(In this column, Sasha Lyutse, a public policy expert with the Natural Resources Defense Council and the Welch Environmental Innovation Fellow, based in New York City, argues that corn ethanol is a mature industry that may no longer merit the wealth of subsidies it receives, particularly in light of research showing it is not as efficient as new technologies in cutting carbon pollution. The blog was first posted on the NRDC’s Switchboard blog site.)

By Sasha Lyutse

Sasha Lyutse

Yesterday afternoon, the nonpartisan Congressional Budget Office (CBO) released its evaluation of the costs and benefits of federal biofuels tax credits, including the Volumetric Ethanol Excise Tax Credit (VEETC), the largest U.S. subsidy for renewable energy that goes almost entirely to corn ethanol.  The release comes against the backdrop of a full court press by corn ethanol industry lobbyists to push Congress to extend the VEETC and a disappointing attempt by Senator Amy Klobuchar (D-Minn.) to attach a 5-year extension of the corn ethanol tax credit to a Senate energy bill ostensibly supporting renewable energy, which we discussed here and the NRDC Action Fund discussed here.

The results of the CBO study, conducted at the request of Senator [Jeff] Bingaman (D-New Mexico), Chairman of the Subcommittee on Energy, Natural Resources, and Infrastructure of the Senate Committee on Finance, were sobering:

The CBO report estimated that roughly 11 billion gallons of biofuels were produced and sold in the U.S. in 2009, over 98% of which (10.8 billion gallons) came from corn ethanol. Tax expenditures (essentially foregone tax revenues) in support of this production were roughly $5.16 billion, including VEETC payments of $0.45 cents per gallon for blending ethanol (regardless of the feedstock) and the additional $0.10 cents per gallon that “small producers” receive on the first 15 million gallons they produce.

CBO finds that before they even pay at the pump, taxpayers incur a cost of $1.78 to replace a gallon of gasoline by substituting corn ethanol. This accounts for not only the cost of the VEETC per gallon, but the relative energy content differences between ethanol and gasoline (gasoline contains ~32% more energy than a gallon of ethanol, so 1.48 gallons of ethanol are required to replace one gallon of gasoline), and changes in the consumption of ethanol and gasoline that can be attributed to the tax credit. In other words, the taxpayer cost of using the VEETC to promote corn ethanol depends largely on the amount of corn ethanol that would have been produced if the credits had not been available. According to CBO, that’s the majority of it:

Based on the results of analysis done at the Food and Agricultural Policy Research Institute (FAPRI), CBO estimates that if no other policies were in place, eliminating the tax credit would reduce corn ethanol consumption by 32%. Importantly, FAPRI also estimates the impact of eliminating the tax credit if RFS mandates remain in place and finds that domestic production drops just 10% over five years, which we discuss here and in our Fact Sheet on the VEETC here. The redundancy is clear, but taxpayers continue to foot the multi-billion dollar bill.

And the costs to taxpayers of reducing greenhouse gas emissions through the corn ethanol tax credit?  CBO’s estimate excludes the emissions associated with land use change—i.e. the carbon dioxide that is released from forests or grasslands that are cleared and converted to farmland as a result of ethanol production—though the report notes that if those emissions were taken into account, the cost could increase substantially. Indeed analysis done by EPA shows that when you factor in the impacts of indirect land use chance, corn ethanol actually increases emissions relative to gasoline. However, even if we use CBO’s assumptions that ethanol produces greenhouse gas benefits, the cost is staggering: $750 for every carbon dioxide equivalent (CO2e) metric ton in reductions!

