Q & A With Paul Hanrahan, CEO of AES
Posted by Glenn on January 7, 2007 - 11:55am in The Oil Drum: Local
This morning's NY Times Business section features a very interesting Q & A with AES (a major, worldwide power company) CEO Paul Hanrahan about the future of power generation. He talks about a wide variety of subjects, from renewable energy sources like wind, to building new LNG plants on the East Coast to different ideas on carbon sequestration. One of the most amazing facts was that to offset the emissions from a new power plant, AES planted 50 million trees in Guatemala. At the end of the interview, there was a question about coal:
Q. In July, AES announced the installation of clean coal technology at your power plant in Dresden, N.Y. With future oil supplies so problematical, what do you see as coal’s future?
A. For countries with coal as an indigenous resource, coal has a lot of potential because you can do a lot to reduce the particulate emissions and the sulfur nitrogen emissions which cause acid rain. You can reduce the carbon emissions from a power plant very cheaply, so we think there is a lot of potential to produce electricity in an environmentally responsible way.
Sounds great...clean cheap coal. It almost makes you almost think that everything is very doable, just leave the private sector alone and let them innovate...But it would be a mistake to not regulate this area.
The reason companies are taking any action on these issues is because of governmental regulations and the fear that they will be caught out when new regulations are announced. And while all these voluntary efforts to cut emissions sound good, sometimes there is a lot less substance than meets the eye. The Natural Resource Defense Council (NRDC) has exposed numerous examples of shady carbon credit accounting. Here's one for AES
AES claimed an emission "reduction" for recovering carbon dioxide from its Warrior Run plant and selling it for use in food processing and soft drinks. This is actually a step backwards, though, because AES's fossil carbon dioxide is replacing renewable carbon dioxide captured from ethanol plants, the usual source of food-grade carbon dioxide. Moreover, no one at AES or the Department of Energy seems to have realized that the bubbles in soda pop are "sequestered" only until the can is opened.
So every time you crack a soda can open, that might be someone's sequestered carbon credits making the pop sound.
Obviously, there is a big need to better track exactly what carbon sequestration counts and what doesn't as we start to look at any legislation to regulate carbon emissions or trading. I strongly think that a carbon cap and trade system would be the best approach to cutting carbon emissions, since it would harness the power of the financial system to squeeze every last drop of efficiency out of the carbon we emit. But before we do, we need to first agree to a system of carbon accounting that makes sense and will actually reduce greenhouse gases.
Right now New York is losing ground to London as the place where carbon emissions can be traded ever since the European Union's Emission Trading Scheme was activated in 2005 by the ratification of the Kyoto treaty. New York City's leaders should push for some type of Carbon trading system to come into effect sooner rather than later so that we don't lose ground in what is sure to be one of new financial markets that is an essential part of doing business around the world.
The problem is that if one country (or group of countries) sets up a carbon trading scheme, and other countries decide not to opt in, there is a 'free rider' problem.
The consequence (about which the Europeans are already talking) is a decline in 'competitiveness'.
People have looked at this quite closely
http://www.hm-treasury.gov.uk/media/9A3/33/Ch_15_Carbon_pricing_and__emi...
has some good thoughts.
The main conclusion is that the aluminium smelting industry in particular is very vulnerable to carbon charging. Other heavy industry has a (varying) vulnerability to it (depending on their ability to pass costs on to their customers). The overall effects shouldn't be too dramatic (energy is about 5% of a modern economy's costs, so an increase in energy costs shouldn't have a huge effect on economic activity).
You can see how this will be used in the US to block any meaningful progress on CO2 emission. Every time someone brings it up, there will be a 'what about China. The US is losing manufacturing jobs to China' conversation. Or India. Or whoever turns out to be a likely suspect.
Eventually I hope, the deadlock will break: perhaps with another Katrina. But we shouldn't be too hopeful about human nature. The government of Australia keeps talking about 'the 1 in 1000 year drought we are experiencing' whilst at the same time denying there is such a thing as man-made global warming.
A couple of other thoughts:
- the AES president mentions that it is cheap to reduce CO2 emissions. In practice, that is not what the likes of TXU (Texas) and Southern Company (Atlanta) will say (the nation's largest CO2 emitters, along with AEP in the Midwest).
There *are* technologies that can deal with CO2 emission in power generation (Carbon Sequestration aka Carbon Capture and Storage), there is also nuclear power, gas turbine (much lower CO2 emissions than a conventional coal plant), renewables etc.
The best guesses are that the costs of eliminating 60%+ of all CO2 emissions by utilities are c. 2-4 cents/ kwhr. (so roughly a doubling of *wholesale* electricity prices in the US, or a 1/3 rise in retail prices, if your retail price is 12c/ kwhr now, it would go to 16 cents).
(I am basing that on the following very rough estimates of cost in cents per kwhr of power:
2 c/kwhr - written off coal plant (existing)
2-4c - new coal plant
3-5c - gas fired, combined cycle (depending on gas price!)
6-8c - new nuclear plant
5-9c - wind (onshore)
6-12c - wind (offshore)
15-20c - solar photovoltaic
(big sensitivities to assumptions about interest rates, fuel costs etc.))
*however* there are lots of tough choices in that:
- it's not clear planting trees really helps with CO2 emission (because mature temperate forests are CO2 sources, not sinks). Bomass may look clean, but it's not entirely clear it is clean.
