Green Resolutions for a Happy New Year

2010 was the best of times and the worst of times for green energy. Here are a few resolutions to help us make 2011 a Greener and Happier New Year.

Resolution #1: Keep The Faith

It is easy to get discouraged during a year when the media and Congress ignored an urgent warning from the National Academy of Sciences that Strong Evidence on Climate Change Underscores the Need for Actions to Reduce Emissions.

But do not despair. We did make progress this year. Walmart launched a Sustainability Index requiring 100,000 of its suppliers to disclose their energy and water consumption, carbon footprint, waste management practices, and what they are doing to become more green and sustainable. President Obama ordered federal agencies to reduce the federal government's carbon emissions by 28% by the year 2020. Both of these actions are having ripple effects as evidenced by Deloitte LLP acquiring three of the largest carbon consulting firms in the world. Deloitte, IBM, Accenture, McKinsey, and all the other consulting firms are building sustainability practices because their clients know that being profitable in the 21st century means finding ways to reduce waste and becoming more sustainable.

So resolve to keep the faith in 2011. We are making progress.

Resolution #2: Share the News

Edward R. Murrow, Walter Cronkite, and other low-key, professional newscasters have been replaced with jesters and snake-oil salesmen. Traditional media are desperately trying to get our attention because we no longer rely exclusively on them for news. Most of us get our news from many different sources including, most importantly, our social networks. Think about how many times you have found a story or a video because a friend sent it to you via email or posted it on your favorite social networking site.

That, my friends, is how we will continue to build upon the growing consensus in support of green and sustainable energy. When you see an interesting article / video / podcast on green energy or climate change or sustainable business practices, post it and share it with your friends. Some of them will share it with their friends. Sometimes it will even go viral.

So resolve to share the news. We can change the world by sharing.

Resolution #3: Think and Choose Green

Many of us have made greener choices when buying cars based on their fuel efficiency rating or when buying appliances based on their EnergyStar rating. This makes sense because a single decision will save energy, save money, and reduce environmental impacts for many years. There is another choice that we should be making and that has only become available in the past 5 years or so. That is choosing where our electricity comes from.

In many states, you have the right to tell your utility to get your electricity from green and sustainable sources. It does not cost any more than you pay now, and it often costs less to choose greener energy. I've done this for my own home. We now get greener energy for 12.4% less than we were paying before. You can click here to find out how you can choose greener energy at an affordable price for your home or business. It's free, it's easy, it will help the environment, and it could save you money. And it will increase the demand for sustainable energy.

So resolve to think and choose green whenever you can. We can make a difference.

Happy New Year!

John Howley
Woodbridge, New Jersey

The Power of Green Thinking (and Small Green Acts)

A friend invited me to join a Facebook group called the Carbon Conscious Consumer (C3) Campaign. The group has a simple agenda: To promote "6 easy steps that anyone can take to reduce our carbon emissions."

Many people scoff at such lists of "easy" ways to save the planet. Thomas Friedman, for example, worries in his book "Hot, Flat, and Crowded," that the "amount of time, energy, and verbiage being spent on making people 'aware' of the energy-climate problem, and asking people to make symbolic gestures to call attention to it, is out of proportion to the time, energy, and effort going into designing a systemic solution." He points out that the energy problems we face are huge -- if you convert global energy consumption into oil equivalents, we are consuming 420 million gallons per hour. We need game-changing technologies and policies, not just six easy ways to go Green.

I agree. So why did I join the C3 group and invite my friends to join too?

Because our daily thoughts and actions drive our national policies and investments.

Think about the 1980's and 90's. Does it surprise you that a nation of people who drove SUVs and built McMansions elected politicians in both parties who did not think about climate change or how our oil consumption was subsidizing despotic regimes? This is not an ideological issue. Very few people in either political party thought much about energy efficiency when buying cars and homes in the 80's and 90's. That thoughtlessness was an important driver of our national energy policies during those decades.

Since then, we have become more aware of energy and the environment as a result of a few extraordinary events. The terrorist attacks of September 11, 2001, and the realization that the terrorists came from countries subsidized by our oil purchases. The escalation of oil prices a couple of years ago. The current Great Recession. The debate over global warming.

Those of us who lived through gasoline and home heating fuel shortages during the oil embargo of the 1970's know too well how transitory these trends can be. How do we sustain our interest in sustainability?

By changing the way we act. People who act every day in small Green ways will enter the polling booths with a completely different mindset than people who drove their gas guzzling SUVs to the polls.

Besides, we must do something while we wait for the game-changing technologies. The six simple steps will have a meaningful impact.

Let's take just one of the six simple steps: Breaking the bottled water habit.

