Future Energy

How Does Canada Stand in the Clean Energy Race?

Source: sustainabilitygalore.com

Although it was released March 29^th, I only got around to looking at the Pew Environment Group's latest analysis of clean energy investment over this past weekend.  Who's Winning the Clean Energy Race? 2010 Edition estimates that global clean energy investment reached US$243 billion in 2010 a 30% increase over 2009.  For the second year, the investment champion is China, which invested a total of US$54.4 billion followed by Germany (US$41.2) and the U.S. (US$34.0).

"The clean energy sector is emerging as one of the most dynamic and competitive in the world, witnessing 630 percent growth in finance and investments since 2004," said Phyllis Cuttino, director of Pew's Clean Energy Program. "Countries like China, Germany and India were attractive to financers because they have national policies that support renewable energy standards, carbon reduction targets and/or incentives for investment and production that create long-term certainty for investors."

Canada came in a lowly 7th place, investing US$5.6 billion - which is actually not bad given a population 1/10^th the sixth of that in the U.S. (and only 1/40^th that of China).  As a country we only accounted for 2.8% of the G-20 investment total.

Pew's Fact Sheet for Canada is brief but attributes most of the control over clean energy investment to the provinces - and, although, they don't break the country totals down by province, its likely that Ontario accounted for the lion's share of investment this past year.  In large part this attributable to the feed-in tariff and the Renewable Energy Standard the province has in place. 

(Interestingly, the report highlights the important role of Feed-In Tariffs (FIT's) in supporting clean energy investment.  Pew cites the US National Renewable Energy Laboratory which estimates that FIT's have led to 75% of global solar installations and 45% of global wind projects.  While Germany and Italy are the best known FIT proponents, as noted above, Ontario also has a FIT program in place - something the Ontario government has increasingly come under criticism for.)

While Canada is in 7th place for investment, the country falls to 12-13% (depending on technology) based on installed capacity, suggesting that conditions in the past one to two years have allowed investment in renewables in this country to accelerate - again, likely to Ontario's support programs.  If you are developing renewable power in this country, you are likely active in Ontario.

One thing Pew doesn't provide is any assessment of the effectiveness of the clean energy policy alternatives.  This type of review should have allowed some observations in that regard, but there is no mention of it that I saw.  Perhaps next year.

 

Integrating Renewables into the Grid - Its All About Flexibility

Source: techvert.com

Back in mid-January, Stanford's TomKat Centre for Sustainable Energy hosted the Grid Integration of Renewables Workshop, bringing together a group to examine the issues relating to grid expansion and the integration of renewables into that grid.  I came across a report on the workshop at the CleanTech blog that interested me but was unable to get much detail about the discussions. 

Sometime in the past few weeks, the TomKat Centre posted most of the presentations given at the workshop.  Collectively they provide an interesting picture of the issues at least these experts foresee as the proportion of intermittent renewables such as wind and solar that are connected to the grid becomes significant.

Keynote Speakers included U.S. Senator Jeff Bingaman (New Mexico) and Commissioner Jeffrey Byron of the California Energy Commission (CleanTech blog's report focuses on what the keynote speakers had to say in lots of detail so I won't try to add anything here).

Speakers included:

• Gregor Czisch, Transnational Renewables, Germany - The Supergrid: 100% Renewable Electricity Supply for Europe and Its Neighborhood » (ppt)
• Mark Jacobson, Stanford - Grid Integration Challenges for 100% Conversion to Wind and Solar Power » (pdf)
• Hans Henrik Lindboe, Ea Energy Analyses, Denmark - Enabling Renewable Energy Integration in Denmark » (pdf)
• V. John White, Center for Energy Efficiency and Renewable Technologies - Pulling the Pieces Together: Thinking Regionally and Cooperatively » (pdf)
• Antonio Alvarez, PG & E - Efforts and Challenges to Manage California's Expected Intermittent Renewable Additions » (pdf)
• Debbie Lew, National Renewable Energy Laboratory - Finding Flexibility in the Existing System » (pdf)
• Nick Jenkins, Cardiff University, UK - Optimizing AC and DC Transmission Networks for High Penetration of Renewables » (pdf)
• Michael Wara, Stanford - Key Regulatory Challenges for Deep Penetration of Renewables (no links provided)
• Willett Kempton, University of Delaware - Low Cost Grid Integration via Met-Smart Interconnection and Storage Inherent in End-Use Devices » (pdf)

