First, let me wish all my loyal followers a very happy and healthy new year! So what exactly does 2014 have in store for us on the energy and environment front? Below is a list of things that I am watching, please comment and bring any topics of interest to my attention.
Keystone XL Pipeline – Just today the State Department announced in their report that the Keystone XL Pipeline would have a minimal impact on the environment. This report was greeted with calls for Obama to approve the project by Republicans and even some Democratic lawmakers much to the chagrin of environmentalists. Critics of the report said it did not pay enough attention to the harmful practice of extracting the oil from the tar sands in the first place. The proposed $7B project would carry 830,000 bpd of crude oil from the Western Canadian Sedimentary Basin and the Bakken Shale formation to Steele City, NE before moving on to refineries on the Gulf Coast. Issuance of this report now begins a 30-day comment period for the public and a 90-day comment period for government agencies, as well as puts the heat on President Obama to take action. As recently as June 2013 Obama stated, “Our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.” Environmentalists have called approval of the pipeline “game over” for the planet.
California Drought – 9% of California is now in a state of “exceptional drought”. While this might not sound like news to anyone who has seen the images of the forest fires in the Bear Republic, this is an extremely concerning issue. In fact, “Thanks to the magic of science (and tree rings), we can now safely say that California hasn’t been this dry since around the time of Columbus, more than 500 years ago. What’s more, much of the state’s development over the last 150 years came during an abnormally wet era, which scientists say could come to a quick end with the help of human-induced climate change.” Lack of rain combined with abnormally low snowpack could leave much of the state virtually dry within 60 – 120 days. If you think this is just a left coast problem, think again – California is responsible for almost 12% of the country’s agriculture.
Emerging markets – If you have been watching the markets lately you have seen a dramatic reaction to perceived threats from emerging markets. I’ll make it quick: Fed removes the free money punchbowl from the party; possible slowdown in China; currency trouble from Brazil, Turkey, South Africa and Argentina. So what does this all mean? Stay tuned and I will keep you posted.
Plus we have Super Bowl XLVIII, the winter Olympics and the World Cup all coming up. What a great year this is going to be.
This week’s Bloomberg Businessweek had an article titled On China’s Electricity Grid, East Needs West, that explained the mega cities of China’s east coast are consuming resources from the coal rich areas in the country’s far western provinces resulting in lengthy transmission lines and growing instability among the minority ethnic groups there.
One of the biggest problems with having cities so far removed from the natural resources that power those cities is transmission. In China, freight railroads and river barges are already overloaded and overcrowded. This led party leaders to push for development of interior regions of the country and build high voltage transmission networks called the West-East Electricity Transfer Project. By 2020 the total capacity of this project is projected to equal 60 Hoover Dams.
The second problem with this large-scale coal driven buildup is the lack of water resources available to produce steam in these plants. Many of these planned coal plants are located in water scarce regions including Xinjiang and Inner Mongolia and has led to tensions with ethic Mongolians and Uighurs who depend on farming and herding for their livelihood. By tapping already stressed aquifers and wetlands, there could be a larger problem looming.
A better idea would be harness China’s production capacity of solar PV cells and adopt a domestic policy of distributed generation. DG is sited near the end user of the electricity and therefore less vulnerable to losses during transmission. PV cells can be placed vertically up the sides of the country’s many skyscrapers eliminating the need to clear land for ground-based systems. Smart building design is another idea that could drastically reduce demand for electricity and save the country from building expensive, inefficient, centralized power plants.
China’s massive infrastructure build out has been nothing short of extraordinary. Now it has the opportunity to leap ahead of other developing nations by committing resources towards building the next generation cities. Distributed generation, microgrids, and smart integrative building design can all help to make this idea a reality.
Years ago, when the US thought they would have to import LNG’s from abroad there was a massive build out of over 24 LNG plants for regassification. Thanks to horizontal drilling and hydrologic fracturing, the US will not have to worry about LNG imports for the next century at the earliest. Converting these regassification plants to be export terminals makes economic sense and environmental sense. With the exception of Sabine Pass in Louisiana who was just recently granted permission to export, all that equipment now sits idle along the gulf coast.
