Sunday, July 31, 2011

Can taxation speed our energy transition?

Some time ago an economist with whom I had an extensive exchange suggested that the best way to incentivize an energy transition would be to tax what we don't want and let the market do the rest. It was really such an elegant approach and an impractical one, I thought.

The economist's view was that if we don't want people to burn carbon-based fuels, then we should just tax those fuels heavily. What he opposed was any direct subsidies to alternatives such as wind, solar, and biomass. This would only serve to distort the economy, he said, and it is too hard to figure out the quickest path to an energy transition from the vantage point of a central government.

Indeed, one of the proposals before the U.S. Congress would be to tax carbon and rebate a substantial portion of the revenues to the taxpayers. This increasingly seems like a better idea than so-called "cap and trade" schemes which may not be able to cover all types of carbon-based energy and will likely be gamed by the same financial wizards on Wall Street that brought us the crash of 2008.

And so, I do agree with my economist acquaintance that taxation could be an elegant method for facilitating an energy transition. But is such taxation practical and even adequate? One might point to Europe where extremely high fuel taxes have been part of the reason that the average European uses one-half the amount of energy of the average American. Whether high fuel taxes could become a reality in the United States is an open question. So far no American politician has dared to propose a level of taxation comparable to Europe.

The main reason for this is that the United States still has enormous fossil fuel reserves and as a consequence a well-funded fossil fuel lobby that has a stranglehold on the U.S. Congress. Europe is now largely bereft of fossil fuels and therefore has a fossil fuel lobby without the necessary influence to prevent high energy taxes and heavy expenditures on public transportation.

And what about promoting public transportation? I asked my economist. If automobile and highway transportation had not been so heavily subsidized by the government, he explained, what we call public transportation today might have remained excellent and in private hands just as it was before automobiles supplanted rail and streetcar transportation. In addition, air travel has been heavily subsidized through airport construction and maintenance and a federally supervised air traffic control system. Take away all the subsidies, the economist suggested, and the price of air and automobile transport would rise to the point that privately maintained rail and bus transportation would likely be competitive.

Perhaps. But we cannot run that movie backwards and start over again. The subsidized infrastructure for automobiles and airplanes is already in place. And, periodic attempts to hike energy taxes in the United States to achieve various objectives including reducing the federal deficit, reducing oil imports, increasing energy efficiency, and reducing pollution have only met with failure. In 1970 President Richard Nixon briefly entertained the idea of an oil import tariff, but then dropped it. In 1980 independent presidential candidate John Anderson proposed a 50-cent per gallon tax on gasoline and finished with just 7 percent of the popular vote. President Bill Clinton tried to tax fuels based on their BTU content. But the plan was ultimately shot down in the Senate. Certainly, some energy taxes have risen such as state gasoline taxes, but only to keep pace with the need to maintain and build roads and bridges which, of course, encourage yet more fossil fuel consumption. (And even the increases in these taxes have largely failed to keep pace with the need for repairs of America's crumbling transportation infrastructure.)

The only taxes in the United States which have risen sharply are those on things which the public has long since categorized as a menace. So-called "sin" taxes have been popular with state governments attempting to balance their budgets. For example, taxes on cigarettes have risen steeply in most states.

But it is probably a vain hope that Americans will come to regard our fossil fuel addiction to be as serious as our addiction to cigarettes and decide to levy high taxes both to discourage fossil fuel use and to encourage alternatives. Taxing fossil fuels heavily and ending subsidies that encourage their use would be an elegant approach for sure. But I believe such an approach continues to be politically very difficult to implement in the United States. Therefore, we in America must work with what is currently feasible--a hodgepodge of government subsidies and tax incentives for alternatives to fossil fuels and for energy efficiency that unfortunately are subject to attacks from the fossil fuel lobby on a regular basis.

Sunday, July 24, 2011

Fly me to the moon (and let me mine among the stars)

Several years ago a young boy asked me during a presentation if we might be able to pipe in oil and natural gas from the Moon or other planets. I thanked him for the idea and explained that the cost of a pipeline would be far greater than the value of any oil and natural gas we might find.

