US Will Soon Be The Number One LNG Exporter

Paolo von Schirach –

WASHINGTON – Energyindepth, www.energyindepth.org recently stated that the world is witnessing a major energy supply revolution. The United States, until a few years ago destined to become a major natural gas importer, is now slated to become the world’s number one exporter of Liquefied Natural Gas, LNG.

New geopolitics of energy

The website made this point also quoting the Executive Director of the International Energy Agency, a Paris-based group of major energy consumers: “The growth of U.S. natural gas production – led by increased shale production – has been transformative, not only domestically but globally. And it’s only the beginning. As IEA Executive Director Fatih Birol recently said:

“The second wave of the U.S. shale revolution is coming. It will see the United States account for 70 percent of the rise in global oil production and some 75 percent of the expansion in LNG trade over the next five years.  This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy.”

US as LNG exports leader

While the US is now the world leading oil producer, let us focus here on the vastly increased American LNG export capacity. New US LNG terminals have been completed, and additional ones will come on line very soon. As a result the US, already the world number three LNG exporter, (behind Qatar and Australia), in a few years will become number one.

While this is good for business, it is obvious that this new role of America as key energy supplier will have important geopolitical implications, as this surge in LNG exports is not just a temporary phenomenon. Indeed, the undeniable fact is that the world will rely on large amounts of natural gas for decades to come.

The world will continue to rely on gas

Realistically, it is clear that notwithstanding pledges to cut down the use of fossil fuels in order to combat global warming there is no way to achieve a rapid shift to non-carbon energy sources within the foreseeable future. It is just technically impossible. And it is also clear that affordable natural gas, used largely as electric power generation feed stock, is and will be the fuel of choice for many energy poor countries. Besides, it pollutes a lot less than coal. Therefore, from an environmental protection perspective, it is the least damaging among the fossil fuels.

Taking all this into account, the world will continue to rely on natural gas as feed stock for electric power generation, heating, and much more for decades.

Vast geopolitical implications

Of course, this sustained demand for gas is about new or expanding markets for the US energy business. However, it is obvious that there are and there will also be significant geopolitical implications. Indeed, US growing LNG exports will be a factor in reshaping commercial and political relations with many Asian countries and Europe.

New markets in Asia

For example, India desperately needs additional energy supplies for its energy starved population, now exceeding 1.3 billion. When it comes to electric power generation, India still largely relies on dirty coal, with horrible environmental repercussions in terms of staggering air pollution levels in most large urban areas. Switching over to natural gas is a necessity for India. The availability of increasing amounts of US LNG will make this transition away from coal a bit easier; while a new, robust energy trade will strengthen overall ties. Likewise, Japan and South Korea, traditional US allies and always net energy importers, also need gas. The opportunity to buy additional quantities of US LNG will strengthen the bonds with these two key Asian countries.

Of course, energy poor China could also be a major buyer of US LNG. But the political relationship between the US and China is bad, and not destined to improve any time soon. Therefore do not expect China to be a major buyer of US LNG. (China is focusing now on a significant increase of imported Russian gas, via new pipelines).

More LNG to Europe will counter Russian dominance

Another important market for US LNG will be Europe. All projections indicate that natural gas consumption in Europe will stay flat. However, European sources of natural gas (originating from Norway and The Netherlands), are dwindling, while much of Europe relies heavily on imported Russian natural gas supplied via a variety of pipelines, old (via Ukraine) and new (via the Baltic Sea). Some European countries see no problem in this significant energy dependence on Russia, while others feel uneasy, given the history of Russian meddling in Eastern Europe and beyond.

Given these geopolitical concerns, some European countries, most notably Poland and the Baltic States, look very favorably at the opportunity to diversify their natural gas imports by increasing US LNG purchases. For the time being, US LNG exports to Europe are modest, and so they do not shift the overall pattern of large purchases from Russia.