- wind has huge opportunities, especially in the Great Plains states. However wind is not 'despatchible' or 'fast ramp' the power industry terms for being able to supply power on call, or with a very short lead time. You need fast-response gas fired stations or a way of storing power.
There are also big structural problems with wind. These range from aesthetics (Cape Wind off Cape Cod has deadlocked thanks to political opposition, and wind turbines on Vermont mountain tops) through to the cost of connecting isolated wind farms to the grid, to the issue of long distance power transmission (other countries have cracked this, but the US doesn't have one unitary grid authority-- so building high tension DC power lines from Nebraska to Ohio and New York is not something any one entity can mandate, and in a (partially) deregulated system, who would pay for this?).
If we come up with big scale, clever ways to store electricity, then wind has huge potential. Be this massive pumped storage facilities (picture the fights if New York floods Adirondack Valleys) or some clever fuel cell technology.
- solar isn't there yet. It will be, someday (the price of wind power has fallen by over 60% since 1980).
- sticking CO2 underground has huge potential *but* it has the political flavour of radioactive waste. A CO2 leak (natural) in Cameroon killed 1500 people-- do you think communities will sign up to that on their doorstep? Who will pay the legal liability if there is a leak?
Also it will require a complete change in coal-fired powerplant technology. (from pulverised coal to IGCC 'intermediate gasification combined cycle'). Although the IGCC technology is well proven, it is expensive and technologically sophisticated: utilities are cautious about reliability and cost, and again in a deregulated world they won't take the financial risk.
- nuclear has big potential, but the costs have always run way ahead of the industry forecasts. There is no place to store waste, and politically it doesn't look like there will be one anytime soon. New York wants to close Indian Point, right?
You can see the political problems mushroom, and no one has *yet* even tried to ram an airliner into a nuclear power plant.
- Quebec has Hydro power. Governor Cuomo backed off a major joint project with Hydro Quebec, after lawsuits from Indian groups. Maybe that one will come again. Certainly there is an opportunity there for New York to pay a high entry price (10s of billions of dollars), but secure energy for a long time to come *if* the snow keeps falling in northern Quebec (a big if under global warming).
- demand management has huge potential. Just reducing peaks (which are met using CO2 intensive coal and gas fired electricity) could have a big impact (nuclear and hydro meet more of the baseload capacity). I would bet replacing all the air conditioning in New York with the latest models could reduce energy demand by 10%, ditto replacing lightbulbs with compact fluorescents.
You can scrub exhaust gases from existing plants. Tech has been around for 50 years.
I assume you are referring to amine-based CO2 scrubbing?
It's a very inefficient process in a conventional PC plant-- because the CO2 stream is so dilute.
Costs are high.
Table 3.7
http://arch.rivm.nl/env/int/ipcc/pages_media/SRCCS-final/SRCCS_Chapter3.pdf
In practice, retrofitting is messy and impossible on some plants.
The CO2 concentration in exhaust gas is less than in the output of a water-shift reactor, true, but only by a few percent. It's more investment, of course, but a hell of a lot less than starting from scratch with a IGCC. Costs you no energy because you use the waste heat of the power plant.
My understanding is that retrofitting CO2 extraction is a very costly exercise, to the point where it probably won't happen.
New plants, again my understanding is an IGCC with CO2 extraction is a lower cost proposition than a supercritical steam coal plant with CO2 extraction.
Do you have any good data on costs? Any cites?
You probably dont have to sequester the same CO2 as is produced - any plant anywhere in the world that can extract CO2 out of the air and sequester it can offset similar C02 emissions elsewhere. The problem is of course to do it with an energy source that makes the whole operation a net C02 sink.
This is where the intermittent power from wind can perhaps play a role. A napkin-calculation to show net energy from say a coal-fired plant with 50% CO2 sequestration using remotely located wind powered plants would be interesting. In other words - how much energy does it take to sequester the CO2 produced by generating 1Kwh of electricity in a coal-fired plant. Anyone?
Would the EROEI even be > 1? Does it matter if you are trading peak supply energy for base load supply?
Francois
Willi Broecker has recently been promoting a scheme to draw down atmospheric CO2 with huge fans, for sequestration. This strikes me as completely ludicrous compared to tapping the non-dilute stream from a power plant.
Some people will go to any lengths to avoid the feared phrase "Plant a tree!". After all, how ludicrous is that? Green plants that sequester carbon... did anyone ever hear something more nonsensical? Didn't we all learn in school that trees produce more CO2 at night than they assimilate at daytime? Didn't we all hear about tree roots that tunnel down to the geological coal deposits to supply the trees with the ever needed carbon?
:-)
I will give you one that essentially requires no energy. Shell fish farms. Assume 1000 tons of oysters a year and the weight of meat is 20 percent. It works out to about 350 tons of CO2 a year. Yes, trivial I know.
I don't think this would be really trivial if it could be used to offset some of the fishing quotas. We know that we are greatly overfishing almost every single species we use from the oceans. If a greatly expanded shell fish industry could remove some of that stress on our oceans and at the same time act as a carbon sink, it would be a win-win. 1000 tons of oysters are nothing. If we want to feed the world, we will probably need a hundred million tons of shell fish (current fishing quotas are 90 million tons of fish, I believe). That amounts to 35 million tons of CO2. Still small compared to the 7Gtons of carbon we put in the atmosphere but not trivial by any measure. I don't know where the other environmental limits of this industry are, but maybe it can make an impact, after all.
