflow, Inc dedicated to reducing the transaction costs and ensuring the transparency and environmental integrity of the global carbon credit market. Karla Bell is the Opinion writer and editor of The Greenhouse Gas Blog on GHGblog.com.See Authors Posts (53) November, 2008

Scientist, Allen Savory in his paper “A Global Strategy for Addressing Global Climate Change describes a holistic method of restoring grazing lands, arid lands and degraded lands using methods of animal husbandry that mimic nature and restore soil health, increase biodiversity and absorb carbon back into the soils. He says, soils are further degraded by industrial agriculture using pesticides and chemicals and modern methods of animal husbandry. Dr Savoury has founded holistic management as a movement.

Dr Allen Savoury has 50 years of scientific and practical experience with a network of farmers now representing 30 million acres worldwide using his holistic management techniques. Holistic management has been proven to work even in drought for over 23 years.

His work is very timely and needs to be explored as more focus on Agricultural Emissions as a contributor to GHG emissions is emerging. So far global projects under CDM/JI have not considered soil carbon and no methodologies have been approved. Most new proposed Emissions Trading schemes including Australia, and New Zealand do not include agricultural offsets, the exception is the proposed US Cap and Trade mooted for 2009. To pass the Senate support from rural American states will be necessary. Soil carbon credits may be the rural stimulus package that Clean Tech is for the cities’ utilities and transport infrastructure.

If the car industry spearheaded by GM has to reinvent itself so may the agricultural sector. Following close on the heels of Global Climate Change is a food crisis noted by UK Scientist Professor Lang and some like Scientist Dr Allen Savory believe these twin issues are linked and part of the same problem.

The first and current high technology path under the current Kyoto Protocol focuses on reducing GHG emissions from industry, utilities and transport by plant improvements, fuel switching from coal to gas or oil to bio-diesel and using alternative energy such as solar, wind, nuclear as examples. The high tech path is the focus of mainstream Scientists including the IPCC where the focus is on reducing fossil fuel emissions. It does not address the burning of the world’s grasslands, savannah and does not mention land degradation as a major source of carbon emissions leading to Climate Change.

Furthermore, Savoury maintains that low impact agriculture is the second path, to combating climate change and the only path that can deal with the existing build up of carbon emissions in the atmosphere. Savoury also notes the limitations on carbon sequestration underground or in the oceans and as many others have noted in the long term carbon can be expected at some point to be released or cause ocean acidification.

Organic farming is often seen as the solution as it may not use chemical and pesticides but this does not mean it is a naturally managed system integrated with animals. The new agriculture will need to be truly holistic in that it mimics nature and restores soil health-keeping soils permanently covered. The cropping practices are more akin to nature’s poly-culture complexity than today’s single-crop fields that leave the soil bare between plants and rows and, in many cases, over the entire non-growing season.

Such a new agriculture will remove and store carbon from the atmosphere risk-free, while also increasing water retention. According to the United Nations, one-third of the earth’s land surface (10 billion acres/4 billion hectares) is threatened by desertification, the bulk of which is rangelands. And this estimate is conservative. Rangelands are similar to croplands in that if the soil is bare any time of the year, they will deteriorate and release carbon previously stored. At the same time the ability of such rangelands to store water is reduced. As so much of the soil in rangeland areas is bare – grasslands that appear healthy to anyone driving by in a vehicle commonly have 50% to 90% of the soil bare and exposed between plants – the erosion figures from them dwarf the dramatic figures recorded for croplands.

Soil Carbon farmer Tony Lovell and Bruce Ward made a submission to the Garnaut Climate Chanage Review regarding Landuse, Agriculture and Forestry. They were suggesting that soil carbon be accepted as a source of carbon credits under Australia’s proposed Emissions Trading Scheme. They maintain that using holistic management far more land is available to store carbon. Estimates are that forestry projects could absorb about 5% of Australian emissions, but the real opportunity for acting as major carbon sink is the 64% of landmass of rangelands, crop lands, that currently remain an unrecognised sink for carbon emissions.

