28 October 2010

Why We Deserve to Lose (The Race for a New Green Economy)

No offenths, as the 4-year-old son of a friend used to say before offering a critical observation, but we suck.

And we deserve to lose the race for a new green economy to China. Why?  Because we have systematically destroyed our opportunity to lead through bad decisions and illusion, sold ourselves to China, and blanketed ourselves with cheap and toxic products bought from China.

(No wonder the Chinese are laughing at us in this political ad Joshua Brown wrote about on The ReformedBroker.com this weekend. Of course, as Josh pointed out in his post, China needs us as much as we need them.)

Then there is this disturbing item from an editorial in the New York Times this morning: "Until a little over three weeks ago, the Interior Department had approved more than 73,000 oil and gas leases since 2005, but only one offshore wind energy project and not a single solar project."

Don't get me wrong, I support domestic oil and gas development -- both offshore and on land -- as long as it is conducted using the highest environmental standards and safeguards.

But why has it so long to approve a project like Cape Wind off the coast of Massachusetts while oil and gas leasing has accelerated?

Two things have been happening since 2005 when Congress directed the US Department of the Interior "to approve enough wind, solar and other projects on public land to produce 10,000 megawatts by 2015 — enough to heat, cool and light five million homes."

The first is the so-called "Haliburton loophole," which exempted natural gas drilling companies from the Clean Water Act after the companies raised a "frackas" over having to disclose chemicals used in their fracking process.  They claimed it would endanger their proprietary formulas.

A September 2009 report issued by the General Accountability Office (GAO) found that 28 percent of drilling permits issued from 2006 to 2008 (about 6,100 applications) were expedited by the Bureau of Land Management through this categorical exclusion.

Here's an interesting list of exemptions the oil and gas industry currently enjoys from the Federal government compiled by the Environmental Working Group.  Any one of these can help accelerate the approval process.

By comparison, the Cape Wind project was subject to meeting a plethora of state and federal agency standards and required almost nine years to get a final permit.

Interior Secretary Ken Salazar, to his credit, has approved six large-scale solar power projects on public lands in California and Nevada, and has moved to close the loophole and reform the process for reviewing all projects on lands under Federal management.

But renewables also continue to be subjected to unclear and inconsistent signals in terms of subsidies and tax credits, which makes investors and project developers wary of going too deep.

As the Times editorial asserts, "When the production tax credit expired at the end of 2003, development of newly installed wind capacity fell from 1,687 megawatts to less than 400 the following year."

Meanwhile, as an Environmental Law Institute study last year illustrated, fossil fuel development benefited from approximately $72 billion in subsidies and tax credits over a seven-year period (2002-2008), while subsidies for renewable fuels totaled only $29 billion overt the same period.

This kind of unlevel playing field and unfair advantage is just another reason why we have already lost the race with China and others on renewables. 

In fact, we better stop thinking about it as a race at all and begin thinking about how best to cooperate with our competitors before we are left out of this new economic opportunity altogether.

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