The clearest point of agreement running through the speakers' presentations was that increased reliance on non-hydro renewables would lead to greater uncertainty of supply, which would in turn demand greater flexibility within the management of the grid if supply and demand were to be successfully balanced.  Suggested mechanisms for achieving the necessary flexibility generally fell into one of three categories, including:

Increase the Size of the Catchment

Speakers identified a range of approaches that relate to increasing the size of the area from which power can be drawn from to lessen the chance that power is available due to weather issues.  Suggested mechanisms included imports, Balancing Area cooperation and development of "asynchronous" resources (i.e. resources that are expected to be couter-cyclical in the availability).  The underlying assumption of efforts to increase the size of the catchment being that its always windy somewhere.  Needless to say, just about any approaches relying on increased catchment size demand big investments in transmission infrastructure - perhaps one of the most significant challenges facing future grid development.

Better Manage  Supply

While some of the suggestions appear to focus primarily on the need for standby conventional power sources, more creative approaches included development of asynchronous sources, as noted above, and the need for grid storage.

Better Manage Demand

Clearly an approach with a lot of future potential as Smart Grid technologies are developed, speakers focused on automatic demand response technologies, "dynamic pricing" (i.e. higher pricing during times of the day that electricity is in greater demand or less available) and curtailment or the ability to automatically cut off some customers or applications as demand increases/supply decreases.

When you say them fast, these all sound pretty simple.  But they represent significant shifts in approach, huge infrastructure investments and potentially years of regulatory and public process to put in place. 

Still an interesting collection of views on what seems the most likely future direction for electricity.

Preparing the U.S. Department of Defense for a Post-Petroleum Era

Source: EVE Online

The Centre for a New American Security recently released its vision for the energy future facing the U.S. Department of Defense.   In Fueling the Future: Preparing the Department of Defense for a Post-Petroleum Era, authors Christine Parthemore and John Nagl provide a concise, pragmatic look at the risks energy poses for U.S. security .....

"Reducing dependence on petroleum will help ensure the long-term ability of the military to carry out its assigned missions — and help ensure the security of the nation ....

• Heavy dependence on large fuel supplies can increase operational vulnerabilities and make fuel supply infrastructure a more valuable target.

• Every dollar increase in the price of petroleum costs DOD up to 130 million additional dollars.  Rising global demand, for instance in China, is increasing the strategic importance of petroleum in ways that could be detrimental to U.S. interests.

• Countries such as Iran and Venezuela could have the largest remaining reserves in a few decades if current production rates hold – and will gain leverage as a result.

• High levels of petroleum consumption are contributing to the changing climate, which can bring destabilizing effects and trigger new security challenges."

...... and the challenges of moving to a non-petroleum fueled armed services.

"To ready America’s armed forces for tomorrow’s challenges, DOD should ensure that it can operate all of its systems on non-petroleum fuels by 2040.  .....  Some estimates indicate that the current global reserve-to-production (R/P) ratio – how fast the world will produce all currently known recoverable petroleum reserves at the current rate of production – is less than 50 years.  ..... Ensuring that DOD can operate on non-petroleum fuels 30 years from today is a conservative hedge against prevailing economic, political and environmental trends, conditions and constraints."

To address the challenge, they propose 12 principles:

1. Set a common energy goal of "managing a smooth transition beyond petroleum over the next 30 years".
2. Establish a clear set of guidelines that help the services and the private sector to understand what sorts of fuels, infrastructure and efficiency technologies will be needed.
3. Plan for an uncertain future.
4. Demand new fuels for old vehicles.
5. continue to increase alternative fuel use at domestic bases.
6. Invest for maximum impact - factoring distribution and infrastructure into decisions about where to invest.
7. Save energy, keep the change - addressing the incentives and dis-incentives built into current budgeting rules and norms.
8. Understand that energy is not free.
9. Promote a shared understanding of the the DOD's energy future with Congress, the Executive Branch and private companies.
10. engage allies in the energy transition.
11. streamline energy management.
12. Plan for the worst.

Whats most interesting for the principles is that they could equally be applied to the country as a whole, guiding the U.S. to a less risky future based on a substantially reduced appetite for petroleum fuels. 

The authors do not appear to even hint at a broader application of the principles they enunciate.  However, given a government even partly focused on governing for the long haul (versus whatever the focus is now - its beyond my understanding) these would be national principles.  I wonder what Tom Friedman would have to say about that?

