EVENT: Rising Tigers, Sleeping Giant: Major New Report on US vs. Asian Competitiveness in Clean Ener
November 13, 2009
In late September, Breakthrough Institute Chairman Ted Nordhaus gave the keynote address at the World Climate Solutions conference--northern Europe's biggest annual clean tech event. The conference was held in Copenhagen, Denmark in the Bella Center, the very place where the international climate negotiations collapsed one year ago.
Nordhaus was introduced by Anders Eldrup, CEO of DONG energy. What follows is a video of the introduction and speech, as well as each speaker's full remarks.
The outcome of COP15 was not what most of us had hoped for. But even though no great decisions were made the challenges are still there.
There are three big and fundamental questions that we need to address. How do we secure sufficient supplies of energy for a world that needs more and more energy? How do we provide clean energy for the world? And how do we ensure that the development of the energy sector can create the jobs that we need so desperately in the economy?
These are the fundamental and essential questions and they have not gone away. Therefore it is of no use to lean back and do nothing just because we did not get the COP15 agreement in Copenhagen. Such an approach does not work.
The other and much better approach is to push forward regardless of the lack of a global agreement. It would have been great if an ambitious agreement had been struck, because then we would have known the rules of the game. But we did not get an agreement and we probably will not see such an agreement this year or next year either. So we must find a way to answer the three questions in the absence of a set of global rules.
Green growth can provide the answers and it is up to those of us who think that it is necessary to move forward to make this happen. We have to create a force of positive social change that can make people walk in the direction needed. Not because of legislation - because it is not there - but because people can see and understand that this is the right way to go.
Out next speaker is the right man to talk about this way forward. Back in 2004 he wrote the article 'The Death of Environmentalism' together with a colleague. And maybe we should have listened more to you last year because already before the COP15 you foresaw that it would not be a smooth walk to reach a global climate agreement.
In 2007 you also wrote a book with the title 'Why we cannot Leave Saving the Planet to Environmentalists' - a book that even more should have read before the Cop15.
In 2008 the Time Magazine appointed you Hero of the Environment which was a well deserved recognition of your work.
The next speaker is Ted Nordhaus. As you have probably guessed he will talk to us about how we make things happen without global legislation in place.
We cannot rely on rhetoric that scares people with images of the ice melting. We must find new ways of making the necessary change happen. All the stakeholders represented here must cooperate around the formulation of a positive vision of a green revolution.
It is with great pleasure that I leave the floor to you Ted.
Before I begin I'd like to thank the World Climate Solutions conference and the good folks at Monday Morning who put it all together. It's an honor to be here today and to have the opportunity to offer some opening remarks to set the stage for your discussions over the next several days. I'd also like to recognize my partner and co-author Michael Shellenberger, who is not able to be here today. My remarks today reflect our shared work. We like to say that between the two of us we make up a whole functioning brain. So if there is anything about my remarks that you don't understand or disagree with, you can blame Michael.
Less than a year ago, the world's governments met here in the Bella Center to make what was already evident to many observers unavoidably obvious. The twenty year effort to negotiate a global treaty to address climate change had irretrievably failed. By the time the many thousands of diplomats, activists, and journalists arrived in Copenhagen last December, what had been envisioned as the final act in the twenty year effort to establish a binding global cap on carbon emissions had turned into a kind of post-modern spiritual pilgrimage.
The gods of climate science were repeatedly summoned. Religious leaders, from Desmond Tutu to the Archbishop of Canterbury invoked our moral obligations to future generations. Big oil, the Chinese, and the Americans were demonized while tiny island nations such as Tuvalu and the Maldives demanded that two billion Chinese and Indians restrain their economic aspirations. The world's largest advertising agencies were hired to create apocalyptic ads complete with polar bears falling from the sky and -- I swear I'm not making this up -- CGI animations of animals from all over the world committing suicide by hanging, drowning, and in the case of a particularly despondent Australian kangaroo, stepping in front of a speeding train.