New flexibility

However, the very fact that several European buyers of Russian gas now have a new purchasing option –US LNG– that simply did not exist until a few years ago, gave flexibility and better bargaining power to the Europeans. As a result, Russia in many instances was forced to lower its prices, as a way to fend off US LNG competition. Going forward, as US LNG export capacity increases and the price differential between LNG and Russian piped gas shrinks, expect additional European purchases of US LNG.

Increased US influence around the world

All in all, the fact that the United States already is today –and will be even more so in the years to come– the leading, dependable exporter of liquefied natural gas, a vital, relatively clean, energy source, will increase American influence around the world, and will help strengthen political ties with key countries in Asia and in Europe.

Yankee Ingenuity

Not so bad overall, considering that this US natural gas (and oil) revolution originated out of the dogged persistence of a small band of American “frackers” who believed that oil and gas could be profitably extracted from shale formations, when all the energy experts and the big energy companies stated that it was absolutely impossible.

Three Cheers for Yankee Ingenuity!




Coal Makes India The Super Polluter

WASHINGTON – In case you were wondering, we are not making much progress in our planetary war against global warming. There is cause for serious alarm. However, despite the exaggerated media focus on Washington, the real problem is not President Donald Trump and his denial of the dangers of global warming, illustrated for instance by exiting the Paris Accord, and by his “promises” to support US coal miners in order to make coal great again.

America failing to lead

Sure, the fact that America, the world’s number two country (behind China) when it comes to emissions, is failing to lead is not helpful, to say the least. That said, while America’s position on this global threat is very disappointing, America is not the main problem.

The problem is India

The monstrous size problem is India. The Subcontinent’s economy, (with a population now in excess of 1.2 billion people), is growing, and with growth comes a voracious appetite for energy, specifically for thermal coal, the kind of cheap coal used for electric power generation. A recent long survey in The Economist paints a rather horrible picture. 3/4 of India’s electricity is generated by coal, and coal consumption is actually growing.

Too much coal

Sure, India has also launched a large number of important renewable energy projects. But compared with the amount of electric power generated by coal they are not very significant.

And cutting down on coal used for power plants is almost impossible, for economic and political reasons. Coal mining is concentrated in the rather poor East of the country. Which is to say that this industry provides badly needed jobs and income to many low income Indians. By the same token, coal transportation is a major source of revenue for Indian freight railways. And coal is relatively cheap. Hard to see how India’s policy-makers can cut down its use without causing major upheavals.

Dependence here to stay

If you take all is this together, unless the cost of renewable energy goes down more rapidly, it is easy to realize that India’s heavy dependence on coal is not going to go away any time soon. And this means that India will continue to lead on global greenhouse gas emissions, because of its super sized fleet of coal-fired plants.

Paolo von Schirach is the Editor of the Schirach Report www.schirachreport.com. He is also President of the Global Policy Institute www.globalpi.org and Professor of International Affairs and Economics at BAU International University www.bau.edu

 




Trump Takes U.S. Out of Paris Accord on Climate

WASHINGTON – U.S. coal miners and out of work factory workers: this is for you! President Donald Trump publicly announced that the U.S. will withdraw from the Paris Climate Accord that his Democratic predecessor, Barack Obama, promoted and warmly endorsed. Trump’s argument against the Paris deal is that it will penalize the American coal mining industry, and the overall American economy in the short term, with only vague hopes of somewhat lower world temperatures, way down the line.

Bad deal for America

As Trump sees it, this is a bad deal for America; and so the right thing is to get out of it. Sticking to the obligations created by the Accord would amount to enacting the equivalent of a huge energy tax on the US economy, because compliance with new, strict emission controls (in order to limit the amounts of greenhouse gases released into the atmosphere) will be very expensive.

As a candidate, Trump promised that he would withdraw from this climate deal, and now that he is President he is doing it. We know that his close advisers are divided on this issue. His daughter Ivanka and son in law Jared Kushner, along with Secretary of State Rex Tillerson, recommended not withdrawing. Still, in the end Trump sides with the opponents.

