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Green News: Who Is Cutting and Who is Increasing GHG Emissions? The Answer May Suprise You

I gotta say, it is nice to not be covering the Syrian civil war in this post. Events in Syria have dominated the news lately, but it seems that at least for the immediate future diplomatic exercises have stalled the prospect of outside military intervention.

I would like to take this opportunity to highlight an interesting trend I have noticed lately, involving different countries efforts (or lack thereof) to curb greenhouse gas (GHG) emissions. The trend is interesting because it involves major players from both extremes (both high emitting nations and sustainability champions) moving forward with policies that would seem to contradict their historical stances on climate change. In recent news, the U.S. and China are moving to curb GHG emissions , while Australia and Canada are moving towards less sustainable energy portfolios.

(For some background, please see interactive maps on: GHG emissions by country per capita, CO2 emissions by country, renewable / fossil fuel energy production and consumption by country)

Australia and Canada have, in recent history, been global champions of sustainable development. Both countries were original ratifying members of the Kyoto Protocol, and have signed the protocol into law (although it appears Canada will not make it’s emissions targets). Australia became one of the first countries to sign a carbon tax into law, and while Canada does not have a federal carbon tax, several Providences have their own regulations in place. Canada and Australia, with their natural beauty, seemed like global poster-children for sustainable development. However, recent developments show these two countries shifting in the other direction.

Economic downturns have pitted environmentalists vs. industry in a zero-sum and short-sighted game, in which advocacy for sustainable development could be political suicide. Of course, in the long run, we need a more sustainable global energy portfolio; but these are problems for future generations who do not have the unemployment problems of today’s world, opponents of carbon taxes argue (I am not considering the climate change skeptic as a legitimate opposition anymore).

Canada has seen rising GHG emissions in recent years, with no future decline in sight–if anything, increased production of oil sands forecasts emissions trending upwards in Canada. Politics have turned against environmentalists in Canada for reasons discussed above; anybody who thinks about environmental sustainability implicitly does not care about jobs / the economy / problems facing Canadians today (sound familiar? this is a common argument for putting off action on reducing emissions around the world).

Australia recently had elections, which were won by conservatives based partially on a promise to abolish the unpopular carbon tax:

The Australian mining industry welcomed Saturday’s election of Prime Minister Tony Abbott and his coalition’s pledge to abolish the carbon tax on fugitive greenhouse gas emissions from coal mines and the Minerals Resource Rent Tax on coal and iron ore mining profits.

The coalition of Liberal and National parties campaigned on a platform to repeal the taxes within 100 days of taking the reins of government.

“On the first sitting day of Parliament under a coalition government, I will introduce legislation to repeal the Carbon Tax,” Abbott said on the Liberal party’s website that included policy documentation stating the party would also rescind the MRRT.

For some Australians, the free-rider issue seems to make being environmentally conscious not worth fronting the bill–literally:

The carbon tax is one reason Sydney resident Geoff Hamment, who normally votes for Labor, is supporting the conservatives this time around. Hamment said he’s seen his household electricity bills go “through the roof” since the tax was introduced.

“I don’t like it,” he said. “I think us paying so much is just pointless when you have countries like China churning it out.”

The tax is extremely unpopular, despite the fact that most Australians, but not the wealthy, get government compensation for higher electricity prices.

For all the well-founded China bashing on the environmental front–China has overtaken the U.S. as the global leader in terms of absolute GHG emissions (although the U.S., per capita, still emits more than China; this is arguably a better measure of a countries energy efficiency)–the Chinese government appears to be trending towards more sustainable environmental policies:

BEIJING — The Chinese government announced an ambitious plan on Thursday to curb air pollution across the nation, including setting some limits on burning coal and taking high-polluting vehicles off the roads to ensure a drop in the concentration of particulate matter in cities.

The plan, released by the State Council, China’s cabinet, filled in a broad outline that the government had issued this year. It represents the most concrete response yet by the Communist Party and the government to growing criticism over allowing the country’s air, soil and water to degrade to abysmal levels because of corruption and unchecked economic growth.