Scrubbing the atmosphere of CO2 rather than individual exhaust streams will not be an efficient solution today unfortunately. The key issue is concentration. Scrubbing processes work more efficiently with higher concentrations to remove.
The atmosphere has ~400ppm CO2
Fossil power stations emit 5-10% CO2 in the stack
The amount of energy required to remove CO2 from air would be huge, with very very low efficiencies in comparison to doing the same on a more concetrated stream.
The power generation efficiency loss from installing CO2 capture / storage on a gas-fired power plant is circa 10-15%. Assume that coal is roughly the same. ie. A CCGT will fall from 55% to 45%, coal from 40% to perhaps 30%. Cost of the equipment for capture and storage is also high, and combined with the energy used to power the capture process could potentially add 50% or more to today's electricity price.
I think a big question here is the general population's willingness to pay for this. Everyone who uses energy will have to pay in the end. Currently there are few other solutions which can be deployed - lets face it man is not going to give up fossil fuel in 10 or 20 years, so CCS will have a vital bridging role to play in managing CO2 before cleaner energy sources start to become dominant.
I'd have to dig through the IPCC report, but my understanding is that full extraction and sequestration costs you something like 25% of energy produced *depending* upon how far you have to pump the CO2 to sequester it.
In practice, from an economy-wide perspective, dealing with the CO2 from coal plants is likely to be about the cheapest form of industrial abatement (although preserving rainforest, collecting methane off garbage dumps and pig farms, etc., will be even cheaper).
A couple of further ideas for reducing usage. Change out/reduce street lighting. Yes, a lot of the power usage is in off peak periods, but it would reduce the water used to turn hydro turbines which in many areas are the base load supply. Yes someone is going to yell about crime and liability, but there are trade-offs in every endeavor.
Regulate the amount of wattage in advertising signs. If everbodies ox is gored equally, no one should be disadvantaged. I have been told that these usages are minimal and my answer is a tenth of a percent is better than no percent.
"Regulate the amount of wattage in advertising signs. If everbodies ox is gored equally, no one should be disadvantaged"
But, every user of energy should not be treated equally. Those whose electricity is wasteful or is not essential to the safety and well being of the population must be charged a higher rate. The billboard companies could be charged a high enough rate to encourage them to get a solar array and battery system to light their signs. And, reduce highway lighting and airport lighting.
The auto/airline industries are huge users of electric power for lighting compared to railroads/transit systems. If more travel could be shifted to these more energy efficient modes, much electrical power could be saved. You don't see many railroad tracks illuminated at night, and the station facilities for transit and intercity passenger rail systems cover much smaller land areas than highways and airports, thus less lighting/power needed.
"But, every user of energy should not be treated equally. Those whose electricity is wasteful or is not essential to the safety and well being of the population must be charged a higher rate."
One question: Why?
Your CO2 is just as bad as your neighbour's CO2. Schemes to differentiate how much energy is used for what puprose usually satisfy the anal mind but are not practical. Slapping a 100% tax on carbon is simple and workable, and, in the end, the market can sort it out. If everything becomes more expensive, what are you going to cut out first: te useless stuff that gets advertised for most or bread and butter? And once you cut out the useless products, advertising for them will stop very, very quickly. People do not produce and do not advertise for things that don't sell.
I'd suggest the following:
3-4c - new nuclear (French calculations)
5-9c - gas fired (5 at current lowish prices for gas)
3-7c - wind onshore
hi Jerome, can you tell me - are the numbers you quote just investment costs or lifecycle generation costs (investment, operational costs and fuel costs?).
Interested as want to use in a comparison for CCS I am looking at.
Those should be lifecycle costs: fuel, O&M, capex etc. So highly dependent on prevailing interest rates and the future track of fuel prices.
Fair enough.
The French cost of nuclear is lower than the Anglo-Saxon cost of nuclear.
I take any 'estimate' of nuclear power cost from the Anglo-Saxon proponents, and add at least 50%. (in practice, the actual outcomes were 400-500% higher but I'm hoping we have learned something from the disasters of the 1980s). In an Anglo-Saxon country, there is a greater dispersion of political and social power, and therefore a far greater planning and appeals process, and more political constraints on the economics.
The UK has one of the oldest civilian nuclear power industries. The estimated costs of disposal and decontamination (present value) for the industry are now £70bn-- that's got to be at least 1p /kwhr (ie nearly 2 cents) for every kwhr the industry has generated.
The grave danger of nuclear power is that it will suck up all the available government funds for alternative energy and R&D: this has apparently happened in Finland.
gas fired I am willing to be led. My understanding was at $4/mcf, that gas was competitive with coal. High interest rates in the 90s meant that gas was superior in cost to coal (60% of the lifecycle cost of a gas plant is fuel). Interest rates have fallen a lot since then (raising the relative attractions of wind, nuclear and coal).
Offshore wind is a bit unproven of course. We haven't, AFAIK, tested an offshore wind platform in a really big hurricane of the Katrina type.
The other problem with wind is that one needs gas-fired as a backup. That can really eff up the system-wide economics.
Notwithstanding, I am a big bull of wind where the geography justifies it (roughly: north western Europe, the Great Plains of the US, and offshore in many many places). I think we could profitably give foreign aid to places like Morocco and Egypt by helping them build wind capacity, which would displace diesel fuel and gas.
