The final part of “MidEast Oil Forever?” (subs. req’d) discusses pollution prevention.

I think the discussion still holds up, and as you can see, I am no Johnny-come-lately to the global warming issue. What is particularly sad about the Bush administration, is that while they eschew the anti-clean-technology rhetoric of Reagan and Gingrich — indeed claim to be pro-clean-technology, they have gutted some of the best clean tech and energy efficiency programs. In particular, they have slashed the budget for the Energy Department’s major pollution prevention effort, the Industries of the Future program (described briefly in the article), and the president has proposed zeroing it out entirely.

This administration’s energy and climate policy make the final sentence of this article, sadly, as true as ever: “Only a misbegotten ideology could conceive a blunder of such potentially historic proportions.”

Here is what we wrote:

Preventing Pollution

The renewables revolution, inevitable or not, won’t spell the end of the nation’s or the world’s environmental problems. In Shell’s scenario overall fossil-fuel use will increase steadily for decades, peaking in 2030 at a level half again as high as today’s, and will not dip below current levels until 2100. If we are to achieve genuine prosperity — higher living standards accompanied by improved environmental quality — we will need to do better.

Consider one of the nagging environmental problems around the world: urban air quality. Most cities have dark surfaces and less vegetation than their surroundings, creating a “heat island” that affects climate, increases energy use, and decreases habitability. Buildings’ dark roofs and inadequate shade in summertime raise the demand for air-conditioning, so more power and pollution are generated. Heat islands raise the temperature of many cities by as much as five degrees, increasing the production of smog, which is typically created in hot weather. Finally, urban heat islands exacerbate all heat waves, contributing to summer fatalities.

We know the basics of how to cool a city: Buildings need shade trees, and buildings, roads, and parking lots require light-colored surfaces. Cooler roads might cost slightly more initially, but they would probably last 20­50 percent longer because they reduce thermal wear and reduce ultraviolet damage. Over a twenty-year period trees could be planted cheaply, and roads, roofs, and parking lots could be resurfaced during the course of normal maintenance, saving the country billions of dollars a year.

Clearly, the mitigation of urban heat islands is an important effort. The federal government has a crucial role to play in research and testing to help identify and develop the best roofing and paving materials, in funding computer models for determining the optimal approach to cooling a city, and in disseminating information in the nation and the world.

This energy-saving, pollution-avoiding approach would be part of a much broader shift in the nation’s environmental policy, which is vital if we are to be a prosperous country in the next century. The environmental paradigm that has predominated since the 1960s has been based on the notion that pollution is an inevitable by-product of business and that public- and private-sector efforts should be aimed at cleaning up that pollution after the fact or safely disposing of it in land, water, or the atmosphere. This so-called end-of-pipe approach is increasingly being challenged not only on environmental grounds but also on economic ones. Michael Porter, a professor at the Harvard Business School, wrote in the September-October, 1995, issue of the Harvard Business Review,

When scrap, harmful substances, or energy forms are discharged into the environment as pollution, it is a sign that resources have been used incompletely, inefficiently, or ineffectively. Moreover, companies then have to perform additional activities that add cost but create no value for customers: for example, handling, storage, and disposal of discharges.

The traditional end-of-pipe approach involves three kinds of economic waste: two identified by Porter (using resource inputs and pollution outputs inefficiently) and the societal costs associated with the myriad harmful side effects of resource overuse (for example, dependence on foreign oil) and of pollution (such as human illness and agricultural loss).

Because of the close connection between energy production and consumption on the one hand and pollution on the other, the Department of Energy provides a substantial majority — 70 percent — of all federally funded pollution-prevention R&D. Pollution-prevention technologies take a variety of forms. Renewable energy prevents pollution in the production of electricity. Fuel cells offer the hope of preventing pollution in the transportation sector. Many other sectors of the economy have equally great prevention opportunities.

As Yergin’s task force noted, in the past two decades a DOE investment totaling about $1.1 billion in energy-efficient industrial technologies has yielded “approximately $2.5 billion in documented energy savings and net productivity gains, and the accumulation of these savings continues to grow at increasing rates.” By 2000 these investments will be generating savings of about $10 billion a year. Very few other federal investments produce as great a societal return on taxpayers’ dollars.

One technology, a process for dezincing (removing the galvanized coating from) scrap steel, provided the breakthrough that industry needed in order to recycle up to 10 million tons of scrap metal annually. By 2005 electrochemical dezincing could reduce raw-materials costs by $150 million a year, saving 50 trillion BTUs in the process, and reduce the need to import at least 70,000 tons of zinc, for further savings of at least $70 million annually. Another government-funded technology, vacuum-pressure swing adsorption, which is now used in manufacturing 15 percent of the glass made in the United States, reduces glassmaking emissions of nitrogen oxide by 90 percent and cuts furnace energy use by 25 percent.

