Normative Narratives


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Trump’s War on the Environment

Despite President Trump’s “pledge” to “promote clean air and clean water”, things are not looking good on the climate change front. By targeting key U.S. policies–the Clean Power Plan and vehicle emission standards–and international agreements–the Paris Climate Accord and the Green Climate Fund–Trump’s administration is threatening to undo recent progress made combating climate change.

Trump’s proposed budget would cut EPA funding by 31%. Scott Pruitt, the new EPA head, said he is unconvinced “that carbon dioxide from human activity is the main driver of climate change.” This is an old tobacco industry tactic, justifying inaction by saying that more research is needed–it is not, there is overwhelming scientific consensus on the subject.

Trump’s budget director, Mick Mulvaney, said of investing in climate change mitigation, “we’re not spending money on that anymore. We consider that to be a waste of your money”. Trump is also reconsidering the government’s use of the “social cost of carbon” metric, which takes into account the potential economic damage from carbon emissions that would result from proposed policies.

All things considered, it is not hyperbolic to say that the Trump administration is carrying out a multi-pronged “War on the Environment”

U.S Emissions–The Clean Power Plan and Vehicle Emission Standards:

Pie chart of total U.S. greenhouse gas emissions by economic sector in 2015. 29 percent is from electricity, 27 percent is from transportation, 21 percent is from industry, 12 percent is from commercial and residential, and 9 percent is from agriculture.

Greenhouse gas emissions in the U.S. are highly concentrated in the electricity, transportation, and industry sectors. These three sectors accounted for 77% of 2014 emissions according to the EPA.

While a national cap-and-trade policy or carbon tax would help reduce emissions across the board, partisan disagreement has prevented such a policy from being enacted. To get around this gridlock, the Obama administration targeted key sectors through existing legislation and executive action. Specifically, the Clean Power Plan (part of the Clean Air Act) addresses emissions in the electricity sector, while stricter vehicle emission standards address emissions in the transportation sector. These important new rules are now in the crosshairs of the Trump administration:

“The tailpipe pollution regulations were among Mr. Obama’s major initiatives to reduce global warming and were put forth jointly by the E.P.A. and the Transportation Department. They would have forced automakers to build passenger cars that achieve an average of 54.5 miles per gallon by 2025, compared with about 36 miles per gallon today.

Those regulations are locked into place for vehicle model years through 2021, and just before Mr. Trump took office, the E.P.A. put forth a final rule intended to cement them for vehicles built from 2022 through 2025. However, the E.P.A. did not jointly release its plan to do so with the Transportation Department, leaving a legal loophole for the Trump administration to take advantage of.

The E.P.A.’s Clean Power Plan regulations, which would cut climate-warming pollution from power plants, will probably be much harder for Mr. Pruitt to undo. He will have to legally withdraw the existing rule and propose a new rule to replace it, a process that could take up to two years and is expected to be fraught with legal challenges and delays along the way.”

Undoing the Clean Power Plan and/or stricter vehicle emission standards would have devastating impacts on air quality (and therefore people’s health) and the fight against climate change.

Global Emissions–The Paris Climate Accord and The Green Climate Fund

The Paris Climate Accord, agreed to by 194 countries, is built on the concept of Intended Nationally Determined Contributions” (INDCs). These contributions represent a country’s climate change mitigation targets, taking into consideration its economic ability and level of development. Trump has vowed to pull the U.S. out of the Accord.

Failure by the U.S. to realize our commitments (a certainty if the Clean Power Plan and stricter vehicle emissions standards are scrapped) would not completely undo the Paris Accord–other countries have stated they will press ahead with its implementation. But, as the world’s second largest greenhouse gas emitter, such a failure would surely crimp the Accord’s effectiveness.

Furthermore, as INDCs are to be updated every 5 years, future commitments by other countries are likely to be less ambitious without U.S. commitment, leadership, and funding. Climate change experts are relying on more ambitious future commitments to stave off the worst impacts of climate change. The Accord was seen as a starting point towards stronger future action, now even this starting point is in jeopardy.

