Carbon Crusaders

There has been much discussion about the contribution of increased ethanol and bio-fuel production to the recent rise in global food prices, which have sparked riots abroad and threaten to reverse the progress towards ending world hunger. While there are clearly connections between the developed world’s demand for these fuels and global food prices, there are other significant factors at work including, higher energy costs, increased global demand and water shortages abroad. However, as C. Ford Runge, an economist at the University of Minnesota told the N.Y. Times, “Ethanol is the one thing we [The U.S. Government] can do something about. It’s about the only lever we have to pull, but none of the politicians have the courage to pull the lever.” The inconvenient truth is that when Oil is $116/barrel, it is economics and political lobbies, not the environment, that are driving developed countries, like the U.S., to divert a 1/5th of their corn harvest towards inefficient ethanol production. Ironically, the effects of higher food prices disproportionately felt abroad, have been blunted at home by the nature of American consumerism, which provides a “branded” cushion between the farm and the single-sized products (and prices) that we see at the grocery store.

The Fuel-Food Price Connection

The global prices of corn, soybeans, wheat and rice are all interconnected (see graph below) – they create the base of a dynamic food pyramid upon which prices of all food staples that lie above (meat, poultry, pork, farmed fish, dairy and egg products) are dependent. Trade policies, domestic subsidies & taxes and numerous other factors distort these connections, but basically, when corn prices double in the United States (the largest grain exporter in the world) due in part to increased demand for ethanol, other food prices around the world shudder.

Corn, Soybean and Wheat Prices (last 10 years)

Other Factors Contributing to Food Price Increases

The mandates in Europe and the United States for increased mixes of ethanol and bio-fuels in transportation fuels and a $.51 U.S. subsidy for ethanol production have helped drive up the prices for corn and soy beans, which in turn have helped push other food prices upward. However, there are also other important factors driving up prices that cannot be neglected:

1. Increased demand for meat in the developing world, most notably China, where a greater substitution of grain for meat has meant 700 grain-based calories are being used to generate 100 beef-based calories.
2. Water shortages abroad (most notably Australia, historically the second largest exporter of wheat) has meant less grain harvested and traded.
3. Increased costs of oil and energy which has contributed to increased fertilizer, farming and transportation costs.
4. The steady depletion of global grain stocks (the carryover stocks from the years before), which usually helps alleviate shortfalls.

Ironically American Consumerism Has Blunted the Domestic Blow

While food prices have doubled in various places throughout the developing world, the average bundle of groceries in the U.S. increased only 5% in 2007 (though milk and eggs have increased 29% and 36% , respectively) – It is important to note that these are record increases, and for many Americans on the margins, backbreaking and bank-breaking. Still, the discrepancy between skyrocketing global commodity prices and the smaller relative increases in U.S. stores is important and deserves explanation.

Only a portion of the prices we see at the grocery store (varying on the type of product) are dictated by cost of a product’s actual raw ingredients. In fact, “farm value” of the commodity raw materials accounts for only 1/5^th of total food costs in the U.S. (down from 2/5^th’s in the 1970’s), while processing, packaging, marketing/branding, transportation and warehousing account for the rest. Ironically, it is the “soft” value of products and the nature of our advertising-based consumerism that has protected Americans from feeling the full force of these global price increases. It is in part the money spent on marketing those leprechauns and bunnies, which has provided distance from farm to shelf and some cushion to soften the blow. If not for that, Americans would be asking a lot more questions about the connections between ethanol and food prices and wondering about the box of $10 cereal they just pumped into their tank.

Related Stories:

Earth Policy Institute

Recent NY Times Article

The Christian Science Monitor

I was recently asked whether I supported a carbon tax or a global cap-and-trade system. I suggested that it really depended on what you thought was more realistic – Americans accepting a carbon tax or the developed and developing world agreeing on national allocations of global carbon emissions.

My response was by no means unique, but shared by a consensus of policy analysts, environmentalists and economists (read the NYTimes article from Sunday’s business section, 9/16/07). I discussed the four policy options for reducing carbon emissions below, commenting on the positives and negatives to explain the logic behind the question I posed.

• The Libertarian Scheme: markets reduce carbon through voluntary measures

Some of the early measures in the U.S. would fall into this category (i.e. voluntary Renewable Energy Credits and carbon offsets for households). This could be a viable long-term option if we were dealing with marginal carbon reductions and the consequences of failing to take serious action weren’t disastrous. In reality, however, we are talking about a reduction of 50-90% in the next 40 years to avoid runaway global warming and voluntary measures won’t cut it.

