Thursday, October 27, 2016

Turning Up the Heat: Nations Cut Use of AC Chemicals to Stop Climate Change

By Joni Sliger, Energy Fellow
President Obama has pushed a strong climate change agenda,
including renewable energy deployment and international action.
Credit: The White House

Earlier this month, even as U.S. efforts to  address greenhouse gas emissions from the energy sector remained locked in a legal battle, the U.S. and almost 200 other countries formed a new international agreement to combat climate change. In Kigali, Rwanda, world leaders met this month for the 28th Meeting of the Parties to the Montreal Protocol and agreed to monumental cuts in the use of potent greenhouse gases known as hydrofluorocarbons.

Hydrofluorocarbons, or HFCs, are popular refrigerants used for air conditioning systems and refrigerators. HFCs have been the primary chemical replacement for ozone-depleting chlorofluorocarbons, which themselves were eliminated by the Montreal Protocol (although a new NASA study notes that HFCs also deplete ozone). However, HFCs are also known for their strong greenhouse gas effects; HFCs are 120 to 12,000 times as potent as greenhouse gases than carbon dioxide.

Under the Kigali Accord, countries agreed to specific timetables for freezing HFC production and for reducing consumption thereafter. The timetable varies: by 2019, developed countries must reduce use by 10% from 2011–2013 levels, and by 85% by 2036; many developing countries (including China and Brazil) agreed to peak use by 2024, and other developing countries (including India and Pakistan) agreed to freeze use by 2028. The relaxed timetable for some countries recognizes in part that air conditioning could be more expensive with chemicals besides HFCs or CFCs and that air conditioning may be a necessity rather than a luxury in heat-stricken areas. Admirably, many developing countries voluntarily joined the midlevel timetables rather than the lowest level they could have chosen; leaders noted that combatting climate change had become a greater prerogative than expanding access to luxuries like air conditioning or refrigeration. 

By cutting production and consumption of HFCs by over 80% by 2050, the Kigali Accord promises to avoid more than 80 billion metric tons of CO2-equivalent, possibly avoiding up to 0.5°C of climate change. That is a significant amount for the world to avoid. Recall, for comparison, that under the United Nations Framework Convention of Climate Change, nations agreed that a rise of 2°C over preindustrial levels is the amount of change the world must avoid to prevent catastrophic climate change. Unfortunately, earlier this year, the atmospheric concentration of CO2 exceeded 400 ppm, the level scientists say is necessary to avoid 2°C of climate change. Even though the world may already be on set to exceed the 2°C goal, however, the scenarios predicted by the Intergovernmental Panel on Climate Change become increasingly catastrophic with greater temperature increases. The Kigali Accord may not be enough for the world to reach its original goal of avoiding 2°C, but it still represents a significant and major action in the fight against climate change.

Proponents note the Kigali Accord could have as much or more impact than last year’s Paris climate deal. Secretary of State John Kerry said, “It is likely the single most important step we could take at this moment to limit the warming of our planet and limit the warming for generations to come.” In large part, this is because the agreement represents a mandatory action for nations: specific and clear cuts in HFCs. In contrast, under the Paris agreement, countries’ actions to greenhouse gas emissions are purely voluntary.

Although only voluntary, the Paris Agreement is legally binding as an international treaty; it is not, however, a treaty under the U.S. Constitution. By framing it instead as an executive agreement under U.S. law, President Obama avoided having to seek the Senate’s ratification of the Paris Agreement.

Unfortunately, President Obama might need to seek the Senate’s unlikely and reluctant ratification of the Kigali Accord. Legally, it is unclear whether he needs to. The Kigali Accord amends the Montreal Protocol; the U.S. already signed and ratified the Montreal Protocol. Some reporters claim that an amendment to an already ratified treaty does not need to be ratified. Others note that it is unclear whether the Obama administration believes it needs ratification. A State Department representative commented that the Department is currently reviewing the Accord to assess whether President Obama needs to submit it to the Senate or not. Several law professors cited in the news say that ratification is necessary, both under international law and U.S. precedence. Others say it only needs ratification to be legally enforceable under U.S. domestic law. One law professor summed up the debate this way: “The president is going to have to go to the Senate or face a lot of political heat.”