What does this mean? 

That said, from a practical standpoint, America’s exit, at least in the short term, will not amount to any worsening of the global climate. Indeed, the Paris Accord, if all goes well, promises only modest progress on lowering the temperature of the world, and only after many years. And this will happen only if we assume that all the other participants will actually do what they promised to do in terms of enacting new policies aimed at lowering their consumption of fossil fuels, this way reducing greenhouse gases emissions. Do keep in mind that the Paris Accord has no enforcement mechanism. The commitments made by the signatories are purely voluntary. In the case of China, the world’s biggest polluter, Beijing is theoretically bound to implement new policies several years from now.

Political consequences 

Still, Trump’s decision on this rather emotional issue has had immediate political consequences. From the stand point of other nations, particularly the leaders of the G 7 Trump just met in Taormina, Italy, this amounts to America choosing to go it alone, openly dissenting from a global consensus on the global threats to the earth created by the unrestrained consumption of fossil fuels.

U.S. no longer leading 

In the short and medium term, this means that America is no longer leading the world on a critical policy issue,  As most world leaders see it, America has now retreated in its narrow universe characterized by a bizarre anti-science fixation pursued by a strange president who is “anti everything”.

Anti-everything Trump

Indeed, Trump is so anti-immigrant and xenophobic that he wants to build a wall along the entire border with Mexico.

Furthermore, according to the now widely accepted narrative, this is a president who is openly against free trade, against the EU, against NATO, and against Muslims, (sort of). Given all this, Trump being also against joint international efforts aimed at stopping and hopefully reversing climate change is disappointing; but not surprising. This new development fits the now accepted narrative.

America is no longer leading. Trump’s America has retreated behind a myopic worldview of narrow self-interest.

From the standpoint of old friends and allies, Trump’s announcement on exiting the Paris Accord is yet another (sad) sign that America is no longer the “Leader of the free World”.

In fact, even before this new development on the Paris Accord, German Chancellor Angela Merkel had already publicly argued that it is time for Europe to think of and plan for a future without close ties to the U.S., since Trump’s America is no longer a reliable friend.

Political symbolism 

Again, keep in mind that all this is mostly about political symbolism. It will take four years for America to fully extricate itself from the obligations contracted under the Paris Accord. This is fairly long time. And again, keep in mind that under the terms of this Paris deal, major polluters like China and India have modest obligations when it comes to reducing their own emissions that will kick in much later. Which is to say that you should not expect world temperatures to start rising tomorrow, simply because today President Trump announced that America will pull out in four years.

No gain 

However, as indicated above, this decision is not without political consequences. In the end, all this is will amount to an additional loss of international prestige for Trump’s America.

With all this in mind, whatever you may think about the intrinsic policy value of the Paris Accord, it would have been better for Washington to be part of it, as opposed to becoming now a big pariah in the eyes of the world.

Trump is talking to his base 

Well, then why did he do it? Very simple.

Trump’s narrow concern here is to reassure his domestic political base –the millions of Americans who voted for him last November. This base includes out of work coal miners and people displaced by the closure of old manufacturing plants.

Trump’s message to them is that his job is to revive the American economy. If this means heavy reliance on dirty energy, so be it. Out of work factory workers want money to pay their bills. They do not care about the fate of polar bears or about extreme weather phenomena in Africa. And they do not care about rising sea levels.

Finally, dire scenarios of New York City and Miami under water in just a few years (because of the rapid melting of the Polar Caps) are definitely a hoax –at least according to Trump and his supporters.

 




Too Many Bad Loans In India

WASHINGTON – India recently decided to change its methodology for calculating GDP and the rate of growth. And, presto, GDP now is a lot bigger, and growing much faster. Except that most analysts do not believe the numbers. No, the 7.5% rate of growth is more likely 5%.