Dr Savoury takes exception to the notion that large herbivores cattle, sheep and goats producers of methane are the problem, but indeed could be a major part of the solution. The generally accepted wisdom is that livestock overgrazing and trampling is responsible for a major part of the land degradation as well as methane emissions.

See Clean Living, this blog on Food Miles

Savoury noted, “An alternative to grassland burning and inevitable desertification as a young biologist/game ranger in Africa in the 1950s. Studying the damage from Government policy to burn Africa’s grasslands, he noticed the healthiest land was associated with remnant wild populations of large game animals, where large populations of thousands of buffalo and game, complete with packs of lions that followed closely and kept the herds bunched, the soil and vegetation was healthiest. What the wild, large concentrated herds did not consume, they trampled onto the ground, thus removing the old growth and preparing both plants and soils for new growth.

The animals in intact communities were doing what we were doing using fire, but doing it better with no adverse effects of soil, wetlands, springs and rivers. The world’s vast savannas and grasslands developed over millions of years with soil, soil life, plants, grazing herbivores and their predators-all acting as one vast indivisible functioning whole in nature.

The world’s large grazing animals run in herds as a defence strategy against pack-hunting predators. The larger the number of animals, both prey and predator, the larger the herd masses. Such herding grazers have what are referred to as non-self-regulating populations. This means their numbers are only controlled by accident, disease or predation, rather than any innate breeding control. Because they cannot regulate their own numbers these populations were often enormous with numbers running to many millions.

In fact, as we have discovered, only through increasing livestock numbers while planning their concentration and movement carefully can desertification be reversed on most rangelands. Once restored, rangelands can store even more carbon than croplands can for two reasons: the rangelands of the world dwarf the croplands in size; and most croplands support annual plants with lesser root volume and depth than the perennial plants of healthy rangelands. Root volume and depth is crucial to both carbon and water storage in soils.

The diaries of early explorers in Africa and the Americas record vast herds, which in all likelihood were but remnants of earlier much larger numbers. In the early 1800s, for instance, some 17,000 antelope were shot in a one-day hunt provided for the Prince of Wales in South Africa. Records kept by early South African pioneers describe substantial wetlands, sponges and springs associated with the vast herds but which dried up rapidly as soon as the herds were killed off and their former role was replaced with fire”.

If his approach to animal husbandry was adopted, we would not have to give up eating meat. Natural management practices following nature’s evolutionary herding methods, which co-evolved between plants and animals when millions of buffalo / bison / antelope ranged the American / African / middle-eastern rangelands are his solution. In fact he argues in times gone by far greater numbers of herbivores producing methane existed without causing Climate Change.

Using modern management techniques that truly mimic natural herding phenomena mean carbon will be sequestered in soils. For the earth’s soils to once more sequester carbon as it once did – it is essential to restore living soils. Small increases in soil organic matter amount to billions of tons of carbon stored safely. Conversely, small decreases in soil organic matter result in vast amounts of carbon released to the atmosphere.

Restoring soil organic matter and soil structure also increases rates of water retention. Excessive soil exposure throughout most of the year leads to soil degradation and further exacerbated by industrial agricultural use of chemicals and pesticides.

The new agriculture is close to organic practices and more. It will have to allow natural systems to re-emerge with poly-culture complexity extending beyond plants to include animals particularly herbivores. This strategy has great appeal for Australia, Africa, Middle East and the US where large herbivores have ranged over grasslands.

Some Soil carbon scientists believe the entire legacy or carbon load could be absorbed in the world’s croplands if properly managed, which would mean the end of human-caused Climate Change as a problem. It is estimated that 24 billion tons of soil are eroded annually.

