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The Fog of Protest: The Promotion and Censorship of “Under the Dome”

This article was also published on The Energy Collective.

Less than a week after People’s Daily Online, the flagship newspaper of the Communist Party of China, released the air pollution documentary, Under the Dome, the government took steps to curtail the buzz. A leaked document from the Central Propaganda Department instructed media outlets to, “absolutely discontinue coverage of the documentary.” By Friday, the documentary was taken down from all Chinese websites. By that time, it had already been viewed by between 200 to 300 million people, more than half of China’s Internet users.

Created and financed by the former CCTV reporter, Chai Jing, Under the Dome has been compared to An Inconvenient Truth in its environmental content and format. The film features Chai Jing delivering a lecture from a stage with the aid of recorded interviews, graphs, educational cartoons, and short, investigative-style news stories in which she travels to sites in China and abroad, exploring the causes of China’s pollution and the solutions that other countries have found to their own pollution problems.

The documentary opens with Chai Jing telling her audience that concern about her unborn daughter’s illness motivated her interest China’s pollution. She poses three questions—what is pollution, where does it come from, and what can be done about it? The documentary takes shape around her investigation of these questions, and the answers that she finds. In telling her story about the origins of China’s pollution, Chai Jing would have had to tailor her message in order to gain some form of official sanction and ensure its release on People’s Daily Online. Remarkably, the film is able to maintain its integrity through the process. Chai Jing has managed to create a film that deftly pushes the boundaries of permitted protest and, despite its shortcomings, still emerges as a trenchant criticism of her society’s failures.

What is pollution?

For the purposes of her documentary, Chai Jing defines pollution as PM 2.5, or air pollution particles with a size of 2.5 microns or less that originate from a number of sources—fires, cars, coal dust, cooking oil. Exposure to PM 2.5 causes respiratory ailments, and increases the severity of asthma and bronchitis. It is linked to higher fatalities from lung cancer and heart disease. Due to the small size of the particles, some particulates are able to pass through the blood tissue and into the lungs, altering the balance of the human system in ways not understood or even studied medial science. Chai Jing has taken some criticism for implying that her daughter’s tumor was the result of pollution when a direct link cannot be proven. This criticism misses the mark. Beyond the chronic cough and irritated eyes that afflict so many Chinese urban residents, Chai Jing is absolutely right to raise the question of how else the pollution may be harming her family.

In 2008 the U.S. Embassy in Beijing placed a pollution monitor on its roof and released the results of the measurements through a mobile application. For the first time, reliable data on urban air quality was available to the public, and almost overnight, air pollution became a part of the consciousness of the urban middle class.

In asking, “What is pollution?” Chai Jing shares how her own investigation forced her to hold up a mirror to her own ignorance. Before she began to think deeply about the question, she thought of and reported on pollution as a problem that afflicted poorer satellite regions. She believed that urban air pollution was a more recent problem. “Isn’t it,” she asks her audience, “just in the last few years that we started hearing about air pollution?”

But as she looked, she realized that the data showed China’s pollution to be a long-standing problem. She gained access to internal statistics on links between air pollution and the high rates of lung cancer as far back as the mid-seventies contacted NASA and received satellite photographs of the north of China, showing heavy coal emissions as early as 2000, and extrapolated the PM 2.5 levels, not available until 2008, from earlier, less refined pollution measurements. Showing a picture of the Beijing airport in 2004, in which a worker sits in the foreground and behind him the ghostly outline of plane reveals itself through thick haze, Chai Jing tells of her shock in seeing this picture in 2014 and realizing, in hindsight, how obvious the pollution was, and yet she remained unaware.

Looking at the smog-shrouded picture that Chai Jing shows on the screen, one is hard pressed to credit her ignorance. I lived in Beijing in 2004 in a near-constant state of shock at what to me was not just the worst air pollution I had ever seen, but the worst I could imagine. The sense of unease caused by the pollution itself was heightened by what I interpreted as an equally pervasive phenomena of its denial, as through the particles in the air were not only choking out the oxygen, but reality itself. It did not occur to me then that what I was seeing was as much ignorance as denial. How, after all, could a whole society be ignorant of something as public, visible, and universal as smog?

The answer is as frightening as it is simple, or perhaps so frightening because it is so simple. “Look at the headlines at the time.” Chai says to her audience, before flashing on the screen a headline from 2004 that says, “Beijing airport closed due to fog.” But Chai has already shown that that government data itself clearly indicated that the north of China had had a deadly problem for decades. Chai does not accuse the government of lying to the public, nor does she have to. She simply presents, without much comment, that data that shows that it did. Her commentary focuses on her personal shortcomings; her surprise at her own naiveté, her shame at her professional failures as an investigative journalist for having missed the story. Her presentation is logical, innocent, and so sincere that one can almost see how People’s Daily, when it signed off on the documentary, might have missed just exactly what it was that it was about to unleash.

Where does it come from?

But after cracking open the ground, Chai steps back from the brink as she moves on to discuss the sources of pollution. Whereas the first section of her documentary had implications beyond her words, in the second section seems deliberately to cull the facts so as to limit the implications.

Take, for example, her decision to stick with PM 2.5 as a definition for pollution, a choice that precludes much discussion of climate change. Chai Jing’s focus is proximate causes of local health problems. Carbon dioxide’s impacts on local health are indirect, but climate change directly influences the negative effects of PM 2.5 emissions, as warmer weather increasing ozone formation from nitrogen dioxide emissions at the ground level. Even if Chai Jing had wanted to focus exclusively on health, climate change could have had a place. More significantly, the decision to largely elide the question of climate change allows her to focus on surface-level regulatory failures as a cause of pollution, rather than having to examine the deeper question of the structure of the energy economy and development strategy.

It may have been a tactical choice. According to the BBC, the documentary contained a section that highlighted the unsustainable trajectory of China’s development model, but that footage was cut from the final version. Some of the vestiges of this critique remain, if blunted. In discussing the number of cars on the road and their devastating consequences, Chai Jing highlights that China is just at the beginning stages of its car ownership. In discussing the consequences of China’s rapid development, she points out that there are many other countries still developing and at risk of using coal for their development trajectory. She calls out China’s energy use as wasteful in that is used to produce the raw materials that are then used to create urban developments in excess of existing demand. These points are raised, but often feel like dead ends. There is little follow through on their implications.

The thrust and sustained force of her criticism falls on the high amount of coal use, the lack desulfurization and vapor control technologies, and the comparatively unprocessed, and therefore dirty state of coal and oil when it is burned. Some of these shortcomings are a question of low regulatory standards, others a question of lack of enforcement of existing laws.

The simple reason for this is corruption, though Chai Jing by and large does not call it out as such. She focuses instead on historical factors that resulted in the oil companies having too many seats on the committee that sets the standards for fuel. She is shown interviewing officials who claim that the Ministry of Environmental Protection does not have expertise to set the fuel standards itself; therefore, it needs the help of industry. This dynamic is specific not just to China. The corruption of standards to protect public health in favor of industry would sound familiar to anyone familiar with the negotiated rulemaking process in United States. Still, the film holds up the public commenting process in the United States and Europe as examples for Chinese regulators to follow. And while there is no doubt that the United States and Europe have better outcomes than China for the greater transparency of their processes process, the process is often imperfect, and the public often remains unprotected. It is hard to discuss these drawbacks without opening a discussion about influence peddling and corruption. But that discussion, except in the case of a cursory mention of Chinese oil monopolies, a target at which the Chinese government has already publicly taken aim, is largely off limits in this documentary.

Some Chinese “netizens” have written off Under the Dome as a piece of propaganda. This charge could seem bewildering given the direct nature of some of the film’s criticism of the Chinese governance system, not to mention the fact that it has now been fully censored on the Chinese Internet. The apparent contradiction highlights the peculiar nature of Chinese protest and the balancing act that activists must carry out in order tailor their message to government priorities enough to have it heard, while still managing to say something that is strong enough to ignite public opinion and have some influence on what is permitted and what is proscribed. This is a different form of a tension that would be familiar to any activist, regardless of their country. How much can public opinion be pushed without causing a backlash? The different dimension to this in China is that the government is the direct arbiter of public opinion, and so the government’s opinion must be minded.

