MIT Energy Summit 2013

At this year’s MIT Energy Summit, the centered on how to mainstream new energy technologies. This will depend on one of two economic changes: 1. Lowering the prices of new technologies or 2. Raising the price of current technologies by adding a price on the pollution associated it them. While the first option will take years of investment for economies of scale to take place, different policy mechanisms have been discussed for the second. These include the carbon tax and the cap-and-trade program to put a price on the greenhouse gas pollution from the the use of fossil fuels. Due to the complexity of the mechanism and competition between developed and developing countries, there is broad sentiment that at the international level, a price of carbon will not be established for the foreseeable future.

Rather than relying on an international framework to drive the development and deployment of low carbon, efficient energy technologies, the key to success lies in local implementation.

The key message coming out of the MIT summit was whether if low natural gas prices will have an impact on investing in alternative energy technologies. While the wind market in the US has added significant capacity in the last few years, the availability of cheap natural gas has made them less competitive.

The impacts will not only be felt in producing power but also across all sectors. Electric vehicles, which have received tremendous resources for investment, may no longer have long term support if natural gas prices stay low. In addition, cheap natural gas will disincentive heavy and chemical industries from improving the efficiencies of their plants.

While big energy companies have traditionally based their strategy on fossil fuels and have been resistant to new energy technologies, some companies have a more progressive outlook and are actively working with both early technology companies and policymakers to help facilitate their implementation.

In his keynote, David Crane, the chair of NRG Energy came to talk about his company’s efforts to develop clean power and provide choices for consumers to switch. He emphasizes the need for public-private partnerships (PPPs), which will be crucial in integrating new technologies into the existing energy infrastructure.

California’s Cleantech War – Prop 23

According to pick your favorite cleantech and carbon media outlet, California is at war. 

AB 32 is California’s carbon cap and trade law.   The law is most the way ready to implement, with the rulemaking in process now.  It’s aimed squarely at two goals, one, reduce California’s greenhouse gas emissions, and two, since such a reduction is largely symbolic without the rest of the world participating as well (CO2 is the only environmental pollutant that really doesn’t care where in the world it goes in or comes out, so is a truly global pollutant requiring a global response) continue California’s trend of environmental policy leadership, and be the beacon on the hill.

As it currently stands, AB 32 rules (as with most of these things the devil’s in the details, and the 2008 law takes a long time to work out the details) are supposed to be ready to go at the end of this year, and implemented in 2012.

Proposition 23 is an initiative on the ballot designed to indefinitely delay implementation of AB 32.  And for the record, if you don’t click that link at least read the Legislative Analyst’s analysis, I suggest you skip the vote.

The actual impact according to the California voter information guide would be to suspend part of the measures in the Scoping Plan (California’s overall GHG Plan), targeting about half of the emissions in the Scoping Plan:

“Various Climate Change Regulatory Activities Would Be Suspended. This proposition would result in the suspension of a number of measures in the Scoping Plan for which regulations either have been adopted or are proposed for adoption. Specifically, this proposition would likely suspend:

  • The proposed cap–and–trade regulation discussed above.
  • The “low carbon fuel standard” regulation that requires providers of transportation fuel in California (such as refiners and importers) to change the mix of fuels to lower GHG emissions.
  • The proposed ARB regulation that is intended to require privately and publicly owned utilities and others who sell electricity to obtain at least 33 percent of their supply from “renewable” sources, such as solar or wind power, by 2020. (The current requirement that 20 percent of the electricity obtained by privately owned utilities come from renewable sources by 2010 would not be suspended by this proposition.)
  • The fee to recover state agency costs of administering AB 32.

Much Regulation in the Scoping Plan Would Likely Continue. Many current activities related to addressing climate change and reducing GHG emissions would probably not be suspended by this proposition. That is because certain Scoping Plan regulations implement laws other than AB 32. The regulations that would likely move forward, for example, include:

  • New vehicle emission standards for cars and smaller trucks.
  • A program to encourage homeowners to install solar panels on their roofs.
  • Land–use policies to promote less reliance on vehicle use.
  • Building and appliance energy efficiency requirements.”

Because it is expected to scrap CARB’s proposed expansion of the California RPS to 33% of power from renewable sources up from the current goals of 20% (we’re not there yet), and the removal of the planned Low Carbon Fuel Standard, the entire cleantech sector is up in arms. 

Contrary to popular opinion, a Yes on Prop 23 probably won’t gut the cleantech sector – since cleantech is global and California’s cleantech companies are driven by programs well beyond its borders, since all the major programs Prop 23 affects haven’t actually been enacted yet and several key programs would be untouched (as well that the LCFS probably gets served by things other than cleantech biofuels anyway at least in the first years).  But it would cut into the future growth of renewables in the state a few years down the road, esp wind and large scale solar.

What it would definitely do is kill the nascent push in the US towards real cap and trade just a month ahead of the next round of international climate change negotiations in Cancun.  Quite frankly if California can’t deliver on its own cap and trade law, who else can?

And it would send a signal to the world that California voters are not quite as ready to be the beacon on the hill for environmental issues as they once were.

Will it hurt the economy and kill jobs if we don’t pass it and AB 32 continues?  Unfortunately it depends, with the pain more certain and likely nearer term, and the huge economic benefits more uncertain and likely longer term – though quite substantial in possibilities.  Yes, in the short term and medium term LCFS and 33% RPS and cap and trade will push up power prices and fuel prices in California, hurting consumers, and pushing some production out of the state (if other states and countries don’t continue to match the increased regulation).  That’s why it’s called alternative energy – it’s still more expensive.  But yes, it will probably simultaneously catalyze more venture capital investment (VC services is a big export for us), carbon markets investment (I know about two dozen companies that moved into California specifically because of AB 32 and its first mover advantage in US cap and trade and I helped bring 2 of them in myself), and certainly add some manufacturing and construction jobs in the cleantech sector. 

Net net, higher energy and manufacturing costs in California and an effective renewable and carbon quota mean economic losses in comparative advantage and to consumers in California.  But how much depends on exactly how good a job it does of catalyzing jobs in California for export or replacing business that we currently import to offset that.  And it is very, very hard to underestimate how good California’s environmental leadership has been at catalyzing US and global change.  Meaning the that comparative advantage loss may be short-lived (higher power prices from more low carbon renewables don’t cost California many jobs if its competitors adopt effective carbon prices as well), and if a new export industry and venture capital emerges to be a world leader (which basically pulls dollars from all around the world into Silicon Valley) it means more new California jobs gained than those lost from the comparative advantage shift, then all is good.

Unfortunately, some of that depends on how well CARB actually designs the final rules, and my big fear for California on AB 32 stems from how badly the state screwed up its last major energy deal – power deregulation.  Keep in mind Texas got that one right, and California’s was a fiasco (then as now blamed on the Texans – but I can buy 100% wind power for 11.4 cents a Kwh flat rate in Texas).

So, vote yes, and kill AB 32, and carbon leadership, and ding the rest of the cleantech sector, and you’ll probably never feel the impact in you pocket book (or realize it if you do).  But if you vote yes, you lose all moral right to claim cleantech and environmental leadership for the state.

Or vote no, and keep the state headed in the direction its going – leadership in renewables and carbon, and signal to the world that you care.  More than that, you tell yourself you believe that policy enabled innovation can change your fortune for the better, and outweigh the investment.  That’s technology and venture capital, and that’s what California does best. 

But please, vote for what *you* believe – not because the cleantech sector is screaming that you’re taking away their subsidy or because a couple of independent Texas oil companies are funding the no vote (they are, but to be fair, they provide a lot jobs and taxes to the state, California has not exactly gone out of its way play fair for them in the implementation of AB 32).  And don’t vote one way or the other just because you think it create or kill jobs – because which way the net outcome sways lies on our shoulders, too, from policy makers and CARB staff to the energy industry to the California consumer and business who will pay the final price and reap the final reward either way. 

Neal Dikeman is a founding partner at cleantech merchant bank Jane Capital, has help found or has interests in businesses in carbon (as founding CEO of Carbonflow), solar, superconductors, and green products, and personally stands to lose a lot of money if Proposition 23 passes and AB 32 goes down.

Big Week in the "Real" CSR – Climate Saving Regulation

It’s been a big week in Greenhouse Gas regulation land.  Huge boost for cleantech sales executives and afficianados everywhere.

EPA announces a slightly delayed and somewhat more limited GHG regulation rule.

Starting in July 2011, all facilities greater than 75,000 tons per year in emissions will have to get GHG permits.

And John Kerry and Joe Leiberman push ahead in the Senate with cap and trade and climate saving legislation.

Lots of good in here:

– Power sector gets capped early on
– Industrial/manufacturing gets phased in
– Transport included down the road as well
– Domestic offsets included (think massive cashflows to the ag belt)
– International offsets included
– International linkages included
– Phased in border tax for non participating countries

And then:

– Riddled with subsidies and wealth transfer and buy-offs, but isn’t that just par for the course with Washington? 
– Price collar ($12-$25/ton) – guts the heart of compliance (market based mechanism to set a “real” carbon price, but the Senate should tell the market what the right price should be?  Joe? John? You do actually WANT emissions reductions, right?)
– And no Republican support – guts the odds of passage.

All in all a good week, even though the EPA will get sued six ways to Sunday and without Republican support Kerry-Leiberman has zero chance of passage, we’ll give it a two thumbs up.  This is a drastic improvement.

Neal Dikeman is the editor of, a partner at Jane Capital Partners LLC, and the Chairman of Carbonflow.

Why Can’t Tom Friedman Find Cleantech?

Thomas Friedman, one of my favorite authors, had an editorial this week entitled, “America must lead in energy technology“. As with most of his recent writings and speeches, it’s targeted around the thesis of his Hot, Flat and Crowded book, which basically argues that a combination of climate change, globalization, and population growth are creating a crisis point in energy and resource use that must be dealt with by utilizing a shift of technologies to cleaner and more sustainable economic practices (some of us call that cleantech). Not a new idea, but as usual Tom Friedman articulates it well.

So for those of us who work in the trenches of cleantech, I found the language he used quite delightfully flighty.

Number one, when it comes to actually doing something about climate change, Friedman can’t seem to get beyond the idealists idea of a carbon tax.