At the heart of the issue is the fact that American gas now sells for $3.40 per MBTU domestically but over $12 in Europe and up to $20 in Asia. Turning American nat gas to LNG cost about $5 per MBTU, so exports of LNG can be beneficial to the economy. Furthermore, the glut of natural gas has actually forced producers to stop producing until the supply dwindles or demand picks up. Tapping the international markets would allow this process to balance out. Of course, there is steady opposition to LNG exports from uncommon bedfellows of environmentalist and business proponents who respectively oppose fracking on environmental grounds and who want to maintain their access to cheap fuels.
I have gone back and forth on the subject of fracking several times now but generally agree with the economic arguments set forth in this article. While I am not a proponent of fracking, the following issues deserve mention:
Nat Gas is priced on a regional market as opposed to a global market. The lack of export infrastructure acts as a subsidy thereby keeping the price of gas artificially low and promoting inefficient use of the fuel. Increasing LNG exports will increase the price but will hopefully establish a free and transparent market. The revenues of the fuel trade should be used in clean technology research and developing next generation technologies.
With cheap nat gas prices in the USA, developing nations have been leaning towards coal to fuel their consumption. Access to natural gas will hopefully reduce the emissions in the developing world more than if the gas were kept in the US.
These two points rely on the assumption that fracking remains legal. As I write this, a moratorium on fracking (bill A.5424-A) was just passed by the Assembly and will go before the NY State Senate and then on to the Governor for signature.
Clean technology has never been more affordable or accessible to the masses. Policy makers are now realizing the national security and economic concerns of relying on fossil fuels. Clean, distributed sources of energy combined with sustainable development are our best options for a healthy, prosperous future.
“One degree Celsius rise in temperature is associated with 10% productivity loss in farming. For us, it means losing about four million metric tonnes of food grain, amounting to about US$ 2.5 billion. That is about 2% of our GDP. Adding up the damages to property and other losses, we are faced with a total loss of about 3-4% of GDP. Without these losses, we could have easily secured much higher growth.”
-Sheikh Hasina, Prime Minister of Bangladesh
Most people think the biggest costs associated with climate change are in trying to avoid it by reducing carbon emissions. However, a new study (Climate Vulnerability Monitor 2nd Ed) by DARA concludes that climate change is already costing us $1.2 trillion in foregone prosperity. Yes, that is trillion with a T. This is roughly 1.6% of global GDP. By 2030 the effects of climate change could amount to 3.2% of global GDP with most of the pain being felt by developing nations. Here are some more stats:
• Climate change and a carbon-intensive economy considered a leading global cause of death today, responsible for 5 million deaths each year – 400,000 due to hunger and communicable diseases aggravated by climate change and 4.5 million carbon economy deaths due mainly to air pollution
• Losses for lower-income countries are already extreme: 11% of GDP on average for Least Developed Countries already by 2030
• Major economies are heavily hit: in less than 20 years China will incur the greatest share of all losses at over 1.2 trillion dollars; the US economy will be held back by more 2% of GDP; India, over 5% of its GDP
However, the future doesn’t have to be so doom and gloom. The report concludes that much of these costs can be avoided by emissions reduction investments of just 0.5% of GDP and $150 billion per year in support to mitigate the effects in the countries most vulnerable.
While a big victory for the environmentalists, it has angered upstate residents and land owners who were looking for economic development or to simply lease out their land to natural gas companies. Mr. Cuomo is caught between a rock and a hard spot on this issue because of his committment to economic prosperity and job creation on one hand, and his environmental conservatism on the other. With both sides fervently pushing to allow or deny fracking on the New York region of the Marcellus Shale, the Governor decided to review more data and let the facts make the decision for him.
I say, “Congratulation Mr. Cuomo! Thank you for not bending to one political pressure or another and instead reviewing actual science and data. This is something that has been missing from many of the major political arguments recently.”
America really needs to learn the facts about natural gas – do not base your decision on a 30 second tv commercial sponsored by the Natural Gas Alliance. Get out and do some research. This is such a big deal for America’s economy and our environment. If fracking is for the public good, then a public health study of the effects of fracking is exactly what the doctor ordered.
