Market Forces

There They Go Again, Part Two: Mercury

Sometimes cap and trade isn’t the best solution. Call me a purist, but I want my kid’s amniotic fluid to be toxin-free. In the case of mercury, direct regulation is the best way to go.

It also shows that carbon can have some good uses after all. Activated Carbon Injection can reduce mercury pollution from power plants by 90 percent. It’s clean(er), readily available, already deployed large scale, and affordable. Now it’s up to EPA to set the proper rules.

Steve Cochran tells the full story. Second in a series.

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One person’s cost, another’s opportunity

Transitioning into a new, low-carbon energy future costs money. No doubt about it. Yet the flip-side of cost is opportunity.

Pew just released a new study on Global Clean Power: A $2.3 Trillion Opportunity. Is this just a smart attempt at rebranding the inevitable, or is there more behind this?

Costs now, savings later

Cash flow graphFirst, a quick qualifier on costs. Yes, investing in low-carbon technology costs money upfront. It’s also true, though, that many investments in clean technology reap savings later.

The up-front capital expenditures for wind, solar, nuclear, and other low-carbon technologies are large. But operating costs are much cheaper than using fossils fuels (and I’m not even including the costs of climate change from carbon emissions, which have long been socialized).

CapEx OpEx tableThat still doesn’t make the transition a freebie, but it makes it much cheaper over time. McKinsey has run the numbers. Global net incremental capital expenditures for a clean energy future are significantly lower than upfront capital investments, once we consider operational cost savings.

These operational cost savings could, in fact, be called “opportunities.” But that’s not what the Pew report has in mind. It refers to the actual costs.

Cost = Opportunity ?

Higher costs imply more money changing hands. So costs do, in fact, equal opportunities in a very real sense for anyone on the receiving end of the transaction.

If you decide which career to pursue, you may well want to opt for renewables instead of, say, petroleum engineering. Your chance of landing a job is much greater. The former will add many more jobs in the foreseeable future. And once you are in a particular industry, you want as much money to come your way as possible. (Of course, a scarcity of petroleum engineers would imply a salary premium for the few who do opt to study a 19th century technology.)

That is different from society’s and especially the government’s perspective, where cost minimization is de rigueur. That’s also what makes market incentives—a cap on carbon emissions—so crucial: it unleashes private investment dollars without government spending.

Investment + Recession = Opportunity

But even the social picture changes completely once we find ourselves in a situation we are in right now.

In a recession, with lots of spare capacity and industry literally sitting on $1 trillion in idle cash, creating incentives for more spending is exactly what we want to do as a society.

Investing in renewable energy, of course, has the added benefit that it also comes with an enormous social benefit—by decreasing the now socialized costs of carbon emissions. That’s one cost we definitely want to avoid.

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Everything’s Amazing, until you illuminate it

We live twice as long as people only ten generations ago. We are richer, much richer than anyone alive two generations ago. Or in other words, it once took weeks, months, or years to make it from sea to shining sea. Now, flying from California to New York means “you watch a movie, take a dump, and you are home.”

Not if, when

But flying is more than watching movies. It also comes with real pollution. Lots of it. A flight from New York to Delhi creates more carbon pollution than the average Indian produces in a year. Individually that has little impact on the planet. Collectively it makes all the difference.

It’s  no longer a question of if, it’s when vast coastal areas will be under water, if we don’t change course soon. We are distorting the global nitrogen cycle beyond recognition. Our oceans face multiple assaults from collapsing fisheries to ocean acidification and often still unknown consequences from oil spills and other toxins.

It may well be both. Many things are getting better most of the time, largely due to awesome technological innovations. Yet we are also facing enormous challenges of unprecedented proportions.

Nightfall or Singularity?

Ian Morris's magnum opusStanford historian Ian Morris argues in his impressive magnum opus, Why the West Rules—for Now, that we face a choice. But the choice is not what you think.

It’s not about educating American children and investing in American ingenuity to fend off the inevitable ascendancy of the “East.” It’s about educating American children—all children—and investing in global innovation to ward off something much bigger: the possibility of planetary mayhem akin to total nuclear annihilation, “Nightfall.” His words, not mine.

Levels of innovation—”progress”—are so rapid, so unprecedented in human history that the question is not whether we will be making cross-country flights even faster or more convenient than they were only thirty years ago, or whether China or India will build faster planes than Boeing or Airbus. We don’t know what the frontiers of travel itself will look like thirty, twenty, or ten years from now. The question, according to Morris, is how to avoid the entire system spinning out of control.

The happy opposite of Nightfall is “Singularity,” a state where everyone, all humans, live at unprecedented levels of wealth, and in harmony with each other and the planet.

That’s quite a tall order. The question is how to get there.

Make Wikipedia history

First and foremost, it’s about channeling human ingenuity to work for rather than against us. That comes down to finding governance systems to guide market forces in the right direction.

The single most important step is to make everyone accountable for their full actions. “Privatizing profits and socializing losses” has its own Wikipedia page. That page, for now, only talks about the financial crisis as a classic symptom of the misguided mantra.

The planet is in exactly the same boat. Profits accrue to each and every one of us, personally. The losses are spread across everyone—you, me, your children, my unborn children.

You don’t have to believe in Morris’s stark choice between Nightfall and Singularity—although after reading his book, he will likely have convinced you—to realize that the planet will be getting worse unless, and only unless, that Wikipedia entry becomes a historical footnote.

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