Cooking the numbers

This is no mere detail. It is hard to take seriously a country that cooks up its numbers to make them look better. India’s government better fix this, and fast. A major developing economy, a country of more than 1.3 billion, cannot risk becoming a laughing stock by producing data that most of the world believes is fake.

Fake statistics in Argentina 

Indeed, Mauricio Macri, recently elected President of Argentina, immediately replaced all the top management at INDEC, the national statistics agency. The simple reason is that the agency had lost all credibility. Under the previous populist government, it published what the political leadership wanted. In order to re-establish credibility, accountability and transparency, as a minimum Argentina needs a truly professional, non-political statistics agency that will publish real data.

And so does India.

Bad loans

In India there are also other problems. There are just too many bad loans on the books of state controlled banks. More credit is extended to borrowers already in default. As a result, the percentage of Non Performing Loans, NPLs, jumped from 6% in 2011 to 14% in September 2015. According to the FT, this is “the worst level in Asia”. 

As the NPLs issue is out in the open, the markets are punishing banks stocks. But the government is reacting too slowly. Various analysts openly argue that Finance Minister Arun Jaitley should act swiftly. This situation damages India’s financial sector, and more broadly it shows its corrupt politics.

Crony capitalism 

It is obvious that all these NPLs are mostly about crony capitalism. Well connected Indian tycoons do not go bankrupt. No, first they get all the loans they want. And when their businesses go south, their bad debts are rolled over, and in fact augmented with the justification that a more robust capitalization of failed enterprises will finally heal them. But this never works.

NPLs in China 

Look, this is happening everywhere in Asia. In China, virtually defunct State Owned Enterprises, SOEs, now explicitly called “Zombies”, keep getting fresh capital from friendly state owned banks. How big is China’s financial hole caused by NPLs? We do not know. But probably bigger than we think.

Rigged game

Thank God, in India there is a bit more transparency. Investors know more or less the extent of the NPLs problem. All the more reason to attend to it. State banks should not be in the business of funding well connected people who are lousy business leaders.

Difficult to get foreign investors to take the country seriously, if the Indian economy is perceived to be an insiders’ game designed to fit the needs of corrupt elites.

 




Coal Consumption On the Rise in Asia

WASHINGTON – The Paris climate talks may end up with new carbon reduction commitments made mostly by Europe and America. But the reality is that the largest developing countries (China, India, the Philippines, and Indonesia), plus Japan and South Korea rely and will continue to rely on massive use of coal, the worst possible fossil fuel in terms of noxious emissions. 

Coal is up 

Data from the WSJ indicate that China uses coal for 66% of its electric power generation. In India the percentage is 56%, in South Korea it is 31%, in Japan 28%, in Indonesia 35% and in the Philippines also 35%.

In the US coal is trending down because of the competition created by cheap natural gas. Still, even with reduced consumption levels, coal is used for about 30% of American electric power generation.

Even with the best of intentions, in Asia it will be really hard to displace coal as the main electrical power generation fuel. For instance, in China renewable energy is only 2% of total power generation. There you have it. Coal 66%, wind and solar 2%. A long, long way to go before renewables will catch up. 

More coal-fired plants 

And, in reality, in Asia there is no plan to cut coal consumption. In fact, exactly the opposite is happening. As world leaders convened in Paris to make solemn pledges to curb carbon emissions, in Asia coal plants construction is up. Japan, a G7 member, will build several new coal-fired plants. (The Japanese claim that the new generation of coal plants they designed will be much cleaner. Still, they will produce emissions).

And this is only a part of the story. According to the WSJ, the Philippines is planning“to open 23 coal-fired plants over the next five years to meet rising electricity demand”. If this construction plan will be executed, the Philippines will become the most coal dependent nation in Asia. Vietnam will also increase coal use, and so will Indonesia.

