28 October 2008
A good panel, and excellent audience participation.
One question that came up: Is now a good time to start a social entreprise? To that, I would answer with a link to this post by Y Combinator founder Paul Graham Why to Start a Startup in a Bad Economy. He was writing about start-ups, but much applies to social enterprise as well.
26 October 2008
I've spent the past few weeks researching John McCain and Barack Obama on the issues of energy and the environment. I've looked at their published platforms, reviewed their speeches and debate appearances, and scanned the opinions of a gaggle of pundits.
And, after all that research, I'm reminded of a TV commercial from the 70s, the one with the French chef comparing margarine and butter. "There is no differ-ance…" he exclaimed.
Well, there's not exactly no difference between the two on energy and the environment, but the similarities outweigh the differences, with the differences mostly in the details and ideology.
Senators McCain and Obama have been talking the good talk in terms of the environment. And their focus on energy independence has, along with last summer's high gas prices, raised awareness about the need for alternatives, including wind, solar, and even clean coal and nuclear.
McCain and Obama both support a cap-and-trade system on greenhouse gas emissions, which uses a limit on carbon emissions to force reductions and provides emissions permits (or the right to emit CO2) to be traded between sources.
McCain would give away some of the carbon credits, while Obama wants to auction the credits off to the highest bidder. Both would use profits from the sale of credits for investments in clean energy technologies.
Both candidates acknowledge that "human-caused climate change is real and urgent," which has some expecting a sea-change in climate legislation, green energy investments, and leadership on setting a new global climate agreement.
Critics of Senator Obama say that he has not yet put forth any major legislation or initiative on the environment, while Senator McCain was the lead sponsor of the first climate change legislation, McCain-Lieberman, which called for mandatory reductions in greenhouse gas emissions.
McCain is still a leader in this regard, calling for 60 percent reductions by 2050; Obama wants an 80 percent reduction in that same time frame, which is closer to the UN recommendation.
I'm not sure setting the higher target -- or even McCain's lower target – is feasible early in the next administration, so we may see them change their positions once elected.
On a number of issues, McCain and Obama have already backtracked on earlier positions. Obama originally opposed offshore drilling; he later embraced it when it was clear a majority of Americans were in favor. McCain has long opposed renewable energy tax credits, which provide incentives for renewable energy generation, but voted for them in the $700B bailout package. (His objection, apparently, is not to the concept, but the structure of the existing tax credits.)
Back in May, McCain said offshore drilling would have little impact on gas prices; by the convention he was chanting "Drill Baby Drill." Obama also initially supported subsidies for ethanol; in part, to please his corn-rich state of Illinois. He now says he would consider withdrawing that support if it proves to have negative impact on food prices.
Both candidates support drilling in the National Petroleum Reserve on Alaska's Central North Slope – the 23 million acres set aside by President Harding in 1923 as an emergency oil supply for the U.S. Navy. And they both oppose drilling in Alaska's National Wildlife Refuge on the eastern end of the slope. (Governor Palin vows to "work on John" about ANWR, but I don't think she'll get very far with it – he's long been against this political hot potato.)
Surprisingly, Obama and McCain have both come out in support of clean coal technologies. This is something many environmentalists are strongly against and may be another issue where the candidates could reverse their position once elected. "Clean coal" has a lot of baggage – even within the utility industry, with its haphazard approach to exploring options such as Carbon Capture and Storage, Coal-to-Liquid conversion, and scrubbers for existing coal plants.
All three approaches are expensive, unproven propositions; environmentalists argue the money is better spent on renewables.
Then there is nuclear. McCain is calling for 45 new nuclear plants by 2030, with an ultimate goal of 100. Setting aside the unresolved questions about waste storage, which is an area in need of serious investment, in my opinion, this position is not without controversy. (McCain, by the way, supports the Yucca Mountain storage facility in Nevada; Obama opposes it.)
Energy analysts who have looked at McCain's goal think it wildly ambitious, given the costs to build such plants, permitting hurdles, opposition, and the time frame for construction. Obama is willing to consider nuclear as part of the mix, but wants to emphasize renewables.
Obama is equally ambitious when he claims "we can create 5 million new jobs, easily," if we subscribe to his proposed investment of $150B over ten years in clean energy and infrastructure. A worthy goal and one that is not without some research to back it up. But I'm not sure how this can be paid for, especially with recently high levels of government spending associated with the "Surge" and "Splurge" – the war in Iraq and the bailout.