What about the commitments of developing countries, many of which face increasing energy needs and have untapped fossil fuels reserves? While it is true that sustainable development is a challenge, there are reasons to be optimistic. These countries have neither the strong fossil fuel lobbyists nor the “sunk” energy grid infrastructure costs the U.S. does. Furthermore, these countries tend to rely more on agriculture for their economic output, placing a premium on predictable climate patterns and environmental protection. Therefore, with a little prodding in the right direction, developing countries may be willing to largely forgo fossil fuel use–this is where the Green Climate Fund (GCF) comes into play:

“The agreement reaffirms an earlier collective pledge from the developed nations to jointly provide $100 billion a year in grants, loans, and investments in developing countries, from public and private sources.

With energy use soaring over the past decade in Asia, it is clear that helping emerging economies avoid tapping their coal reserves in favor of installing renewable sources in solar, wind, tidal, wave, and geothermal energy will be essential in mitigating their carbon emissions without unfairly stifling their economic development.”

Trump’s proposed budget would completely eliminate America’s contribution to the Green Climate Fund. U.S. leadership is needed to galvanize global efforts to even come close to the lofty GCF goal of $100 billion a year. Without this funding, poorer countries will not be able to meet their commitments under the Paris Accord, further undermining its effectiveness.

If absent Green Climate Funding developing countries develop unsustainably, efforts taken by developed countries to lower their emissions would likely prove inadequate in preventing the worst impacts of climate change.

“It’s the Economy (and National Security), Stupid”

Even if you do not care about the environment or sustainable development, climate change has economic and national security implications for the U.S.

“In terms of returns on investment, climate finance is ridiculously cheap for what America gets for it: goodwill and cooperation, less warming, clean and resilient growth, and, importantly, fewer refugees.

What’s more, these renewable energy sectors hold vast business potential for American companies wanting to supply technical expertise and equipment. Establishing the U.S. as a leader in green energy is directly in the Trump administration’s interest as it aspires to slow, or at least balance, China’s expanding global clout.

Aid to help poor rural farmers on marginal lands adapt and thrive can be the key to avoiding a surge of climate refugees flowing either into already crowded urban centers in the developing world or, worse yet, forcing people to set out on dangerous voyages over land or water in search of a livable future. In security terms, the U.S. military and relief agencies alike understand that an ounce of this kind of prevention is worth a pound of cure.”

Some people may dismiss the notion that climate change is a national security risk as liberal-hippy nonsense, but this is simply not the case. Trump’s own Defense Secretary James Mattis stated climate change was a national security risk during his confirmation hearing.

On the economic front, clean energy related activities already are and will increasingly be big employers in the U.S. However, growth in future clean energy employment could be compromised if Trump’s budget for the Department of Energy comes to pass. “The [budget] plan would eliminate the Advanced Research Projects Agency-Energy, which funds ‘high-risk, high-reward’ research.” This is exactly the type of public R&D needed to ensure the U.S. is a leader in the emerging clean energy economy.

Multilateral clean energy financing also promotes American exports. “…of the top 30 markets for U.S. renewable energy exports—as determined by the Commerce Department—more than half are eligible for GCF [Green Climate Fund] investments. As has occurred in other multilateral environment funds, the GCF is beginning to directly finance some projects that have U.S. sponsors or use U.S. equipment and services.”

China aims to spend at least $360 Billion on renewable energy by 2020 because it understands the value of being the global leader in the clean energy economy. Trump talks about “being tough on China”, however his stance on clean energy investment is anything but.

Resistance Is Not Futile

As with any war, the Trump administration will face resistance in its efforts to undo important environmental protections. Obviously liberals will oppose Trump, and many foreign leaders will try to get him to reconsider his position. The state of California, a progressive thorn in the Trump administration’s side on a number of issues, recently upheld stricter vehicle emission standards in a challenge to the aforementioned rollbacks at the federal level.

