Block’s Indicator of Sustainable Growth

by Ray Block

There are three energy and climate bill currently before the US Senate. These are:

• The American Power Act.

• The American Clean Energy Leadership Act.

• Lugar Practical Energy and Climate Plan.

The first of these-  the American Power Act proposed by Senators Kerry and Lieberman, which is the Senate version of the House’s Waxman- Markey Bill passed last year would mandate a cap and trade system and require a 17 per cent reduction in greenhouse gases from 2005 levels by 2020.

The second bill emerged from the Senate Committee on Energy and Natural Resources in June 2009, sponsored jointly by Democrat chairman Jeff Bingaman and Ranking Republican Lisa Markowski is a bipartisan measure designed to accelerate clean energy technologies in the US, including clean energy project financing, a renewable electricity standard, and a robust and secure national electricity transmission highway.

The bill which is yet to go to the floor of the Senate would also require increased energy efficiency in buildings.

The third measure, Lugar Practical Energy and Climate Plan S 3464 by Republicans Senators Richard Lugar and Lindsay Graham is a “possible bipartisan framework for making progress on energy driven national security, economic, and environmental concerns.”

The Plan would reduce by over 40 per cent the need for foreign oil; cut energy use by 11 per cent; cut greenhouse gas emissions by more than 20 per cent over “business as usual” by 2030. This climate savings trajectory meets nearly half of President Obama’s 2020 climate goal.

Barack Obama’s (June 15 2010) powerful speech from the Oval Office to the American people, at a time when the BP oil spill disaster in the Gulf is a blow to the American psyche deliberately made no mention of the Kerry-Lieberman bill.

The problem is that the Republicans won’t swallow the  carbon cap and trade  measure.. Democrats would like it,, but they can’t secure the support of 60 Senators for passing such a requirement. But in a design to secure wavering Republican support for some meaningful legislation, Obama mentioned the other two proposals before the Senate.

Obama said in part: “ Last year, the House of Representatives passed a strong and comprehensive energy and climate bill- a bill that finally makes clean energy the profitable kind of energy for America’s businesses. Now, there are costs associated with this transition. And there are some who believe that we can’t afford not to change how we produce and use energy- because the long term costs to our economy, our national security, and our environment are far greater.”

“ So, I’m happy to look at other ideas and approaches from either party – as long as they seriously tackle our addiction to fossil fuels. Some have suggested raising efficiency standards in our buildings like we did in our cars and trucks. Some believe we should set standards to ensure that more of our electricity comes from wind and solar power. Others wonder why the energy industry only spends a fraction of what the high tech industry does on research and development- and want to rapidly boost our investments in such research and development.”

“All of these approaches have merit, and deserve a fair hearing in the months ahead. But the one approach I will not accept is inaction.”

The excellent  online newsletter on Congress, Politico.com (June 17 2010), said that the Senate Democrats held a special caucus meeting on the three bills. But there was no consensus, on which bill was likely to gather sufficient support for a bipartisan energy and climate bill could emerge on the floor of the Senate,  before the August recess. The November elections is expected to hand ccntrol of both Huses back to the Republicans, so time is short. Another caucus meeting is tentatively scheduled for next week.

The Democrat Majority would like to get through the floor of the Senate a climate and energy bill that puts a price on carbon, but they lack the numbers to execute such a plan.

What is likely to happen in a consensus measure, is one which  cobbles together pieces from all three bills. No cap and trade for the US economy as a whole,. But possibly some measure which includes  a mandated reuirement for power plants to use less hydrocarbons and more renewables. This would be accompanied by large tax benefits for the energy utilities to dramatically increase their renewable energy facilities in wind and solar power.Also a ban on new coal fired power plants. That would be a big advance to the bits and pieces the US has now.

After all, seven of the largest electric utilities- AES, Duke Energy, Exelon, NextEra Energy, NRG, PG&E, PNM Resources are members of the US Climate Action Partnership, which says “we are committed to a pathway that will slow, stop and reverse the growth in US emissions, while expanding the US economy.”

Other large greenhouse gas polluting companies in the Climat Action  group  include DuPont, Dow Chemical, Alcoa, Shell Oil, Rio Tinto, General Motors, Ford and Chrysler, which share the same passion with some leading environmental organisations, who are also members of the partnership.

by Ray Block

When China paraded its energy efficiency qualifications at the Copenhagen climate change conference, many observers were cynical, believing that Chinese statistics were regularly fudged.

Even when McKinsey consultants on assignment in China regularly reported that the Chinese were junking obsolete energy intensive plant and equipment and replacing them with energy efficient, low carbon equipment, the too smart western observers refused to believe them.

Xiong Yan, chairman of the China Beijing Environment Exchange and China  Beijing Equity Exchange at the Eight Transnational Corporations China Forum (China.org.cn March 2 2010) said that China’s decision to reduce the intensity of carbon dioxide emissions per unit of GDP by 40 to 45 per cent by 2010, compared with the levels of 2005, will require changes to the law and policy, and cause improvement of the development of technology.

“It will transform the structures of economy, industry and energy, including the area of renewable energy, energy efficient, forest carbon sinks, low carbon transportation and pattern of consumption,” Xiong said. The Chinese energy efficiency drive is on top of a “reduction of carbon emissions per unit of GDP by 47 per cent from 1990 to 2005, and I believe it is practicable to achieve its goal for 2020.”

Chinese Premier Wen Jinbao, in addressing a State Council meeting of conserving energy and cutting emissions in Beijing on May 5 2010, called for more efforts to cut emissions and conserve energy to meet the country’s targets set by the 11th Five Year Plan, (China Daily china.org.cn).