In Paris, just talk 

Anyway, you get the picture. The Paris talks would like to get to a global agreement that will move the world away from carbon. In reality, large parts of the world are moving exactly in the opposite direction.

But why is that? Why so much coal use, when everybody seems to agree that it is the main source of the emissions that cause greenhouse gases at the root of global warming?

Coal is cheap 

Very simple, Because coal is abundant, and very, very cheap. And what about emission free renewables? Well, they are coming along. But slowly. And this is mostly due to the fact that, while prices have come down, wind and solar are still considered too expensive in many parts of the world. (According to the WSJ, renewables make up only 2% of power generation in China, 2% in India, 3% in Japan, 1% in Indonesia, 0.5% in South Korea).

Development first 

In the end, whatever their governments may be pledging in Paris, the fact is that emerging countries want economic development first. For that, they need electricity. And, so far, dirty coal is still the cheapest option.

For those who believe that global warming is a real planetary emergency, these Asian energy policies amount to reckless behavior. However, the fact is that no Western government will seriously commit to a large enough plan aimed at subsidizing green energy deployment on a global scale.

Therefore, until renewable energy becomes truly affordable, (let’s hope soon), expect more coal-fired plants coming on line.




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.




India: 2.3 Million Applicants For 368 Low Level Jobs

WASHINGTON – Narendra Modi, India’s Prime Minister since May 2014, has disappointed many supporters. While recent GDP growth numbers look good, (+7.5%), the average Indian is not doing so well.

Where are the deep reforms? 

Most critical of all, Modi so far failed to deliver on far-reaching reforms aimed at simplifying the business environment. Notwithstanding Modi’s efforts, India is still an almost impenetrable maze of federal and state laws, including a plethora of different tax regimes, too many required licenses, too many permits to operate businesses, and obscure regulations.

Hard to run a company there. And therefore it is also hard to attract the large number of foreign investors India openly says it wants and needs in order to add speed and quality to its uneven development. (No, contrary to popular belief, unfortunately most Indians do not hold a Ph.D in computer science. Only a tiny sliver of the Indian labor force is employed by Indian IT companies operating in Bangalore or Chennai. In fact, growth notwithstanding, millions of Indians have no jobs, while millions more work in menial low-pay occupations, because they have little or no education).

Millions seek government jobs 

Well, add to this not so inspiring picture another disappointing reality. With all the talk about “private sector-led growth” the sad truth that millions of unemployed or under employed Indians still crave public jobs, even menial ones, that pay extremely little. The BBC reports on a rather shocking example that illustrates this point.

BBC: 368 government jobs, 2.3 million applicants

“Authorities in India’s most populous state, Uttar Pradesh, say they have been overwhelmed after receiving 2.3 million applications for 368 low-level government jobs. Prerequisites for the posts include having primary school qualifications and being able to ride a bicycle. [emphasis added]

But, tens of thousands of graduates, post-graduates and others with doctorate degrees have also applied. An official said it will take four years to interview all the candidates.

“These candidates only have to be interviewed but my estimate is that the entire process will take at least four years to complete even if there are 10 boards interviewing 200 candidates a day, for 25 days a month,” senior official Prabhat Mittal told BBC Hindi’s Atul Chandra.

Those who have applied for the posts, advertised in August, include 255 PhD holders and 152,000 graduates. With the number of applicants, there are more than 6,250 candidates vying for each post. The successful candidates will receive a monthly salary of 16,000 rupees ($240; £156).

Unemployment is a huge challenge in Uttar Pradesh where tens of millions are out of work. The state, with a population of 215 million, is expected to have 13.2 million unemployed young people by 2017, according to one estimate.

Government recruitment drives have attracted massive responses in other parts of India, too. Earlier this year, several people were injured in a stampede when thousands turned up to join the Indian army in the southern city of Visakhapatnam.

In 2010, one man was killed and 11 others were injured in the crush when more than 10,000 candidates gathered to join the police in Mumbai.