• The Kyoto/Acid Rain Style Cap-and-Trade Scheme: where permits are allocated freely

A cap-and-trade system works by capping the total carbon emissions for a state, country or group of countries and allocating permits to individual polluters for the right to emit a portion of the total. The scheme allows those who can reduce their carbon emissions cheaply (low “marginal cost of abatement”) to sell their permits to the companies for whom it is more expensive (high “marginal cost of abatement”). The idea is that through market mechanisms, the lowest cost of compliance will be sought and the regulating body need only to reduce the total cap overtime and watch the market adjust. Similar to other supply chain costs, the “cost of carbon” will be passed onto consumers through higher prices, which will disproportionately place the burden of reducing carbon on low-income families. If permits are allocated freely, as opposed to an auction where the government sells the rights to pollute, there is no revenue raised by the government to alleviate these effects.

• The Auction Cap-and-Trade Scheme: tax revenue is raised

Similar to the above approach, the only difference is that tax revenue is generated by the auctioning of permits for programs that alleviate the effects of higher prices for those in need. The most appealing component of this solution is that it allows the government to determine the quantity of carbon emissions and cap it, as opposed to a tax which attempts to estimate what increase in price would stimulate that reduction.

• A Carbon Tax

Using a carbon tax, the regulating body determines a marginal price of carbon emissions (i.e. something on the order of $8-25 per metric ton) and allows the market to incorporate it into decision making. Similar to cap-and-trade strategies, lower carbon emissions will result and the associated costs of compliance will be passed onto consumers in the form of higher prices. The most appealing component of this approach is that it lends itself to better international cooperation (countries can determine their own carbon tax) and avoid some of the geopolitical problems associated with determining national shares of a global cap on carbon emissions (i.e. are they allocated according to population or historical emissions).

The truth is, any of the last three options are better than a voluntary approach. A carbon tax or a cap-and-trade with auctions are the most complete, because they can raise the revenue necessary to alleviate the socio-economic consequences of higher energy costs. The question is about which approach is more realistic. Americans will balk at the word tax and the international community are in a stalemate over the logistics of a global cap-and-trade system.

Sitting on a rooftop overlooking downtown Manhattan, I watch the remains of a 300 pound globe, sculpted from ice, melt. It is 4 in the morning and we are waiting for the sun to rise. After 20 hours of filming, we are holding out for a few more shots to call it a day.

There is nothing like sitting on a rooftop in the middle of the night looking out over New York City – you feel like you are alone in a city of millions. Watching the world turn, you feel significant, yet insignificant at the same time.

Witnessing the chaotic melting of an ice sculpture 1/100,000,000 the size of it’s subject, you glimpse just how incomprehensible the mechanisms are, that are changing our planet forever.

I woke up to an NPR piece about Fox going green this morning. When I first heard Murdoch’s announcement in May, I passed it off as yet another corporation greening up (which is all well and good, just not news anymore): News Corp will employ an increasingly standard approach, reducing their carbon footprint 10% by 2012 through conservation measures and going carbon neutral by 2010 through investments in carbon offsets.

What struck me about the piece this morning, was the excerpt from Rupert Murdoch’s speech, which spoke to including green messages in News Corp’s entertainment content. In his words,

“Our audience’s carbon footprint is 10,000 times bigger than ours … Imagine if we succeed in inspiring our audiences to reduce their own impacts on climate change by just 1 percent. That would be like turning the state of California off for almost two months.”

While I am not convinced of the degree to which green messages will be integrated into television programming, I see potential in their ability to mainstream them: the OC makes it cool to buy organic/vintage clothing and John Madden can convert his bus to bio-diesel, turning his fear of flying into a green crusade on Sunday football (I don’t see him giving up his Thanksgiving Turducken for a Tofurky, but who knows?).

Let’s face it, America’s anti-intellectuality makes it far easier for households to accept green messages (although passively) delivered through entertainment than presented through a nuanced debate or documentary.

I see no harm in embracing proposals such as these, just as long as we make sure to provide scrutiny of them in practice. I look forward to seeing what they come up with…

For more: listen to NPR’s podcast or read Grist article

Imagine a future where:

1. Half of the America’s electricity is generated by coal-fired power plants which remove pollutants from smoke stacks (a process known as “scrubbing”) and pump CO2 emissions into underground caverns (a process known as “carbon sequestration” – only experimental at this stage).
2. Energy independence from foreign oil by converting America’s vast coal resources into synthetic fuel (“synfuel”) again sequestering the CO2 in underground caverns. Minus the sequestration, conversion of coal to synfuel was a process used by Germany in WWII to fulfill over 90% of their aviation and 50% of their automotive fuel needs.