Something that is not widely understood is that most industrial pollution in the United States comes from the country’s seven most energy-intensive industries: steel, aluminum, petroleum refining, chemicals, pulp and paper products, glass, and metal casting. These industries account for about 80 percent of the energy consumed in U.S. manufacturing and for more than 90 percent of the hazardous waste. They represent the greatest opportunities for increasing energy and resource efficiency while reducing pollution. That’s why the DOE has been forming partnerships with these industries to develop clean technologies.

Funding for pollution prevention is the best way for the nation to avoid the need for costly environmental regulations. The government has a role in encouraging pollution prevention for several reasons. First, pollution-prevention technologies often benefit each of many companies only a little bit, so no one company has an incentive to spend the necessary money by itself. Second, prevention has many societal benefits: it reduces energy and other resource consumption and improves the environment, among other advantages. Third, and most important, pollution prevention and resource efficiency help companies to shift money from consuming energy and resources to investing in technology and capital equipment, thus creating jobs and economic growth. Indeed, a shift from consumption to investment may be the single most important transformation the U.S. economy must undergo if we are to remain prosperous in the next century.

A 1993 analysis for the DOE attempted to quantify the macroeconomic benefits of pollution prevention. The study found that a 10­20 percent reduction in waste by American industry would generate a cumulative increase of $1.94 trillion in the gross domestic product from 1996 to 2010. By 2010 the improvements would be generating two million new jobs, or roughly 1.5 percent of employment in that year. According to the study, this is “a relatively large impact considering that the investments driving it were assumed to be made for purposes other than increasing employment.”

Moreover, this analysis does not include the jobs to be gained from capturing the large and growing export market for clean technologies and processes. Resource inefficiency and environmental degradation are very real limitations on the attempts of developing nations to raise the living standards of their people, especially since most of those nations do not have the abundance of resources with which America is endowed. The World Bank estimates that by 2000 the countries of Asia alone will need to spend about $40 billion a year on clean technologies. By then the global market for environmental services and technologies is expected to exceed $400 billion. The resource, environmental, and capital constraints on the developing world guarantee a rich export market for the nation that leads the world in developing clean technologies.

As Michael Porter wrote in the Harvard Business Review,

We are now in a transitional phase of industrial history in which companies are still inexperienced in handling environmental issues creatively. … The early movers — the companies that can see the opportunity first and embrace innovation-based solutions — will reap major competitive benefits, just as the German and Japanese car makers did [with fuel-efficient cars in the early 1970s].

That’s why foreign governments are forming partnerships with their nations’ companies to develop clean technologies: to overcome inexperience and ensure that they reap the benefits of early strength in the field.

The Japanese government is betting heavily on clean technologies and renewable energy. It is vigorously pursuing the Asian environmental market through the Green Aid Plan, which is designed to help Asian countries prevent water and air pollution, recycle waste, conserve energy, and develop alternative energy sources. In 1993 Japan quadrupled funding for the Green Aid Plan, to $120 million.

Germany, too, is moving in this direction, with regulations that increasingly push industry toward prevention, recycling, and life-cycle analysis. Proposed or pending regulations throughout Western Europe have implications for U.S. companies, as noted in a 1993 report prepared for the Saturn Corporation by the University of Tennessee Center for Clean Products and Clean Technologies: “European auto manufacturers are the current world leaders in car recycling and the use of life-cycle assessment to design environmentally superior cars.”

One of the countries most attentive to prevention is the Netherlands, which spends about $500 million a year on environmental technologies — equivalent on a per capita basis to $9 billion in the United States. More than a third of that money is spent on pollution prevention. The Netherlands also uses its tax code to promote clean technologies by allowing firms that practice innovative pollution prevention to depreciate their investment in one year instead of over ten years.

Congress, in contrast, has cut by a third the Department of Energy’s proposed budget for the development and deployment of energy-efficient and pollution-prevention technologies — a step that threatens U.S. leadership in this crucial area. Congress has proposed still deeper cuts in its multi-year budget plans — cuts that would deny U.S. companies a great many opportunities to compete and the nation as a whole the opportunity to capture a big piece of a market whose potential is equal to that of renewable energy: several hundred billion dollars a year.

Even the vitally important urban-heat-island-mitigation program described above has gone unfunded. For the 1995 and 1996 budgets the DOE asked for $2 million — a tiny sum by federal-government standards — for a Cool Communities program, to take the idea beyond the realm of small-scale testing. Like many programs that save energy in a cost-effective way, the program would also reduce emissions of carbon dioxide, whose increasing prevalence in the atmosphere may be changing the earth’s climate. The department included the Cool Communities program in its Climate Change Action Plan, to meet the nation’s international commitment to try to limit greenhouse gases.

In both years Congress zeroed out the Cool Communities program. Why? Whereas the pre-1994 Congress was skeptical of global climate change, the new one is downright hostile to the concept, with some labeling it “trendy”and “scientific nonsense.”

Yet at a meeting last December of the Intergovernmental Panel on Climate Change, representatives of 120 governments agreed that “the balance of evidence … suggests a discernible human influence on global climate.” In a 1995 study scientists examined detailed records of weather over the past hundred years and concluded that weather extremes — heat, drought, excessive rain, or the kind of blizzard that the Northeast experienced in January — are becoming more common and that the extreme weather is almost certainly due to human-generated emissions of greenhouse gases.