In his article he mentions

cap-and-trade/carbon tax
tax on carbon
long term price on carbon

But not one mention of carbon trading or Kyoto, or CDM, ETS or any of the carbon trading work ($125 Billion in 2008) that makes up the vast majority of the current global response to climate change in process now.

The basic idea here is that the theoretically most efficient way to “put a price on carbon” is to tax carbon. Of course this ignores the reality on the ground that we are really, really bad at making efficient taxes, and the best real world that we absolutely have to have involved to succeed (read India and China) is even worse. So carbon tax basically means carbon trade war if you’re not careful. In the real world, a global response of cap and trade ends up being more efficient as it allows the melding of international trade schemes better, lets industry find the least cost path to comply, and also actually means compliance can be assured. And carbon tax ignores that fact that any economist worth their salt knows full well that a tax ensures some level of revenues to the taxing goverment, but does not necessarily mean you hit your abatement targets (some people just pay the tax). And didn’t we say it’s all about hitting the abatement targets? In the real world we’d actually like to do that with as LOW a carbon price as possible, as long as we hit the critical abatement levels. Unless you don’t like your current standard of living, in which case the fastest way to fight climate change is just take it out of GDP.

We as a globe entered into cap and trade and carbon trading as the best alternative that would 1) ensure we actually reduced GHG emissions enough (a tax doesn’t even pretend to do that) and 2) do it in the least cost path with the least economic collateral damage.

I heard him speak, so I’m pretty sure he knows how this works. But Friedman seems blissfully uninterested in diving down into the details on “how”, prefering to stay only in the “why” realm. Maybe because the how is actually hard. Unfortunately, when it comes to climate change action, the devil is ALL in the details of the how.

Number two, Friedman must really, really hate the term cleantech. He uses everything else he can think of.

clean power 2 mentions
clean-energy hawk 1 mention
green hawk 1 mention
E.T. 3 mentions
energy technology 3 mentions
green-tech 1 mention
clean energy 3 mention

but not a single mention of the word cleantech or clean tech. Now do a google search and see how those terms compare. It’s not like cleantech is one of the top segments of the venture capital world. And it’s not like cleantech investment isn’t anchoring billions upon billions of market and policy dollars. Oh wait, yes it is.

I guess my only request is this, Tom, please come back to the real world, and give the guys in the cleantech and carbon trading trenches their due. They’ve been working hard for years on the topics you are just now discovering. And yes, I have a vested interest. That’s because I’m actually working in the trenches.

Neal Dikeman is the founder of Cleantech Blog, and the Chairman of, and Carbonflow, and a partner at Jane Capital Partners LLC.

Cap-and-Trade: How it works and why it’s the been the option of choice

In the run up to Copenhagen and the debate over Waxman-Markey, I think it’s worth laying out some of the key debating points on how cap and trade works and why it’s been our weapon of choice to date in the climate change fight.

I like to think of our carbon and energy problem as follows. We built the first industrial economies and long term economic growth model in all of human history in the last 200 years on a cheap, available energy base, in part by effectively running down our existing inventories of energy stocks from the least cost to the most expensive. We now need a lot more inventory each year (since we’ve been successful and are a lot bigger), and we’re into the expensive layer of our inventory, so it’s hitting our global cost of goods heavier than before. And we know we need to find more sources to replenish inventories, and we know that if we move immediately to higher cost sources we’ll pay the price in GDP.

We also know that producing and using those inventories had a non zero (and we argue about the level) cost to our environment that we have not measured well, but have been working on reducing for the last three decades. But we’ve now run into a new part of that cost with carbon or GHGs that’s very large, and is going to take a much larger and bigger hit to take care of, and depending on your view, has an aggressive time fuse on it. Essentially this means pricing carbon into our economy – which will basically add a whole new cost in all of our supply chains, a cost that varies from country to country and industry to industry, and will shake up comparative advantage in trade. And because it’s global, as far as the environment is concerned, for carbon, unlike most environmental pollutants, it doesn’t matter where in the world it’s emitted or reduced. So our problem is China’s problem is Europe’s problem is our problem.

So we start with a first climate change goal: to reduce the carbon emissions levels in the economy, by a level that we all debate by a point in time that we all debate. But we have to realize that while we do this, we do need to replace those energy supply inventories to both keep us where we are in GDP, and find new ones to sustain growth, or we’ll solve our GHG problem simply by being really poor. And we have to remember that adding costs has to be paid for, and it isn’t “business” that pays for it, it’s us, with business as our proxy.

So my corollary is the goal should be to squeeze carbon emissions out of the global economy in the fastest, least cost path, and as fairly as possible. Sorting out what that means and how to do so is the rub. But part of fair should mean a “do no harm” principal for the economy as well as the environment – meaning that when we start, as far as possible no country or group or industry or company within industries gets penalized out of the gate without either compensation or enough time to adjust. Think of it like eminent domain. If we give something up to the greater good, we deserve to get paid for it.

We have two main ways to go about it, place a tax or penalty on the emissions, or constrain the emissions factors (like power generation, driving, etc.) Cap and trade is essentially a hybrid of the two. The cost of such carbon reduction, because of the ubiquitous nature of carbon, and typically inelastic demand curves for most energy and carbon intensive products, is spread across all consumers in any scenario, but depending on system design can be borne disproportionately by some groups, industries or countries. Our special challenge is because of that global nature, we literally HAVE to have a solution that can engage and work in every country. Unlike cleaning up a local toxic spill, where we can fix ours without our trading partners, in carbon, if China fails, we fail. So if we try and succeed, and China does not try, the environment loses, and we lose worse.

Carbon Tax – Basically with carbon tax the government picks a series of carbon intensive industries or products, assigns a carbon value to them by one of a number of methods, and levies a tax on them. It’s often touted by economists as theoretically the cheapest method, and generally an industry favorite because they know how much they’ll have to pay and can plan.

But carbon taxes have big drawbacks. You can’t be sure you’ll actually get the level of reductions you want, because the tax fixes price, not volume. Worse, carbon is a global problem, and getting global tax codes to mesh together is virtually impossible (we can’t even do it inside the US), which means we may end up with everybody paying a different price of carbon and a complete mess. That certainly would throw the efficiency argument out the window. The next big disadvantage is that if you don’t get the tax level and structure exactly right, businesses and consumers get hurt in unpredictable ways, and have little room to adjust if we get it wrong. So while theoretically better, it’s not a very “fault tolerant” plan.

Main advantage is that you have a known cost to industry (which is why most industry prefers tax to trade or command and control). Next main advantage is that the the government gets lots and lots of revenue, which is why many politicians favor it.

The second option is classic environmental “command and control”, if you’ll excuse the perjorative sounding nature of that term. Esstentially the EPA or equivalent simply regulates every one who produces GHGs, and tells them how much they can produce through a permitting process.

The advantage is that you know exactly how much emissions reduction you are going to get. The disadvantage is that you may pay much more than you thought, and sink your economy, especially if your trading partners are more lax on either regulation or enforcement, and you let the EPA pick the winners and losers. The other disadvantage is that there is no upside. Under no circumstances will you ever get more reductions than you thought, unlike cap and trade, where done right, you may.

Cap and trade is the middle ground (which is why it keeps coming up). With cap and trade, the system operator (UN, EU, EPA, CARB etc) designates how many credits can enter the system, and prints, them like money. It then designates how many credits a company must turn in each year or period per unit of production (ie 0.5 tons/MWH of power produced), and penalizes or shuts down the company if they don’t turn in enough to meet their obligation. So no more emissions from a regulated sector will occur than credits (often called allowances) exist.

Then the regulator decides whether to sell the credits to the industry that needs them, or to simply allocate them (often based on some measure of current production). Both methods have pros and cons, and in practice have nothing to do with environmental protection or the price of carbon (the total level of credits and the relative level of credits to demand sets that) and more with subsidizing one industry vs another, or collecting revenue for the government.

Finally, the regulator can let offset credits be produced from the remaining unregulated sectors (or from inside a regulated or “capped” sector if appropriate adjustments are made), and sold to the emitters (it simply adjusts the cap so that the total level is where we want it to be). The advantage of this is that the regulations can be phased in easier, and we get a more equal price of carbon.

And what happens is that in unregulated sectors any time potential reductions exist (eg, a very inefficient emitter that could be shut down or run more efficiently), carbon developers pay up for the rights to the reduction, and that emitter finds it’s more profitable to do the right thing. The downside is that it looks like emitters are getting a profit off emissions. In reality, they are getting paid to reduce emissions for you and I, at just the right price.

Then emitters and financial parties buy and sell these credits from the government or each other or develop offset credits in a race to pay the least. And since the regulator starts reducing the number of credits it puts into the system, it’s kind of like musical chairs, the slowest, most carbon inefficient company gets left out and has to shut down, or shifts to a lower carbon production in order to stay in business.

The main advantages of cap and trade – 1) it assures us that we will meet our target goals like command and control 2) but it allows industry the flexibility to figure how to meet them cheapest (which is good for all of us), 3) it tells us what the real price (or cost) of carbon actually is, 4) and it’s better at equalizing the price of carbon so everyone pays the same across different industries and geographies, 5) in practice it costs less, and is easier to implement in a multicountry environment than command and control or tax.

Main disadvantages, it takes some time to get up and running, and makes it look like (not really true), that emitters are making money off it. Trust me, if they thought it was a profit center, they’d be all over it. The final disadvantage is it depends on the government operator to manage a market, something where we’ve had some good success (like NOX and SOX trading and up until recently the Fed), but can be susceptible to politics as usual.

In essence, you can think of cap and trade as a carbon tax with a tax rate that varies with the market (going up if industry is worse at producing carbon reductions than the government thought and down if they are better, and similiarly going down when the economy is bad and we can’t afford it and up when the economy is strong) and a tax base that is higher for emitters and emissions intensive industries than for those more efficient.

In any case, all three options need a lot of money spent on new technology and good measurement and verification. All three options will be expensive, and will be paid for by you and I at somepoint. And in practice, we are doing all three options to varying degrees right now.


If Larry King Wrote My Column….

by Richard T. Stuebi

You heard it here first: the energy consultancy Douglas-Westwood is claiming in a May 11 white paper that “peak oil” may have already happened, as far back as October 2004, and that the oil price boom followed by economic collapse is indicative of how things will play out over the decades to come as oil supplies are unable to expand in the face of increasing demands. Stay tuned….