Perhaps most significantly, however, is the resistance to Trump’s anti environmental protection agenda that is growing in the Republican party:

The activists’ efforts have not swayed anywhere near a majority yet on Capitol Hill. Only 20 or so of the 237 Republicans in the U.S. House of Representatives have spoken out on climate change this year. But they hope to build a big enough bloc in Congress, or enough influence at the White House, to temper Trump’s agenda.

“It shouldn’t surprise anyone that more and more Republicans are interested in this issue,” said Republican Representative Carlos Curbelo of Florida. “This issue was regrettably politicized some 20 or so years ago, and we are in the process of taking some of the politics out.”

The negative effects of environmental degradation–economic, national security, and health–are felt by people across the political spectrum. If enough Republicans take a stand, it just might be enough to get the fight against climate change back on track.


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Green News: US-EU Free Trade Agreement–Putting the Cart Before The Horse


Negative Externality

Original article:

Officials familiar with the EU’s proposal have told Reuters the European Union will offer to lift 96 percent of existing import tariffs, retaining protection for just a few sensitive products such as beef, poultry and pork.

“This is just the first step, but it sends a message that no sector will be completely shielded from liberalization,” said one person involved in preparing the EU offer. The official declined to be named because of the sensitive nature of the talks. Two other European officials confirmed the offer.

Tariffs between the United States and the European Union are already low, and both sides see greater economic benefits of a transatlantic accord coming from dropping barriers to business.

The United States and the European Union are seeking to seal a trade deal encompassing half the world’s economic output, hoping it can bring economic gains of around $100 billion dollars a year for both sides.

All moves to lower the cost of trade are seen as beneficial for companies, particularly automakers such as Ford, General Motors and Volkswagen, with U.S. and European plants.

EU cars imported into the United States are charged a 2 percent duty, while the EU sets a 10 percent duty on U.S. cars. Including even higher duties for trucks and commercial vans, the burden for automakers amounts to about $1 billion every year.

I have generally been supportive of the US-EU Free Trade Agreement. Two large developed economic blocs dedicated to human rights principles should be able to draft a reciprocal FTA without the adverse human rights implications of the Trans-Pacific Partnership Agreement (TPP) (whether they will remains to be seen).

However, another concern comes to mind. It is a concern that is inherent to all free trade agreements, but more-so the further the geographical distance between partners. I am talking about emissions released from the transportation of goods. In the absence of a global carbon pricing mechanism, environmental concerns are likely to take a backseat to immediate economic interests.

Trade agreements result in increased emissions from the shipment of goods. The purpose of any FTA is to increase the flow of goods by lowering the cost of doing business between partners. Emissions from trading represent a “negative externality“–a cost to society not reflected in the market price of a good. In the absence of a carbon-tax, when the only considerations for transatlantic trade are comparative advantage and transactions costs, any U.S.-E.U. FTA will naturally result in greater emissions than “socially optimal”. Remember, the main purpose of a carbon tax is not to raise revenue, but to reduce carbon emitting activities in favor of more environmentally friendly substitutes.

The E.U. and U.S. “are seeking to seal a trade deal encompassing half the world’s economic output, hoping it can bring economic gains of around $100 billion dollars a year for both sides”; this economic gain should be subject to a carbon tax. An agreement encompassing half of the worlds output, between ideologically aligned partners, is an excellent opportunity to begin implementing new human rights and environmental norms. Failure to do so mainly serves large corporations (although partly consumers as well in the form of higher prices, depending on the elasticity of demand for a good), at the expense of vulnerable groups and future generations.

With all the political rhetoric about overcoming inequality and the costs of environmental degradation, and in light of the damaging effects of human rights violations on economic development and national / global security, it would be a grave mistake for the governments involved to continue to put GDP growth above all else. This outdated priority undermines other foreign policy and domestic goals the U.S. dedicates vast resources towards. 


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Green News: Access to Energy, Poverty Reduction, and a Reason to be Optimistic About Renewable Energy Use in the Developing World

The image shows projections for COemissions and global temperature changes based on different scenarios. Since we cannot know the future of environmental policies, technological advances, or economic growth, projections based on are the best way to hypothesize about these issues. One thing should become apparent after viewing these graphs–while the future is yet undetermined, failure to take action will have dire consequences.

