When Hillary Clinton signed on to John McCain's proposal to suspend the 18.4-cent federal gas tax this summer and Barack Obama didn't, the Democratic candidates suddenly had a real substantive difference to debate.
The trouble is, there's not much to argue about. Everyone who's looked at this knows that a gas-tax holiday is a silly idea. With gasoline supplies pretty much fixed in the short term, demand will increase and the price will go back up. But instead of the U.S. government capturing that revenue, the oil companies will pocket it. Factcheck.org tried and failed to find a single economist who thought gas prices would drop as a result of the holiday. PBS couldn't find a supporter, either.
Asked about this by ABC's George Stephanopoulos Sunday, Hillary sniffed, "I'm not going to put in my lot with economists." What's it going to be then, prayer circles?
Now, you might say: There's almost zero chance this proposal will go anywhere, so what's the harm? Well, it makes no sense to say you're for "energy independence" while vowing to cut gas taxes. If anything, the U.S. government should raise the federal gas tax to at least 50 cents a gallon, not cut it. Or better yet, tax carbon and bring coal emissions into the mix, too. But above all, don't mislead voters about the choices before them.
Fortune has an interesting interview with Google cofounder Larry Page. Here he is pontificating about alternative energy, one of his company's eclectic new research areas:
Chris Hondros/Getty Images
You can be a bit of a detective and ask, What are the industries where things haven't changed much in 50 years? We've been looking a little at geothermal power. And you start thinking about it, and you say, Well, a couple of miles under this spot or almost any other place in the world, it's pretty darn hot. How hard should it be to dig a really deep hole? We've been drilling for a long time, mostly for oil - and oil's expensive. If you want to move heat around, you need bigger holes. The technology just hasn't been developed for extracting heat. I imagine there's pretty good odds that's possible.
Solar thermal's another area we've been working on; the numbers there are just astounding. In Southern California or Nevada, on a day with an average amount of sun, you can generate 800 megawatts on one square mile. And 800 megawatts is actually a lot. A nuclear plant is about 2,000 megawatts.
The amount of land that's required to power the entire U.S. with electricity is something like 100 miles by 100 miles. So you say, "What do I need to do to generate that power?" You could buy solar cells. The problem is, at today's solar prices you'd need trillions of dollars to generate all the electricity in the U.S. Then you say, "Well, how much do mirrors cost?" And it turns out you can buy pieces of glass and a mirror and you can cover those areas for not that much money. Somehow the world is not doing a good job of making this stuff available. As a society, on the larger questions we have, we're not making reasonable progress.
And yet, Page is optimistic that this progress can accelerate:
Look at the things we worry about - poverty, global warming, people dying in accidents. And look at the things that drive people's basic level of happiness - safety and opportunity for their kids, plus basic things like health and shelter. I think our ability to achieve these things on a large scale for many people in the world is improving.
Tulsi Tanti, one India's most inspiring "green" entrepreneurs and now one of the world's richest people (worth $3 billion), is facing stiff challenges with his wind power company that could either lead to its massive failure, or its unbridled success. Tanti is hailed as one of India's most globally successful businessmen in the vein of Ratan Tata and Lakshmi Mittal -- but his company is one of the few that has given India the potential to be a worldwide leader in alternative energy.
But now Suzlon Energy, which Tanti founded and now serves as chairman and managing director for, confronts two main challenges, according to Friday's Wall Street Journal. First, the 144-foot-long windmill blades the company has sold to energy firms including California's Edison Mission Energy have begun to split in some locations, and Suzlon has had to recall 1,251 blades. That represents the majority of blades the company has sold in the United States, and a cost of at least $30 million to the company to repair the cracked blades and reinforce the rest.
The second major challenge for Suzlon is gaining access to the wind industry's most advanced technology. Suzlon is actually in a prime position to do so through its 33.6 percent ownership stake in the innovative German turbine manufacturer, REpower. The problem for Suzlon, however, is that under German law, REpower can consider Suzlon a "competitor" since it does not own a majority of the company. It is therefore not obliged to transfer its blueprints to Suzlon; Suzlon would need to buy out the minority shareholders. And REpower is refusing to share the technology at present in order to protect the interests of those minority shareholders.
Nonetheless, it's unlikely that these setbacks spell major trouble for Suzlon. As of late last year, the firm had a $3.5 billion order backlog, and wind power demand in general has been growing significantly. With its green credentials and the fact that oil is continuing to hit record highs, wind power is set to remain popular. Moreover, Suzlon has withstood plenty of other challenges since its founding in 1995: the withdrawal of tax breaks in India, competition with major Western companies to acquire other foreign firms, and overseas expansion -- including cracking into the U.S. and Chinese energy markets. Suzlon's annual sales amount to $1.8 billion, and its profits are growing. The WSJ reports that it probably won't be able to make a tender offer for REpower until 2009. Even so, given Suzlon's history I'm expecting the deal to go through, and for Tanti to look back on these problems as minor glitches. And if you live in the United States, don't be surprised if part of your electricity payments soon end up in Suzlon's coffers.
