Policy Pile-On
Policy Pile-OnIn the previous module, we looked at the basic economic analysis showing that the world’s people will be better off if the solid scholarship on energy and environment is used efficiently. And, we mentioned that if we are close to being influenced by limits to growth, then the motivation to use the scholarship is stronger. Earlier in this module, we looked at some of the ways that policies can be used to address these issues. Next, we will briefly consider a number of issues that influence policy choices, including national security and price stability.
Extinguishing Externalities:
Any energy source that supplies a significant fraction of human use is almost guaranteed to have “externalities”—unintended consequences for people and other living things. Solar farms in the desert may shade the habitat of cacti and tortoises, wind turbines kill some birds and interrupt views, nuclear plants require long-term storage of potentially poisonous waste, fracking produces “flow-back” fluids containing possibly harmful chemicals that must be disposed of, and so on. Realistically, we have no practical hope of an energy system that doesn’t involve unintended costs and “Not in My Back Yard” (NIMBY) issues.
But, several studies have found that wind turbines are not nearly as deadly to birds as cables on radio towers, skyscrapers, cats, or the climate changes from fossil fuels that will be avoided by use of wind turbines (see Enrichment on the next page).
Want to learn more?
Read the Enrichment titled Living with Wind Turbines and Coal Exhaust.
In general, the externalities of renewable energy are quite low—covering the desert with solar cells does not use the most productive landscape, and covering roofs with solar cells replaces one human-made surface with another that has essentially the same effect on neighbors, except it generates electricity.
In contrast, recent scholarship shows that coal-fired electricity as currently practiced in the US and some other places (parts of China, for example) has very high negative externalities, from issues such as particles and mercury causing health problems. Some studies for the US (see Enrichment) have indicated that for each dollar spent by consumers on coal-fired electricity, society spends a similar amount, or more, in lost health and environmental quality. Hence, these studies indicate that there would be economic gains from additional regulations or other policy actions to clean up or reduce coal burning, even if the effects on climate change are ignored.
Earth: The Operators' Manual
Video: Yes in My Backyard (aka YIMBY!) (9:08)
To see how people in Denmark and Texas came to welcome the wind into their backyard, you can watch this clip. Beauty really may be in the eye of the beholder, and things that pay the beholder good money may look just a little more beautiful.
Yes, In My BackYard
NARRATOR: Are there other examples of communities and nations that have begun the transition away from fossil fuels? What does it take to welcome the turbines and solar farms of the new energy system, and say, "Yes, In My Backyard." This is the story of two communities that at first look very different. Samso is a small island off the Danish mainland. West Texas is a vast, dry expanse in America's South. What both have is abundant wind. At times, Samso produces more electricity than it uses, exporting surplus power to the Danish mainland. And Texas wind now generates as much power as the next three U.S. states combined. Samso and West Texas both solved the NIMBY, not in my backyard challenge that has stymied so many renewable energy projects. It's not easy, but with patience, and persistence, and the efforts of the right people, it can be done.
SOREN: Okay-- My name is Soren Hermansen, and I am the Director of the Samso Energy Academy. Samso means, in Danish, means the Meeting Island-- when you make a circle around all of Denmark, then Samso is right in the center of the circle.
NARRATOR: But it wasn't geography that brought Lykke Friis, then Denmark's Minister of Climate and Energy, here in mid-2011. It was why and how this community had turned NIMBY into "Yes, in my backyard."
LYKKE FRIIS: Well, Samso is a pioneering project, in the sense that Samso, way back, decided that Samso should become independent of fossil fuels.
NARRATOR: Before its transformation, people thought of Samso as just a cute tourist community, busy in summer, empty and desolate in winter. Now people come here not just to see the turbines, but to understand the process that got the community to welcome wind energy. After a national competition, Samso was selected by the Danish government to be a proof of concept for how to transition from fossil fuels. But it was up to individuals like Soren Hermansen, with the passion and skills to effect change, to figure out just how.
SOREN: So when we won, the normal reaction from most people was, "Yeah, you can do this project, that's OK, but just leave me out of it."
NARRATOR: Samso has a deep attachment to its past and values its traditional way of life.
SOREN: But gradually we won their confidence in establishing easy projects to understand, and also easy projects to finance. Because basically, it's all about, "What's in it for me?" Because it's not convinced idealists or green environmental hippies who lives here.
