Tesla Batteries and Climate Change

By Paolo von Schirach —

WASHINGTON – Notwithstanding solemn pledges issued by many governments, no country that really matters is taking the fight against climate change seriously. Headline grabbing global agreements detailing ambitious emission reduction goals mean almost nothing, as they are purely voluntary, and therefore non verifiable, and certainly not enforceable.

Policy-makers will not act

Do not expect more on this front. The truth is that all policy-makers live under the constraints and pressures of urgent matters that require immediate attention. Catastrophic climate change scenarios regarding what will materialize in our world years or even decades from now do not motivate anybody in a position of responsibility to engage –today– in serious and very costly policy changes.

Innovation will deliver results

That said, there is hope when it comes to drastically reducing dangerous emissions. And hope rests on coming up with cost-effective technological innovation. Man made global warming leading to climate change is largely due to the continuing use of dirty emission producing technologies and industrial processes, most of them developed quite a long time ago. The reason why we keep using them, with only some improvements here and there, is because any currently available alternatives would be far too expensive. However, innovation may change all this. Human ingenuity should not be discounted.

Tesla leading on new battery technologies

Take Tesla, for example. Under Elon Musk, its controversial founder, Tesla dared to think of commercially viable electric vehicles (EVs) many, many years ago, when nobody –literally nobody– in the automotive business believed that this might be possible.

Well, fast forward to today and we see how tiny Tesla has become an EVs sector leader. True, the jury is still out on Tesla’s long term commercial viability. However, a relentless effort to improve its battery technology and therefore reduce cost structure and increase both vehicle performance and company profitability may indicate that this maverick EV company may not just survive but actually lead a boom in EVs production.

We know that the main obstacle on the way to mass produced, affordable electric cars is relatively unsophisticated battery technology. While there has been progress, the batteries used to power most EVs are still expensive, very heavy, and not very efficient compared to the traditional internal combustion engines running on oil derived gasoline.

A game changer

Tesla, however, (and many others innovators around the world working on the same or similar issues), seem to have made very significant progress in improving battery performance on all fronts: life of the battery, cost and weight of the battery, amount of energy stored in the battery, and therefore distance that can be covered with a single charge, and shorter recharging time. Many of these battery technology breakthroughs have just been announced by Tesla, and it remains to be seen how the actual vehicles sold to real customers will perform. Still, assuming that most of what Tesla announced is true or close to becoming true, then we are getting to, or very close to a tipping point when it comes to the mass adoption of electric vehicles.

Cheap, high performance electric vehicles will generate mass markets

It is no secret that so far electric vehicles have had only limited appeal. They are still regarded by most consumers as too expensive. They are fancy gadgets for the rich who can afford to pay extra money for a high-tech car, so that they can brag about being green and cool.

Most budget conscious people considering buying a new car look at the price and then the operating cost of the car (mostly fuel) over the time in which they will use it. For these reasons, an expensive EV coming with the additional problems of limited range, limited numbers of charging stations and a long recharging time does not look appealing.

But a new generation of Tesla vehicles powered by a super efficient, low cost, lower weight, high performance battery that will essentially last for ever, would be a true game changer. It would signal a new era for EVs: from experimentation and tinkering to mass production based on proven superior technology and lower prices.

End of gasoline

When this happens, high performance and cheaper EVs will inevitably displace gasoline powered traditional cars. Assuming that these battery technology breakthroughs will work as expected, we can reasonably conclude that EVs will begin to dominate the global auto industry in just a few years. This will be the beginning of the end for traditional cars. And this will also be the end for many refiners currently producing the rivers of gasoline necessary to power hundreds of millions of traditional cars. Further upstream, the virtual end of gasoline will also mean significantly lower demand for crude oil.

Oil will survive, at least for a while

Of course, we do know that even if it all happens as planned regarding a new generation of batteries, with Tesla and many others inundating the global automotive market with affordable, state of the art, super efficient EVs, it will take years before the world automotive fleet will become totally electric. In the meantime, there will be still demand for gasoline and therefore oil.

The oil industry will survive. Let’s not forget that beyond gasoline oil is also used to make diesel fuel for trucks and other heavy vehicles, and powering ships’ engines, not to mention jet fuel, heating oil, and plastics, and what not. Therefore we can expect that there will still be an oil industry ten or even twenty years from now, (unless other technological disruptions will introduce alternatives to other oil-derived products). However, it will be a smaller, streamlined oil industry; and it will be dominated by the low cost producers, (think Saudi Arabia). In a world market characterized by lower and declining demand for oil, only those who can be and stay profitable with oil at $ 10 per barrel or less will be able to survive.

The end of shale?

This being the case, the future of the recently reborn US oil industry appears very uncertain at best. The economic sustainability of the US shale revolution, itself the fruit of American technological ingenuity, was and is predicated on fairly high oil prices. While the cost of fracking operations has come down significantly in the last few years, fracking is still a fairly expensive activity. It is hard to believe that companies struggling in 2019 to stay alive, let alone do well, with oil at around $ 50 per barrel or less, will be able to survive when crude will go down to $15 or less, on account of soft global demand.