The European Union just took what it hopes will be a crucial step toward escaping its dependence on Russian natural gas.
EU External Relations Commissioner Benita Ferrero-Waldner told the Financial Times that Turkmenistan's President Gurbanguly Berdymukhammedov (left) promised last week to supply the EU with 10 billion cubic meters of gas per year in addition to what it is already supplying to Russia and China. The EU has been pushing hard for a deal like this ever since the death of Turkmenistan's former leader, the lunatic isolationist Saparmurat Niyazov.
The only problem is, no one is exactly sure how they're going to get the gas to Europe:
There were three short-term options, Mrs Ferrero-Waldner said. One would be to close a 60km gap between Azeri and Turkmen offshore installations with a mini-pipeline. Another would be to build an onshore link to Kazakhstan, to connect with a route to Azerbaijan. The third would be to compress the gas into liquid form and take it by tanker across the sea.
The hope is that Turkmen gas fields can eventually supply the proposed Nabucco pipeline across Turkey. Unfortunately, the first leg of the pipeline won't be operational until at least 2013. (China, on the other hand, will have its own Turkmen pipeline up and running by next year.)
According to Eurasianet, the Russian response has been muted, with analysts pointing out that given Europe's 500 bcm yearly gas needs, 10 bcm is small potatoes:
For example, the Rosbalt news agency quoted Alexander Shtok, a Moscow economic analyst, as asserting that EU officials had sought a greater commitment from Berdymukhamedov. Thus, the EU mission to Ashgabat was "unsuccessful," Shtok contended. Other experts, citing Turkmenistan’s tangled involvement in the Russian-sponsored Prikaspiisky pipeline, say that Berdymukhamedov can be quick to agree on a deal, but is capable of stalling when it comes to implementation.
Ferrero-Waldner acknowledged that the commitment was not a "vast quantity" but described it as a "very important first step." Given that most of Turkmenistan's reserves have not been developed, and those that have been are under contract until 2028, a lot more big steps are going to be needed if Europe plans to break its Russian gas habit.
Though, if it doesn't work out, there's always Iran.
EU Energy Commissioner Andris Piebalgs has a great new blog, and he's wasted no time in taking on a controversial issue. Biofuels have taken a lot of hits lately, but Piebalgs says the relationship between them and food prices is overblown:
Biofuels, have become a scapegoat for recent commodity price increases that have other causes – poor harvests worldwide and growing food demand generated by increased standards of living in China and India. In Europe, we use less than 2 percent of our cereals production for biofuels, so they do not contribute significantly to higher food prices in the European context. Even if we reach our 10% biofuels target by 2020, the price impact will be small. Our modeling suggests that it will cause a 8 to 10% increase in rape seed prices and 3 to 6% increase in cereal prices. Increase in the price of the latest has very small influence on the cost of bread. It makes up around 4 per cent of the consumer price of a loaf.
Even if price food price distortions are minor, I'm still not convinced the biofuels are worth the trouble given that it's not entirely clear whether they really do anything to reduce greenhouse emissions once land clearance is taken into account. Still, Piebalgs' blog should be great opportunity to hear from an informed voice in the debate.
The focus of the seminar I'm attending here in Salzburg is figuring out what Russia will be like in 2020. It's no small task, since Russia's political and economic development in the past few decades has been notoriously unpredictable.
One thing we do know is that the future of Russia will largely be determined by oil and gas, at least in the near term. Oil and gas account for about 20 percent of Russian GDP and more than 60 percent of its exports. The rest of the economy depends heavily on energy. As one panelist put it today, oil is like the blood of the economy, so you can't think about it solely in percentage terms. You can't live without blood, no matter what its percentage of your body weight might be.
The recent high oil prices have a great deal to do with Russia's democratic backsliding, as Thomas Friedman argued in "The First Law of Petropolitics." Oil revenues allow the Russian state to satisfy its citizens without granting them greater political rights. So, if you want to understand where Russian politics are headed, you need to know where oil prices are going to go.
But here's the problem: Nobody has a clue what oil prices will look like in 2020. As one of the presenters pointed out, even people you would think would be the top experts on this issue are usually wrong. Take the case of former BP CEO Lord Browne, who told a crowd at the Peterson Institute back in 2005 that he expected "a price that stabilizes at around $30 a barrel." Whoops. Today, oil prices are just under $107 per barrel.
If oil-company CEOs can't predict the future accurately, what about the oil futures market? In theory, oil traders ought to know better than anyone where prices are headed, since their livelihoods depend on making sound decisions. In reality, though, oil futures prices are almost always just an extrapolation of today's prices into the future. If oil is $10 a barrel today, the futures market will guess that it will be $10 tomorrow.
The obvious implication here is that anyone trying to forecast Russia's future is in big trouble. Another implication is that Dmitry Medvedev is only going to be able to shape Russia's development on the margins. More on that soon.
Blake Hounshell is Web Editor of ForeignPolicy.com. He has been blogging this week from the Salzburg Global Seminar session on Russia: The 2020 Perspective.
Is the U.S. State Department really backing plans that would make Iran Europe's next major source of natural gas?
