Gas-Pipeline

It was Canadian Prime Minister Pierre Trudeau who once announced, “Canada is a country whose main exports are hockey players and cold fronts. Our main imports are baseball players and acid rain.”  Yet the head of state’s wry humor belies the significance of the U.S-Canadian relationship, and how this relationship is destined to shape – and to be shaped – by the posture that the United States takes towards the explosion of unconventional oil production occurring because of the Canadian oil sands.

Conventional wisdom would suggest that the prospect of a nearly 2,000 mile long pipeline between Canada and the United States, the TransCanada Corporation’s “Keystone XL” project, should be welcomed as a harbinger of closer ties and safer energy supplies.  Under the surface, however, lies a complex geopolitical and commercial logic that suggests it is Canadian producers – not American consumers – who stand to gain most from the project.

Our neighbor to the north will hardly ever receive the bursts of attention or scrutiny that Saudi Arabia or China garner in present times, but it is this bromidic consistency on Canada’s part which places it squarely, albeit quietly, as a foundation of US energy policy.  The US has been Canada’s largest market reaching back to the beginning of the Cold War, and the two are currently the world’s largest trading partners.  Canada has the world’s second largest oil reserves – after Saudi Arabia – and is the United States’ number one source of oil imports, almost doubling the volume of its closest competitor – Mexico.  In 2008, Canada provided 90% of US natural gas imports, and also boasts one of the world’s largest reserves of high-quality uranium.  Were the country anything other than a stable Western democracy sharing a similar colonial heritage with the United States, our deep interdependence with such an energy superpower might prove alarming.  Instead, it is often cited as a source of strength.

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As President Obama emphasized earlier this week in his State of the Union address, U.S. clean energy innovation has a crucial role to play in tackling climate change and ensuring the future vitality of the United States economy. However, at least two other factors – creating a demand “pull” for clean energy sources and shifting towards more sustainable lifestyles – are also crucially important and should not disappear from our policy discussions.

As my colleague Teryn Norris has argued here, the Obama Administration’s commitment to U.S. innovation – especially in the clean energy field – is a wise decision, and we can only hope that legislative victories follow. But while energy innovation can indeed boost U.S. economic leadership, it won’t be enough if we also hope to address the further problems of energy independence and climate change. In other words, technological innovation shouldn’t become the only focus of our energy discussion.

With repeated disappointments in climate and energy policy in recent years, it is indeed tempting to give up on conventional policy mechanisms and hope that a new technology will solve the problem. Some thinkers, such as Time magazine’s Bryan Walsh have argued recently that “putting a price tag on pollution isn’t solving our climate-change woes. It’s time to invest our muscle—and money—in breakthrough innovation.” Although I would be the last person to question the benefits of technological breakthroughs, I believe we shouldn’t overlook how policy, economics and human behavior ultimately determine how much we’re able to take advantage of these breakthroughs.

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A Lesson from the Great Australian Floods

Renewable energy has been put forth as the solution to a myriad of problems, some of which have received more attention than others. Perhaps most prominently, the implementation of renewable energies has been touted as a method of abating CO2 emissions and climate change, alleviating energy poverty in developing nations, as well as the boon to employment in the United States. Focusing on a small subset of benefits of renewables certainly has its advantages but also leads to the neglect of other benefits perceived at one time to be less important. One such neglected benefit, though, now merits much greater significance than has been previously accorded it given the tremendous floods that ravaged eastern Australia earlier this year: a hedge against marketplace volatility.

Marketplace Volatility

The world stands at a crossroads when it comes to market volatility. Historically, market volatility has largely been a result of anthropogenic influences, such as geopolitical conflicts (e.g. the 1973 oil crisis) or abrupt surges in supply or demand as new reserves are discovered or nations rapidly industrialize (e.g. China’s recent rise to power). However, in the 21st century, these historic drivers of market volatility may be dwarfed by a growing player on the world stage, natural disasters. Certainly, natural disasters have always caused market fluctuations, but as climate change escalates and increases the frequency of extreme weather events and shifts global weather patterns, these events will have an even greater effect on the world’s economy.