And in 1999, the government in West Bengal state was deluged with responses when they advertised 281 jobs and received nearly one million applications.”

So, here are the truly “Incredible India” numbers, as reported by the BBC story:

2.3 million applications

368 clerical jobs – These are low-level, low skill, low pay positions, (functions include: ride a bicycle, serve tea)

Among the applicants:

  • 255 PhD holders
  • 152,000 graduates
  • It will take 4 years to interview all candidates [Estimate]



Forget Global Warming – America Should Reduce Carbon Emissions In Order To Improve Public Health

WASHINGTON – Most Americans do not know that much about global warming. Likewise, most Americans do not have clear opinions as to whether global warming is man-made, what problems it has caused and will cause, and what should be done about it.

Regulating carbon

Indeed, several opinion polls reveal that global warming and climate change are way down the list of issues that people in America are concerned about.

In the light of this public opinion context, President Obama’s June 2 policy initiative to cut down CO2 emissions by regulatory fiat, as opposed to introducing legislation aimed at achieving this goal, looks like a daring move.

Coal will be penalized

Without getting into the many technical details, the upshot is quite simple. Whatever the benefits down the line, in the short and medium term, regulations will hurt some energy sector, coal first and foremost. This means that jobs will be lost in the coal mining industry, (very significant in some states such as West Virginia and Montana), the closing down of older, high emissions coal-fired power plants, and a lot more. Do consider that America still gets about 40% of all its electricity from coal.

Higher prices

Apart from the direct hit on the coal sector, it is also obvious that the regulatory obligations to switch to cleaner, (and still more expensive), technologies for electric power generation will translate at least in some regions into higher electricity prices, that will be viewed by most opponents as a “global warming tax”.

Pay more? For what?

And here is the political rub. As indicated, most Americans do not feel strongly about global warming. Therefore the idea that they will have to pay for the cost of stopping it or reversing it may not look very appealing. In fact it will be strongly opposed. We see already the arguments: “Obama’s crazy policies will kill jobs while they will impose an unnecessary economic burden on businesses and consumers”.

No global warming benefits

That said, it gets worse. By its own calculations, the US Environmental Protection Agency, (EPA), the federal body put in charge of regulating emission, has estimated that all these new policies, curbs and de facto taxes on coal, will change almost nothing when it comes to global emissions. Therefore, the impact of this new US policy on the larger goal of stopping global warming is practically zero.

It is indeed clear that, unless China, India and other emerging economies adopt stringent standards, global emissions will continue to grow, and therefore the goal of stopping, let alone reversing, global warming will not be achieved, whatever America decides to do today.

Regulations will be challenged

So, here is the situation. Using unprecedented regulatory prerogatives that –rest assured– will be challenged in courts throughout the 50 states, the Obama administration says it wants to impose costly burdens on several economic sectors, with the goal of stopping global warming. And yet, the EPA, its chief enforcer, admits that the impact of this policy on global warming will be almost zero.

This does not look like a political winner.

Happy environmentalists

Sure enough, Obama’s initiative will please the small but well-organized and well-funded US eco-lobby. There will be millions of Americans who will be enormously pleased. They view carbon based energy as evil. Therefore, anything aimed at reducing its use is most welcome. And it is also true that this minority has the support of the liberal media establishment, most opinion leaders and a slew of experts and academics. And all this matters politically.

And, of course, in combination with other Democrats, these groups create political majorities in traditionally left-leaning states on both coasts: California, Oregon, New York, Massachusetts, etc.

But, even if we grant that in many politically relevant states there is genuine political support for curbing carbon emissions, these new regulations will be strongly opposed in many states.

And this is largely because the administration is unable to make a credible case for what it wants to do. Indeed, as powerful and vocal as the anti-carbon coalitions are in several key states, they do not constitute a national majority. Not even close.