Innovation spill over

Improved battery technologies will also transfer to other applications, such as efficient storage for electricity produced by renewable sources such as wind and solar, something that will most likely increase their appeal and marketability vis-a-vis traditional fossil fuel based electric power generation. Overtime, expect fewer (if any) coal fired power plants, and eventually fewer natural gas power plants that are now necessary given intermittent generation from renewables.

You see where we are going here. We are looking at the real possibility of cascading positive effects, affecting different sectors, all born out of technological innovation spurred by the goal of getting a better battery for Tesla’s EVs. And this is the magic of innovation. It spreads. Tesla was not born out of the need to address a well defined market need. True enough, American drivers were routinely complaining about the high cost of gasoline. But all they wanted was cheaper gas. They had not articulated this complaint into a demand for an alternative to the traditional car powered by an internal combustion engine.

And here is the beauty of innovative minds. Elon Musk launched into an industrial adventure that most analysts dismissed as silly, and therefore destined to failure. But now Tesla, the company he created, despite all its challenges, may be on the verge of deploying another generation of technological innovation that is likely to transform the EV sector, and consequently the entire automotive industry in the US and worldwide.

We need more than new batteries

Back to global warming, it is clear that even radical transformations in the automotive sector leading to sharply lower demand for gasoline and therefore crude oil will not be enough to cause dramatic emissions reductions. More innovation will be needed to radically transform industrial processes, from cement production to petrochemical plants and more, that currently produce harmful emissions.

Green and profitable can go together

However, the Tesla relentless quest for better and more efficient car batteries is a good illustration that it is possible to pursue at the same time profits, a more efficient propulsion technology, and drastically reduced greenhouse emissions. It is not true that trying to be green is a luxury that is simply not practical nor affordable for most industries.

Tesla’s innovation efforts may be driven in part by the desire to produce a perfectly green car. But we should keep in mind that Tesla is a business, not a charity. Ultimately Tesla has to serve its shareholders. They want to see a return on their investments. And this means more cars sold at a profit. By pursuing better batteries that will increase performance while reducing cost, the company is strengthening its competitiveness vis-a-vis conventional vehicles, with the hope that millions of consumers will prefer affordable EVs, not because they are green, but because they are better value for money.

By the same token, assuming that some new industrial technologies will be able to eliminate emissions and increase productivity and profits at the same time, you will have classic win-win propositions in which being green is also good for business.

A long shot, but the only one we have

While this innovation driven approach may be a long shot, this is the only practical way to cut down emissions, stay profitable, and avoid the dire effects of global warming. International agreements that cannot be enforced produce short-lived feel good moments, and not much else. Innovation will be the game changer.

Paolo von Schirach is the Editor of the Schirach Report He is also the President of the Global Policy Institute, a Washington DC think tank, and Chair of Political Sciencand International Relations at Bay Atlantic University, also in Washington, DC.

Fight Global Warming With Disruptive Innovation – Not Mandates

WASHINGTON – The Paris event on climate change will probably yield nothing really concrete. The fact is that, despite the rhetoric and the contrived “emergency mode”, there is a huge disconnect between the desired result to stop and possibly reverse global warming and the tools available for this enormous undertaking.

Impossible targets 

Whatever the environmentalists may preach or demand, it is essentially impossible to put the entire world, or even most of it, on a stringent, low-carbon diet. Western politicians who claim that they have a plan are pandering, posturing, or dreaming. We could do this only if we had viable, truly cost-effective technological alternatives. And we do not have them. At least not yet.

Renewable energy? Not quite here yet

Of course, there is renewable energy, the miracle cure. We have solar and wind power, and a lot more. But, so far at least, these are not really cost-effective solutions. Otherwise, they would have been already adopted –on a massive scale.

Sure, today we can install solar power plants in Namibia and Arizona or Morocco, and in other countries where there is a lot of sunshine all year round. As prices for this technology are coming down, this is beginning to make economic sense. But what about Sweden, Siberia, or Belgium? Not much sun there.

Mandates are a bad idea

The worst public policy mistake has been to mandate the adoption of still imperfect renewable energy technologies, so that politicians could show that “we are doing something”. This is a bit like governments, circa 1980, mandating the purchase for every public office of the first generation of PCs running on the first Microsoft operating system. This would have created a rent position for PC manufacturers and for Microsoft, therefore diminishing the incentives to innovate and out-innovate each other.

Real innovation, not subsidies 

Indeed, if I know that whatever renewable technology I produce today, it will be adopted for political –rather than cost-effectiveness– reasons, why bother to invest more, refine it, perfect it and make it wonderful, as opposed to barely passable? I know that, because of the mandates, utilities are forced to buy my stuff. I make enough money this way. Then why push the envelope?