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Reality Check on Earth2Tech’s Top 10 Cleantech Predictions for 2009

Katie Fehrenbacher, writing on Earth2Tech, is one of the most prolific of the cleantech journalists. She compiled this week their 2009 top 10 cleantech predictions. Here’s my take, worth the electronic paper it’s printed on, of what she got right, wrong, “duh, of course”, and most understated. Just for fun, of course, Katie’s one of my most favorite bloggers.

1) U.S. Federal Policy On Climate Change Will Move Slowly:

Probably. But the end of 2009 in Copenhagen is still a pivotal point for the global climate change framework, so we have to get our act together to play ball.

2) Oil Prices Will Stay Low For Much of the Year, Potentially Climbing in Q4 of 2009:

True only if you believe that oil prices in the $30s are low. I happen not to. $15 is low. $40 is high. $140 is ridiculously high. Oil has been essentially deflationary for 30+ years, with just a blip looking flat in real terms the last couple. And the big variable is GDP growth. No economic recovery, no oil price stablization, let alone rise. I don’t buy that OPEC will stop the slide over the next couple of quarters either. And I don’t buy a Q4 climb.

3) Next Generation of Biofuels on the Backburner:

Only if you believe they were ever on the front burner. I’ve been blogging this siren’s song for years.

4) Green Buildings are Bright Spot:

Probably a good call. It is growing, but is it large enough to be a bright spot?

5) Utilities Turn to Energy Efficiency Programs:

Utilities ALWAYS turn to energy efficiency programs, they just never seem to achieve scale. But we can hope. My hope is demand side energy efficienciy gets included in our cap and trade scheme.

6) Gloomy Skies for Traditional Solar PV:

I disagree. In a year when companies are reporting falling sales, solar will still be a way outperfomer. But we should see margins compressed as the industry learns that it (gasp!) really is a heavily subsidized very cyclical business when supply growth meets subsidy weakness and economic turmoil.

7) Infotech Turns to Energy Efficiency to Save Cash:

Hmmmmh. With energy prices cratering? I could imagine some wind coming out of these sails (or sales). But I’m not an expert on this one.

8) More Green Buildings? Yes. Emergence of the Smart Home? No.:

Smart home is another of those siren’s songs. Smart metering, however, is a goldmine, and just now coming into it’s own. We’ll see how it weathers the financial crisis.

9) Public Perceptions of Green to Become More Savvy:

How about, the public just ceases to care? We’ll find out just how much of a luxury item “green” really is. My personal benchmark here is random chats with Erik Blachford, CEO of Terrapass, the leading retailer of carbon credits. His last prognosis – green may be a bit more of a luxury item than previously expected. But we can hope. And I’ll keep asking Erik.

10) Green Investors Go Conservative Or Double Down:

Come on people, energy is STILL the biggest industry out there. When energy prices are cratering it’s time to buy. Just stop buying into the highest cost producer (like next gen biofuels :)) of the most “out there” technology at venture prices. But try telling that to Sandhill Road.

Neal Dikeman is a partner at Jane Capital Partners LLC, the Chairman and Founding CEO of Carbonflow, Inc., edits the Cleantech Blog and Chairs Cleantech.org.

Revolution Now

by Richard T. Stuebi

as posted to Huffington Post

Sandwiched around the election of the first African-American President of the United States, we find the debacles associated with the collapse of the international finance sector and the imminent end of the American automotive industry as we’ve known it for decades — accompanied by the scurrying of would-be leaders and experts around the world attempting to patch holes in the badly leaking dikes with hastily-applied band-aids.

It’s abundantly clear that the world has changed drastically. In my view, we’re now in the midst of truly historical sea changes, although the biggest implications of these dramatic changes are very unclear — and may not become fully apparent for some time to come.

But, the world spins on, waiting for no-one. Unable to stand still until clarity emerges, how can one make sense of what has happened in the relative blink of an eye? Here’s what I’ve been able to cobble together so far.