The effect of the recent floods in Australia provide a perfect illustration of this claim. First and foremost, while true that climate change has not been (and perhaps cannot be) linked to the floods, the Intergovernmental Panel on Climate Change (IPCC) nevertheless found that the likelihood of heavy precipitation events becoming more frequent over most areas is “very likely”. Thus, although climate change may be entirely unrelated to this instance of flooding, it almost certainly will drive other instances in the future. Furthermore, floods are not the only severe weather event that will be impacted by climate change; tropical cyclones, droughts, heat waves, and fires will most likely all be exacerbated as well. In other words, expect to see considerably more naturally-induced disturbances to supply chains as in Australia earlier this month. (more…)

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The term ‘energy efficiency’ usually brings to mind better-insulated homes and smart power meters. But emerging thermoelectric technology could give energy efficiency a whole new meaning by tackling the huge energy waste that happens before the watts even reach our homes.  Yet, to reach market, thermoelectics will have to overcome a number of technological and policy related barriers.

The Promise

Thermoelectric devices, which enable the conversion of heat into electricity, are still at an early stage in the energy innovation chain, but the principle behind how they work can help to highlight a crucial aspect of energy waste across the world that is often ignored in the policy realm.

You may have heard that homes in developed countries waste 25-35 percent of their energy due to insulation problems and inefficient devices. But the lion’s share of energy waste actually comes at the early stages when the electric power is generated in power plants and carried across transmission lines.

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Cancun and the Intellectual Property Challenge

While it looks increasingly likely that the same dynamics which undid the 2009 Copenhagen climate summit  are again present in Cancun, it is far too early to eulogize international approaches to climate change mitigation. One area that the developed and developing world share an interest in sorting out in more explicit terms is the debate over the global intellectual property (IP) rights framework as it applies to energy technologies.

Given the urgent imperative to reduce carbon emissions, the diffusion of ideas, components, and processes across the globe is a modern day “Icarus” whose trajectory must be delicately plotted.  Protect IP rights too stringently, and the promise of a widespread clean-tech revolution is stymied by the torpid pace of technology diffusion.  Yet maintain too loose of a regime and we risk melting away the financial incentive to innovate in the heat of our haste.  In avoiding both the sun and sea, the world community should expand the role of actors that stand apart from, or at least above, the contentious politics of bilateral trade disagreements.

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On Monday, Secretary of Energy Steven Chu warned that in the global clean energy race, “America still has the opportunity to lead” — but “time is running out.” While our nation seems to be standing still, countries like China, South Korea and Germany have been speeding ahead to develop and deploy new technologies — and reap the economic benefits.

Chu’s speech also marked the release of a new report by the President’s Council of Advisors on Science and Technology (PCAST).  This report joins a growing call for increased federal investment in RDD&D to around $16 billion per year.  The most compelling of the recommendations is one to create a Quadrennial Energy Review—modeled after the Pentagon’s Quadrennial Defense Review—that could provide increased long term planning and coordination for the federal government’s energy policy.

As reported by CNET, during his speech at the National Press Club, Chu “suggested that the U.S. is reaching a ‘Sputnik moment’ where political leaders and the general population will realize how the U.S. has fallen behind other countries in science and technology.” In response, the U.S. must “fund research in clean-energy technologies in order to stay apace and take advantage of the economic opportunity that cleaner energy technologies represent globally.”

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While hardly shocking, today’s release of the International Energy Agency report, “World Energy Outlook 2010,” sheds further light on the urgency of the moment.  As expected, the world is not on track to stop average temperatures from rising more than 2°C, a central goal of the Copenhagen Accord.

Non-OECD nations will be responsible for 93% of increased energy consumption between 2008 and 2035.  China will remain the focal point of the international energy landscape; in the report’s models China “contributes 36% to the projected growth in global energy use, its demand rising by 75% between 2008 and 2035.” Without cheap alternatives, these nations will largely turn to fossil fuels.  In an international context, it is imperative that OECD nations work not just to limit their own CO2 emissions, but to create cost competitive clean energy technologies which can help fulfill non-OECD nations’ rising demands.