World consumption of bottled water has increased by 70% since 2001 to more than 200 Billion litres. Of that amount, Americans bought more than 33 Billion litres. That's a lot of plastic bottles that need to be manufactured, filled with water, shipped to warehouses and stores, cooled in stores or home refrigerators, and recycled or thrown into landfills where they will take up to 1,000 years to decompose. Each stage of this process uses much more energy than running tap water through a filter.

Will reducing or eliminating all this waste solve our energy and environmental challenges? No. But it's a start. And an American public that thinks about how much energy and other resources are consumed to produce a bottle of water is one that will think about energy and environmental issues when choosing its leaders.

That's why I joined the Carbon Conscious Consumer (C3) Campaign and am promoting the group to my friends. Because thinking and acting Green in our daily lives will make a difference today, and it is the only way we will build a public consensus to invest in the game-changing policies and technologies we need for the long term.

John Howley
Orlando, Florida

The Mouse That Roared: Micronesia Challenges a Czech Power Plant

World government conspiracy theorists must be foaming at the mouth.

The Federated States of Micronesia has demanded that the Czech Republic allow an international audit of a planned upgrade of the largest coal-fired power plant in the Czech Republic . . . and the Czech Republic acceded to the demand.

Micronesia made the demand pursuant to recently adopted European Union regulations allowing any nation in the world to challenge construction or upgrades of industrial sites emitting carbon dioxide. Under EU law, transboundary environmental impact assessments are part of normal procedure.

The essence of Micronesia's claim is that the upgraded Czech power plant should be required to use the best available technology for the project. The Czech plant is the 18th-largest CO2 emitter in Europe, emitting 40 times more CO2 annually than the whole of Micronesia.

Why is a nation on the other side of the world complaining about a coal-fired power plant in the Czech Republic? Micronesia is a chain of more than 600 islands in the west Pacific, and some of its land area has already been lost to rising ocean tides. It asserts that failure to control CO2 emissions in the Czech Republic will further contribute to the warming of the planet blamed for rising ocean water levels. It fears that climate change could also result in more intense and damaging storms.

“Climate change is real and it is happening on our shores. It’s a matter of survival for us,” Andrew Yatilman, the director of Micronesia’s Office of Environment and Emergency Management, told Reuters.

The Czech utility that owns the plant, CEZ AS, asserts that it is using the most advanced technologies and that the refurbished power plant will emit less CO2 than it does now. The plant's efficiency will increase from a current level of 32.8% to 39.06%, a spokeswoman for CEZ AS said.

KPMG Survey Suggests Shift Towards Hybrid and Alternative Fuel Vehicles

Senior automotive executives are expected to increase their investment in new technologies to produce more environmentally-friendly, fuel-efficient vehicles. This is the conclusion reached by the 11th annual global automotive survey conducted by KPMG LLP, the US audit, tax and advisory firm.

Of the 200 senior executives surveyed worldwide, nine in ten expect manufacturers and suppliers to focus on new technologies, while 88 percent predict manufacturers will increase investment on new models/products and 78 percent say suppliers will do the same.

Hybrid Seen As Most Important Fuel Technology

When asked to rate the importance of alternative fuel technologies over the next five years, hybrid fuel systems came out on top (almost 85 percent), followed by battery electric power (68 percent), fuel cell electric power (63 percent), and biodiesel (42 percent).

"The consumer mindset on fuel efficiency is forcing automakers to build more fuel efficient cars and to create new product that satisfies demand,"said Gary Silberg, National Automotive Industry leader for KPMG LLP.

The survey results come on the heels of sales data released earlier in the week showing that 2009 industry sales in the US were 21.2% lower than sales in 2008.

Fuel Efficiency Cited As Key Purchase Factor

The key question of course is: How much of the emphasis on fuel efficiency is the result of economic conditions, how much is due to stubbornly high fuel prices, and how much is due to climate change and environmental concerns?

The survey suggests that both fuel efficiency and environmental friendliness are driving consumer demand. When asked what would influence consumer purchase decisions over the next five years, fuel efficiency was most frequently cited (94 percent), fairly flat from last year's high of 96 percent, followed by environmental friendliness (just over 80 percent). Other consumer desires were significantly lower including safety innovation (71 percent) and vehicle styling (61 percent).

When asked which vehicles the executives expect will see sales increases over the next five years, hybrid fuel vehicles (almost 93 percent) were most frequently named, followed by other alternative fuel vehicles (83 percent), low cost or introduction cars (82 percent), cars (66 percent), cross-overs (46 percent) and small pick-up trucks (just under 45 percent).