NARRATOR: Soren, a native of the island, convinced some of his neighbors to become early adopters. They found success, and spread the word. Jorgen Tranberg operated a large and profitable herd of milk cows. After initial reservations, he invested in a turbine on his own land. When that went well, Jorgen became part owner of one of the offshore turbines.
SOREN: Farmers, they have to invent new things and be ready for changes. So when they see a potential, they look at it, no matter what it is. They look at it, say, "Could I do this?" And if they see fellow farmers do the same thing, they are quick to respond to that. So even being very traditional and conservative in their heads I think they have this ability of making moves and do things because they have this independency in them. A farmer is a free man-- maybe he owes a lot of money to the bank, but he's still a free man in his thinking.
NARRATOR It was seeing what was in it for them and for their community, that won over landowners in West Texas. And it took one of their own, a man whose family had deep roots in Roscoe's cotton fields, to educate them about wind farming. Cliff Etheredge: Well, I'm really a farmer-farmer, you see. I farmed for almost over 40 years. We're in-- right in the middle of the Roscoe Wind Farm. And we've got about 780 megawatts of production, that's per hour, enough electricity for about 265,000 average homes.
NARRATOR: Roscoe had no oil and faced hard times in the early 90's, but it did have wind.
CLIFF: When this land was acquired, there was absolutely no value to the wind. Fact is, it was a severe detriment, because of the evaporation of the moisture.
NARRATOR: Cliff, like Soren, had to work with his neighbors to get them ready to accept wind turbines.
CLIFF: The first thing farmers want to know is, "Well, how much is it going to cost me?" It costs them nothing. "What's it going to hurt?" Three to five percent of your farmland is all it's going to take up. You can do what you want to with the rest of it. Then it came down to, "Well, how much money is this going to make me?"
NARRATOR: Cliff did his research and checked his numbers with wind experts and the Farm Bureau.
CLIFF: Then I was able to go to our Landowners' Association and show them, where they had been receiving 35 to 40 dollars an acre, then the landowners could expect somewhere in the neighborhood of three times that.
NARRATOR: In fact, farmers stand to make 10 to 15 thousand dollars a year, per turbine, just from leasing the wind rights.
CLIFF: There was no guarantees in it from the very beginning, but sure enough we've got, I think, in the neighborhood of 95 or more percent of our area that accepted the wind farm.
NARRATOR: In both Samso and West Texas, individuals saw economic benefits. But the whole community, beyond the investors and land-owners, benefited too.
CLIFF: Because of the wind farm, now, and the people working in the wind industry, now we've got jobs available and opportunities for young people to come back from college or from technical school or from whatever. It's just been a Godsend.
NARRATOR: For Kim Alexander, superintendent of the Roscoe school district, that godsend translates into dollars.
KIM ALEXANDER: In 2007, prior to the wind values coming on our tax roll, our property values were at about \$65 million. And then, that wind development, they jumped to approximately \$400 million, to \$465 million.
NARRATOR: The school district will get more than \$10 million dollars over a decade. That guaranteed revenue stream unlocked additional funding. School buildings, some dating from the 1930's, could be updated, and computer labs added.
CLIFF: This is an indication to me of what can be done for rural areas, and will be done, all the way to Canada-- bringing life and prosperity back to these rural communities that are suffering just like we have.
NARRATOR: The same oil shock that got Brazil started on ethanol, got Denmark started on manufacturing wind turbines, just in time to compensate for a decline in its ship-building industry.
LYKKE: And it's also good for the economy, in terms of export. I mean, 10% of Danish exports comes from the cleantech area.
NARRATOR: Energy and environment always require tradeoffs, such as clear vistas versus clean energy. It's something that communities have to make time to work through. Cliff, for one, believes it's worth it.
CLIFF: Everything, the schools, the churches, the civic organizations, all the businesses will benefit from this. It will increase, hopefully, our town's populations, and our economics.
KIM ALEXANDER: My granddad used to say, not realizing he was prophetic, but "If we could sell the wind, we'd be wealthy." Well, who would have ever thought we'd be able to sell the wind?
NARRATOR: For Samso, Denmark and Texas, clean energy brought economic benefits and energy security. But replacing fossil fuel emissions with wind power has other advantages.
LYKKE: And let's not forget, also good for climate and health, and such, and that's a very important argument.