But for this reason, the government’s limited thinking on energy policy is on display in Under the Dome in a way that, at times, seems unsavory. This is never clearer that in the section on ‘clean energy’ recommendations, which plays almost like an infomercial for natural gas, or a hit piece on the Chinese oil monopolies. With triumphant, upbeat music playing in the background, Chai shows charts and interviews all making the point that China’s oil and natural gas industry lag behind the rest of the world, that innovation is needed, and that that innovation is being blocked by China’s oil monopolies.

The United States’ technology-driven adventure in hydraulically fractured gas and oil shale has, unfortunately, has inspired a lot of hand-wringing in countries all over the world who are wondering if they can or should be doing the same. China is no exception. It sees natural gas development as a primary conduit for reducing its massive coal consumption. While American companies are now helping China to develop their shale gas reserves, exploitation of natural gas in China has been thwarted by inability of Chinese energy majors to master the technology. There is no question that Under the Dome sells this narrative in a slick package. This is a pity because shale oil and gas development are a folly for China. This is the case first because China does not have the same unconventional shale resources of the United States to merit the investment, and second because unconventional resource development is water intensive and China does not have water, and third because transitioning to natural gas is a half-measure in achieving climate change goals. Using gas as a way to get off of coal locks in long-term investments in carbon dioxide emitting fossil fuel power generation well beyond the point when they should be dramatically reduced or entirely eliminated. The United States had made this mistake and now China, in using the United States as a development model, is attempting to repeat it.

This theme is also apparent when Chai Jing discusses fuel economy standards and emissions controls for vehicles. In discussing a better model for China, she heads to Los Angeles where, she points out, car ownership has increased three-fold in since the fifties, but pollution has fallen by sixty-five percent. But cleaner is not clean. According to the American Lung Association, Los Angeles has the worst smog in the United States, routinely achieving ozone levels that are harmful to human health. It has no place as a model in a documentary that focuses on clean air. That it is held up as a paragon certainly serves to underline how dire the air quality situation in China is, but it also underscores the lack of an ambitious or innovative plan for fixing it. But it should come come as no surprise that walking cities are not on the government’s agenda. As with the natural gas industry, the government sees the automotive industry as a key driver for growth in China, and it will need domestic markets in order to grow.

These choices likely indicate more about Chai Jing’s constraints than her own personal preferences. Those remain unknowable, obscured behind the official government line that in some parts of the documentary she is compelled to toe. But it does give an indication of China’s current development trajectory, and what comes through is incremental. These incremental changes will make China cleaner, but it will not make it clean. Moving away from coal can cut carbon dioxide emissions, but it will not be enough to slow dangerous climate change. Emissions standards on cars will make them cleaner, but it they will not stop traffic jams in cities, nor will they stop harming human health until they are fully electrified and backed by a clean grid.

Better environmental enforcement and strict use of end-of-pipe emissions controls are good things, but they should be used only in the absence of better options, not to make terrible technologies into mediocre ones. China’s goals of mitigating climate change and cleaning up its air would be better met through structural, rather than incremental change. Rather than follow the United States, China should acknowledge that its transportation and energy infrastructure follow an outmoded paradigm: a twentieth century development model that is ill-suited to the twenty-first century in which the China is emerging as an economic and political superpower.

What can be done?

Pollution is a difficult problem to solve, less from a technical standpoint then from a societal one. Alternatives to polluting always exist, but their implementations can alter the existing order of society and stir up its politics, power centers, and prejudices. Documentarians taking on pollution problems are faced with a quandary at the end of their films as to how to offer hope and actionable recommendations to the complex problems they have just spent an hour and a half illuminating. Within this constraint, the suggested remediation can seem unequal to the problem, as it did when Al Gore suggested to his audiences that they change their light bulbs and drive more efficient cars to solve climate change.

While on the surface Under the Dome’s solutions may seem also absurdly simple, in the context of Chinese society, they are anything but. Faced with a widespread lack of enforcement from government, Chai Jing asks her viewers to take matters into their own hands by either directly confronting non-complying business owners, or by dialing the Ministry of Environmental Protection’s hotline for violations if this fails.

The film shows Chai Jing modeling this behavior by walking into a building site were construction debris lies in an exposed heap—a major source of pollution in China—and asks the site manager to cover the debris as regulations require. Viewers are shown workers on the site covering the pile in short order. Chai Jing has won. She tells her audience, “It didn’t take more than five minutes to achieve this result.” In another intervention, she dials the Ministry of Environmental Protection’s hotline to report a restaurant that didn’t have a proper ventilation system installed the kitchen, and then again for gas station that does not have proper vapor controls on its gas pump.

It is hard to watch this video without wondering if the construction site manager or the Ministry of Environmental protection would have responded so quickly if Chai Jing were not a well-known television personality or had turned up without a camera crew. But Chai Jing too appears to be aware of her position. Recounting that the officials from the Ministry of Environmental protection told her that enforcement will respond one hundred percent of the time when the hotline is dialed, she wonders aloud to her audience, “Will they always come? I don’t know, but we can try.”

Chai Jing notes also that upon leaving the construction site where she successfully staged her intervention, a worker pulled her aside and said that the manager was afraid of her because she had a cell phone, and he was afraid that she might be filming. In telling this part of her story, she cannily conveys to her audience a tip that any good grassroots organizer would give to their trainees—record your actions; create a record both of the injustice and also of how you are treated while attempting to intervene.

This hotline, after all, is the number of the same Ministry of Environmental Protection that the documentary squarely blames for failing to enforce the law. But this, of course, is part of the intent of the action—first to remind the offenders that the citizenry knows that they are in violation of the law, and then to remind the enforcers of the same thing. In the one week that Under the Dome was available in China, the previously obscure hotline for the Ministry of Environmental Protection was advertised to almost 300 million viewers. Even if only ten percent of those viewers ever pick up the phone, the Ministry of Environment will have a very busy year. Why would the government publicize this message encouraging such direct action, even for one week? The Chinese government has long kept tight rein on environmental movements in China for their tendency to spill over into broader, democratic demands.

Elements of the central government are serious about environmental monitoring and reporting, but contrary to popular Western perception about the strength and centrality of the Chinese government, these changes are difficult to implement across the labyrinthine Chinese bureaucratic apparatus. In the past, the Chinese government has sanctioned citizen policing to enforce order in areas of the country or economy where it has weak control, sometimes to tragic effect. Popular outrage can be helpful in accomplishing autocratic ends, but it is also difficult to control. And so a week after Under the Dome enjoyed a government supported released, the experiment ended. The shutdown came several hundred million views too late. Chai Jing’s work has paid off—the box is now closed, but the genie has escaped already.

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Atlantic Oil is a Bad Investment

Last week, the Obama Administration released its 5-year offshore drilling plan, which included a proposal to open up drilling along the South and Mid-Atlantic Coast. The American Petroleum Institute says that drilling in the Atlantic Outer Continental Shelf (OCS) could bring $US 195 billion in investment between 2017 and 2035. Environmental groups have decried the announcement, saying it is out of sync with the President’s environmental goals in that offshore drilling opens the Atlantic coast to the unacceptable risk of uncontainable oil spills and is incompatible with his goals of halting dangerous climate change.

There is no question that prospecting and drilling disrupts wildlife. Further, most of the oil and gas in the Atlantic OCS is in deep and ultra deep water—higher risk prospects by every measure than their conventional, shallower counterparts. But reasonable people can disagree about the risks of a catastrophic spill and the difficulty of containing it.

The climate impacts, by contrast, are incontrovertible, as are the risks to investors who choose to pour still more money into expensive oil and gas extraction projects. The reasons are straightforward—oil companies already have more than enough oil and gas reserves on their books to destabilize the climate. Any further investment in fossil fuel development is just another log on a fire that is already threatening life as we know it. In order to keep the world from breaking the 2 degree Celsius limit, the non-profit organization the Carbon Tracker Initiative estimates that the world can burn enough oil to release 360 gigatons of carbon dioxide—about 760 billion barrels of oil—and then it needs to stop.