There are two major problems with this picture disregarded by the peddlers of the clean coal economy. First, generating electricity and fuel from coal is cheap and competitive only when done without carbon sequestration, but quite expensive when done with it (cost of producing electricity can increase by nearly 50% from an estimated $56 per MWh to $79 according to Jeff Gogell in “Big Coal”). Second, mining coal is still dangerous, an environmental catastrophe and one of the most inadequately compensated jobs (average wages have actually decreased by 20% in real terms over the past 20 years even though worker productivity has tripled).

Proponents of clean coal deflect to the “near future” on the first problem and completely punt on the second (“we’re much better than China when it comes to coal mine mortalities and we’re using more cost-effective technologies everyday” say mining executives, I’m sure not directly to the families of the Utah miners or the residents of West Virginia who have witnessed entire mountains removed in a process aptly called, “mountaintop removal mining”). Advocates like governor Brian Schweitzer (D) of Montana, would like us to believe that cost-effective clean coal is around the corner and that synfuel processing plants and coal power plants going up today can easily be converted to include carbon sequestration tomorrow. They obfuscate concerns over global warming with patriotic claims about national energy security and cheaper fuel:

“Like all Americans, Montanans are… tired of paying $3 a gallon gas, tired of supporting the kind of tyrants that young Americans have spent two centuries fighting and dying to defeat.”

Yes, clean coal technology will be an important and necessary component of a diverse energy economy in the future but not for the reasons the advocates are loudest about. Clean coal is not the cleanest, nor the cheapest option setting aside the myriad problems associated with coal mining (which one has to hope will be more harshly regulated and better compensated with higher scrutiny on the industry).

Coal, is however, the most abundant resource in exactly the countries which have the largest energy needs: the US (which has an estimated 270 billion tons of reserves, enough for 250 years worth of generation), Russia and China (which constructs 1 coal-fired power plant per week to meet it’s growing energy demands, read more in a NY Times article). In order for China and Russia to budge on clean coal, the US will not only have to walk the walk to prove that the technology is viable, but be strong leaders in the international community on carbon capping policies that would make clean coal cost-competitive with coal plants not sequestering carbon (by adding a carbon tax to the cost of generation). Furthermore, I have yet to see an energy proposal that suggests how the US, which now derives over 50% of our electricity from coal, will meet our energy needs in the future without coal (even if a new generation of nuclear power plants were commissioned).

I support clean coal as a realistic second best, but I find it troubling that more public debate has not been devoted directly to the topic considering it’s magnitude and importance.

My colleague wrote an entry earlier this week about the energy bill put forward by the House of Representatives to curb greenhouse gas emissions responsible for climate change. As he mentioned, the bill’s strongest feature is a national 15% renewable energy portfolio standard to be implemented by 2020 (the target was reduced from 20% earlier this month as a compromise to southern states who don’t have the same level of hydro and wind resources). Noticeably absent, were new Fuel Economy (aka “CAFE “) standards, which were the landmark feature of the Senate’s energy bill passed earlier this summer.

Enter the conference committee, which will convene September 4th to reconcile the two bills. House majority leader, Nancy Pelosi (D-California), has not been shy about her advocation for higher fuel economy standards. Her comments after the bill passed on Saturday without it’s inclusion only confirmed what many believe was a strategic play to drop it from the house bill, only to push it’s inclusion in the consensus bill put forward by the conference committee. In her words, “I don’t want to be coy about it — it’s something I support.”

Enter concerned citizens like ourselves. We have less than a month to write letters and make calls to our state representatives lobbying for the most important features of both bills (do not doubt that industry lobbyist are beating the war drums). I have outlined my list from the two bills below (please add to and comment):

Senate

• Roughly 40% increase in Fuel Economy Standards by 2020 (overall fleet average must increase from 27.5 to 35 MPG), with SUVs, small trucks and vans falling under same regulation as passenger cars.
• 36 billion gallon renewable fuels standard by 2022, including the specification that at least 60 percent of the requirement must be met by “next generation” biofuels like cellulosic ethanol.
• New appliance and lighting efficiency standards, as well as a requirement that the federal government accelerate the use of more efficient lighting in public buildings.
• $50 billion of federal loan guarantees for innovative power plants generating clean energy (notably includes Nuclear generation, which the House’s $7 billion guarantee program for energy and water specifically excludes). I will not venture an opinion on Nuclear power here, there are too many issues surrounding the true costs of projects and the long-term environmental damage associated with waste – best left to another entry.
  