According to John Rosenthal in World Politics Review, the answer, surprisingly, is yes.
Starting last month, the State Department began to openly and enthusiastically back plans for the Nabucco pipeline, a largely European-owned line that will bring gas through
The problem with all this enthusiasm, however, is that if Nabucco does indeed "make sense," the virtually universally held and more or less openly expressed opinion of the key European decision-makers is that it precisely does not make sense without the inclusion of Iranian gas supplies."
And he could be right. The Nabucco pipeline, as originally planned, would draw on Azeri gas from the Shah Deniz fields in the
Which leaves us with
Nicolas Sarkozy has been raising quite a few eyebrows since he assumed the presidency, not least by leveraging French civilian nuclear expertise to gain diplomatic advantage in the Middle East. This week, the International Herald Tribune noted "unease" among nonproliferation experts "at the idea of exporting potentially nuclear-bomb usable technologies to proliferation-prone regions." The article also notes that, even putting proliferation concerns aside, obstacles to the large-scale spread of nuclear power exist -- some of which include high infrastructure costs, waste management issues, and personnel shortages.
France is not the only country seeking ways to surmount such obstacles, though. The U.S.-led Global Nuclear Energy Partnership is one of the best known of these initiatives. The core proposal behind GNEP is to employ advanced reprocessing technology to close the nuclear fuel cycle as much as possible. This entails recycling burnt nuclear fuel over and over until it is no longer useful for producing electricity or weapons. In so doing, GNEP aims to increase effective fuel supplies, decrease the amount of waste produced by nuclear power plants, and reduce the danger of nuclear proliferation. As initially conceived, existing nuclear exporters would (exclusively) perform enrichment and reprocessing services and provide them to any GNEP partner that agreed to refrain from enriching or reprocessing fuel on its own.
So far, it has signed on 21 nations as partners and has several others observing or interested. Most recently, the UK joined, praising GNEP for promoting "responsible nuclear development." In theory, this all sounds great, but GNEP has been attacked from several angles. Perhaps most crucially, the National Academies of Science and Engineering found that the required technologies are "too early in development" to justify large-scale implementation. Others (pdf) argue that reprocessing is economically unsound (at least for now); that waste issues won't be eased significantly; and that, using current technology, the initiative may actually be more proliferation-prone than the current nuclear fuel cycle.
As a result, Congress slashed funding for GNEP in the FY2008 budget, but the Bush administration has requested a significant increase for FY09. In addition, the program does seem to have broad international appeal. Partners include countries as widely spread as Bulgaria, Ghana, Poland, Senegal, and South Korea. With so many other nations involved, GNEP seems likely to persist in some form despite congressional opposition. But given the state of reprocessing science today and the political restrictions under which it operates, GNEP will likely undergo some significant changes in the future.
Speaking Wednesday about his vice president's impending trip to the Middle East, President George W. Bush told reporters that Dick Cheney would try to make the standard case that Saudi Arabia should increase oil production to head off a U.S. recession. And he added another wrinkle, saying that Cheney would remind King Abdullah that "high oil prices are stimulating an enormous amount of venture capital money into alternative forms of energy."
It's an interesting negotiating ploy, given Saudi Arabia's role in flooding the market and killing off alternative forms of energy in the 1980s. I'm sure King Abduallah remembers it well. The question is, at what oil price point are various competing technologies -- biofuels, plug-in hybrids, hydrogen -- economically viable (leaving aside their environmental benefits)? And do the Saudis have the means to lower the price of crude below that level?
In 2006, Thomas Friedman argued in an FP cover story that "the price of oil and the pace of freedom always move in opposite directions." The price you pay at the pump is another matter. In a column for the Guardian, Julian Borger examines the excessive fuel subsidies that allow Iranian drivers to enjoy gas at about 12¢ per liter. There are, of course, numerous side effects to contend with -- clogged roads, air pollution, forced rationing, and less incentives to build refineries -- but Iranians remain stubbornly attached to their cheap gas. Borger sees a limitation on Tehran's political power:
Everyone I talk to, including officials, realises that the petrol subsidies make no sense, but no government since the 1979 revolution has had the political courage to cut them. If Condoleezza Rice was right about Iran being a totalitarian society, popular opinion would not matter, but it clearly does.
Venezuela's Hugo Chávez could probably sympathize. Chávez has succesfully extended his control over the country's judiciary, legislature, and media, but Venezuelans have made it quite clear that he shouldn't even think about touching the subsidies that let them fill up their SUVs for about $1.50:
The link between social peace and gasoline so cheap it is almost given away is evident to many motorists. "If you raise gasoline, the people revolt,” said Janeth Lara, 40, an administrator at the Caracas Stock Exchange, as she waited for an attendant to fill the tank of her Jeep Grand Cherokee at a gas station here on a recent day. "It is the only cheap thing."
Chávez, correctly for once, sees the subsidies as an unfair tax on the non-car owning poor, but politically he can do little more than grumble that he didn't take power to lead a "Hummer revolution."