CLIFF: We've got a constant wind resource here, that's tremendously valuable, and as opposed to oil and gas, it'll last forever, and it doesn't pollute anything.
Calming Commerce
Calming CommerceBusinesses routinely pay more for long-term, guaranteed supplies than the lowest short-term price available on the spot market. Unexpected, large price increases ("shocks") have real costs. There is, for example, a rather close relation between oil-price shocks and major economic recessions. One fairly recent study, from members of the Research Department of the US Federal Reserve Bank of Philadelphia, concluded that even with optimal policies, central banks cannot completely offset the “recessionary consequences of oil shocks” (Leduc, S. and K. Sill, 2004, A quantitative analysis of oil-price shocks, systematic monetary policy, and economic downturns, Journal of Monetary Economics 51, 781-808). Reducing reliance on oil may help offset such shocks, however, and the analogy to common business practices suggests that at least some extra cost is justified to smooth such fluctuations.
Until recently, countries with local resources of coal or gas might have relied on them; the greater difficulty of transporting coal and gas long distances for international trade has insulated them from some of the spikes in oil prices arising from the effects of Mideast political unrest or other issues. However, huge investments are being made to increase the shipping of coal and gas. This may reduce (but not eliminate) variability in oil prices, by broadening the total supply of easily traded fossil fuels, but likely by increasing variability in coal and gas prices.
Renewables and nuclear power typically have high construction costs, but low operating costs compared to fossil fuels; once built, the price of power from renewables and nuclear tends to be more predictable than from oil. Ironically, the fluctuations of renewable energy sources over times from seconds to seasons (wind dies, sun sets) are highly challenging for engineers, complicating construction of an energy system based on these sources; however, at longer times the fluctuations of fossil fuels are larger, with renewables offering stability and predictability for the financial side of the industry. The US Pentagon has stated that it is increasing its use of renewables and its conservation efforts in part to provide protection from energy price fluctuations (U.S. Department of Defense, 2010, Quadrennial Defense Review Report, p. 87,).
Providing for the Common Defense
Providing for the Common DefenseMilitaries around the world face the difficulty of defending their countries, and contributing to peacekeeping or humanitarian efforts. Changing conditions make this mission more challenging.
The US military, in its Quadrennial Defense Review (2010), made the often-quoted statement “. . . climate change, energy security, and economic stability are inextricably linked. Climate change will contribute to food and water scarcity, will increase the spread of disease, and may spur or exacerbate mass migration.”
The importance of climate change for security was echoed by US Navy Admiral Samuel J. Locklear III, whose duties include relations with North Korea and many other Pacific nations. When asked about the biggest threat to stability in the region, he stated that climate change “…is probably the most likely thing that is going to happen… that will cripple the security environment” over the long-term (Bryan Bender, Boston Globe, March 9, 2013).
Slowing down climate change thus may improve issues that the military considers important for national security, in the US and many other countries. If national security merits investments above those for an economically optimal path, this would tend to motivate more action now to address the coupled problems of energy and environment.
Earth: The Operators' Manual
For a little more about what the US military thinks about climate change, and what why are doing, take a look at these two short clips.
Video: The Pentagon & Climate Change (4:19)
The Pentagon and Climate Change
DR. RICHARD ALLEY: So physics and chemistry show us carbon dioxide is at levels never seen in human history. And the evidence says it's all of us burning fossil fuels that's driving the increase. But what about climate change and global warming... are they for real? Here's what those who have looked at all the data say about the future.
3RD PARTY VOICE: Climate change, energy security and economic stability are inextricably linked. Climate change will contribute to food and water scarcity, will increase the spread of disease, and may spur or exacerbate mass migration.
DR RICHARD ALLEY: Who do you suppose said that? Not a pundit, not a politician... the Pentagon.
[machine gun fire]
DR. RICHARD ALLEY: These war games at Fort Irwin, California, provide realistic training to keep our soldiers safe. The purpose of the Pentagon's Quadrennial Defense Review, the Q.D.R. is to keep the nation safe. The review covers military strategies for an uncertain world. The Pentagon has to think long-term, and be ready for all contingencies. The 2010 Q.D.R. was the first time that those contingencies included climate change. Rear Admiral David Titley is Oceanographer of the Navy, and contributed to the Defense Review.