It will be just as expensive if you tie capital up in court instead of into revenue generation. I imagine what utilities have learned is hedging strategies to keep capital working against the discount rate if some enviro's manage to pull their stunts again.
And when the lights dim while the price rises, this can easily prompt change for fasttracking nuclear licensing.
Thats a nonsense number. All disposal costs can be essentially put to zero with the magic of discounting unless you are desperate to do something about some geologic repository immidiately; Which is a giant waste of time. Its a political price and not a technical one.
Oh come on! You really think you are going to deliver several GW of baseload from wind turbines in a localized area for the same cost? Germany isn't having a good time with it.
It wasn't just the environmental movement. There were changes in design and serious safety problems. It was a managerial fiasco of the first order.
Also there was unforeseen inflation in construction costs due to general economic conditions.
The reality is our record for forecasting and controlling big capex projects is poor-- most overrun.
I don't think a number given to Parliament, and a financial liability on the UK taxpayer, is a 'nonsense number'. The people are being hired and the plans are being laid to decomission these plants.
The destination of the waste is, as yet, uncertain.
You have to look at full system cost. You can't just look at the cost of building the damn thing, if you don't look at the cost of decommissioning and decontamination.
The discount rate is appropriate: I believe they use the long term cost of borrowing of the UK government. As they do for other public infrastructure projects.
re Energy R&D. Just because we can't see a solution, with existing technology, doesn't mean we shouldn't pursue finding better technologies.
Wind *can* and will provide a very significant chunk of the UK's electric power consumption. Perhaps 20%, perhaps more.
That is independent of the nuclear choice because the time lags on nuclear are so long. And nuclear economics are truly lousy for above baseload capacity.
I'm always fascinated that nuke advocates see themselves in opposition to new forms of energy. It's like the world will be a great place if we would only accept the Holy Water of Nuclear Power. Well, as a technology, it has not delivered before, at least not in Anglo-Saxon countries, at the promised cost. (everyone says 'France' but you could just as well say 'Russia' (Chernobyl) or 'Japan' (cracking throughout the reactor fleet).
In practice, you can't play off nukes against wind. Neither is fast-ramp despatchable, in grid terminology.
A simple R&D example will show you the importance of research: what if we invent new and better ways of power storage? At which point, wind and solar expand their applicability.
It should be a secure parking lot. We'll check on it again in fifty years.
I dont see myself in opposition to wind or solar, but the problem is that nuclear isn't in competition with wind or solar; It competes with coal!
I'm sure wind is cheaper than nuclear in some sites for flexible power demands, but for baseload power the only thing that can compete with nuclear is hydro or coal. Hydropower is great but has a limited number of exploitable sites. Coal is great for turning into diesel fuel and just a giant waste to burn for electricity.
What if we develop new, cheaper reactors?
I'm sure wind and solar have a future, but today nuclear is in competition with coal. Ignoring nuclear today means building more coal plants.
The main problem with all this talk about "competitiveness" is the assumption that a reduction of carbon budget can come at "no cost" if we do it just right. It won't. To preserve the climate of our home planet, and please keep in mind we don't have another to go to once we mess this one up, we will have to spend real money. Period. Carbon trading was one political idea to ease people into what, eventually, will have to be a very substantial tax to make everything made with carbon more expensive. The competitiveness issue does not show up on that scale, at all, of course. Why? Simply because every carbon tax in a country can and will be accompanied by a carbon import tax. So everyone who buys something in a country acting responsibly will pay the carbon tax independently of it being produced with coal at home or with coal somewhere else. The difference will mainle be one for the accounting of the tax authorities.
"You can see how this will be used in the US to block any meaningful progress on CO2 emission. Every time someone brings it up, there will be a 'what about China."
The US is simply not a responsibly acting country. There is no political will and no public interest to solve the problem. This is a matter of moral breakdown, not one of the particular scheme that would be used to reduce carbon use.
Morals will change as ocean levels will rise. It will probably be half a century too late and a hundred trillion dollars more expensive to solve the future crisis than if we had acted early, but then, nobody says grandchildren are not allowed to spit on the graves of their grandparents if they deserve it.
Solution to those that do not opt in: Extremely high tariffs on imports from such countries covering both the carbon cost plus a punitive fee.
Yes, this is a punishment. What the EU can do is say "if you want to trade in out economy then you play by our rules". There does not stop another nation from going its own way but there is a cost.
What the world needs is a carbon tax union, where each member agrees to implement laws and regulations to abide by carbon goals and where nations not members of the union are punitively taxed for engaging in trade with the union, unless or until they comply.
I'm not sure energy is 5% of the worlds economy probably closer to 10-15%.
If you take into account all transportation/power generation and oil based synthetic production energy or better carbon based products are a big part of our economy. Rising energy costs have a profound impact throughout the economy.
I think its better to think of the price of oil as the central energy banks interest rate since it has a similar economic effect. Or you could consider the price of oil as a sort of commerce tax applied to almost every transaction.
Rising oil prices almost directly result in inflationary price pressure throughout the economy.
The reason is money spent on oil does not result in high value economic activity if oil production is past its peak.
Before oil peak's as the price of oil increases we expect expanded production to reduce price. For example as the price of corn grows more land
is planted in corn.
Next its almost common sense to realize that energy costs must be a much bigger part of our economy than 5% simply consider the effect of doubling or tripling energy costs. I'd guess that if energy costs were 3 times higher than today we would have 50% less economic activity.