But dreams of exploiting mineral wealth on other celestial bodies lurk not only in the minds of young boys, but also in the minds of intelligent and completely sane adults. The most recent iteration of this dream comes from scientists working on fusion energy. It turns out that helium-3, a rare isotope of helium, may be useful as fuel for fusion reactors. The very small quantities of helium-3 available on planet Earth are a byproduct of the manufacture of hydrogen bombs using tritium, a radioactive isotope of hydrogen. Ironically, one of the advantages of helium-3 in fusion reactors is that it lends itself less to weapons proliferation than tritium, the decay of which is the source of helium-3. In addition, helium-3 fueled reactors would produce no radioactive waste.

The problem is getting sufficient quantities of the stuff. The solution according to one scientist working on a helium-3 fusion reactor is to mine the isotope on the Moon and bring it back to Earth. The Moon's surface is thought to contain a million tons. At the current price of $7,000 a gram with a little more than 900,000 grams to a ton, that works out to be about $6.3 quadrillion. One could expect the price to decline somewhat should a steady supply become available.

I am reminded of James Howard Kunstler's admonition that during times of great stress mass delusions of deliverance--in this case through technology--are often afoot. I cannot fault fusion researchers for working on the intriguing problem of sustaining a fusion reaction that will produce more energy than it consumes. Nor can I fault them for seeking out the safest fuel possible. But the drumbeat in the media that alternatives are just around the corner--if we will only do things such as set up a Moon base and mine the surface--take the public's eye off more viable responses.

This is no conspiracy. The past 150 years of astonishing technical advances have trained us all to expect more of the same in response to every perceived problem. We've actually been to the Moon and back, carrying hundreds of pounds of its surface with us on the return trip for use in scientific investigations. Couldn't we just go back and do it on a greater scale?

The potential financial rewards may make it seem possible. But wait! First, we have to perfect fusion using helium-3. This is where the public and the media conveniently forget that scientists, some of them quite well-funded, have been working on fusion energy for 60 years already. And yet, even the most lavishly funded of the current crop of projects, the International Thermonuclear Experimental Reactor (ITER), explains on its website that "[t]he timescale to commercial fusion therefore extends until at least the middle of this century...." All this should tell us that the technical hurdles to producing commercial electricity from fusion may never be breached or at least not in any time frame that matters to a world whose main sources of energy, fossil fuels, will certainly peak and begin declining before mid-century and likely much sooner.

In addition, many of the services that are necessary to ITER are currently powered by fossil fuels--though one must admit that ITER's location in France means it is more dependent on the power generation of conventional fission reactors than it would be elsewhere. But even those fission reactors are heavily dependent on fossil fuels for their servicing.

To the already long, complex logistics chain for reactors, the proponents of the helium-3 fueled version of the fusion reactor hope someday to add mining on the Moon. Of course, it is in the nature of humans to dream. And, their technological dreams have been made manifest in many ways in the industrial age. But the fulfillment of those dreams has been largely due to the wide availability and low cost of energy resources, the vast majority of them from fossil fuels.

Ignorant of that reality we can imagine just about anything--even mining camps on the Moon with ore-carrying shuttles. But the decline of fossil fuels--which have up until now allowed us to harbor such daydreams--may soon shock us back to reality and return us to the urgent task of organizing a society that runs on less, not more energy.

Sunday, July 17, 2011

Less energy is better--really

I now make it a staple of my public talks on energy to ask who in the audience has been to Europe. Usually many hands rise. I then explain that Americans seem to love to get on a jet plane, cross the Atlantic, and spend time in a theme park called Europe where good meals abound; interesting and usually friendly people reside; and beautiful, historic cities and breathtaking countryside are everywhere. What they may not know is that by American standards Europeans live in an energy-starved society where the per capita energy consumption is only half that of the United States.

There are many things that make European energy frugality possible: the density of European cities; the wide availability of good public transportation; the willingness of people to walk or bicycle to their destinations; small cars; and parsimonious use of central heating to name just a few. Perhaps the key to understanding Europeans when it comes to energy use is the very high price of energy in Europe, due primarily to stratospheric energy taxes. For example, in the United Kingdom the effective tax rate on motor fuel for automobiles as of December 2010 was 175 percent. When something costs a lot, people tend to figure out how to use less of it or to use it not at all.