One area that has been only tacitly addressed and could potentially have the largest impact on meeting greenhouse gas emissions targets and stimulating the economy is energy efficiency. Unfortunately, efficiency is about as sexy as Jimmy Carter's cardigan sweater, thus the candidates have not been talking about it on the Campaign Trail. Nevertheless Amory Lovins of the Rocky Mountain Institute and others have argued that efficiency is the fastest and cheapest way to reduce our energy consumption and greenhouse gas emissions.
Obama and McCain both want to set building efficiency goals. Obama proposes weatherizing 1 million low-income homes annually and McCain wants to start by "greening" the federal government, which has over 3.3 B square feet of offices.
Obama also wants to expand the federal grant program to help states and municipalities build more efficient schools, libraries and police stations that adopt the US Green Building Council's Leadership in Energy and Environmental Design (LEED) principles. He also wants to get rid of traditional incandescent lights by 2014, which should be a boon to CFL and LED producers.
Both support efforts to improve the grid and increase percentages of electricity from renewables: Obama envisions 25% of consumer electricity coming from renewables by 2025 (renewables recently topped 10%, according to the Energy Information Association) and McCain has commented that wind could provide 1/5 of electricity supply by 2030 with the right tax credit structure.
On automobiles, McCain has voted against Corporate Average Fuel Economy (CAFE) standards, while Obama supports raising and perhaps doubling those standards (currently 27.5 mpg for passenger cars and 22.2 mpg for light trucks) over the next 20 years.
And, finally, the two candidates don't see eye-to-eye on two environmental tax issues: renewal of the Superfund clean-up tax on polluting industries (McCain = nay; Obama = yea) and Obama's proposed Windfall Profits Tax, taking "excess" profits away from oil companies to support alternatives and offer a "rebate" to individuals and couples ($500/1000) to help offset fuel costs.
In the end, there are a lot of overlaps in their positions, with a few critical differences, mostly in the details or ideology. It is clear that the potential for leadership on energy and the environment is the strongest since Clinton and Nixon.
Both candidates believe that climate change is an urgent issue, are committed to energy independence and investments in alternatives, and want to make green jobs a reality. Senator McCain has long been a conservationist, in the Teddy Roosevelt Republican mold, and Senator Obama has been engaged in environmentally friendly proposals since his time in the Illinois Senate.
The big question is the economy. There are troubling signs that the double edged sword of the economy and war may impede progress on the environment and a new energy economy in the coming administration. Oil could go as low as $50/barrel before it bounces back, which it will, and the financial crisis is likely to drag on, if it hasn't already moved from Recession to Depression.
Unfortunately, the environment and all things green tend to thrive in positive economic times; it is still considered a luxury issue. That may all change if oil and gas supplies have indeed hit peak – Russia, Norway, and Saudi Arabia are all in decline -- if the impacts of climate change begin to be felt more acutely, and, frankly, if we can demonstrate that the best way to rebuild our economy is to do it around something more sustainable than new home sales, consumer spending, toxic mortgages, and credit default swaps.
In my view, the next President must stay the course in his pursuit of a new green economy, but be realistic about costs and timing. Right now, we've heard mostly platitudes.
Practical solutions exist and we need to accelerate the adoption of low-carbon energy sources, raise efficiency standards to spur development of energy efficient products, and improve the electricity grid and energy infrastructure. This will require a laser-like focus on the lowest cost solutions and make trade-offs where necessary.
In the end, policy action is only a partial solution, innovation and entrepreneurship is critical. We can't expect the government to do it all – especially now that they are taking over the entire financial services sector.
Let's hope the next president, whoever he is, heeds the words of Oxford professor Steve Rayner, to paraphrase, "We don't need a silver bullet, but rather silver buckshot" to tackle these issues.
We need to make the environment and energy part of the economic and national security agenda. I think Senators McCain and Obama both realize this; and whoever wins on November 4th will set aside platitudes for pragmatism.
21 October 2008
That's true, at least, if you believe the New York Times. In an article yesterday, Clifford Krauss took a decidedly dour view of the prospects for renewable energy in the near future.
"The central questions facing renewables now," according to Krauss, "are how long credit will be tight and how low oil and natural gas prices will fall. Oil and gas are still relatively expensive by historical standards, but the prices have fallen by half since July."
Indeed, oil tumbled more than 5 percent Tuesday, according to Reuters, "amid worries a global recession will crush fuel demand, limiting the impact of any supply cuts by OPEC."
