Climate Exchange Cool heads tackle our hottest issue
by Marilyn Berlin Snell
(page 4 of 5)
Khosla: And research on carbon sequestration for the oil industry is even more advanced. However, carbon sequestration in oil recovery has nothing to do with carbon sequestration for coal at the global scale we need it.
Schneider: Exactly. The oil industry has already pumped CO2 underground. But oil companies have done it at a level of tens of millions of tons. The amount of CO2 we need to pump from coal-burning power plants in the next 100 to 200 years, in a business-as-usual scenario, is trillions of tons. You can't scale from 10 million to trillions without an awful lot of research and development to prove it works.
Reicher: We need to be spending more money on sequestration research. But my point is that the biomass world ought to be tagging along, because anything we can do to sequester carbon coming out of a coal plant we can do even better with biomass emissions.
Take, for example, the pulp and paper industry. This industry is getting much of its energy in very inefficient ways from its own waste materials. If you could, first, radically increase the efficiency of the pulp and paper industry in powering itself and, second, sequester the carbon emissions, you could have an industry that is actually contributing thousands of megawatts of power to the U.S. electricity grid while at the same time having dramatic impacts on greenhouse-gas emissions. There's an interesting technology-meets-policy-meets-finance idea there.
Khosla: Yes. It's exciting that, when properly produced, biomass fixes carbon in the plant while growing, in the roots after harvest, and in the soil during decomposition.
Schneider: I'm a big fan of biomass, but you can't sequester carbon in the soil very long when the temperature gets warm, because then the bacteria that decomposes dead organic matter will work at much higher rates. If it's part of the solution to keep us under a two-degree increase in temperature, we're going to be all right. But if we're going to go high, then all that stored CO2 is going to come screaming out when it gets warmer. If you warm the soil enough, it switches from being a sink for CO2 to being a source, and you only amplify the problem.
Khosla: Let's be fair. Rising temperatures might also increase plant growth, which could decrease CO2. We don't know the dynamics of that. Further, once you have biomass, it then translates into other uses. You can fire it in coal plants for electricity generation, but probably a better use is to make plastics. That's relatively modest technology. The estimates I'm starting to see for bioplastics are 20 to 50 percent lower costs than petroleum-based plastics as long as oil is at $60 a barrel.
I'd like to make another point about biofuels. I believe that the current U.S. subsidization of corn ethanol is a good trend. The corn ethanol process on average reduces greenhouse gases by about 20 percent. Brazilian ethanol reduces it dramatically more. A hybrid car improves efficiency by about 20 to 25 percent on average. Getting that efficiency improvement costs consumers between $3,500 and $5,000 more per car because of the extra batteries and drive-train costs. Sugarcane ethanol adds nothing to the cost of a new Brazilian car and reduces greenhouse emissions per mile driven by about 60 to 80 percent!
Unfortunately, politics in this country is such that we buy the cheapest oil from Saudi Arabia and have it compete with perhaps the most expensive ethanol in the world--U.S. ethanol--instead of the much greener ethanol from Brazil. Hopefully that will be corrected.
More important, to me, is that if corn ethanol had not established a marketplace, I would not be investing in cellulosic ethanol now. We have four cellulosic ethanol investments in our group, including a wood-cellulosic plant under construction in Georgia that will burn wood waste from the state's pine forests, and one in Louisiana that will use waste from sugarcane to produce ethanol. Several other investments use waste sources but don't fit the traditional definition of "cellulosic." None of that could have happened had the market not been established by corn ethanol.
Reicher: The ability to use all sorts of living things, from crops to forest products, to produce everything from fuel and power to plastics is exciting. Virtually anything we can do with fossil fuels we have the technology, or close to it, to do with biomass.
Khosla: Even more exciting, and this gets into geopolitics, is the use of biomass production to alleviate poverty. I grew up in India and went to college there and understand that we won't solve environmental problems without first solving the global poverty problem. It just won't happen. Biomass production is the only scalable poverty-reduction program in the world because it can increase the value of, and the income per acre of, land. And, unlike an oil well, it's least susceptible to corruption because it's so highly distributed--the very architecture of biomass helps with poverty.
