The Green Update

Stephen DeAngelis

February 18, 2009

One of the prominent themes of President Obama’s campaign was developing a “green economy” and creating 5 million new jobs. Sensing an opportunity, former Vice President Al Gore went to Capitol Hill to lecture his former colleagues with an “update of his Oscar-winning documentary, ‘An Inconvenient Truth'” [“Gore Urges Cap on Carbon Emissions, Global Climate Pact,” by Juliet Eilperin, Washington Post, 29 January 2009]. During his presentation, “Gore urged lawmakers … to adopt a binding carbon cap and push for a new international climate pact by the end of this year in order to avert catastrophic global warming.”

“Gore received a largely sympathetic hearing from the panel. ‘Frankly, the science is screaming at us,’ said the committee’s chairman, John F. Kerry (D-Mass.), who added that the United States would not make the mistake of leaving emerging economies out of any future climate agreement. ‘A global problem demands a global effort, and today we are working toward a solution with a role for developed and developing countries alike, which will be vital as we work to build consensus here at home in tough economic times,’ Kerry said.”

Featured in a television ad sponsored by the coal industry are remarks made by Obama during his campaign in which he insists that if America was able to put a man on the moon it must certainly be able to develop a clean way to burn coal. In his remarks to senators, Gore was not so sanguine.

“While politicians including President Obama have touted the importance of exploring ‘clean coal technology,’ the former vice president said it will not be available for years: ‘We must avoid becoming vulnerable to the illusion that this is near at hand. It is not.’ … After distancing himself from his political past — ‘I’m a recovering politician. I’m on about Step 9′ — Gore said the chances of a treaty passing the Senate should be boosted by developing countries’ willingness to embrace binding climate goals, coupled with the new scientific evidence of recent warming and Obama’s leadership.”

It was clear during the hearings that Republican senators favor a carbon tax over a cap-and-trade system. Most of the senators, Eilperin reports agreed that the end game was “about increasing the price of carbon.” The Economist believes that a carbon cap-and-trade system is a better approach to addressing greenhouse gas emissions than subsidizing the development of alternative sources of energy [“Green, easy and wrong,” 8 November 2008 print edition].

“Two pressing problems face the world: economic meltdown and global warming. Conveniently, a solution presents itself that apparently solves both: governments should invest heavily in green technology, thus boosting demand while transforming the energy business. This notion is gaining credence around the world. Last month the United Nations called for a ‘Global Green New Deal’. But it is in America that the idea is really taking off. The United States Conference of Mayors reckons that green investment should provide 2.5m jobs. The Centre for American Progress, a leftish think-tank, thinks $100 billion worth of spending in the area would spawn 2m jobs. The new president tops both. Barack Obama proposes spending $150 billion over ten years, thus helping, he says, to create 5m jobs. … Mr Obama’s commitment to solving climate change is devoutly to be welcomed. There is also a case for giving the economy a boost through government spending. But combining the two by subsidising renewable energy is, like many easy answers, the wrong solution.”

The magazine acknowledges that governments can promote cleaner energy either by enacting a cap-and-trade system and/or by reducing costs of clean energy.

“Mr Obama is, quite rightly, planning to introduce a cap-and-trade system, but he is also promising massive subsidies. Making polluters pay is unpopular with companies. Politicians don’t much like it either, because it means a fight with business. But it’s the efficient way to discourage pollution, because it shifts costs onto those who should bear them, and allows the market to pick the best way of cutting emissions. Subsidies are more popular but both theory and practice argue against them. Subsidising clean energy requires politicians to decide on the best way of delivering it, and their judgment is likely to be worse than the market’s. America’s huge ethanol subsidies, for instance, have led to overinvestment in the businesses, which is now experiencing a sharp bust, and have helped drive up the price of food, with painful consequences for the world’s poor. Germany’s generous solar subsidies covered the roofs of one of the world’s most sunless countries with solar cells, thus pushing up the price of silicon and reducing the cost-effectiveness of solar power in countries where it actually makes sense. Both subsidies promoted the wrong technologies; both wasted taxpayers’ money. The easy notion that there is a single solution to the world’s economic and climatic problems is, thus, a dangerous one.”

