Flood myths are common to human culture. Swollen rivers, tidal
storms, and tsunamis make their appearance frequently in literature. But
Hurricane Sandy, which has drawn newly etched high-water marks on the
buildings of lower Manhattan (and Brooklyn), has shifted the discussion from storytelling to reality.
Volatility in climate has drawn the attention of policy makers for a
decade. But as so often is the case, a dramatic event like superstorm
Sandy -- the largest storm to hit New York since the colonial era --
has punctured the psyche of the densely populated East Coast, including
the New York-Washington, DC axis where US policy is made.
Not surprisingly, in the weeks since the historical hurricane made
landfall, new attention is being paid to the mounting costs coastal
world megacities may face.
Intriguingly, however, this new conversation about climate, energy
policy, and America's reliance on fossil fuels comes after a five year
period in which the US has dramatically lowered its consumption of oil
and seen an equally dramatic upturn in the growth of renewable energy.
America's production of CO2 in the first quarter of 2012 fell to twenty year lows.
The country is using less coal, increasing its use of natural gas, and
like the rest of the OECD, is seeing its transportation demand migrate
from cars and trucks to rail. While Europe is often cited as being at
the forefront of renewable power, the US has also started to produce
very strong growth rates for Wind and Solar power:
The combination of declining oil use and a greater reliance on the global powergrid is going to shape energy and climate policy. Especially
at a time when the concerns of climate change -- or rather rising seas
and the greenhouse dangers of fossil fuel dependency -- are being
increasingly raised. This will make for a rather muddled and complex
array of diverging policy initiatives.
Moreover, as the oil-based economy (which was harder to meter) gives
way to the electricity-based economy, policy makers will find there are
more levers to shape energy demand in their economies. The oil age was a
more natural fit for free-spirited individualism. The
electricity age will see an era more comprehensively dominated by
policy, as the powergrid becomes the mechanism for governments to shape
the future of energy demand.
Rebounding to the Grid
The oil age went into decline roughly ten years ago.
Oil's share of total, global energy demand which had been on the rise
since the 1930's, peaked in the mid 1970's but held steady for over
twenty years until the new millennium. But starting early last decade,
through a combination of oil's repricing and the industrialization in
the Non-OECD, oil's market share in the global energy mix retreated.
This decline of oil in the global economy explains perfectly why the
weak rebound since the 2008 financial crisis has grown along the
contours of the powergrid. It's not just the United States. In Japan,
and especially in Europe, oil use has continued to decline right through
"the recovery" as increasing numbers of car drivers are taken off the
road, as jet travel declines, and as trucking has given way to higher
deployment of freight rail.
This opens up, however, a number of new constraints as well as new
opportunities, because while there is high growth in solar and wind
power, the growth of global electricity is largely driven by coal. That means awareness of coal's role is going to widen among populations, and governments are going to be drawn into action over coal.
Carbon Taxes, Renewable Portfolio Standards, and Feed-In-Tariffs
Global coal markets have recently sputtered in the face of slower
growth in China as well as the rise of natural gas in the United States,
which has dislocated consumption of its own coal. If glanced at
quickly, this looks like an interruption in the supertrend. Alas, no
such interruption is taking place.
Instead, the coal which Americans are no longer consuming is being exported to the rest of the world. Even Europe is taking greater volumes of US coal, which in 2012 is on pace to see the highest level of exports in US history.
But a more important phenomenon to understand about global energy
consumption is that much of the upswing in Asian coal demand the past
decade, especially in China, is really just an offshoring of OECD
manufacturing capacity. In other words, an increasing proportion of
goods purchased by Westerners since the year 2000 is the result of goods
made in Asia. And these goods are made in factories powered by
coal-fired electricity generation. Clothing, appliances, electronic
devices -- yes, iPhones, too -- are made in facilities powered by coal.
This is why, as policy is increasingly driven either by concerns
about climate, or increased distaste for dependency on fossil fuels --
or both -- the clamor for carbon taxation is going to grow.
