Paul Deninger, the vice Chairman of Jefferies & Co., scared the pants off me this morning on the subject of complex issues involved in clean energy. And remember, this is also the week of the Poznan Conference, which we are covering over on Earth911.com.
Deninger points out that an energy tsunami is coming. All around the world, the demand is for more energy rather than less. There is a tenuous alliance forming now between environmentalists and business. The US is outspending Europe in clean energy spending, but Europe is ahead in regulation.The developing countries are, well, developing. They are not thinking about saving energy, only about getting it.
$4 billion of venture capital, about 10-12%, is now invested in clean technology. This will increase to 6 billion, because consumers are pushing for it, and government regulation is spurring it on. But this will create issues if we do it wrong.
Clean tech is a mosaic of alternative energy generation, applying technology to brown energy generation, energy transmission, energy storage, carbon monetization and water purification.
Cars are not the biggest consumers of energy or emitters of GHGs. The biggest emitters are buildings, followed by industries, and cars are third. Tesla is an interesting story, but not a big one.
Here are the more important issues: Over 30 billion bottles of water are consumed in the US. The amount of oil consumed to make those bottles would keep 1 million cars on the road. The water used to manufacture a water bottle is 3x the amount the bottle contains. Not only that, but we don’t know where our energy consumption really is. 55% of all energy generated is lost in transmission somewhere to where it is used.
Our addiction to incandescent light bulbs and bottled water consumes much of our energy.
Gas at $4.00 a gallon is cheap. Toothpaste is $7500 a barrel. Bacardi rum is 10x more expensive.
We expect energy to be free. Our economic growth was based on the presumption of widely available, cheap energy. Our assumptions of how we live our lives are based on $20 a barrel oil.
Wind is free, but so is oil; it’s a natural resource. It’s the rent to get it out and the extraction that’s expensive. We are shipping money one way for oil and another way for cheap consumer products. There is a $10 trillion wealth transfer going on as we ship all our money to the Middle East for oil and to China for consumer goods.
If this continues, sovereign wealth funds will be bigger than mutual funds.
We are more energy efficient now than we were 25 years ago. We have increased our GDP 25% with little energy consumption increase. We are one of the only countries to do that. Developing economies consume more energy than we do without anything we can do about it.
Developed countries are moralizing on global warming, but developing countries are focused on industrial development. They can’t become prosperous without it.
Is a price on carbon good policy? It raises the cost of fossil fuels, lowers the bar on the price-competitiveness of alternatives. But if China and India don’t participate, is the US then non-competitive? We have outsourced our pollution to China as we outsourced our manufacturing.
Worldwide, there’s a huge tug of war between priorities: pulling people out of poverty vs. lowering carbon emissions. The developing world is not focused on polar bears and icecaps.
Be careful what you optimize for. The green world is optimized now for eliminating carbon. Should it be? It should be optimized for alternative energy. Social costs really matter. The developed world is focused on jobs and GDP. The next big thing is low cost clean energy. In Deninger’s opinion, that’s not accomplished by a carbon tax.