Even without ratification, President Obama can push for compliance through more executive actions. Indeed, the White House has already celebrated getting commitments to reduce HFC use from the private sector. With or without ratification, observers expect HFC reductions to continue.

While the U.S. Clean Power Plan languishes in the courts, President Obama is continuing to push his climate change legacy. The Kigali Accord promises real, measurable avoided emissions in the years to come.

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Tuesday, October 18, 2016

Economic Dynamism and Renewable Energy

By Ed Jewell, Energy Fellow

Photo Credit:
On October 8, 2016, President Barack Obama published an article in The Economist titled "The Way Ahead," in which he laid out four "major structural challenges" to the U.S. economy that must be addressed in order to restore faith in the nation’s economic (and by extension, political) system. The four major structural challenges identified by the President include: 1) boosting productivity, 2) reducing inequality, 3) reducing unemployment, and 4) building a resilient economy that will continue to grow.

President Obama has demonstrated—by leading the U.S. out of the worst economic crisis in over eighty years, saving the auto industry, and establishing an economy which gained 15 million private-sector jobs since 2010—that he has the requisite understanding of how a functioning economy works. President Obama’s strategies for creating economic dynamism promote the role of government in providing a stable landscape for investment, as well as a direct role in stimulating and guiding specific economic sectors that are crucial for overall societal functioning.

The history of federal involvement in the renewable energy industry demonstrates that direct federal spending is greatly beneficial to fledgling industries for at least three purposes: 1) researching and developing new technologies, 2) providing the early investment necessary to allow the new technologies to mature to a point in which they can stand on their own in a competitive market without federal subsidies, and 3) stepping in when economic conditions deteriorate.

Further, the history between the federal government and the renewable energy industry illustrates that when the federal government tries to substitute tax credits for direct federal spending, the major beneficiaries are the largest and wealthiest banks and mutual funds in the country, a result that does not encourage economic stability or promote the general welfare.

In sum, direct federal investment in renewable energy technologies should be increased under the next administration, and industry reliance on tax credits should be gradually reduced—as currently planned—in order to maximize societal and economic benefits of renewable energy development. 

I.             Boosting Productivity 

Strong public investment in renewable energy—much of which came as a response to the financial crisis—has benefited the renewable energy industry in multiple ways, and the renewable energy industry has returned the benefits to the American people through technological innovations, reduced carbon emissions, and living-wage jobs. The successes of these federal investments demonstrate that the federal government should continue and enhance these investments in emerging renewable energy and energy storage technologies.

A handful of provisions in the American Recovery and Reinvestment Act of 2009 (the stimulus package) were critical to enabling the fledgling renewable energy industry to survive and even grow through the financial crisis.

Section 1603 Treasury grants, provided for in the stimulus package, funded 30% of project costs for renewable energy projects from 2010 to 2014. In the wake of the financial crisis, nearly $25 billion of stimulus money was paid out through the program. These federal grants helped fund 105,178 renewable energy projects that brought 21,633 MW of wind power capacity and 8,283 MW of solar power capacity online in the U.S., creating 75,000 construction jobs and 5,000 long-term jobs in the process.

The stimulus package also established the Section 1705 loan guarantee program, which provided loan guarantees for renewable energy projects that employed "new or significantly improved" technologies that were not yet in commercial use. The loan guarantee program effectively launched the utility-scale solar industry in the United States. As Energy Secretary Ernest Moniz recently noted, the federal loan program helped spur the deployment of 1.5 GW of utility-scale solar capacity in the U.S.

