The New York Times, in an article entitled, “Geography is dividing Democrats over energy,” makes much of an alleged split between policymakers on the coasts, vs. those in the Midwest and Plains states. Somehow coal and manufacturing are grouped together, challenging a concern for global warming:
“There’s a bias in our Congress and government against manufacturing, or at least indifference to us, especially on the coasts,” said Senator Sherrod Brown, Democrat of Ohio. “It’s up to those of us in the Midwest to show how important manufacturing is. If we pass a climate bill the wrong way, it will hurt American jobs and the American economy, as more and more production jobs go to places like China, where it’s cheaper.”
Since many, if not most, of my posts attempt to explain why manufacturing and green issues are mutually reinforcing instead of at loggerheads, I find this all very troubling. The problem seems to be that a cap-and-trade policy would make coal more expensive, thus making electricity for manufacturing more expensive. In addition, cap-and-trade might make energy-intensive industries, such as steel and chemicals, more expensive as well.
I think the way to square this circle is to pair cap-and-trade with direct governmental investment to assist coal dependent areas turn to green energy. In other words, if cap-and-trade legislation was passed along with funding to build the wind and solar systems needed to replace the coal plants (and the attendant electrical grid upgrades), then nobody would be worse off. In fact, the Midwest and other manufacturing states would prosper by manufacturing the very wind turbines and solar panels that would be used to replace the coal plants as well as generating any potential on-site solar and wind power. But that would require big bucks from the federal government.
Unless cap-and-trade is accompanied by direct funding for clean energy construction, I’m afraid cap-and-trade will be in big trouble in Congress.
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amazingdrx Posted 1:24 am
28 Jan 2009
"...if cap-and-trade legislation was passed along with funding to build the wind and solar systems needed to replace the coal plants (and the attendant electrical grid upgrades), then nobody would be worse off."
If the money that industry payed at auction for carbon permits were applied directly to building wind and solar in the areas that will be hit by the cost, passed on by industry (multiplied by the inflation all the way up the supply chain), then the cost to the regional economy would be offset. And actually improved as lower renewable power rates kicked in.
The trick is to take money from the old energy economy and use it to start the new one up. Industry seems to prefer cap n trade, I think they see a way of weaseling out of any big changes that way. pass on costs, do business as usual. Blame the green politicians next election time.
I can see the "clean" coal industry ad now: "Sen "Green" made us raise your power rates, we didn't want to do it. Send Sen. "Green" a message this election day."
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Colin Wright Posted 5:04 am
28 Jan 2009
What about the idea of a national infrastructure bank (or better still, a green national infrastructure bank) to set up the kinds of industries Jon talks about above? Nationalization of the banking system is already being considered by the Obama team.
David Korten on DN makes the point that we don't even have to go into debt for this sort of infrastructure spending:And it makes a whole lot more sense to develop a whole new orderly system by which the money is essentially issued by the federal government, and then we don't owe anybody anything
Meanwhile Gore has been warning about the need for strong legislation this year to take to Copenhagen. So I'd agree with Jon -- look for ways to fund renewable manufacturing as a way to get C&T passed.
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Sean Casten Posted 7:32 am
28 Jan 2009
There may be other ways as well, but the key point I think has to come from an acknowledgment in the green community that ultimately, we still have to make things. From steel to aluminum, our economy is dependent on many things that we want in our homes and products, even if we don't want the factories in our backyards. It strikes me that much of the green v blue polemicism derives from a combination of luddite-esque tendencies amongst some in the green community and a simple lack of understanding of how stuff gets made amongst others. Both combine to create the false perception that you can maintain any kind of acceptable standards of living without factories. So long as the debate is framed as renewables v coal, we will never get the manufacturing community on our side. But if we frame the debate instead as minimizing fuel combustion per dollar of GDP v the status quo, the debate goes away. Burning less fossil fuel does not have to imply shutting down factories; but we need to articulate why that is the case or else this debate will persist.
(And note that the way much cap & trade has been framed to date does far more to polarize those sides than align them.)
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Jon Rynn Posted 7:49 am
28 Jan 2009
So if anything comes along, like a cap-and-trade system, that costs money, upfront, I don't see any political will for that. I do see political will for public works, for spending money on something that will create jobs -- and helping industries become more efficient should create jobs, no?
By the way, I totally agree that people don't understand the need for manufacturing and how various industries fit into a well-functioning economy. As I think we've discussed before, there is a basic lack of "industrial literacy" in this country.
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Sean Casten Posted 7:58 am
28 Jan 2009
Vastly better - and much more in keeping with the "trade" notion, and the original theory of tradeable permits - is to cut government out of that process, except as an administrator. Allow bilateral transactions where sources pay sinks. With an output framework, sinks are defined as anyone who by their actions is lowering the average emissions rate. Ergo, you immediately get a rush of cash away from the dirtiest and to anyone who's actions are incrementally cleaning up - which would include any industrial facility who has the opportunity to increase their efficiency (e.g., all of them)
The only losers in that scenario are those who remain beholden to inefficiency and/or are economically dependent upon the extraction of fossil energy. But as I noted here, the US economy has vastly more winners than losers in that scenario.