Seven hundred and sixty billion barrels of oil is less than the total amount of reserves that companies have on their books already. This means that even without more drilling, some companies are going to be left holding the bag, likely the ones with the highest cost of production. As it is, pursuit of expensive resources has already put the world into oversupply, dropping oil prices to $US 50 barrel. These low prices are expected to continue through 2015. It is impossible to know what will happen beyond that horizon, but given the dynamics of climate change, countries with a long-term view will be changing their infrastructure to limit fossil fuel demand, not increase it.

But the oil and gas industry persists in its inverted view of the future. When questioned about the wisdom of drilling at such a low price, Erik Milito, the American Petroleum Institute’s Director of Upstream Industry Operations, was quoted by Washington Examiner as saying “The oil and gas industry … is looking at investment windows of 10, 20, 30 years. And we’re looking at these windows based upon the understanding that global demand for oil and gas resources is going to continue to grow.”

It’s not clear that Saudi Arabia holds the same view. Some have questioned why it hasn’t cut production in the price slump, but instead continued to endure low prices. But the answer is simple: because it can. If Saudi Arabia cut production, it would simply be yielding market share to higher cost producers. And why should it? Memo from Saudi Arabia to the arriviste oil powerhouses of the world: “This is what being a major oil producer looks like.”

This is as it should be. It is both economically and environmentally efficient that the lowest price assets sell first and the more expensive fuels stay in the ground. If the world is paying an oil price that reflects the cost of technically complicated projects when it buys its fuel, then it is overpaying. All of the oil in the world that we can safely use is available at a lower price. The Carbon Tracker Initiative has matched the 760 billion barrels of oil budget to a point on the cost curve. The result is that if we were to use our energy resources efficiently—least-cost first—then no oil over a market price of $US 90 a barrel is worth digging for. Paying for oil higher up the cost curve creates an epic deadweight loss to society. The case for environmental efficiency is more straightforward. The infrastructure needed to extract oil is already in place; one doesn’t need to dig up a boreal forest, or put a rig off an untouched coast just to take more oil out of the ground than the world can afford to use anyway.

So how bad a bet is Atlantic OCS oil? Quite bad, it turns out. Using the 2014 update from the Bureau of Ocean and Energy Management for its estimates of economically exploitable oil for the Atlantic, and extracting the data for the South and Mid-Atlantic regions named in the Obama Administration’s plan, it is clear that that only 28% of the oil is exploitable at less than $US 90 dollars a barrel. Further, more than 50% of the production requires a market price of over $US 100 a barrel. A detailed breakout of the price can be seen in the table below.[1]

Table 1. Atlantic OCS Economically Exploitable Resources

Screen Shot 2015-02-03 at 3.03.54 PM

Let the buyer beware. Investors sometimes imagine returns as the function of a neutral market that operates according to economic laws, unbounded by politics and human nature. But of course this is not the case. The profitability of any investment is shaped by the policy environment, which in turn is shaped by the norms of a society. Oil and gas drilling in the Atlantic is unlikely to start until 2021. The current regime may be permissive, but the profitability of Atlantic oil relies on the continued negligence of the future governments of the world. The savvy investor should look at the high oil price needed for Atlantic drilling, consider the high demand that that price implies, and realize that they will only exist in a world where climate change is allowed to continue unabated.

And the Obama Administration should be ashamed of itself. Not only is it sending the wrong signals about fossil fuel development, but also in offering public waters up for oil and gas leases, it is putting public money behind a fossil fueled future. The expansion of American oil and gas development has been matched by the rise is subsides for exploration and drilling—$5.1 billion in 2013, up from $2.6 billion in 2009. The economy of a society is shaped by policy, and this policy is pushing us in the wrong direction.

The economic future of America cannot lie in competing with the Middle East for oil production; it has no comparative advantage there. But the United States has always had an advantage in technology and new systems development. It ought to be pouring resources into clean energy infrastructure. Instead it is creating a policy that will result in the squandering of public and private resources on an investment that carries a high risk of yielding meager to negative financial returns on an end product that endangers the future.

[1] Note that percentage of an exploitable resource is given in terms of oil and gas prices. This is because oil and gas are often found together. These two prices work together, i.e., if the given gas price for an oil price is lower than in the table, a higher oil price will be required for economic exploitation. If the gas price is higher, a lower oil price will be required and vice versa. Gas prices are not discussed in this article, as the Carbon Tracker Initiative has yet to do analysis on price points for stranded gas, though a report is forthcoming later this year. As per the EIA, the Henry Hub gas price for Jan. 30th 2015 was $US 2.88 per MMBTU. 1MMBTU=1 MCF.

This article was also published on The Energy Collective.

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Europe Shouldn’t Feign Weakness When it Comes to International Climate Finance

The COP 20 in Lima is over, having delivered to the world, like so many COPs before it, yet another awkward acronym. The latest for the pile is ‘INDCs’, that’s “Intended Nationally Determined Contributions.” Presumably different from Nationally Determined Contributions of the unintended variety.

By the COP 21 in Paris, countries of the world are to put forward their own plans (“INDCs”) for reducing or slowing the growth of greenhouse gas emissions in future years. While not all targets have been submitted or solidified, indications from major economies—the European Union, China, and the United States—are that commitments will not be enough to keep the world from breaking the two-degree barrier. Cambridge University professor and PAGE climate modeler Chris Hope, estimates that total commitments will give the world just a 1.1 percent chance of staying within two degrees Celsius of warming. The most likely trajectory for the world is still a warming 3.8 degrees Celsius by 2100.

First, a quick refresher about where that level of warming will likely leave us; between 3 and 4 degrees C of warming, the world faces high risk of coastal flooding causing hundreds of millions of climate refugees, Chinese food production will be at significant risk of collapse, Europe could regularly face summer temperatures of 45 degrees C, the Amazon will be in danger of collapse, and there is a reasonable likelihood of triggering the melting of the permafrost.

Chris Hope’s PAGE model estimates that damages will cost $US 19 trillion by 2100 at the current rates of emissions. Given the uncertainties and the scale of the events involved, putting a real number to damages is nearly impossible. But whatever the real number is, it is not small.

It is thus appropriate that at a debriefing on the COP 20 this week held at the Center for European Policy Studies in Brussels, Joss Delbeke, the European Commission’s director general for climate cited ‘climate financing’ as one of the major hurdles to the next year’s Paris negotiations—if ambitions are so low, the need for adaptation money will be high, the means of getting it fraught with difficulty.

The problem with climate financing is the same as it ever was: the bulk of climate financing won’t—can’t—come from public finance. In response to some questions on levels of climate financing from the NGO community, Delbeke acknowledged this reality, further stating that it was member states, not the European Union, that would ultimately be in control of commitments. The European Commission had very little role or jurisdiction in that area.

True, but as it happens, the more critical source of financing, private finance, does, indeed, fall under the Commission’s sphere of influence. The elephant in the room when it comes to private sector climate financing has long been how to generate returns from climate mitigation and adaption projects that have insufficient or no cash flow. Whether the project is a renewable energy project, land remediation, or conservation project, the answer often comes back to carbon markets—the cash flow must be created through a carbon price; a mechanism that monetizes the political will to stop climate change.

The European Emissions Trading Scheme is currently the world’s largest and oldest emissions trading institution, and it is failing. The price is not currently high enough to drive investment in climate change. Granted, all of the climate financing in the world cannot be driven by the European Emissions Trading Scheme, but Europe’s setting a high price would not just set an example for other trading schemes, but would also create an incentive for them to match Europe through harmonization requirements. These things are still a ways off—linking markets and using domestic carbon pricing to drive overseas investment are enormously difficult tasks, fraught with difficulties. But setting a high carbon price is the first step that the world’s flagship ETS is not taking, and it should.

Prices in the EU-ETS currently languish around 7 euro. The European Union has put forward numerous measures to improve the ETS, the first being a back loading scheme temporarily removing 900,000 million EUAs to be withheld from the market between 2019 and 2020. The next stage, a more permanent fix in making the ETS effective is the Market Stability Reserve (MSR). In its current proposed form, the MSR will withhold 12% of the surplus from the market each year as long as the surplus is in excess of 833 million allowances. When the surplus dips below 400 million allowances, then 100 million allowances will be released from the market.