Most surprising were the responses on incentives, including discounts, rebates and free offers. When asked to name which vehicles might see an increase in incentives during the next year, the top prediction was SUVs (53%). But almost an equal number of the auto executives surveyed responded that incentives would be increased for hybrid fuel vehicles (almost 50 percent) and other alternative fuel vehicles (48 percent).

When Big Oil Buys the Gas Company

Earlier this week ExxonMobil, the world’s largest publicly traded oil and gas producer, announced that it had agreed to buy XTO Energy, the second-largest producer of natural gas in the US. ExxonMobil will acquire XTO for stock valued at $31 billion, making this the biggest oil and gas deal in four years.

This acquisition (and more like it) will have very significant impacts in at least three areas: energy prices; advances in natural gas innovation; and climate change legislation.

1. The Impact on Energy Prices

By acquiring the second-largest natural gas producer in the US, ExxonMobil will increase its ability to influence natural gas prices.

Prices for natural gas under long-term contracts are currently fairly close to prices for oil when measured on a cost per BTU basis. But prices for natural gas on the spot market are much lower -- often as much as 400% lower -- than prices for oil. The more natural gas that remains available on the spot market, the more likely it is that prices for natural gas under long-term contracts will come down.

When independent natural gas companies like XTO selling gas on the spot market, there is pressure on prices for natural gas to go down. Which makes gas a nice alternative to oil and coal. Which ultimately puts pressure on oil and coal prices.

ExxonMobil and other major oil companies that buy natural gas companies could influence prices by simply selling less natural gas on the spot market. The major oil companies have plenty of cash, so they could hold onto their natural gas inventories until the gap between gas and oil narrows. That is not good for consumers . . . or for the country.

2. The Impact on Natural Gas Innovation

Over the last decade, a handful of the nation’s small energy companies discovered huge amounts of natural gas in new fields stretching from Texas to Pennsylvania. XTO was one of these companies. It grew almost unnoticed into the nation’s second-largest gas producer by amassing a substantial portfolio of gas fields and developing expertise in the complex technology needed to extract the gas from shale beds.

If the major oil companies buy up these smaller, innovative companies that are making all the new natural gas discoveries, then who will pursue new natural gas technologies in the future?

Good question.

3. The Impact on Climate Change Legislation

Oil is one of the major contributors to carbon emissions worldwide. Gas is a much cleaner fuel.

The oil industry and its trade organization, the American Petroleum Institute, have vehemently opposed any aspect of climate change legislation that would raise the price of petroleum-based products. In contrast, the natural gas industry has supported many aspects of climate change legislation. Because natural gas has relatively low carbon emissions, any restriction on carbon emissions will give it a competitive advantage over oil and coal.

If the major oil companies buy up all the significant natural gas companies, then who will advocate for climate change legislation?

Another good question.

John Howley

Orlando, Florida

More Important Than Copenhagen

I told you so.

Four months ago, I predicted that, "Those looking for simple solutions to climate change will be very disappointed by the absence of firm emission reduction targets in Copenhagen later this year. . . . But at the same time, [the US and China] will pursue a second path of cooperation towards achievable solutions with or without an agreement on targets." See US and China Forge a New Path on Climate Change.

That is exactly what the US and China did in Copenhagen yesterday.

Why? Because nothing this important and this complicated ever gets resolved by a committee.

Consider for a moment the race to put a man on the moon. Thomas Friedman and others have said that this should be our model for the Green energy revolution.

I agree. But we did not get to the moon by holding international conventions and listening to dictators and despots like Iran's Ahmadinejad, Zimbabwe's Mugabe, and Venezuela's Chavez lecture us on the evil nature of our plans to be the first to put a man on the moon. Nor did we wait until we could reach the lowest common denominator consensus with Russia, China and 180 other nations on how and when to put a man on the moon.

If we had followed the path of seeking international consensus before we went to the moon, then we probably never would have achieved the goal.

So, now that we have gotten Copenhagen out of our system, let's get down to the serious work of pursuing the Green energy revolution the old fashioned way. With vigorous competition among nations to be the most energy efficient and energy independent economies in the world.

Walmart has given us a good first step. The company has sent out a Sustainability Index survey to 100,000 of its suppliers. The survey asks each supplier to provide information about their carbon footprint, energy and water usage, plans and goals to reduce their carbon footprint, energy consumption and water usage, and other factors that affect the sustainability of their operations. For now, Walmart will review this data internally. But it plans in later stages to release the data to consumers and possibly even disclose a ranking of individual products based on a Sustainability Index for the product and the company that manufactured it.