You can't use places like the EU that charge a high tax on gasoline since this tax money. Energy costs are higher in the EU but not as high as final pump prices suggest since its offset by the fact that a big part of the cost is taxes used internally and lower per capita consumption for the same economic activity.
With energy being 15% of the world's economy, a doubling in energy cost is still not a killer. Obviously there is a lot of waste going on and if we can save 40% of our energy demand (which we easily can), a doubling would not negatively effect the economy at all, given the fact that any efforts on saving energy will result in investments and new business opportunities.
Your analyis is simply based on the assumption that the system will not respond and continue to waste energy at the same rate. That, of course, is not correct. The EU and Japan are living proof of that.
15%? I don't think u will find a g-20 country where Energy is greater than 5% of its GDP.
Yes, lets keep our fingers crossed for another Katrina.
Planting trees makes sense if they are the right species for the location. In tropical and subtropical climates the Jatropha tree could sequester some CO2 plus provide oil seeds that the local population could harvest and sell to local oil press company to market as biodiesel. Livestock could also coexist on land devoted to these Jatropha groves. This is already being done in India and the oil used by the national railways there.
A plan for planting Jatropha in Africa, parts of Asia and Central America would capture some CO2 plus boost local economy. I don't know why worldwide charitable organizations have not promoted this concept in areas where much of local population is impoverished.
What is really telling... in this Q&A there is not one mention of the term "conservation". An industry executive only talks about expansion and supply, not about reduction and conservation. Yet, that is where the real savings are to be had. 70% of our primary energy use is waste. Once we change that, other things will start falling into place.
Conservation/efficiency is a personal virtue, not a social one, unless you are one of those old Europeans.
Americans as a group no longer understand the idea that less does not equal poor. As a matter of fact, they don't even understand the idea that less can mean higher profits - Porsche definitely earned more in profit than GM, for example.
I think it is hard for outsiders to understand how Americans view the world at this point, since it is so foreign, excluding what seems to be common sense or prudence.
This is also a part of the 'doomer' debate here - notice just how many people who aren't American suggest that societies can adapt and survive by simply planning and changing, while many Americans feel that planning and changing won't work - and if their view generally only encompasses America, they may be correct.
Planning has a bad record (although there is a role for it). It also doesn't work well in politically decentralised societies.
I would argue Anglo Saxon societies are highly politically decentralised (UK much less so). The regional differences just within the US are huge. The legal system is an important arbiter of winner and loser-- things go to the Supreme Court far more often than they do in other countries.
What could work in the US context is a centralised decision to charge for carbon. The actual adaptation would then be left to local forces.
Instead what the US has is a handful of States that are trying to do something about global warming, and an absolute block at the top level.
This has a lot to do with the curious shape of the US electoral college and Senate-- small states which are energy rich have a disproportionate voice (by losing West Virginia, Al Gore lost the election).
(Canada has a similar mirror problem. Alberta produces greenhouse gases, and is the electoral rockbed of the current governing party. To be fair, Ontario and Quebec have a carbon-rich lifestyle as well, just not the big tar sands plants and relatively few coal-fired electricity stations).
Nothing to disagree with really, except 'planning' - I meant it more in the sense of forestry management, or in terms of making a reasonable forecast about the future, and preparing for it.
Obviously, if you either believe that this year Jesus Christ will reappear (as apparently a quarter of Americans do believe) or that all our problems need to be dealt with after your death, which means they don't need to be dealt with, planning is a waste of time.
Yes, I know what sort of planning you are referring to, and indeed, it has a pretty poor track record. After all, the entire world buys American consumer electronics because the MITI planned Japanese producers were so hobbled in the world marketplace. And the Koreans failed in conquering the markets that the Japanese failed to conquer (shipbuilding, for example) because the Koreans copied the flawed Japanese method of industrial planning. Which is why the world orders its ships from America.
Nothing is perfect, but being prepared for the future is the basic reason for planning, and yes, it does seem to have a poor reputation in most English speaking countries at this point. This doesn't mean the rest of humanity is so blind.
Expat,
You raise a most interesting issue in the history of ideas. Americans mostly dislike the whole concept of (government) planning.
Whence comes this powerful and somewhat irrational aversion?
The clearest source I know is F. A. Hayek, "The Road to Serfdom," in which "planning" is used as a pejorative synonym for socialism. The polar opposite of "planning" is the "market" driven by the invisible hand to creatively destroy the ineffieciencies of the past and bring forth the technological marvels that increase productivity and hence living standards.
Now looking at the record, government planning does not inspire confidence. It is hugely ineffiecient and often grotesquely ineffective. Also, in a democracy where planning horizons are limited by upcoming elections it is not clear whether there is any reasonable way to do coherent long-range planning.
One of the biggest planned economies in the world is the U.S. Dept. of Defense. The planning found at the Pentagon does not inspire confidence in this kind of socialistic organization. Planning at the level of local school boards in the U.S. is an abysmal failure. Thus scale doesn't seem to matter much: Basically, nobody (and that includes corporations) knows how to plan very well.
On the other hand, externalities and other market failures make it absurd to rely upon market forces alone to shape the future.
I do not have the answers. But what I can say is that the answers that are out there are not very good. Some forms of the mixed economy (e.g. Sweden) seem to do much better than others. Whether the key factors are history, culture, political institutions, "national character," scale, or whatever--nobody really knows that.