U.S. oil for November delivery tumbled $3.98 a barrel to $70.27 by 12:33 p.m., after hitting a session high of $75.69. Natural gas has also pushed down by close to half to $6.79 per thousand cubic feet from $13.58 in early July.
OPEC is set to meet on Friday, which has many analysts scrambling to anticipate what they will do. Some analysts close to the situation cite Iran's assertion that "drop in demand could push OPEC to cut output by 2 - 2.5 million barrels per day, while other members have said a smaller cut may be needed."
Energy analyst Gregor MacDonald is "not convinced they need to cut that much."
"Remember," Gregor wrote in his blog yesterday, "this meme of demand destruction is is very much perception related right now. There is not alot of data to support it. US demand numbers revived very quickly in July and August when petrol prices fell. The new demand data showing US is down again actually has alot to do with people in the South simply being unable to obtain petrol, after hurricane Ike."
The forces do seem to be aligning against alternative energy, despite the $17 billion tax credit rider attached the Paulson-Bernanke rescue blanket.
Seemingly, a perfect storm is brewing against alternative energy development: low fuel prices, lack of credit, and the government shelling out money it doesn't have to shysters and speculators who took on too much risk.
But at the end of the day, we're still going to have several problems with which to deal, including a dwindling and more difficult to access (read costly) oil and gas supply, renewable energy portfolio standards in many states, global pressures to deal with greenhouse gas emissions, and continued increases in global demand for energy.
Unlike the collapse in oil prices in the 1980s, when the nascent renewables market evaporated, renewable energy today is a big business. The total investment in the sector increased to $148.4 billion last year, according to a New Energy Finance analyst quoted in the Times.
While this year investment is likely to be lower than last, the upward trend may be hard to stop.
And if you think low oil prices are be back to stay? Think again, says MacDonald.
"Already, these price levels around 70.00 are the set-up to a new price high next year," MacDonald writes. "At 100.00, we can have lots of steady supply without much need to go higher. At 70.00, supply is killed off and then we ramp again. Next time above 150.00."
John Whitehead, a professor in the Department of Economics at Appalachian State University, thinks that it's essential we price nonrenewable energy in a way that accounts for the associated negative externalities. He suggests, as others have, that cap-and-trade or a carbon tax can "keep the demand for renewable energy going strong."
"Since we can't much afford renewable energy subsidies with a big budget deficit," Whitehead writes. "I will go so far as to say that high nonrenewable prices are the only way to reach the point where we significantly shift to renewable energy."
But others argue that cap-and-trade and carbon taxes are market distortions (although the subsidies fossil fuels have been receiving for years may be equally so) and, in the end, will do little to spur the level of economic activity that is needed.
A temporary slip in oil prices, however, that leads to a higher spike may shift the floor yet again.
"Let's make this simple," Gregor writes. "If OPEC cuts big and gets the price back up to 90.00 or 100.00, then the chances of a new price high in oil next year will diminish. But if price, for whatever reason, stays at 70.00 into the middle of Winter, then prepare for 160.00 by next August."
And this time, it may just be game-changing levels in favor of the new green economy.
17 October 2008
As Jim Cramer says, "They know NOTHING!"
But what if you could eavesdrop on and converse with other traders, amateur analysts, and market enthusiasts? What if you could have a dialogue about stocks you're interested in or actively trading? What if you could bring your own knowledge and interest to the conversation about investing, be it alternative energy and clean tech or whatever.
Well, now you can. Try StockTwits. It just launched with a simple design that will be familiar to users of Twitter or other social networking platforms. Here's a screen shot of my feed stream:
Developed by Soren Macbeth and Howard Lindzon, StockTwits was built on the Twitter API as a way to aggregate Twitter conversations about stocks, trading, and financial markets. A number of us have been using it for months now (and you can too) simply by adding a dollar sign before a stock ticker (such as $FSLR).
A simple idea and a pretty cool concept. The folks at betaworks, which focuses on seed stage Internet media, must think so, too, as they added StockTwits to their portfolio with an investment last month.
I'm interested in using StockTwits to engage with like-minded (and contrarian) clean tech and green energy investors, contribute to the knowledge base about some top performers, as well as learn more about companies I've missed or overlooked.
Come join the conversation.