The conclusion could not be clearer: we are spending billions in scarce taxpayer dollars to prop up a decades-old corn ethanol industry and a mature, polluting technology – money that isn’t getting us where we need to go in terms of reducing greenhouse gas emissions and in many cases is setting us back. The good thing is key Congressional leaders are beginning to recognize the wastefulness of these policies and the opportunity we’ll miss if we don’t instead direct our support towards newer, cleaner and better-performing advanced biofuels. In response to the release of the CBO’s report, Senator Bingaman called on Congress to look seriously at the VEETC rather than just reflexively extending it:

“This report by the nonpartisan Congressional Budget Office provides further evidence that our nation’s biofuels tax incentives might not be appropriately calibrated.  In particular, CBO’s findings should prompt Congress to critically examine whether it is appropriate to extend the Volumetric Ethanol Excise Tax Credit (VEETC) at its current 45-cents-per-gallon level beyond the credit’s December 31 expiration.”

Calling corn ethanol a “mature technology whose market share is protected by an aggressive Renewable Fuel Standard”, he also reminded Americans of just how much corn ethanol subsidies have already cost us:

“According to the Congressional Research Service, the VEETC will cost the American taxpayer $7.6 billion this year alone.  That high price tag makes the VEETC by far our Tax Code’s largest subsidy for renewable energy.  And this annual price tag comes on top of the $41.2 billion in current dollars that U.S. taxpayers have already spent since 1980 on tax-based subsidies for ethanol.”

Like the CBO, it’s time for Congress to talk a cold hard look at just how much the VEETC costs us and just how little we get in return and let the VEETC expire at year-end.

By Francesca Rheannon

Francesca Rheannon produces and hosts the website Writer's Voice and serves as an editor for the CSR newswire.

Tis the season of farmers’ markets. Last week I moseyed on down to the Southampton (NY) farmers market and picked up some tasty, locally produced cheese that melted in my mouth with a delicious tang. But that local dairy farmer and others like him could become an endangered species if we continue on our current carbon-spewing energy path. Cows don’t produce much in very hot weather and scientists say that “heat stress and other factors could cause a decline in milk production of up to 20 percent or higher” in the Northeast under a business-as-usual (BAU) scenario. That’s a big deal: dairy is the largest agricultural sector in the region, producing some $3.6 billion dollars annually.

It’s a hundred humid degrees here as I sit here writing. The summer — and century — is still young. Here in the Northeast, we could be seeing 30 days or more of 100+ degree weather by mid-century or sooner. Summers like that will stress more than Bessie the Cow: possibly wiping out the apple harvest and “eventually leaving only a small portion of the Northeast with a viable maple sugar business.” The climate in New York State will be like that of Georgia now, bringing plagues of heat-loving insects and creating a profusion of weeds (among them bigger and stronger poison ivy.)

Agriculture isn’t just a victim of climate change; it’s a major cause of it, contributing 18% of all global carbon emissions. Half of that comes from a handful of agribusiness giants who are cutting down the rain forest to grow crops for biofuels or feed for cattle. The other half comes from industrial food practices like packing thousands of animals into CAFOs (Concentrated Animal Feed Operations), where huge amounts of fossil fuels are used to feed, heat, and cool them; more emissions result from the giant “lagoons” of their waste. It adds up to more CO2 pollution than that given off by all modes of transportation put together.

It doesn’t have to be this way, says Anna Lappé of the Small Planet Institute. I sat down with her recently to talk about her newest book, Diet for a Hot Planet. She’s on a campaign for a climate-friendly agriculture, one that learns from and works with nature, instead of pulverizing it with toxic pesticides and chemical fertilizers. (They’re not good for other growing things, either — like children.) One in three American children now have autism, allergies, ADHD or asthma, which many scientists are suggesting are at least partially due to toxics like growth hormones and pesticides.

And she doesn’t much trust the claims of some Big Ag companies that they promote “sustainability.” Lappé says we need to be careful how we define the term. She points to taxpayer subsidized “green credits” given to chicken processor Tyson Foods for using waste from CAFOs to produce biofuels. “If we count the full life cycle of the product in terms of fossil fuel use, in no way does it counter its carbon footprint,” she told me. “I’m all for creative ways of handling our waste, but should we be incentivizing production that is so wasteful with our tax dollars? Should we have CAFOs to begin with?”