REAR ADMIRAL DAVID TITLY: I think the Q.D.R. really talks about climate change in terms that really isn't for debate. And you take a look at the global temperatures... you take a look at sea level rise, you take a look at what the glaciers are doing, not just one or two glaciers but really glaciers worldwide, and you add all of those up together, and that's one of the reasons we really believe that the climate is changing. So the observations tell us that. Physics tells us this as well.
DR. RICHARD ALLEY: What climate change means for key global hot spots is less clear.
REAR ADMIRAL DAVID TITLY: We understand the Earth is getting warmer, we understand the oceans are getting warmer. What we do not understand is exactly how that will affect things like strong storms, uh, rainfall rates, rainfall distribution. So yes, climate change is a certainty, but what is it going to be like in specific regions of the world and when?
DR. RICHARD ALLEY: One area of particular concern to the Navy is sea level rise.
REAR ADMIRAL DAVID TITLY: Sea level rise is going to be a long-term and very, very significant issue for the 21st Century.
DR. RICHARD ALLEY: The Q.D.R. included an "infrastructure vulnerability assessment" that found that 153 naval installations are at significant risk from climatic stresses. From Pearl Harbor, Hawaii, to Norfolk, Virginia, the bases and their nearby communities will have to adapt.
REAR ADMIRAL DAVID TITLY: Even with one to two meters of sea level rise, which is very, very substantial, we have time. This is not a crisis, but it is certainly going to be a strategic challenge.
DR. RICHARD ALLEY: Globally, climate change is expected to mean more fires, floods and famine. Nations may be destabilized. For the Pentagon, climate change is a threat multiplier. But with sound climate science, Titley believes, forewarned is forearmed.
REAR ADMIRAL DAVID TITLY: The good thing is, science has advanced enough in oceanography, glaciology, meteorology, that we have some skill at some timeframes of predicting this. And if we choose to use those projections, we can in fact, by our behavior, alter the future in our favor.
DR. RICHARD ALLEY: Titley and the Pentagon think the facts are in.
REAR ADMIRAL DAVID TITLY: Climate change is happening, and there is very, very strong evidence that a large part of this is, in fact, man-made.
[Indistinct talking from military members]
DR. RICHARD ALLEY: The military is America's single largest user of energy, and it recognizes that its use of fossil fuels has to change.
Earth: The Operators' Manual
Video: Toward a Sustainable Future: "Khaki Goes Green" (4:33)
Khaki goes Green
[Indistinct talking from military members]
DR. RICHARD ALLEY: The military is America's single largest user of energy, and it recognizes that its use of fossil fuels has to change. The Pentagon uses 300,000 barrels of oil each day. That's more than 12 million gallons. An armored Humvee gets four miles to the gallon. At full speed, an Abrams battle tank uses four gallons to the mile. And it can cost as much as $400 a gallon to get gas to some remote bases in Afghanistan. Fort Irwin is a test-bed to see if the army can operate just as effectively while using less fossil fuel and more renewables. And it's not just Fort Irwin and the Army.
MARINE CORPS CADENCE: Mama, mama, can't you see...
DR. RICHARD ALLEY: At Camp Pendleton, Marines were trained on an energy saving Experimental Forward Operating Base that deployed with them to Afghanistan.
BRIGADIER GENERAL ROBERT HEDELUND, COMMANDER MARINE CORPS WARFIGHTING LAB: Before any equipment goes into theater, we want marines to get trained on it. So what are some of the things that we could take hold of right away and make sure that we can make a difference for the war-fighter down range?
DR. RICHARD ALLEY: They test out different kinds of portable solar power units. They also practice how to purify stagnant water and make it drinkable. The Army and Marines both want to minimize the number of convoys trucking in fuel and water. A report for the Army found that in five years, more than 3,000 service-members had been killed or wounded in supply convoys.
BRIGADIER GENERAL ROBERT HEDELUND: And if you've got Marines guarding that convoy, and if, God forbid, it get hit by an IED, then what are the wounded, and what are the deaths involved in that, and really, are we really utilizing those Marines and that capability, uh, the way we should.
DR. RICHARD ALLEY: Generators used to keep accommodations livable and computers running are also major gas-guzzlers.
CAPTAIN ADORJAN FERENCZY, ENGINEER OFFICER, MARINE CORPS WARFIGHTING LAB: Right now, what we are doing is putting up a power shade. It has flexible solar panels on the top, and gives us enough power to run small electronics such as lighting systems and laptop computers. It also provides shade over the tent structure. Experimenting with this equipment in Africa proved that it could reduce the internal temperature of the tent seven to ten degrees.