The American Wind Energy Association (AWEA) exposition WINDPOWER 2009 attracted 23,000 attendees to Chicago earlier this month. Glad AWEA didn’t ask me to do the headcount!….

Your stock portfolio isn’t the only thing that’s plummeted. According to a snippet in the March 2009 issue of Power, so too have PV prices fallen, by an estimated 10% since last October, with a further 15-20% decline expected in the coming year. Seems that, after several years of tight supplies, there’s now a glut in the market, due to collapsing demand in Europe….

Lots happening in DC these days. Looks like cap-and-trade requirements for carbon dioxide emissions are making real progress, embodied in the grandiosely called “The American Clean Energy and Security Act” (H.R. 2454) — better known as the Waxman-Markey bill. Cap-and-trade might even pass the House sometime this summer. Don’t think it’s going to be so easy in the Senate, though….

The U.S. Department of Energy (DOE) has created ARPA-E, to fund the initial evaluation of new whiz-bang ideas for energy, just like DARPA’s been doing for out-of-the-box defense gizmos for decades. One can only imagine what’s going to come out of that shop in years to come….

It also appears that the e-DII concept floated by Brookings earlier this year, to create Clean Energy Innovation Centers mainly affiliated with universities, is gaining traction, now having been tucked into the Waxman-Markey bill. Wonder what the national research labs, such as NREL, NETL, ORNL, LBNL and other alphabet soupers, think of this?….

Speaking of NREL, hats off to Joel Serface, who just completed a year’s residence there on behalf of uber-VC firm Kleiner Perkins to help accelerate technology commercialization and spin-outs from the lab. A year in Golden/Boulder is hardly hardship duty, but as Joel indicates in a recent post at this very CleanTechBlog site, it wasn’t enough time to make much of a dent in the bureaucracy….

Congratulations to my former colleague Cathy Zoi, who’s been tabbed by President Obama to lead the Office of Energy Efficiency and Renewable Energy at DOE. Wish her good luck: she’ll need it!….

Let’s hear it for Joseph Romm, now a Senior Fellow at the Center for American Progress. He calls ‘em like he sees ‘em. In a note in the May/June Technology Review, Romm claims “it’s not possible to have a sustained economic recovery that isn’t green” and calls our economic system a “global Ponzi scheme: investors (i.e., current generations) are paying themselves (i.e., you and me) by taking from future generations.” Whew!….

The U.S. Chamber of Commerce just released a study performed by Charles River Associates estimating 3 million jobs to lost in the U.S. by 2030 as a result of climate change legislation. Last year, the Chamber commissioned a similar study announcing a similar doom-and-gloom result. I’m not saying there won’t be job losses as a result of cap-and-trade – there certainly will – but I don’t think it’s going to be apocalyptic either….

Gotta hand it to Bob Galvin, former Chairman of Motorola. Not content to be retired, he has launched the Galvin Electricity Initiative to promote a “Perfect Power System” to help prevent future blackouts. In a sense, he’s trying to Galvinize the grid….

Last Wednesday evening, the Cleveland Chapter of the American Jewish Committee honored The Cleveland Foundation for its advanced energy initiative. Accepting the award on behalf of the Foundation was President and CEO Ronn Richard. A good time was had by all….

Richard T. Stuebi is the 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 Managing Director of Early Stage Partners.

Director of Congressional Bugdet Office on Cap and Trade

A couple of days ago the Congressional Budget Office Director Douglas Elmendorf wrote about his Senate testimony on cap and trade revenue redistribution on his blog late last week. Worth a quick read, the main text below. The full 28 page testimony is linked in his note. It’s worth noting that the homepage of the CBO has a climate temperature chart on in front and center this week.

“Testimony: The Distribution of Revenues from a Cap-and-Trade Program for Carbon Dioxide Emissions

I testified this morning before the Senate Finance Committee on the distribution of revenues from a cap-and-trade program for carbon dioxide emissions. My comments emphasized these points:

A cap-and-trade program would lead to higher prices for energy and energy-intensive goods, which would provide incentives for households and businesses to use less energy and to develop energy sources that emit less carbon dioxide. Higher relative prices for energy would also shift income among households at different points in the income distribution and across industries and regions of the country. Policymakers could counteract those income shifts by using the revenues from selling emission allowances to compensate certain households or businesses, or by giving allowances away.

In distributing the value of the allowances, policymakers have a wide range of options but face trade-offs. For example:

  • If allowances were auctioned, some of the revenue could be used to fund climate-related research and development. This approach might reduce the cost of transitioning from a high carbon emissions economy, but it would not provide any immediate help to affected industries or households.
  • Instead, auction revenue could be used to reduce existing taxes on capital or labor. This could lessen the overall economic cost of restricting emissions but would do little to offset the burden that higher prices would impose on certain industries or households.
  • A different approach is to use the revenue to give rebates to low-income households, perhaps using the tax system. This would lessen the burden on these households but not trim economy-wide costs.
  • Alternatively, allowances could be given away for free to certain industries. Giving away allowances is generally equivalent to auctioning the allowances and giving the proceeds to the same firms. Giving allowances to energy-intensive manufacturers would not, by itself, hold down the price of their output, which would rise to reflect the private market value of the allowances. The result could be windfall profits for these firms, which would tend to benefit higher-income households who own most stocks. However, if receipt of free allowances was tied to future production or employment, then prices would not rise as much as otherwise. At the same time, because these firms would not reduce emissions as much as they would have without free allowances, other sectors of the economy would have to reduce emissions by a larger amount to meet the overall cap.”

Neal Dikeman is a partner at cleantech merchant bank Jane Capital Partners and Chairman of Carbonflow, Inc. and

BlogRoll Review: Space Beams, Leaded Batteries, and Sins

This seems like something out of a James Bond movie. There is a startup, Solaren, which is trying to build panels in space that converts sunlight into a radio frequency beam aimed at a receiving station near Fresno. The station then converts the radio waves into electricity.

Megan Treacy at EcoGeek says:

“If everything goes according to plan, this will be the first real-world application of space solar power, with power delivery starting in 2016. I’m keeping my fingers crossed that this works out. The technology has been experimented with for a while and has a lot of potential and, let’s face it, running your home on “space power” would be really cool.”

If anyone is worried that the beam is gonna fry birds or planes that fly into its path, apparently the company has done analysis to show that radiation is not intense enough to cause harm.

Still, the thought of fried chicken falling out of the sky is kind of cool. :)

In other news…

While not the most attractive of technologies, lead acid batteries are certainly robust…and they may still have a promising future. On CleanBreak, Tyler discussed Axion’s lead battery technology that lasts three times longer than conventional ones.

* It looks like the folks at Google think lead is the way to go, too. AltEnergy Stocks agrees.

* I don’t remember how many ways you can sin, but Joel Makower talked about the Seven Sins of Greenwashing.

* Maria talked about Cap-and-Trade on TV.

* Simon says efficiency is still promising.

* Is natural gas a better standard than oil? Rob Day ponders.

Throwing down the gauntlet to Secretary Clinton

By Marc Stuart

Secretary Clinton’s weeklong trip to Asia was notable for a number of firsts. The first time a new Secretary of State of a new administration has opened her tenure by flying west, rather than east. Well, George Schultz apparently went south, as the exception that proves the rule. It’s also the first time that these kinds of “nice to meet you” meetings have happened in the eyewall of an global economic meltdown, at least since Cordell Hull got on the boat for FDR. And it’s clearly the first time that climate change was generally at or near the top of any agenda for any Secretary of State at any time.

Secretary Clinton stopped in four countries – Japan, Indonesia, South Korea and China – who for various reasons are each a keystone to a future climate accord. Including the US, the four industrial countries are all among the world’s top ten emitters and roughly account for just about half of the world’s direct emissions from fossil fuels, while Indonesia is generally regarded as the largest emitter from land-use change – i.e. deforestation. So, to paraphrase the bank robber Willie Sutton on why he robbed banks, if we’ve looking for emission reductions, you could do a whole lot worse than starting with these five countries.

And, to briefly get into the odd position of praising the Bush administration on climate policy, its recognition of efficiencies in getting the world’s biggest emitters around a far smaller table – and thereby launching the Major Economies Meeting – was really not a bad one. The UN process of embedding 200 countries into a highly complex stream of multifaceted negotiations is, if nothing else, a giant time suck at a moment when alacrity is of the essence. And to be blunt, it really doesn’t matter what Togo, Paraguay and Laos do when it comes to emissions. Emit to your heart’s content – go nuts. By and large, the decisions and agreement of those 17 countries are what matters – some 85% of the world’s emissions – even if the MEM itself was quite deliberately impotent. And Secretary Clinton’s itinerary went straight to the heart of both the MEM and, more importantly, APEC, a international configuration that indeed might have some teeth going forward, as trade, environment and social issues begin to bubble together around the Pacific Rim.

Leaving aside Indonesia ‘s annual half billion tons of forest clearing CO2 emissions for the moment, Japan, South Korea, China and the US represent not just massive emitters, but the foremost inventors, disseminators and consumers of technology. But beyond that, their status differs quite radically. Despite being the symbolic birthplace of the Kyoto Accord, Japan has consistently argued that its namesake agreement treats it unfairly, giving no credit for its impressive embedded efficiency (catalyzed by the 1970’s oil shocks), as well as the direct impact of its technologies around the world. In other words, Japan thinks should get some kind of credit (beyond a pat on the shoulder) for all the Prius’s and other superefficienct gizmos’s that develops and exports around the world. For South Korea, despite being the world’s 9th largest emitter and having per capita GDP roughly comparable to places like Spain, Portugul and Belgium, it has been classified under Kyoto as a developing country without emission caps. They recognize that this is certain to change and today Seoul is gripped with a mini-carbon fever, as they get ready to become a major importer of emission credits after 2012, if indeed the current architecture is continued.