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A Bipartisan Strategy for Energy Leadership

By Teryn Norris & Clifton Yin
Published by The Huffington Post

When President Obama and key Senate leaders meet today to reach a compromise on energy and climate legislation, they should strongly consider increasing federal investment in clean energy technology to at least $15 billion annually. This is a comprehensive third way strategy to improve U.S. energy independence, economic competitiveness, and climate security, and it deserves bipartisan support.

We are a Democrat and Republican. One of us campaigned for Barack Obama in 2008, the other as a delegate for John McCain. One of us worked on energy and climate policy for the progressive Breakthrough Institute, while the other worked on similar issues for the conservative American Enterprise Institute. We disagree on a wide range of issues, and we hold different economic philosophies.

Despite our differences, we are strongly united behind a serious federal agenda for clean energy innovation. Regardless of the future of cap and trade, robust federal investment in clean energy technology can effectively tackle both energy and climate policy reform. In addition to reducing our oil addiction, it can help build new export-oriented and manufacturing-intensive industries, seize global market share, drive down the price of clean energy technologies, and accelerate the transition to a cleaner, low-carbon economy.

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New Reports on the Global Energy Race

The Apollo Alliance and Center for American Progress have both released new reports on the global clean energy race and strategies for U.S. leadership:

Apollo Alliance: “Winning the Race: How America Can Lead the Global Clean Energy Economy,” March 2010

Center for American Progress: “Out of the Running? How Germany, Spain, and China Are Seizing the Energy Opportunity and Why the United States Risks Getting Left Behind,” March 2010

The Breakthrough Institute and Information Technology & Innovation Foundation released a major report in November 2009 on this topic called “Rising Tigers, Sleeping Giants,” which provides more analysis on China, South Korea, and Japan compared to the United States.

NYT calls for climate bill

The New York Times editorial board is calling on President Obama to forge ahead with a climate bill, despite the loss of the Democrats’ 60th Senate seat. According to conventional wisdom (and some pundits), the chances of Congress taking action on energy and climate this year are  ”somewhere between terrible and nil.” The editorial challenges Obama to “prove the conventional wisdom wrong by making a full-throated case for a climate bill in his State of the Union speech this week.”

(However, as previously noted by this blog, the Senate bill in its current form has far less federal investment in clean energy technology development and deployment than what many experts, and the White House, have called for.)

Some of the reasons Congressional action cannot wait? In addition to concerns about climate change (which only continue to mount in severity), the editorial cites issues of national competitiveness at stake:

  • China is “moving aggressively to create jobs in the clean-energy industry. Beijing not only plans to generate 15 percent of its energy from renewable sources by 2020, but hopes to become the world’s leading exporter of clean energy technologies. Five years ago, it had no presence at all in the wind manufacturing industry; today it has 70 manufacturers. It is rapidly becoming a world leader in solar power, with one-third of the world’s manufacturing capacity.”
  • The U.S. faces a “question of credibility.” At COP15, the US pledged to “meet at least the House’s 17 percent target. Success in the Senate is essential to delivering on that pledge. Failure would undo many of the good things [Obama] achieved in Copenhagen, and it would give reluctant powers like China an excuse to duck their pledges.” [Not sure about this last sentence with regard to China, which agreed to a voluntary carbon intensity reduction unilaterally ... and they probably mean to keep it.]
  • Finally, the editorial notes, “the ‘jobs argument’ should impress the Senate … The climate change bills pending in the Senate would not begin to bite for several years, when the recession should be over. The cost to households, according to the Congressional Budget Office, would be small. A good program would create more jobs than it cost.”

Unfortunately, things look a bit hazy, despite Harry Reid’s earlier announcement that the climate bill was on the agenda for March. The editorial worries that “many Democrats as well as Republicans seem willing to settle for what would be the third energy bill in five years—loans for nuclear power, mandates for renewable energy, new standards for energy efficiency. These are all useful steps. But the only sure way to unlock the  investments required to transform the way the country produces and delivers energy is to put a price on carbon.” (This presumably refers to investment from private capital markets and not government-sponsored programs or federal investment.)

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