The European example should give us great pause on this side of the Atlantic. It is perhaps the clearest illustration that beyond a certain level of energy consumption, the quality of life rises almost imperceptibly or not at all. In fact, high energy use may even be correlated to a lower quality of life in the United States where obesity and diabetes have become epidemics (in part because we drive too much instead of walking or bicycling); where sprawled out suburban development made possible by cheap fuel condemns many of us to spend hours in the car each day; where the availability of that cheap fuel encourages motorized recreation that keeps our lakes and parks abuzz with engine noise while it degrades and pollutes them; where cheap consumer goods are often characterized by their low quality; where mountains of those shoddy goods clog our landfills; and where all the required extra energy production creates additional pollution at our mines, power plants and factories.

And yet in the United States, we continue to focus on producing ever increasing amounts of energy, believing wrongly that greater energy use will always mean an increasing quality of life. Any person who dares to talk about cutting our energy use usually gets shouted down as a Luddite who hates the poor and cares for plants and animals more than human beings. Keep in mind that compared to America, European countries collectively run an economy larger than that of the United States; generally have considerably lower levels of inequality; provide universal health care with better overall outcomes; and enforce stricter environmental, health and safety regulations--all on half the energy per person. Vaclav Smil illustrates this phenomenon in a recent article entitled "Science, energy, ethics, and civilization." (PDF) He notes that there is an inflection point for many quality of life measures at around 100 gigajoules/year per person. Above that, indicators improve very little. For comparison the United States uses 330 gigajoules/year per person. Smil thinks consumption above 200 gigajoules is actually counterproductive.

To the rational mind the sensible thing to do would be to cut down. But humans are evolutionarily designed for scarcity. Their evolutionary impulses haven't caught up with modern realities. Besides this, consumption has also become correlated with status. As Thorsten Veblen so ably explained in The Theory of the Leisure Class, in a mass society it is much easier to display one's social position to large numbers of people by buying a grand mansion or an expensive automobile than by trying to walk the streets of a city the size of New York with a large retinue. Veblen coined the now familiar phrase to describe the first strategy: conspicuous consumption. The second strategy often sufficed in ancient Rome which was, of course, much smaller in population than New York. Veblen also expressly showed how the quest for social status trumped abstract theoretical notions of rational utility-seeking in economic decision-making.

Humans are energy-gathering machines. If they did not gather more energy than they expend, they would instantly die out. Every organism on the planet seeks to maximize its energy gain. So consistent is this pattern that Howard Odum dubbed it the Maximum Power Principle and proposed it as the fourth law of thermodynamics.

But as with any adaptive strategy, it eventually becomes maladaptive. If an organism cannot evolve to match changing conditions--in this case, rapid fossil fuel depletion, climate change, soil degradation and so on--then dieoff or extinction can follow. And, just because I and many others can articulate the problem, it does not at all imply that a meaningful and broad-based understanding can spread and that a response can be implemented in time to avert the worst. Every fiber of a human being instinctively rejects limits on energy gathering--unless those limits can be framed as a necessary sacrifice for the good of a group to which that human being feels a strong attachment.

To say one needs to use less energy for the good of humanity has very limited appeal. To say one needs to do it for God, king and country is a move in the right direction.

Sunday, July 10, 2011

Did I miss something or is Canada now the 51st state?

Back in 2008 my congressman, Fred Upton (R-Michigan), then the ranking Republican member of the U.S. House Subcommittee on Energy and Air Quality, still acknowledged there was a border between the United States and Canada. He claimed that oil from the Canadian tar sands was not reaching the United States, saying, "We stop it at the border." He meant he believed that the pipeline network could not bring it into the United States, a claim that was simply wrong.