The Now-Dubious Ascent

For the past fifty years, the United States has implicitly pursued a social/industrial policy based on consumer largesse powered by low-cost energy. As outlined in a thoughtful December 4 USA Today opinion piece entitled “Blame and the Big 3” by Alan M. Webber, the government decades ago instituted what gradually became a fundamentally unsustainable social compact.

The two prongs of the compact were, first, to Detroit: Make big, powerful, low-cost and disposable vehicles, hire employees at high wages, and customers will flock to your products; we’ll ensure there’ll be plenty of cheap gas and cheap credit.

The second prong, to Joe & Jane Six-Pack: Work in factories at high wages, keep buying bigger new cars every few years, build big homes in the suburbs; we’ll build you roads and ensure cheap credit so you can live a good life.

For a while, it seemed to work pretty well. Sure, we had a tough patch in the 1970s, but with the demise of the Soviet Union and the Eastern Bloc in the late 1980s and early 1990s, we felt secure in our market-oriented supremacy.

At that moment in time, American hegemony looked limitless. It was, we were told, the end of history. The so-called “peace dividend” allowed us to enjoy a decade of almost unparalleled bliss — unburdened by any intrusions on the national consciousness more existentially serious than sexual peccadilloes in the White House.

Then, 9/11 happened. It was shocking and horrifying, but amazingly it didn’t become any wake-up call. Rather than altering the compact, the Bush Administration in effect told Americans not to worry: ignore the war, keep on going as you were — only more so.

And, boy, did we binge. For most of this still-young century, the United States has been borrowing money from lenders abroad, based on the expectation of ever-increasing housing values, to buy all sorts of stuff from China to fill their too-big and too-remote houses, and to buy oil from the Middle East to fuel their mega-vehicles and driving patterns. (Thanks to Thomas Friedman in a brilliant set of New York Times columns over the past several months for getting at the gist of this logic.)

American automakers went along for the ride, even encouraged it, with the shift to SUV’s. As has been long and widely documented, the Big Three focused heavily on SUVs largely because their ongoing and legacy cost structures made them uncompetitive in small cars, and their lingering brand weakness made them uncompetitive in performance and luxury cars. The only niche left for them were the big beasts.

In D.C., our fearless leaders doubled-down on the bet, by simultaneously waging two wars while cutting taxes. How to pay for this strategy? By cutting interest rates, printing money, and mortgaging the future. Dick Cheney said that deficits didn’t matter, and Treasury Secretary Paul O’Neill was given the axe for daring to suggest otherwise.

With all of the positive feedback loops in force — gas less than $1.50/gallon, home values increasing 10% a year, ample supplies of debt at low interest rates — the social compact held together… at least at a superficial level, at least for a time.

The Rapid Decline

But, for those sufficiently observant, the warning signs were increasingly obvious. By 2005, what was considered a strong year economically, the aggregate savings rate for the U.S. went negative — which had only happened before in 1932 and 1933, in the midst of the Great Depression. Americans financed their profligacy by increasing their borrowing on what-they-thought-were-appreciating balance sheets.

As long as the asset base increased, and as long as there were lenders, the bubble kept growing. But, clearly, it couldn’t last.

Meanwhile, the dollar weakened, and weakened, and weakened. Given the insistence for low interest rates and the persistence of demand for borrowing capital to fund ever-increasing imports of oil and other stuff, the only way that foreign investors would lend to the U.S. is if they could also gain from their currency strengthening in relation to the greenback.

In other words, the world was screaming to the U.S. that the key measure of its relative economic standing on the planet — the Almighty dollar — is on the wane. The fundamental forces underlying the U.S. economy may have been invisible to many Americans, but in retrospect, foreigners were the first to pierce the veil.

All of the fundamental precepts underlying U.S. vitality started eroding badly, and in an escalating death-spiral, in the last two years.

