Some 1970s-era liberals and old-school enviros think massive government spending is the only way to achieve the clean energy transition. They could not be more wrong, as a particularly uninformed post by the otherwise cutting-edge Grist online magazine makes clear.
As a climate bill, Waxman-Markey is at best a B-, but as a clean energy bill, it is a solid A – though both sides of the bill should be improved. Together with Obama’s other climate and clean energy efforts, it would, as I’ll explain, very quickly bring U.S. investments in clean energy technologies and industries close to the record-smashing levels now being set by the stimulus bill, nearly $100 billion a year.
BACKGROUND
I have spent two decades trying to accelerate the clean energy transformation of the US (and global) economy, since that is our only hope for averting catastrophic global warming impacts, Hell and High Water. For a number of years in the mid-1990s, I helped run DOE’s billion-dollar Office of Energy Efficiency and Renewable Energy (EERE), the largest program in the world (at the time) for working with businesses to develop and deploy the core clean energy technologies.
Over the years, the work of the office has been crucial in maintaining and expanding US leadership in key areas of clean energy. In fact, its investments have the highest documented rate of return of any federal program. The success of the office and its analytic work, especially the 5-Lab study that I initiated, oversaw, and publicized, played a key role in convincing the White House to engage positively in the Kyoto negotations in the face of strong opposition by Clinton’s entire economic team (see “The history of the ‘safety valve’ debate“). You can read an account by Art Rosenfeld [the first article, his autobio] now California Energy Commissioner – then science adviser to the assistant secretary of EERE. Kyoto was not ratified here, of course, but it has ultimately driven many tens of billions of dollars in clean energy investment in Europe and Asia.
What I came to learn in the federal government was that no matter how much money the federal government spent – money that would always be constrained by moderates and conservatives in Congress and the vagaries of presidential elections – it would always pale in comparison to what the private sector must spend in any genuine clean energy transition, by at least a factor of ten or more. Indeed, in the 5-lab study we specifically needed to model a modest CO2 price just to return to 1990 levels of CO2 emissions by 2010 – otherwise, all of the energy efficiency that we were driving the private sector to adopt mainly squeezed out new renewables and high-efficiency gas plants, not the least efficient coal plants.
GRIST FOR THOUGHT – NOT
So I was shocked, needless to say, when Grist magazine published an anachronistic (and falsehood-filled) piece yesterday, “Joe Romm’s strategy to lose the clean energy race.” The amazingly flawed premise of this article is that the only way to win the clean energy race is massive government spending – spending of a kind that is not merely politically infeasible, but suicidal from the perspective of the human race. Indeed, the article actually asserts that because I would like to pass a strengthened version of Waxman-Markey, I am embracing a strategy that would lose the clean energy race.
Who would write such old-school drivel? Let’s call them The Big-government Institute (TBI) or The Bad Idea (TBI). But I’m far less interested taking on the authors, who are stuck in the 1970s, or even Grist, who bizarrely published it, then in addressing the old-think at the core of their argument.
[Truly, being smeared by the disinformers of TBI (The Breakthrough Institute) puts one in very good company — Al Gore, Barack Obama, Tom Friedman, Al Gore again, Rachel Carson, Henry Waxman, Barack Obama again, Congressional Democrats, Al Gore yet again, hundreds of the country’s top scientists, and, of course, the entire environmental movement too many times to count (see “Memo to media: Don’t be suckered by bad analyses from TBI“).]
All TBI seems to care about is government funding of clean energy. They seem utterly blind to the fact that the government could never plausibly spend even one tenth the amount of money needed to complete the clean energy transition. Consider this paragraph in the Grist article:
In the American Recovery and Reinvestment Act, the United States allocated over $60 billion to be spent over two years building American clean energy industries-an excellent start. Yet the Waxman-Markey bill would slash that level of commitment by two-thirds. Romm is apparently content with letting U.S. investments in clean energy technologies and industries lapse. The Breakthrough Institute is not.
As readers know, in TBI’s original article that I debunked, TBI refused to even acknowledge the ARRA funding (see “Will America lose the clean-energy race? Only if we listen to the disinformers of The Breakthrough Institute“). And even here they keep trying to lowball what Obama and Congress have done. McKinsey says in a new report on the stimulus that it “appropriates $97 billion in energy-related funding.” That, of course, is nearly two thirds of what Obama promised to deliver over 10 years!
More important, McKinsey adds that ARRA “aims to mobilize roughly $100 billion more in private capital.” This is what The Big-government Institute doesn’t get about the strategy of Obama and the Congressional Democrats – the key is to leverage private sector funding, since the private sector is more than 10 times bigger than the public sector, and, of course, the private sector is the one that actually does all of the clean energy manufacturing and the overwhelming majority of the deployment. So to the extent that ARRA works as planned, it should drive $200 billion dollars in investment – most of it spent over a 2-year period.
