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.
Showing posts with label politics and diplomacy. Show all posts
Showing posts with label politics and diplomacy. Show all posts
Wednesday, January 27, 2010
Saturday, December 19, 2009
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
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
Sunday, November 8, 2009
Wind Energy and Political Grandstanding
Plans to build a $1.5 Billion wind energy project in Texas got some unwanted publicity this week when grandstanding politicians issued press releases and open letters urging the Department of Energy to reject any applications for clean energy tax credits “unless the project relies on US-built turbines and other components.”
Now, this project will create 300 construction jobs in the USA and 30 permanent maintenance jobs, also in the USA. It will provide a clean, renewable source of electricity for Americans. And it will reduce our dependence on foreign oil. Just the type of thing that deserves tax credits.
But some politicians are dead set against allowing any tax credits for this project because the turbines will be made in China, thereby creating jobs in China as well. Senator Schumer of New York objects, arguing that, "American taxpayer dollars should not be used to finance those Chinese jobs."
Let’s consider the implications of this political posturing.
First, the US just convinced China to repeal a law that required 70% of technology used in Chinese wind projects to be made in China. Now I agree that if China were keeping us out of its markets, then fairness, good trade policy and practical diplomacy might dictate that we keep them out of our markets until they agreed to free and open trade policies. But having convinced them to eliminate their local content rules, it is hypocritical for us to use local content rules to keep them out of our markets.
Second, if we prohibit foreign turbine makers from competing for any wind projects that get tax credits, then we effectively bar them from any wind projects at all. All renewable energy projects today require tax credits or some other form of subsidy to be economically viable. (This is because coal and oil get to impose the cost of pollution on our environment at no cost, thereby eliminating a major competitive advantage of non-polluting renewables – but that is a subject for another time). Barring foreign turbine makers from renewable energy projects receiving tax credits effectively bars them from all renewable energy projects in the USA.
Third, local content rules make no economic sense and will force projects (and jobs) outside the USA. Any developer who can put together a $1.5 Billion project in Texas has the ability to put that project together someplace else – such as in a foreign country that does not impose local content rules. If politicians insist that only higher-cost domestic content be used in a wind project, then some developers will decide to put their $1.5 Billion at risk elsewhere. Like in China. Which will then get ALL the jobs, including the 300 construction jobs and 30 permanent maintenance jobs that this project will generate in the good ol’ USA.
Fourth, and finally for now, if we are going to refuse tax credits and subsidies to any energy company that creates jobs outside the US, then why don’t we start with the oil companies? How about eliminating all tax benefits for any oil company that creates jobs outside the US? Obviously that would be a stupid policy and would put most of the oil companies out of business. It is just as stupid when it is applied to wind projects. And it would have the same absurd result.
John Howley
Orlando, Florida
Tuesday, September 1, 2009
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:
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
“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
Monday, August 10, 2009
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
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
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