But it is undoubtedly China where the State Department and others should be putting their focus. China and the US have such an integrated economic relationship that it is foolhardy to think that global emission policy derives from anything else but the power politics that characterize their “coopetition” rivalry. China and the US account for some 40% of the world’s emissions and are definitely each others largest potential markets for the GHG friendly technologies that both Beijing and Washington trumpet commitment to. China has also easily been the largest beneficiary of Kyoto’s Clean Development mechanism with some 60% plus of all forthcoming emissions reductions. Yet despite this, at the last global climate meeting in Poznan, China fired off critiques of the CDM’s woeful inefficiencies that would have made industry blush. All in all, this represents a market and policy gap that is waiting to be filled

So, Secretary Clinton, how about something like this the next time you head over for banquets in Forbidden City? We negotiate a permanent free trade agreement between China and the US for all low emission technologies. That’s all of them – wind turbines, fuel cells and solar panels, smart meters, microturbines, cellulosic ethanol and nuclear reactors and everything else that comes out of the skunk works of either Silicon Valley or Shanghai. We seek a bilateral emissions trading regime between our two countries that starts with sectoral benchmarks and caps on key output areas of China, combined with a hard aggregate cap on the US. We develop a constant stream of exchange on green technology development, finance and execution via channels such as the Energy Foundation, Tsinghua University, World Resources Institute. etc We start a serious dialogue about how to embed carbon issues into the WTO negotiations, so that countries can actually have leverage on each other for emissions underperformance, malfeasance and fraud.

And last, but not least, we agree to use our collective bully pulpit to drag the rest of the world towards a real half century policy trajectory that mirrors the aims of the IPCC and President Obama’s campaign commitments. We’ll bring in the Europeans, Canada the Australians and Japan. China can use carrots and sticks with rest of the developing world. Maybe it’s the other way around – who knows. We can split Korea, since they are still on both side of the fence. But a united front from China and the US on this key issue of our time would be difficult to object to

We can only hope that President Obama and Secretary Clinton realize as well that the world’s two largest emitters have gone without any kind of serious comprehensive emissions policy for at least a decade too long. The world is subsequently much closer to an environmental tipping point than anybody should feel comfortable with. The economic dislocation is giving us a profound and unique opportunity to hit a bit of a reset button on a whole lot of levels. The opportunities from developing a technology and trade partnership for greenhouse gases with China are extremely compelling, whereas the risks of keeping to the old modalities are unacceptable.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities.

Renewables That Even Coal-Based Utilities Can Love

by Richard T. Stuebi

Generalizations are always tricky, but it’s safe to say that many employees of many electric utilities whose generation plants are mainly coal-fired have a hard time feeling very enthusiastic about renewable energy. You can imagine the rants: renewables are tiny and negligible, renewables aren’t baseload, renewables are for wimps.

So, it’s interesting to me when coal-based utilities can find something nice to say about renewables. Last week, the Electric Power Research Institute (EPRI) — the U.S. R&D organization funded by companies in the electricity industry — announced its efforts to test the addition of solar thermal collectors to fossil-fueled powerplants, in an effort to reduce the amount of fuel that these plants need to burn for generating electricity.

The test project involves powerplants operated by Progress Energy (NYSE: PGN) and Tri-State Generation & Transmission Association, and is co-sponsored by The Southern Company (NYSE: SO) — all sizable coal-based utilities.

Of course, these utilities are motivated by practical considerations more than they are by being viewed as “green”. For them, the important green is money: the use of solar thermal can reduce per-kilowatt-hour variable costs, which can increase plant profitability in wholesale power markets. And, the use of solar thermal will reduce the per-kilowatt-hour emission rates of fossil powerplants, which will reduce compliance costs under a likely future cap-and-trade program for carbon emissions.

Not to mention, the installation of solar thermal at existing fossil powerplants may qualify for compliance with renewable portfolio standards that now exist in many states — and that may come into law nationally under the Obama Administration.

It may not be as sexy as photovoltaics or wind turbines, but the economics of solar/fossil hybrid power generation should be pretty compelling. If so, solar thermal augmentation at fossil powerplants may become very widespread, perhaps unseen and out-of-mind, but nonetheless making sizable dents in the energy industry’s emissions footprint.

Thanks to Keith Johnson of the Wall Street Journal for making me aware of this EPRI study, and for quoting me in his post to the WSJ‘s Environmental Capital blog last Friday.

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.

Climate Change Policy Thoughts, McCain, Palin, Obama, Et al

Those of you that know me know that fighting climate change is an issue near and dear to my heart – and day to day life, since I am currently involved with a start up working on helping to deliver even better transparency and environmental integrity to carbon credits.

So as a small government, energy focused, environmentally conscious, social liberal, fiscal conservative, who has worked in both oil & gas and alternative energy, I had a lot to like about the McCain-Palin ticket. And I’ve stated that and my reasons for it, and gotten ripped for it for an audience on this blog that is commendably and passionately progressive when it comes to these issues, but unfortunately doesn’t always read to the end of the blog articles or do their research before ripping me for being Republican. But one key area I struggled on was where Palin came down on climate change. Luckily for the 182 small government, energy focused, environmentally conscious, social liberal, fiscal conservatives like me left in America, John McCain’s climate change position has apparently rubbed off on her. Like her or not, this is a very good sign for progressives. It means we as a nation are joining the climate change fight no matter who wins the election fight.

To those of you who say we should have signed Kyoto, don’t forget, Obama, GW Bush, Hillary Clinton, and John McCain all agree on this one, multilateral climate change legislation has to include China and India committing to something. (Hillary actually flopped on this topic). And China and India haven’t agreed. The Senate voted something like 98 to 0 during the Clinton years saying no to Kyoto if China didn’t agree to caps.

The main difference between US politicians has been the willingness of every one on this list except Bush to work to push through some sort of cap and trade in the US – independent of a multilateral framework like Kyoto. McCain has been pretty lock step with the Democrats on this one. And then smaller differences emerge in their approach to tough the caps should be, and whether the profits from trading ought to go into the government coffers as a new (Iraq war size massive) tax, or back to industry to fund future abatements. Of those, Obama talks the toughest game, but McCain is the only one who has ever tried.

The problem with a unilateral approach to cap and trade is that it’s about like going into Iraq unilaterally – it’s a bad a idea. Carbon is a global problem, and lots of separate policies aren’t likely to solve it without significant economic collateral damage. And worse, with cap and trade or taxes, if we try to have separate markets or tax schemes, it means we likely get a different price of carbon in California than in Texas than in China, than in Europe. And if there is no way to equalize the price by trading credits in linked markets, the only route left for industry is to shift production out of the country with the highest price, or lose out to competitors from those markets with lower prices. If the markets aren’t linked (which Obama supports in small amounts and McCain in medium amounts), we will definitely see these geographical price differentials. Then industry will respond by shifting production to China and India, whether it’s overt or not, they won’t have a choice. The power of the consumer dollar will force it to some degree. And the tighter the US carbon legislation is compared to the Kyoto, the bigger incentive to shift production overseas. Hence Obama’s position on 80% auctions for very rapidly implemented, very tight caps results in a large tax windfall to the US government, and a correspondingly large effective price differential on the price of carbon from the US to Europe even, let alone the US to China which still has caps. Where as McCain-Lieberman’s slower and lighter (but still much faster and tighter than Kyoto) plan with explicit links to Kyoto markets, would result in more moderate price differentials. If the markets are linked (meaning you can buy Chinese credits to meet California demands), but the local carbon regulations are tighter, industry has less of a need to shift production ourseas, but can instead cans sometimes shift it’s carbon purchases overseas instead of labor or other materials, but instead we would still see an increased trade imbalance as dollars flow to China to pay for the carbon.

Basically, if the US cap and trade is tighter than foreign cap and trade, either manufacturing has to go off shore, or if the markets are linked and you can buy carbon offshore, then either dollars could go offshore for carbon to keep jobs and production home. That’s why the big push for multilateral climate change, carbon trading markets, and environmental regulation that moves in lockstep with our biggest trading partners.

Hey wait, does that mean that the Democratic position on climate change will actually exacerbate outsourcing to Asia and trade imbalances even MORE than the Republican position this time? ‘Fraid so. The thing I like about McCain on climate change, is that despite getting a bad rap on economics, he’s the only candidate who’s bothered to include the impact on you and I into the complex calculus of climate change legislation.

It’s a catch-22 with no real way out, and a lot of bad options. The worst option however, is doing nothing. Luckily, with Palin now toeing McCain’s line on climate change. That option may finally be off the table.

The Shiny Copper Penny Plan for Energy and Cleantech

I wrote a piece last week arguing that McCain / Palin was my energy/cleantech dream ticket, and promptly got slammed by my readers on the left (who generally think McCain’s plans for the environment /cleantech investing are nowhere near aggressive enough and that Palin is way too conservative), AND friends on the right (who think that Palin is anti-Big Oil). There were more of the former than the latter since Cleantech Blog has been more of a progressive voice than anything else. I think I have published all the comments that came through on the blog (though not the emails), even those ripping me to shreds.

But pretty much everyone agreed I was crackers for one reason or another. So of course I’ve expanded the discussion, and am opening the floor to you. I am looking for comments that reflect at least one pro AND con for each candidate as the best candidate for energy / cleantech. Comments that only offer pros on one side or the other will be sent straight to the trash can.

Here’s mine to get you started – and while you’ll see my opinion come straight through, attached are the reasons behind it:

Barack Obama – Dubbed the Shiny Copper Penny Plan

His environmental and energy issues page

His stated plan’s objectives (editor’s notes in [brackets])

“Provide short-term relief to American families facing pain at the pump [How, by raising taxes elsewhere to subsidize energy and thereby support increased demand but oppose any increase in domestic production? Our gas prices are already way lower than Europe’s. The best policy I’ve seen to reduce gas prices is corn ethanol, yes the much maligned corn ethanol, which has reduced prices at the pump $0.29 to $0.40 / gallon. That plus CAFE plus domestic drilling, and we may have a viable answer. The real short term answer to high gas prices is break the back of OPEC as a cartel, but NOBODY wants to go there.]

Help create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future. [Despite the fact that this would likely make me quite rich (I have significant interests in several companies that could milk the hell out of this), I’m not really interested in massive increases in government spending. And let’s be clear, Presidents do not create jobs, you and I do. Oh, and Barack wants to get the US government into the venture capital business in cleantech. On what planet is THAT a good idea?]

Within 10 years save more oil than we currently import from the Middle East and Venezuela combined. [We don’t import a lot of our oil from the Middle East, it’s too far away, we get a large chunk of ours from Mexico and Canada :)].

