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Hot, Flat, Crowded, and Taxed October 12, 2010

Posted by Amir Roth in books, clean energy, climate, energy efficiency, sustainability, taxes, weird.
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One of my favorite parts of my temporary new job is the commute. It’s between 30 and 40 minutes each way, but all on public transportation. This not only gives me the moral authority to browbeat people about their energy consumption—I’m not part of the problem! I use public transportation! My carbon footprint is only 12 times that of an average Indian, not 14 times!—it also gives me time to read in relative peace and while I am more or less awake. In fact, I am somewhat surprised by the relatively small number of people that read on the Metro. On any given day, I would say that fewer than 20% of the people on the Metro are reading, and most of those are reading that free magazine you can get as you come into the station. What are the other 80% doing? 20% are texting. 20% are listening to iPods. 20% are staring blankly into space. 19% staring blankly into space, listening to their iPods, texting in one hand, and holding the Metro newspaper in the other. 1% are trying to extricate themselves from the Metro doors.

The first book I read entirely on the Metro was Tom Friedman’s “Hot, Flat, and Crowded.” I won’t rehash Friedman’s thesis—the best thing America can do for itself and the world is to go seriously Green—Friedman does that just fine. I did want to say three things about the book though. First, I love that the cover is sampled from “Garden of Earthly Delights” by Hieronymous Bosch. Look no further than GoED for proof that they had very good psychotropes even in the 15th century! With publishing margins as slim as they are these days—although perhaps not for bankable stars like Friedman—why pay for cover art? Sample a renaissance painting for free!

Second, one of the things that struck me about “World Is Flat”—HF&C’s predecessor—was Friedman’s own itinerary. Bangalore. Shanghai. Doha. Copenhagen. Sao Paolo. Back to Bangalore. The most frequent refrain in WiF is “I just kept on moving.” Readers of Philly Bluejay know how I feel about business air travel. Friedman may fly more than any person on the planet! This was bad in an absolute sense but not hypocritical in the context of the book—WiF is about globalization. But HF&C is about climate and the Energy Era and yet the itinerary is similar. London. Mumbai. Dalian. Multiple visits to every continent except for Antarctica. I hope Mr. Friedman purchased carbon offsets for all of those air miles! Now, if you will excuse me, I have to fly to San Francisco. For business. Tom, I kid because I love. And because I am a hypocrite.

Third and finally, I want to elaborate on Friedman’s point about the necessity of a carbon tax. One of Friedman’s sub-points is that a clean energy revolution will never truly take off without a clear, loud, consistent and projectable price signal on carbon. The market will not move away from carbon—at least not efficiently and at scale—unless they know what staying with carbon will cost and unless that price is sufficiently high. Short of privatizing the atmosphere, the fastest way to create this signal is by government regulation. And here he advocates a carbon tax over cap-and-trade. Friedman views cap-and-trade as a kind of “hidden ball” trick—a way for the government to limit emissions in a way that does not result in direct costs for consumers or a direct trail of money back to itself. In a perfect world, the government hands out emissions credits, electric utilities buy and sell them amongst themselves and customers don’t see increased rates, and when they do, they don’t see that money going to the government. Friedman claims that this kind of shenanigan hides the true urgency of the problem from people—people are not going to change their habits unless they see how their actions translate directly into costs. I agree. Wholeheartedly. But I think that a better and more accurate way to state this problem is that a cap-and-trade system isn’t an effective price signaling mechanism because it doesn’t behave like a traditional price!

A price is a constant. The price of the first unit of is the price of the millionth unit. With a price, cost is always proportional to consumption and you can safely map out the future. Not so with cap-and-trade. With cap-and-trade, the price of a unit purchased under the cap is far less—perhaps infinitely less—than that of a unit purchased over the cap. And whether a unit is over or under depends on overall demand, not on your demand. Which system do you reckon would be more conducive to economic growth? “Neither” is not an option!

Meanwhile, the real commodity here is not electricity—or even coal—it’s CO2. It’s easy enough to create a cap-and-trade system for coal or electricity. A CO2-emissions-from-coal exchange would consist of a relatively small number of individually large participants. A cap-and-trade makes some sense in this case. But oil companies do not operate like utilities and so the CO2-emissions-from-gasoline effectively consists of millions of small participants. Cap-and-trade is logistically much more difficult here! And remember, if cap-and-trade were a true pricing mechanism than it would be possible to trade gasoline emissions for electricity emissions. Anything short of a holistic economy-wide cap-and-trade will effectively create a market distortion, effectively subsidizing uncapped sources of emissions at the expense of capped ones. Market distortion—specifically, implicit subsidies for carbon emissions—is how we got ourselves in this mess to begin with!

Perhaps Tom and I can discuss these points en route to Sacramento. Or maybe at the checkout counter at the Whole Foods on River Road. Tom, Text me!