In contrast, Anna Lappé showcases projects like the small-scale methane digester used by a small coop of local, organic farmers to produce energy and helping to build a more climate friendly food system along the way.

But, I asked her, can small, local organic agriculture really feed the planet’s teeming billions? “We have very good evidence now from studies looking at organic yields, that they are as good or better than those using industrial practices,” Lappé answered. Industrial agriculture means that over time, the soil becomes impacted and depleted of microorganisms; insects develop pesticide resistance; and we are getting high yields at a high price: costing us in water depletion, climate chaos, and topsoil loss. “That’s undermining our long term capacity to feed ourselves.”

Lappé says that while we need to understand the gravity of the crisis, we also need to transform our fear into energy for spreading climate-friendly practices throughout the food system. The practices aren’t necessarily new — only better. Take cows: Anna Lappé says they evolved to eat grass and turn it into high quality protein for humans, fertilizing the ground in manageable amounts with their manure. Going back to the pasture-based system helps to restore and regenerate the land, two principles of a climate-friendly agriculture.

Lappé lays out several ingredients of climate friendly farming. One is “nature-mentored,” using nature’s own wisdom to promote healthy production — like letting cows pasture on grass. The farmer no longer tries to impose her will on nature, but acts more as a population manager, bringing the right mix of insects, animals and plants together.

Lappé says that we also need to practice a resilient agriculture as we adapt to the inevitable disruptions of climate change. That means promoting diversity of crops and seed strains, as opposed to the tying up of nature into patented genetically modified seeds that make up so much of major monoculture crops like soybeans and corn.

In order to practice climate friendly farming, Lappé says we need to adopt long-term thinking over short-term profits — a lesson, it seems, that is being pounded into our heads during this time of financial meltdowns and spreading Gulf oil slicks.

But she has hope it can be accomplished. With her mother, Frances Moore Lappé, she went to India to talk to farmers who were fighting to stop the use of pesticides, patented seeds and chemical fertilizers that were bankrupting them (and driving many in their ranks to suicide-by-pesticide). She found inspiration in these poverty-stricken farmers who were enlivened by their collective organizing to renewed hope in creating a better future for themselves and their families. She learned then to understand hope in a radically new way, as “more verb than noun.” By taking action toward a climate friendly agriculture, stability, Lappé says, she’s finding herself becoming more hopeful that we can bring the planet’s climate back to stability.

(You can hear Francesca Rheannon’s interview with Anna Lappé on the radio show, Writers Voice.)

By Richard Heinberg

Following the failure of the latest efforts to plug the gushing leak from BP’s Deepwater Horizon oil well in the Gulf of Mexico, and amid warnings that oil could continue to flow for another two months or more, perhaps it’s a good time to step back a moment mentally and look at the bigger picture—the context of our human history of resource extraction—to see how current events reveal deeper trends that will have even greater and longer-lasting significance.

Much of what follows may seem obvious to some readers, pedantic to others. But very few people seem to have much of a grasp of the basic technological, economic, and environmental issues that arise as resource extraction proceeds, and as a society adapts to depletion of its resource base. So, at the risk of boring the daylights out of those already familiar with the history of extractive industries, here follows a spotlighting of relevant issues, with the events in the Gulf of Mexico ever-present in the wings and poised to take center stage as the subject of some later comments. Readers in the “already familiar” category can skip straight to part 5.

1. The Pyramid Scheme

Perhaps it’s best to start with the most familiar metaphor: resource extraction always proceeds on the basis of the low-hanging fruit principle. We typically go after the most easily accessible, highest quality portions of the resource first, and save the hard-to-get, low-quality portions for later.