No real results out of Paris

So, here is the thing. The big Paris gathering may yield something. But it will not be much. And we can be sure that measures promised eventually will not be implemented, at least not in full.

By the same token, it is obvious that poor countries do not have the luxury to tax carbon, or to subsidize solar.

In fact, guess what, the use of coal –by far the most hated carbon-based fuel– is going up, worldwide. Yes, up.

More coal plants in Japan

Look at Japan, for instance. The Japanese have come up with a new generation of cleaner burning, lower emissions, coal-fired plants. They are better, for sure. But they still pollute a lot more than comparable gas-fired plants. Let alone zero emission solar.

Coal everywhere 

And yet the Japanese are merrily marching ahead. And they are actively marketing their “clean coal” plants in Indonesia, and elsewhere. India depends heavily on coal. And so does China. Ditto for America, even though coal in the US has been gradually displaced by cheaper (and much cleaner) natural gas.

Add to the mix parts of Africa, beginning with South Africa, the number two economy in the Continent, heavily dependent on coal. So, forget about abolishing coal. Right now, it simply cannot be done.

The revolution 

Can this change? Of course it can. But we need some truly disruptive innovation in non carbon energy that does not need political coercion for early adoption.

Look, imagine that tomorrow we get state of the art, truly affordable and super efficient solar power. At the same time, Tesla or some other manufacturer comes up with a really cheap electric car that you can drive for 400 miles without recharging. Assuming all this, we are done.

It would take no more than a few minutes for millions and millions of price conscious consumers, and later on the whole world, to switch to the new technologies.

The end of coal, gas and oil 

Millions would install cheap and highly efficient solar panels on their roofs, this way making their own electricity, at home. Then they would dump their cars with gasoline engines and buy an electric vehicle that they can charge at home at almost zero cost. People would make this switch not because they are pious environmentalists, but because they want to save money.

This way, in no time we would have eliminated coal, natural gas (power generation fuels) and oil (transportation fuel) as our key energy sources. Think of that. And we would have achieved the dream of a mostly carbon-free world.

Not enough R&D 

This is what we should aim for. Whereas, right now we get little investment in R&D in new energy technologies, and plenty of mandates, regulations, and subsidies for still rudimentary renewable energy solutions.

We should spend real money on “Moon Shot” projects. Bold stuff, out of the box ideas. Of course, most of these efforts will lead to nothing. Lots of money will be burnt on crazy ideas. But this is what happens when you go into uncharted territory.

Fantastic energy future? 

Nobody really knows what our main source of energy will be in 50 years. I hope it will be something fantastic, clean and cheap. But if we continue at this pace, chances are that in 50 years we will continue to have debates about “clean coal”, and “lower emission”, gasoline-fired internal combustion engines.

And, if that is so, forget about “solving” global warming.

Fusion: The Next Energy Revolution

WASHINGTONTIME‘s cover story (November 2, 2015) has this tantalizing title: “Unlimited Energy. For Everyone. Forever. FUSION, It might actually work this time”.


Yes, the long article is about “fusion”, the Holy Grail for all those who seek a way to produce and harness abundant, cheap, and emission free energy. However, this is still a distant dream. Indeed, the inside joke among those who have been working on nuclear fusion is that “fusion is about 30 years away, and it will always be 30 years away”.

Therefore, fusion is something theoretically possible, but so removed from practical reality that it is in fact only a fantasy. Indeed, even if we take it literally, “we shall have nuclear fusion 30 years from now” does not mean “never”. But it is a very long time away for a world that is seeking practical, commercially viable alternatives to fossil energy –today.

The global energy picture 

When it comes to energy, we know where we are. Contrary to even recent predictions, we still have plenty of oil and gas, not to mention enormous coal reserves. In fact, thanks to the US-led “hydraulic fracturing” revolution, now we can tap into large oil and gas shale reserves that we believed to be economically non viable until very recently.

However, energy from fossil fuels is still too expensive for many developing countries. Hundreds of millions of people in Africa and Asia lack electricity and modern transportation systems simply because they cannot afford them.


Besides, fossil fuels extraction, processing and consumption contributes to environmental degradation, while their emissions increase the amounts of greenhouse gases that cause global warming.

Those who really worry about climate change (they seem to be a majority) declared that, because of global warming, we have to curb the use of fossil fuels now, while switching to emission free renewable energy.

Good intentions 

The intentions are good. However, the problem with this approach is that it is not cost-effective, at least not yet. At its current level of technological development renewable energy (mostly wind and solar) is still too expensive and not reliable. In many cases, it is adopted only because of imposed legal mandates. This may make environmentalists happy, but it is bad economics.

Enter fusion 

How would fusion change all this? Well, if indeed fusion would move from quasi-science fiction to commercially viable reality, its impact would be equivalent to the invention of the electric light bulb.

Fusion is what takes place in the sun, at extremely high temperatures. Imagine that we would learn how to provoke fusion while properly containing it, and use the tremendous amount of power released by it. This would be a real revolution. As TIME put it: “Unlimited Energy. For Everyone. Forever.”