DR. RICHARD ALLEY: All the LED lights in the entire tent use just 91 watts, less than one single, old-fashioned incandescent bulb.
CAPTAIN ADORJAN FERENCZY: It's a no-brainer when it comes to efficiency.
DR. RICHARD ALLEY: Light emitting diodes don't weigh much, but they're still rugged enough to survive a typical Marine's gentle touch.
ZACH LYMAN, CIVILIAN CONTRACTOR: When we put something into a military application, and they beat it up, it's ruggedized. It's ready for the worst that the world can take. And so, one thing that people say is, if, you know, if the military has used this thing, and they trust it, then maybe it's okay for my backyard.
DR. RICHARD ALLEY: Renewable energy will also play an important role at sea and in the air. The Navy's Makin Island is an amphibious assault ship with jump jets, helicopters and landing craft. It's the first vessel to have both gas turbines and a hybrid electric drive, which it can use for 75 percent of its time at sea. This "Prius of the ocean" cut fuel costs by two million dollars on its maiden voyage. By 2016, the Navy plans to have what it calls a "Great Green Fleet", a complete carrier group running on renewable fuels, with nuclear ships, hybrid-electric surface vessels, and aircraft flying only biofuels. By 2020, the goal is to cut usage of fossil fuels by 50 percent. Once deployed to Afghanistan, the Ex-FOB cut down on gas used in generators by over 80 percent. In the past, the Pentagon's innovations in computers, GPS, and radar have spun-off into civilian life. In the future, the military's use of renewable energy can reduce dependence on foreign oil, increase operational security, and save lives and money.
COLONEL JIM CHEVALLIER, COMMANDER, US ARMY GARRISON FORT IRWIN: A lot of the times it is a culture change more than anything else. And the Department of Defense over the years has proved, time and time again, that it can lead the way in that culture change.
Working on a Solution
Working on a SolutionEmployment is an important and often contentious issue in most countries, with concerns about providing enough good jobs for everyone who wants one. Fossil-fuel companies unequivocally provide many jobs, and good ones. Recently, natural-gas fracking in Pennsylvania, where Dr. Alley lives, has generated many jobs (although some of them have come at the expense of coal jobs). How many? Do you count only the jobs in the industry? Or the jobs in supply industries? Or the jobs that are supported by the salaries of people in the industry and the supply industries through the money they spend? Different groups promote different numbers, which can vary greatly. Real issues underlie some of the choices—you could argue that if Pennsylvania did not produce gas, it would produce coal, or wind energy, or something, so the jobs would exist. Or, you could argue that if Pennsylvania did not produce gas, the jobs would all go to Texas or Saudi Arabia, and then you need to decide whether Pennsylvania should count jobs there or not.
With a sufficiently broad view, the most accurate assessment probably is that, if we ignore the economic good from avoided climate change, switching from fossil fuels to alternatives will have relatively little influence on employment overall, if the switch is done so as to minimize impacts or maximize gains in the economy, as described above. A small but notable body of literature points to gains in employment with a switch. And, if the advantages of an economically optimal course as opposed to a business-as-usual course are considered, gains in employment become likely. A few relevant references are given in the Enrichment. Note that although the literature on employment effects of energy choices is growing rapidly, it has not reached the level of reliability that applies to, say, the radiative effects of CO2.
Pulling a few things together
Pulling a few things togetherThe preceding sections are not a complete list of policy-relevant issues. And, as noted earlier, politics, psychology, and other issues are important. Policy choices that shift employment from one profession to another have costs for people who located, trained, and otherwise prepared for the lost jobs. And, those losing jobs have faces and names, whereas the people who will get the new jobs generally don’t know who they are, and often are still in school somewhere, so policy choices that have no effect on total employment nonetheless have real economic costs and often much larger political costs.
Nonetheless, the available scholarship shows clearly that an efficient response to climate change is economically beneficial if the costs of climate change are included. Even ignoring the benefits of avoiding climate change, the response can be made at a cost that is small compared to the whole economy (say, 1% or less, rather than 10% or more), with the possibility of the most efficient response having no effect or even yielding economic and employment benefits, while the response clearly can have benefits for national security and avoidance of negative externalities of the energy system.