 

McKinsey: Energy and Environmental Resource Constraints a Key Global Trend

 

"Understanding a company's full exposure to energy and environmental risks will in many cases be a - if not the the - decisive factor determining its long-term viability."

Yet another interesting bit of information I came across over the summer was some research from McKinsey & Company.

In the June edition of McKinsey Quarterly, the authors behind a survey of more than 1,400 executives around the world discussed the importance of key global trends, their impact on business and the need for pro-active trend-spotting, issues management, etc.

"The fact is, trends matter. Systematically spotting and acting on emerging ones helps companies to capture market opportunities, test risks, and spur innovation. Today, when the biggest business challenge is responding to a world in which the frame and basis of competition are always changing, any effort to set corporate strategy must consider more than traditional performance measures, such as a company’s core capabilities and the structure of the industry in which it competes. Managers must also gain an understanding of deep external forces and the narrower trends they can unleash. In our experience, if senior executives wait for the full impact of global forces to manifest themselves at an industry and company level, they will have waited too long."

McKinsey's research identified five global trends expected to define the coming era, including:

• The Great Re-balancing - the shift in the nexus of the global economy from developed to emerging economies.

• The Productivity Imperative - the need for among developed-world economies for pronounced gains in productivity.

• The Global Grid - impacts of increasing cross-border flows of capital, information, goods and people on the global economy.

• Pricing the Planet - the effects of growing resource shortages and competition.

• The Market State - the role of national entities in a globalized world.

The most interesting/relevant trend from an energy point of view is "Pricing the Planet", i.e. McKinsey's take on the role of resources and resource shortages in the future economy.

"A collision is shaping up among the rising demand for resources, constrained supplies, and changing social attitudes toward environmental protection. The next decade will see an increased focus on resource productivity, the emergence of substantial clean-tech industries, and regulatory initiatives."

McKinsey identified three forces that will affect what resources we use, how we use them and what price we will need to pay for them, including:

• Growing demand - projections for global economic growth over the next decade suggest that demand for natural resources will rise by at least a third. About 90 percent of that increase will come from growth in emerging markets.

• Constrained supply - as easy-to-tap, high-quality reserves are depleted, supply will come from harder-to-access, more costly, and more politically unstable environments.

• Increased regulatory and social scrutiny - there is an emerging global consensus focused on environmental sustainability. While climate change is the most visible battleground, other issues loom: water scarcity, pollution, food safety, and depletion of global fish stocks, among other things. For businesses, this new sensibility will lead to stricter environmental regulations and growing demands from consumers and employees that companies demonstrate greater environmental responsibility.

McKinsey's research is really a business-focused take on what has been a long line of research and opinion tattempting to understand the limits to human population growth.  Beginning with Malthus in the early 19th century, the Club of Rome in the 1970's and more recently the exploration of "planetary boundaries",  there as been a regular dialog on the limits to how much our population can growth and obtain the resources needed to support us.  McKinsey is looking at the globalizing economy and what it means for business, but it builds on a well established foundation.

McKinsey's research applies to resources in general.  However, looking specifically at energy, the authors offer two views.

One speaks for the status-quo:

"The fossil fuel consumption infrastructure is so large that, despite recent clean-energy investments, the ratio of fossil fuel to renewable and nuclear power use in 2020 will still be 80 percent, as it is today. ....... Despite huge investments in clean energy, in 2020 the ratio of fossil fuel consumption to renewable and nuclear power will remain largely as it is today—roughly 80 percent. No realistic scenario will move the needle: the embedded resource infrastructure is so large that any transition away from fossil fuels will take decades."

But the other looks at the key role clean tech will have for new energy investment:

"But the view changes dramatically when you look beneath the supply stock to the flows of new investment. Suddenly, clean tech emerges as one of the next decade’s biggest growth industries. Upward of $2 trillion will probably be invested in building clean-energy capacity globally over the next ten years. In the United States, 90 percent of this expanded capacity will be in renewable or nuclear energy—66 percent in the European Union and China. Before 2020, this investment will probably create a clean-tech industry generating well over $1 trillion a year in sales."

As these trends come to affect energy and other resource availability, McKinsey predcts a changed global economy, one in which resource productivity will be key.  To achieve that goal, the authors offer a range of prescriptions.  However, the philosophy that they are espousing seems best summarized as "in uncertain times, the need to plan for widely differing outcomes is the one clear certainty".