Geologists use a different metaphor; they commonly speak of a “resource pyramid.” The capstone represents the easily and cheaply extracted portion of the resource; the next layers are portions of the resource base that can be extracted with more difficulty and expense, and often with worse environmental impacts; while the remaining bulk of the pyramid represents resources that geologists believe are unlikely to be extracted under any realistic pricing scenario, usually because of depth, location, or quality issues. There’s a pyramid for oil, one for coal, one for iron ore, and so on.

As we chew our way down the layers of each pyramid, starting at the top, some fairly predictable things happen with regard to technology, economics, and environmental impacts. These effects are often mutually interacting, and I will try to highlight those mutual interactions as we go.

2. Technology

Some resources can be extracted, at least in initial stages, with very simple tools. Primitive mining was accomplished with stone and wooden picks and shovels, using reed baskets to carry ore (usually copper, gold, or silver) to nearby sites where it could be smelted in charcoal fires. Once copper, tin, and iron had been smelted in sufficient quantities, metal tools began to be used in mining.

Early coal mining consisted simply of digging lumps from surface outcrops, but by the 18th century British miners were working in shafts over 300 feet deep.

Many very early oil wells consisted of shallow pits (up to 100 ft deep) dug into natural seeps; the earliest known drilling for oil occurred in China in the fourth century, achieving depths of up to about 800 feet using bits attached to bamboo poles. As petroleum became a heavily traded commodity in the early 20th century, rotary drills using steel pipes and bits were developed, able to penetrate to depths of thousands of feet.

The patterns are clear and unsurprising: As resources near the Earth’s surface become depleted, we have to work harder and dig deeper to extract more of what we want and have come to need. Production problems lead to the development of new extractive technologies—which, in solving those problems, often also make more of the resource accessible. As a larger portion of the resource base becomes available to society, more uses for the resource are discovered. The new technologies themselves (starting with metal tools) also frequently wind up having other purposes—ones that may increase demand for the resource they were developed to extract.

There is no more significant or instructive example of these trends than the story of the steam engine—which was invented to pump water out of deepening coal mines, but (when applied to other ends, such as providing the motive power for railroads) became a prime user of coal. Tellingly, iron rails were also first used in coalmines. And thus, of course, began the Industrial Revolution.

Fast-forward to deepwater drilling rigs, satellite and seismic geological surveys, horizontal drilling, fracking, and Blowout Preventers (BOPs) for finding and extracting oil (and unconventional natural gas); Steam-Assisted Gravity Drainage (SAGD) technology for obtaining oil from tar sands; long-wall mining, Underground Coal Gasification (UCG), and Carbon Capture and Sequestration (CCS) in the coal industry; and so much more. Each extractive industry boasts its own fleet of cutting-edge technologies, each consisting of a suite of tool systems all working together to make the production of some fuel or ore cheaper or more environmentally benign.

The 21st-century search for useful non-renewable resources is testing the limits of science; and both the brawn and the intricacy of machines that have been developed to feed our growing human needs for nonrenewable resources are truly impressive. Watching some of these machines in action, it is tempting to think that human ingenuity has no bounds. Moreover, since we are still fairly close to the top of the pyramid with regard to many nonrenewable resources, it is also natural to assume that constantly improving machines will enable us to dig very far down indeed, so as to continue supplying our burgeoning collective appetite for energy and minerals for many generations to come.

However, as we are about to see, the development of extractive technologies also involves tradeoffs and limits.

3. Economics

Fancy extraction technology comes at a price. But investment in more expensive tools is often justified by greater efficiency of production, reduced environmental impacts, or by the ability to open more of the resource base to exploitation. The relationship between cost and payoff is captured to some extent by the simple ratio of Return on Investment (ROI), to which every drilling or mining company’s bean counters pay vigilant attention. This ratio can easily go sour in situations where the resource isn’t present in sufficient quantities (even using the newest oil exploration techniques, two out of three initial wells—each costing tens to hundreds of millions of dollars—still comes up dry) or where environmental problems get out of hand (note to self: at end of fiscal year, remember to review BP’s balance sheet for Gulf of Mexico operations).