In a recent essay, Forget Kyoto: Putting a Tax on Carbon Consumption, take note of the emerging emphasis on the global trade of energy use:
China's phenomenal economic growth has been based on
exports, notably of energy-intensive goods, from steel and
petrochemicals to a host of manufactured products. These have been
bought largely by the U.S. and Europe, which together account for nearly
50 percent of world GDP. It is carbon consumption that measures the
carbon footprint and hence responsibility, not the carbon production in
particular geographical areas. Yet remarkably the Kyoto framework does
not take consumption into account. Instead it focuses on carbon
production, and mostly in Europe, where deindustrialization and the
collapse of the former Soviet Union make compliance with the targets
easy.
Politically speaking, carbon taxation has been a very tough sell --
especially in the United States. Interestingly, there have been trial
balloons since the election that the Obama Administration may even tie
together, or try to tie together, new carbon taxes as a way to lower the US budget deficit.
That too is unlikely to have much political appeal. Though it does
signify the shift coming in the wake of Hurricane Sandy and this
summer's extraordinary drought.
There are interesting divergences, however, about the effectiveness
of carbon taxation among those who work in the areas of energy and
climate policy.
Chris Nelder, writing in Smart Planet, Why America Needs a Feed-in-Tariff,
makes the case that a carbon tax policy will not necessarily spur
construction of renewable energy. Essentially, if getting renewable
energy infrastructure built is the ultimate goal shared by both climate
policy and energy policy, then why not pursue a national FiT
(feed-in-tariff), of the kind deployed in Europe?
Given the obvious success of FiTs as a policy tool in
Europe, one must wonder why the U.S. has not embraced them. Germany
already tried all the incentives that we're using in the U.S., such as
aspirational targets like renewable portfolio standards (RPS), rebates,
and low-interest loans, and eventually turned to FiTs because they
proved to be far more effective, simple, low-cost, and efficient.
But while it's true that growth of wind and solar power is already
growing at a very strong rate in the US (as discussed previously) it's
not clear this will continue at the same rate.
California's RPS (renewable portfolio standard) has triggered the
construction of a great deal of new utility-grade solar power. However,
this is small in comparison to California's overall energy challenge, as
it sees its own dependency on out-of-state power supply continue to
expand. As I have addressed previously, California's energy production
from all sources is at 50 year lows. This comes at a time when, just as in the rest of the country and the world, transportation demand is switching over from cars and trucks to the grid as light rail is built out in its cities.
New Energy, Climate, and Urban Infrastructure
(image: Thames Flood Barrier, Greater London, UK)
Western cities are aging and the forecast for rising sea levels may
hold true, regardless of any climate policy. In a recent post, Roger
Pielke Jr notes that mitigation of rising sea levels through aggressive
CO2 reduction may not change the current trajectory all that much:
One of the more reasonable discussion points to
emerge from efforts to link Hurricane Sandy to the need to reduce carbon
dioxide emissions focuses on the role that future sea level rise will
have on making storm impacts worse. Logically, it would seem that if we
can "halt the rise of the seas" then this would reduce future impacts
from extreme events like Sandy. The science of sea level rise, however,
tells us that our ability to halt the rise of the seas is extremely
limited, even under an (unrealistically) aggressive scenario of
emissions reduction.
If cities like New York are compelled instead to construct tidal
barriers, and other coastal cities in the US follow, then changes in
global energy consumption and in the public's perception of climate issues may see governments drawn in more closely than ever before to such policy making.
After all, the construction costs for mitigation through
infrastructure will come through state and federal partnership. Indeed,
the discussion about tidal barriers for New York has already begun. Given the extent of recent flooding, this is no surprise. And subsequent storms will only push such initiatives along further.
The New Policy Era
The decline of oil's share in the global economy marks the end of a
kind of free-ranging era in which individual discretion over energy use
reached spectacular heights. Cheap oil gave rise to cities such as Los
Angeles, where the freedom to drive all distances was a luxury enjoyed
by most people. It's not surprising that the cultural adjustment to a
new era, where individual choice in energy use will be redefined, is
proving cantankerous.
Moreover, as new oil supplies emerge from domestic American sources,
the dream of resurrecting this cheap oil era will come back around
several more times, no doubt. But none of these new resource plays will
either change much the trajectory of global oil supply, nor will they
lower the price of oil. So far, new oil supply mostly offsets declines
elsewhere -- but at substanitally higher marginal cost. This should now
be clear.