Block’s Indicator of Sustainable Growth

by Ray Block

It is far too easy to be a professional global warming sceptic, particularly if you are paid to be, or want the fashionable exposure and publicity, which goes with the ranters of denial.

But it takes much greater discipline to accept that with global population expected to rise to 9.2 billion by 2050, without carbon abatement schemes in operation, planet earth will be in serious crisis, keeps the rest of us committed.

I remember back to the days when putting fluoride in public water systems attracted a brigade of sceptics, but you won’t find any young person complaining about how superior their dental health is compared to their parents.

With the encouraging belief that 2009 will finally see United States, the lone outsider among the developed industrial countries still outside the Kyoto club finally signing up to the benefits of an emission trading system, rapid progress will eventuate.

There is no doubt that an emissions trading scheme will lead to a rise in global inflation, as re-priced energy will cost a great deal more. But it will also lead to an unparalleled acceleration in research and development on renewable energy and clean coal technology. In turn, it will attract the leaders of the BRIC countries (Brazil, Russia, India and China) to eventually join the carbon abatement countries.

The European Union (EU) emissions trading scheme (ETS) Phase 1 January 2005- December 2007 based on a cap and trade led to an oversupply of units. The cap had been set too high, which led to an eventual collapse in the price of traded CO2. As a result, the commercial incentive to reduce emissions was largely destroyed.

The mistakes of Phase 1 based on giving away free credits to the heaviest polluters have been corrected in EU Phase 2 (January 2008-December 2012). The cap has been set at a level 6.3 per cent less than the verified emissions in 2005-06.

The EU planners expect that CO2 prices during Phase 2 will trade between Euros 20-30 per tonne rising steadily thereafter. The EU planners hope that over Phase 2, there will be a reduction in greenhouse (GHG) emissions by 11.4 per cent by 2010 from the 1990 base year. This would be making good progress towards the EU target of reducing emissions of 20 per cent by 2020.

With Australia also joining the Kyoto club with a cap and trade emissions trading scheme in 2010, nearly one half of the 50 states in the US have similarly ambitious plans, which have already been passed into legislation. All of the US states’ schemes are fashioned on the Californian model, initiated by Governor Arnold Schwarzenegger in 2005-07. These include a EU style cap and trade model with commencement of the scheme by 2012, and reductions in greenhouse gases (GHG) to reach 1990 levels by 2020.

In real terms, this means reducing GHGs 30 per cent from business –as-usual emission levels projected for 2020, or approximately 10 per cent from today’s levels.

The most dramatic element of the Californian plans affect transportation fuels, which are responsible for 41 per cent of the state’s GHG. California has more than 24 million registered motor vehicles. The intention is to replace 20 per cent of on-road gasoline consumption with lower-carbon fuels, the equivalent of taking 3 million cars off the road. The size of California’s renewable fuels market would more than triple during this time, and the state would become home to more than 7 million alternative fuel or hybrid vehicles.

It will be up to the market to decide whether to expand ethanol production, grow the market for hybrid and electric cars, hydrogen or other fuels to achieve the government standard, or alternatively go for all these projects.

The green energy gold rush, as it has been called, is the rush of R&D to take advantage of demand from the new energy trading systems. The United Nations Environment Program reported on July1 2008 that global investment in renewable energy rose 60 per cent in 2007 to a new level of $148 billion. This compared with the 2006 total of $92.6 billion spent on clean energy projects. Wind power attracted the most capital at $50.2 billion, compared to $28.6 billion in solar energy, and only $2.1 billion in the bio-fuel sector. Solar power investment has increased annually at the rate of 254 per cent since 2004.

Most of the clean energy investment has been in Europe and United States, with Brazil, India and China reporting clean energy projects in 2007 of $26 billion, up 14 times new renewable investment of $1.8 billion in 2004. China now has the largest installed capacity of solar power in the world.

Investment in 2007 is only the tip of the expected R&D volume in green gold renewable energy projects, with the United Nations agency estimating investment rising to $450 billion in 2012 and $600 billion in 2020.

Of the new investment, my favourite pick is new advancements in solar thermal electric technology (STE), also known as CSP, or concentrating solar power. Solar thermal electric options are being used experimentally not only in peak power, but more importantly in base load power as well, to a point that eventually it could replace most fossil fuel electricity generation.

David Mills and Robert Morgan in Renewable Energy World (July 3 2008) report that STE options are dropping in price and some companies are introducing thermal storage to match power demand. With thermal storage much cheaper than electrical, mechanical or hydrogen storage, solar electricity will be predominantly in STE with thermal storage, rather than photovoltaic solar electricity with electric or mechanical storage.

carbon emissions, global warming, greenhouse gases