Some opinion leaders have argued that, by enacting CO2 restrictions, America “will set a good example”, that will force China and India to follow suit. Really? And so we create a de facto carbon tax in the hope that this will inspire others? This is silly.

Focus on public health benefits

In my view the only way in which the Obama administration may be able to create a broader coalition of clean energy supporters is by dropping the dubious anti-global warming goal of these regulations, while enhancing the public health benefits.

Yes, noxious emissions may or may not  increase global warming. However they do have a demonstrable and mostly negative impact on the health, well-being, and life expectancy of those who are directly exposed to them.

Emissions make you sick

Here the science and therefore the policy argument in favor of reduction is a lot stronger, and therefore a lot more cogent. Indeed, if we look at China and India, we can see the dreadful impact of unregulated power generation. These countries have horrible rates of respiratory problems affecting mostly children and old people. They have high incidence of asthma and various forms of cancer.

Now, this is an argument that most Americans can understand. “Do you still want cheap power generated by dirty coal, even though this means that you will die younger because of the emissions?”

Higher electricity costs are OK, if this means improved health

Again, I am no expert on how this information can be presented in an accurate and understandable way to the general public. But in my judgement it will be a lot easier to find allies for a lower carbon economy by showing the public health advantages of clean energy.

All considered, higher electrical bills are a small price to pay if the alternative is having lower utility costs but also having your children sick with chronic respiratory diseases –children who may die younger as a result of the noxious emissions generated by coal-fired power plants.

 




Instead Of Funding Green Political Candidates, Billionaire Tom Steyer Should Use His Millions To Support More Research In Renewable Energy

WASHINGTONTIME magazine has a lengthy portrait of Tom Steyer, (Green Giant, June 2, 2014), a California billionaire who decided to spend millions in order to support political candidates who pledge to fight global warming.

Global warming is the enemy

According to the TIME article, Steyer seriously believes that global warming is the defining issue of our times. It is an urgent matter that requires immediate policy changes. Hence his determination to support political candidates and major legislative or regulatory initiatives that will result in diminishing the use of carbon based energy, while favoring renewables.

On the face of it, all this is really odd. Even assuming that Mr. Steyer is totally right and that indeed man-made global warming is real, the notion that throwing his money to elect Democrat Terry McAuliffe Governor of Virginia will help stop or reverse global warming –a planetary phenomenon– is so bizarre that it looks really stupid.

Electing green candidates in the US will change nothing

Here are some simple facts. Whatever you may believe about global warming, without the active committment of China, India and many more major polluters to drastically cut their emissions, there will be no total emission reductions. (By the way, it looks as if the world is in fact moving exactly in the opposite direction. In case Mr. Steyer missed it, China just signed the carbon energy deal of the century with Russia, worth $ 400 billion. Russia will supply natural gas to China for the next 30 years. What’s Mr. Steyer going to do about that? Will he fund a political campaign to unseat Vladimir Putin, so that he can force Russia to reverse this deal?)

And, even assuming that the worst Asian polluters were totally on board (as of today, obviously they are not), even assuming a global and enforceable committment to reduce emissions by curbing the use of carbon based energy, the impact on global temperatures would be minimal. In other words, unless we want to outlaw carbon altogether, this way regressing to pastoral, pre-industrial societies, reducing carbon based energy consumption here and there would make little difference.

If this is so, does Mr. Steyer (and his political allies) really believe that passing this green measure in California or electing that Governor in Virginia will really move the needle on a vast problem that is by their own definition global?

Of course one might reply to this question by stating that “Surely it is better to do something rather than stand by and do nothing, while our planet is cooked by global warming…you have to start somewhere to build an anti-global warming coalition, etc.”

OK, I get it. But I do not agree.

Futile effort

Indeed, the whole effort, even if well-intentioned, looks really impractical, in fact utterly futile. And, from a public policy stand point, the approach –forcing emission cuts through laws and regulations– looks extremely expensive and therefore ill-advised.