It's incredible to me that these governments are not shy about attempting massive feats of social engineering, but are afraid to raise gas prices for fear of getting people riled up. Despite all the enormous economic and environmental consequences, both regimes are essentially forced to bribe their middle class with cheap gasoline. It doesn't seem like a very stable arrangement.
Michael Specter of the New Yorker, as he tends to do, files a brilliant article on a subject that you would think has been beaten to death: climate change and carbon footprints. It's a must read. (I still recommend his 2006 article on water scarcity to anyone remotely interested in development.)
Even though the article isn't just a fact barrage, there are some salient factoids worth pulling out:
Ethanol is a product that would not exist if Congress didn't create an artificial market for it. No one would be willing to buy it... Yet thanks to agricultural subsidies and ethanol producer subsidies, it is now a very big business - tens of billions of dollars that have enriched a handful of corporate interests - primarily one big corporation, ADM. Ethanol does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality."
-John McCain, November 2003
I support ethanol and I think it is a vital, a vital alternative energy source not only because of our dependency on foreign oil but its greenhouse gas reduction effects.
-John McCain, August 2006, Grinnell, Iowa
The widespread use of ethanol from corn could result in nearly twice the greenhouse gas emissions as the gasoline it would replace because of expected land-use changes, researchers concluded Thursday. The study challenges the rush to biofuels as a response to global warming.
-Associated Press, February 7, 2008
McCain has more often than not spoken against subsidies for corn-based ethanol, and he therefore claims he's been consistent on this issue. Sort of. Here's him trying to explain his ethanol flip-floppery to Tim Russert back in 2006, when he was still planning to contest Iowa. Judge for yourself whether you find it convincing.
As for Barack Obama, winning Iowa was the linchpin of his electoral strategy, and pander he did. And Hillary Clinton? She says she opposed ethanol subsidies on behalf of her New York constituents, but supports them as a presidential candidate—big time.
Nobody, in other words, looks good on this issue right now.
Europe's top election-watchdog group may not have gotten the welcome it wanted from neighboring Russia, but Deep Purple—best known for its hit "Smoke on the Water"—is getting the presidential treatment. Gazprom, Russia's state-owned energy company, has invited the band to perform a concert celebrating Gazprom's 15th anniversary and the departure of company head Dmitri Medvedev.
Apparently Medvedev, Russia's president-to-be, says the '70s British rock group is his favorite band. And he's not the only Deep Purple fanboy among the Russian elite. Last year, Medvedev and 70 other Russian business and government leaders invited the band's former lead singer Joe Lynn Turner to Moscow for a secret concert during Turner's Russian tour.
The Moscow Times has reported that Putin is expected to make an appearance at the upcoming show, but it might not be his cup of tea:
Putin is known to enjoy patriotic Russian pop songs. It was not clear if the concert lineup would have anything to suit his tastes.
When pricing a house next door to the contaminated site of a former uranium smelter, even a house with waterfront access, most realtors would aim low. In Sydney, though, one such house is on the market for roughly $3.6 million. The realtor describes the site nearby, full of radioactive dirt contaminated with "traces" of uranium and thorium, as just "a slight variation from the norm."
Not surprisingly, the house has been on the market for awhile. Many potential buyers have expressed interest, but so far nobody has purchased it (the crackle of Geiger counters from across the street may have something to do with this). As nuclear power expands, though, it is worth examining just how dangerous such contamination can really be.
Few specifics about the case in Sydney have been released, but it is possible to speak generally about the materials involved. Uranium is only mildly radioactive, and exposure even to high levels of uranium is not known to cause cancer (high levels, if ingested, can cause kidney and tissue damage, though). So, "traces" of it are unlikely to be dangerous. Thorium can give you cancer if you inhale it in large amounts (or possibly when you ingest it), but has not been known to cause birth defects or fertility problems, as some other radioactive materials can. Again, "traces" of thorium are likely harmless.
The wild card in this situation is the radioactivity from the soil. When certain types of powerful radiation encounter everyday materials, those materials can become "activated." In other words, they become radioactive (to a weaker degree) themselves. However, after nearly a century, the soil at this site in Sydney would have reverted to a very low, though perhaps above "background," level of radioactivity. (The New South Wales government and an independent consultancy say the radiation level is higher than background, but safe.)
While a higher than usual level of radiation in the area sounds scary, it is probably not all that dangerous. Many studies have found that constant exposure to low levels of radiation does not pose a health risk. One study, performed by the U.S. National Cancer Institute, found no increased cancer risk for people living near 62 large nuclear facilities. If nuclear power spreads, we should remain vigilant, but there is no need for paranoia.
India and Bulgaria have both declared 2008 "The Year of Russia" (putting Russia up there with its beloved tuber).
For India, the celebration has meant little more than a Russian-themed World Book Fair. But in Sofia, Bulgarian leaders rang in the Russian year with the signing of a controversial energy deal that allows Russia to build both a nuclear power plant on the shores of the Danube and a gas pipeline across Bulgaria, linking the Caspian basin to European markets.