Cheap, no radiations 

And the beauty of all this is that fusion is cheap. The raw material for fusion is super abundant hydrogen. And fusion is much more powerful than fission (this is what happens in nuclear power plants), without the disadvantage of creating nuclear waste, or radiations. Besides, just like nuclear power, but unlike wind or solar, fusion would generate a constant supply of energy.

Imagine the consequence of this energy revolution. We could power almost anything at a fraction of today’s cost. Forget about drilling oil wells, transporting and then refining crude oil. Forget about coal mines. Forget about gas wells, and pipelines.

Energy for developing countries 

We could give clean, affordable energy to all poor countries, so that they would be able to kick-start their economic development without the huge up front costs associated with the construction of power generation plants, and the additional expenses related to fueling them and running them.

A game changer? 

Well, has there been any breakthrough? Have we removed the “we shall have fusion, 30 years from now” insurmountable barrier? Not quite. In this respect the article disappoints a bit. We are still not “there”. However –and here is the good news– we have entered a new dimension that may be indeed the prelude to a real game changer.

State-run programs

Here is the thing. Until recently fusion research was the domain of publicly funded researchers. And this was and is a systemic weakness. The allocation of (relatively scarce) public funds devoted to fusion research and experimentation is governed by too many rules, procedures and endless bureaucratic protocols.

And it seems that risk averse program managers dominate this process. As a result, everybody is doing pretty much the same stuff. New frontiers are not explored. Hardly any progress registered.

Mega international projects, such as ITER (International Thermonuclear Experimental Reactor) in the South of France, are years behind schedule and billions over budget. ITER started in 2008. It is now estimated that the reactor will be operational in 2027. In the meantime, projected costs ballooned from $ 5 billion to $ 20 billion.

Private capital 

But something has changed. And the change is that private capital is now bankrolling small and generally unknown start-ups. And these start-ups (like Tri Alpha, Helion Energy and General Fusion) are experimenting new technology approaches that seem to be more promising.

Now, this renewed enthusiasm about fusion is no guarantee of success. But it indicates both optimism and impatience among dedicated scientists, and beyond. Obviously there are many people, including funders, who believe that the science has been properly addressed, and now the trick is to move to the next step, by making the machines that will make fusion possible and commercially viable.

Getting there? 

Again, let’s stress that optimism and the availability of venture capital is no indication of ultimate success. However, many more smart people focusing on fusion may increase the likelihood of faster progress.

One again, the very idea of fusion seems to be the classic example of something that is “too good to be true”, and therefore impossible. Still we may, just may, get there. And may be sooner than we think.


Obama’s Anti-Carbon Policies Will Have No Impact On Global Warming

WASHINGTON – President Obama is trying to transform the US energy industry via federal regulations. He just announced a new plan aimed at promoting renewable energy production while penalizing “dirty” carbon fuels: coal, of course, but also much cleaner and cheaper natural gas.

Expensive electricity 

If implemented, this new policy means that at least for many years we shall have higher electricity prices, simply because more costly solar and wind energy still need subsidies in order to stay afloat. Without government-imposed mandates, they would not be adopted. “Dirty” natural gas instead is abundant and cheap. (Thanks to shale gas and fracking technologies that allow us to extract it, the US is now the largest natural gas producer in the world).

What is most extraordinary in all this is that, according to the same Obama administration keen on re-engineering the entire US power generation industry, there will be practically no change in global temperatures as a result of this major domestic energy revolution. Well, if this is so, what is the point?

Dogmatic beliefs

Sadly, there is no point. This is all about taking actions that please the pious members of the “Church of the Environment”. While they claim that all their policy positions are based on “definitive science”, the Faithful think and behave just like other religious zealots. Their point is that anything that contributes to global warming is bad (in fact evil) and therefore it must be stopped. Cost-benefit analysis does not apply here. What they believe is the Truth and therefore it is rational. Period.

As most of them vote for the Democrats, Obama believes that his anti-carbon policies are an appropriate homage to his base.

Let’s protect our environment 

Let me state the obvious. Every sane citizen should be in favor of environmental protection. We should all be in favor of preserving the fragile ecosystems that support all life on Earth. We should also regulate, or forbid all human activities that have or may have an adverse public health impact.

We all want clean soil, clean water, and clean air. And if this means curtailing or outright forbidding economic activities that do have harmful public health effects, so be it.

We do not want another China 

Again, this is common sense. The alternative is what we had until the 1960s, before environmental issues awareness spurred land mark US legislation, (Clean Air Act, Clean Water Act, the creation of the US Environmental Protection Agency, and so on), aimed at protecting the environment.

It is also clear that, If we stop protecting the environment, then we get something like China, a country that for 30 years promoted large-scale manufacturing without any concern whatsoever for the extraordinary pollution caused by unregulated industrial activities. And the result of this is an environmental disaster.