New targets to shut down outdated 10GW capacity of small coal-power plants, 25 million tonnes of small iron smelting, 6 million tonnes of steel production, 50 million tonnes of cement, 330,000 tonnes of aluminum, 6 million containers of glass sheets and 530,000 tonnes of paper production within this year.

All these closures are being achieved by administrative measures, with the “new targets distributed to local governments and enterprises by the end of May. The enterprises involved are expected to be closed down by the end of September. Local officials and executives of enterprises will be taken to task if their specific energy efficiency targets are not met by the end of the year.”

The environmental costs in the transformation to a fast growth economy have been very high, resulting in unacceptable levels of atmospheric pollution, and in water pollution.

by Ray Block

Having won the fight over national health insurance, followed up by financial reform bills now in the conference stage to be reconciled between the House and Senate, to achieve the trifecta with a climate and energy act in 2010 would be a tremendous achievement for President Obama and the Democratic Party.

Every step of the way to legislative reform in the US Congress has been bitterly fought over, with the Republicans fighting rear guard action much in the way of military campaigns, with few defecting to the other side.

There is still a long way to go before the climate and energy bills become law, but some headway is being made. Here are some road signs:

* Bloomberg (May 28 2010) reports that China will likely set up a domestic market for trading carbon emissions by 2014. Polluting companies would have “half mandatory” targets for their greenhouse gases. Feng Shengbo, deputy director of the China Clean Development Mechanism Management Centre said this in an interview.

The market would be run by trade associations overseen by the government. “From the government point of view, an absolute reduction is not realistic for China at the current stage.” Feng said that he didn’t think the targets would be “very hard.”

* The E&E group which publishes a number of excellent newsletters on climate and energy policy issues reported on May 28 2010 that Senator Lindsay Graham, leader of the moderate faction of the Senate Republicans, said that “we do need to price carbon to make nuclear power and the wind and solar and some alternative technologies economically viable.”

“The electric utility industry is most in need of a market signal for pricing greenhouse gases, while other major industries could be left out of a new US carbon market, especially if it means finding enough votes to pass a bill in the Senate.”

The Greenwire unit of the E&E publishing group says “Graham maybe on to something.”

It went on to say that “Beyond Graham, several other Senate Republicans seen as critical for passing a climate bill have also expressed an interest in a less sweeping plan for controlling greenhouse gases including Senators Judd Gregg of New Hampshire, Lamar Alexander of Tennessee, George Voinovich of Ohio and Richard Lugar of Indiana.”

by Ray Block

There is something heroic about the new UK Coalition Government. To have a coalition between political foes is itself heroic. To go one step forward for Prime Minister David Cameron to commit the UK to have carbon emission reductions of 10% over the next 12 months.

This is at a time when many countries have either slowed down their carbon emission cutbacks timetable, or shelved them entirely, until the world economy stabilises. 

And to do this at a time, when the just announced UK Government Budget brought down by Chancellor George Osborne, for cuts of Estg 6.25 billion in the large government deficit will require a 2.5 per cent cut in the annual budget of the Department of Energy and Climate Change (DECC), while the Department of Food, Environment and Rural Affairs (DEFRA) will have a budget cut of 5.5 per cent.

David Cameron, who is a supporter of renewable energy keeps on asserting that despite these cuts, carbon reductions have to be made.

Housed in the Department of Energy and Climate Change (DECC) are the three largest delivery bodies, Nuclear Decommissioning Agency, Carbon Trust and Energy Savings Trust, which will face budget cuts by an average 1 per cent. The Environmental Transformation Fund, which invests in emerging low carbon technologies will see its budget cut by 22 per cent to Estg 120 million.

Business Green, the UK blog, reported that Leonnie Greene of the Renewable Energy Association is saying that producers of biomass systems, ground source heat pumps and other renewable heat technologies now urgently needed clarity on when the proposed Renewable Heat Incentive scheme will be introduced.

by Ray Block

The Financial Times energy source blog (May 16 2010) reports that Germany, with the largest Solar PV installations in the world, is about to reduce the gross feed in tariff subsidy on solar rooftop installations by 16 per cent.

The cut in feed-in-tariff incentives, along with an 11 per cent reduction in incentives for solar installations on conversion sites, and the scrapping of support for solar installations on agricultural land will come into force from July 1 2010. Predictably, shares in some of the leading solar companies have fallen.

PV-tech.org in a background note reported on April 16 2010 that feed-in-tariff laws place an obligation on energy companies to purchase electricity from renewable sources at a premium price. In Germany, the national gross feed-in-tariff provides access to the grid at a set price per kWh and is guaranteed for 20 years. This makes solar PV and other renewable energy investments secure for producers, investors and suppliers.

The German Government began offering incentives for renewable electricity generation with the introduction of the Electricity Feed Act. The scheme was enhanced with the adoption of the EEG in 2000, leading to a nine fold increase in solar installations. A more updated and refined FiT became law, with an amended EEG in 2004. The new law committed Germany to increasing electricity supplied by renewable energy sources to 12.5 per cent by 2010, and to at least 20 per cent by 2020.

Angela Merkel’s government in May 2010 said that the reductions of solar subsidies were necessary, because panel prices had fallen by as much as 40 per cent, causing overcapacity of silicon panels on the German market. The FiT rules give solar energy producers an extra 8 euro cents for each kilowatt hour generated when they use more than 30 per cent of the total produced.

Bank of America Merrill Lynch says that with “solar prices around E50/MWh in Europe currently, solar is costing consumers around E60 billion more than they otherwise would have paid for electricity. German households are paying E130 annual solar subsidies and rising rapidly. We fear an increasing backlash against overly generous subsidies.”

With all Eurozone countries warned to reduce their sovereign debt and government deficits, there will be a sharp reduction in FiT subsidies. Early in 2010, France cut its solar subsidies. Italy is next on the list, and the other high subsidy countries will follow suit.