Russia's presence in Bulgaria's energy market is nothing new, but it should not be overlooked. In a country already covered in Russian Lukoil gas stations, Bulgarian analyst Ognian Minchev says:
There is a danger not only of a monopolization of the energy sector, but also a potential for direct geopolitical influence over the decisions of Bulgaria's future governments."
Bulgaria's current government is still controlled by the Bulgarian Socialist Party, the successor to the country's pre-1990 Communist Party. Bulgarian voters will likely reject this Cold War relic in next year's elections, but Russia is keen to insure that any change in government leadership don't lead to much in the way of policy change.
If the pipeline goes through, Bulgaria's energy deal will have repercussions outside the former Soviet satellite state. For more than a year now, European countries have been flushing out plans for the Nabucco pipeline, which would bring Middle Eastern gas to European consumers, also via Bulgaria. Its successful completion would give the EU an alternative to Russian oil, but according to The Economist the completion of the Russian pipeline would render Nabucco – a nearly $7.4 billion project – "uneconomic."
In a sweeping New York Times Magazine essay this Sunday on the new global order, FP contributor Parag Khanna dismisses growing Western fears about an aggressive Russia, noting that "some E.U. officials say that annexing Russia is perfectly doable" and dissing the country as an "increasingly depopulated," second-world "swing state." That may be so, but if Russia completes this new pipeline, its swing will be a little mightier.
This week, U.S. Central Command chief Adm. William J. Fallon is quietly reaching out to everyone's favorite Central Asian dictatorships: Uzbekistan and Turkmenistan.
Uzbekistan, you may recall, is the country with which the Pentagon broke off a basing agreement back in 2005, not long after government forces massacred nearly 200 civilians in the eastern Uzbek town of Andijan and U.S.-Uzbek relations went sour. Tentative contacts between the two countries have been underway since late September, though, as the U.S. military has grown increasingly concerned about the situation in Afghanistan and its supply lines in Pakistan. The United States is also seeking to undercut Russia's ability to play hardball with Central Asian energy resources, and rescue pipeline projects that have been threatened by savvy Russian and Iranian moves. So what it Uzbek President-for-life Islam Karimov boils dissidents alive and has unarmed civilians gunned down in the streets? He's in a strategic location.
Fallon has previously denied suggestions that the United States would reopen its air base in Uzbekistan. And so far, it appears that nothing substantive has come of Fallon's Thursday meeting with Karimov. Of course, that's normal with these types of touchy, under-the-radar missions.
In particular, Washington is keen to secure Ashgabat's participation in the long-planned Trans-Caspian Pipeline (TCP), a route that would circumvent Russia... Turkmen leader Gurbanguly Berdymukhamedov has expressed interest in the project, but has yet to make any firm commitment.
Turkmenistan is also in a bit of a spat with neighboring Iran over gas prices, so perhaps Fallon is sensing an opportunity to bring Berdymukhamedov into the anti-Tehran camp. But as I'm sure the admiral well knows, Central Asian leaders are wily negotiators with a history of using Western powers to gain leverage with Moscow. They might just be hinting at warmer ties with Washington in order to get what they want from the Russians. So, on which level is this great game is being played?
Last summer I wrote briefly about the "nuclear renaissance," the widely anticipated shift to nuclear power as oil prices skyrocket and concern about global warming increases. Such anticipation has given rise to comments like this one, from the head of the French nuclear giant Areva:
We are facing a nuclear renaissance. Nuclear's not the devil anymore. The devil is coal."
Earlier this month, predictions of a nuclear renaissance were seemingly borne out in Britain, when the government announced its support for the construction of new nuclear power plants in the country to replace the current, aging fleet of reactors. All but one of Britain's nuclear power plants, which together supply 20 percent of the country's electricity, are slated to close by 2023. Because the lead time for constructing new reactors is so long (due to regulatory and construction requirements), a decision to replace the current fleet must be made soon.
The fine print of the British government's decision, though, highlights just how uncertain the nuclear renaissance still is. Energy companies will almost certainly pay the full costs of building and operating the new plants in the UK, but it remains unclear whether this will be economically feasible for them—especially since the government hasn't determined how nuclear waste will be disposed and who will pay for it. But the British public is warming to the idea of nuclear power, so there may be increasing pressure on policymakers to find solutions to these issues.
Not so in Germany, where opposition to nukes remains deeply entrenched. A program to completely phase out the country's nuclear power generation has been in place for seven years. Politicians and the public remain supportive of eliminating nuclear power, but polls show most Germans have no sense of how much their country currently relies on nuclear energy. This may have something to do with Germany's near-fanatical fondness for solar power. Polls also show that 63 percent of Germans believe solar power can provide most of their energy needs over the next three decades. (In fact, only 0.4 percent of cloudy Germany's electricity is solar-generated.)
With prospects for a global nuclear renaissance still murky, it should not be surprising that the big nuclear energy companies like Areva in France or RWE and E.ON in Germany are casting their sights on Britain for new business opportunities. Within Germany, though, we may soon find out whether other types of low-carbon energy sources are ultimately feasible for large-scale electricity production. If not, technologies like nuclear energy or carbon capture for coal power will need a second look.