16 October 2008
Founded by Howard Lindzon, Adam Eland, and Jeff Marks, Wallstrip was hosted by the fabulous Lindsay Campbell (now the host of MobLogic.tv) and currently by the equally fabulous Julia Alexandria, who took over in January of this year.
Howard conceived of the idea in the Summer of 2006. He "wanted to create a show like Jon Stewart about stocks. Positive and simple." Eight months after launching Wallstrip, Howard sold it to CBS for $5 million.
Over the past two years Wallstrip has featured alternative energy and green stocks (see search list here), such as WFR, CLHB, and ORA.
Here are two episodes (one from each of Wallstrip's delicious hosts) on wind and solar energy:
Watch CBS Videos Online
Congratulations to the Wallstrippers, and here's to another fabulous season of Wallstrip!
Howard's latest play is StockTwits, which he is developing with Soren Macbeth. StockTwits is an open, community-centred investment idea and information service. Think of it as a "Bloomberg for the little guy."
Soren built it off the Twitter API as a way to track real-time conversations between people interested in stocks, trading, and sharing. Check it out: StockTwits
15 October 2008
And yet, today, according to a 2005 UNDP study, Energizing the Millennium Development Goals, "millions of households in the developing world still lack access to safe and reliable energy and pay high prices for poor-quality substitutes. Moreover, poor people spend much of their income on energy, more than a third of household expenditures in some countries."
That would be bad enough were it the only impact, but poor households, especially women, also "devote a large portion of another important asset, their time, on energy related activities--women and young girls spend upwards of 6 hours a day gathering fuelwood and water, cooking, and agro-processing."
Worldwide, around 2.4 billion people still use solid fuels, including wood, dung, agricultural waste, and coal to meet their household energy needs. Cooking and heating using open fires or traditional, inefficient stoves results in health-compromising indoor air pollution, and causes up to 1.6 million deaths every year, according to the Baker Institute Energy Forum at Rice University in Houston. Most of those deaths involve women (60 percent) and children under five with acute respiratory infections.
In some countries, Baker Institute researchers claim, "this neglected health risk is to blame for 3.7 percent of all deaths, making it the most lethal killer after malnutrition, unsafe sex and lack of safe water and adequate sanitation."
Worldwide, according to sources familiar with the situation, two billion people live without any access to modern energy supplies and about 1.6 billion people live without access to electricity.
It's a vicious cycle: poor households do not have the resources to obtain cleaner, more efficient fuels and appliances; so they rely on solid household fuels and limited, often inefficient appliances, which in turn reduces the potential for economic development and affects their health and productivity, keeping them from making their way up the poverty ladder.
One can argue that achieving many of the UN Millennium Development Goals by 2015 is extremely difficult, if not impossible, without addressing the need for increased access to cleaner, affordable, and safer energy.
Researchers at the Baker Institute conclude that, "In order to halve the number of people living on less than $1 per day, there is a concomitant need to reduce the number of people who lack electricity services by some 560-600 million." Their price-tag for providing electricity services to these people? Around US$200 billion.
It's kind of a no-brainer: Better energy services can reduce workloads and indoor air pollution, potentially generate income for poor households, and lead to greater environmental sustainability, encouraging better natural resource management and improved water quality.
Microenergy or small, distributed energy generation may be the key to providing energy services to the global poor. Small-scale solar installations are now affordable for application in most rural, developing countries. Wind turbines, geothermal, and more efficient biomass or biogas stoves can reduce the impact of indoor air pollution and forest degradation.
As microfinance has revolutionized the access of financial services to the poor -- by no means is that revolution complete -- so, too, can microenergy help leverage the rural poor out of their vicious cycle of poverty.
And just as there is a ladder out of poverty, there is a corresponding ladder of energy (see diagram above). Increasing energy access to the world's rural poor can contribute to reducing global poverty. Indeed, you can't reduce rural poverty without it.
(Diagram Source: IEA Analysis, World Energy Outlook 2002)
13 October 2008
Tyler recommends Canadian voters choose Liberal Party candidate Stéphane Dion over Conservative incumbent Stephen Harper or even the Green Party, which found some candidates backing out or even backing Dion.
In Tyler's opinion, Dion represents the best hope for clean energy and infrastructure development in the North Country. Read his full column in the Toronto Star (link here or below) for details.
Happy Thanksgiving, Canada! The world can be a crazy place, but we do — in the big picture — have much to be thankful for. Enjoy the time with family and friends, and a week of turkey dinner leftovers.