Those who love Freedom and worship The Market have ...
Declared a War on Terra
What more need we say?
Mission accomplished?
He's the worst case of crony capitalism.
He is no true defender of freedom, nor of free markets.
He has been Libertarian's worst nightmare as a president: the Patriot Act, the wiretapping, the federal deficit, the war in Iraq...
Don,
I've been racking my brains looking for "answers" also and have thus far come up empty.
A growing suspicion is that the "question" is all wrong.
We should ask not whether socialism (planned society) is better than pure capitalism (let the flashlight held by the Invisible Hand guide us through the darkness).
We should look in the mirror and ask how to re-engineer ourselves, our most fundamental way of thinking about the world, so that average human beings are encouraged to go to work for the betterment of Planet Earth rather than for the perceived betterment of only themselves (the greed is good factor) and for the unending growth of their poisonous apple collections.
Did Japanese electronic manufacturers succeed because MITI told them what to make, or because Japan is the most competitive and innovative environment for consumer electronics?
Does America dominate PC technology (chips, software etc.) because the US government told them to do that, or because the US had the most competitive environment for electronics companies, plus large R&D transfers?
'planning' I meant in the Soviet Bloc sense. A dismal failure (and an environmental disaster).
Anticipating scenarios, building flexibility, subsidising 'spillover' activities, like R&D? Yes.
Picking winning industries and technologies? No.
Europe is driving innovation in energy technology by raising the price of energy, and by implementing an Emissions Trading Scheme, *not* by dictating which is the right technology.
See Don's points about political constituencies, shaping the government planning process.
Well, actually Japan, through MITI, focused its industrial energies in several areas, and were able to dominate consumer electronics for this reason - it was a planned economic decision to manufacture transistor radios, then televsions, and so on. And yes, they did just happen to take advantage of a free market, by the way.
As for America dominating PC technology - look where almost all the components for the PC are manufactured, and which companies dominate such trivial things as lasers, magnetic drive components, or memory chips - admittedly, AMD, Intel, Sun, and IBM retain a definite lead in processor technology, but when you look at the size of the mobile phone or DVD/CD market, and how essentially no American manufacturing company beyond Motorola has any role in them, it becomes a fairly American-centric view to think the world cares all that much about PCs in terms of electronics that are purchased and used in daily life.
And yes, the central planning of the Soviet Union was an utter disaster - except it is free market America and its followers (ironically including the pro forma Communist Chinese) that has pretty much ensured that the Earth's CO2 level will become a major planetary scale experiment, not the Soviets.
The role of MITI in Japanese success is massively overstated.
Yes there is a role for sheltering and developing nascent industries, but Japan's companies have succeeded, where they have succeeded, because they are well run and ferociously competitive.
The experiments in Europe with state controlled industry have been little short of total disaster, and are part of what cripples the European economy now. Think British Leyland.
The SU did far more environmental damage, per unit of GDP. The difference is western capitalism is far more successful at generating GDP.
It will also be far more successful at tackling the CO2 problem, using free market mechanisms.
"Conservation/efficiency is a personal virtue, not a social one, unless you are one of those old Europeans."
In other words: the US should open ALL national forrests, national parks etc. for mining and logging, after all, there is no need for conservation on the federal level?
"I think it is hard for outsiders to understand how Americans view the world at this point, since it is so foreign, excluding what seems to be common sense or prudence."
I don't think there is much of an "American View" about this at this point. There is mostly a misguided neo-con ideology driven by special interest on the political level paired with a failure of the school system to educate people to become responsible citizens. Somebody needs to rescue the Americans from themselves. I think Iraq has made that perfectly clear.
"This is also a part of the 'doomer' debate here - notice just how many people who aren't American suggest that societies can adapt and survive by simply planning and changing,"
Actually... that is usually what societies do: they plan and execute the things that the individual can't, like building power plants and flying to the moon...
"...Americans feel that planning and changing won't work - and if their view generally only encompasses America, they may be correct."
That, unfortunately, might be true. The Europeans, on the other hand demonstrate that planning works quite well. A cursory look around any European city will convince you of that one.
In part, that first sentence was sarcastic, but I decided to not mark it so, and second, you should really follow what success the Bush government has been having in following exactly what you wrote (sarcastically). For example, the program to protect forests by cutting down trees before they can burn -
'Bush unveils 'Healthy Forests' plan
Generating criticism from environmentalists, President Bush Thursday announced a new initiative to allow more logging in national forests, a move that he said will curb the threat of wildfires.'
http://archives.cnn.com/2002/ALLPOLITICS/08/22/bush.timber/
Or how about this -
'Pushing the Privatization of Public Lands and Waters.
The U.S. is giving away millions of acres of public land to private companies.
It asks just a few dollars in return for land rich in resources. For about the price of an economy car, a company can buy public land worth billions of dollars.
Moreover, foreign owned corporations seem to be reaping the rewards - in direct contradiction to the intent of 130 year old mining law being exploited for this purpose. About 20 percent of the mineral wealth of the Western United States is now controlled by foreign corporations.
According to a report released this week by the Environmental Working Group a total of 9.2 million acres of public land has been converted to private use under the 1872 mining law.'
http://www.truthout.org/cgi-bin/artman/exec/view.cgi/9/4557
I could add a few more examples - Clear Skies comes to mind of yet another cynical naming ploy - but I see that at times, my writing is not clear enough - which is my fault. It tends to blend sarcasm and irony in not obvious ways, with a lot of cynicism.