P.S. The cover art of HF&C contains several images from the Paradise and Earth panels of GoED, but none—as far as I can tell—from the Hell panel. Was this intentional? A better cover would have had a sample from “Paradise” on top and “Hell” on the bottom. No?

P.P.S. Another suitable cover for HF&C—although not renaissance and likely not royalty free either—would have been a pair of paintings by neo-Bosch Salvador Dali. Butterfly windmills on top and that-painting-with-a-giraffe-on-fire-which-I-swear-is-by-Dali-but-I-can’t-find-a-link-for-so-now-I-don’t-know on the bottom.

P.P.P.S. Wonder if the Taliban puts this on their recruiting posters.

P.P.P.P.S. If you drop something on an escalator, never shoot your hand down to try to catch it while it’s falling. I’m just saying.

Shock and Awe June 25, 2010

Posted by Amir Roth in clean energy, climate, politics, war.
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Not in Afghanistan—where Stanley McChrystal is out and David Petraeus is in. Hey, that’s what happens when you badmouth the boss in the open rather than on WikiLeaks. In Canberra, Australia—where prime minister Kevin Rudd is out and form deputy Julia Gillard is in. Rudd is only the first Australian PM to be ousted in his first term since 1930. Gillard is only the first female Australian PM. But the real shock is the reason for the switch and the way it went down.

By most accounts—and, forgive me, but I don’t follow Australian politics closely or even remotely—Rudd’s first two years in office have been successful or at the very least non-disastrous. Hey, Australia is one of the few modernized countries which hasn’t been bludgeoned by the global recession! But Rudd ran on an environmental platform—he promised to be a leader in Copenhagen and to implement aggressive carbon measures at home. And he did neither. Rudd couldn’t have prevented Copenhagen from melting down—pun intended. With only 20 million people, separated by oceans from any other country, and unable to support forests, Australia is simply not a global carbon player of any consequence. But he could have implemented his national environmental strategy, starting with an energy cap-and-trade program. However, after the legislation was defeated in the Senate by a Conservative coalition, Rudd decided to table it until 2013. Infuriated by this “cowardly” political maneuver, many of Rudd’s supporters switched allegiance to the Green party. Rather than facing a humiliating defeat in the next election, Rudd’s own party’s power-brokers forced him out.

Ladies and gentlemen—we are witness to a historic moment. A political head of state has been removed for failing to implement climate change measures. I hope every head of every state was watching.

P.S. If you get a chance to read the The Runaway General—the Rolling Stone piece that got McChrystal “resignated”—you should. Not only to get a picture of McChrystal, but also to get a multi-dimensional view of the War in Afghanistan. First, the man. He’s essentially Jack Bauer. Now that “24” is over, FOX should pilot a follow-on series called “48” starring Stan. Stan could pull it off too—he doesn’t eat, sleeps four hours a night, and runs seven miles a day. Stan’s problem is that he’s a field seargent in a major general’s uniform. He likes the dirty work too much and has too little respect for civilians and politicians—and he resents having to deal with the latter at the expense of the former. He’s not a conventional modern general like Schwartzkopf or Powell or Petraeus—who have field experience, but largely rose up through the ranks of American military colleges. McChrystal is a former ranger and climbed the ladder in the field. He’s a “soldier’s soldier,” not a “politician’s soldier.” He’s trying to carry out his originally stated mission as best as he can—he can’t see that it’s mission impossible. He should never have been in this position in the first place. He’s almost a tragic figure.

As for the war, oy! If you didn’t think it was unwinnable before reading this article, you will afterwards. By the way, did you know that this is now the longest war in US history? We can only hope it doesn’t end up being the longest war in Afghan history too.

P.P.S. One of the few “funny” things in the article? McChrystal’s inner circle calls itself Team America and throws around more F-bombs than Team America does—if that’s possible. This reminds me, one of the saddest days for television in the last 25 years was the day MTV canceled Super Adventure Team. Sigh. At least we’ll always have YouTube.

P.P.S. The equivalent of this in baseball would be a 30-inning game. With no pitching changes.

P.P.P.S. It’s that time. Bluejay Jr. wants to know—”how big is the hole that babies come out of?” What do I say—”It’s small but stretchy, like SillyBandz?”

Electric Net Neutrality? May 3, 2010

Posted by Amir Roth in clean energy, economy, taxes.
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The recent developments in the net neutrality battle (see Comcast vs. FCC) and my general interest in clean energy and energy efficiency have led the following idea to kick around in my head for the last few months—does it make sense from both physical and end-goal standpoints to try and enforce some analog of net neutrality on the electric grid? Is it feasible to decouple maintenance and governance of the electric grid itself from electricity production at its edges, thereby opening up electricity production to consumer-facing competition? It appears to me that if this were the setup, then such competition—combined with a price on CO2 emissions—would be the most effective driver of a whole-scale move to clean energy production. Wind or solar clean-energy mini-utility startups would spring up by the thousands and coal-fired power-plants—CCS-enhanced or otherwise—would not survive the twenty-teens. Imagine that you were free to buy your electricity from any provider. Would you buy it from a company that had to pass its CO2 emissions costs to you?