The United Arab Emirates (UAE) has just officially unveiled its plans to build the world's first carbon-neutral city. Situated on Abu Dhabi's desert outskirts, "Masdar City" is designed from the ground up to be the first completely environmentally sustainable city and a hub for renewable energy research. The UAE's rulers hope Masdar will eventually house at least 1,500 businesses and 50,000 people, powered by solar and other renewable energy sources.
Residents will be able to get by on foot, despite the region's blistering climate, thanks to architectural techniques that promote shading and help generate cooling breezes. Stops for the city's solar-powered "personalized rapid transport pods" will be no further than 200 meters apart. Lord Norman Foster, the founder and head of the architectural firm in charge of the Masdar development, said the project "promises to set new benchmarks for the sustainable city of the future." Is he right? Is the project even viable?
Ann Rappaport, an urban and environmental policy specialist at Tufts University, spoke with FP about the project a while back. She seems to share Foster's optimism:
[F]or almost everything, it's easier to do it right the first time. That's true of a new building versus renovating an old building, [so] why shouldn't it be true of [building] a new city, [rather] than transforming an old one? ...
[Y]ou can think about spatial patterns, you can think about their notion of creating walkable spaces... shading—all these things that we now understand to be very important to our carbon budget. We just weren't thinking about that hundreds of years ago when our major world capitals were developed. So that's exciting.... [Your first reaction may be that this is] a city in the middle of a place that others might define as a desert. On the other hand, I think that climate change is challenging us all to think about where the good locations are for human development.... When many of the world's foremost cities were developed, we were looking at transportation access by boat, and now that means that these cities are really vulnerable to sea level rise... [T]he prospect looks attractive, and perhaps the devil's in the details, but it’s not a ludicrous concept.
No country needs this type of innovative thinking about the environment more than the UAE, designated by the World Wildlife Fund as the country with the world's worst per capita ecological footprint. Obviously, one project is not enough to exonerate the country's wasteful and unsustainable practices. But at least it's a start.
Justin Logan of the Cato Institute and Matthew Yglesias of the Atlantic Media Empire protest that, contra my short post about U.S. President George W. Bush and his relationship with the Saudis, the United States needn't coddle King Abdullah.
There's nothing about the fact that [the United States]–or Europe, or China, or Japan–consume oil that mandates that we play kissy-poo with Abdullah or anybody else. There are a few theories why we would want to kiss up to the Saudis, and none of them hold water.
The United States has what I'd deem an unduly chilly relationship with Venezuela at the moment, but the oil still flows and Citgo stations are still around. The process by which oil-rich states in the Persian Gulf export oil to oil-consuming states is a business arrangement for mutual advantage driven by the exchange of money for fuel.
Here's the thing. As the only country with spare production capacity, Saudi Arabia plays a vastly different role in the global economy than does Venezuela. Unlike Chávez, the Saudis have the power to control the price of the marginal barrel of oil. Until the U.S. economy becomes much less dependent on oil than it is today, that means the Saudis get treated with special deference. Hence the aforementioned kissy-poo.
Logan maintains that Saudi Arabia chooses to expand or cuts back on production based on its own economic self-interest, not because a U.S. president begs it to. We have differing views on the 1970s oil embargo, obviously. Today, Saudi Arabia regularly prevents OPEC from cutting back on production, in line with U.S. requests. And then there's petrodollar recycling—the practice of investing money back into Western economies, often at key times and in key sectors. Surely this is all coincidence?
Perhaps a more hands-off approach to Saudi Arabia would work, as Logan and Yglesias suggest. But no U.S. president has dared try it yet.
UPDATE: Gal Luft has a different take on Bush's begging in Saudi Arabia.
The European Union is reexamining its biofuels policy after finding evidence that increased demand might be endangering rainforests and causing other nasty side effects:
A couple of years ago biofuels looked like the perfect get-out-of-jail free card for car manufacturers under pressure to cut carbon emissions...Since then reports have warned that some biofuels barely cut emissions at all - and others can lead to rainforest destruction, drive up food prices, or prompt rich firms to drive poor people off their land to convert it to fuel crops.
It's hard not to get excited about the biofuel breakthroughs on the way (switchgrass, anyone?), but sorting out sustainable supply chains will take some time. One thing seems clear: Ethanol from corn ain't the answer. And with the Iowa caucuses now behind us, some presidential candidates may even be able to say so.
Over the last few weeks, there's been a lot to digest in the oil world, particularly as presidential candidates traveled through cold New Hampshire with heating oil futures pushing $2.70 per gallon. And, of course, the infamous $100/barrel crude oil price.
The debate over the role of trading will not go away, particularly because it appears that a trader overpaid slightly to push the price into the triple digits and claim to be the first to buy $100 oil. With that in a mind, here are a few threads to think about.
While oil prices have fallen from their highs, the supply outlook in two key producers doesn't look so hot. Russia looks to stay roughly flat this year. And it appears that Mexico's production is unlikely to pick up to the say the least, as the state-run Pemex appears to be in dire straits. Pemex General Director Jesus Reyes Heroles says: "The situation of Petróleos Mexicanos is critical and merits immediate attention."