This is a religion 

That said, it is now clear that environmental protection has morphed into an anti-industrial religion. One of the key elements of its dogma is humanity’s moral duty to stop “man-made global warming”, most of it caused by burning fossil fuels.

As all dogmas, this absolute environmental belief assumes that man-made global warming is a settled issue, and that it is also settled that we must reverse it or at least stop it by outlawing or regulating all activities that will lead to an increase of greenhouse emissions, CO2 first and foremost.

Carbon is bad

As I said above, it should be possible to forge a consensus about regulating harmful emissions. If an old coal-fired power plant fouls the air around it, causing respiratory diseases or worse, let’s close it down.

However, it would be wise not to stretch our definition of harmful effects beyond the obvious. But this is precisely the problem we have with the environmentalists. Their dogma assumes that burning fossil will raise Earth surface temperatures so much that we shall end up cooking the planet, with anything and anybody in it. Hence the necessity, indeed the moral duty, to stop the use the use of all fossil fuels.

That said, the believers themselves agree that even drastic and costly action aimed at reformulating America’s energy mix will have almost no impact on global temperatures.

Set a good example? 

If so, then what is the point? Their point, I assume, is that America, as the leading per capita energy consumer, should set a good example. If other countries see that America is serious about “doing something” to stop global warming, then they may follow our example by cutting down their own fossil fuels consumption and emissions, this way allowing mankind to win this gigantic fight against global warming and climate change.

Irrational and crazy 

So, here is the thing. For the believers, It appears to be totally rational to embark in a policy that will have high immediate and medium term costs in terms of higher energy prices, even though we have no reassurance that it will produce any impact on the issue they want to address.

This is irrational and wasteful. In fact, it is crazy.


Obama: War With IS Going Well – Climate Change Is The Real Threat

WASHINGTON – How is the US war with ISIL (IS) going? Well, not so great; but not bad either, according to the Commander in Chief. Rather optimistically, President Obama declared in an interview with The Atlantic that “I don’t think we are losing”.

War with ISIL under control

And he said this after Ramadi, the main city of Anbar Provice (and a short drive from Baghdad) was captured by ISIL, while the Iraqi troops run away. Meantime, ISIL registered another gain by taking over the city of Palmyra in Syria.

According to Obama, these are temporary setbacks, not at all surprising in what he described as a long campaign that will take years. The message is: “Do not worry. We have this thing under control. We have been at it only for a few months. Do not focus on the daily news. We have put together a winning strategy. We really know what we are doing.”

The real threat is climate change

In the meantime, since the war with ISIL is going relatively well, here is what the US President is truly concerned with. In his May 20 Commencement Speech at the US Coast Guard Academy, (New London, Connecticut), Obama stated that denying climate change is a “dereliction of duty”.

So, here is America’s true strategic priority: “Stop climate change”. The war with ISIL, the first well organized, functioning terror state in modern history, is a mere side show, and we have that situation under control anyway.

But climate change is a different matter. This is the real threat to US national security. No, I am not making this up. This is what President Obama said. And these appear to be his priorities.


Historic US-China Deal To Fight Global Warming?

WASHINGTON – President Obama went to Beijing and –surprise, surprise– he pulled a huge rabbit out of a hat in the form of a “historic” agreement with China committing the latter to the reduction of its own green house gases…after 2030.

Joint US-China commitment

To be precise, China pledged “to intend to achieve the peaking of CO2 emissions around 2030”.

As this is a bilateral committment, President Obama promised that the US by 2025 will reduce its own emissions by as much as 28% below 2005 levels.

We shall do something, after 2030

Got that? America pledges –now– to achieve further green house emissions reductions by 2025, in exchange for the vague promise that China, after peaking in 2030, will start reducing its own emissions after that date.

And, by the way, this is only a “declaration”. An interesting development, in as much as it seems to commit China to doing something about reducing emissions. But this is not a treaty. It is a non binding document. There are no penalties for non compliance. Which is to say that it is not enforceable.

And again, we are talking the vague “promise ” –today– to do something meaningful after 2030, long after Obama and most likely Xi Jinping will be out of the picture.

I am not impressed.

Little substance

There is very little substance here. And yet many commentators talked about this “deal” as a (needed) major breakthrough in the fight against global warming. You see, China at last set some clear emissions reduction goals and timetables, finally recognizing its responsibilities as the top world polluter, along with America.

All in all, we are told by “the experts” that out of this announcement we get that the two countries that produce the largest amount of harmful emissions are finally setting a good example.

We are also told that, after this Beijing China-US deal, in the future no country within the developed world will be able to hide behind the (lame) excuse that, until China is on board with concrete commitments to cut its own emissions, it makes no sense to take steps aimed at reducing greenhouse gases. Now China is “on board”, so everybody else should join in and do its part.

A new milestone?

Really? I find it bizarre that analysts and even serious media are willing to make so much out of so little.