But he did get the part about there being a border between the two countries right. Since then Upton has become the chairman of the House Energy and Commerce Committee, and with his elevation, the U.S.-Canadian border seems to have vanished. No, we Americans are not now living in provinces that report to Ottawa. Instead, it is Canada that has become part of the United States. Here is the exchange between Upton and Energy Now! in a recent interview. The interviewer asks about the release of oil from the U.S. Strategic Petroleum Reserve:

INTERVIEWER: But the reasoning is that, essentially, this is an emergency, because of the loss of 140 million barrels so far of oil because of the strife in Libya, 1.5 million barrels a day. And also because gasoline prices are high. Those aren't emergencies?

UPTON: Well, a couple things. The administration has so far blocked the permitting and plans in the Gulf, which allows 1/3 of our oil to come from that region. If they simply say--and already it's hundreds of thousands of barrels a day, from projections that were made public just, you know, last fall--if they would simply say, "It's time to start again here in this country," whether it's from Canada, Alaska, the Gulf, I think that we could more than make up for what the disruption has been for the Middle East.

Now, I am almost certain that Upton realizes that Canada is a separate country. But for purposes of energy supply he speaks as if it isn't. And, that is indicative of the signal pathology of America energy policy. We have failed to manage our energy use and deploy sufficient alternatives so that we can be largely independent of energy imports. Instead, the United States military has long since become a vast worldwide oil supply protection force that is currently mired in three wars in Iraq, Afghanistan and Libya. We don't factor the trillions spent on this task into our energy costs, but we should. We would then find it much cheaper (in terms of money, not to mention loss of life) simply to reduce our energy use through conservation and efficiency while deploying alternatives. We got started on this in the 1970s. But, we were lulled to sleep by deceptively low energy prices in the 1980s and 1990s.

The implication of our current posture is that "our" oil is merely inconveniently parked under the territory of other countries, Canada among them. While the North American Free Trade Agreement prevents Canada from abruptly reducing America's share of oil production coming from that country, Canadians can pull out of the agreement with six months' notice. How would the United States react if the Canadians decided to export more of their oil to Asia? Or to reserve more oil for domestic consumption? Or simply to lower production to save oil for future generations of Canadians?

For now Upton has the luxury of thinking of Canada as America's 51st state for purposes of energy supply. A strenuously pro-American administration currently sits in Ottawa and wants ever closer ties to the United States. But as events around the world remind us, it may not be ever thus.

Keep in mind that Canada imported more than 43 percent of the crude oil it used in 2010, according the country's National Energy Board. That's right, imported! That's because even though the country produces almost one and half times the oil it consumes, it has never bothered to link sufficiently the western part of the country with the eastern part to move that oil from where it is primarily produced to where it is primarily consumed. The bulk of Canadian oil production is exported to the United States. So, the eastern provinces must import substantial amounts of oil from abroad. Canada could be oil independent, but chooses not to--for now. (In fact, it could be entirely energy independent when one considers its substantial production of uranium and natural gas.)

It is not only sloppy thinking to regard oil in Canada and other countries as "our" oil. It is a mindset dangerously out of touch with the emerging realities of strained global oil supplies. One has only to imagine how Americans and especially members of Congress would feel if it were Canada treating the United States as merely another province to be plucked of its energy resources at will.

We would almost certainly hear thundering voices across the airwaves and in the halls of Congress sounding the alarm over the threat to our sovereignty and the importance of reserving vital energy supplies for use by the American people. What makes us think that Canadians won't someday feel that same way about the oil they are exporting to the United States?

Sunday, July 03, 2011

Interview on Equal Time radio

In lieu of my regular posting, I'm linking to a radio interview I did last week on WDEV which is located in Waterbury, Vermont. Carl Etnier, host of the show "Equal Time," started with my peak-oil-themed novel Prelude. Then, we went on to a wide-ranging discussion which covered who in government circles understands peak oil, Vermont's new peak-oil-aware governor, the inscrutable and often unmanageably complex human-built systems within which we live, the advisability of using nature as a guide for redesigning those systems, and recent revelations in the media about exaggerated and perhaps fraudulent claims concerning the amount of natural gas we can expect from shale gas fields. The second half of the hour-long program is devoted to an interview with a Vermont Law School faculty member who discusses the fight over possible closure of the Yankee nuclear power plant in Vermont. Here again is the link for the entire program:

Equal Time Interview 6/27/11