Today I’ll just post a link to my Clean Break column, which argues that green-minded Canadians heading to the polls tomorrow would be best to vote for the federal Liberals if they hope to see any action on climate change and development of a cleaner, more energy-efficient economy. Now is the time to begin taxing pollution and using that money to tackle poverty, stimulate the economy, and ultimately help Canadian households and businesses operate more efficiently, while at the same time accelerating green innovation that could serve us at home and others abroad.
From the perspective of a green-technology advocate, one could just as easily support the Green Party and, to a lesser extent, NDP on this issue, but the Liberals are the most likely to defeat the federal Conservatives, which have proven in their two years of power that they don’t take green job creation or climate change seriously. This is an important federal election, coming at a time when even the U.S. is likely to vote in a new president — i.e. Obama — who has declared energy and green-economy building as his top priority. -- Tyler Hamilton, Clean Break
Tyler is senior technology reporter and columnist for the Toronto Star, Canada's largest daily newspaper. His bi-weekly column, Clean Break, is the basis of a blog of the same name that discusses trends, happenings and innovators in the cleantech market.
09 October 2008
"Don't you see what's happening? Potter isn't selling. Potter's buying! And why? Because we're panicky and he's not. That's why. He's pickin' up some bargains. Now, we can get through this thing all right. We've, we've got to stick together, though. We've got to have faith in each other."
The scene ends with the financial wizards of the BBB&L toasting the last two dollars they have before closing time. Hope springs eternal, even in the worst of times.
I kept thinking of that scene during the past few weeks and, while there are comparisons to that earlier era, the "Debtpression" is different from the Depression. And while the seemingly socialist tools of nationalizing banks and credit institutions seems like a "New Deal," I don't think it is the answer and may end up being a raw deal.
We need to rethink the whole premise of our economy and of what growth looks like, and what our country is built upon. For far too long, our economy has been built on unsustainable growth, and greed.
When housing starts are the bell-weather of growth and consumption fuels the GDP, what do we expect? What do you do when new housing slows down? Make loans more available to those who can't really afford the mortgage you're selling. And extend their credit so they can buy more things to fill up those houses. How long could that have gone on?
We need to rethink the foundational elements of our growth. Why can't growth be equivalent to healthy communities, to greater efficiency, and improved and better uses of existing infrastructure? Why can't our economy be built on sustainable innovations?
Fred Wilson of Union Square Ventures and author of the popular blog, A VC, wrote today about the effects of the economic downturn on his portfolio companies. And (pardon me Fred if I've misinterpreted) it seems that he actually finds opportunity for these companies in the challenging times we're facing.
He writes, "Much has been written about how the 'nuclear winter' of 2001-2003 led to many of the innovations we've been tapping into since. Clearly the capital efficiency revolution was fanned in the nuclear winter. When capital is scarce, smart people figure out how to do more with less. So first and foremost, let's all take advantage of this capital efficiency to get our costs down and build businesses with even more operating leverage. And hopefully there are new tricks out there that we can use to get even more capital efficient."
Gregor Macdonald, an oil analyst and energy sector investor, who also focuses on the coming transition to alternatives, seems to share this view of a leaner, more efficient financial engine.
"What’s needed now is a flowering of smaller investment banks and private equity, to fund the next wave," he writes on his blog Gregor.us. "The financial landscape should become 6 inches high, and 3000 miles wide. We are going to have to cut in the opposite direction, from the current consolidation in US banking. And it will take time. But I think what the country needs is to see a lively investment community in all major cities. Not just New York and Silicon Valley."
Greater capital efficiency and more dispersed investment community. Lean business models and more operating leverage. Sounds more sustainable.
I can't help thinking that out of this crisis -- if we can avoid the noise and abject panic -- can come a new path; a second chance, really. A path that is fundamentally about triple-bottom value creation, where profits are good, but so is people and the planet.
And I keep thinking, as I know Gregor does, that the three areas crying out for investment and that could provide a foundation for a new economy are energy, infrastructure, and new financial service models. Really, a new green economy.
"We invested in the wrong things," Gregor writes. "We invested in the wrong infrastructure. We invested in things that are now paying us little, in the way of return. I’m certain a new era dawns for energy and finance. The investment failures of this decade have likely made the ground fertile, to make it happen."