First, due to a combination of tightening supplies and a weakening dollar, gasoline prices followed oil prices up to extraordinary levels. According to a March 2008 Petroleum Intelligence Weekly article, it was projected that the U.S. would send $400 billion overseas in 2008 to buy oil, an increase of 300% relative to just 6 years previously. With cheap oil, Americans had been lulled into buying inefficient vehicles and locking into inefficient commuting patterns — and now with much higher priced oil on the market, we were saddled with our prior decisions.

By May 2008, Gal Luft had seen the future very clearly: “Oil Dependency is America’s Financial Ruin”. Jeff Rubin of CIBC is similarly on record with the opinion that spiking oil prices were the true trigger for the recession to follow.

High fuel prices pinched consumers, and they had to borrow more money to continue fueling their lives. But, alas, they couldn’t take out second (or third, or fourth) mortgages, because housing values were no longer appreciating to enable additional financings. Indeed, housing prices began falling, as speculative demand for real estate began to waver.

As housing values fell, more and more loans went “underwater”, which as they accumulated — and exacerbated by extreme leverage, through collateralized debt obligations and other repackagings of mortgages in secondary trading — eventually tipped many of the banks (and hedge funds) into insolvency. And so it was that we started circling the drain in late 2007 and early 2008.

The wipeout of Bear Stearns, acquired for virtually nothing by J.P. Morgan Chase at the end of March, was widely thought to be the turning point, after which we could all go back to normal. During the summer, we became distracted and enthralled by the McCain-Obama campaigns and the Beijing Olympics, but behind the scenes, the economy was in fact gulping its final death gasps.

As profiled in a December 29 Wall Street Journal article entitled “The Weekend That Wall Street Died”, the mid-September decision by the Feds to step back and allow the stunningly rapid collapse of Lehman Brothers put the world’s financial markets on brutally vivid notice that all bets were off, nothing was safe anymore. This had everyone running for the exits, and in the financial world no one has stopped running since. Securities of virtually all flavors and nations have been routed.

Meanwhile, the so-called “real” economy is now stuck at a standstill. In the U.S., car sales are off about 40% from the previous year, housing values continue to slide because there are few viable buyers, new real estate development has been terminated, manufacturing is at the lowest levels in decades, steel production has fallen by 50% since August, and businesses can’t get financing.

Oil prices — what had been a leading indicator of our troubles — have crashed back to historical norms, falling by about 75% from $147/barrel on July 11 to the mid-$30s by December, even though demand is off just a few percent from their highs. (For various reasons, it is probably wisest to view this decline as a temporary phenomenon, as the inescapable growth of oil requirements to fuel the slowed but nevertheless major economic growth in China, India and elsewhere in the developing world will quickly chew up the demand-destruction that has occurred in the U.S. and developed economies. But this is a story for another day.)

Taking Stock of the Debris

Before problem-solving on how to stop the panic, it’s worth reflecting upon the fundamental priorities that the U.S. had set over the past few decades that has culminated in us spinning and sinking inside this financial black hole.

There’s lots of blame to be spread around. It’s easy to finger the capitalists on Wall Street for our woes, and certainly they deserve their share of hostility directed toward them. Clearly, plenty of executives in the banking sector were key enablers to our present morass with their often dubious (or worse) ethics and practices, leading to lots of economic activity that is now revealed to have been essentially fictitious.

But, as the preceding text indicates, the list of foundational culprits must truly begin with the U.S. societal devotion to cheap energy, inefficient autos, outsized homes, sprawl, roads in lieu of public transit, and excessive materialism.

In other words, many of the things that make the U.S. economy environmentally unsustainable are what have also made the U.S. economy financially unsustainable.

We have met the enemy, and it is us.

These are not factors that are simple or quick to change, so the way out of our current conundrum will not be an easy one. Barack Obama inherits an incredibly daunting set of challenges. Perhaps this is the rare historical confluence of the right man at the right time, true leadership rising to meet challenges that only historically gigantic leaders can surmount.