Sure, I can recognize that this Xi-Obama deal may have some symbolic meaning. Who knows, may be China really means this. But we are talking about a promise today (2014) to do certain unspecified things many, many years later (2030).

In the meantime, in order to honor its side of the agreement, America would have to curb its own emissions at a faster pace, starting now.

So, US unilateral sacrifices beginning now, in exchange for the promise of Chinese action after 2030.

And this is a historic breakthrough based on shared principles, spelling out coordinated US-China actions to fight climate change?

To me, all this looks most unserious.


Fighting Climate Change Is Useless – Invest In Adaptation

WASHINGTON – If you want a cogent and well explained argument about the complete uselessness of US carbon restriction laws and regulations aimed at combating climate change, please read the WSJ op-ed piece by economist Edward Lazear, (The Climate Change Agenda Needs to Adapt to Reality, September 3, 2014).

Policies will have no effect

Using very simple language, and with the support of a lot of data, Lazear shows how any US attempt to limit emissions via expensive domestic regulations will have no impact whatsoever on global emissions, simply because China, India –real giants when it comes to emissions– and other emerging countries are not on board.

Even with major national efforts, we shall reduce global emissions only a little, while China and India will keep adding a lot, therefore nullifying the impact of our –expensive– new policies.

No real difference

Indeed, if our goal is to really reduce global emissions, even though America is the second largest contributor, and by far the biggest in terms of per capita emissions, the fact is that forcing 300 million Americans to change behavior (at a high cost) will not stabilize or reverse total greenhouse emissions.

This being the case, it is really insane to insist on this policy course, when we know in advance that the policy objectives will not be achieved.

Invest in adaptation

Lazear argues that it would be a lot smarter to invest in measures focusing on “adaptation”. As temperatures are going to rise anyway, let’s protect ourselves as best we can.

In his WSJ piece he lists the most obvious: dykes to prevent higher water levels from flooding low-lying areas, and planting heat tolerant crops and trees. Indeed, it is a lot smarter to invest limited resources in technologies that will help us adjust to higher temperatures than trying to stop or reverse global warming through imposed restrictions that will not make a dent, simply because the real super emission producers are not on board.

Common sense

Now, this is common sense. But the climate change lobby is driven mostly by ideology dressed up as “science”, not by common sense.

Carbon is “evil”, green is “good”. Therefore, we have to pursue the “good”, no matter how useless this is, and no matter how much it costs.


Chinese Experts Say That China Needs A Lot More Natural Gas – Not Renewables

By Paolo von Schirach

February 17, 2014

WASHINGTON – In the often schizoid US national debate on energy issues the “good and enlightened people”, (those who would like us to stop using carbon based fuels immediately), frequently point out that China is way ahead of America. China, we are told, is investing massively in renewable energy, most notably solar. You see, the real point is that the wise Chinese technocratic leaders, capable as they are to serenely contemplate “the big picture”, figured out long ago that their vast nation needs to get out of carbon. The conclusion is that the Chinese are wise and smart. We are not.

Bad carbon based energy

Largely because of the evil works of the oil and gas lobby, we keep focusing on the outmoded, wrong formulas –fracking being the latest. Indeed, by developing this (sinister?) source of natural gas contained in shale formations we continue our perverse dependence on carbon, while we pollute our precious water supplies and create untold dislocations across rural America.

What is really happening in China

Well, the real picture is quite different. China’s state TV, CCTV, reports that in order to curb stratospheric levels of pollution, officials in the Hebei Province, (a large area surrounding Beijing and now officially the most polluted province in China), had to resort to the actual closing down or destruction of 8,347 industrial plants producing cement and glass, among other heavy polluters.

An expert from an official research agency, interviewed by CCTV, indicated that reducing horrible levels of smog will be very, very tough.

For one thing, he stated, if the province wants to move to renewable energy, making anything there is going to be much more expensive. This will be very tough for business, he pointed out. Furthermore, the general public will be hit by higher utility bills.  So, there you have it. Renewable energy costs a lot more and makes it harder for industry to stay competitive.

China needs natural gas

And so, what is the way out? Well, the expert said that China needs to increase its supplies of “natural gas” and “nuclear power”.

Got that? “Natural gas” and “nuclear power”. Not a word uttered by this presumably enlightened Chinese expert about solar and wind. And why not? Not because they are bad. It is because, to date, they are still too expensive.

So, here in America our incredible natural gas bonanza is demonized by the “good experts” as more of the same bad stuff, while they invoke the healing power of renewables supposedly pushed forward by the smart Chinese technocrats. But it turns out that in China the experts say that they would love to have access to a lot more natural gas, so that they could reduce their reliance of dirty coal.

Renewable energy has a future

The day of renewable energy no doubt will come. But we are not there yet. The American do gooders should look at China’s environmental disasters and the lack –today– of cost-effective renewable energy solutions. After that, they should look back at America and consider how lucky we are. Thanks to fracking and horizontal drilling –American home-grown technologies– we are now the largest producer of natural gas in the world.