You can see TBI’s old-school thinking best in this sentence:
Yet the Waxman-Markey bill would slash that level of commitment by two-thirds. Romm is apparently content with letting U.S. investments in clean energy technologies and industries lapse. The Breakthrough Institute is not.
The only U.S. investments that TBI can conceive of are government
investments. In fact, the Waxman-Markey bill would dramatically increase U.S. investments in clean energy technologies and industries – once you realize that the U.S. is much more than just the government.
Let me do a rough calculation to show what I mean. The new McKinsey report says an investment of “$520 billion [is] needed through 2020 for upfront investment in efficiency measures … to reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs” (which is a bit more than 10% of total energy use today).
According to the EPA analysis (which TBI endorses in its Grist piece), Waxman-Markey lowers demand 7 quads in 2020 compared to business as usual, and 9.4 quads in 2025 and 10.4 quads in 2030 (see “New EPA analysis of Waxman-Markey: Consumer electric bills 7% lower in 2020 thanks to efficiency – plus 22 GW of extra coal retirements and no new dirty plants“). That is similar to what the the American Council for an Energy-Efficient Economy (ACEEE) calculates for the savings from W-M’s efficiency provisions – 5 quads saved in 2020 and 12.3 quads in 2030 (see “The triumph of energy efficiency: Waxman-Markey could save $3,900 per household and create 650,000 jobs by 2030“).
Let’s just keep this back-of-the envelope and say that the energy efficiency provisions of W-M save 9.1 quads in 2025, which, according to McKinsey, requires $520 billion in investment. So, roughly, from 2012 to 2025, W-M will drive on average $40 billion a year in investment in energy efficiency – most of which, clearly, comes from the private sector. Of course, in the early years, the investment is much smaller, and it grows over time as the building standards and appliance standards kick in and the emissions targets start to bite. So by 2025, W-M may well be driving $60 billion in investment.
As an important aside, if you want to fully account for the massive energy efficiency investments being driven by President Obama, then you’d have to calculate the huge amount of investment that the car companies and eventually consumers will be making in fuel-efficient cars to meet the most aggressive increase in fuel economy standards proposed in decades – Obama to raise new car fuel efficiency standard to 39 mpg by 2016 – The biggest step the U.S. government has ever taken to cut CO2. Of course, those investments, as with the W-M investments, will pay for themselves in a few years, yielding pure savings (as well as major oil and climate benefits) for years and years to come.
The Obama administration has estimated the added cost of the new standard will be $1,300 per car, and save drivers $500 per year – if gasoline remains $3 per gallon. Of course, once the global recession ends, we are headed back to $4 gasoline and probably $5 by the middle of next decade if not sooner (see here). Some think the $1300 figure is low (see here) – and, of course, it only includes the extra cost of the vehicle, not the portion of the investment in efficiency that doesn’t add to the cost of the car. So this one act by Obama will likely drive upward of $20 billion a year in U.S. investment in energy efficiency.
Back to Waxman-Markey. It is tougher to figure out how much private sector investment in clean energy other than efficiency the bill would drive, since that depends crucially on things like the price of natural gas. Also, because the stimulus drives so much new renewables into the market and W-M drives so much efficiency into the market, you don’t see a lot of extra low-carbon energy by 2020. That really comes later. Still, the single most important thing needed to stimulate private sector investment in low carbon technologies is raising the price of carbon, which this bill does steadily for decades.
I’ll just do a rough estimate that the bill leads to government spending in renewables, CCS, electric and advanced vehicles, and R&D of about $100 billion from 2012 to 2025 and that is matched by the private sector in research, development, demonstration, and deployment. That’s almost certain a lowball estimate, since the bill also has a green bank in it designed to finance clean energy, and the venture capital community alone is likely to spend more than $10 billion a year once we pass sharply shrinking CO2 caps. Also, since TBI seems wedded to counting promised spending by other countries, it’s only fair to count Obama’s promised increase in clean tech R&D (see Obama: “Our future on this planet depends on our willingness to address the challenge posed by carbon pollution,” vows “we will exceed [R&D] level achieved at the height of the space race”).
So if we enact something like Waxman-Markey (preferably stronger) into law and if Obama is a 2-term president and thus sticks around long enough to fulfill his promises, then I expect by the 2020s, U.S. investments in clean energy technologies and industries would come close to the record-smashing levels now being set by the stimulus bill, roughly $100 billion a year.
Again, the overwhelming majority of those investments will be made by the private sector, which is as it should be, though not as TBI wants.
[Regular readers can skip the rest of this post, but I need to included for completeness sake.]