All of this reflected a kind of nihilism. By this I mean the phenomenon of going to church, saying confession, and sometimes even praying to God, even though you no longer believe that God will do anything for you. Europe pretends to have reduced its emissions and other nations pretend to believe them. Obama promises to reduce U.S. emissions 17 percent even though he has neither a credible plan nor the votes in Congress to do so. China, in the name of post-colonial solidarity, demands to be treated the same as Tuvalu and Tuvalu, in the name of United Nations style democracy, demands to be treated the same as China.
Rather than bringing the world together, Copenhagen had driven us further apart. World leaders left Copenhagen without a treaty and more divided than ever over how to reduce global carbon emissions. Today we stand amidst the rubble. The pollution paradigm -by that I mean the notion that global warming could be understood and addressed in the same way as past pollution problems such as acid rain or ozone depleting chemicals - has collapsed and is now in full blown retreat virtually everywhere.
The United States Congress this summer failed for the fourth time in ten years to pass climate legislation that even had it succeeded would have had virtually no impact upon U.S. carbon emissions over the coming decade. Australia has abandoned its efforts to cap its emissions. Britain has recently delayed the imposition of new emissions performance standards for power stations, acknowledging that renewable energy alternatives are not ready to displace coal and gas fired generation at a scale that might make achievement of ambitious emissions reduction targets possible.
Even the European Union, which will likely meet its Kyoto commitments, will do so primarily thanks to the collapse of eastern bloc economies in the early 90's and the collapse of the global economy in 2008. This during a period of rapid deindustrialization of most EU economies. Calculated on a consumption basis rather than a production basis, EU emissions have almost certainly risen during this period.
Meanwhile, international efforts to achieve a legally binding agreement to reduce global emissions continue to founder upon the same set of seemingly impossible political, economic, and technological dilemmas that have confounded efforts to limit global emissions for almost two decades.
In this sense, Copenhagen was both the end of something old and the beginning of something new. It marked the end of the idea that we would solve global warming through a single global treaty to reduce carbon emissions. The end of the idea that carbon caps, regulations, and markets would be the primary driver of the clean energy revolution that will be necessary to address climate change. And the end of the idea that the central obstacles that we face to addressing the issue are political, not economic and technological.
And it marks the beginning of a new era in which the true nature of the climate challenge and what it demands of us have become fully apparent.
So let us move on now to those challenges. The first place that we must begin is the sheer scale. We are today a planet of 6 billion humans. By 2030 there will be over 8 billion of us and by 2050 there will be close to 10 billion. As a result, global energy use over this period will probably double and more likely triple even as we are told by the IPCC that we must cut global carbon emissions in half.
Second, we must recognize that these levels of emissions reduction will not be achieved through conservation or lifestyle changes. There may be many reasons to downscale our economic aspirations and dematerialize our consumption but climate change is, in fact, not among them. Old ideas about the limits to growth and steady state economics have come back into vogue in recent years, as emissions have continue their inexorable rise and resource depletion has accelerated. But the very simple math of global population and global economic development is unrelenting and unforgiving.
Let us grant the much contested happiness threshold for the moment. This is the idea that once people are able to meet their basic economic needs, at around an income of $15,000, additional wealth does not result in additional well being.
But even if we redistributed all of the excess income that is today in the hands of developed world populations, achieving such a level for a global population of 9 billion would require the global economy to more than double in size. So steady state economics offers little promise. In order to meet the basic human needs and aspirations of our growing global population, the global economy must expand substantially.
Finally, we must consider the question of energy technology. Despite much progress, low carbon energy technologies still cost vastly more than fossil fuels when all is said and done. Despite the great expense to which many developed economies have gone to both price carbon and subsidize the deployment of clean energy technology, those technologies are still not able to compete with fossil fuel based energy.
Now some here and elsewhere will object that such comparisons fail to fully account for the full, externalized costs of fossil fuels. But here we should consider that even were we able to achieve agreement on what those costs actually were and to convince political economies around the world to impose those costs upon their energy economies, the resulting tariff might still be insufficient to drive a rapid transition to a clean energy economy.
The carbon price equivalent for Germany's solar feed in tariff is over $500 per ton. China's proposed solar feed in tariff is almost $300 per ton. Even wind energy, the cheapest present day renewable technology, still requires subsidies that are substantially greater when calculated as carbon price equivalents than any carbon price that has been seriously proposed or implemented in the United States or Europe. And these carbon price equivalents do not even account for the substantial further costs associated with transmitting and storing intermittent sources of energy such as wind and solar power.