So, I'm trying to pay attention to a different kind of noise right now -- although it has been tough. It's a bunch of conversations, dialogues, monologues, and even rants by people a lot smarter than me in this arena. It's happening in a community that has a gathered on services like Twitter and StockTwits and Disqus. And it's a more hopeful noise. Concerned, yes, but already beginning to think about what happens post-panic.
As Andy Swan put it in his blog tonight, starting to move from despair to opportunity:
Despair : Opportunity
Fully Invested : Cash Heavy
Short Term : Long Term
Employee : Entrepreneur
Noise : Vision
STOP leveraging your bottom-calls.
STOP thinking in terms of next week or next month.
STOP just being an employee.
STOP listening to the noise.
START raising money.
START thinking about 2012
START thinking (and working) like you own the place
To which, I can only reply (and did), "Amen, brother."
We can get through this thing all right, as George Bailey told the investors of BBB&L. We've, we've got to stick together, though, have faith in each other, and stay focused on a vision and a plan for 2012.
06 October 2008
"We don’t just need a bailout. We need a buildup," Thomas Friedman wrote in the New York Times last month. "We need to get back to making stuff, based on real engineering not just financial engineering.
"We need to get back to a world where people are able to realize the American Dream — a house with a yard — because they have built something with their hands, not because they got a 'liar loan' from an underregulated bank with no money down and nothing to pay for two years. The American Dream is an aspiration, not an entitlement."
Friedman described what a new economy could look like for America and how more important it is that we don't just see this bailout as a respite, but a wake-up call "to launch an E.T., energy technology, revolution with the same urgency as this bailout."
As Friedman wrote, "The exciting thing about the energy technology revolution is that it spans the whole economy — from green-collar construction jobs to high-tech solar panel designing jobs. It could lift so many boats.
"In a green economy, we would rely less on credit from foreigners 'and more on creativity from Americans,' argued Van Jones, president of Green for All, and author of the forthcoming The Green Collar Economy.
"'It’s time to stop borrowing and start building. America's No. 1 resource is not oil or mortgages. Our No. 1 resource is our people. Let's put people back to work — retrofitting and repowering America. ... You can’t base a national economy on credit cards. But you can base it on solar panels, wind turbines, smart biofuels and a massive program to weatherize every building and home in America.'"
Van Jones is a familiar figure to readers of this blog. Now, you can read the words of the man himself, as his book is released tomorrow. (Pre-order it here.)
I'd like to see copies in the hand of the presidential candidates at the debates tomorrow night.
"The 'green' in 'green-collar' is about preserving and enhancing environmental quality—literally saving the Earth," Jones wrote in his Introduction. "Green-collar jobs are in the growing industries that are helping us kick the oil habit, curb greenhouse-gas emissions, eliminate toxins, and protect natural systems.
"Today, green-collar workers are installing solar panels, retrofitting buildings to make them more efficient, refining waste oil into biodiesel, erecting wind farms, repairing hybrid cars, building green rooftops, planting trees, constructing transit lines, and so much more. California has shown that a state can still grow its economy while reducing the rise in greenhouse-gas emissions. The nation can do the same thing.
"We have the chance now to create new markets, new technology, new industries, and a new workforce. Let's do it right—with good wages, equal opportunity, and pathways to success for those whom the pollution-based economy left behind."
(I'll write a review of the book in the coming weeks.)
02 October 2008
Read this carefully, for Rayner is onto something. He declares that cap and trade won't work and that new technology investment is critical. Here is Professor Rayner's letter:
The outgoing administration failed to come to grips with climate change out of fear that reducing greenhouse gas emissions would damage the economy. But the decision to deal with climate change doesn't lend itself to cost-benefit analysis. It is a strategic choice, like the decision to get married. You have an opportunity to define the nation's character and upgrade its infrastructure -- and bold action would be consistent with America's historical role as a leader in innovation. It would also encourage India and China to participate in the effort. Here are a few points to keep in mind.
Cap and trade won't work. The market for carbon offsets is widely touted as the best way to curb greenhouse gases. This would be fine if time were unlimited. However, the best available science suggests that we need to stabilize emissions by mid-century. That's too soon for carbon prices to rise enough to drive the R&D necessary to enable cleaner alternatives to compete with fossil fuels. It doesn't help that the cap-and-trade approach relies on underdeveloped monitoring and accounting systems that inevitably leave plenty of wiggle room for unscrupulous speculators to work the system, amassing fortunes while achieving nothing for the atmosphere.