  

Picturing Energy Use - Who Knew it Could be So Simple

I've always liked a good diagram to help me understand something complex, and, as they say, a picture is worth a thousand words.  That's particularly true of the diagrams of U.S. and Canadian energy consumption I found on the Lawrence Livermore National Laboratory website.

The first diagram shows estimated U.S. energy use in 2009.

The second diagram shows U.S. carbon emissions for 2008.  as you would expect the dominant roles of coal for electricity generation and petroleum transportation fuels in the U.S. carbon budget is readily apparent.

 

The third diagram looks at estimated future U.S. energy use by 2050.  The big changes that are apparent relate to the expected growth of renewable sources of electricity, the role of hydrogen as an energy intermediary and the dramatic drop in use of oil (looks like LLNL is a believer in peak oil).

The fourth diagram looks at U.S. energy losses, the biggest single proportion of which is electricity generation, transmission and distribution losses.   Notably, more than 55% of current energy consumption in the U.S. is wasted (and I would assume that a similar proportion is wasted in Canada).

LLNL hasn't limited itself to looking only at U.S. energy consumption patterns either.  Below are two more diagrams which look at 2007 energy use in Canada and 2006 carbon emissions in Canada.

The biggest difference in energy use patterns when comparing to the U.S. is the truncated lines indicating energy exports - mostly to the U.S.

Comparing carbon emission patterns with those in the U.S. highlights the much smaller role of coal in Canada.

Enjoy.

Three Polls for Sustainability

Source: Signal Environmental

It was a busy summer and some things, like this blog, just couldn't keep up.  But that's not to say I didn't come across lots  I'd like to look back at as I try to get back in the habit of posting again.  Take the three polls I came across in early August (that's when I came across them, not necessarily when they were made public).

Back in June, Pembina Institute released a survey of 5,000 "thought leaders" (whatever the heck a thought leader is - I'm not sure that academics and government middle managers are leading many in their thinking these days).  The survey was conducted by McAllister Opinion Research and was released in advance of the G8/G20 meetings in Huntsville and Toronto, respectively.  Needless to say, with the uproar over fake lakes, $1 billion in security costs and riots in T.O., this survey sank without a trace. 

In the words of the press release ......

"The federal government is out of step with leading thinkers on issues related to sustainability, energy and climate change, according to the results of a groundbreaking survey of more than 5,000 experts and government officials  ....  These results clearly illustrate that leaders within government, academia and the private sector understand the energy and sustainability challenges Canada faces, and have a high level of agreement on how best to tackle them  ....  What Canada still lacks is the political commitment to take sufficient action."

Whats most interesting for me is that 59% of the respondents work in government (and most are in Canada), suggesting a profound disconnect between the Harper government and its civil servants on energy policy, climate change and sustainability.

Shifting direction (but just a bit), Gibbs and Soell, a New York based public affairs firm released their 2010 Sense and Sustainability Study, looking at how 2,600 U.S. consumers and 300 Fortune 1000 executives view the corporate pursuit of sustainability.   Scepticism is the key word Gibbs and Soell use to describe their own study.

Again in the words of the press release ...

Corporate America has embarked on its journey toward sustainability, but still draws public skepticism. Only 29% of executives and 16% of consumers believe that a majority of businesses (“most,” “almost all,” or “all”) are committed to “going green” – defined as “improving the health of the environment by implementing more sustainable business practices, and/or offering environmentally friendly products or services.” Many executives (54%) and consumers (48%) believe only “some” businesses are committed to “going green.”

However, I don't know if I would really define the response as sceptical.  If anything, it may be incredibly optimistic for 29% of executives to believe that "most", "almost all" or "all" U.S. companies are going green.  While the press release says that "Corporate America has embarked on its journey toward sustainability ...", as someone that makes a living helping companies down this particular road I would suggest that the majority of companies display the symptoms (e.g. publishing sustainability reports) but provide only tepid support beyond what the regulations require.

Finally, the last poll, conducted by Harris Poll for the Financial Times, looked at U.S. and European support for greater regulation of oil companies in the aftermath of the BP-Deepwater Horizon disaster.  The poll, released August 12^th, found that support for more regulation ranged from 73% of Britons to 91% of the French (U.S. respondents were in between with 77% of those spoken to favoring more regulatory constraints).