Put 1 million Plug-In Hybrid cars — cars that can get up to 150 miles per gallon — on the road by 2015, cars that we will work to make sure are built here in America. [I’m a big fan of PHEVs, but right now the technology is just not there yet, despite all my electric car friends. This is definitely a shiny copper penny. I would rather focus on CAFE, car size, and biofuels.]

Ensure 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025. [2012 is just around the corner in energy terms, virtually nothing the next President can do would really change our trajectory here. 25 x 25 is a good goal, and probably his best energy plank in my opnion, but he’s short on the details of how to actually achieve it, even at astronomical energy price increases. One main challenge is that to accomplish this, we need more clean baseload (coal, gas, nuke or hydro) to underpin it and lots and lots and lots of new transmission lines – which are 7 to 10 year projects in of themselves. And of course, it depends on what you mean by renewable, right now every state in the US defines it differently.]

Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050. [I’m very pro cap and trade, but Obama’s plan is the high cost, unilateral way to do it, resulting in the most revenues to the government. The other issue here (which McCain will also face), is that even reducing the US impact on CO2 emissions is pretty much lost in the wash if China and India et al don’t commit to some sort of reductions (And of course if we do and they don’t the net effect is to push manufacturing jobs overseas. THAT is why neither the US Senate, the Clinton administration nor the Bush Administration, Barack Obama or John McCain has supported ratifying Kyoto (Hillary used to, then flipped once she figured it out))]”

The Pro

  • Clearly the most aggressively stated energy and environmental plan – if you like all green with costs taking a back seat, Obama is the way to go. But it’s very hard to conceive of cheap energy and aggressive switchs to alternatives.
  • Supports most aggressive climate change proposals out there – would definitely put us in the lead in solving the climate change problem – if you believe that us solving our part of the problem internally is more important than the world working to solve it together.
  • Supports long term not short term incentives for alternatives in general (as does McCain)
  • Would likely spend mega bucks on new energy techology spending and subsidies – great for me personally, bad for you and the country in the near term, possibly good for the country in the long term.

The Con

  • Very limited resume of actually authoring any legislation on energy or the environment
  • No experience in domestic energy policy
  • Anti- drilling (or was until he realized that like two-thirds of Americans support it)
  • Supports climate change plan that would represent a wealth transfer from the central US to the coasts and result in a several hundred billion dollar per year new tax on energy (that’s on the order of the Iraq war size)
  • Picked a VP with no real energy experience
  • Seems to have little respect for the cost of his energy plan to you and I – read Jimmy Carter all over again?

John McCain – Steady Wins the Race

John McCain’s energy page. His stated plan’s objectives (editor’s notes in [brackets])

  • “Expanding Domestic Oil And Natural Gas Exploration And Production – John McCain Will Commit Our Country To Expanding Domestic Oil Exploration. John McCain Believes In Promoting And Expanding The Use Of Our Domestic Supplies Of Natural Gas. [You may not like it, but most Americans do, and underpinning domestic supplies should be a part of every energy policy discussion. Tax the output at the pump if you want, but this country was built on cheap domestic energy, never forget that.]
  • Taking Action Now To Break Our Dependency On Foreign Oil By Reforming Our Transportation Sector – The Nation Cannot Reduce Its Dependency On Oil Unless We Change How We Power Our Transportation Sector. John McCain’s Clean Car Challenge. John McCain Will Propose A $300 Million Prize To Improve Battery Technology For Full Commercial Development Of Plug-In Hybrid And Fully Electric Automobiles. John McCain Supports Flex-Fuel Vehicles (FFVs) And Believes They Should Play A Greater Role In Our Transportation Sector. John McCain Believes Alcohol-Based Fuels Hold Great Promise As Both An Alternative To Gasoline And As A Means of Expanding Consumers’ Choices.Today, Isolationist Tariffs And Wasteful Special Interest Subsidies Are Not Moving Us Toward An Energy Solution. John McCain Will Effectively Enforce Existing CAFE Standards. [I hate prizes. The government shouldn’t be in the l0ttery business, but battery technology IS the ultimate force multiplier in energy and transport. Flex fuel, should be a basic requirement. See above on ethanol’s impact on prices already. CAFE standards, here is our near term transport lynchpin, I’d like to see McCain stronger on this.]
  • Investing In Clean, Alternative Sources Of Energy – John McCain Believes That The U.S. Must Become A Leader In A New International Green Economy. John McCain Will Commit $2 Billion Annually To Advancing Clean Coal Technologies. John McCain Will Put His Administration On Track To Construct 45 New Nuclear Power Plants By 2030 With The Ultimate Goal Of Eventually Constructing 100 New Plants. John McCain Will Establish A Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D. John McCain Will Encourage The Market For Alternative, Low Carbon Fuels Such As Wind, Hydro And Solar Power. [Long term R&D tax credit, finally! This is part of a policy that has helped Australia punch outside it’s weight in technology for years. Nukes + clean coal, we may not like it, but it HAS to be done to baseload all those new renewables. Obama will figure this out, eventually.]
  • Protecting Our Environment And Addressing Climate Change: A Sound Energy Strategy Must Include A Solid Environmental Foundation – John McCain Proposes A Cap-And-Trade System That Would Set Limits On Greenhouse Gas Emissions While Encouraging The Development Of Low-Cost Compliance Options. Greenhouse Gas Emission Targets And Timetables: 2012: Return Emissions To 2005 Levels (18 Percent Above 1990 Levels)2020: Return Emissions To 1990 Levels (15 Percent Below 2005 Levels) 2030: 22 Percent Below 1990 Levels (34 Percent Below 2005 Levels) 2050: 60 Percent Below 1990 Levels (66 Percent Below 2005 Levels). The Cap-And-Trade System Would Allow For The Gradual Reduction Of Emissions. [See below, the most practical multi-lateral plan yet devised in the US]
  • Promoting Energy Efficiency John McCain Will Make Greening The Federal Government A Priority Of His Administration. John McCain Will Move The United States Toward Electricity Grid And Metering Improvements To Save Energy. [Investing in the smart grid and smart metering, now there’s an interstate highway style policy I can support. Smart grid is THE key to underpinning a generational shift in our power use or EV fleets. It’s our electric power sine qua non – without which there is nothing]”

The Pro

  • His energy plan is balanced, focuses on the force multiplier’s like R&D tax credits, batteries, and smart grid, and cleaning up cheap domestic resources like gas, coal, nuke, and ethanol, not the shiny copper pennies like a US Venture Capital Fund, PHEVs, and cool sounding names like 25×25.
  • Only candidate to actually author a climate change bill. It gets dinged for not being aggressive enough, but it is MORE aggressive than Kyoto, and probably the most reasonably practical one that’s come through Congress.
  • Picked a VP with lots of domestic energy experience (The state of Alaska is basically an oil company) who while pro drilling is not pro Big Oil.


  • Legislative record on environmental protection issues is generally considered spotty. I’d like to see more balance here.
  • Hasn’t pushed CAFE like I’d like.
  • I’d like to see explicit support for a 10 year PTC (Obama supports a 5 year one)
  • Depending on your position, pro nuclear (which is a very climate change friendly answer, by the way), but often viewed as anti environmental.

So sorry folks, I think McCain’s energy and environmental plan is as spot on as any presidential candidate in a long time. Yes his record on the environment is “spotty”, but energy and environment always involve tradeoffs with economic and technological reality, and I think any balanced plan will look spotty to some.

My rationale for McCain getting the crown on energy and cleantech, because it’s real and focuses on the long term force multipliers that will keep us competitive, clean and safe in the most economic manner, not Obama’s shiny copper penny plan.

In full disclosure for those of you who don’t know me, of my two largest clients, one is an oil company, and the other is an all renewable power company. I have been helping them develop their solar and low carbon strategies and businesses. I have founded cleantech startups myself in superconductors and carbon, and stand to see more financial benefit from Obama’s plan than McCain’s. But that doesn’t make it right.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of

Green Jobs or Industrial Calamity? Dueling Economic Models in Carbon Politics

by Richard T. Stuebi

In early June, the U.S. Senate considered the Lieberman-Warner Climate Security Act (S. 2191), which proposed the establishment of a cap-and-trade system for CO2 emissions, analogous to the cap-and-trade program in place in the U.S. for acid rain pollutants since the mid-1990’s.

Predictably, the bill was defeated, before even going to a formal vote. In a press release, Senator Lieberman bravely painted the defeat with a positive spin: “We have convinced a majority of the Senate to support mandatory, comprehensive, market-based legislation to curb global warming and enhance U.S. energy security.” No-one expected the bill to make it out alive from the Senate, and even if it somehow had, the House would never have passed a similar bill, and surely President Bush would never have signed any such bill into law.

As might be expected, the Senate debate on the Lieberman-Warner bill largely came down to economic considerations. Those who favored the bill foretold of the massive “green economy” that would be spurred by its passage: the creation of wealth and jobs that would occur by pursuing technology innovations and growing businesses in renewable energy and energy efficiency necessary to combat climate change. On the flip side, those who voted against the bill saw the threat – increases in energy prices, loss of industrial competitiveness, declining economic activity – much more acutely than the opportunity.

In my view, both sides of this debate are guilty of hyberbole and exaggeration. Let’s take each in turn.

Regarding the green economy, perhaps no phrase is more in vogue these days than “green-collar jobs” — a concept most compellingly articulated by Van Jones, the Founder and President of Green For All. A dynamic speaker, Mr. Jones was among the first to recognize that the adoption of green energy (renewables and energy efficiency) leads to local economic activity consisting of jobs that look very much like what used to be called “blue-collar” jobs – which offers the opportunity to rescue a segment of the U.S. population that has been increasingly disenfranchised in the past few decades.

I think this line of argument is conceptually solid. Certainly, energy efficiency retrofits and solar panel installations cannot be sent offshore: they must be done locally. And, in many instances, the best opportunities are available in downtrodden urban areas that badly need building rehabilitation, economic revitalization and new job possibilities.