There will never be an internationally acceptable carbon scheme unless we agree
1) what offsets/credits should be allowed
2) how to punish free riders
I think it would be better to exclude all but directly proveable offsets. That way tree planting and alleged clean-displaces-dirty energy would have to stand on their own merits without payoffs from the fossil fuel industry. As far as punitive carbon import tariffs are concerned no large country has yet earned the moral right to do this.
I also doubt that any 'affordable' carbon tax would make CCS economic. If electricity price increases of the order of 40% were required to make clean coal viable that is too big a slug for the economy to absorb. The cost increases need to be just a few percent a year to give time to adapt.
Boof,
I think it is fair enough to assume the economy can absorb surprisingly high increases in energy prices. Take what's happened to the oil price over the last five years (3 x), gas price in the US and Europe (2-3 x).
This, together with carbon taxes in Europe has had a big impact on el gen prices (in Europe anyway), and though there has been an impact on energy intensive industry (ore processing etc) the rest of the economy has proved surprisingly resilient.
So can we withstand an increasing use of fossil+CCS and other alternative low carbon power generation? (wind, nuclear, energy efficiency etc)
I think that we have to - or take a risk of potentially huge environmental consequences. I guess the general population isn't there yet, but it will be soon - the world managed to eliminate CFC's why not CO2?
How indeed to punish free riders . . . .
Suppose the EU and the U.S. get on board with tough carbon taxes: How do you propose punishing China? Bomb their coal mines?
In the absence of a global authority, I think there is no practical way to reduce CO2 emissions. You think we've seen global warming? I think we have just had a small taste of what is to come. And if you (or anybody) have a realistic proposal to deal with the free rider problem, I'd sure like to hear what it is.
This is not about "punishing" anyone. China's energy consumption can be reigned in by collecting steep import taxes and offering them to hold those taxes in escrow accounts which they can use to buy energy efficient technology in the US. Talk about solving the trade deficit... :-)
China is less than 15% of world greenhouse gas emissions. The problem with China is *future growth* rather than the current position.
EU+US+Japan+Australia/Canada is over half world GHG emissions (and over 80% of the existing stock of CO2 in the atmosphere).
Bringing China onside, assuming that the rest of the developed world is onside, won't be impossible. They too are concerned about the impacts of global warming-- the drought in Chungking this summer was the worst ever recorded. They won't move first (although energy conservation is a priority in the current 5 year plan).
And of course there is the threat of carbon-based import tariffs. China is a major manufacturing exporter.
The world dealt with CFCs, in a manner which phased out First World production of CFCs very rapidly, and is now phasing out Emerging Market production. The same can be done for CO2.
The cheapest, fastest, easiest, way to reduce carbon emissions is to give free nuclear reactors to rapidly industrialising third world countries like China or India. No coal, no CO2.
I prefer convection gas cooled fast reactor technology because it has the sparsest fault tree for meltdown. Pressurised Water Reactors and Pebble Bed Reactors are much more susceptible to mismanagement and attack.
Would Iran be your first candidate for receipt of these reactors?
Beyond doubt they have a need for it: declining energy reserves, booming population and demand.
In practice the world has 482 operating reactors (civilian power reactors, from memory).
If we build 1,000 new reactors, (which replaces the 482 and adds 500 new ones), that is one 'Socolow Wedge' ie 1bn tonne pa of abatement on a 15bn tonne carbon pa 'Business as Usual' scenario for 2050.
So nukes are piece of the puzzle, but not the whole solution (no one technology is).
Carbon sequestration is one of these 'feel good' things that is largely one big load of public relations crap.
Trying to capture CO2 at the end of a power plant's stack has marginal technical and economic feasibility. Furthermore the 'sinks' to where the carbon is supposed to be sequestered may, in the long term, not really be very good sinks at all. Even a massive global effort at carbon sequestration will barely make a dent in the total C02 loading to the atmosphere. Furthermore, carbon sequestration is highly energy intensive (and will thus cause even more carbon to be burned).
This is clearly a technological deadend. A waste of valuable resourses. Wanking at its worst.
Let's face it: if we want to burn large amounts of fossil fuel, then large amounts of CO2 are going into the atmosphere, one way or the other, and regardless of what.
I really do think that we, as a race, are going to have to make plans to cope with the nearly inevitable effects of climate change. These will be very painful and highly disruptive, but the sooner we start preparing for such, the less painful and disruptive it will be. No matter what: it's still gonna be bad news.
Feh. I am not advocating new CO2 emitting power plants, but even if everything from now on was nuclear or wind installations there are too many CO2 emitters now. They're not going to be replaced; develop CO2 sequestration or the CO2 concentration keeps going up.
True in theory. But it just ain't gonna happen.
If carbon costs $100/tonne ($28/tonne for CO2) it will happen. It will certainly happen if carbon is more than $200/tonne.
The cost per kilowatt hour would be something between 1 and 2 cents. As the technology improved and shifted towards low carbon generation, that cost will fall.
That would be a total tax take on the planet of $700bn pa (slightly over 1% of world GDP).