Once we have come to terms with these three critical concepts: That the global population and the global economy will continue to grow. That modernizing economies, in both the developed and developing worlds will continue to use more energy, not less, even as they use that energy more efficiently. And that we do not, in fact, have all the technologies that we need to address global warming, we can begin to think more clearly about what this particular moment demands of us and what it is that we must do.
So let us turn now to that question. What must we do?
To start we must make clean energy cheap. There will be no political solution to climate change, no binding international agreement to substantially reduce emissions, and no effective domestic carbon caps until low-carbon technologies are much cheaper than they are today.
When I say cheap, what I am referring to is the real, unsubsidized cost of clean energy. This is not the same as making, in President Obama's words, clean energy the profitable kind of energy, if by that we mean raising the price of carbon based energy such that clean energy is cost competitive. We have now spent almost twenty years attempting to do this through various policies and in various national and international contexts and, to date, no nation in the world has been willing or able to raise energy prices high enough to significantly transition their economy away from fossil fuels.
Nor do I refer to simply subsidizing renewable energy heavily. Traditional subsidy schemes provide precisely the wrong incentive, subsidizing firms to produce more of the same rather than driving rapid innovation and cost reductions.
Rather, successful efforts to drive down the cost of clean energy technology will rationalize direct public investments to deploy new technology by demanding that those technologies demonstrate significant cost reductions and performance improvements before they receive further investment.
Public sector investment will lead these efforts and private sector investment will follow, and the primary means through which we will do that will be direct procurement mechanisms, not indirect market mechanisms.
This is how we have historically brought new energy technologies, from nuclear power, to gas turbines, to wind energy to market and if you find yourself doubting my argument, just look out the windows here at the Bella Center. The wind energy revolution that you see all around you, and that Denmark has led for the last two decades was not made possible by market signals, carbon prices, or private capital. Rather, it was driven from the start by extraordinary and direct state investments in the development and deployment of multiple generations of wind turbine designs.
Whether it is wind in Denmark, solar power in Germany and Japan, nuclear power in France and Sweden, or the extraordinary and rapid emergence of China as a global clean tech power in all of the above, the key driver in every case has been direct state investment in clean energy technology. Indeed, the more substantial, direct, and public those investments have been, the more successful has been the effort.
Now make no mistake, wind energy, like all renewable technologies, still has a long way to go before it will be able to displace fossil based energy at a large scale. My point though, is that if those technologies are ever going to achieve that scale, we have a pretty good roadmap of how to get there and it doesn't centrally involve the policy levers that have been the central focus of climate policy at both the international and national level for almost two decades - namely carbon caps and carbon pricing.
Indeed, the most radical and rapid clean energy effort in the world is presently occurring in China, which has neither a price on carbon nor a cap on emissions and continues to adamantly resist both. China is currently creating scores of clean tech industrial centers all over the country - luring innovative companies large and small with state of the art infrastructure and generous investment tax policies. They are guaranteeing markets for a wide range of clean energy technologies. They are building a transportation and electrical infrastructure that can support those technologies. They are procuring on the cutting edge of a range of clean technologies from nuclear power plants to mag-lev bullet trains.
This is in fact how you build a clean energy economy and it diverges chapter and verse from the prescriptions of neo-classical economists and environmentalists alike.
And this brings me to my second observation. The nations and economies that will ultimately drive the clean energy revolution, and will reap the lion's share of the economic benefit from doing so, will be those that have a proper industrial policy and put real public resources behind it.
China, Japan, and Korea, have, for a variety of reasons, never been burdened by the same ideological baggage that has for decades constrained U.S. and European policymakers. They are unapologetic about their embrace of industrial policy and have used it to great effect. While western economists have prattled on about comparative advantage and the inherent superiority that U.S. and European economies hold in innovation, China, Japan, and Korea have established dominant positions in automotive, electronics, information technology, and a range of other advanced, high value manufacturing sectors and they are in the process of doing the same in clean tech.