My primary beef with the green economy crowd is not with Van Jones, but to his often overly-ardent disciples that assign way too much credibility to estimates – in my view, guesses – of how many green jobs exist or will be created. Every politician and reporter wants to know the number of new jobs that will result from a move to an advanced energy economy. My pat answer to that question is “It’s likely to be a very big number, but no-one can possibly quantify it with any degree of rigor.” Yet, these “job studies” invariably produce numbers that are told and retold until they become accepted as fact — when actually, they are pretty darn dubious.

This is most pointedly illustrated by the 2007 study commissioned by the American Solar Energy Society, developed by Roger Bezdek of Management Information Services, which claims a current “direct” green energy job count in the U.S. of 3.7 million. The incredulity of the study’s results becomes clear when reviewing a case study for the state of Ohio, in which about 500,000 jobs are credited to 2006 energy efficiency activities in Ohio. Note that Ohio’s current employment level is about 5.3-5.4 million. Does anyone who knows anything about Ohio really think that nearly 10% of today’s Ohio workforce is employed in energy efficiency products and services? I sure don’t.

The other side of the climate change policy debates, those clinging to the status quo and skeptical of the advanced energy economy, is also guilty of overstatement to defend their position.

Earlier this year, the American Council on Capital Formation (ACCF) and the National Association of Manufacturers (NAM) commissioned a study by Science Applications International Corporation (SAIC) of the economic implications of Lieberman-Warner. The ACCF/NAM/SAIC study projected strong adverse impacts on manufacturing and industry, especially for many key states.

However, as well summarized in reports by both the Electric Power Research Institute (EPRI) and the Congressional Research Service (CRS), the ACCF/NAM/SAIC study is just one of several studies on this issue, with results that are far more economically scary than others performed by unbiased organizations such as U.S. EPA, U.S. DOE’s Energy Information Agency, and MIT. The ACCF/NAM/SAIC results are outliers – yet, they are used again and again by those interests who wanted to see Lieberman-Warner killed.

In short, both sides of the carbon debate – green jobs vs. economic destruction – use economic models inappropriately to justify their stances. This tendency reflects badly on both sides. But, of course, it is the side with the deeper pockets – the established industrial sector – that wins. And, good policy loses.

As an economist, I wish that people would use economic models for insights, not numbers – a point very well summarized in an excellent white paper by Janet Peace and John Weyant issued by the Pew Center. If political leaders were to strip away the overly bold rhetoric and review the facts and analyses with the proper context and perspective, I think we would make a necessary first large stride towards forging an agreement on good carbon policy. In the meantime, the world is hostage to dueling models wielded by careless advocates making overly bold statements.

Because insight is desperately needed to cut through the fog of biased chatter, to provide some closing perspective on the tradeoffs between the costs and benefits of climate change policy, I’ll leave the last word to remarks made last year by an eminent economist, the former Chairman of the U.S. Federal Reserve, Paul Volcker, who gives a succinct personal view on the thorny economic questions associated with climate change:

“First of all, I don’t think [taking action on climate change] is going to have that much of an impact on the economy overall. Second of all, if you don’t do it, you can be sure that the economy will go down the drain in the next 30 years. What may happen to the dollar, and what may happen to growth in China or whatever, pale into insignificance compared with the question of what happens to this planet over the next 30 or 40 years if no action is taken.”

What more need be said?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also Founder and President of NextWave Energy, Inc.

Cap-and-Trade Gold in the Golden State

By John Addison (7/2/08). Obama and McCain have both stated that climate change requires decisive action. Both support cap-and-trade, putting a limit (cap) on greenhouse gases and enabling the market to work by allowing the trading of permits.

How would this work in the United States? We will all learn from California’s progress with its enacted law – AB32 Climate Solutions Act. The implementation is detailed in the 93-page Climate Change Draft Scoping Plan.

By requiring in law a reduction in greenhouse gas emissions to 1990 levels by 2020, California has set the stage for its transition to a clean energy future.

Since the law was enacted in 2006, the lead implementing agency, the California Air Resources Board (ARB), has been getting an earful from everyone from concerned citizens to industry lobbyists. It moves forward publishing data from the California Climate Action Registry, facilitating 12 major action teams, conducting public workgroups, and drafting plans which get more feedback in public meetings. The ARB Board will next meet to review the proposed Scoping Plan on Novembers 20 and 21.

Climate change is already impacting everything in California from draughts that cause agricultural loses to water shortages that impact industry. But instead of seeing the glass as half empty, the California Plan states, “This challenge also presents a magnificent opportunity to transform California’s economy into one that runs on clean and sustainable technologies, so that all Californians are able to enjoy their rights to clean air, clean water, and a healthy and safe environment.” Cleantech will be a major winner.

The plan is ambitious because California’s population in 2020 is forecasted to be double the 1990 level. The Climate Solutions Act will require that per capita CO2e emissions be reduced from today’s 14 tons per year to 10 tons per day by 2020. The total state cap for 2020 is 427 MMTCO2e. Keys to success will include:

  • Green buildings with improved construction, insullation, energy efficient lighting, HVAC, equipment, and appliances.
  • Electric utilities that use at least 33 percent renewable energy.
  • Development of a California cap-and-trade program that links with other western states and Canadians provinces to create a regional market system.
  • Implementation of existing State laws and policies, including California’s clean vehicle standards, goods movement measures, and the Low Carbon Fuel Standard.

The Plan shows that California has learned from the Kyoto implementation. California’s scope is much broader, covering 85 percent of the State’s greenhouse gas emissions from six greenhouse gases: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs). AB32 calls for incremental improvements all the way to 2050.

The transportation sector – largely the cars and trucks – is the largest contributor with 38 percent of the state’s total greenhouse gas emissions. Electricity generation is 23 percent. Industry 20 percent. Commercial and residential buildings are 9 percent.

Look for economic growth in a number of areas. New buildings will increasingly be LEED certified, often at the Silver level. Building efficiency retrofits will be an active area employing contracts large and small.

Distributed power generation will grow. Combined heat and power will be actively deployed. Process efficiency will continue.

Renewable energy will experience strong growth including wind, solar, geothermal, and bioenergy. Ocean power pilot projects will continue. Controversial new power from nuclear and petroleum coke gasification with CSS will be considered. In-state coal power generation is history in California. Using out-of-state coal power will continue to decline as GHG emissions are priced into the equation.

Wind continues to grow in California and the nation. A fascinating read is the Department of Energy (DOE) report, entitled 20 Percent Wind Energy by 2030, which identifies the real feasibility of the United States reaching meeting 20 percent of its energy requirements from wind by 2030. A path to over 300 GW of wind power by 2030 is detailed.

California and much of the nation is blessed with an abundance of sunlight. The Utility Solar Assessment (USA) Study, produced by Clean Edge and Co-op America, provides a comprehensive roadmap for utilities, solar companies, and regulators to reach 10% solar in the U.S. by 2025 with both PV and CSP.

C02 costs are not likely to significantly increase the cost of fuel, but rocketing oil costs have changed the game. Use of corporate flexible work programs, commuting, and use of public transportation are now at record levels in the state and will grow in popularity.

California High-Speed Rail (HSR) is likely to be on the California ballot this November, with a price tag that will be a fraction of the cost of expanding highways and adding an airport. HSR would link major transit systems throughout the state, and save billions in fuel costs and emissions.

AB32 is also likely to reach its goals because cars will increasingly outsell SUVs and trucks in California. By 2020, electric cars and plug-in hybrids may experience and explosion of popularity. New low-carbon fuels are likely to be widely used.

California is working closely with six other states and three Canadian provinces in the Western Climate Initiative (WCI) to design a regional greenhouse gas emission reduction program that includes a cap-and-trade approach. ARB will develop a cap-and-trade program for California that will link with the programs in the other partner states and provinces to create this western regional market. California’s participation in WCI creates an opportunity to provide substantially greater reductions in greenhouse gas emissions from throughout the region than could be achieved by California alone. AB32 may give the United States a head-start in its own cap-and-trade program.

John Addison publishes the Clean Fleet Report.

Super Tuesday was Super for US Carbon Cap and Trade

One things for sure, post Super Tuesday with Governor Mike Huckabee far behind, Mitt Romney out, and McCain the all but crowned Republican nominee, the US is getting a cap and trade system for carbon. The question is which one. I thought I’d track a little of the candidates’ various positions.

The major differences that are left between the parties are on how to do it. In general the Republicans favor US based systems, the Democrats favor a Kyoto based approach, sort of. The Democrats favor 100% allowance, the Republicans favor a slower adjustment scheme (The Kyoto mechanisms today are actually closer the Republican stance).

Don’t forget, the real reason the US has not ratified Kyoto is less about whether to use the market based mechanisms (we were the ones who actually advocated putting carbon trading in), and more about the fact that under Kyoto, our major economic competitors in China and India have no commitments to reduce greenhouse gases, and under Kyoto effectively receive foreign aid from developed nations to build out their powerplants and infrastructure. And this concern has gotten worse, as China has now passed the US as the largest emitter of greenhouse gases, but has consistently refused to consider its own emissions reductions. So in reality, even if the Democrats win, we may still get a US focused cap and trade system if that is all that can get through the Senate.

But while any candidate election would likely make a US cap and trade a foregone conclusion, unlike McCain who has actually put forward US cap and trade legislation with a Kyoto “linkage”, Hillary and Barack both talk a new treaty and about a G-8 plus major emitters “extra Kyoto” approach that includes China. This sound surprisingly like the approach George W Bush took at the G-8 summit proposing to work within a group of the 15 largest emitters. Not surprisingly, it failed when the Bush Administration refused to sign up to commitments without China and India on the hook, and China still is not interested in signing commitments. Unlike McCain, I’m not sure Barack Obama and Hillary have figured out the details here. But we shall see.

First, the last naysayer.

Mitt Romney

In 2004 Mitt Romney told the Boston Globe he was not sure global warming is happening.

In 2007 on the global warming issue he continued to be anti Kyoto, at least. “As governor, I found that thoughtful environmentalism need not be anti-growth and anti-jobs. But Kyoto-style sweeping mandates, imposed unilaterally in the United States, would kill jobs, depress growth and shift manufacturing to the dirtiest developing nations.” Source

And the Republicans.

Mike Huckabee

Bottom line, likely no Kyoto and but maybe a cap and trade.

Huckabee has come out in support of “economy-wide” cap and trade, in a Bloomberg article on Huckabee’s support for the McCain sponsored bill.