Before I go on—and if you are a Bluejay regular, you know I’m going on—is a neutral grid with consumer-facing competition strictly necessary? Wouldn’t a plain carbon tax or a cap-and-trade system move electricity generation towards clean-energy? Not necessarily. A carbon tax without competition will likely not push a shift towards clean generation, or at least not quickly. Without competition—and many markets aren’t competitive—providers will just pass the tax onto consumers. Consumers in turn may choose to consume less electricity—or to purchase solar panels and water heaters—and the provider may generate less electricity produce less CO2 as a result. And this would be good too. But if the provider were guaranteed some level of consumption, there wouldn’t be much impetus for change. In the absence of competition, cap-and-trade may be similarly ineffective because an unchallenged provider would just pass the cost of CO2 allowances to consumers. Cap-and-trade does have the benefit of a CO2 cap, but providers may choose to meet that cap by producing less electricity rather than by producing additional electricity cleanly if the additional electricity could not be sold at a profit. In a competitive market, providers that did not pay a tax or allowance fees would have a cost advantage they could pass onto consumers. Competition is key. How do we make it pervasive?

For the internet, neutrality means that carriers must treat all traffic equally. Where the rubber meets the road—and where Comcast meets the FCC—they must give equal priority and resource to traffic they don’t profit from as they do to traffic they do profit from. This is the condition in which the internet grew and one of the facilitators of the massive innovation by content and application providers. ISPs charge a monthly fee for access. Content providers duke it out for the rest—sales, payed content, ad dollars, whatever. The problem starts when companies go vertical and provide both access and content, like Comcast. More accurately in the case of Comcast, the problem is when an already vertical access/content company gets into the internet business. Surprisingly, the Federal appeals court recently ruled against net neutrality—actually, it ruled against the FCC’s power to enforce net neutrality—but eventually, net neutrality should and will be placed on a legal footing. And Comcast will either toe the line or have its business broken up into Comcast access and Comcast content. In the electricity business, every company is Comcast. There are no separate electricity content and access providers. Providers provide both content (electrons) and access to it (wires). All companies have a vested interest in selling you their own electricity rather than someone else’s. The electric grid is not neutral because it did not grow up that way. But that doesn’t mean it can’t be regulated into neutrality.

To be sure, electricity is not internet data. Internet data is digital, can be transmitted without loss, and along a variety of media—telephone lines, coaxial cable, optical fiber, airwaves—all of which support wavelength division multiplexing. Electricity requires moving electrons along electrical media, which as far as I know does not support WDM and experiences loss over distance. But this doesn’t matter for neutrality. What matters is that, like the internet, electricity providers and their proprietary grids are interconneted and can pass payload to one another. An electricity provider should not be forced to sell you someone else’s electricity—that may be either impossible or inefficient—but they can be forced to sell you their own electricity at someone else’s price!

Here is the proposed setup. The electricity business gets broken into two pieces— a monthly connection or access fee, and content or usage charges. The access fee is collected by the local provider. The usage charge is collected by whichever provider you sign up with, with your local provider possibly tacking on a small “processing” fee, e.g., $0.0025/kWh. The electricity you get is produced by your local provider, but your contract is with the producer of your choice. The producers simply fulfill each other’s orders as necessary in an electric form of Nader-trading. Of course, producers cannot sell more electricity than they can actually produce. And so initially, not everyone would be able to sign up for green CO2 tax/allowance fee-free electrons. But any and all such electricity that comes online anywhere will be bought immediately—much like it currently is in China by state mandate—and there is nothing like perfectly elastic demand to encourage supply.

What say you, people?

P.S. Temperatures last week in Philadelphia: 60, 40, 50, 70, 90. I don’t think we’ve ever wanted to have the heat on and the A/C on in the same week. Climate change? What climate change?

P.P.P.S. For the past few weeks, I have been working on a 5,000 piece jigsaw puzzle of Breugel the Elder’s “Tower of Babel.” I have the sky and ocean part done or about 30% of it. I realized something yesterday that I suppose I should have realized a long time ago—the cuts in jigsaw puzzles are periodic! Entire sections can be exchanged for one another or even checkerboarded. I realized this when I noticed that a 4-piece section of the sky on the right side of the puzzle was slightly off-color relative to its surroundings as was a similarly shaped 4-piece section on the left side. Who knew?