Aside from the financial stimulus package, the federal government has historically been a major funder of research and development in the renewable energy field, such as through the SunShot Initiative and the various other R&D projects undertaken through the National Renewable Energy Laboratory. However, more funding is necessary to adequately mitigate the threat of climate change. From 1978 to 2014, federal funding for renewable energy research and development (R&D) accounted for only 17% of total federal energy-related R&D funding. The Executive Director of the International Energy Agency recently called on world leaders to triple the amount of funding for renewable energy R&D.

In addition to funding research and development, the government should play a major role in infrastructure development—an idea that, as President Obama pointed out in his article—used to share wide bipartisan acceptance. The President noted the need for bridge and airport upgrades, to which I would add the need to make major investments in the electricity transmission system to facilitate a transition to a renewables-based grid.

The federal programs created by President Obama’s stimulus package, as well as his administration’s enhanced investment in R&D, have successfully boosted productivity in the renewable energy sector. The incoming administration should continue to invest in emerging renewable energy technologies.   
II.            Reducing Economic Inequality
The tax incentives authorized by Congress for renewable energy projects have been a main driver of the renewable energy industry for years, and therefore are responsible for a great amount of societal good through lower carbon emissions, living-wage jobs, and technological development. However, a decent argument can be made that this incentive structure furthers economic inequality—at least to a small degree—by allowing a small group of the largest financial institutions in the country to capture an economic benefit from nearly every renewable energy project developed.

While there are numerous drivers of economic inequality throughout the economy, and the tax credits for renewables play a small and perhaps insignificant role in the overall level of economic inequality, it is worth noting that the tax incentive structure—which has been a primary driver of the renewable energy industry—is perhaps less than ideal from an overall economic health perspective.

In order to realize the financial benefits of the Investment Tax Credit (ITC) or Production Tax Credit (PTC), project developers must find investors who have a large enough tax appetite to take advantage of the tax credits. Because large-scale solar and wind farms cost tens to hundreds of millions of dollars, and the ITC and PTC can only be used to offset “passive” income, there are only a handful of large banks and hedge funds that are capable of monetizing the benefits of the tax credits.

Renewable energy development—even with the tax credit incentive structure—creates broad-based economic gains that combat economic inequality. Installation of renewable energy technologies cannot be outsourced, and installation jobs pay living wages for skilled workers in local communities. Additionally, farmers and ranchers can receive royalty payments for the use of their land while continuing to produce their primary products, and overall, entrepreneurship is encouraged in the dynamic renewable energy industry. However, other forms of incentives that do not depend on financing from only the largest financial institutions and instead rely on financing structures that do not limit the pool of investors to only those with outrageous levels of “passive” income, are certainly possible.

The ITC and PTC are scheduled to gradually phase down in the coming years, mitigating the influence of the credits and reducing the contribution of renewable energy to income inequality. The next administration should ensure that there are adequate incentives for renewable energy development, and explore options that reduce economic inequality as well as encourage renewable energy development.

III.            Reducing Unemployment 

Renewable energy development helps reduce unemployment by creating new jobs in a growing industry. In addition to job creation, renewable energy development has the potential to provide secondary employment benefits as well.  As long as tax incentives are not over-utilized, the placement of high capital technologies in local jurisdictions can increase the tax base. An increased tax base generates revenue for the local government, allowing it to provide greater social services that in turn fight societal ills that sap lives and workforces.

As President Obama pointed out, social problems, such as opioid abuse and entry and recidivism in the criminal justice system, negatively affect unemployment rates as well as overall societal health. A renewable energy-based economy can help combat these problems by creating more living-wage jobs and expanding the tax base. Further, job training programs and other social opportunities could be made available because of the benefits created by renewable energy development. 

The solar industry already employs 77% more Americans than the coal industry, and these jobs are spread across communities throughout the country. While certainly the transition from fossil fuels to renewable energy will hit specific communities hard, the economic benefits, including a reduction in unemployment rates on a national scale, will be shared widely.

