Wednesday, September 9, 2009

Cap and Trade: All Tricks and No Treats (Part 2 of 3)

Last week I wrote about the cap and trade legislation under consideration by Congress. In Part 1, I postulated the important question that everyone should be asking themselves, “Why do I care if the average temperature of the earth rises a few degrees Celsius over the next 100 years?” In that column I pointed out that the science is not conclusive or unanimous that humans are the cause of global warming despite the overwhelming media and political support for this hypothesis.

In this column, I will be discussing the policy implications of trying to reduce carbon dioxide emission through this cap and trade bill. The intended outcome of this legislation is presumably to stop, or at least slow the rate of global warming by reducing the amount of, or at least stopping the growth in annual emissions of carbon dioxide in the United States. I will also be looking at the potential secondary environmental impacts of reducing carbon dioxide emissions through the proposed cap and trade legislation.

One of the biggest challenges facing environmental policy makers today is that they first must come to the realization that there are no solutions, only trade offs. We do not live in Utopia and there is no perpetual motion machine out there that will allow us to ignore the most basic laws of physics.

Let’s take fuel cells as an example. In these engines, hydrogen and oxygen are burned to release energy and the only emission coming out of the tail pipe is water. If we ignore the fact that water vapor and clouds account for 90% of greenhouse gases, then fuel cells could replace carbon burning internal combustion engines and reduce carbon dioxide emissions significantly. But, hydrogen in its pure form is not an abundant resource, therefore, hydrogen fuel must be derived from sources such as water and natural gas. The fact of the matter is that it takes more energy to make hydrogen fuel than one gets from burning hydrogen. Because making hydrogen fuel is a net negative energy transaction, the only way to reduce carbon dioxide emissions with fuels cells is to make hydrogen fuel using energy that has been generated from non-carbon-based sources. I once read an analysis that suggested that using only solar and wind power to produce the hydrogen fuel required to run all the cars in California would impact half of that state with solar and wind power generation facilities! I can imagine the hue and the cry from environmentalists at that proposal.

And that gets us to one of the fundamental policy problems with the cap and trade bill. It attempts to create incentives for alternative or sustainable energy sources, but incentives are not enough, so it actually goes so far as to underwrite development of alternative or sustainable energy by taxing carbon-based power. “Alternative” and “sustainable” are buzzwords for any source of energy other than coal, oil, gas, nuclear, and hydroelectric. If the goal is to reduce carbon dioxide emissions, we should be encouraging the development of zero-emission electric generating facilities such as nuclear or hydroelectric plants. The term “sustainable” implies that these resources are unlimited or that there are no environmental impacts associated with these power sources. The most favored forms of alternative and sustainable energy, wind and solar, ignore the fact that many parts of the country do not have enough sunshine to make solar effective and other parts of the country do not have the kind of winds necessary to make wind power efficient.

As has been amply demonstrated by the permitting process for the Cape Winds Project in the Nantuckett Sound off the coast of Massachusetts, everybody wants wind energy. They just do not want it in their back yard. Indeed, it appears we have transcended from the “not in my back yard” (NIMBY) phenomena to “build absolutely nothing anywhere near anything” (BANANA)! The same people who do not want wind towers in their viewshed will also oppose the power transmission lines necessary to transport electricity from where wind and solar will work and be tolerated.

And consider this. The highest demand for electricity occurs when there is a heat wave, and during heat waves, the wind is often very calm. In order to meet peak demand in the new alternative/sustainable powered electric grid, power companies will have to build more peak demand generators that usually run on natural gas and emit carbon dioxide. Some analysts have suggested there might not be any net gain there.

Lastly, I am waiting for the climatologists to clue in to the fact that solar and wind power works on the principle of converting wind energy and the heat of solar radiation to electricity. What will be the long term effects on our climate from the human-caused alteration of these two very significant contributing factors to weather patterns around the world?

Other attempts to impose policies to reduce carbon dioxide around the world have failed. The European Union has imposed cap and trade on its carbon dioxide emissions, yet their total annual carbon dioxide emissions continue to increase. The Kyoto Protocol was intended to slow the growth in carbon dioxide emissions, and though some would blame the United States for not obligating itself to this treaty, the fact is that nearly every country that did sign on to the carbon dioxide reduction plan has failed to meet its obligations. These policies do not work because people will always find the loophole or a work around. More importantly, the people of the world are not curbing their appetite for electricity; the demand is increasing everyday.

Most egregious of all, a cap and trade bill in the United States will do nothing to address carbon dioxide emission from other countries. Yes, the United States may be the largest single source of human-caused carbon dioxide, but China (150% increase from 1992-2007) and India (103% increase from 1992-2007) are coming on fast. These two population giants have made it clear they will not deny their people the opportunity to prosper economically, improve their health, and enjoy the creature comforts of light and air conditioning.

By unilaterally and artificially making electricity less abundant and less affordable in the United States, we will create a huge incentive for American industry to take its business overseas. To address this contingency, the bill proposes tariffs on goods that come from countries that are not limiting their carbon dioxide emissions. In the current world economy and even with our trade deficit, the United States is still the largest exporting nation in the world. It would not be good policy for the United States to initiate a trade war, especially with the countries that are bank rolling our National Debt.

For better or for worse, the United States has built the most sophisticated and efficient infrastructure to explore for and produce oil and gas, process it, and distribute its byproducts to consumers across the nation. And we are finding more oil and gas all the time; these resources are not nearly as finite as some people would have you believe. We have domestic sources of clean burning, low sulfur coal that can meet the current US demand for centuries. At present about 45% of the electricity generated in the United States comes from coal and new coal fired power plants can be extremely clean. Our nation runs on energy and our life style, jobs, and the economy are dependent on a stable and affordable supply of it. We need new technology and we need more diversified forms of energy. We need more efficient transmission and improved battery technology. But, we should not be shooting ourselves in the foot by penalizing our most abundant and affordable energy sources. The United States in a prospering economy has shown itself to be incredibly resourceful at solving complex problems and meeting challenges. Conversely, if people cannot meet their basic needs of food, shelter, and security, then their willingness to expend time and resources to address the other issues decreases.

If global warming is indeed principally caused by human sources of carbon dioxide, then this problem began about 150 years ago with the industrial revolution. The most pessimistic projections are not expected to manifest themselves for 50 to 100 years. Even the scientists who believe humans are responsible for global warming agree that nothing done in the short term is likely to significantly impact the long term projections.

The policies of the United States should facilitate improving our understanding of climate science, promote and support expanded research and development on greater efficiencies and energy generation, transmission technology, and energy storage mechanisms. In the mean time, the United States should continue using the cleanest forms of carbon-based energy to fuel the economic engine that will improve our understanding and adequately develop the new technology and infrastructure necessary to fully address all the issues of the future.

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