The criticism has been especially pronounced in some of China’s largest cities, where anxious residents grapple with choking smog that can persist for days and even weeks. In January, the concentration of fine particulate matter in Beijing reached 40 times the exposure limit recommended by the World Health Organization.

For years China has had an array of strict environmental standards on paper, and its leaders talk constantly about the need to improve the environment. But enforcement has been lax, and the environment has continued to deteriorate at an alarming rate.

“The plan successfully identifies the root cause of air pollution in China: China’s industrial structure,” said Ma Jun, a prominent environmental advocate. “Industrialization determines the structure of energy consumption. If China does not upgrade its coal-dependent industries, coal consumption can never be curbed.” he said. “The key to preventing air pollution is to curb coal burning — China burns half of all the coal consumed in the world.”

In the United States, the world’s number two GHG emitter, the issue of emissions has been divided largely down partisan lines. Liberals, led by President Obama, believe in taxing carbon and subsidizing renewable energies as part of an “all of the above” energy portfolio to meet future demand and cut emissions. Conservatives tend to argue against the need to curb GHG emissions, largely for the same reasons mentioned above with respect to Canada and Australia. However, it seems Obama intends to bypass partisan gridlock by passing executive orders, carried out through the EPA, to curb emissions from fossil fuel power plants:

The Environmental Protection Agency is due to unveil next week the first batch of regulations under President Barack Obama’s new climate action plan – a carbon emissions-rate standard for new fossil fuel power plants.

If standards are as strict as the industry expects, it could be the death knell for new coal plant construction. The recent bankruptcy of Longview, a highly efficient West Virginia coal plant, is an example of the pressures already facing the industry.

The EPA is due to issue an emissions-rate standard for new fossil fuel power plants by September 20. Proposed standards on existing plants will follow in 2014.

Obama asked the EPA to re-propose a rule it introduced last year using a section of the federal Clean Air Act that required all new power plants, including those that use coal, to meet a standard of 1,000 pounds of carbon dioxide per megawatt hour – the rate of an average gas-fired plant.

Sources that have met with the administration in recent weeks said the agency has likely revised its earlier proposal to provide separate standards for natural gas and coal plants, and also raised the emissions limits for coal plants.

The new rules, like those initially proposed in 2012, are also likely to include a requirement for new coal plants to use a form of carbon capture and storage (CCS), a technology that captures carbon emissions and stores the carbon underground, that is years away from being available on a commercial scale.

Eugene Trisko, a lawyer who represents clients such as the American Coalition for Clean Coal Electricity in energy and environmental matters, said CCS cannot be deployed if coal plants, such as Longview, are unable to run.

“If you really wanted to advance CCS, you really need to build new coal plants because those are the plants that one day or another would be the laboratories for CCS,” he said.

“Nobody is going to put CCS on plants that are 50 years old,” he added.

But some environmentalists argue that new EPA rules will only add another layer of financial risk around coal plant investment even in coal-reliant states like West Virginia.

Instead of investing in new coal plants, which will only become more costly, states should diversify their energy supply, said Cathy Kunkel, an energy research consultant and fellow at the Institute for Energy Economics and Financial Analysis.

The concept behind taxing carbon emissions and subsidizing renewable energies is pretty straightforward. Emissions represent a negative externality, pollution, that is a detriment to society as a whole. A carbon tax or cap-and-trade system creates a cost for this negative externality, discouraging its use and potentially helping to fund R & D in renewables (and therefore encouraging competing cleaner energy sources). Renewable energy has positive externalities (energy with lower levels GHG emissions), subsidies compensate producers for these externalities. Furthermore, renewable energy is still a relatively infant industry, which combined with its inherent positive externalities and increasing global energy demand, make it a prime candidate for government subsidy.