The Economist concluded last October, “Climate change is a legitimate worry. Although still riddled with uncertainties, the science of climate change is becoming firmer: put too much carbon in the atmosphere and you might end up cooking the earth, with possibly catastrophic results.

Preparing for the Future

Some argue that energy forecasts are notoriously inaccurate and that for the Department of Energy to base decisions on them is risky. We cannot, of course, say with certainty that an oil crisis will occur in the next decade, that a transition to renewable energy will occur as Shell envisions, or that industry worldwide will shift to pollution prevention. But each of these things seems very plausible, if not likely.

Another criticism often leveled at the DOE is that it has had big, expensive failures, such as the synthetic-fuels program, but few successes. The department has learned from experience, however, and its R&D portfolio is diverse, emphasizing small-scale technologies that have in fact been remarkably successful in the past. The recently concluded independent review of the department’s energy-research portfolio cited dozens of examples of such technologies, among them a $3 million investment in energy-efficient windows made in the late 1970s, which has already saved U.S. taxpayers more than $1 billion in lower energy bills; a polycrystalline diamond drill bit that has reduced the cost of drilling for oil by $1 million per well; and many of the advances described above, including photovoltaics.

Diversity is a key element of DOE policy today: diversify the world’s oil supply, and diversify America’s domestic supply and end-use options. Because no one can predict the future with certainty, or know the outcome of R&D in advance, the DOE must invest in many options. The sharp cuts that Congress is pursuing narrow the country’s options and leave us far less flexibility to respond to future crises and opportunities.

Finally, some argue that government investments are “corporate welfare,” a term implying a giveaway with no societal benefits. But the DOE has formed partnerships with the private sector to develop leapfrog technologies — such as the fuel cell, solar energy, and clean industrial, building, and transportation technologies — that will benefit many segments of our society.

Americans today have a duty to eliminate the deficit, rooted in their obligation to future generations, but the country also needs to acknowledge that public investment in R&D, far from being corporate welfare, is an investment in America’s own future. As the Yergin task force wrote, Americans have an obligation to “assure for future generations that our Nation’s capacity to shape the future through scientific research and technological innovation is continually being renewed.”

The cuts planned for the energy-efficiency-and-renewable-energy program — 30 percent this year and 60­80 percent over the next several years — far exceed the cuts planned in overall domestic discretionary funding to balance the budget. The impact of such cuts will be enormous.

Perhaps the only way to begin to realize the loss to the future is to look at the past. Federal investment in research and development for national needs has been one of the great success stories in twentieth-century America. Why does the United States retain leadership and strong exports in vital industries like aerospace, computers, and biomedicine? American ingenuity and the private sector have certainly been instrumental in each of these industries. Yet these industries have also enjoyed government support for decades. Who can doubt that a sustained high level of federal funding — eight times as much money as America’s leading competitor provides — is responsible for U.S. leadership in biomedical and biotechnological research?

As for computers and software, the Pentagon’s Advanced Research Projects Agency “virtually single-handedly created the United States’ position of world leadership in computer sciences,” according to a Harvard Business School case study on ARPA. And of all R&D dollars spent in the aircraft industry from 1945 to 1984, some 85 percent came from the federal government. In an unexpected benefit of the kind that is common in federal R&D, much of the turbine technology that is today generating electricity and helping to keep down utility rates had its roots in government-funded work on jet engines.

John Preston, formerly the director of technology development for the Massachusetts Institute of Technology, told Congress in 1993, “It seems clear that when the government teams up with academia and industry, and participates throughout the spectrum of technology, the United States becomes dominant in that industry.” America’s technological lead in most kinds of fuel cells and photovoltaics stems from almost two decades of NASA, National Science Foundation, and Pentagon support, followed by almost two decades of DOE support.

Some of the most pressing national needs in the coming decades are to reduce the country’s huge and growing trade deficit in oil, to minimize any economic or political threat that might arise from the growing world dependence on Persian Gulf oil, to prevent pollution, to avoid irreversibly changing the global climate, and to capture a large share of the enormous potential market for energy and environmental technologies. Remarkably, a great many of the same R&D investments can simultaneously achieve all these ends while cost-effectively reducing the energy bills of businesses and consumers. Equally remarkably, Congress demonstrates an overwhelming desire to gut the funding for investments by the energy-efficiency-and-renewable-energy program, although it costs Americans only $4.00 per person a year.

Nothing is clearer to those who study the matter than that the world is on the verge of a revolution in energy and environmental technologies — a revolution made possible by more than two decades of U.S. government investment. This revolution can be expected to create a number of industries that collectively will provide one of the largest international markets and one of the largest sources of new high-wage jobs in the next century, with annual sales in excess of $800 billion.

Yet just as our foreign competitors are starting to catch on to the major trends in this American-led revolution, Congress wants to pull the federal government out of every relevant technology, leaving America on the sidelines, perhaps for good. Only a misbegotten ideology could conceive a blunder of such potentially historic proportions.