House

• Repeal of $16 billion in tax breaks given to the oil and gas industry, shifting the money into programs to boost biofuels, renewable energy and efficiency programs.
• $3.5 billion to install E-85 pumps and expand production of cellulosic ethanol.
• 15% National Renewable Portfolio Standard (“RPS”), which notably allows a 4% contribution from Energy Efficiency Measures (a good idea, but somewhat mis-leading, RPS = 11%, especially considering that EE measures would probably occur autonomously given market incentives and the corresponding technology improvements).
  

These are some of the most salient features of both bills which I hope are included in in the consensus bill (I don’t necessarily agree with the Senate’s $50 billion in loan guarantees for 28 new nuclear reactors, mainly because if Nuclear generation had to compete evenly with renewables and clean-coal I think the truer costs of nuclear generation and waste would become clearer).

Get on your podium, turn on the loudspeakers and get behind the congressmen who need our support. Similarly, let’s make those like representative, John Dingell (D-Michigan) aware of the consequences if they continue to block meaningful legislation to protect the special interests that support them.

Going to the supermarket was one of a my favorite activities when I was a kid. After watching TV all week with cartoon ads about cereal leprechauns and chocolate milk bunnies, I would head to the store with my mother and lobby for each of their products. I would marvel at the variety of cereals, chips, sodas and ice creams all of which were lit to perfection in wide aisles that towered above my pudgy 9 year-old frame. The supermarket is where I learned to become a consumer and the playing ground for my development of brand recognition.

I mention this here, because beyond being a great educator and propagater of consumerism, supermarkets are also major energy hogs. You need only think of your last trip to the store, with its bright lights and open freezers/refrigerators to imagine the wasted energy.

I do quite a bit of energy research and modeling, but was absolutely amazed by some of the facts about supermarkets revealed by George Monbiot in his latest book, Heat:

“The heaters over the doors each have a rating of 50 kilowatts. This is roughly 17 times as powerful as domestic fan heaters. The aisles are lit to an intensity of 1,000 lux, which is about the same saturation as a TV studio, and two or three times that of an office. The counters are brightened with spotlights – at up to 2,000 lux. Fish, in particular, must sparkle, so they are lit with ceramic discharge metal halide lamps, which are otherwise used to illuminate castles and cathedrals at night. [Also remember] that fish have to be kept on ice, while lamps of this brightness could fry them… Between 20 and 25 percent of [the] chain’s energy budget is spent on lighting. Most of the rest – 64 percent – is used for refrigeration. (p. 192)”

This might seem like conspicuous energy consumption, but in the store managers’ defense, supermarkets are an extremely competitive industry and they need to sell stories as much as they do products. In order to succeed, they must match the clarity of the images portrayed in ads with crystal-clear illumination of the associated packages and brands in their aisles, or at least that is what the current distribution and supply chain calls for.

The problem of the current system is obvious and it’s amelioration not far from the source. In his research Monbiot also reveals that the wharehouse attached to the supermarket (which all the goods pass through) uses 1/20th of the energy the store itself does and that the fuel used to make the round-trip to the store is 70% greater than a truck delivering the same groceries directly to the home. Meaning that if people were to purchase their groceries through an alternative mechanism, like the internet and circumvent the store entirely, they could reduce the energy for distributing their food significantly – some 95% in Monbiot’s research of the UK. Moreover, the branding and packaging surrounding the supermarket distribution system would also become virtual, reducing the millions of tons of waste associated with the unnecessary packaging of otherwise indistinguishable products.

Internet-based grocery shopping is not a novel idea, Tesco in the UK (which is the subject of Monbiot’s research) and services such as Fresh Direct and PeaPod in the US have been doing it for years. They are a more convenient option than going to the grocery store, especially for busy families and provide one less justification for owning multiple cars (given that 10-25% of car trips in the developed world are for shopping). And if you worry that I am forgetting the local farmers market, virtual grocery shopping should increase rather than retard their patronage. People will still crave the personal interaction of the market and when offered through the internet, supermarkets will have a tougher time providing the illusion of fresh produce and baked goods which combined with one-stop convenience is how they out-compete farmers markets currently.

Wide-scale virtual grocery shopping sounds somewhat ridiculous in the US and in some rural areas quite inefficient, but in comparison with the current system is a great way to reduce a huge source of carbon emissions and energy demand without completely reinventing the wheel.