Do not get me wrong, we are still a long way away from the point where China and America can lecture Australia and Canada about their emissions (especially considering that China and America represent large export markets for Australian and Canadian fossil fuels respectively). However, it is interesting to note the role reversal, which I believe at it’s root is a failure of the international community to embrace the concept of “common but differentiated responsibilities”. Previous environmental champions, discouraged by the lack of international commitment to emissions reductions, have created an environment where politicians can win elections by tapping into that frustration. “We have tried, now we are concerned with our own problems.” people in these countries may argue. Australia has taken this stance on step further, with respect to ODA:

The outgoing Labor government said in May that Australia’s long-standing pledge to increase its foreign aid spending to 0.5 percent of gross national income by 2015-16 would be postponed by two years.

The coalition said in a statement last week that it shared Labor’s commitment to reach the 0.5 percent target “over time, but cannot commit to a date given the current state of the federal budget.”

“I have to say, there are higher immediate priorities” than reaching the 0.5 percent target, Abbott told reporters last week. “The best thing we can do for our country and ultimately the best thing we can do for people around the world is to strengthen our economy.”

The plans have been condemned by opponents and aid groups, who dubbed it short-sighted and contrary to the nation’s image of global cooperation, particularly in light of Australia’s recent appointments to presidency of the U.N. Security Council and the G-20 in 2014.

While this stance on international relations is obviously flawed and short-sighted, it is understandable how Canada and Australia got to this point. The U.S. and China, on the other hand, are recognizing they must lead any global initiative to reign in GHG emissions, before the costs rise further and irreparable damage is done.  China has an even more pressing problem, with the deadly smog it’s unchecked emissions has produced. This is the natural ebb and flow of accountability without coordinated global policy. Those who are mostly responsible for GHG emissions, fearing future accountability, want to work together to make those future costs as low and evenly shared as possible. Those who have forgone some economic growth for sustainable development in the past feel they have already done their part, and are beginning to forsake what they see as failed international commitments for domestic goals.
This is a failure of global policy coordination, and one the world cannot afford. The G20 would be a natural place to come up with a global environmental commitment, based on the concept of “common but differentiated responsibilities” (which is really only fair) as the worlds largest emitters are represented there. Furthermore, as a relatively new group (established in 1999, the first meeting of the G20 Leaders took place in Washington, D.C., on November 14-15, 2008)the G20 doesn’t have the history of failed negotiations that sometimes doom other global climate change efforts. Australia taking over the U.N.S.C. and G20 presidency in 2014 looked liked a “win” for sustainable development a few years back; now I am not so sure that is the case.
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Conflict Watch: Oil Sand and Renewable Energy, a New Case for a Carbon Tax / Cap and Trade

An interesting piece in the NYT about how a less incentive-laden renewable energy sector in Europe is actually helping the industry grow “sustainably”:

“Europe used to be nirvana for companies in the clean-energy business, but in the past couple of years it has become a much tougher place. With economies anemic, electricity demand is down; and, not surprisingly, once-generous subsidies that encouraged installing swaths of solar collectors in sun-poor Germany or wind farms in relatively calm areas of France are either being reduced or look as if they could be.

But for some people and companies, the harsher environment is fostering a tough-minded approach that may be healthy for the effort in the years ahead to curb the greenhouse gases that are blamed for global warming.

Europe’s struggles, for instance, pushed Enel Green Power, one of the world’s largest electricity generators from renewable sources like wind and solar, to explore markets like Brazil, Chile and Mexico, that may turn out to be a lot more promising than Europe.”

“Contrary to the practice in much of Europe, where subsidies are used as a lure for renewables projects, developing countries like Brazil often award contracts to build new power capacity through competitions that sometimes pit clean energy against fossil fuels like natural gas and diesel. For instance, Enel Green Power recently won wind power deals in Brazil in bake-offs that included proposals for natural gas-fired stations.

‘There was a competitive approach to renewables that we liked a lot,’ said Francesco Starace, the company’s chief executive'”

“Mr. Starace especially likes long-term deals like the ones he has worked out in Mexico with Nissan and Nestlé to build wind farms to supply factories with power. He hopes to replicate this sort of arrangement across emerging markets, including east Africa. These private, one-on-one arrangements are more sustainable, he figures.