But financial ROI is not the only return on investment that matters. If we’re discussing energy resources (oil, gas, or coal) then we also have to keep track of the ratio between the energy invested in exploration and production versus the energy yielded by the resources extracted. This is commonly termed Energy Return on Energy Invested, or EROEI. Technology uses energy, and bigger and more complicated machines usually use more of it. Moreover, the mining and refining of deeper or lower-grade fossil fuels generally takes more energy regardless of what technology is used. When the amount of energy required to produce a given quantity of fuel equals the amount of energy obtained from burning it, that fuel ceases to be a net energy source. There may be financial reasons to continue the production process (including government subsidies or tax write-offs), but from an energetic standpoint the exercise has become pointless. The EROEI for fossil fuels is declining for all the above reasons.

Since each layer further down the resource pyramid requires more expensive extractive machinery, while yielding lower-quality or more expensively produced fuels or ores, one would expect that the market price for resources would continually be rising. But this has not been the case in most instances—until recently. During the 20th century, most commodity prices (including prices for metal ores and, often, fossil fuels) actually declined in inflation-adjusted terms. Why? More areas for exploration were continually being opened, while payoffs from the ability of new technology to access lower layers of the resource pyramid trumped both the extra cost of the technology itself and the declining resource quality (a factor that must be overcome with increasing investment in refining or ore upgrading).

Over the past few years, that situation has begun to change. A study, “Increasing Global Nonrenewable Natural Resource Scarcity,” by Chris Clugston tracks the production levels and price of 57 Non-renewable Natural Resources (NNRs). Clugston begins by pointing out that

During the 20th century, global production levels associated with 56 of the 57 analyzed NNRs (98%) increased annually, while global price levels associated with 45 of the 57 analyzed NNRs (79%) decreased annually. Generally increasing global NNR production levels in conjunction with generally decreasing global NNR price levels indicate relative global NNR abundance during the 20th century. On the whole, global NNR supplies kept pace with ever-increasing global demand during the 20th century.

So far, so good. But that’s changing.

Generally slowing or declining global NNR production growth in conjunction with generally increasing global NNR prices indicate increasing NNR scarcity during the early years of the 21st century… Annual global production levels increased during the 20th century, then decreased during the 21st century; while annual price levels decreased during the 20th century, then increased during the 21st century…

Case in point: for petroleum, between the years 2000 and 2010 production increased 9 percent, while prices rose by almost 400 percent. No, we’re not “running out” of oil, but we are running out of cheap oil. Clugston echoes this conclusion more generally: “We are not about to ‘run out’ of any NNR; we are about to run ‘critically short’ of many.”

Something else we learn from petroleum: as production expands and high-quality deposits deplete, continually higher prices do not represent the full extent of the problems that arise. At some point, regardless of price, production reaches a maximum rate and begins to decline (this, of course, is what the whole “Peak Oil” discussion is all about). This “peaking” phenomenon has occurred with regard to the extraction of many different resources, and in many places and times, so its dynamics are now the subject of fairly sophisticated study.

Standard economic theory holds that, as a resource becomes scarce, potential buyers will bid prices upward; and as prices escalate, increasing numbers of users will turn to substitutes. It’s easy to point to historic examples where these things happened, but there have also been instances where prices responded in a highly non-linear fashion (more on that below), and where substitutes were unavailable or inadequate. In the case of fossil fuels, substitutes do exist; however, most have drawbacks of one kind or another (see Searching for a Miracle) and the scale of current global fossil fuel usage makes a full transition to substitutes a truly daunting prospect.