IV.            A More Resilient Economy 

President Obama specifically addressed the need to align the national economy with ecological limits. “[S]ustainable economic growth requires addressing climate change. Over the past five years, the notion of a trade-off between increasing growth and reducing emissions has been put to rest.”  

The decoupling of emissions from economic growth is absolutely critical if both the capitalist system and the ecological systems of the planet are to continue to co-exist. The International Energy Agency estimates that on the global level, “the annual rate of reduction in global energy intensity needs to more than double – from 1.1% per year today to 2.6% by 2050.” Thus, while our gains in decoupling are important, they must be increased. Our society is locked in to a capitalist system, and as the President points out, “it is important to remember that capitalism has been the greatest driver of prosperity and opportunity the world has ever known.” Therefore, decoupling emissions from growth has to be a bedrock principle for growing the economy.

The President writes of an economy that "grows sustainably without plundering the future at the service of the present." There is no better single way to make a massive stride toward achieving such an economy than through the development of renewable energy.

In sum, President Obama effectively advocates for a strong role for the federal government in creating a structurally sound economy. The example of renewable energy development provides a good case study of President Obama’s principles being applied—e.g., stimulus package investments, R&D, and infrastructure—but also show that the renewable energy industry could make a greater overall contribution to the health of the economy if the incentive structure was adjusted to depend less on tax credits and more on direct federal spending.

Whether moving away from a dependency on tax credits in the renewable energy industry is politically possible is another question altogether. A reliance on direct federal spending carries with it its own perils, but renewable energy cannot prosper at the expense of the greater economy. Likewise, the overall economy cannot continue to grow without rapidly adopting renewable energy technology. The relationship is reciprocal and important to get right and will largely fall to the next administration. Be sure to vote.

Monday, October 3, 2016

Offshore Drilling: Have We Learned Our Lessons Yet?

By Joni Sliger, Energy Fellow
The U.S. Coast Guard responds to the Deepwater
Horizon explosion.
Credit: NOAA's Office of Response and Restoration

In recent weeks, I have discussed offshore renewable energy technologies like offshore wind and hydrokinetics. While offshore development for these renewable energy technologies is new, the same cannot be said for offshore fossil fuel development.

The U.S. Has a Long History of Offshore Fossil Fuel Development (and Spills).

Offshore oil drilling began in the Pacific Ocean over a hundred years ago, according to the American Oil & Gas Historical Society. Yet a 100 years’ worth of experience has not helped us to avoid the omnipresent risks of oil spills and subsequent environmental disaster.

About six and a half years ago, the U.S. suffered the worst offshore oil spill in history: Deepwater Horizon. On April 21, 2010, an explosion aboard the offshore drilling platform, Macondo, resulted in the release of approximately 168 million gallons of oil into the Gulf of Mexico. The oil spill devastated local ecosystems and wildlife populations, including some marine species critical to local fishing industries. Scientists continue to study the long-term effects of the spill. For example, just last week scientists released a study on how the oil coated and killed marsh grasses, causing marsh erosion that may be permanent, which means a potentially permanent reduction in how well the coastal marshes can serve as carbon sinks, wildlife ecosystems, and storm surge reducers. But we still do not know all the environmental effects. At a Senate committee hearing on the spill in 2015, experts reviewed lessons learned from the spill but lamented the continuing gaps in scientific knowledge.  

Deepwater Horizon did more than just wreak environmental havoc. Eleven crew members died, an oft-overlooked consequence of the explosion. The film Deepwater Horizon came out this past weekend to honor these workers, according to the movie director. Additionally, the spill continues to affect many Gulf state residents, as documented by first-hand accounts in the 2015 film, the Great Invisible. Last month, a division of the U.S. Department of Agriculture released a new $328 million three-year plan to continue recovery efforts for coastal agricultural areas. Offshore drilling for oil and gas threatens local economies as well as local ecosystems.

