The New Carbon Cycle

New Book on "The Impact of Global Warming on Texas"

A new, or perhaps second edition, of a book is being published by the University of Texas Press entitled "The Impact of Global Warming on Texas."  I have not read the book, but will be reading it over the next few weeks.  An electronic version can be found at the website of the Texas Climate Initiative.   The book contains chapters written by various scientists, including several from Texas A&M University. 

Atlantic Article Delves into Complexities and Interrelationships of Energy and Climate

A very good article from The Atlantic was shared with me by Mike Titens, one of Thompson & Knight's corporate partners and a member of our Climate Change and Renewable Energy Practice Group.  The article is entitled The Elusive Green Economy and delves into the complexities of and interrelationships between climate change, renewable energy, energy independence and security, as well as how entrepreneurship and government can have a positive impact or a negative one depending on the policies adopted. 

 

It's rare that any insight is shown on these issues by the press (or politicians for that matter).  While I may not agree with every conclusion, I was pleased to see a more in-depth discussion of these complex issues and recommend it for your reading.

Presentation at Energy and Manufacturing Seminar in Houston

I will be speaking this Thursday, August 27, 2009, at the Weaver and Tidwell program on Oil and Gas, Manufacturing, Renewable Energy, and Economic Outlooks. I will discuss voluntary carbon markets and how they have already taken hold in the U.S. and how state climate change programs are already in effect and coming on line. If federal climate change legislation passes, the largest carbon market and perhaps one of the largest commodity markets in the world will be formed. This presentation will discuss the evolving climate legislation and carbon markets in the U.S. and internationally.

The program will be at the Houstonian Hotel and starts at 1:00 and ends at 5:00.  A reception will follow.

To sign up please click this link.

US Energy Information Administration Estimates Climate Bill Impact on Consumers

The US Energy Information Administration issued a report on August 4, 2009 evaluating the economic impact on the individual US citizen of the passage of the Waxman-Markey climate change bill.  This bill is known as the American Clean Energy and Security Act, H.R. 2454.  Under the climate legislation passed by the House of Representatives in June, electricity, heating oil and other bills for average families will increase $114 in 2020 and increase $288 in 2030.  The impacts, if accurate, certainly would not create a significant burden on the average citizen.  Of course the devil is always in the details in all of these economic predictions.  The report can be reviewed on the EIA website.

Energy Efficiency and the Competitive Advantage of Our Nation

Management guru and professor Michael Porter's concludes in The Competitive Advantage of Nations that one of government's roles involves "acting as a catalyst and challenger, . . to encourage--or even push--companies to raise their aspirations and move to higher levels of competitive performance. . .."  In the Senate debate over the American Clean Energy and Security Act, H.R. 2454, the "Waxman-Markey Bill", the Senators should consider the extent to which energy efficiency contributes to both domestic firm competitive performance and to the competitive advantage of the nation as a whole.

No doubt companies that can substantially reduce their energy consumption can reduce costs and,therefore, increase profits.  As an example, Walmart is working with numerous potential vendors to reduce its energy consumption as its energy costs are significant.  Walmart's Sustainable Building Plans among other efficiency plans would reduce energy usage dramatically.  Other companies such as Dow cite substantial reductions in electrical use and concomitant reductions in greenhouse gas emissions.  Dow's energy savings program  has resulted in energy savings of $8.6 billion and has prevented 86 million metric tons of CO2 from entering the atmosphere. With the ability to monetize these greenhouse gas reductions in the form of carbon credits, these firms will have an additional incentive to reduce electrical and transportation fuel consumption.

In addition, these firms will be incentivized to switch transportation fuels for their fleets of trucks.  Natural gas is now abundant in the United States with the discovery of the means to extract natural gas from the various shales from across the United States that contain huge stores of natural gas.  Not only does the use of natural gas allow the potential savings in fuel costs over the long term, but the monetization of the greenhouse gas reductions by switching from diesel to natural gas permits yet another revenue stream to assist in financing a more sustainable and more efficient company.

As a nation, these changes make the firms in the country more competitive as costs of production decrease and allow the use of domestic fuels.  To the extent, new regulations promote not only energy efficiency and fuel switching, but the invention and domestic manufacture of new technologies and products for export, then the nation become even more competitive.

Nations that reduce their dependence on foreign oil will undoubtedly increase their domestic and international competitiveness.  Those that can design new, more distributed energy sources for their troops to produce water, drive electronic-based weapons and communications, and alternative ways of fueling mechanized aspects of their sea, ground, and air-based forces will have a stronger military.  The United States armed forces are spending significant money to develop these technologies.

McKinsey & Company recently issued a report entitled Unlocking Energy Efficiency in the U.S. Economy.  In this report, the leading business consulting firm states its central conclusion as follows:

Energy efficiency offers a vast, low-cost energy resource for the U.S. economy--but only if the nation can craft a comprehensive and innovative approach to unlock it.  Significant and persistent barriers will need to be addressed at multiple levels to stimulate demand for energy efficiency and manage its delivery across more than 100 million buildings and literally billions of devices.  If executed at scale, a holistic approach would yield gross energy savings worth more than $1.2 trillion, well above the $520 billion needed through 2020 for upfront investment in efficiency measures (not including program costs).  Such a program is estimated to reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons fo greenhouse gases annually.

The McKinsey Report demonstrates that a more energy efficient country is a more competitive country.

To put this in competitive context, Europe and China are pushing for more energy efficiency and the building of domestic sources of energy and fuel and the development of renewable energy technology firms, energy efficiency technology firms, and the domestic manufacturing of new 21st-century products.  Technologies like LED lighting that will reduce the consumption of electricity dramatically are the race to the future by companies around the world.  The countries that achieve development of firms with lower energy consumption and energy efficient technologies and alternative fuels will likely be the more dominant economic powers in this century.

Thus, a look back at Michael Porter's book and the application of its model to the current debate about the Senate version of the American Clean Energy and Security Act is warranted.  Putting politics and ideology aside, the empirically demonstrated need to move toward a 21st-century energy policy is critical to the future competitiveness of the nation.  This should be at least one of the critical strategies underlying the debate in the Senate over the next few months.