It is important to know whether commodity prices escalate linearly as petroleum and other non-renewable resources become scarcer. If they do, then the invisible hand of the market will solve many of the problems that scarcity brings: in addition to making substitutes more attractive, higher prices will motivate efforts to increase efficient usage of the resource. But a recent historic example calls such rosy scenarios for painless, market-led resource transitions into question. In the years and months leading up to July 2008, demand for oil was increasing, but global production remained stagnant. Traders bid the price up to a record $147 per barrel—and global financial mayhem followed. While a concurrent derivatives/real estate crash was responsible for much of the bloodshed, dramatic slumps in the auto, airline, trucking, and shipping industries seemed closely tied to the oil price spike. These (along with the general economic convulsion) resulted in declining fuel demand, which in turn caused petroleum prices to plummet nearly to $30 per barrel in December 2008. This then led to curtailed investment in oil exploration—which, in due course, will provoke another rapid price rise as supplies dwindle. The cycle will presumably begin again; and each time it recurs, it will likely have an even more devastating economic impact. Not all non-renewable resources will provoke similar scenarios as they deplete, as very few are so essential to the economy that scarcity or price spikes could trigger a major recession. However, price volatility does seem to be a typical sign of depletion-led resource scarcity.

Finally, perhaps the most significant economic factor with regard to the extraction of nonrenewable resources is growth. Modern economies depend on growth in provision of goods and services; meanwhile, world population continues to expand. As we make our way down the down the pyramid, increasing appetites (growing population times growing per capita consumption rates) translate to increasing dependence on depleting resources. If total consumption rates were declining or even constant, the economic and environmental problems stemming from resource depletion would be easier to solve. Growth makes all such problems more intractable with every passing year.

4. Environmental Impacts

In many respects, advancing technology tends to reduce the environmental impact of each increment of resource extraction (though there are exceptions!).

Underground coal mining in the early days—only a few decades ago—was far more dangerous, dirty, and dreary than it is today, though mine disasters still occur (as we sadly discovered just a few weeks ago in West Virginia) and miners still die from pneumoconiosis.

Similarly, the oil business in the early 20th century lacked regulations and safety technology, and resulted in more frequent oil spills and fatal accidents than does today’s high-tech industry. The first successful exploratory oil wells nearly always produced gushers because there was little to prevent pressurized oil from shooting out the top of the drill pipe once reservoir contact was made. These days, gushers are extremely rare due to modern oil well pressure control systems.

In the deepwater Gulf of Mexico, we see on display all the most advanced technology for drilling safety and spill cleanup. Blowout preventers, pressure monitors, careful planning, regulations, and advanced engineering combine to make accidents rare. If something does go wrong, there are remote-controlled underwater vehicles, top kills, and junk shots to seal off the leaks, and oil booms and chemical dispersants to deal with the spill itself.

And yet, despite all this technology and expertise, we are still witness to one of the worst environmental disasters in history. Why?

As we are still learning, the Deepwater Horizon disaster was due largely to gross negligence on part of several companies, primarily BP, and also to the approval of a flawed drilling plan by the Federal Government’s Minerals Management Service (MMS). Such lapses are to be anticipated. In a deepwater drilling operation with a budget running upwards of a hundred million dollars, every minute costs money, so there are strong incentives to cut costs. Often, engineers (who may be more concerned about safety) are overruled by management (who are more concerned about budgets and ROI). Then there is the phenomenon—common throughout government—of regulators being figuratively (or literally) in bed with industries they are supposed to be regulating. So in March 2009, when BP filed a plan with the MMS, repeatedly asserting that it was “unlikely that an accidental surface or subsurface oil spill would occur from the proposed activities,” so unlikely in fact that “a blowout scenario… is not required for the operations proposed,” the regulators simply took the company at its word.

In the bigger scheme of things, an event such as the Deepwater Horizon explosion becomes more likely with every passing year, despite the continuing development of superior technology: as oil production levels grow to meet rising demand, and as the industry is forced to drill deeper in ever more hostile environments, there are more things to go wrong; and when problems happen, they are harder to fix.

While the world’s attention is appropriately riveted on the consequences of the Macondo blowout, it is important to remember the ongoing, routine environmental devastation that comprises the background static of contemporary industrial life: climate chaos, air and water pollution, and loss of biodiversity. In many instances of resource extraction—including “mountaintop removal” coal mining and tar sands oil production—massive environmental destruction is the result not of unforeseen accidents, but of normal operations.