The Economist argues that synergy can be created, but not from any plan that relies on subsidies.

“In the midst of a financial crisis seen as emanating from Wall Street, a demonstration of leadership would help burnish ‘Brand America’. Combating climate change, which demands technological and financial resources of the sort that only America has, offers the right sort of challenge. The world needs America to lead the fight against climate change. But if Mr Obama goes about it the easy way, rather than the right way, he will discredit the cause he espouses, and thus damage the planet instead of saving it.”

What the article doesn’t really address is the fact that the government’s most urgent concern is creating jobs not reducing emissions. A cap-and-trade system won’t stimulate job creation to the extent necessary to have an impact on the current recession. While a cap-and-trade system would stimulate the sector that deals with technologies aimed at reducing emissions, it wouldn’t create nearly as many jobs as the development of an invigorated green sector. That doesn’t necessarily lead to the conclusion that subsidies to develop alternative forms of energy are right answer. In an earlier article, The Economist reported how information and communications technologies (ICT) can help reduce emissions by making systems that use or distribute energy more efficient [“Computing sustainability,” 21 June 2008 print edition].

“A group of technology firms calling itself the Global eSustainability Initiative (GeSI) has joined the Climate Group, a non-profit environmental club, to examine how information and communications technologies (ICT) affect climate change.”

The place to start to reduce emissions, of course, is the with ICT industry itself.

“When it comes to emissions, ICT is on a par with aviation. In 2007, according to the report, the world’s electronic gear (including PCs, their peripherals, telecoms networks and devices, and the warehouses of corporate machines known as data centres) produced 830m tonnes of CO2—about 2% of total emissions from human activity. Even with technology that uses energy more sparingly, this is expected to grow to 1.4 billion tonnes by 2020. Although PCs, mobile phones and networks will account for most (56%) of this, emissions from data centres will grow the fastest.”

A number of companies are working on how to make data centers more energy efficient; but the big benefits offered by ICT are in helping make other systems more energy efficient. GeSI talks about this as the “enabling effect” of ICT.

“[A GeSI] study calculates that ICT could help to reduce emissions in other industries by 7.8 billion tonnes by 2020, or five times ICT’s own footprint. Perhaps the best-known of these enabling effects is to replace face-to-face meetings, which require carbon-belching air travel, with low-emission alternatives such as videoconferencing. John Chambers, the boss of Cisco, a big maker of network equipment, says his company has reduced its carbon footprint by 11% by using its own ‘telepresence’ gear. It also means higher productivity and reduced ‘wear and tear’ on executives, he adds. But reducing transport emissions using technologies such as videoconferencing and teleworking turn out to be some of the smaller enabling effects—saving a potential 140m and 220m tonnes of CO2 a year in 2020 respectively. Using computers to improve logistics (for example, by planning the routes of delivery vehicles more efficiently) could save 1.5 billion tonnes; using data networking inside a ‘smart’ electrical grid to manage demand and reduce unnecessary energy consumption could save 2 billion tonnes; and computer-enabled ‘smart buildings’, in which lighting and ventilation systems turn themselves off if nobody is around, could save 1.7 billion tonnes.”

 

The article admits that achieving these savings will not be easy, but it notes that “people, economics, and politics” will all be necessary to make it happen. That sounds like a formula ripe for the stimulus package.

“None of this will be easy. The industry can supply the hardware and software, but the bigger problem is the ‘wetware’—people, economics and politics. The right skills are often scarce. Incentives are lacking for businesses to invest in carbon-reducing technology. There need to be new technical standards. For transport, power grids and buildings to become more efficient, there must be rules on how, for instance, refrigerators should talk to electricity meters, and thermostats to heating systems. But the internet shows that when common standards are agreed on in an industry, great things can happen. The technology industry’s contribution to tackling climate change may come from its standards bodies as much as its clever gizmos.”

I certainly agree with most of The Economist‘s conclusions. Most Enterra Solutions® offerings focus on the efficient use of standards, rules, and efficient relationships. In order to reduce emissions and get people back to work “great things” need to happen. A little less partisanship in Washington would be one of those “great things.”