Huckabee adopted the National Governors Association policy:

“not sign or ratify any agreement that mandates new commitments to limit or reduce greenhouse gas emissions for the US, unless such an agreement mandates new specific scheduled commitments to limit or reduce greenhouse gas emissions for developing countries within the same compliance period;”

Kyoto was a mistake, but “Earth in the Balance” is not. You do not have to hug a tree to appreciate one. It would have been a mistake to sign the Kyoto Treaty since it would have given foreign nations the power to impose standards on us. But Al Gore was not entirely wrong when he spoke of earth “in the balance.” Balance is exactly what we need more of in this discussion. All of us need to have a healthy respect for our resources, a responsible level of use of those resources, and a comprehensive plan for either preserving or renewing those resources. Source: From Hope to Higher Ground, by Mike Huckabee, p. 70 Jan 4, 2007 Source

John McCain

A keen proponent of market based environmental solutions, and anti tax to boot. He is heavily in favor of cap and trade, and as coathor of the McCain-Lieberman Senate bill backing a US cap and trade is the only candidate who has actually been doing anything about it. But he has not necessarily supported ratifying Kyoto without Chinese participation like Hillary Clinton (her husband was the one who signed it originally) used to advocate.

Among other things McCain-Lieberman calls for cap and trade, with the amount of allowances to be determined in the future, up to 15% of allowances permitted from other systems (like Kyoto’s CDM mechanism), and an enforcement penalty of 300% of the per ton market price for companies over their cap. A good summary has been done by the Pew Center, as well as a comparison with other climate change legislation.

In 2003 he did a good LA Times Op Ed piece defending cap and trade as a solution to global warming.

In a further interview he reaffirmed his belief that market based environmental solutions will work.

“Is your party where it needs to be on global warming yet?

Sen. McCain: It varies in my party, so I can’t say “my party.” But where I think our party needs to be is to be more involved in market-based economically beneficial green technologies which will then reduce greenhouse-gas emissions.In other words, Lieberman’s and my cap-and-trade proposal is market based. General Electric, the world’s largest corporation believes they’re going to make profits off of green technologies. I was just out at the port of Los Angeles with Schwarzenegger and BP is going to sequester carbon and take some offshoot materials and convert them into some kind of fuel, as I understand it. That’s going to be beneficial to BP to do that; in other words, it’s economically profitable to do these things.

Ponnuru: One of the stumbling blocks people sometimes have is that they look at these proposals to deal with the problem and they seem, not the ones you’re talking about but some of these other ones, incredibly draconian, like Kyoto, and then you look at the pay-off and it’ll solve 0.7 percent of the problem. Is the problem so enormous that these kinds of measures can’t really get you very far?

Sen. McCain: [They can] if they’re market-based. If business and industry sees a way to make money and get returns to their stock holders, then they’re going to move in that direction. And I really believe that again, this cap and trading thing, which is still being sorted out a bit in Europe, is a good market-based approach to it. And again, carbon sequestration is fine, all of these things are fine, but if you want an immediate impact on reduction of greenhouse gases then start building nuclear power plants. And I’m not saying that’s the only answer but I think it’s a significant part of the answer.”

McCain has adopted the Republican Main Street Partnership issue stance:

“The Republican Main Street Partnership supports the goal of immediate, near-term reductions in greenhouse gases, and would move toward this goal by providing strong incentives that have minimal adverse impact on the economy, and to continue to apply our best scientific minds to developing a better understanding of the long-term nature of climate change and the means to cope with it.

Two objectives should be accomplished:

create an “early action crediting system” to provide assurances to companies that actions taken now to reduce emissions of greenhouse gases will be recognized and credited in the eventual system of emissions reductions standards that will be developed; and

commit the necessary resources to national and international scientific efforts to better understand the cause and effect of global climate change.

With regard to global warming, the Republican Main Street Partnership recognizes that a longer debate over the proper U.S. role in implementing the Kyoto Protocol should and will occur. In so doing, we hope to bolster our scientific understanding of the problem and perhaps, in turn, provide immediate incentives for communities and corporations to act in their own and the nation’s best interests in reducing emissions. We are strongly committed to acting on the emerging consensus for progress and constructive change, and maintaining America’s ability to lead the world in the critical area of environmental protection. Source: Republican Main Street Partnership Issue Paper: Environment 98-RMSP2 on Sep 9, 1998″

Ron Paul

A strong environmentalist and free market libertarian, who opposes the Iraq war, Kyoto, and energy company subsidies for all the same reasons, for one, the constitution does not permit it, two, it is the job of the private sector, not government. Despite being the only non cap and trade Republican left in the mix, I always find it hard to disagree with Ron Paul. He and I are kindred spirits when it comes to small government.

Ron Paul on the environment:

“The federal government has proven itself untrustworthy with environmental policy by facilitating polluters, subsidizing logging in the National Forests, and instituting one-size-fits-all approaches that too often discriminate against those they are intended to help.

The key to sound environmental policy is respect for private property rights. The strict enforcement of property rights corrects environmental wrongs while increasing the cost of polluting.

In a free market, no one is allowed to pollute his neighbor’s land, air, or water. If your property is being damaged, you have every right to sue the polluter, and government should protect that right. After paying damages, the polluter’s production and sale costs rise, making it unprofitable to continue doing business the same way. Currently, preemptive regulations and pay-to-pollute schemes favor those wealthy enough to perform the regulatory tap dance, while those who own the polluted land rarely receive a quick or just resolution to their problems.

In Congress, I have followed a constitutional approach to environmental action:

  • I consistently vote against using tax dollars to subsidize logging in National Forests.
  • I am a co-sponsor of legislation designed to encourage the development of alternative and sustainable energy. H.R. 550 extends the investment tax credit to solar energy property and qualified fuel cell property, and H.R. 1772 provides tax credits for the installation of wind energy property.
  • Taxpayers for Common Sense named me a “Treasury Guardian” for my work against environmentally-harmful government spending and corporate welfare.
  • I am a member of the Congressional Green Scissors Coalition, a bipartisan caucus devoted to ending taxpayer subsidies of projects that harm the environment for the benefit of special interests.

Individuals, businesses, localities, and states must be free to negotiate environmental standards. Those who depend on the land for their health and livelihood have the greatest incentive to be responsible stewards.”

From an interview with Grist:

“What, if anything, do you think the government should do about global warming?
They should enforce the principles of private property so that we don’t emit poisons and contribute to it. And, if other countries are doing it, we should do our best to try to talk them out of doing what might be harmful. We can’t use our army to go to China and dictate to China about the pollution that they may be contributing. You can only use persuasion.

You have voiced strong opposition to the Kyoto Protocol. Can you see supporting a different kind of international treaty to address global warming?

It would all depend. I think negotiation and talk and persuasion are worthwhile, but treaties that have law enforcement agencies that force certain countries to do things, I don’t think that would work.

You believe that ultimately private interests will solve global warming?
I think they’re more capable of it than politicians.

What’s your position on a carbon tax?
I don’t like that. That’s sort of legalizing pollution. If it’s wrong, you can buy these permits, so to speak. It’s wrong to do it, it shouldn’t be allowed.”

Then the Democrats.

Hillary Clinton

Hillary Clinton has previously stated she would ratify Kyoto (though has discussed “fixing” it first), and has come out in favor of aggressive cap and trade systems. It is a little hard to understand how she will reconcile her stated desire for environmental protection as a key part of trade policy, and a Kyoto protocol that places no emissions reduction commitments on major US trading partners like China and India. The short answer may be she has backed off Kyoto, focused on cap and trade and a new treaty for Kyoto.

The Hillary Clinton global warming agenda from her website:

“Hillary’s plan to promote energy independence, address global warming, and transform our economy includes:

A new cap-and-trade program that auctions 100 percent of permits alongside investments to move us on the path towards energy independence;

A requirement that all publicly traded companies report financial risks due to climate change in annual reports filed with the Securities and Exchange Commission”

Her previous statements were very strongly pro Kyoto. “As Senator, I will work for New York to get its fair share of federal mass transit funds and to increase the amount of money that goes to transit funds. And, I will vote to ratify the Kyoto Protocol to bring all nations together to address global warming and build a better future for us all. Source:, “Environment” Sep 9, 2000″

But recently she has started hedging a bit, talking about the flaws of Kyoto. “I will start by reigniting our international involvement. We cannot sit here, in the United Sates and expect to deal with global warming if we do not cooperate with other countries. Getting back into process, you know when President Bush took us out of Kyoto, I regretted that but he had an opportunity to start his own process, he didn’t want to do Kyoto, do something else. Reach out to India and China they have to be part of this. One of the flaws of the Kyoto process was I don’t think people anticipated, even in the early 90s how quickly China and India would grow. China is now growing at 12 percent a year. They are the second highest user of energy but they are now the highest emitter of green house gases in the world. India is not far behind. We have got to get a new international process.” “Energy and Environment: Speech on the Green Building Fund,” Hillary Clinton’s official candidate website, July 24, 2007

And further here.

“The President’s failed unilateral energy policy is a part of our failed unilateral foreign policy. It’s deprived us of the credibility and the leverage we need to solve the climate crisis. I’ll change that by leading the process to develop a new treaty to replace the Kyoto Protocol, which is set to expire in 2012. One of the worst messages the President sent was when he took office and rejected completely Kyoto. He could have said we don’t like Kyoto but we’re immediately starting a new process. But that didn’t happen. Well, come January 2009, I’m sending a different message. I want to act quickly to help develop a new treaty. I will engage in high level meetings with leaders around the world every three months, if that’s what it takes to hammer out a new agreement. My goal will be to secure a deal by 2010. We can’t wait for two more years. I will establish an E8 that’s modeled on the G8 which is where the big industrial economies come together. We need the world’s major carbon-emitting nations to come together to tackle these challenges.”

Barack Obama

As aggressive a global warming activist as you will find in the election, he is actually more Republican on his global warming position that he looks. He like Hillary, favors cap and trade, technology investment, and a 100 percent auction for allowances. But with his extra-Kyoto Global Energy Forum and a noncommital “re-engage” Kyoto strategy, like Hillary he does not appear to have worked out the details.