In practical terms, looking at Socolow's '15 wedges':
- Business As Usual, 2050, is 15bn tonnes carbon pa (v 7bn now)
- each wedge is 1bn tpa abatement, so 8 wedges stabilises carbon emission at the current level
- carbon sequestration on 1000 large power plants is 1 wedge
Since we will not be emitting carbon after 2200 (we will have run out of fossil fuels), sequestration needs to hold that CO2 for 100+ years, but less than 1000 years. There are enough geologic reserves to do that-- whether we can safely sequester CO2 at the bottom of the ocean is not yet known (we don't know enough about the biosystems down there).
Glenn, it's good to see these critical issues addressed on TOD. Below is some feedback that I hope may be of interest.
x
First, I'd point out that the increasingly popular notion of "Cap & Trade" is a classically American bit of bullshit.
It skims straight past the core issue - with an unconsidered assumption that US will get what it wants -
with regards to the sharing out of GHG emission rights between the nations.
Thus the slang for this approach should be "Cap, SHARE & Trade"
The technical name for this global policy framework is Contraction & Convergence.
It is very widely recognized and has gained serious endorsements, such as by the Africa group of nations, & the EU Parliament.
Convergence BTW is about the transition over an agreed period of years,
from the present national emissions according to GDP (close correlation)
to per capita parity of national emissions rights (i.e. according to size of population).
For background info, see www.gci.org.uk ---
gci is Global Commons Institute who originated the concept, presented it to UN in 1990, and are still pushing it.
x
Secondly, the US is a renegade free rider already - it signed up to the Berlin Mandate in the mid-90s
but has failed to keep its word that, like other industrialized nations, it would cut its GHG output below 1990 levels,
before developing nations would be required to accepts limits in their turn.
Punishing free riders is tempting & very easily achieved by tarrifs, executive travel bans, etc,
but is likely to be counter-productive in empowering reactionaries -
far better to leave laggard states to face the anger of the populace at such national humiliation, plus endangerment.
x
Thirdly, I get really quite tired of defeatist bullshit about supposedly malign human nature
and the predictions that we can't change our ways -
which nonsensically confuses our inner nature with the prevailing patently defunct (thascist) ideology.
I'm just not interested in what the defeatists who've posted comments on TOD think others will or won't do -
I am vaguely interested in knowing what THEY are willing to do, if anything, and WHERE, HOW, AND WHEN ?
Regards,
Backstop
A system that recognises that richer countries are going to be able to buy more CO2 permits, is far more likely to succeed than a system that aims for total 'equality'.
Richer countries both can buy more permits *and* use more advanced technology to reduce their CO2 emissions. In practice, they will do both.
Waiting around for civilisation to collapse so that we can impose the 'perfect' system is probably not a good strategy.
Valuethinker - it's not clear as to what system you are proposing.
C&C will clearly increasingly require industrialized states to purchase emissions entitlements
from developing nations with surplus entitlements -
but this is not equality, it is more about a transition toward an equitable allocation of a vital resource,
namely the increasingly limited capacity of the atmosphere to accept yet more GHGs.
In this sense America is indeed unwisely "waiting around for a perfect system"
and has in fact already missed its best timing for trading under C&C -
With China, India, Brazil and Indonesia all industrializing,
the US will now have to pay far more for the emission entitlements it will need
than would have been the case if they'd adopted C&C in the '90s.
Regards,
Backstop
Then we are agreed.
The optimal solution is one global pool of auctioning for carbon permits.
Given enforcement problems, a global carbon tax might be easier and with less fraud. Nordhaus certainly thinks so.
The other hard problem is pricing the international offsets: doing something like saving the Brasilian rainforest is likely to be disproportionately cheap, in terms of helping global warming. Ditto giving third world peasants better cooking stoves.
Paul Hanrahan of AES says,
"A. We have three terminals in development right now. The U.S. is running out of natural gas — production is declining and demand growing — so the expectation is that the import levels will go from 3 percent today to about 24 percent in 2020. The constraint is, How do you get it into the country? If the three are successful, we will continue to look for opportunities to develop L.N.G. terminals."
The most interesting statement in the article to me. Has there been a more ringing endorsement that the U.S. is in a natural gas emergency, and should begin conservation/mitagation now? Is there a clearer statement that the "flat price" out to 2030 as projected by the Department of Energy's EIA is totally idiotic as an assumption? One last question, BIG? Has anyone bothered to calculate the effect of that much increase in importation of energy (added to the increased importation of crude oil that will be needed) will do to the American balance of payments?
Wind, thermal solar for hot water heating and certain home and building heating plus industrial processes, PV for electric genereration, and efficient building practices are beginning to look like a bargain, perhaps?
Roger Conner known to you as ThatsItImout
I can only agree... conservation followed by massive investments in renewables would pay for themselves in three decades and our children would reap the benefits. Instead, they will probably be reaping the storms their parents were sowing. Quite literally.
Interesting article. The reason the book "Big Coal" by Jeff Goodall gave for lack of investment towards coal gasification technology and CO2 and cleaner emissions were governmental standards, which make owning older, less technologically advanced coal utilities more profitable: many regulations were passed in 2004/2005:
1) Ability to keep old plants and spend a high % of the cost of the plant per year on maintenence capital expenditures (imagine how long your car would last if spent $5K-10K a year maintaining it). Therefore, low sums spent each year is more profitable than one large sum paid and a 10-15 pay off period -- author Jeff Goodall compares that under current regulation racing a '72 Dodge will beat a '06 Porsche in terms of profitability.
2) Relatively low CO2 emission fines and regulations which made investment in scubbers unprofitable (however this is changing)