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Jon Rynn Posted 8:53 am
28 Jan 2009
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Sean Casten Posted 9:55 am
28 Jan 2009
So as you start to increase that efficiency, you end up as a net winner under a sensibly defined GHG plan (in the sense that a sensibly defined plan would provide incentives to burn less fossil fuel, however structured.) The only question then becomes where the biggest impacts are for enhanced efficiency - which leads to a net economic gain (profit, not cost per tonne of CO2 reduction) - as opposed to more expensive fuel switching and/or standard of living curtailment which have costs per tonne.
Those opportunities are, to a significant degree, concentrated in the rust belt. They are also concentrated in the power sector, but only at a macro level. (e.g., there will certainly be losers: namely, those who insist on clinging to expensive, inefficient power). But so long as the result is to drive down the overall fossil-fuel intensivity of the power sector, the overall sector wins.
This is a really key point - far too often, we confuse wealth transfers with economic pain. They not only aren't the same thing, but are also the opposite thing. A GHG bill that allows bilateral trades and cuts gov't out of the process will incentivize massive reductions in fossil fuel combustion - and therefore, massive reductions in our expenses to pay for that fuel. That's a good thing economically and environmentally, even if it does mean that our coal miners get a little less money along with inefficient coal plants. But that is, after all, how economies move forward. Not by guaranteeing that all shall win, but simply by providing an opportunity that allows for more winners than losers.
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Colin Wright Posted 5:45 am
29 Jan 2009
But take a look at the new DOE report on the state of the grid. It has been government neglect of the grid that has pushed the system to the brink of failure. (Just one example: there is no way to currently transfer renewable energy west-to-east.)
And even McKinsey doesn't think a renewable revolution will pay for itself: they are talking 4 trillion euros collectively by 2030 in their new report. (Though I imagine that cost will be far cheaper than sticking with fossil fuels).
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amazingdrx Posted 6:24 am
29 Jan 2009
I liked Jon's idea because it would tie green investment in areas affected by the permit auction to the actual revenues collected.
But since banks need to be nationalized to some extent anyway, why not designate a few regional banks, under government control, to use funds collected with subsidy diversion (the plan I favor) or cap and trade or carbon tax to invest in green infrastruicture?
It would be a way to hold someone responsible for the funds. Have the books open to the public to make sure local jobs are created to offset temporarily higher electric rates. That would bring the power rates in that area down as renewables and conservation take hold.
Any region with a lot of coal power will suffer somewhat from any carbon pricing regime, even subsidy diversion. Costs will always be passed on to ratepayers. But maybe we would be willing to pay 3 cents per kwh more than the going rate if it helped our regional economy with green jobs and investment. Like rooftop solar and ground source heating/cooling system loans at low rates for homeowners? Or biogas digestor and wind power loans for farmers. And maybe even smart grid upgrade loans for local utilities.
Maybe even low rate car loans to buy plugin hybrids? Eureka!
It could be a very effective plan.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Jon Rynn Posted 6:58 am
29 Jan 2009
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Colin Wright Posted 10:29 am
29 Jan 2009
The article Jon pointed to also makes your point that a nationalized banking system might make a transition to a renewable ecomomy much more easier. Then I came across this funny paragraph in the NYT:Moreover, Mr. Obama's advisers say they are acutely aware that if the government is perceived as running the banks, the administration would come under enormous political pressure to halt foreclosures or lend money to ailing projects in cities or states with powerful constituencies, which could imperil the effort to steer the banks away from the cliff.
Good grief, we wouldn't want to help struggling homeowners or help fund TOD!
I think we may actually have to go over that cliff before the country (or at least, the Republicans) realizes that nationalization of the banks doesn't mean the end of the world and the Gulags!
Incidentally, I guess the Obama administration is exploring the possibility of a small infrastructure bank modeled after the European Investment Bank.
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amazingdrx Posted 1:46 pm
29 Jan 2009
My guess is we will be drumming up supporters to call and email their legislators to get things going through congress. We will have to convince the politicians that by blocking Obama's initiatives they "...will DESTROY THE ECONOMY!"
And we will be there to remind voters come next election time how they voted.
One good thing about GOP obstructionism, now that they have refused any of their support why give them any tax breaks for the wealthy and corporations?
A recent revelation came across the teevee, via Moody's Investor Service research. they found that each tax dollar spent on tax breaks for the wealthy stimulates the economy $1.03, a 3 cent net stimulus per dollar. Tax breaks for corporations stimulate the economy 30 cents per dollar, for a loss of 70 cents.
Infrastructure spending produces $1.59 for each dollar spent by government. A 59 cent surplus per dollar invested.
This will be a good meme for the Obama grassroots team. Join up now! I'm looking forward to targeting the district of that Wisconsin congressman that dissed Obama's plan today in the mass media with plenty of calls to Obama supporters.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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