Organizations like Sandbag have done an excellent job underlining the weaknesses of the Market Stability Reserve, not the least of which is that, as it is currently designed, the ETS will remain until well after 2027. There are several obvious ways to strengthen the ETS; the early start of the MSR, the cancelation or continued withholding of back-loaded allowances, and the cancellation of unallocated allowances. There are also less obvious fixes, such as adjustments to the formula used to calculate the size and the trigger points of the MSR which will ensure greater price stability and create better investment signal. There is a reasonable chance that the EU Parliament will pass a proposal for an early start to the MSR.

It will not be enough. London-based consultancy Energy Aspects estimates that even with an early start and continued withholding of back loaded allowances, allowance prices will only reach 10 euro per ton by 2020. This is hardly an amount that will drive emission reductions, let alone private investment.

If the Directorate General for Climate Action feels that its task at the international negotiations will be weighed down by disagreements over climate finance, it should leverage its mandate for the administration and policy development for the EU-ETS to affect the economics of private climate financial markets. In some ways the weakness of the ETS is ironic, given that when the DG Climate Action was established, some groups feared it would protect the the ETS at the expense of other climate policies. While the Directorate General cannot make changes to the ETS without the consent of the Commission and Parliament, it could advance and advocate for the passage of more effective reforms than those that it currently has on offer, which, even if executed in full, will not leave the ETS an effective instrument for driving either emission reductions or pro-climate investment. But a stronger EU-ETS could do both.

Through the EU-ETS the European Union has the currently has infrastructure in place to do more to more than any other region of the world to catalyze international climate finance. But this will mean nothing if it chooses not to use it.

This article was also posted on The Energy Collective.

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Does Europe Really Need an Emissions Performance Standard to Keep from Falling Behind America?

Last month at the European Parliament, the WWF held an event that was titled: “Fighting Coal CO2 Pollution: Is the EU Falling behind the US?” The event was held to discuss the United States’ use of an Emission Performance Standard (EPS) as a part of the climate change regulations that it will be effecting under the Clean Air Act. The event raised the question of whether such a policy could be a helpful compliment to Europe’s climate change policies, particularly its troubled Emissions Trading System (ETS) whose excess permit supply has allowed Europe to return to burning cheap coal.

Where ETS had failed to keep coal from the market, the event’s conveners hoped that an EPS might succeed. After all, in the United States there is no carbon price, but coal-burning fell off a cliff after 2008 in the face of stricter carbon dioxide standards for power plants under the Clean Air Act. Europe, meanwhile, remains irrevocably addicted to coal. Is the United States is doing something right while Europe’s policy has run amok?

Not really. Carbon intensity in the United States currently stands at just above 0.5 tons of carbon dioxide per MWh. Europe’s carbon intensity—in the midst of its coal bacchanalia—is 0.31 tons of carbon dioxide per MWh. That number has actually declined in the past few years even as coal use in Europe has increased, and done so despite the fact that Germany has taken on the order of fifty terawatt hours per year of zero emissions nuclear offline. If Europe instituted an EPS just like the United States has, it would have to increase its carbon intensity by 45% by 2030 in order to meet the target that the United States has set for itself for that year of 0.45 tons of carbon dioxide per MWh.

To which one might say, but of course that’s not what anyone is talking about. Even in the United States, 0.45 tons per MWh is the country average; some states have stronger targets, others weaker.  Europe’s EPS could be selectively applied to coal-offending countries in order to drive down coal consumption. Perhaps. But this is not the way that the EPS has been applied in the United States, where coal burning states, due to the pragmatic realities, have been given the highest per-megawatt hour emissions quotas, whereas states with a cleaner emissions profile have the tightest targets. This speaks to a reality of climate change policy—that countries and governments do what they can, given the barriers that are created by powerful incumbent industries and their influence in governments. But put that aside for a moment and consider that in Europe some of the countries with the highest renewable energy generation percentages also are major coal offenders—namely, Germany.

Would an EPS really fix the problem? In Germany, coal is being burned as a bridge fuel to the fill the power demand while it continues to bring more renewable energy online, and retire its nuclear power plants. That the United States is using gas, not coal, as a bridge fuel is an indication of the comparatively low gas price in the United States, not its comparative virtue with respect to Europe, or the comparative success of its carbon dioxide regulations. Indeed, despite impending regulations on coal in the United States, coal emissions continue to fluctuate with gas prices; in 2013, coal generation increased by 71.6 TWh, an amount greater than the 50 TWh per year increase that European environmental organizations are trying to prevent with the introduction of an EPS.

Rules for the US EPS under the Clean Air Act are not yet finalized. But one of the many options being discussed for their implementation is trading of carbon efficiency between over-performing and underperforming regions. Such a measure would mean that when gas prices increase in the United States, American generators will have plenty of room to continue using coal as a bridge fuel in the same way that Germany is using it now. Indeed, even without trading, with the target as high as 0.45 tons per MWh, There will be room in United States for using coal as a bridge as in the same manner that Europe is now as gas  prices increase.

More dangerous still for the United States, while coal is clearly a bridge in Europe, it may be a long-term strategy for the United States, which, in the absence of the renewable targets that exist in Europe, is already starting to replace its retiring coal-fired power plants with gas plants, rather than building renewable energy. This will lock the United States into a long-term relationship with natural gas that will prevent it from meeting the emission reductions targets required to mitigate climate change. It is true that Europe has a number of new coal-fired power plants coming online, but these are the result of legacy policies, and—with the possible exception of Poland—new plants are very unlikely to be permitted in EU countries in the future. The average age of a coal fired power plant in the United States is 40 years old, in Europe it is 34 years. In both regions, much of the coal fleet will be retired in the next 20-30 years. For both regions, the critical question is what will replace coal. Europe’s use of coal in the mid-term, unlike the United States use of gas, does not hold the danger of massive new investments in long-lived energy technology that is incompatible with a stable climate.

Of course Europe could design an EPS with a target that was so tight, say 0.2 or 0.1 tons of carbon dioxide per MWh, with tight geographical boundaries, no concessions for coal regions, and no trading that would make it harder to burn coal, and drive an accelerated retirement of coal-fired power plants. But if Brussels could pass this without giving concessions to the member states and industrial interests that will lobby against it, one might ask why it couldn’t simply tighten the ETS, or increase its renewable energy targets and get the same effect?

In some ways the focus on the EPS is strange preoccupation with form over function. The political economy and civil society of a region, more than the particular policy levers it chooses, shape the substance of climate policy and the ultimate strength of its outcomes. That there is such debate over coal burning in Europe despite the comparative strength of its climate policies is already an indication that it is a leader in emissions cutting. Coal burning or no, there is no other region of the world where there is such concern both within environmental organizations and the government not just with cutting emissions, but cutting them enough to matter.

This post was also published on The Energy Collective.

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Did The “People’s Climate” March Leave Conservatives on the Sidelines?

“I wish they wouldn’t call it The People’s Climate March.“ I said to a friend in the weeks before taking the bus up to New York City to attend the march. The messaging seemed out of line with the organizers’ stated intentions to include everyone. But my friend insisted that getting conservatives to attend the climate march was more than just a matter of words. The science was there; if people wanted to fuss about words and not believe the science, that wasn’t his problem. But it isn’t simply denial that keeps people from turning out for a demonstration.

Katherine Hayhoe, climate scientist turned political science professor and evangelical Christian, clarified the problem in a recent television interview, “It’s not a scientific issue…The answer has much more to do with who we are as humans, and how we function politically.”

“Would your father attend The People’s Climate March?” I asked him. Both of us have conservative fathers who believe that inaction on climate change is a serious failure of both the Republican and the Democratic leadership. He conceded that his father would not. And nor would mine. But the truth is, demonstrating is uncomfortable for many people, regardless of political affiliation, who perceive it as something that other people do—people more emotional, idealistic, and perhaps less rational than they are. My experience in trying to recruit people to attend the march was that, right out of the gate, the name on the fliers seemed to confirm their biases about who marched and how their values were different.