The upstream (getting it out of the ground) segment of the oil industry today is shaped by resource nationalism, high prices, and supply constraints. These three things together mean that oil rich countries want the latest in upstream oil technology but would rather not deal with the western oil majors. BusinessWeek has an excellent story on Schlumberger, a high-tech oil services firm that is thriving in this new environment.
Just to keep you on your toes, John Cassidy argues in Portfolio that the dynamics of supply and demand will push oil prices down to $50 within the next three years. That's not an extreme position, as I'm sure some would argue that a recession in the United States could make $60 a reality this year.
But if prices continue to stay in this general high-ish area, keep an eye on the budgets of developing countries with fuel subsidies. India is running up a huge subsidy bill already, and Indonesia and Malaysia feeling the pain as well.
Yesterday's brief foray into $100-a-barrel oil territory was due to "an independent trader apparently intent on securing his place in market history," according to the Financial Times. The unnamed trader bought 1,000 barrels, the minimum allowed, and sold them shortly thereafter for a loss.
In theory, it's a meaningless number. But markets are not simply mechanistic aggregators of supply and demand; they're deeply psychological. So the fact that the price of oil briefly surpassed $100 a barrel today is significant. Many people will be wondering if the high prices mean that we're finally running out of oil—that the peak that some folks have been warning about is finally upon us. FPTV recently sat down with Vijay Vaitheeswaran, who wrote "Think Again: Oil" for our November/December issue, and Robert L. Hirsch, the lead author on a famous report about peak oil, and got very different perspectives on that vital question.
Check out the video here:
Reducing dependence on foreign sources of energy is a stated policy goal of the United States. You might think, therefore, that the United States would be eager to take part in an international research effort to harness the energy released by fusion reactions like those that occur in the Sun. But you'd be wrong. Congress just cut the U.S. contribution to the $12 billion International Thermonuclear Experimental Reactor (ITER) project, a collaboration between the European Union, China, India, Japan, South Korea, and Russia.
In theory, fusion technology has the ability to provide massive amounts of energy with less radioactive waste and little pollution. Sounds good, right? Of course, the technology is very experimental and rife with such minor problems as, oh, how to heat atomic nuclei to the 100 million degrees required in a fusion reaction and still generate more energy than was used in the process. It may sound like something from Star Trek, but the rewards that could be gained by investing in such technology are astonishing. The United States might someday be able to retire older nuclear fission plants, reduce coal power emissions, and maybe even end imports of oil from unstable regions of the world.
Too bad the U.S. Congress doesn't feel the same way. Along with slashing technology budgets in other areas of crucial R&D research, Congress couldn't be bothered with funding a $149 million commitment to the ITER project for the upcoming year. The 2008 energy and water bill does provide funding for alternative technologies such as solar power ($200 million), ethanol ($250 million) and hydrogen-cell cars ($235.4 million). Fossil fuels managed to grab the biggest piece of the "alternative energy" pie with $708.8 million in funding.
With all the gains that might someday be realized by fusion technology for such a small investment, it makes you wonder where the United States' priorities really lie.
Bolivia appears to be on the verge of a constitutional crisis after four of its richest states declared their autonomy over the weekend. At issue is a new draft constitution—approved by supporters of President Evo Morales—that leaders in the energy-producing lowland states of Santa Cruz, Tarija, Beni, and Pando fear will put the country on the path to Hugo Chávez-style socialism. The new constitution would greatly increase the power of the presidency and give the central government greater control over the economy. There is a racial aspect to the split as well. The mostly European population in the lowlands object to new policies that would redistribute wealth to Bolivia's indigenous population, of which Morales is a member.
The state governments are now seeking support for a referendum that would place elections, public works, roads, and telecommunications under state control and protect private property rights to prevent redistribution of land. Morales meanwhile has declared their actions unconstitutional and placed the military on high alert. It should be stressed that this is a bid for greater local autonomy, rather than a declaration of independence like the one Kosovo will likely make in the next few weeks. However, Stratfor outlines how the situation could easily spiral out of control:
Morales cannot allow the country's sources of income to flout the authority of the center, and the lowlands cannot allow Morales to usurp both political and economic power from them. The questions now are: can Morales muster enough force to impose his will on the lowlands? Or can the lowlands resist?
Neither side has openly discussed the issue of secession or civil war, but once one security force starts firing on another, that is the next logical step.
That seems bit overly dramatic, but with Morales signing a $750 million deal with Brazil this week to exploit Bolivia's oil and gas reserves (most of which are in the lowlands), he certainly can't afford to lose control over his energy supplies. Could we be witnessing the birth of Latin America's Kurdistan? As Tyler Cowen complained on Sunday, this story should really be getting more attention.
Where's the most car-crazy place in the world?
An easy question, right? Of course it's United States, where the U.N. estimates there are 776 cars for every 1,000 people. But other countries are catching up. China has held the top spot for new-car sales for several years, and by 2012, India is projected to take over as the world's fastest-growing car market.