Economic development is an essential component of poverty reduction in the worlds least developed countries (LDCs). However, economic development /poverty reduction are impossible without increased access to energy. Looking at the UN’s “My World 2015” survey, most of the 16 variables “for a better future” rely, to varying degrees, on energy access.

Original article:

In a speech on Monday in Warsaw, the United Nations’ top officer on climate change warned coal industry executives that much of the world’s coal will need to be left in the ground if international climate goals are to be met.

Godfrey G. Gomwe, chairman of the World Coal Association’s energy and climate committee, responded in a speech that, with “1.3 billion people in the world who live without access to electricity,” the questions of climate change and poverty reduction could not be separated.

“A life lived without access to modern energy is a life lived in poverty,” said Mr. Gomwe, who is also chief executive of the mining company Anglo American’s thermal coal business. “As much as some may wish it, coal is not going away.”

Todd Stern, the United States envoy on climate change, said at a news conference in Warsaw that the world’s reliance on coal is “not going to change overnight.” But, “high efficiency coal is certainly better than low efficiency coal,” he added, noting that carbon capture and storage technology was “the most important hope” for coal’s future.

Does this mean that the goals of (extreme) poverty reduction and environmental sustainability are incomparable? No, international efforts for poverty reduction have taken place in the context of “Sustainable Development“. While coal will not “go away”, the chief executive of a coal business is hardly an unbiased agent–he is likely to overstate coals importance in the global energy portfolio. In order to reconcile these two goals, LDCs must meet growing energy demands primarily with zero / low emissions renewable energy sources.

I, for one, am optimistic that LDCs will pursue sustainable development. This is not blind optimism, it is based on political and economic realities.

In the U.S., renewable energy industries face the impediment of strong, established “traditional” energy industries (such as coal power). These industries have billion dollar profit margins and employ large numbers of people. Furthermore, infrastructure or “energy grids” already exist which may not be able to distribute renewable energy, representing large “sunk costs” to switching to renewable energy. In sum, these factors lead to strong local level support and national lobbying efforts for traditional electric. The benefits of renewable energy are realized in the future, while the costs (higher energy prices) and resistance from special interests occur in the present.

In LDCs, where many people are “off the grid”, these “incumbency” obstacles do not exist. In LDCs, people rely primarily on the agrarian economy, and are therefore more likely to support environmentally sustainable energy sources. Furthermore, “off-the-grid-renewable energy” represents a way of bypassing the large fixed costs associated with building traditional energy grids–something that is extremely important in the context of the world’s poorest countries:

Sub-Saharan Africa is also seen as a promising context for renewables. An analogy with the region’s adoption of mobile phones suggests sub-Saharan Africa could dispense with polluting, grid-connected power plants – just as it skipped landline telephones — and move straight into distributed generation from renewables.

Yet a note of caution enters any forecast for any region that so consistently outwits the sharpest analysts. Bhattacharyya tallies up several points for optimism but, while sharing Cohen’s enthusiasm, expresses doubt about the scale of development.

‘The market-driven approach’ has started to ‘flourish’ in areas such as Kenya, he says. He also sees grounds for optimism in how global attention on the lack of access to clean energies by agencies such as the UN, IEA and World Bank has also raised local recognition and awareness of the issue.

In ‘an optimistic case’ he forecasts that sub-Saharan Africa could add a few gigawatts through off-grid technologies, bringing electricity to millions of its people.

‘There is surely huge potential for off-grid options but it is difficult to tell how much is really likely to materialise,’ he says.

The issue with financing renewable energy projects was supposed to be addressed by the UN Green Climate Fund; developed countries promised $100 billion a year to the developed world by 2020 to help cope with and reverse climate change. Issues over “common but differentiated responsibilities“, as well as austerity measures in response to the Great recession, call the availability of these resources into question.

One potential means of making up this funding gap is through a so-called “feed in tariff“:

The report by the World Future Council says providing feed-in tariffs for developing countries so that they can finance setting up large-scale renewable systems and feed electricity to their grids is the best way forward for the fund.