The march, of course, didn’t have any attendance problems—the crowd of an estimated 311,000 outstripped the organizers’ reach estimates by a factor of two, and it was about six-eight times larger than the previous best-effort in Washington, D.C. only a year and a half ago. A lot of work went into reaching out to labor groups, churches, and organizations that had never before identified climate change as a key issue, and that work was a striking success. But I’m not sure it was necessary to leave conservatives behind in the process.

I was made to revisit my concerns when at the march in New York I looked at the logistical material for the line up at the front of the march, in which participants were encouraged to group by six different affiliations—solutions, front line communities, building the future, a section entitled “we know who is responsible” under which  “anti-corporate campaigns” were encouraged to line up.

Anti-corporate? “Corporations” are not one thing. Renewable energy companies and electric car companies are corporations. Whether the future is full of centralized or distributed, community, or utility owned power, the technology will be developed and delivered by corporations. I do not doubt that powerful incumbents in the fossil fuel industry use their political and economic power to block legislation on climate change. Their behavior is unconscionable, and it is not limited to oil companies. But the government has also participated in the corruption of American democracy, and it is there that conservatives tend to direct their outrage. There were no anti-government campaigns under the “We know who is to blame” section. For a movement that wants to be broad-based, would it not be better to welcome both sides and let them bring their own messages instead of sending unsubtle queues about who the march is really for?

Several days after the march this message came across my twitter feed, “I can think of few ways to marginalize a movement seeking to rally mass support faster than giving Naomi Klein the microphone. #sigh.”

Author and activist Naomi Klein is a board member of 350.org, the most prominent and successful grassroots climate change organization. 350.org is a small group of people that has done tremendous work bringing an awareness of climate change and helping to organize and publicize participatory actions for people all over the world. A brief twitter exchange with the tweet’s author led me the radio interview that had elicited his lament—an hour long segment on Boston’s WBRU that Klein was giving in connection with the march and her new book, “This Changes Everything: Capitalism vs. The Climate.”

When I moved back to the United States seven years ago after having spent many years working on investment in clean energy projects in Asia, one of the stranger things for me to discover as I familiarized myself with the cultural debate around climate change was the accusation made by certain elements of the right wing that climate change was a plot dreamed up by liberals to destroy capitalism. Having worked in a commercial enterprise with the goal of stopping climate change, the two things were unrelated in my mind. The roots of this fear are now more obvious to me even if it remains, in my mind, as unwarranted as ever.

But for Naomi Klein the fear is not unwarranted. On the contrary, she seeks to validate it. The title of her book is a provocation, meant to meet the opposition head on, reclaiming its territory as her own. Yes, she says, capitalism is to blame for climate change, and yes, conservatives were justified in their fears. But these two things, capitalism and climate change, are unequally matched. The climate can be specifically defined, capitalism cannot be; it is an economic system that takes many shapes in different societies, and can be modified or restrained to fit the needs of the future. As with the term ‘corporation’, a blanket condemnation of capitalism is hard to make sense of.

Many of the things that Klein calls for—small, locally owned energy enterprises, government control of dangerous activities, strengthened homeowners rights, and the end of predatory banking, breaking the link between economic growth and resource depletion—are not inimical or intrinsic to capitalism. The same is true for radical deregulation which, in her interview on WBRU, Klein conflates with capitalism. Radical deregulation is a trend that in past thirty years has seized both Democrats and Republicans alike. Not even Adam Smith advocated for it, and it has been criticized by Anat AdamtiDavid Moss, and Simon Johnson respectively of Stanford, Harvard, and MIT Business Schools, to name a few.

Even Klein’s statement that some profits are illegitimate is far from anti-capitalism. The mere existence of markets in a society does not imply that the amoral transactions that constitute them need to rule, unchecked, in its every aspect. On the contrary, it is important for a healthy society to evaluate where markets belong and where they don’t. Different societies will have different lines, but the need to establish a line is in itself uncontroversial. Even Milton Freidman would have balked at selling babies.

Klein demurs when it comes to solutions, saying that she is a journalist diagnosing a problem, and she will leave solutions to others. She is clear that she does not think that communism is the solution, acknowledging that the record of communist societies in dealing with the environment is terrible. In many ways, this acknowledgment negates her thesis. It’s not capitalism vs. the climate; it is destructive human activities vs. the climate. And these destructive activities can be mediated through any number of government systems. However we choose to organize society in order to deal with climate change, it will be some combination of market and non-market activity. Unless, of course, one is advocating full-throated communism, which Klein certainly isn’t.

And so it is not clear to what this language serves, coming from someone on the board of such a prominent climate change activism organization, except to alienate a vital section of the grassroots. This is a pity because there is much in Klein’s message—particularly in her eloquent detailing of the harm that major industrials run amok cause to human and infant health—that is important and underreported. It is a message that would resonate with almost anyone, regardless of political affiliation.

It would be one thing if none of this mattered, but it does matter.

In a column last week, entitled, “Why the [Awesome] Climate March Won’t Change America,” Grist writer David Roberts rightly pointed out that the climate march is hobbled in its ability to effect change because, diverse though it was on the liberal side of the spectrum, the right, by and large, did not turn out.

“[march organizers] would have been over the moon to have more Republicans. They deliberately kept the march’s message broad, avoiding specific policy demands, to allow a wide range of people to participate. I’m not one of the many back-seat drivers who blames the climate haws for the right’s intransigence of the issue. The right is to blame for the right. And right now, the right is unreachable on climate change. But the fact remains that the diversity on display was, broadly speaking, diversity within the left.”

Of course people are to blame for their own actions, but reasonable people can disagree on whether not turning out for the march is blameworthy if one is conservative.  The march’s message might have sounded broad to Robert’s liberal ears, but it wasn’t terribly. Further, not joining the People’s Climate March is not synonymous with climate denial. Roberts says that, “The right is unreachable on climate change,” a characterization that is both inaccurate and dehumanizing.

Roberts confuses the denial and inaction of conservative members of Congress with the broad base of conservative voters, whom he dismisses as a bunch angry and entitled southern white men.

Let’s look at the numbers. The Yale Climate Change Opinion Survey details that of 726 self-identified conservative voters, 52% of them believe that climate change is happening, 26% percent do not, and 22% don’t know. Seventy percent of conservatives believed that the United States should increase the use of renewable energy “immediately”. Forty-two percent of those people believed that that the benefits outweighed the costs of greater government regulations. Two-thirds of respondents believed that America should take action to reduce its fossil fuel use. Only one third of respondents felt that the Republican Party’s position on climate change reflected their own, and a majority believed that their congressional representatives were unresponsive to their views on climate change.

So that doesn’t sound like unreachable on climate at all. It sounds like the Republican Party has a position on climate change that is increasingly untenable, and that there is a disconnect between the desires of the electorate and the actions of the Congress. It is not just a problem with climate change and the Republican Party. A recent Rasmussen poll showed that 53% of Americans believe that neither political party represents them, and the most recent numbers for Gallup’s confidence in  Congress poll show that number to be at a new historic low for the poll’s forty-two year history; seven percent of the public reports having a high degree of confidence in Congress, while two-thirds of the voting public has ‘very little’ or ‘no’ confidence in the Congress. All of this seems to indicate that Americans vote, but are not entirely happy with either options or the results, and that it wrong to categorize the public as a whole in terms of broad swaths of red and blue.

William J. Becker, Executive Director of the President’s Climate Action Project, has already taken Roberts to task for ignoring the data on conservatives. In a column yesterday, Robert’s breezily dismissed Becker’s data, saying he doesn’t trust polling and message testing because data doesn’t represent the way that people will act in the real world. He then goes on to describe how he believes the real word does act by citing the Ph.D. research of Irina Feygina, who…seems to have done a lot of work with polls and message testing. The first line of her Ph.D abstract reads, “Despite extensive evidence of climate change and environmental destruction, polls continue to reveal widespread denial…” It appears some polls and message tests are more equal than others.