With the convergence of climate change and “clean coal” technology we see the culmination of many of the trends discussed here. Climate change is an environmental consequence of nonrenewable resource usage, and one that is so horrendous it will stop civilization in its tracks. Therefore something must be done to stop it. Several key industrial nations can’t afford to give up coal, the highest-carbon fuel, because their economies depend on it and the alternatives would be too costly to develop. The ideal solution would be a new technology to clean up carbon emissions from burning coal. Voila! Such a technology exists—Carbon Capture and Sequestration (CCS), which entails burying carbon dioxide from the coal combustion process underground. But CCS will cost so much to build to scale that the technology will almost certainly never actually be implemented. (see China’s Coal Bubble…and how it will deflate U.S. efforts to develop “clean coal”) The upshot: there is no apparent solution to the coal/climate conundrum that preserves economic growth much longer. The trends end in some sort of unpredictable discontinuity.

5. Deepwater Horizon: Impact on Future Oil Production

Now, back to the events in the Gulf of Mexico.

The U.S. Department of Energy forecasts that “a vast majority” of projected increases in U.S. oil production in the near term will come from Gulf deepwater fields similar to the site of the Deepwater Horizon spill. Such deepwater fields currently represent about 70 percent of all Gulf oil production (the other 30 percent come from shallow depths, typically of a few hundred feet). Offshore oil provides almost a third of total U.S. oil production of 5.5 million barrels per day, and that percentage is rising. For the world as a whole, the International Energy Agency projects that by 2020 deepwater will be providing 40 percent of all oil being extracted. Why the emphasis on deepwater? Because we’ve already chewed our way down through the higher levels of the oil pyramid: there’s very little onshore or shallow-water oil left to find. So down we go!

The BP spill is likely to throw a wrench into these plans. Heavier regulations, and higher (more expensive) standards are on the way. President Obama has just ordered the suspension of all current U.S. deepwater drilling operations for six months, and future deepwater projects could be delayed by years.

Insurance costs for deepwater projects will soar (“The cost of insuring a rig against a so-called physical loss—damage to the rig itself—can easily surpass $3 million a year, and could reach $9 million depending on the deductible,” according to Rigzone). Total insurance claims on the Deepwater Horizon disaster could far exceed the total premiums paid by all oil drillers to insurance companies in 2010, so a bankrupting of some insurers is at least possible.

Further, deepwater projects require financing—however, in case anyone hasn’t noticed, the economy is falling apart. Banks aren’t lending because of all the bad loans on their books; and, though oil companies may be flush with cash, they prefer to spread risks around. Now that the risks associated with deepwater exploration appear much larger, and credit is tight in any case, fewer investors are likely to want to jump aboard. Oil companies may want to just hang onto their cash by buying up their own stock shares. After all, the object of the game is to make a profit; producing more oil is just a means to that end, and if a better means is available, why not go with it? Sure, “financializing” the oil industry doesn’t work over the long term, as oil companies need booked reserves in order to attract investors, and maintaining reserves requires exploration. But who’s in it for the long term? Hey, in the long term, we’re dead. Maybe it’s time to cash out and let a new generation of managers figure out what to do next.

Then there is the problem of over-optimism. Developers of production projects are naturally inclined to talk up the prospects for the latest “play.” Later, when reality sets in, initial rosy forecasts may not be borne out. Case in point: BP’s flagship deepwater Gulf of Mexico project, Thunderhorse, was slated to produce a billion barrels of oil at the rate of 250,000 barrels a day (b/d). Production hit 172,000 b/d in January 2009, but then declined rapidly to 61,000 b/d by the end of last year. BP has not commented publicly on the reason for this unexpected production crash, but outside observers are skeptical that the platform will ever actually produce the promised billion barrels. According to Post Carbon Institute Fellow Tom Whipple in “Peak Oil Review” for May 24, “At least 25 other deepwater projects are said to be facing problems of falling production, raising the question of just how much oil these very expensive deepwater projects will ever produce.” Take one Thunderhorse, add a Deepwater Horizon, mix thoroughly, and what do you get? Investor jitters.