Reicher: It's absolutely right that poverty in the developing world has to be addressed. But let's not forget our own country. More than 30 million U.S. homes are currently eligible for the home-weatherization program, which insulates people's dwellings and can, for a modest investment, reduce home energy use by more than 30 percent. Yet with regard to federal policy, what do we prioritize? We spend $3 billion to $4 billion a year to buy down people's fuel bills. It's a reverse incentive--really a perverse incentive--rather than a positive incentive.
The budget last year for the home-weatherization program was $228 million. We've done 5.5 million homes in the U.S. in the last 30 years, but we have 25 million more that are eligible for federal and state help. By upgrading a home's furnace, sealing leaky ducts, fixing windows, and adding insulation, we can cut energy bills by up to 40 percent. By adding energy-efficient appliances and lighting, the savings are even greater. Replacing a 1970s-vintage refrigerator with a new energy-efficient model will cut an average home electricity bill by 10 to 15 percent.
There may be ways to encourage private-sector investors to make major investments in home weatherization, leveraged by government money, particularly if we can aggregate thousands of homes into financeable packages. If we can figure out a public-private investment approach, we can radically increase the number of homes we weatherize each year and the resulting climatic and economic benefits.
Poirier: Senator Boxer has focused on the extent to which government incentives can drive the markets and work efficiently. Are there other places where a role for government is helpful in getting over barrier-to-entry humps?
Anderson: Utilities are a natural to weatherize homes in this kind of public-private partnership. Yet most utilities are rewarded for producing more energy and building more plants. In most states, there is no reward for the people who can actually create efficiency. If a utility were to come up with a plan to cut energy use by 20 percent and was willing to give half of the benefit to the customers and half of the benefit to its shareholders, the state public utility commissions would say, "That's a great plan, but it's going to go 100 percent to the customers." And so the utility decides to build another power plant instead.
Pope: Whether at the city, state, or federal level, government should be required to factor in the lifetime costs and benefits of its investments in the energy field.
I recently heard a great story about Chicago, where one of the largest line items in the school budget is utilities. Mayor Richard M. Daley decided that the city could afford the up-front costs of retrofitting its public schools with energy-efficient windows so as to save money down the line in utility bills. He also ensured that the contracts for the majority of the construction labor would go to Chicago residents.
Schools are a wonderful example of the long-term benefits of building green. Energy-efficient schools reduce emissions from power plants by using less energy. And improved indoor air quality, lighting, and temperature have been found to improve both school attendance and test scores.
Khosla: We also need long-term policy from Washington so we can make 15-year investment decisions in these areas. We don't mind losing. In the technology venture-capital world, we know we lose half the time, maybe 70 percent of the time. But when we lose, we lose our initial investment. When we win, we make 50 times our money. The math works. We just need to make sure we do enough crazy projects.
Policies should encourage investment because we are close enough in technological terms to make coal, oil, and petroleum-based plastics obsolete and to have efficiency breakthroughs. The investor needs long-term stability on policy even more than having the most attractive policy.
Reicher: I agree. Wind industry investment year by year over the last ten years was up and down--all driven by whether the industry thought tax credits were going to be extended by Congress, which tends to only authorize them for a year or two. On-again, off-again tax credits have killed the acceleration we could have seen with renewable technologies.
Schneider: I had an interesting experience with Australia's government; I recently spent six months there. I'm not responsible for this title, but I was the Adelaide thinker in residence. After long discussions with government officials and business heads, the premier of South Australia announced a target of a 60 percent cut in emissions by 2050. I advised the premier to start smart.
I borrowed from California, which is the lowest-CO2-emitting state per capita, what I call the 7-11 solution: Legally mandate energy-efficiency standards-- better windows, lights, refrigerators, air conditioners, and automobile performance standards--that pay for themselves in less than 11 years. This would be roughly equivalent to a 7 percent return on investment--as good as or better than the standard mortgage interest rate. You can't make it voluntary. Some business executive argued that "we're not a culture of mandatory," and I said, "Then you're not a culture of sustainability."
Pope: Yet at the federal level, we have an energy policy in which oil, coal, and uranium producers matter, not consumers. Congress approaches energy policy as a regional zero-sum game--who gets to scratch whose back.
Khosla: I agree that there isn't a level playing field with regard to energy subsidies, and I'm not a huge fan of incentives, but I've proposed a policy package for biofuels. To give you some rough numbers, with the current course in the next 15 to 20 years, incentives for biofuels would reach at least $80 billion. With the policy package I have proposed, $30 billion.