That said, of course polling and message testing are limited and are not predictors of political behavior. They are a grain of insight, nothing more. And that is an important insight, if you need polls to get it. I do not have the same, incredulous reaction to these polls as Roberts because, for me, they reflect realities that I see in my personal and work life. But from Robert’s descriptions of how ‘the conservative’ behaves, one gets the impression that his only exposure to conservatives is what he reads in the liberal media; that he is both the purveyor and the product of the very polarization he calls himself “obsessed with.”

I give you this:

Put a conservative in a room with a poll and ask him whether he supports cleaner air. Why of course he does! More efficient energy use? Sure! More solar energy? Yes, please! People like cleaner, more, and better, generally speaking.

Now imagine that conservative in his living room, watching Fox or listening to talk radio. Is he hearing about cleaner air? No, he’s hearing about job-killing regulations, which he hates. Is he hearing about efficiency savings? No, he’s hearing about Big Government coming to take his lightbulbs, and he hates that. Is he hearing about the recent flourishing of solar power? No, he’s hearing about Solyndra, about government boondoggles and giveaways. He hates those.

Would Robert’s dare refer so categorically to any other group but conservatives? And also, did it occur to him that his own reaction towards optimistic polls about conservatives and climate change is not far off from the behavior of ‘the conservative’ that he so grotesquely caricatures?

In the service of his Manichean depiction of America, Roberts shows a map of the United States, color coded red and blue by the straight majority of the districts that voted Democrat or Republican in the 2012 Presidential election.  He contends that liberals exist in what he calls ‘urban archipelagos’ with the rest of the country awash in rural angry-white redness. This picture is radically oversimplified. Even a slightly color coded map shows a more nuanced and accurate picture. This map from the Chicago Sun Times is a good graphical representation of the margins of victory between Republicans and Democratic in congressional districts, making it clear that margins of victory are slim in most states. The geographical divide is also far more nuanced than Roberts would have us believe

There are people who vote for both parties all across the country, and they encounter each other every day in school, as neighbors, and at family gatherings. Contrary to what some pundits in rarefied circles would have us believe, we are not, as Americans, binary-red-and-blue-bots who avert our eyes from The Other on the rare instances that we happen to pass on the sidewalk. Among our ranks are Republican voters who believe in broad access to inexpensive healthcare and strong action on climate change and Democratic voters who believe in fiscal conservatism and second amendment rights. But for both parties, their decisions at the voting booth are restricted in primaries and congressional campaigns run by well-funded and organized groups with a few, narrow priorities. Few individuals are so involved in the political process that they can, or even would consider, participating in picking their political candidate, or even forming a relationship with their already elected official by way of writing, visiting, or demonstrating in order to influence that official to act on certain issues. Just because Republicans—and for that matter Democrats—care about climate change does not mean that it is an issue that they are organized to vote on.

The implication is that there is plenty of room to activate people who care about climate change. This is what 350.org has been and doing well, but it appears to be triaging a critical constituency as a hopeless case.  David Robert’s bombast is extreme, but the risk is that the prejudice behind it, “Forget them, they’re hopeless. They might as well be from Alpha Centauri. Their values are not ours. Their very brains are wired not to care,” is, in fact, endemic to a large section of the environmental movement. Robert’s solution for funders—which appears to mirror the strategy of the grassroots movement—is to fund liberal causes, and build a passionate and active liberal movement. That’s what appeared to be happening at The People’s Climate March. But Robert’s strategy is internally inconsistent, doomed to failure by his own analysis. He himself points out that odds are that conservatives will continue to control the House of Representatives for any timeline that matters to climate change. So what, exactly, are we trying to accomplish?

It’s good news that some climate change advocacy groups still put science before politics. Groups like the Citizens Climate Lobby, which organized lobbying visits to more than five hundred Senate and House offices on this last summer to lobby for a revenue neutral carbon tax, has a non-partisan membership and has an fanatical ethos of respect for all people involved in the organizations, regardless of their political affiliation.

Others would do well to follow suit. No one movement will be enough, and the organizations putting people in the streets are powerful. They could be more so. The environmental movement has repeatedly claimed that “climate change is not a left or right issue.” If that’s true, they need to walk the walk. More alarming still, that truth—that climate change affects us all— seems to be threated in the minds of some by the creeping notion with that it really is a liberal issue after all. That is a pity not just because it is wrong and is in itself a fundamentally illiberal idea, but also because it is a dead end.

This post was also published on The Energy Collective

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Why We March

March Picture

We left at six in the morning from Washington, D.C., bleary-eyed and unresponsive to the bus leader who gave us the run down on how the day would go. But by ten o’clock, when the bus rolled into New York City, people were introducing themselves, chatting about their points of origin, reasons for coming. The bus came from D.C., but it pulled its passengers from a wider radius. This four-hour trip was just the last leg for many of them. At one point a giddy, grinning, middle-aged man, there with his college-aged daughter took over the PA system to share a few upbeat lines of climate-march doggerel that he composed on the ride up.

I started demonstrating three years ago when, more than a year after I had turned thirty, I found myself getting arrested outside the White House to protest the approval of the Keystone Pipeline. In college, studying for my economics degree, I remember watching fellow students from the window of the library as they protested World Bank lending policies. I thought they were silly. I thought that anyone who really knew what she was talking about could make a chart and find a reasonable person to listen without needing to make so much of a fuss out in the street. If you didn’t know, you had to yell. It took me almost a decade of chart making before reality sank in. There were fifty thousand students at the rally yesterday. Whenever I see youth out at demonstrations, I am impressed with them for having an understanding of government and individual responsibility far superior to what I had at their age.

Joining a movement takes you outside of yourself in ways big and small.  Yesterday morning when the bus leader stood up and said that we were going to go around the bus and introduce ourselves, I curled up in my seat, looked at one of my companions and grumbled, “Noooooo.” I don’t do well on little sleep, and I don’t do well on long, lurching, over air-conditioned bus journeys either, but that morning I’d done both of these things and didn’t want to be bothered to do much else. But after everyone on the bus had introduced themselves to the group and I heard how much farther many other people had come, I was forced to remember that I had come out to be something more than my every-day, ineffectual self. I introduced myself to the man behind me, who had just come back from seven years of democracy-building work in Afghanistan, was traveling by himself and had said that he, “wasn’t affiliated but was looking to be.” I was affiliated, a part of a nationwide grassroots lobbying effort on a carbon tax, and traveling with a group of people from my local chapter in D.C. I told him about our work and he ended up marching with us.

We got off the bus at around 86th and Amsterdam. I noticed, looking through the windshield as I stepped down off the bus, that most of the people on the street appeared to be carrying signs and heading towards Central Park. A marching band made their way across the immediate intersection, their percussions announcing their way. They were one group of dozens of bands come to show their support and help move people along, as drummers have always have done with armies. We were told to expect one to two hundred thousand people. No one knew yet that that the actual numbers were three to four hundred thousand. But it looked like there were a lot of people on the move.

At about 11 am we stepped into the staging area that stretched along Central Park West from Columbus Circle and up into the eighties. We were at 73rd. Standing in the middle of the street waiting to move, it was hard to know who was in or out, or if even those people themselves knew. We were shoulder-to-shoulder inside the police lines, but there were almost as many people in the wings, lining up along the sidewalks, kids climbing the scaffolding of buildings to get a better view, people sitting on the rock embankments of Central Park taking photos, assembling signs, and floats. We were in the middle of a lot of vegans carrying signs saying, ‘Ask a vegan why you’re not a real environmentalist if you eat meat.” I eat meat, and I do give a damn, so I didn’t bother to ask. Lots of livestock is pretty bad for the planet, no argument there. Another sign said, ‘What’s the ROI on a dead planet?” But it’s the dead planet that’s the ROI on fossils and reckless agriculture, I think. Behind us, a group of people launched a ten-by-fifteen foot inflatable Holstein cow and started moving it into the center of the column. We made way.