Even if Mr. Steyer won all his political battles and green friendly elected officials will be able to set policy for the entire United States, new mandates forcing everybody to use renewables will cost a fortune while they will produce negligible results.

This is not a way to say that greenhouse gases emissions do not exist or that global warming is just a minor issue.

Focus on developing cost-effective renewables

This is to say that we need a different approach. And this has to focus not on curbing the use of carbon based energy but on producing economically viable alternatives to carbon.

To borrow a fictitious example, word processing did not get established as the normal way to compose documents because in the 1980s policy-makers put a tax on typewriters, while granting tax brakes to Microsoft.

The market simply adopted a superior technology –but only after it was proven that the new technology was demonstrably superior.

When it became obvious that word processing run through PCs was a better tool, typewriters disappeared. This revolution did not require special laws, mandates or policy changes. A more efficient tool replaced the old one.

The simple truth is that solar panels, wind and other alternatives have not yet reached this stage. While progressing, the renewable energy revolution is still immature. As yet, we simply do not have truly cost-effective alternatives to carbon based energy sources. If the currently available solar panels, wind farms and what not were economically viable, then they would be adopted by all users, whatever they believe about global warming, simply because they would be efficient and cheaper. As of today, they are not.

And this is why well-intentioned policy-makers (some of them elected via Mr. Steyer’s money) can deploy these still imperfect technologies only through mandates, subsidies and tax cuts. The simple reality is that, as of today, renewable energy solutions have to be imposed because they are not yet mature.

Europe tried and failed

And Mr. Steyer should just look at the outcome of Europe’s disastrous attempts to force an energy production revolution by deploying currently available renewable energy technologies.

Solar panels in Germany and wind power in Spain have produced some of the highest electricity prices in the world, with no appreciable environmental impact in Europe, let alone the world.

Use money to fund more R&D

Given all this, here is a practical suggestion. Mr. Steyer’s precious money should be devoted to fund more research and development in renewable energy alternatives. I am confident that human ingenuity sooner rather than later will come up with economically viable alternatives to carbon. More R&D money invested in this effort hopefully will accelerate the innovation-seeking process.

When we reach that point, the new zero-emission technologies will be adopted not because they are virtuous but because they are viable. Commercially competitive renewable energy, not politically mandated regulations, will help us cut emissions.




Contrary To What Many Believe, Most Indians Are Illiterate

WASHINGTON – Based on partial and therefore misleading information you think that most Indians are highly educated and English speaking. You think that a large number of them hold advanced degrees in computer science, engineering and other sophisticated subjects. You also believe that India’s high-tech industries based in Bangalore, Chennai and Hyderabad now rival Silicon Valley. In other words, you tend to believe that India has made great progress and that it is now rapidly becoming a modern country.

Partial truth does not provide real picture

Well, let’s say that, while some of this is true, India’s real figures tell a completely different story. According to Teach India, a non-profit organization, in India 4% of all children never start school, 58% do not complete primary school, 90% don’t complete secondary school, and only 10% go to college. Among these, only a small fraction get advanced degrees in high-tech. And less than 10% of all Indians speak English.

Look, in absolute numbers these small percentages still give you very high figures. India is a country with an enormous population of more than 1.2 billion. Therefore, 10% of Indians going to college means roughly 120 million people. Less than 10% fluent in English is still about 86 million, more than the entire UK population.

Well educated are only a small minority

Still, it would be a huge mistake to assume that the educated Indians we see succeeding in America or elsewhere represent an Indian average. Sadly, most Indians are poor or semi-poor and illiterate. And no, they do not speak any English.

Modernizing India?

Narendra Modi, the newly elected Indian Prime Minister, wants to launch a rapid modernization program that will trigger the creation of new business and investments. Well, good luck to him. This is hard to do anywhere. Even harder when you are dealing with a mostly illiterate or semi-literate population.