"The findings underline the challenge facing the industry after the accident on April 20 when the Macondo well ruptured, killing 11 workers and spewing 4.9m barrels of oil into the sea. Although the Obama Administration's moratorium on deep-water drilling in the gulf, imposed after the spill, should be lifted earlier than it's November 30th expiry date, the industry is already bracing itself for further regulation and higher costs"

So what does it all mean?

At a minimum, I would say there is a disconnect between industry claims to be "going green", becoming sustainable, etc. and the public that is on the receiving end of the message.  It also shows what bad performance on the part of one or two companies can do to the whole sector, and even all industry.  Looking at Canada and the Pembina/McAllister survey that disconnect extends to include a government and the thought leaders that are in many cases employed by it. 

Its been a tough summer for corporate reputations in the energy sector so it would be interesting to look at similar polls again in six months.

Australia is Recognizing Aboriginals in its Constitution ... I Think

Source: Thriving in the Desert blog

With repatriation of our Constitution in 1982, Canada took the step of ensuring recognition of Aboriginal rights.  With Section 35 of the Constitution Act, the country provided constitutional protection to the existing aboriginal and treaty rights. 

35. (1) The existing aboriginal and treaty rights of the aboriginal peoples of Canada are hereby recognized and affirmed.

(2) In this Act, "Aboriginal Peoples of Canada" includes the Indian, Inuit and Métis peoples of Canada.

(3) For greater certainty, in subsection (1) "treaty rights" includes rights that now exist by way of land claims agreements or may be so acquired.

(4) Notwithstanding any other provision of this Act, the aboriginal and treaty rights referred to in subsection (1) are guaranteed equally to male and female persons.

From an energy development point of view, Aboriginal recognition was and is significant because of the string of court cases that followed, establishing an Aboriginal role in the development of natural resources.  In particular, a series of landmark court cases have established the responsibility of the Crown to "consult" with Aboriginal peoples and, where appropriate, accommodate Aboriginal rights or interests when considering development proposals. (A position paper by Weyerhaeuser does a particularly good job of articulating the issues and ways of addressing.)

In practical terms, the Crown's responsibility is frequently effectively handed-off to industry and others proposing to develop resources and rarely does it seem to be done well.  Evolving understandings of what constitutes consultation and how to consult have been huge factors in the complication of regulatory processes for approving projects.

Now Australia seems to be stumbling towards similar accommodation of aboriginal peoples rights and interests (See Coalition to put Aboriginal Recognition to Referendum, August 10^th). 

I say stumbling because, in 2007 John Howard's government committed to holding a referendum on whether the preamble to the Australian Constitution should be changed to explicitly recognize aboriginals.   The promise was then reiterated by Kevin Rudd in 2008. 

Now as a national election approaches, the current Labour government under Julia Gillard has suggested that it would form an expert panel to build support for the constitutional recognition of indigenous people.  And, needless to say, the conservative Coalition thinks it has a better idea.

As indigenous people across remote Australia began casting their votes in mobile polling booths for the federal election on August 21, the Coalition's indigenous affairs spokesman, Nigel Scullion, said there was no need for another committee and he would guarantee a timeline for constitutional recognition to be delivered to Australia's first people.

"We are not only committed to it, we certainly aren't going to flick this very important matter to an expert panel," he said.

"There's been a lot of conversation with the wider community about it. I haven't met anybody who doesn't think it should be reflected in our Constitution and it is down to words and there's not a great deal of angst in the community about the words."

Its hard to see the difference between the two positions beyond a knee-jerk bias against "committees".  Both say they are going to referendum, with Labour suggesting a need to build support among voters, presumably to ensure the issue doesn't blow up in their faces (i.e. get rejected by Australians). 

I wish them luck as they proceed down this path.  Australia has done a lot of interesting work developing innovative regulation and reducing regulatory barriers to development.  I would hope to see some lessons for Canada to come out of this.

Off the Cliff: US Climate (Energy) Policy

The last few weeks have seen a slow train wreck as recent efforts to craft a climate/energy bill died in the U.S. Senate.  While the House was able to bring the bloated Waxman-Markey Bill forward a year ago, Senate Majority Leader Harry Reid last week announced that he would not even try to bring forward a compromise bill to the Senate.  And since mid-term elections in November appear likely to favour the Republicans, that seems to translate into a death sentence for any kind coherent climate or energy legislation in the U.S. for a while to come.