If you were a factory owner in China, what would provide a better incentive for you to reduce your carbon footprint and use of energy and water? (a) An international treaty that committed China to nation-wide carbon reduction targets over a 20 or 30 year period? Or (b) a Walmart Sustainability Index that made your products unsellable to the world's largest retailer unless you reduced your own company's carbon footprint and use of energy and water?

Forget Copenhagen. We need barriers to entry that will make it difficult for producers around the world to sell their products unless they are made using non-polluting energy sources and sustainable manufacturing practices.

We also need to alter the economics of energy at home. Yes, solar and wind are more expensive than most carbon-emitting alternatives right now. But only because those carbon-emitting alternatives do not pay the full cost of their pollution. If we make coal and oil companies include in their pricing the cost of eliminating their products' emissions (either with cap and trade or a carbon tax), then solar, wind and other non-emitting alternatives would seem very inexpensive by comparison.

Lastly, we need to use government funding and regulations to promote sustainable energy based on the long-term benefits -- just as we did when we used government funds to finance space exploration.

Imagine, for example, if all new construction and renovations in the US had to be "net zero" in terms of direct and indirect carbon emissions. By "net zero" I mean that the amount of energy used by a facility from non-carbon-emitting sources like solar and wind is equal to or exceeds the amount of energy from carbon-emitting sources. This could be accomplished by a combination of building codes requiring higher levels of efficiency in buildings (which many local governments are already imposing) and subsidies for investments in solar, wind and other non-carbon-emitting energy sources.

Yes, this would cost us in the short term. But think for a moment about the competitive advantage this would give us in the longer term. What if five or ten years from now our factories used highly efficient buildings that required less energy, and that energy was supplied by solar and wind plants that had ZERO fuel costs. Our factories would have a tremendous competitive advantage over factories in China and elsewhere that continued to use power generated by coal and petroleum fuels.

I hear all those out there who say that climate issues are different because they transcend borders. But space travel transcended borders too. And we did not succeed with space travel by waiting for everyone to agree. We went out and did it.

John Howley
Woodbridge, New Jersey

Pollution Economics 101

The oil industry is attacking the proposed climate change legislation that has passed the House and is on its way to the Senate. Here is a summary of the arguments from the American Petroleum Institute:

“The House climate change bill will increase costs of gasoline, diesel and aviation fuel, and drive jobs and production overseas, increasing greenhouse gas emissions (GHGs) in foreign countries that will have a new competitive advantage. Under the so-called ‘American Clean Energy and Security Act’, U.S. refiners will have to buy allowances, increasing their costs and giving a competitive advantage to non-US refiners. U.S. jobs will be lost and contrary to the bill’s intention, America will be less energy secure and more reliant on imports of gasoline and other refined products."

Wow. That’s a lot to swallow. Let’s take it step-by-step.

First, the proposed climate bill “will increase costs of gasoline, diesel and aviation fuel.”

Yes! Absolutely! Totally true! That is the entire point of the legislation! And it is a good thing!

Now before you think I am some kind of tree-hugging, left-leaning radical, let me tell you what the most famous conservative and libertarian economists say about the subject.

Alan Greenspan – the former Federal Reserve Chairman, acolyte of Ayn Rand, and self-described Libertarian – favors a hefty gasoline tax of at least $3 or more per gallon because, he says, we “need significantly higher gasoline prices to wean us off gasoline-powered motor vehicles.”

Milton Friedman agrees. Remember him? He was the Nobel-prize-winning economist from the University of Chicago who provided much of the intellectual firepower behind Reaganomics.

Why do these intellectual giants of conservative and libertarian economics favor taxes on gasoline? Simple. It has to do with something economists call “externalities.”

To understand externalities, consider a chemical company that offered to create more jobs and lower prices. There is just one catch. They will save the money to make this possible by dumping their toxic wastes into the pond in your backyard instead of disposing of the waste properly. In other words, they will make the cost of avoiding or cleaning up pollution “external” to the price of their product.

Obviously, that is not acceptable. Proper disposal of toxic waste is a cost of doing business and it should be factored into the price of the product – even if that means higher prices and/or fewer jobs.

The costs of avoiding or cleaning up pollution, however, are not always incurred by the producer or passed on to its customers. For example, coal-fired power plants have delivered relatively low-priced electricity for more than 100 years, but have also been dumping carbon dioxide and other greenhouse gases into the atmosphere. The same with petroleum products like gasoline and diesel fuel.

That is why Greenspan, Friedman, and many other conservative and libertarian economists have favored taxes on gasoline and other substances that cause pollution. Because the failure to account for the cost of pollution tends to distort many basic economic decisions such as pricing and competition. People think they are getting a good deal because their gasoline and electricity are relatively cheap. But they are really only imposing the cost of pollution on the environment.