Food for thought…

I attended a “Green Jobs Forum” in Boston earlier this week. It was host to a range of influential speakers, most notably John Kerry and Van Jones, who reminded us that the next wave of the environmental movement will rely on repudiating it’s elitism, or as Van Jones put it, “you shouldn’t have to buy a hybrid to get involved”.

The truth is, the green retrofitting of America will represent one of the largest labor opportunities in the 21st century – our generation’s new deal. More importantly, a high portion of those jobs will be for lower income workers. It represents an opportunity to bridge both the socio-economic and environmental divides in America. To reclaim, revive and reconnect communities. It is becoming clear that we must move beyond the eco-apartheid that has confined the environmental movement since the 70’s. We must surge towards eco-equity and the recommendations put forth by the forum for government programs represent a great start in that direction.

Recommendations:

1. Green Enterprise Zones, where the city works with local labor and businesses to bring green businesses into underserved neighborhoods.

2. Prepare a green workforce. Start with “people with barriers to employment” — e.g., conviction, no high school diploma, etc. Don’t just start with people already in the workforce. It will cost more up front ($8-10,000 vs. $1-2,000 per person). But it saves a lot more elsewhere. These folks are not out hurting the neighborhood — instead, they’re working to benefit their communities, take care of their families, etc.

Click here for a more detailed discussion of the “Green Jobs Forum”.

Click here for more information on Van Jones and “The Reclaim the Future” initiative in California.

We vote for candidates to represent our concerns on the local and national levels. There are obvious shortcomings to our political system, but really it is the illusion that this is our only means of affecting change and the abdication of personal responsibility that is most problematic. Whether we like it or not, our consumer driven society puts much of our power in our pockets rather than our votes.

The products/services we purchase and our patterns of consumption send hundreds of signals every day about our preferences and willingness to pay for various environmental, social and health related attributes. For instance, by buying “Organic” Milk or “Cage-Free” Eggs we suggest that we care about health, the environment and are willing to pay a dollar extra for them.

There are myriad problems with this system, most notably markets tend to commodify our concerns and force us to pay a premium for them. This among among many other reasons is why unfettered markets are absolutely inadequate. On the other hand, there are just as many if not more opportunities related to the nature of our consumption where we can both express our preferences and save money in the process. Making sure to switch the lights off at night and the AC during the day, saves money and tells the utility that we don’t need them to invest in additional power plants and transmission lines which result in higher electricity rates and unnecessary emissions.

We complain about feeling powerless, but the truth is, as we move further into this “MY/I” world, we have an opportunity to empower ideals and affect change. That is, if we choose to take responsibility for our choices. Otherwise, “My/I” will continue to be an effective opiate for a disillusioned generation.

I was cleaning out my mother’s garage with my ten year old daughter. Thirty years of living and indiscriminate storing of the no longer ‘useful’ has overwhelmed the space originally designed to house two cars. My mother is no pack rat, but in her desire for cleanliness she has the tendency to take things lying around the house and pile them away in a place out of view. Hence the garage of yesteryears’ discard-ables.

Like an archaeologist excavating an ancient city, my daughter examined the contents of the garage in attempt to uncover the mystery of our lives. She is not old enough to really understand what has happened in the past 15 years and grasp how much things have changed. She has seen movies and heard stories, but for the most part my mother’s garage might as well be an ancient roman city.

She was holding a box of Swiffer mop replacements, which to my amazement were still completely intact in their individual polymer wrappings, when she asked the question that best characterizes our generational gap: “Daddy what was this for?”

I answered: “These were disposable mop heads that some people used to clean with. They could only be used a few times before you had to throw them away.”

As she always does in response to my explanations to this question, she shook her head in confusion.

It is impossible to explain the need for 95% of the goods we consumed in the 1990’s and 2000’s and how we were able to manufacture a need for all of them at the time. There is nothing one can say that would justify this behavior to a generation that now sees waste as obsolete and the environment, both physical and social as the only measures of progress.

Those of us that were of age during the height of hyper-consumerism have lived through two completely contrasting eras: “The Great Waste” and “The Great Recovery”. We were the ones that changed the course. We were the ones that disrupted our path towards self-destruction. But as the revolutionary fervor has subsided and we settle into this new era we must now live through the environmental and psychological consequences of what we forever ignored.

My mother’s garage is emblematic of all that was wrong, but cleaning it with my daughter reminds me of how far we have come and how close we were to not making it.