Because of this abundance of domestic, cheap and relatively clean energy we can retire old, high polluting, coal-fired plants without any adverse economic effects.

What do you know: our natural gas is very cheap and it is much cleaner than coal.

And, yes, as a result of this shift from coal to gas for power generation we have cut our greenhouse gases emissions. China is indeed investing heavily in solar energy. But, thanks to a huge number of high polluting coal-fired plants that cannot be shut down, as there is no economically viable alternative, millions of wise Chinese live in cities that are virtual gas chambers.

Certainly, we in America have a long way to go in our quest for affordable, clean energy; but –thanks to our natural gas revolution– we are much farther along.

Industrial Policies Usually Do Not Work – The Obama Administration Bet On Renewable Energy Right When Shale Gas Drove Down The Price Of A Key Carbon Source Illustrates The Point

[the-subtitle ]

By Paolo von Schirach

September 26, 2012

WASHINGTON – Watching the science program NOVA on PBS, (US public television), I was absolutely mesmerized by the array of incredible experimentation currently going on in universities and laboratories across America. New airplanes wings that will be able to change geometry during flight, “self healing” materials that can absorb bullets, contraptions that recreate the same photosynthesis used by plants to transform sun light into life creating processes, new chemicals that can guide medications precisely to cancer cells, thus avoiding any damage to healthy tissues.

Creativity and innovation

This TV program presented a veritable festival of creativity and innovation. All these efforts should give us hope regarding the ability of capable scientists to solve major problems while creating economic value through industrially viable versions of their discoveries.

All true, except for one thing. Most of these incredible discoveries are still at the experimental level. In most cases it is not clear if and when an economically relevant application will be created. In many instances there will never be one. In other cases there will be a bad marriage between the innovators and the business development people. And finally, even when smart people decide that the innovation is going to be a money maker, something will go wrong. Projections will turn out to be far too optimistic, market conditions will be different, and so on.

All this is well known: creating innovation and bringing it to market is a very riskly business. Most new ventures fail. Some look promising and then fail.

Renewable energy, anybody?

With this general background in mind, it is important to give a second look to far reaching US public policies, such as the push for renewable energy, that turned out to be wrong. They were not wrong as a matter of principle; but mostly as a matter of timing.

The desire to see a world in which clean technologies will provide renewable, zero emission, affordable energy is a healthy one. The world would benefit enormously from viable renewable energy. With the deployment of such technologies, we could solve the combined problems of lack of energy in emerging countries, (mostly Africa), high energy cost, pollution and climate change caused by burning fossil fuels.

Good goals, bad timing

Keeping all of this in mind, why wasn’t it a good idea for the Obama administration to support, mandate and subsidize renewable energy solutions? It was not a good idea because the timing was not right. In other words, the issue is not about the goals, but about misjudging the level of maturity of the means at hand.

Renewable energy technologies have been improved a great deal in the past decade. But as yet they cannot conquer markets based on their cost effectiveness. At least not yet. The most common mistake of policy-makers who think they understand more then they do about technologies and markets is to misread the value of they are pushing forward. And very often their “industrial policies” are misdirected because of their ideological biases and belief in politically popular simplifications.

Political bias

In the case of Obama and renewable energy there was an ideological bias against the powerful interests that support the hydrocarbon industry, (read the oil multinationals), the high cost of oil and gas, the widespread fears about the impact of global warming and the exaggerated claims made by green technology enthusiasts.

To make it simple: “Oil is dirty, expensive and bad. Money goes to greedy Exxon. Renewable is green, clean, modern, progressive and politically correct. So let’s go green!”

As I noted above, nothing wrong with the basic idea of green tech as a long term goal. But federal support for the long term goal should focus not on deployment of existing technologies but on supporting more research, so that the existing ideas could be further refined and improved upon.

Pushing for renewables in the midst of a natural gas boom

But if you are blindsided by your ideological biases, then you want to believe that existing technologies are “state of the art” therefore just fine; and so you will use public policy to force them into place. In the case of the Obama administration push towards renewables, it so happens that they did push existing technologies concurrently with a parallel but far more powerful development entirely driven by the private sector that greatly undermined the effort.

And this was the incredible hydrocarbon renaissance produced by hydraulic fracturing and horizontal drilling. These technologies, (developed by industry with no government help), created a natural gas boom, while extending all projections about US oil reserves.

So, right at the time in which Washington made a push for renewables, the same renewables were displaced by ridiculously low natural gas prices. Hard to make a case for subsidizing wind and solar when the cost of generating electricity with natural gas (a carbon source much cleaner than maligned coal) has just plummeted.


Faced with these new facts, what did the Obama administration do? For almost three years absolutely nothing. Nobody said: “Well, hold it. We had a policy based on certain premises including scarce and expensive natural gas. Now we have to review everything, as the fundamentals have changed”. No, they just kept doing the same, simply ignoring the shale gas revolution until it became so huge that they could not keep pretending it was not there.