The vanguard started walking at 11:30. Less than halfway up the staging area, we were still stock-still by 12:30, and a little restless. It was a cloudy, swampy day for late September and uncomfortably warm. Some of us sat down on the pavement to give our legs a break before we started walking. Beneath the street, the subway rumbled by at regular intervals, and overhead the police helicopters made routine sweeps. But no one complained about the long wait because we all knew that it meant that the crowd was huge. Each one of us had come with the burning ambition to be only the tiniest possible fraction of the whole. It was that that would make us powerful. So as we sat and waited amidst the masses, we had the sense that we had succeeded.

‘It doesn’t make a difference.’ I have heard the criticism more than once when trying to corral friends to join me at demonstrations. They talk about the ignored Iraq war protests. They point to global governments that are becoming increasingly insensitive to democracy. But like it or not, at the time that the United States invaded Iraq, the majority of Americans saw Iraq as a security threat and were in favor of U.S. action. And the millions who took to the streets against the Iraq war, feeling the sting of their failure a few months later, did not return.

A majority of Americans now believe that climate change is real, man-made, and want the global governments to do something about it. The New York climate march is a reflection of what most of the public feels. But of course the public can be ignored. In the coming days and months global leaders will continue to talk about climate change within their countries and between other countries. They will likely continue to put forward actions that are not strong enough. The public will have to stay on top of this every step of the way. The march is not the culmination of the movement; it is the beginning still. It is a way of showing how many of us care enough that we are willing to get up early, to pay for planes and trains, sit on uncomfortable bus rides, stand in line in swampy weather and to march in huge crowds for hours in order to be heard. The significance of this march is not just that it happened and was huge, but also that it is almost ten times larger than the last largest American climate change march that happened in Washington, D.C. just a year and a half ago.

And in democracies we will also vote the way we walk. But it is hard to vote when leaders of all countries and parties have been complicit in inaction. And so we are in the streets en masse, because it is a time-tested way of making governments uncomfortable in their complicity. No one wants to rule a country where something like that keeps happening.

At about four o’clock, we marched through midtown and, having stood for hours, a friend and I ducked out of the march to get something to eat. The pizza line was full of marchers and non-marchers alike. I was in line behind a set of the latter. A man wearing a Mets sweatshirt tapped his finger on the pizza in the window, “This is the stuff. This is a good New York slice right there.”

“Not as good as a New Jersey slice,” the friend said. The man snorted and the friend defended himself, “Hey, I’m from Jersey, gotta stick up for it.”

The man still shook his head. I am of midwestern origins and can’t parse the difference in Eastern pizza types, but they both had accents that indicated they knew their territory. Then a few marchers coming up the sidewalk, walking counter to the flow of the main parade, overwhelmed the conversation with their chanting, “What do we want? End climate change! When do we want it? Now!”

The men listed for a second, tilting their heads and then bouncing them in rhythm to the chant. And then as the demonstrators passed they joined in, responding, “End climate change!” And when do we want it? “Now!”

The nodded to each other as the marchers faded away, and the man from New York said, “Yeah. Ain’t gonna end it though.”

The friend shook his head in agreement, “Nope.”

“You can slow it down, but you can’t end it.”

They saw me watching them, recognized me for what I was, and shrugged. I met their eyes nodded my head. Atlantic shore locals would know. They were still recovering from the floods.

As we rejoined procession the police, having double the people they had anticipated, had stopped giving full right of way to the demonstrators and started breaking the march at intervals to let traffic through. As we waited at a light to get back into the flow, a barfly stuck his head out into the street and shook it in a mix of wonder and exasperation. “They’ll still f—ing marching!”

And they will continue to be.

This post was also published on The Energy Collective.

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Energy Prices on Both Sides of the Atlantic Still Not Responsible

Earlier today at the Center for Global Development, IMF Director Christine Legarde gave a talk promoting ‘responsible’ energy pricing, defined as pricing reflects the environmental costs of fossil fuels, by way of launching the IMF’s new publication, Getting Energy Prices Right, From Principle to PracticesMeanwhile, developed countries on both sides of the Atlantic were busy demonstrating how put into practice climate policies that that get energy prices dead wrong.

Last week, the EU decided on targets of increasing energy efficiency by 30% by 2030, a percentage that is well below the 40% targets that many environmental groups were hoping for. The debate around energy efficiency targets in Europe has been fraught with accusations that the Commission is using opaque modeling to justify efficiency targets kept deliberately low in order to prop up the carbon price in the ETS. Brook Riley of Friends of the Earth has called the debate ‘bizarre’.

It would indeed be bizarre if the E.U. were keeping efficiency targets low to protect the carbon price. Efficiency and carbon pricing should be complementary, not competing policies. Energy efficiency targets are designed to mandate action on the negative end of the cost curve that is entirely insensitive to carbon pricing. If an economy is so energy inefficient that mandatory targets significantly reduce the demand for fossil fuels, then the logical implication is that there is plenty of room to increase reduction targets without causing the carbon price to spike. In essence, the best way to protect the carbon price is to reduce the cap. And energy efficiency policy should have no ambitions beyond efficiency. It is a pity that the EU-ETS cannot manage to solve its oversupply problem through a steeper or permanent set-aside, but treating efficiency as a back door to the carbon price is the wrong way to rectify the problem.

As the EPA closes out the Washington, D.C. public comments period for its Clean Power Plan, it is worth asking what the total global impact of the Obama Administration’s climate policies will be. The administration is mandating national emissions targets of just over 1100 lbs per MWh of generation by 2029. The size of this target is synonymous with locking in natural gas as the fuel of choice for the U.S. power sector.  The Obama Administration has made no secret its intention to use natural gas as a bridge fuel for emission reductions. The appeal of this strategy is easy enough to see—having let cheap natural gas set up the ‘bridge’, the administration need not bother itself about how to get to the other side—a question the Clean Power Plan certainly doesn’t address.

A recent report by Rhodium Group and CSIS shows that the Clean Power Plan will cause a 15% increase in natural gas generation over the reference scenario by 2030 versus a 1% increase in renewable generation. Environmental groups lauding the Climate Action Plan tend to focus on its impact on coal, which will indeed decrease. To what end? More exports for China, evidently. The developed world has a long history of exporting its pollution to poorer countries, but the act takes on unusual perversity when the pollutant is carbon dioxide, which doesn’t stay out of the proverbial back yard if one chooses to burn it there.

But can the government be blamed that the coal is going to China? It can be. As the above article from Vox highlights, 40% of U.S. coal comes from public lands, and the Obama administration has presided over the leasing of 2.2 billion tons of coal to private companies in non-competitive auctions. That is to say, it is practically giving away the coal to allow private companies to profit by selling environmental destruction to China. A real climate policy would put a price on the carbon dioxide in coal at the mine mouth to close the export loophole. Some may protest that such a policy is out of reach of the Obama Administration, but setting a higher reserve price for the auction, which would have the same effect, is far from politically impossible. And yet the U.S. government continues to ask for plaudits for reducing coal, and all the while it is giving it away.

Whether in coal or carbon pricing, if the U.S. and Europe want credit for strong climate policy, they should put their money where their mouths are.

This article was also posted on The Energy Collective.

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Model Governance and Emissions Models, Transparency and Climate Policy in China and the EU

Last week Reuters published a brief article updating the public on the status of Beijing’s emissions trading system, with its thinly traded volumes and largely opaque transactions. The crux of the article comes in the last paragraph, Without transparent data, it is hard for investors to position themselves,” said another trader, who asked not to be identified because he is not authorized to speak to the media. It doesn’t bode well for the strength of China’s emissions trading system that the person willing to speak out about its core problem, lacking the State’s imprimatur to open his or her mouth, prefers to remain anonymous. This is not the kind of environment in which strong climate policy can prosper.

But opaque climate policy is not just the purview of post-communist oligarchies.  Earlier this month at a meeting on modeling for climate policy at Breugel, a Brussels-based economic policy think tank, attendees were privy to the spectacle of Peter Zapfel, Assistant to the European Commission’s Director General for Climate Action, telling the crowd that they should ask themselves how much transparency the public really needed. The issue in question was the closed-source PRIMES model, the partial equilibrium model used by the European Commission to determine the impacts of different climate policies and to justify the policies selected by the Commission for the achievement of their own 2030 targets for climate clean energy. Attendees representing environmental NGOs in the room, including Friends of the Earth, WWF, and Greenpeace were demanding that that the basic assumptions of the model be made public.

