Energy analyst Chris Nelder sees a chance to get energy policy right in the death of the cap and trade bill. It’s time to put carbon legislation aside and focus on energy transition.

Beyond Carbon Legislation: Energy Transition

A New Chance To Get Energy Policy Right

By Chris Nelder
(Cross-posted to HuffPo)
July 23, 2010

“I felt a great disturbance in the Force… as if millions of voices suddenly cried out in terror and were suddenly silenced.” –-Obi-Wan Kenobi

The death of the climate bill yesterday struck the Climateers like a wet, oil-soaked dead dolphin to the face.

Their wails of despair and cries for retribution swamped my Twitter stream, as carbon cap champions learned the Democratic leadership had given up on mustering the 60 Senate votes needed to pass the bill. The political realities of Washington had stymied them once again. Nothing had changed.

The news release a few hours later that China had unveiled a $740 billion, 10-year energy plan–including all forms of energy–only rubbed salt into their wounds. There was China once again, charging ahead, doing what we should be doing, and here we were “back to Bush.”

Then, true to their fundamentally political nature, the Climateers set about attacking Obama, Republicans, and the Blue Dog Democrats, trying to pin the blame for the bill’s failure. The notion that there might be something inherently unworkable about carbon legislation remained taboo.

As for me, I was pleased. Perhaps, I thought, we’d now have a chance to get the policy right.

There was a time when I would have joined the mourning of my environmentally minded brothers and sisters. I supported a carbon pricing approach two decades ago. We could have had a society that was a quarter of the way down the path toward energy transition if we had done it then, instead of starting from near zero today. In fact, I supported the carbon tax approach (but not cap and trade, or cap and tax, or carbon capture and sequestration) right through the final months of 2009.

But then Copenhagen and cap-and-trade failed as I expected, and I read Empire of Illusion…and a few key insights into the problem of carbon control finally sunk in.

One, the energy business moves at glacial speed. It’s the biggest business in the world and has the most powerful lobby in Washington, and it generally gets what it wants. Add in the agriculture and automobile lobbies, and it’s essentially an unstoppable force. Comparatively, the lobby for alternative energy, permaculture, rail, and other solutions is a tiny speck. Call me cynical, but a few decades of watching reform fail in energy, transportation, and the environment will knock a lot of magical thinking out of your head.

Two, nearly everything that gets done in this country gets done by business, not via politics. As long as we’re agreeing to play by the rules of capitalism and relying on business lobbyists to craft policy, then you have to harness that beast in order to rebuild your energy infrastructure. You have to incentivize, not penalize.

It almost seems too elementary to bother saying, but elected officials find it far easier to vote for initiatives that bring money into their districts than for anything that takes money away. Carbon capping is a penalty approach, and predictably it aroused enough resistance to sink it.

As I said last November: “It’s a whole lot easier to find the financing and business support to roll out millions of little solar systems and insulation upgrades and more efficient vehicles, and so on, than it is to get a world full of politicians to agree on anything. Even after you get that agreement, you still have to build the solar systems and cars and install the insulation.”

Focusing on carbon emissions is simply looking at the wrong end of the problem. Instead of trying to control what comes out of the tailpipe, we should be thinking about what we put into the engine. Even if carbon emissions legislation succeeded, it would do little about the even more pressing problem of peak oil (and peak fossil fuels in general).

If we put all our efforts into incentivizing efficiency and renewable energy, and slowly phase out the much larger incentives we put into fossil fuels, we can solve the emissions problem…only we’ll wind up with more energy supply, not less, and it will be more sustainable.

All is not lost, my Green friends. We’re hardly back to Bush. In fact, there is finally significant momentum going in the right direction. Lest they be lost amid the Climateers’ moaning, consider these news releases from the very same day the climate bill died:

• A stripped-down remnant of the climate bill will likely pass, and will include some important, if incremental, incentives: $5 billion for transitioning the truck fleet to natural gas (a big win for the Pickens Plan and companies like Clean Energy Fuels, a stock I own), and $5 billion for the HomeStar program.
• Sen. Frank Lautenberg (D-NJ) announced the FREIGHT Act. Aiming to “Create A 21^st Century Freight Transportation System,” the bill would support rail-based freight transport. It’s not yet clear what kind of teeth it will have, but moving freight off tractor-trailers and onto rail is a key pathway to actually reducing our petroleum consumption.
• The Department of Energy announced a $122 million award for a joint research project led by Cal Tech and the Lawrence Berkeley Lab to try to create chemical fuels using photosynthesis. It’s a bold concept, and precisely the kind of appropriate federal R&D investment that might yield breakthrough discoveries.

Meanwhile, momentum is building toward a slow phase-out of fossil fuel subsidies, and toward longer-range investments in renewable energy and efficiency.

China is still going to run circles around us. Policymaking by the political process is no match for a command economy. To cite just a few examples: The U.S. has committed a total of $13 billion to rail development, while China is already building a $556 billion high speed rail system that will link all of their major cities in five years. The U.S. has no energy plan, while China is embarking on a $740 billion comprehensive energy plan to see them into the future, with vigorous support for renewables. China is on track to do more about its future emissions than the U.S., even while it has just surpassed the U.S. as the world’s largest consumer of energy.

It’s time to rethink our strategy. We would do well to follow China’s model. Instead of taking a political approach, circling the wagons around the eco-warrior camp and battling the fossil fuel industry, we should be developing a serious energy plan based on science, encompassing all forms of energy, to unite all parties in an unreserved commitment to the great task of energy transition. Because oil depletion is relentless, time is running out, competition for fuels is only increasing, and we’re the most vulnerable player at the table.

Never mind carbon emissions. That game cannot be won. What we can do—and what will engender bipartisan support—is work steadily toward replacing fossil fuels with renewables, transitioning from liquid fuels to electricity, and making the most of every last BTU. If we get that right, our carbon emissions problem will take care of itself.

Until next time,

Chris