Some of you may know that I was academically trained as an economist. Actually, I was almost certainly the least motivated student ever under the tutelage of current Fed Chairman Ben Bernanke (while he was at the Stanford Graduate School of Business, 1984-85), so it would be presumptuous to say that I have found the yellow brick road out of this economic nightmare. And, for sure, I’m not in any particularly influential position to offer advice. (“Hey, Ben! Remember me, your worst pupil? Listen up: I’ve got the answers!” Yeah, right.)

The few macroeconomic fundamentals I dimly remember suggest, to me at least, that any economic recovery will need to be driven by a boost in aggregate demand. With interest rates offered by the Federal Reserve Bank now essentially at zero, monetary policy tools will have limited power. Thus, fiscal tools will need to carry the load to spur aggregate demand.

As widely reported, the Obama Administration is angling for a major economic stimulus package of nearly a trillion dollars (how fondly I remember the days when a few billion dollars was a lot of money) that will focus on new infrastructure and energy projects.

Given the “Green Team” that the President-elect has picked to lead the nation’s energy and environmental agenda, sustainability appears well-positioned to become the essence of an Obama Doctrine. A true test will be if the Administration’s economic plan leads the country to pursue only projects that will help us reverse direction from the trajectory we’ve been headed since World War II.

Even if the Obama plan is large and properly pointed, it’s not likely to be enough to restore the American economy and put it on a financially (and environmentally) sustainable path. More will be needed.

Given that the average consumer is far overstretched, there is little scope for increased consumption (and, indeed, lots of evidence to suggest a need for reduced consumption). Thus, any additional demand stimulus needs to come from promoting private-sector savings (which translates to investment), along with the near-certainty of increased government spending.

Bluntly, along with the economic stimulus package that the Obama team is now concocting, we need to cut capital gains taxes and expand R&D to accelerate the turnover to the future, and we need to increase consumption taxes to end the era of living beyond our means.

This is especially the case on the cleantech front.

Investments in new cleaner energy technologies — both to develop them and to deploy them — will need to grow dramatically, perhaps even by an order of magnitude. This isn’t gonna happen on its own.

Certainly, a cap-and-trade program on carbon dioxide emissions will help, and Obama promises this. However, the magnitude of emission reductions likely to be compelled by any legislation that can get passed through Congress will not cause enough of a tilt in favor of clean energy to drive any rapid shift to a sustainable economy. Additional impetus will be needed.

The capital markets are so broken right now, and savings rates so low, that investment in the U.S. must be more aggressively encouraged. Possible solutions: slash capital gains tax rates, and make R&D expenditures tax-deductible.

And, as politically unpopular as it certainly would be, taxes on fossil-fuel based energy must be raised. We’re not going to wean ourselves from our addictions if we don’t make it more economically burdensome to maintain the status quo. And, if we raise government expenditures and reduce tax-based disincentives against investment, Uncle Sam is going to need to collect more revenue somehow, some way.

Given the recent freefall in oil prices, many have argued (including a December 8 editorial in the Washington Post called “Start Making Sense”) that the time is now to put in place taxes that set a floor on the prices paid by consumers for gasoline. This will not only stimulate more far-sighted decisions and behavior by drivers and vehicle suppliers, but will also provide more certainty for investors in alternative fuel technologies and projects that are so badly needed.

A New Beginning

Some might say that we’re poised on the edge of a precipice. For instance, the current environment looks like the early days of what James Howard Kunstler has memorably called The Long Emergency, a dire depiction of a bleak long-term future.

While clearly very urgent, I don’t see our situation as hopeless. I prefer an interpretation similar to what I’ve seen from a number of sources in recent weeks: that innovation and ingenuity are in fact amplified during difficult times, during which many of the most enduring and important enterprises are founded. See, for instance, the recent report on entrepreneurism by the Kauffman Foundation, George Gilder’s “The Coming Creativity Boom” in the November 10 issue of Forbes, or the December 15 interview with Harvard’s Clayton Christensen in the Wall Street Journal.