Zapfel’s response, in essence, was that the top line outputs of the model were all that mattered; civil society didn’t need to worry its little head about the inputs. To illustrate his point, Zapfel added that he used to want to know all of the technical specifications of his camera or computer, but then he realized that that was too much information, and all he really needed to know was whether the camera or computer was good or not.

It was a strange analogy from a technocrat, given that revelations about unbounded reach of the United States NSA have recently left the whole world to learn the hard way the dual perils both of not fully understanding the capabilities of their own high technology and of taking a government that says, “just trust us, it’s for your own good” at its word.

Complex systems create the possibility for magnification of small error; therefore, as societies increasingly rest on complex systems, they have a greater, not lesser need for transparency and for civil society organizations to observe and translate the importance of the small details to the public. Whether those details are the discount rates or technology assumptions used in a model, or the quality of continuous emissions monitors used to measure the integrity of an emissions trading system, they have the potential to create consequences of national and even global significance when climate change is what is at stake.

The European Commission has listed “new governance systems” as one of the key elements of the policy framework for its 2030 climate and energy goals. As the Commission sorts out exactly what this means, it would do well to remember just how foundational transparency is to good governance. Both China and the European Union are making real attempts to find the best solutions—both in policy formation and implementation—for the reforming their energy systems, but gagging or blinding their best watchdogs is the wrong way to be spending their efforts.

This article was also posted on The Energy Collective.

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Short Commentaries 5/31/14

China, EU launched three-year cooperation on “Carbon Emissions Trading Scheme” from English People’s Daily. Cooperation will include exchange of experts and sharing of experiences and best practices. One wonders what the EU, plagued with endemic oversupply, can offer the Chinese system. Chinese regional schemes are still young, but a major problem seems to have been lack of price clarity and transparency. On the surface, price problems in China come from a different are different to those in the EU, but the problems have a common root—lack of will to create real reductions. In the idealized world of global emissions trading, cooperation and harmonization should begin early, but as yet there is no indication that ambition or leadership on either side is enough for this cooperation to amount to anything more than trading around the margins.

U.S. eases risks for $134 million forest protection fund from Reuters. USAID moves way from direct payments to projects to a model that, on its face, is more private sector oriented—using its money to leverage investments rather than to directly fund them. The press release gives very little indication of the kind of activities that will be funded or how loan recipients will repay the loans—either traditionally through business activities, or through the sale of voluntary forest credits. It also does not indicate the terms on which Althelia is offering the credit, or the price at which it is buying this insurance from USAID. All of these things would be useful in knowing if Althelia is engaging in actual commercial-style transaction or, or merely giving out donor money with commercial attributes. There is nothing wrong with the latter per se, but there is a question of what it will be proving to the private sector if it is successful. If the transaction is successful under terms that the private sector could not accept or replicate, then leverage effect of the USAID guarantee will have no effect beyond it’s immediate disbursement. This would be a missed opportunity because forest protection needs more money than the public sector can currently offer. While USAID has called Althelia the first private sector fund of its kind, its backers are all development banks. This is, in fact, USAID insuring the European Investment Bank. But if the projects are successful on terms attractive to the pure private sector, perhaps it will follow.

Wonks Collide as Obama Climate Plan Prompts New Ideas from Bloomberg. Great River Power proposes a carbon price that is set according to a level of desired abatement and collected by regional ISOs, who then refund to the fee to the load serving entity on a pro-rata basis per hours of generation. Set up in this way, the price acts directly on the dispatch order of electricity, pushing coal, which would have the highest carbon price, further down the queue. Authors of the study claim that cost relief for consumers will be provided through refunding the revenues to the load serving entity. But in deregulated markets,  load serving entities, will be likely both keep the refund and pass through the price increase anyway. That said, this is not a bad way to arrange a carbon price for power. It would be a step forward for the EPA if, under the carbon regulations for existing power plants to be that will be announced this Monday, it allows for states to creatively implement their carbon limits through use of this pricing plan, or another one link it.

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Between Drilling and the Deep Blue Sea

““Unlike most of the planet, the Arctic still contains uncharted mysteries,” Bloomberg yesterday quoted Scott Minerd of Guggenheim Partners LLC as saying.

The statement is no doubt true. The Arctic is among the last pristine wildernesses on the planet. There are elements of the global influence of its climate and the local details of its ecosystems and geology that science has not yet attempted to record, let alone understand. But Minerd was being loose with the language—by ‘uncharted’ he meant ‘unexploited’, and by ‘mysteries’ he meant ‘resources’. His investment management fund is looking at investing in heavy industry in the Arctic region.

Guggenheim Capital Partners is not the only investor interested in exploiting the Arctic. A 2012 report from Lloyd’s of London identifies around $US 400 billion of committed and projected funds for the development of potential Arctic oil and gas projects. Four hundred billion dollars is not a spectacular sum when it comes to the oil and gas investment—Ernst & Young reports that 75 non-national oil companies representing only 9% of oil and gas reserves worldwide invested $US 540 billion in 2012 alone.  Investment numbers for national oil companies, which hold 90% of reserves, were omitted. Lloyd’s numbers are quotes of preliminary estimates and crude approximations as such. The U.S. Geological Survey estimates that around 22 percent of the world’s untapped oil and gas reserves are in the Arctic. If a sizable fraction of reserve prospects for Arctic development proved exploitable, total investment would well exceed $US 400 billion.

What else could be done with this money? A timely transition to renewable energy will require at least US$ 1 trillion in investment a year. But total renewable energy investment was down by 11 percent last year to $254 billion dollars—some considerable change shy of the trillion-dollar mark. Even if $1 trillion isn’t an exact figure, it’s beyond dispute that more money is needed.

Investment in Arctic Ocean oil is an interesting analog to renewable energy investment. In the logic of the last decade, risk-adverse financial investors would flock to fossil fuels over renewable energy because with fossil fuels, they were confident of a steady return due to its low risk profile and steady returns.

But Arctic Ocean oil turns that argument on its head. Early this year, after spending $US 6 billion dollars and not drilling a single well, Shell announced that it was suspending its operations for drilling in the Arctic for fear that the investments were damaging its bottom line.

Shell’s $US 6 billion dollar loss was buried in a portfolio of higher return projects so their shareholders, while affected by the loss, did not feel the bite in the way they might have were they taking a stake in an Arctic-only private equity fund as Guggenheim Partners is considering doing. Renewable projects, due to uncertain regulation and comparatively newer technology, are considered a risk. But average returns on renewables, in the low single digits, are better than Shell’s Arctic Ocean prospect that on account of regulatory issues, legal hang-ups and technology immaturity has until now offered only negative yields. When risk capital is the rasion d’etre for investment, it is worth asking why, when given a choice, one would invested in destroying the environment rather than preserving it?

But returns are not the end of the story, even though it is easy to get lulled into thinking of them that way. Yesterday evening, Harvard students blockaded the office of the University President Drew Faust in protest of the University’s decision not to withdraw the endowment’s investments in fossil fuels. This morning, a number of them were arrested. In a statement to the Harvard Community written last October, Faust stated that, ‘The endowment is a resource, not a tool to impel social or political change.” In so writing, Faust perhaps unwittingly, invoked the backward view of finance that recently resulted in the Great Recession by way of robbing a line from Machiavelli’s playbook— In actions of all men, especially princes, where there is no recourse to justice, the end is all that counts.

The purpose of debt and equity finance is to facilitate capital accumulation, which in turn defines the structure of the society in which it exists. Returns are fees, the project is the purpose. In a healthy financial system, financers are mere middlemen. The great disasters of modern finance, including the 2008 financial crisis, were a symptom of a financial sector that came to conceive of returns as the purpose and, in the most recent crises, deliberately created ways of divorcing those returns from the projects that they intermediated with catastrophic consequences. While it is true that investors evaluate projects on the basis of returns, it simply incorrect to imply that the decision to stop or go ahead with projects will not have social or political consequences. The ends are a resource, but the means of getting them shapes the world.

This article was also posted on The Energy Collective.

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