Indian officials are preparing for the jump. Along with the biggest highway-construction boom since independence, India will also be raising its speed limits from the current upper limit of 80km/h (48mph) to 100km/h (60mph), thereby lopping nearly 3 hours off the trip between New Delhi and Mumbai.
With all the highways and faster speed limits, India might have to come up with a better driver's licensing scheme. That is to say, the country might actually need to develop one. No driving test is required to obtain a license despite India's 96,000 traffic fatalities each year.
Cars seem to be a global right of passage for fast-developing countries, but with more cars and higher speed limits, critics are already complaining. With higher speeds generally comes lower fuel efficiency, increased carbon emissions, and higher global oil prices. Despite billions in new highway spending, increased public transportation is not in India's plans.
China and India both seem to look at the U.S. transportation system as a model worth replicating, but it's a system that was developed over 50 years ago at a time when oil was cheap and efficiency was not a concern. It's time to get a new model.
Update: It seems that this post has generated a bit of criticism from The Other Side, which takes exception to my characterization of the Indian driver's licensing system and the efficiency of motor vehicles. I'm not one to shy away from criticism so allow me to clarify two points:
The Economist has a great cover story about the rising price of food, a main reason for which is a U.S. policy that supports the development of ethanol made from corn (the rise of Asia is another major factor, but that's a good thing). Read the piece for the full account of what is going on and why it is so dangerous, but in the meantime, ponder this graphic:
On Tuesday, CNBC's popular stock-picker Jim Cramer discussed oil supply constraints at length, explaining why he likes ConocoPhillips because it's one of the few firms that really thinks oil prices are staying high and is investing accordingly. Most companies tend to evaluate projects for viability at around $40 per barrel of crude. That's mainly because the rise in oil prices has been moving higher than the supply-demand fundamentals suggest they should, which we have discussed recently (here and here). Cramer thinks ConocoPhillips is "ahead of the curve" and is well-positioned to take advantage of the current market.
In making his case, Cramer read a quote from a recent presentation by ConocoPhillips CEO Jim Mulva that I think is significant coming from an industry leader, given that is sounds a lot like a measured endorsement of peak-oil theory:
Talking a little bit about the supply challenge. This is a slide that's been prepared by International Energy Agency and it just shows if you take all of the oil production around the world today, say, 86 million barrels a day, the natural decline on average is about 8% a year.
"So, if we're going to stay with 86 million barrels a day, we've got to be out there adding 6 or 7 million just to stay flat. So the question is, where is that all going to come from when you see Saudi, Arabia saying they're going to go to 12 million to 12.5 million and maybe up to 15 million barrels a day? How is this going to happen? It's not so important just what I think or say, but I know we've been saying for the better part of nearly 12 months. Personally, I don't think we're going to see --- for three reasons, I don't think we're going to see the supply go over 100 million barrels a day. The reason for that is, where is it all going to come from?
"Second, it's going to be from a climate change greenhouse gas emission? I'm not so sure that the world, even if you could get up to those levels, would allow us it be done. So we have -- Demand maybe going up, but it's going to be constrained by supply."
The transcript of the presentation is unfortunately not available online, as it comes from the November 2007 Merrill Lynch Global Energy Conference.
The idealized carbon tax is an almost perfect example of what Coase famously called "blackboard economics": abstract economic theory that proceeds by ignoring a detailed knowledge of the actual economic system. You can't separate the "merits" of a carbon tax from the "politics" unless you want to compare the kind of carbon tax you could create in the imaginary world where you are absolute dictator to the alternative policies that have to be developed in the real, messy world of democratic politics. It is this practical recognition that explains why all those "dumb" politicians are blind to the incredible elegance of this academic creation.
Manzi raises a number of serious questions, among them the most crucial one of all: political viability. It's true that the need for a carbon tax might be difficult to explain to voters and a challenge to enact, but that's why you have public advocacy campaigns. That's what presidential leadership is for. And a gas tax, at least, is hardly fantasy. Consider this NYT/CBS poll from February 2006:
It remains an open question, though, as to whether having to pay more for gas would lead U.S. consumers to drive their freedom capsules any less or switch en masse to hybrid vehicles—and thereby reduce energy consumption and dependency on foreign oil. Consider this new study by economists Dora Gicheva, Justine Hastings, and Sofia Villas-Boas, who say that Americans just cut back on grocery bills when the price of gas goes up:
On average, consumers are able to decrease the net price paid per grocery item by 5-11% in response to a 100% increase in gasoline prices. Our results show that consumers respond to permanent changes in income from gasoline prices by substituting towards lower-cost food at the grocery store and lower priced items within grocery category.
Let me get this straight. Barack Obama's team is now claiming that supporting ethanol is evidence of political courage? So it seems. Responding to a Clinton jibe on missing controversial votes in the Senate, Obama spokesman Bill Burton said the following.
The truth is, Barack Obama doesn't need lectures in political courage from someone who followed George Bush to war in Iraq, gave him the benefit of the doubt on Iran, supported NAFTA and opposed ethanol until she decided to run for president."
It takes a brave soul to pander to Iowa farmers from day one.
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