The list of commentators weighing in on who is to blame is long, including:

• Andrew Revkin - The Broken Senate and the Energy and Climate Challenge (Dot Earth)
• David Roberts - The Death of the Climate Bill (Grist Magazine)
• Robert Redford - Its the Opportunity, Stupid (The Huffington Post)
• Bradford Plumer - No Climate Bill? Then No Nukes, Either. (The Vine/The New Republic)
• Eileen Claussen - Climate Bill: Where to From Here? (Climate Compass/Pew Center)

(And probably many, many more than I have the time to read.)

However, among the most detailed and coherent assessments is one provided by Eric Pooley, a deputy-editor at Bloomberg Business Week, writing at Yale's environment 360 blog (see The Wreckage of Climate Bill, Some Clues for Moving Forward, July 28^th).  Mr. Pooley identified 6 culprits worthy of blame, including:

1. Professional climate deniers
2. Senate Republicans
3. Senate Democrats
4. The (Electric) Power Barons
5. The Green Group (environmental NGO's)
6. President Obama.

The list of who to blame doesn't leave to many out (although, interestingly, he identifies Representative Henry Waxman and House Speaker Nancy Pelosi as 'the only grown-ups in the room' during this debacle).

But perhaps the better part of Pooley's assessment is the consideration of options for Plan B - i.e. how does the U.S. move forward to address an issue (climate change) that is becoming ever more urgent.  Briefly, he looks to existing policy and institutions to lead the way - as they have indeed been doing for some years now. 

According to an analysis by the World Resources Institute, by leveraging existing authority over the next ten years the U.S. could reduce greenhouse gas emissions by 5 percent to 12 percent below 2005 levels. This is far short of the 17 percent reduction Obama promised in Copenhagen and nothing close to what needs to be done. But if we continue cutting emissions before asking voters to embrace a cap, we prove that cuts are both technologically feasible and economically sustainable. And we’ll be in a better position when the next legislative opportunity comes.

Until then, the climate war will be waged by cities, states, regional cap-and-trade programs, and, above all, the EPA, which early next year is set to begin regulating stationary sources of CO2 — power plants and large factories.

So in many respects, U.S. Climate policy and action may not look a lot different than it did under the leadership of George Bush.  Not exactly a ringing endorsement of President Obama's leadership on this file but a significantly better performance than we are seeing here in Canada where emissions steadily rise in the face of both federal and provincial unwillingness to act.

Pooley does point out the importance of the EPA going forward and the likelihood that Republican attacks will now shift to that agency. 

Tough new EPA rules for conventional pollutants will help, and so will new EPA carbon regulations. Perhaps these strict new regulations will refresh the power bosses’ appetite for a cap. But they have plenty of lawyers, and the long, ugly battles over implementation of EPA regulations could extend the current period of uncertainty by many years. Republicans (and some Democrats) will try to strip EPA of its authority over carbon, or at least delay implementation of its new rules.

Searching for Energy Nirvana?

Source: Rock Merch Universe

Last week, writing in the Cleantech Blog, Richard Steubi asked if "In the wake of the BP oil spill in the Gulf, is this time different? Will the U.S. finally be able to change its stance on petroleum? Will the petroleum industry itself be irrevocably altered?" (See The Petroleum Industry: Past the Tipping Point?, July 5^th)

He proceeded to answer the question with a resounding no, laying the blame on "ineffective posturing and inane bickering in Washington", which he concludes is driven by the vast amounts of cash that the petroleum industry is willing to spend to defend the status quo.

[Any discussion of U.S. energy policy has to include current efforts to craft some kind of climate bill - any kind of climate bill.  Pew Center's Eileen Claussen for one seems to have accepted that the best that can now be achieved is a bill that caps only utility emissions.] 

Steubi's skepticism leads him to look for change as a result of energy prices and from their he begins to riff off of Jeff Rubin's arguments, that in a world of Peak Oil its only a matter of time before oil prices are back in the triple digits.  With the return of $150 plus oil, Rubin sees the need for a re-engineering of the global economy, driven not by policy makers in Washington (where they can't) or Ottawa (where they won't) or elsewhere, but by the micro-economic decisions that businesses and consumers will have to make to allow them to adjust to the market for declining supply.

Both Steubi and Rubin see a silver lining in the coming of Peak Oil -and the high energy prices that would accompany Peak Oil.  A silver lining based on their view of a more sustainable global economy, including:

• Reversal of the globalization of manufacturing, bringing manufacturing jobs back to North America and Europe;
• Emergence of local economies, including more farmers markets (???); and
• Greater investment in national infrastructure, particularly public transportation infrastructure.