FULL DISCLOSURE: I must admit that I was originally in favor of fracking in certain areas and more importantly, in favor of natural gas as a “transition fuel” until renewable sources were cost competitive. I saw the economic benefits and job creation associated with fracking as outweighing the environmental degradation. Since then I have changed my opinion. I have to ask myself, why are we taking a bunt when we could be swinging for the fences in terms of renewable energy technology. Natural gas will still play a large role in America’s future – after all, we need a diversified energy portfolio. But now I see the economic benefits of renewable energy technology being even more important to our economy. Instead of risking potential poisoning to our fresh water supplies and still being dependent on the spot price of a commodity, our renewable energy future will protect our most vital resources and at the same time create a demand for good, high-paying jobs in science, engineering, and operations and maintenance of distributed, renewable energy systems.
Few things effect international relations more than the balance of power. Whether it be water or oil, the first societies to harness the potential of these commodities enjoy the creation of wealth and goods such as cropland in the case of water and industry in the case of oil. Eventually each sector is going to grow and the demand for the input will outgrow the supply, leading to price hikes that make that commodity even more desired. Problems exist when the source of these commodities are located outside of that nations borders. The balance of power is then transferred from the first-mover user to the upstream producer of that commodity. This is where it gets interesting. The choice then becomes whether to use soft power (such as diplomacy, aid, or economic development) to gain influence over the producer or hard power (military action, sanctions) to force them to act. Only by reducing demand for the commodity in question can the consumer nation wrestle back control from the producer nation. This could include finding a substitute, developing new technology, or learning to use that resource more efficiently. In the case of water, there is no substitute. Downstream nations must learn to make the most out of every drop that they have. This includes studying what crops to plant domestically and supplementing others through trade. New technology such as desalination plants could also help secure access to clean water, but it will take an economic toll. In the case of oil, there are several substitutes such as biofuel, natural gas, and plug-in hybrid cars, but while we further explore these technologies, squeezing the most out of every drop seems to make the most financial sense.
“Many of the wars this century were about oil, but those of the next century will be over water.”
Ismail Serageldin Chairman of the World Commission for Water in the 21st Century and senior World Bank official
While most of my writing thus far has been focused on sustainability and the economy, I recently read a great book by Steven Soloman called Water: The Epic Struggle for Wealth, Power, and Civilization that shows that the scarcity of clean, potable, freshwater is going to be one of the greatest challenges of the 21st century and promises to redefine international relations between the Haves and the Have-Nots. Historically there has been a link between access to freshwater and population growth, but over the past hundred years the overuse and poor management of this vital resource has left many natural aquifers in very bad condition. The heart of the water epidemic is the fact every person, animal, and plant requires water to live. Up until now, there has been enough freshwater to meet the needs of the population. However, new evidence shows that humans may now be using water faster than it can be replenished into the aquifers. The alarming dark side of this humanitarian divide include over 1.1 billion people – almost one-fifth of all humanity – who lack access to at least a gallon per day of safe water to drink. Some 2.6 billion – two out of every five people on Earth – are sanitary Have-Nots lacking the additional five gallons needed daily for rudimentary sanitation and hygiene. Far few still achieve the minimum threshold of 13 gallons per day for basic domestic health and well-being, including water for bathing and cooking. There are also over 3.3 million deaths every year from water-related heath problems such as diarrhea, dysentery, malaria, dengue fever, schistosomiasis, and cholera. Not surprisingly, lack of freshwater runs hand in hand with insufficient food production and malnutrition since agriculture is such a water intense industry. Persistent water shortages threaten governments both on the domestic front from social unrest as well as internationally through territory disputes, military threats, and trade patterns.
Oil can be replaced by a growing number of alternatives including renewable energy but there is no alternative to water. In your quest for sustainable living, please remember that water is the foundation of life and for the first time in history, in danger of leaving some inhabited regions dry. This is a problem on a massive scale, but it can also be navigated effectively by understanding the issue and the reasons for it. Hopefully the existential threat of water scarcity is enough to force nations into dialogue over their resources as well as how populations can be more efficient.
 Solomon, Steven. Water: The Epic Struggle for Wealth, Power, and Civilization. New York: Harper Perennial, 2011. Print. p. 370.