New technology is critical. The only plausible way to curb emissions in the next few decades is to accelerate the development and adoption of low-carbon energy sources. Rather than setting targets for greenhouse gases, we should establish goals for installed technology, beginning with the most energy-intensive sectors, like electricity generation, ground transportation, and cement manufacturing. Similarly, international cooperation on emissions reduction should focus on the handful of countries responsible for the lion's share of the problem. In the US and elsewhere, R&D funding should be directed toward technologies that otherwise might not come online for up to 20 years. This would fill the gap between the turnaround timeline for venture capital (three to five years) and for basic research (beyond 20 years).
Let the market decide. No amount of public investment will succeed if politicians are allowed to pick the winners. The program must be designed to widen the choices available to the market, not to preempt them. There is no silver bullet, but we can develop silver buckshot. The point is to ensure that money flows to a variety of options from which the market can select, not just the one that's being developed in the district of a powerful member of Congress.
Mr. President, this strategy is not just about throwing money at the problem. It will be necessary to review a wide range of policies that affect technology development and deployment, including intellectual property, defense procurement, taxation, and performance standards. Moreover, stabilizing the atmosphere does not address the legacy of past emissions. It is equally important to invest in infrastructure that will head off damage from extreme weather events caused by the climate change we've already set in motion.
Twice in the past century, the US dragged its feet before confronting threats to our civilization in the form of two world wars. But when it finally committed itself, it shot straight into the leadership position and dealt decisively with the problems. Climate change poses the same sort of challenge -- and opportunity -- at the beginning of the present century.
Steve Rayner is Professor of Science and Civilization at Oxford University.
01 October 2008
The states participating in the Regional Greenhouse Gas Initiative (RGGI) recently announced that the auctioning of carbon dioxide (CO2) emissions allowances in North America is off to a strong start.
All of the 12.5M allowances offered for sale on September 25, 2008 were sold at a clearing price of USD$3.07 per allowance, which is about 65 percent more than the minimum set price of $1.86. $2 per ton had been a reasonable estimate of what a RGGI CO2 allowance is really "worth" in 2009, according to energy consultants at Webb, Scott & Quinn.
RGGI, Inc. reports that 59 participants from the energy, financial, and environmental sectors took part in the first-in-the-nation auction, starting the first of many CO2 allowance auctions.
Demand for the allowances appeared to have been strong with a total of 51,761,000 allowances demanded or four times the available supply for this first auction.
The USD$38.5M in proceeds produced from the auction will be distributed to Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont, the six RGGI states that offered allowances for sale during the first auction. The states are expected to invest those funds in energy efficiency and renewable energy technologies, along with programs to benefit utility rate payers.
Pete Grannis, Commissioner of the New York State Department of Environmental Conservation and Chair of the Regional Greenhouse Gas Initiative, Inc. "RGGI’s example shows that an open and competitive carbon market can be implemented."
Any CO2 allowances purchased at the first auction can be used by a regulated facility for compliance in any of the RGGI states, even if that state did not offer allowances in the first auction. Four out of the ten did not participate in this first auction.
The RGGI auction was administered by World Energy Solutions, Inc (TSX:XWE), which operates online exchanges for energy and green commodities, and overseen by Potomac Economics, RGGI's independent market monitor.
The next allowance auction is set for December 17, 2008. These early auctions, combined with the others being held in the first compliance period, according to RGGI, will ensure an ample opportunity for bidders to obtain the allowances they will need for compliance across the entire 10-state region. RGGI intends to hold quarterly auctions during the first RGGI three-year compliance period, which runs from January 1, 2009 to December 31, 2011.
James Letzelter of Webb, Scott says that "RGGI is indeed a real cost. At $3 per ton, a 10,000 Btu/kWh coal plant faces about $3 per MWh. A 7,000 Btu/kWh gas-fired combined cycle faces a cost of about $1.50 per MWh."
While that's not onerous, Letzelter concludes, "these prices will increase power market prices slightly (figure about $1.50 per MWh). Count that as "RGGI Bonus" revenue picked up by all market players, especially nuclear, hydro and renewable players with no RGGI costs."
The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions. Ten Northeastern and Mid-Atlantic states will cap and then reduce CO2 emissions from the power sector 10 percent by 2018.
Other regional greenhouse gas coalitions, such as the Western Climate Initiative and the Midwestern Greenhouse Gas Accord, are in the early stages of development.
Sources: RGGI, World Energy Solutions, Clean Edge News, Webb, Scott & Quinn