You don’t run the risk of a regulator or a state coming back at you and saying, ‘Guys, the good days are over, now we have to talk about reducing this and that,’ he said.”

“The goal of the renewables business, Mr. Murley said, should be to be competitive eventually on costs with other energy sources and not to rely on subsidies. He also believes in building businesses like his clusters of Swedish wind farms that have the scale to engage a team of managers and the clout to cut better deals with suppliers. His organization tries to buy turbines and other equipment that are reliable rather than cheap and does not skimp on spending money on maintenance.

The closer you are to the wholesale price of power, the less you are at risk,’ he [Tom Murley of HgCapital] said. He is also investing in onshore wind projects in Ireland, where the operating environment resembles that of Sweden.”

Talking about the “sustainability” of the renewable energy sector may be an interesting choice of words, but how the renewable energy sector matures is yet to be decided. Perhaps a rethinking of the subsidy approach to developing renewable energy would be a good think, if a more efficient complimentary / substitute path is proposed. Subsidies distort markets, so governments must have a credible threat that they will stop providing subsidy support if companies in the industry do not mature as they are  supposed to. But pulling the plug on subsidy programs is a bad move politically–it is always difficult to find politicians that are willing to let jobs leave their municipality.

What you get is subsidies and tax-breaks that are not at all linked to any real C-B analysis or long term commitment from companies (Another reason that making MNC themselves finance sustainable energy infrastructure makes sense as it locks the company into a longer term commitment–the cost of closing up shop is greater).  Some tax breaks and subsidies are good ideas, but they should be based on adequate C-B analysis and should contain long-term legally binding commitments. Additionally, tax breaks and subsidies for “dirty-energy” have to go, so that these two competing industries can actually compete on common ground. If we are considering an approach to scale back subsidies for an “infant industry”, removing subsides for a more mature competing industry must be part of that approach.

Ending tax breaks for “dirty energy” brings us to the next point of this article, which is the argument for some sort of carbon-tax or cap-and-trade system. If we are not going to reward the renewable energy industry for its implicit positive externalities, we should make dirtier forms of energy pay for their negative externalities. An article about “petroleum coke” highlights the need for something to keep emissions in check:

“Assumption Park gives residents of this city lovely views of the Ambassador Bridge and the Detroit skyline. Lately they’ve been treated to another sight: a three-story pile of petroleum coke covering an entire city block on the other side of the Detroit River.

Detroit’s ever-growing black mountain is the unloved, unwanted and long overlooked byproduct of Canada’s oil sands boom.

And no one knows quite what to do about it, except Koch Carbon, which owns it.

The company is controlled by Charles and David Koch, wealthy industrialists who back a number of conservative and libertarian causes including activist groups that challenge the science behind climate change. The company sells the high-sulfur, high-carbon waste, usually overseas, where it is burned as fuel.”

““What is really, really disturbing to me is how some companies treat the city of Detroit as a dumping ground,” said Rashida Tlaib, the Michigan state representative for that part of Detroit. “Nobody knew this was going to happen.” Almost 56 percent of Canada’s oil production is from the petroleum-soaked oil sands of northern Alberta, more than 2,000 miles north.”

“Detroit’s pile will not be the only one. Canada’s efforts to sell more products derived from oil sands to the United States, which include transporting it through the proposed Keystone XL pipeline, have pulled more coking south to American refineries, creating more waste product here.”

“And what about the leftover coke? The Environmental Protection Agency will no longer allow any new licenses permitting the burning of petroleum coke in the United States. But D. Mark Routt, a staff energy consultant at KBC Advanced Technologies in Houston, said that overseas companies saw it as a cheap alternative to low-grade coal. In China, it is used to generate electricity, adding to that country’s air-quality problems. There is also strong demand from India and Latin America for American petroleum coke, where it mainly fuels cement-making kilns.