Feed-in tariffs provide the owners of small or large-scale wind and solar arrays with a guaranteed price for electricity over 20 years, so the investor is certain to get a return on their capital. The scheme has worked in developed countries like Germany and Italy to rapidly boost renewable output.

An added problem in developing countries is making sure that the national or local grid can take up and use the electricity generated. Some developed countries have already had difficulties with this, so sorting out the grid must be part of any financing package, the report says.

The report envisages 100 gigawatts of electricity being funded in this way by 2020 – the equivalent of the output of 100 large-scale coal-fired power plants. This would cost 1.3 billion euros a year to fund, sustained over two decades. 

Feed-in tariffs require energy grids to feed-into, and for that reason are not a viable option for the most impoverished / remote areas in the world which do not currently have traditional energy grids. For areas in the developing countries with traditional grids, this is a viable solution. For other areas, financing for off-the-grid renewable energy must be made available. The ability to reconcile economic development, environmental sustainability, and poverty reduction–sustainable development–depends on it.

Update: Alternatively, perhaps off the grid renewable energy can be stored in batteries and sold as part of a feed-in tariff. I know advances are being made in large scale renewable storage in large batteries, I wonder if there is a way to make this work on a small scale as well. Just a though…


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Green News: Walmart, Wages, Emissions, and Personal Accountability in a Democracy

Original Article:

Walmart is one of the biggest and fastest-growing polluters in the nation, despite the company’s 2005 pledge to become an environmental leader, according to a report from the Institute for Local Self-Reliance (ILSR).

The retail giant emits 45 million metric tons of CO2e (carbon dioxide equivalent), slightly more than Target, at 42 million metric tons, and significantly more than Costco, at 16 million metric tons, according to the report.

“The scale of Walmart’s energy efficiency and renewable power measures is not up to the scale of their business or their growth,” Stacy Mitchell, the author of the report, told Al Jazeera. “They been placing solar powers on the rooftops and getting some wind power and so on, but Walmart only derives 4 percent of its energy from renewable energy sources.”

“This is a business model that is built on these far-flung distributors and goods that are trucked all over the country [and shipped all over the world],” Mitchell said. “There are fundamental aspects of Walmart’s business model that are at odds with sustainability.”

Walmart spokesperson Christopher Schraeder told Al Jazeera that the company is “working hard every day to find solutions to the most pressing sustainability issues,” and that has “ambitious sustainability goals to improve our operations, increase fleet efficiency, source locally and sell more sustainable products.

Mitchell acknowledged that significant change in emissions will have to come through legislation, not just from companies becoming more ‘green.’

But with Congress more divided than ever, that’s not likely to happen soon, especially when companies use their financial resources and lobby members of Congress to block environmental protection measures.

Through the Walmart Stores Inc. PAC for Responsible Government, Walmart has given more than $22 million to politicians who are opposed to legislation that would regulate emissions and promote climate change.

In the 2008 elections, 80 percent of Walmart’s senate campaign contributions went to people who blocked the “cap-and-trade” bill, which would have reduced carbon dioxide and other greenhouse gas emmissions across the U.S. economy. In the 2012 elections, 70 percent of donations went to people who supported the Keystone XL pipeline

Walmart has gotten a bad rap over a number of issues, and in the past I have been critical of Walmart’s business model as well. But I was still fair in my analysis back then; the two main issues Walmart receives flack for–employee compensation and emissions–need to be addressed by government policy:

 

1) Employee Compensation: This is as clear cut an example of policy failure there can be. Walmart, by paying its sales associates an average of $8.81 cents / hr, is not breaking any laws. This comes out to a yearly income of a little over $15,000, placing a large burden on the social safety net:

On the flip side of this, it costs the nation an estimated $1 billion a year in social safety net use. Essentially, the U.S. taxpayer is subsidizing Walmart’s  low wages, which systematically produce full-time workers living below the poverty line.