The Obama statements:

“Restore U.S. Leadership on Climate Change

Create New Forum of Largest Greenhouse Gas Emitters: Obama will create a Global Energy Forum — that includes all G-8 members plus Brazil, China, India, Mexico and South Africa –the largest energy consuming nations from both the developed and developing world. The forum would focus exclusively on global energy and environmental issues.

Re-Engage with the U.N. Framework Convention on Climate Change: The UNFCCC process is the main international forum dedicated to addressing the climate problem and an Obama administration will work constructively within it. “

“Reduce carbon emissions by 80% by 2050

Cap and Trade: Obama supports implementation of a market-based cap-and-trade system to reduce carbon emissions by the amount scientists say is necessary: 80% below 1990 levels by 2050. Obama’s cap-and-trade system will require all pollution credits to be auctioned. A 100% auction ensures that all polluters pay for every ton of emissions they release, rather than giving these emission rights away to coal and oil companies. Some of the revenue generated by auctioning allowances will be used to support the development of clean energy, to invest in energy efficiency improvements, and to address transition costs, including helping American workers affected by this economic transition.

Confront Deforestation and Promote Carbon Sequestration: Obama will develop domestic incentives that reward forest owners, farmers, and ranchers when they plant trees, restore grasslands, or undertake farming practices that capture carbon dioxide from the atmosphere.
Source: Campaign booklet, “Blueprint for Change”, p. 24-27 Feb 2, 2008″ Source

“Q: What do you think the toughest choice you have left to make is? What haven’t you made up your mind on yet? And why haven’t you?
A: The issue of climate change. I’ve put forward one of the most aggressive proposals out there, but the science seems to be coming in indicating it’s accelerating even more quickly with every passing day. And by the time I take office, I think we’re going to have to have a serious conversation about how drastic steps we need to take to address it.
Source: 2007 Democratic radio debate on NPR Dec 4, 2007″ Source

“As president, I will place a cap on carbon emissions and require companies who can’t meet the cap to buy credits from those who can, which will generate billions of dollars to invest in renewable sources of energy and create new jobs and even a new industry in the process. I’ll put in place a low carbon fuel standard that will take 50 million cars worth of pollution off the road. I’ll raise the fuel efficiency standards for our cars and trucks because we know we have the technology to do it and it’s the time to do it.”
Source: Take Back America 2007 Conference Jun 19, 2007

“I proposed a cap-and-trade system, because you can be very specific in terms of how to reduce the greenhouse gases by a particular level. What you have to do is you have to combine it with a 100% auction. Every little bit of pollution sent up into the atmosphere, that polluter is getting charged for it. Not only does that ensure that they don’t game the system, but you’re also generating billions of dollars that can be invested in solar & wind & biodiesel. On a carbon tax, the cost will be passed on to consumers. Under a cap-and-trade, plants are going to have to retrofit their equipment. That’s going to cost money, and they will pass it onto consumers. We have an obligation to use some of the money that we generate to shield low-income and fixed-income individuals from higher electricity prices. We’re also going to have to ask the American people to change how they use energy. Everybody is going to have to change their light bulbs and insulate their homes. It’s a sacrifice that we can meet.”
Source: 2008 Facebook/WMUR-NH Democratic primary debate Jan 6, 2006

So here comes the cap and trade. But the how is still up in the air. In the interests of full disclosure, this is an area I fully believe in, and I am not only involved with at least one business that would likely benefit from a US cap and trade, though also a few businesses that would likely suffer from a cap and trade.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, and a blogger for CNET’s Cleantech blog.

Climate Legislation: Who Gains? Who Loses?

Most Americans now agree that something needs to be done to reduce our greenhouse gas emissions. Hopefully most Americans now appreciate that this is not a small, but even more so, not a simple problem. I am a big believer that the playing field for our low carbon future should start level, and the market should be structured to allow our major power and energy companies a chance to lead the way, instead of simply dishing out punishment for our combined historical choices. Carrots and sticks work well together, but sticks alone are not going to solve our global carbon problem. I think it is also important to ensure that our carbon legislation does not result in a higher cost to consumers in middle America, just because the MidWest happens to have been historically coal fired, than the cost to those of us living on the coasts. Jim Rogers of Duke Energy puts this much more eloquently than I do.

Duke Energy (NYSE:DUK), one of the largest power companies in the US, has been a long supporter of energy efficiency, and known for being forward looking when it comes to a low carbon future, smart metering, and advanced energy technologies, despite having a generation fleet that is 70% coal fired. Cleantech Blog is delighted to welcome Jim Rogers, CEO of Duke Energy, to give us his thoughts on the devil in the details from their perspective. It is heartening to see a major power company take on the carbon issue full force, and like Duke has done, push energy efficiency in a big way.

– Neal Dikeman,

By Jim Rogers
Chairman, President and CEO of Duke Energy

As we debate our differences on how to address the challenge of global climate change, surely we can agree on the end-goal – a secure, sustainable and affordable supply of energy now, and for future generations.

Most Americans also agree that we must act now – and begin building a bridge to an energy-efficient, low-carbon economy.

As the third-largest coal consumer in the United States, and one of the largest greenhouse-gas emitters, Duke Energy has a responsibility to be part of the solution. That means looking at not only how climate change affects our business today, but also the implications for the future.

We support federal legislation to address global climate change by putting a cap-and-trade system in place. The U.S. Senate is in the process of vetting a cap-and-trade bill introduced by Senators Lieberman and Warner in October. This bill is well-intended, contains some good points and appears to have bipartisan support.

But on closer examination, questions arise. Who really stands to gain, and who stands to lose? What are the real costs to average Americans?

You would expect the bridge to a low-carbon economy to have a cost, just as you might pay a toll to cross any bridge. But should some of us have to pay twice? With the Lieberman/Warner approach, that’s exactly what would happen.

Lieberman/Warner proposes to auction a large number of emissions allowances to the highest bidder. In effect, an auction becomes a carbon tax, levied on consumers in the 25 states that depend on coal for electric power – primarily the Midwest, the Great Plains and the Southeast.

Electric power customers in those regions would have to pay for the auctioned allowances up front, and then pay again later to upgrade power plants, or build new ones, as carbon-control technologies become available.

A better approach is to allocate allowances at no cost to generators who emit greenhouse gases – and reduce the number of allowances over time, while new carbon-control technologies are being developed and put in place.

Some say that an auction is the only way to take action to reduce emissions, but history tells us otherwise. Allowances were not auctioned under the 1990 Clean Air Act Amendments; nearly 97 percent of them were allocated at no cost. Since then, new technologies to reduce sulfur dioxide and nitrogen oxide emissions have been developed and implemented. Those environmental controls have reduced emissions by more than 40 percent since 1990, and they continue to decrease, without dramatic rate hikes. In fact, the nation’s average electric rates have declined.

In contrast, some estimates put the Lieberman/Warner bill’s cost to the average family at more than $1,000 per year, while emissions traders would stand to profit greatly from a volatile market for carbon allowances. According to Bloomberg, the Lieberman/Warner bill would create a potential $300 billion annual carbon-trading market by 2020.

So the question comes down to this – are we interested in protecting consumers or enriching emissions traders?

Customers who live in the Midwest, the Great Plains and the Southeast did not choose to get a large portion of their electricity from coal – it was a matter of economics, geography and geology. They should not be punished for decisions made decades ago, in good faith, using the best and lowest-cost technology of the time, with regulatory approval – and long before anyone knew about the impact of carbon emissions on climate change.

And before we dismiss coal as a viable energy source for the future, consider this: The U.S. is sitting on more than 250 years of coal reserves, more than any other nation in the world. This rich natural resource has untapped potential for ensuring our country’s energy security. The challenge is primarily technological – to find smarter and cleaner ways to use it, such as carbon capture and storage. Until those technologies are available, we must continue to use our existing coal resources and protect the interests of consumers who rely on coal.

The goal for carbon legislation should not be to punish utilities for building coal plants to keep the lights on in the past. It should be to create the incentives to put new clean technologies in place for the future – not just clean coal, but also nuclear and renewable energy, natural gas and the “fifth fuel” – energy efficiency.

Under the Lieberman/Warner approach, electric power customers in half of our states will carry a disproportionate share of the burden. We need to pass climate legislation that is fair to all consumers and protects the economic interests of all states and regions. Our climate is at stake, and so is our economy. By allocating most allowances, following the precedent set by the successful Clean Air Act, we believe both can be protected.

Jim Rogers is the CEO of Duke Energy, writing as a guest columnist on Cleantech Blog.

Carbon Taxes…Sorry, I Meant, "Fees"

by Richard T. Stuebi

For a long time, I have been assuming that U.S. regulations to reduce carbon emissions, when they come, will be in the form of a cap-and-trade program, similar to what is in place in the U.S. for limiting sulfur dioxide emissions.

Even though a cap-and-trade system for carbon emissions is probably workable, it is still (in my opinion) a less direct mechanism for reducing carbon emisisons than the more obvious: a carbon tax, priced on a $/ton emitted basis.

Carbon taxes have not found much favor because…well, they’re a tax, and no politician wants to implement a tax, as it’s deadly to one’s career ambitions. (Remember “Read my lips”?) More substantively, some have argued that a carbon tax would be harder to administer, though I would think that a cap-and-trade system would be much more cumbersome (all those allowances to track!).

For certain, a tax is a better structure dealing with emissions from all sources, large and small, whereas a cap-and-trade system is only manageable for large point source emitters — such as utility powerplants. Not surprisingly, therefore, oil and auto interests generally favor cap-and-trade as the carbon mitigation approach of choice. Perhaps somewhat surprisingly, those utilities that have gone on record in support of climate legislation are OK with a cap-and-trade approach, probably because of accumulate utility experience with cap-and-trade for sulfur dioxide.

However, FPL Group (NYSE: FPL) has cast their lot in arguing for a carbon “fee” — a tax by any other name, but a much more acceptable term. (Policy statement here) This is the first big company that I’m aware of that has gone this far out on the carbon tax limb.

True, FPL is not among the leading carbon emitters: with a large emphasis on gas, nuclear and wind for their electricity generation, they can better afford to adopt a bolder climate stance than other utilities.

But I wonder if other utilities — Exelon (NYSE: EXC) comes to mind, maybe Duke Energy (NYSE: DUK) — can be far behind? And, if so, will the pendulum swing away from cap-and-trade to carbon taxes…er, fees?

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.