Private investment will follow public investment and the nations that will lead the world in clean technology will be those that lead the world in public clean tech investment. In this, the advantages of being first mover in critical clean energy technologies will accrue to nations, not individual firms.
While firms will come and go, national and regional advantage, resulting from the dense networks of research institutions, corporate laboratories, manufacturing capacity, engineering talent, and skilled labor that sustained public investments in research, development, and procurement of clean technology leave behind, will endure.
For those nations that move first and succeed in substantially driving down the cost of clean energy technology, untold economic benefits will almost certainly follow. The global economy, the global population, and global energy demand are growing faster than our conventional energy technologies can keep up with. There will almost certainly be a virtually unlimited market for those who can drive down the cost of clean energy technologies such that they are reasonably competitive, in terms of both cost and performance, with fossil fuels.
And this brings me to my final observation: radical innovation to drive down the cost of clean energy technology will be necessary not only to address global warming but to address global poverty as well.
Today, there are roughly two and a half billion people on the planet with little or no access to modern forms of energy. Access to modern energy, particularly electricity, is highly correlated with longer life expectancy, better public health, higher living standards, higher education levels, and a range of other indicators of social and economic well being.
For the two and a half billion of us who do not have reliable access to modern forms of energy, the problem with fossil fuels is not that they are too cheap but rather that they are too expensive. Without decent light, one cannot read or study at night. Without modern fuels and electricity, billions of us still spend much of our time collecting firewood, hauling water, and tending open fires or primitive stoves.
And indeed, developing economies around the world today subsidize fossil fuels as a basic economic development strategy, so that their overwhelmingly poor populations can afford gasoline and electricity.
The development and diffusion of modern forms of energy, and the attendant technologies that use it, has liberated those of us lucky enough to have been born in the developed world from lives of hard agricultural labor. Two centuries ago, virtually all of us worked in agriculture. The collective labor of virtually the entirety of the human population was involved in the process of producing enough food to feed ourselves.
And while liberating ourselves from these burdens has had its costs, particularly ecological costs, the overwhelming impact has been positive. Today, in the developed world, we live longer, healthier, and freer lives than any cohort of human beings that have ever lived upon the planet. And increasingly, billions of people in the developing world have begun to taste the basic fruits of modernity as well.
As such, energy that is cheap, clean, and available to all should be understood as a fundamental public good. There will be no real pathway out of poverty for billions of people until our energy technologies are much cheaper. Those technologies will, of necessity be clean, for the simple reason that there is no other way. We cannot extract enough fossil fuels cheaply enough to meet the growing demand for energy.
So let us return now to Copenhagen, where it all truly started to fall apart and where the new era that is just now beginning to take shape began. After twenty years of failed climate policy, the pollution paradigm -- with all of its magical assumptions about politics, technology, and economics -- has fully collapsed and the opportunity that lies before us is to embrace an approach that is simultaneously more pragmatic and far bolder.
Creating a clean and prosperous global economy will be a creative and generative endeavor, not a restrictive one. Our world will not be saved through one grand or elegant accord nor bent with precision to the targets and timetables of climate science. Along the way we will make mistakes. We will bet on many technologies that fail for every one that succeeds. There will be problems that result from fixing problems and unintended consequences that result from our efforts to deal with unintended consequences.
This is what the world looks like after Copenhagen, after we let go of the idea that a treaty or a carbon price or a legally binding cap might relieve us of the burden of attending to all the difficult details of actually building a global clean energy economy.
And so I leave you today with the far more eloquent words of the great American novelist, Dave Eggers. Eggers lost both his parents to cancer at the age of twenty-one. Reflecting on the experience, and how it had shaped his life he observed:
"On the one hand you are so completely bewildered that something so surreal and incomprehensible could happen. At the same time, suddenly the limitations or hesitations that you might have imposed on yourself fall away. There's a weird, optimistic recklessness that could easily be construed as nihilism but is really the opposite. You see that there is a beginning and an end and that you have only a certain amount of time to act. And you want to get started."
And this is the spirit that I hope we can all grab hold of, an optimistic and experimental recklessness. What this moment demands of us is imagination, not magical thinking. It demands that we get on with the hard and collective work of inventing and engineering our way to what will always be partial and imperfect solutions. It demands that we get started.