“I’m not making a value statement, but it comes down to emission controls,” Mr. Routt said. “Other people don’t seem to have a problem, which is why it is going to Mexico, which is why it is going to China.”

“It is worse than a byproduct,” Ms. Satterthwaite said.“It’s a waste byproduct that is costly and inconvenient to store, but effectively costs nothing to produce.””

“Lorne Stockman, who recently published a study on petroleum coke for the environmental group Oil Change International, says, “It’s really the dirtiest residue from the dirtiest oil on earth,” he said.”

–Here we have an example of billionaire industrialists selling oil and shipping the dirty byproduct around the world to be burned, releasing even more emissions. And how much does all this profit-generating business pay for it’s emissions? Essentially zero. Oil sand creates 3rd degree pollution (burning of the oil, transportation of petro-coke, and burning of the petro-coke), and because of their lobbying power, industrialists are able to shift the cost onto future generations.

It is appalling our government, and other governments, let companies do this without paying anything for the emissions they produce.  Companies claim they cannot deal with a carbon-tax or cap and trade, while posting billion dollar profit margins. At the end of the day, a carbon tax is a small blip on the companies cost-function. Cap and Trade would initially not even make emissions more expensive, as the market is depressed (due to lower energy demand following the Great Recession) and swamped with low-price / free vouchers. For these reasons, a carbon tax would likely be more effective in the short-run, but having either system in place would be better than what we have now (which is essentially having no system in place to check emissions).

Corporate interests will always claim the sky is falling, and that any additional cost will bring that industry to it’s knees, forcing  them to outsource jobs and close operations. What we would see , I imagine, is that if you call this bluff, often companies will decide the cost and uncertainty of relocation is not worth the small price of paying for emissions (especially if that company had to install, say, a wind-farm when it started operations). If companies want access to developed countries markets, they should have to pay for their emissions. If America and Europe came up with a strong carbon-market (perhaps part of a larger U.S.-Europe FTA?), the rest of the world would join in. The ultimate goal would be a global carbon-market, which would eliminate the threat of companies to move operations to a lower regulation  area.

A double sided approach–ending subsidies / tax-breaks for both renewables and “dirty-energy”, combined with a carbon-tax / cap-and-trade system, could allow market forces to help renewable energy prices converge towards the price of more traditional forms of energy. It would do so while creating a more resilient renewable-energy industry, create a cleaner environment, and open up fiscal space for spending on important social programs.

This approach is different, and theoretically sound–it would be very interesting to see how effective a pilot version of this program could be.

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Monday Morning QB: March Madness Starts Early This Year

http://espn.go.com/video/clip?id=espn:9036126 (link to a video of the brawl between Mexico and Canada in the WBC)

The World Baseball Classic has been about as exciting as anyone could ask for up until this point. The Italian team has been the surprise story of the tournament, emerging from a tough division along with Team USA to make it to the single elimination games. The remaining 8 teams are:

USA, Italy, Dominican Republic, Puerto Rico, Chinese Taipei, Netherlands, Cuba, and Japan.

This list includes some surprises and some obvious names. It was nice to see team USA advance past group play for the first time. The Netherlands may come as a surprise, but players from Curacao (a small island state near Venezuela) help bolster the team’s roster. The Dominican Republic boasts a powerhouse lineup and are many peoples’ favorite to win the whole tournament. Two-time defending champion Japan, whose roster includes a whopping ZERO MLB players, have no intention of letting that happen. There is lots of talent in this WBC, and it has been fun to see some of the non-MLB players getting a chance to shine on a global stage.

It has not been so much fun for everyone; some teams suffered frustrating eliminations. Team Venezuela was expected to go far in this tournament, but could not make it out of a difficult division featuring the D.R. and P.R. Teams Canada and Mexico showed their frustration in the form of a bench clearing brawl (although Canada was not yet eliminated at that point). The Canadian team, up 9-3 in the 9th inning, bunted to get a runner on base (aggregate score is a tie-breaker for group play in the WBC). This prompted Mexican 3B Luis Cruz to tell his pitcher to intentionally hit the next Canadian batter. After several failed attempts, the batter (Rene Tosoni) was hit, and a bench clearing brawl ensued.