Unfortunately, so long as drilling continues, oil spills, big or small, are inevitable. While proponents argue that Deepwater Horizon was unusual and that new safety regulations decrease the chance of spills, critics remain skeptical. Deepwater Horizon was unusual in spilling such a large quantity of oil but not in spilling. According to the National Oceanic and Atmospheric Administration, oil spills (from rigs and other sources) happen “nearly every day.”

This week, the U.S. has over 500 oil and gas rigs off the coast. If one has a mishap, oil may spill. And oil spills are difficult to clean up. While the U.S. has established more safety protocols and regulations to govern offshore drilling (including some just this past April), it remains a dangerous enterprise.

But What if Drilling Does Not Continue?

Last Tuesday, over 70 Congressmen signed a letter asking President Obama to stop offshore drilling by withdrawing all Atlantic and Pacific Ocean waters from future leasing. The letter follows one submitted by major environmental groups the week before. The President has the power to do so under Section 12(a) of the Outer Continental Shelf Lands Act (OCSLA), which states “The President of the United States may, from time to time, withdraw from disposition any of the unleased lands of the outer Continental Shelf.” 43 U.S.C. §1341(a). The letters note that if the president makes such a withdrawal—declaring the areas no longer available for leasing—it may permanently stop drilling, since the law does not authorize a future president to undo such an act.

If a president did withdraw all Atlantic and Pacific Ocean waters from leasing, he would do so under the congressional authorization of the 1953 OCSLA, but it would be highly controversial. The authorization is similar to that given to presidents to declare national monuments under the 1906 Antiquities Act. Last month, President Obama established the first marine monument off the Atlantic Coast, protecting almost 5,000 square miles of ocean. The declaration comes on the heels of the president’s declaration in August expanding the Papahanaumokuakea Marine National Monument near Hawaii by an additional 442,781 square miles, thus protecting a total 582,578 square miles. These monuments cover only a fraction of the areas the Congressmen proposed be withdrawn under OCSLA, but even these presidential declarations have fallen under critique.

When the president declares a national monument under the 110-year-old Antiquities Act, he may do so without consulting Congress or relevant state or local officials. Disgruntled officials claim the president is abusing his authority by declaring so many monuments that cover such large areas. The current Republican platform calls for amending the 1906 Antiquities Act to require the president obtain approval for future monuments from both Congress and from the relevant state’s congressmen. Because the president’s authority under OCSLA is similar to that under the Antiquities Act, the GOP would likely amend both if it gets the chance.

An arguably less controversial approach than using OCSLA to wholly withdraw all Atlantic and Pacific Ocean waters from leasing is already underway, thanks to the Obama Administration’s release of new regulations in August. The Council on Environmental Quality (CEQ) issues guidance to federal agencies on how to comply with the National Environmental Policy Act (NEPA); NEPA requires environmental analyses for most major federal actions. The CEQ’s new guidance, among other things, “recommends that agencies quantify a proposed agency action’s projected direct and indirect GHG emissions.” This is huge. Under the guidance agencies must consider direct, indirect and cumulative effects of proposed actions; this means before an agency could issue a drilling lease, it would have to consider the emissions likely to result from drilling and eventual use of the oil or gas obtained. While an agency could grant a lease regardless of the environmental effects, considering emissions may delay the process or at least make a decision to lease more politically unpalatable.

The Bureau of Ocean Energy Management (BOEM) is currently at work reviewing public comments and finalizing its Draft Programmatic Environmental Impact Statement (Programmatic EIS) for the 2017-2022 Outer Continental Shelf (OCS) Oil and Gas Leasing Program.  With the new CEQ guidance, BOEM will have to quantify the emissions likely to result from its program and it may face significant public and political opposition to leasing.

Perhaps the best option for opposing fossil fuels and offshore drilling, however, is the continued pursuit of renewable energy sources. If you can’t beat ‘em, make ‘em obsolete!