Necessity is the mother of invention, and desperate times call for desperate measures. They may be old cliches, but there’s a lot of truth in them nevertheless.

Recall that Microsoft was born in 1975, during the last really bleak period of U.S. economic history. In that context, it’s interesting to read the perspective of Nathan Myrvhold, formerly Microsoft’s Chief Technology Officer, who in “Inventing Our Energy Future” in the November/December issue of EnergyBiz clearly sees the opportunities for reinventing the energy economy.

It’s not just the hardware of the energy economy that needs to change, but also the software: how we as Americans think about and operate in the world of the future.

I’ve written before that we need a whole new story to move us forward in the 21st Century in a truly sustainable manner. I think the story’s being rewritten right before our very eyes. The rules of the game are changing, and we don’t yet see what they will become yet.

I believe we’re in the midst of a revolution. It is uncomfortable, to say the least. But, that’s the nature of revolutions.

The Beatles asked if you wanted a revolution, if you wanted to change the world. If so, here’s your chance.

But, be assured, this will be a participative sport — indeed a full-contact sport — and it won’t be a spectator sport.

Advance forward a few years after the Beatles into the music of Gil Scott-Heron, who noted darkly that the revolution will not be televised. No, indeed, it won’t. We are living it now. It’s reality TV turned inside-out: the fantasy is inside the boob-tube, the reality is on this side of the screen at which you’re looking.

The revolution is now. Are you game to take part?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. In 2009, he will also become a Managing Director at Early Stage Partners.

Cleantech’s Solar Conundrum

The solar market is still going strong, despite the financial crisis, and turmoil in some of its key markets. But that doesn’t mean all is well on the venture financing end.

As a number of longtime Silicon Valley solar darlings start to demand even more serious money to build plants for commercialization, the financing picture gets clouded. Conventional wisdom has been suggesting it’s market issues. Maybe so, and then again, maybe not.

Greentech Media has been reporting on the funding efforts of Solyndra, including a recent discussion of struggles by Goldman Sachs to raise structured finance for the startup, which claims it is shipping some of its very weird looking CIGS product, though little evidence let alone field data exists.

It’s not the only one. Recently CPV darling SolFocus was reportedly struggling to raise capital arranged by Advanced Equities. The cash was to fund the buildout of a commercial manufacturing plant, and at least twice the company drastically cut its pre money valuation ask.

The conventional wisdom is that the finance crunch is hurting solar. I have another thought. Perhaps its just the riskiest solar technologies and businesses coming home to roost. Both of these companies have been pitched to investors as late stage, helping to justify massive capital needs and valuations. I’d argue they are actually very, very early stage, with all the risk still in front of them.

Maybe it’s not the market? Maybe its the ludicrous suggestion that the first plant should be 420 MW in size. How about two new ideas: 1) Stage gate, or 2) Walk before you run.

Take Solyndra, which has raised hundreds of millions to coat CIGS on a glass cylinder. Perhaps the question shouldn’t be is solar getting hurt by the credit crunch, but should be who exactly thinks its a good idea to invest hundreds of millions to build a plant to coat CIGS in a circle, at “pre IPO style prices”? The question everyone I know has been asking is, if they really can coat CIGS with good yields, why didn’t they just do it? That’s world beating on flat plate glass, if it works as advertised. Why wrap the same amount of solar material around a long glass paper towel roll?

With SolFocus, maybe its just that CPV isn’t as good an idea as applying manufacturing process improvement to CdTe and tandem cell thin film?

Who knows, but let’s look a bit closer at the particular technologies before we just blame it on the the financial crisis.

Neal Dikeman is a partner at cleantech merchant bank Jane Capital Partners LLC, and Chairman and CEO of Carbonflow, Inc. He edits the Cleantech Blog and chairs Cleantech.org.