Support basic science, stay away from industrial policies

The point of all this is that the government should be in the business of supporting basic science, especially in the uncertain sectors that the private sector would not touch. But the government should stay away from choosing technologies, while pushing them into place through market distorting tax brakes and subsidies.

And this advice comes from reviewing the record. If the private sector makes a mistake by betting on the wrong technology, it is discovered pretty soon. The market mechanism will take care of it. When the government makes mistakes the tendency is to hide them, because they are politically embarrassing. As the technologies are protected by favorable taxation, subsidies, biases regulations, tariffs and what not, it takes much longer to recognize the error.

The government should use its limited resources to create an enabling environment. Picking winners and losers on the basis of politically popular biases is a bad idea.

The Forced Adoption Of Renewable Energy Has Been A Costly Mistake – We Should Subsidize Research And Not The Usage Of Current Technologies

[the-subtitle ]

By Paolo von Schirach

June 19, 2012

WASHINGTON – Large investments in subsidized renewable energy for the most part make no econ0mic sense. And yet, they seemed to make a lot of sense only a few years ago. In 2008 oil was at a staggering $ 140 plus a barrel, thus prohibitively expensive. Al Gore had won the Nobel Prize and an Oscar for his warnings on man made climate change. The world seemed to be (mostly) of one mind. Human kind needed to stop, immediately, burning (super expensive and super dangerous) fossil fuels, while it was incumbent on all governments to push for the rapid adoption of renewable energy technologies.

Renewable energy was adopted

And so we did. May be the adoption of renewables was not as massive as some would have liked. But major steps were taken. Governments passed laws that forced utilities to purchase electricity made form renewable sources, even though the price was way higher than power produced from conventional sources. The conventional wisdom was that these fledgling industries needed to be nurtured. And in any event, the main goal was not to create viable businesses; but to save the planet from certain man made destruction.

Besides, the argument went, we were soon going to run out of most fossil fuels. Therefore there was also a longer term, but equally certain economic survival imperative.

The case for renewables faded

Well, fast forward to today and we are in entirely different world. The global warming “science”, whereby rising temperatures will destroy the planet, while the phenomenon is totally man made, for some reasons appears to be less cogent. Furthermore, additional studies indicate that, even if the main argument were true, heroic and immensely costly efforts aimed at reducing the consumption of carbon based fuels would have only negligible effects on the temperature of the earth surface.

On top of that, the United States is experiencing now a natural gas boom that reduced the price of gas to levels not seen in more than a decade. In this entirely new context, it is hard to justify the forced purchase of more expensive renewable energy.

Europe paid a huge price

The record shows that in Europe, where these policies of subsidizing renewable energy have gone on much longer and a much larger scale, the economic price paid for this fixation has been very steep. Investing in non competitive renewable energy is expensive. Capital has been sunk in costly enterprises that can come to life and survive only because of mandates. For instance, it is estimated that a major new system of off shore wind farms in the UK would cost about 140 billion pounds. The same energy could be produced via conventional means at 5% of the cost. Consider that.

Huge cost, no benefit

In the end, because of these mandates, consumers and the broader economy have to pay a higher price for electricity. All this translates into a substantial waste of capital that could be used more productively. For example, Germany, a rainy country, made huge investments in solar energy, an effort described by a utility executive to be as cost effective as establishing large scale pineapple farming in Alaska.

There you have it: waste of capital and overpriced energy that imposes an extra burden on the economy. And all this has been done in the name of an ideological fixation about the blessings of renewable energy that has become for some the equivalent of a religion.

We should side step economic concerns only if we had compelling evidence

Look, if we had indeed definitive and conclusive proof that a) global warming is both man made and catastrophic; and b) that stopping now to burn oil, coal and gas would quickly reverse it, then we could argue that this is not about economic choices but about planetary survival. But we are not there, it seems. The environmentalists’ zeal has been deflated. The science is not as compelling as it seemed to be.

The US natural gas revolution changed everything

In the meantime, at least here in the US, just in the last few years we realized that we have a true energy game changer: immense amounts of cheap natural gas that, among other things, has much lower emissions than coal. This means that we have a really inexpensive and much more benign fossil fuel for electricity generation and down the line also for transportation. (Much lower emissions than oil derived gasoline). Put all this together and you realize that renewable energy, at least as mainstream policy, is politically and economically dead. For sure there are and there will be niche markets in which renewable energy can be and is cost effective. But not everywhere, as we used to think.

Continue funding research

This of course does not mean that we stop researching new forms of energy. On the contrary, we should keep going, at full speed. At some point new technologies will be developed that will be truly cost effective. (And, yes, at some point we shall run out of fossil fuels). Who knows what scientists may come up with in the next 1o years.

But there is a huge distinction between subsidizing open ended energy research and subsidizing the adoption of current technologies that are still not economically viable. And this is what we have been doing.