It is unfortunate that tempers had to boil over, as the WBC is supposed to be about different countries coming together under the umbrella of Baseball, but it just goes to show you how seriously players take this tournament. The action will only get more intense, as games are now single elimination (although I wouldn’t expect anymore brawls; you want that, go watch any Hockey game).

Congrats to Tiger Woods, whose dominant performance at Doral earned him his 17th World Golf Championship Title. Tiger has paid enough for his transgressions; it is good for him and the game of golf to see him return to championship form.

Congrats to Bernard Hopkins, who over the weekend broke his own record to become the oldest Boxing title holder at 48 years old. “On Saturday, Hopkins beat 30-year-old Tavoris Cloud for the IBF light heavyweight championship.”

Joe Flacco backed Anquan Boldin’s assertion that he will not take a pay cut to stay on the Ravens next year. Joe should really use some of that money he got to hire himself a math tutor, or at least have someone explain how the salary cap works. There was arguably no other player who was more important to Joe Flacco’s playoff success than Boldin, who “in the playoffs, caught 22 passes for 380 yards receiving (95 yards per game) and four touchdowns.” Flacco should put his money where his mouth is, and agree to shave a few million dollars of his record-setting contract in order to bring back the guy who most helped him win the Super Bowl and secure said contract. Boldin has been the Raven’s leading receiver since he came to the team from Arizona three years ago.

Flacco owes much of his success to Boldin, and a small restructure would allow Boldin to stay on the team (Boldin has stated he does not want a pay raise, but he will not take a pay cut either):

“Boldin told USA Today on Saturday he’s unwilling to slash his salary in order to stay with the team, citing “principles.”

“At no point, no matter how well I played, would I come back to the table and say, ‘I need more money.’ The contract that I signed was the contract that I intended to play out,” he told USA Today.”

I believe Boldin is right here, but Flacco “backing him” is a bit of a joke unless he is willing to structure his deal in a way that will allow the Ravens to keep Boldin. In a salary cap league, one man’s record contract is (potentially) coming out of his teammate’s pocket. A great WR can make a QB better, and Boldin’s ability to go up and get the ball has undoubtedly made Flacco better.

Two weeks ago I said that Flacco’s legacy may be determined by how flexible he is with his contract. Signing such a large deal puts a considerable amount of responsibility on Flacco to allow the Ravens the salary cap flexibility needed to ensure they can continue to surround him with championship caliber talent. I never would’ve thought such an opportunity would present itself so soon, but this is an opportunity for Flacco to prove to the city of Baltimore that money is not everything, and that winning is what is most important to Flacco (just to be clear, this would be a very small portion of Flacco’s 6 year 120.9 million dollar contract, as Boldin was only set to make $6 million next year before he was asked to restructure his deal).  

Talk is cheap Flacco. While it is nice to back your WR, it’s time to put your money (which we all know you now have more of than you could ever need) where your mouth is.

Update: It appears that Boldin has been traded to the 49ers for a 6th round pick (once he passes a physical). It’s amazing to me that the team couldn’t figure out a way to keep it’s most consistent weapon following it’s Super Bowl victory and record-setting contract for Joe Flacco, but there you have it. As former teammate and now undisputed No. 1 Ravens WR Torrey Smith put it upon learning of the trade, “This business is BS at times,”Enhanced by Zemanta.

The Ravens lost a big piece in Boldin. Boldin was not the most physically gifted WR at this point in his career, but he was a strong No. 2 WR with exceptional hands who always played bigger than he actually was. The Ravens have a True No. 1 WR in Torrey Smith, but nothing certain after that. Will they draft someone or sign a free agent? Do they believe the explosive Jacoby Jones is ready to make the next step as an every-down WR?

This could end up being a big mistake by the Ravens (I think it is), time will tell.