Jeff Rubin develops this theme in his book, Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization.  And since I have not yet read it, I have to temper my comments.  However, a couple of thoughts do jump out at me. 

First, while I can see how a partial retrenching of globalization away from the current energy-intensive model may make for a more robust world (i.e. more resilient to spiking oil prices, reduced trade imbalances, particularly between the U.S. and China), any judgment of greater sustainability may only be from the point of view of the western economies.  A significant loss of manufacturing might not look like a sustainable path to China.

Second, how much manufacturing would really come back in the face of increased energy prices.  With dramatically lower labor costs available in China and other Asian economies such as India, Bangladesh, Burma, etc.  it might take a very large energy price differential to lead to repatriation of manufacturing jobs. 

Finally, while their arguments sound kind of plausible if you say it all fast, the transition costs to a less globalized economy could be devastating - trillions of dollars have been spent over the past few decades in China alone to build up the manufacturing capability they currently enjoy.  That would not be easily reversed.

So cycling back to Steubi's original question(s) about the effect of the BP Deepwater Horizon disaster on the petroleum industry, I would have to suggest that yes, the industry will undoubtedly be affected.  I would expect to see significant changes in operating practices and in the risks drillers are willing and/or able to take on.  However, in the face of reduced potential supply and higher costs, the real question should be whether our society, in which the petroleum industry exists, can change.

Will we be capable of developing the alternative energy infrastructure, be it efficiency, renewables, nuclear, etc. that would allow us to meet the challenge of significantly higher oil prices when they come.  If we are unable to anticipate change, then I think we will pay a high price.  Unprepared, we would enter a very painful transition period on the way to Rubin's sustainability nirvana.

I don't disagree that we could find nirvana - but I don't think we can sit back and wait for higher oil prices to take us there.  As a result, I think I am a lot less sanguine about the current inability of Washington, Ottawa, etc. to lead the energy policy changes that will be required. 

Cap & Trade: A Short History?

Source: theage.com.au

The current issue of Foreign Policy provides a brief history of Cap and Trade in Capping It Off (Elizabeth Dickenson, March/April 2010).  Looking at the concept from its inception in 1967 through to Copenhagen, the article provides a good sense of the evolution of a promising policy.

With U.S. Senators Kerry and Graham working to develop a federal climate change bill, the timing for this article would seem to be good.  However, the vocabulary for the climate policy debate has shifted in the last few months.

A little over a week ago the NYTimes reported cap and trade's demise, in "Cap and Trade" Looses Its Standing as the Energy Policy of Choice (John Broder, March 25th) and this past week CBS quoted Interior Secretary Ken Salazar to say that "cap and trade is not in the lexicon anymore" (White House: "Cap and Trade is Out, Stephanie Condon, March 31st).

The turnabout on a policy approach that has dominated climate change discussions for more than a decade comes despite the success of the Acid Rain program, which used cap and trade to reduce U.S. utility emissions of SO₂ and NO_x by more than 40% since its beginning in 1995.  The term has apparently become too polarized and "discredited" to provide a workable basis for a going forward U.S. climate policy.

Some of the blame for cap and trade's fall from grace has to rest with with the congressmen Waxman and Markey who led the bill Congress passed last year and which was based on cap an trade.  The NYTimes suggests that the two dished out so many concessions and exemptions to affected industries that they created a long, complex bill favoring those with the most political muscle - the bill came in at 1,400 pages.  (Some of the blame also has to rest with those who see the alternative as doing nothing - which makes it easy to highlight costs but hardly realistic.)

However, announcing the death of cap and trade may may be a bit premature.  The apparent alternative seems to be simply cap and trade by another name, with the principal difference whether permits are given away to emitters or auction and the proceeds recycled through tax cuts.  CBS concludes that ....

"If cap and trade is to survive, it would likely, at the least, need a new name. One solution for the White House could be a piece of legislation from Democratic Sen. Maria Cantwell (Wash.) and Republican Sen. Susan Collins (Maine) called "cap and dividend", which would auction off pollution permits and return three-fourths of the revenue to citizens."

Notably, Ms.'s Cantwell and Collin's bill is only 39 pages.

Stay tuned.

(A version of this post appeared earlier in the blog at my company website, Eosconsulting.ca).