By imposing a tax equal to the cost of avoiding or cleaning up the pollution, the market will make rational choices based on the real cost of the polluting product. And – this is very important – inventors and investors will have an incentive to develop cleaner alternatives that can be sold at a competitive price without the pollution tax.

So, the oil industry does not get any points for arguing that the climate change legislation will increase the price of gasoline, diesel fuel, and aviation fuel. That is what it is supposed to do.

BUT! The oil industry has a very legitimate point when it argues that the proposed legislation will “drive jobs and production overseas, increasing greenhouse gas emissions (GHGs) in foreign countries that will have a new competitive advantage.”

Anyone who has seen horrific pollution in developing countries knows what will happen to our environment if we simply drive up costs in the more developed economies. Without a comprehensive, global approach to pollution and climate change, we will just shift the externalities (costs of pollution) from our own backyards to backyards of very poor and politically less influential people in developing countries. And we will not be able to fence in the adverse effects.

Which leads to questions that have more to do with politics than economics. How do we get to a global solution on climate change? To what extent must we, in the more economically developed world, take the first step and make the first sacrifices? And to what extent should we refuse to budge until the rest of the world agrees to follow?

And you thought economics was the dismal science. More on the politics and diplomacy of a global climate change agreement in later posts.

John Howley
Tokyo, Japan

US and China Forge a New Path on Climate Change

Last week the US and China signed a Memorandum of Understanding agreeing to cooperate on climate change. Some have criticized the document as nothing more than an “agreement to agree” that failed to address the contentious issue of firm targets for carbon emissions reductions.

This criticism misses the point.

To begin, consider how far the US-China relationship has come in such a very short time.

In April 2001, just months after the Bush Administration took office, the US sent a military plane near Hainan Island in China. China responded by forcing down the plane and detaining the 24 American crew members for 10 days until the US apologized.

The message then was clear: Do not mess with us.

In stark contrast, China began its relationship with the Obama Administration by sending 150 senior Chinese officials to Washington to discuss the global economy and climate change. Before leaving Washington, they signed an agreement to cooperate on renewable energy, smart grid technologies, electric vehicles, carbon capture and sequestration, joint research and development, clean air and water, and protection of natural resources.

A very different but equally clear message: We want to work with you on climate change.

Consider also the importance of a US-China consensus on: (a) the existence of a climate change problem, and (b) the need to address it.

Many in the Bush Administration – including Vice President Cheney – did not believe that we had a problem or that we needed to do anything about it. The official position on climate change was that America should not sign any agreements until China and other developing nations agreed to firm targets to reduce their greenhouse gas emissions.

China responded by arguing that they should not consider firm targets until the US and other developed nations first agreed to firm targets to remediate their much longer history of carbon emissions.

As Wu Changhua of The Climate Group in Beijing has noted, very little progress was possible when the US and China each “used the other as an excuse for inaction.” The agreement last week is meaningful because it signals an intent by both sides to find ways to work together. That is the essential first step towards any progress.

Equally encouraging are the reasons why the US and China are beginning to work together:

1. A solid consensus in the US on the need for renewable energy. This consensus rests on beliefs that transcend partisan lines, including: (a) that US national security requires a shift away from dependence on foreign oil; (b) that we are leaving a legacy of significant environmental damage for generations in the not-so-distant future; and (c) that economic growth in the US depends on becoming a world leader in new, clean energy technologies.

2. A recognition in China that it must move quickly to prevent environmental disaster. In each of the past five years, China has built an average of 70 gigawatts of electric generating capacity – about the same amount as exists in all of France. Most of these plants have been dirty coal plants with obvious environmental impacts. Remember when China had to shut down factories before and during the Beijing Olympics to make sure the air quality would not kill the athletes? China knows that it cannot continue on this path.

Does this mean that the US and China will agree on firm targets for greenhouse gas emission reductions in Copenhagen later this year?

I hate to disappoint you. But I think the answer is "No."

The underlying message of the agreement signed in Washington last week is that the US and China are going to forge two paths to address climate change. Yes, they will still argue with one another over how much each country should reduce its carbon emissions and by when. But at the same time, they will pursue a second path of cooperation towards achievable solutions with or without an agreement on targets.

Those looking for simple solutions to climate change will be very disappointed by the absence of firm emission reduction targets in Copenhagen later this year. But what would you rather have? A Copenhagen Agreement on firm targets without any agreement on how to reach them? Or a Copenhagen Agreement on how to reduce greenhouse gas emissions without firm targets?

Whichever you prefer, get ready for the latter.

John Howley
Manila, Philippines