The most embarrassing thing about the Grist piece is that Grist lets TBI print these outrageous lies:
The Breakthrough Institute believes the gathering clean energy race demands a vigorous and sustained commitment to clean energy technology and industries and has called on Congress to strengthen U.S. climate legislation, boosting clean energy investments from its current level of $10 billion per year to at least $30-$50 billion per year. In contrast, Romm ardently supports weaker legislation that would invest just $10 billion per year in clean energy and energy efficiency, less than one quarter of China’s planned investments. That may be acceptable to Joe Romm-but it is no way to win the clean energy race.
If you follow the link, it’s quite clear that I don’t ardently support W-M, I just think it is infinitely superior to the alternative – the status quo, which is what TBI is primarily pursuing. And, as I’ve shown, W-M coupled with Obama’s other initatives, will drive a staggering amount of investment in clean energy and energy efficiency – ten times what TBI claims with their nar
row Big Government focus. Ironically, while parts of the clean energy side of the bill should be strengthened, particularly the renewable energy standard, it is the climate side of the bill that is the weakest, as I’ve said many times. Yet bizarrely TBI, which cares much more about clean energy than global warming, hates a bill they should love. Nordhaus even admitted on CP, “We have argued for five years now that efforts to build the clean energy economy needed to be centrally defined around energy independence not global warming.” Climate science activists they ain’t.
What is most egregious about the Grist piece is that, as pretty much everybody inside the DC beltway knows, TBI has dedicated the resources of their organization to killing prospects for climate and clean energy action in this Congress and to spreading disinformation about Obama, Gore, Congressional leaders, Waxman and Markey, and anyone else trying to end our status quo energy policies (see “Memo to media: Don’t be suckered by bad analyses from TBI” and “The dynamic duo of disinformation and doubletalk return” and “”Shellenberger and Nordhaus smear Gore by making stuff up“).
TBI is directly lobbying members of Congress to kill the bill. They are directly lobbying the press to trash it. They do NOT want to strengthen U.S. climate legislation. In a press call notification sent to many in the media, TBI stated:
We support a cap and trade policy that:
1) Auctions 100 percent of the pollution allowances;
2) Sets the price for carbon dioxide at between $8 – $12/ton, using safety valves;
3) Does not allow offsetting; and
4) Dedicates all the money from revenues (between $48 bi and $72 bi per year) to technology innovation.
That’s right. TBI supports a policy that would
- Probably get no votes whatsoever in either House of Congress – since it raises energy prices a little across the board but doesn’t give a nickel of it back to consumers, businesses, or low income households.
- Does nothing whatsoever to stop new coal plants – and in fact encourages them by removing from the table a shrinking cap that renders new dirty coal plants unprofitable.
- Does not offer any strategy in the near-, medium, or long-term for beating the 2.5 to 3 cents a kWh cost of existing coal. As I think is rather obvious to anybody but The Breakthrough Institute, all the “breakthroughs” in the world can’t make a new zero carbon power plant cheaper than an existing coal plant (see “Is 450 ppm (or less) politically possible? Part 3: The breakthrough technology illusion“).
- And fails to mandate targets that would allow international negotiations with other countries as part of either the UNFCCC process at Copenhagen or a bilateral agreement with China.
This proposal is just old-school BIG GOVERNMENT. It is a joke, an insult to genuine climate science advocates and a bigger insult to clean energy advocates. No one advancing it has any business criticizing Waxman-Markey or criticizing anyone trying to pass a strengthened version of W-M.
Let me end with TBI’s final hypocrisy, from the original op-ed piece that started this:
If America does not take immediate action to bridge its energy education gap – and if we fail to make substantially larger investments in our own clean-energy economy – we will effectively cede the clean-energy race to Asia. A decade from now, we may still find the burgeoning clean-energy economy promised by Obama and Democratic leaders. It will simply be headquartered in China.
Seriously. Yes, the TBI piece was partly about an underfunded new energy education initiative, but it was mostly a vehicle for TBI’s standard attacks on clean energy leaders. It opened with a phony apples-to-orange set of comparisons trying to make it look like Obama and Democratic leaders were not keeping their clean energy promises and ended with the absurd implication that if we pass Waxman-Markey those leaders will somehow be giving up the race to China.
Waxman-Markey is far from perfect, as I’ve said many times, but at least it has a serious chance of becoming law, as the House demonstrated, something that could never be said about TBI’s proposal. Indeed, right now, whatever you think about W-M’s climate provisions, one can state with absolute certainty that passing a bill like it is our only politically plausible chance of beating China in the clean energy race.
Ironically, or perhaps intentionally, if we don’t get a climate and clean energy bill, it will be at least in part due to the disinformation spread by TBI. It is time for everyone – including Grist – to see TBI as the opponent of clean energy and climate action that they are.