It should raise a red flag that the same ideology opposed to safety net policies also tends to be against higher minimum wage legislation as well. It used to be that if you worked hard you could live a comfortable middle-class life and have enough to invest in a better future for your children. With the current minimum wage, the American Dream is no longer a reality for a large number of hard working but less-skilled Americans.

The plan to increase the federal minimum wage to $10/hr  (and thereafter tying it to a cost of living metric such as the CPI) beginning in 2014 (I believe the plan is to phase it in over three years) is a good start. This could also have the effect of pushing up non-minimum wage compensation as well, as employers looking for more skilled labor will have to compete with higher minimum wage employers. Such changes are all the more important in the context of rising inequality and falling median incomes (which are at their lowest level since 1995).

2) Emissions: 

As the report states, “significant change in emissions will have to come through legislation, not just from companies becoming more ‘green.’”. Corporate social responsibility (CSR) is a nice idea, but it only changes things at the margin. As with employee compensation, the real driver of change must come from carbon tax / cap-and-trade legislation. With proper legislation in place, CSR gives way to more enforceable corporate accountability.

Another important element of environmental sustainability should come from tax incentives for using local producers. This legislation would be less politically contentious than carbon taxation, but would have a huge impact on emissions. According to the ILSR report, Walmart’s carbon emissions disclosure does not include emissions from international shipping. However, this is a large component of Walmart’s competitive advantage, finding the lowest cost producers, which are always in developing countries due to lower labor costs. Since there is no taxation on emissions, as long as the price of production + transporting from the developing world is lower than the price of producing domestically, retailers such as Walmart have little incentive to choose the later.

By evening the playing field through tax incentives, the benefits would be twofold: 1) stimulating the U.S. economy through more local production and 2) lower emissions due to less transportation from production site to the store. These tax incentives could be paired with carbon tax / cap-and-trade revenue (to fulfill the revenue-neutrality legislative condition the G.O.P. lives by), further tilting the playing field towards lower emission  American production.

Walmart’s own CSR initiatives have led to an increase in American production, appropriate legislation can (literally and figuratively) bring these changes home.

I would like to take this opportunity to also highlight an example of the political economy definition of a “collective action problem”:

Through the Walmart Stores Inc. PAC for Responsible Government, Walmart has given more than $22 million to politicians who are opposed to legislation that would regulate emissions and promote climate change.

In the 2008 elections, 80 percent of Walmart’s senate campaign contributions went to people who blocked the “cap-and-trade” bill, which would have reduced carbon dioxide and other greenhouse gas emmissions across the U.S. economy.

A collective action problems occurs when a large group of people would be better off with a change, but that change does not occur because the gains to each individual in that large group are small, while the losses imposed by the change on a small group are large. In this case, the American public would be better off with regulations on GHG emissions, but these improvements in environmental quality are hard to quantify and will occur only in the future. In contrast, the cost to the small group (Walmart) is large and immediate–having to pay for emissions. Therefore, it is rational for Walmart to use it’s resources ($22 million in this case) to lobby against these changes.

But there is strength in numbers and in public opinion, particularly in a democracy. While civil society may not be able to raise money to counter Walmart’s lobby, it need not do so to overcome the collective action problem. This comes down to an issue of social accountability. In a democracy, we can vote for lawmakers who will stand up to lobbies for the greater public good.

The fact that these politicians are rare-to-non-existent is partially due to legislation (lobbying money is allowed to influence lawmakers), but mainly it is due to a failure of social accountability. People are either too busy or too cynical to vote, with the aggregate outcome of a legislature that represents the interests of it donors rather than its constituents.

Democracy is powerful, voting is powerful. It is why we see wars fought in the name of democracy; people are willing to die for the rights we as a nation largely take for granted. Our ability to move forward as a nation whose laws represents the interest of the general public hinges on overcoming cynicism in the democratic process.

Finger-pointing and playing the blame game are not the answers. Education / information dissemination is an important element of overcoming collective action problems, and is largely why I do what I do here at NN. But ultimately the responsibility lies with each and every U.S. citizen. Belief in the power of the democratic process is the only way to return to the more egalitarian America of yesteryear.


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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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