Economic optimists never tire of pointing out how enormous the resource pyramid is when viewed as a whole. When society is desperate, they say, we will go after energy resources and raw materials no matter where they are, no matter how expensive the process, and no matter how much environmental destruction comes with it. We’ll solve problems that arise as best we can and move on. Growth is inevitable and unstoppable, and if fuels and materials that enable growth exist, we will find and use them. In reality, though, things may not work out that way. New extraction projects require the cooperation of many functioning systems including manufacturing/fabrication, finance, insurance, regulation, and advanced technical education. As that system of systems becomes more complicated, the sites of potential breakdown multiply. The current economic crisis is likely to rupture the system in multiple places, crippling extractive industries. Much of the remaining oil, coal, gas, and mineral resource base that could technically be extracted may well end up staying in the ground simply because society can’t continue to organize itself functionally at a high enough level to maintain the growing effort needed.

In short, the Deepwater Horizon story is not just an environmental tragedy. It is a story about the limits of both extractive technologies and the increasingly complex societal systems that support them. It’s a reminder that the whole project of basing unending economic growth on ever-increasing rates of extraction of depleting nonrenewable resources is wrongheaded from start to finish. And it’s a signal that hopes for our economy to magically “dematerialize” have turned out to be just that—mere hopes.

6. This Is What the End of the Oil Age Looks Like

There will be plenty of blame to go around, as events leading up to the fatal Deepwater Horizon rig explosion are sorted out. Even if further efforts to plug the gushing leak succeed, the damage to the Gulf environment and to the economy of the region are incalculable and will linger for a very long time indeed. The deadly stench from oil-soaked marshes—as spring turns to hot, fetid summer—will by itself ruin tens or hundreds of thousands of lives and livelihoods. Then there’s the loss of the seafood industry: we’re talking about more than the crippling of the economic backbone of the region; anyone who’s spent time in New Orleans (my wife’s family all live there) knows that the people and culture of southern Louisiana are literally as well as figuratively composed of digested oysters, shrimp, and speckled trout. Given the historic political support from this part of the country for offshore drilling, and for the petroleum industry in general, this really amounts to sacrificing the faithful on the altar of oil.

President Obama has called the spill a “massive and potentially unprecedented environmental disaster,” and his representatives are now referring to it as both the worst oil spill and the worst environmental disaster in U.S. history.

But it’s much more than that. It is a sign that we’re nearing the end of a trail we’ve been following for at least a couple of centuries now.

Once again, I must repeat: we’re not even close to running out of oil, coal, gas, or most minerals. But we face a convergence of entirely predictable but severe consequences from the depletion of the concentrated, high-grade resources at the top of the pyramid: less affordable and more volatile commodity prices; worse environmental impacts—cumulative, mutually reinforcing impacts—both from accidents and from “normal” extraction operations; declining resource quality; declining EROEI for fossil fuels; and the need for massive new investment both to grow production levels, and to keep environmental consequences at bay. And all of this is happening just as investment capital (needed to fix all these problems) is becoming scarce. In short, the monetary and non-monetary costs of growth have been rising faster than growth itself, and it looks as though we have now gotten to the inevitable point where growth may in fact no longer be an option.

The Deepwater Horizon disaster reminds us that, of all non-renewable resources, oil best deserves to be thought of as the Achilles heel of modern society. Without cheap oil, our industrial food system—from tractor to supermarket—shifts from feast to famine mode; our entire transportation system sputters to a halt. We even depend on oil to fuel the trains, ships, and trucks that haul the coal that supplies half our electricity. We make our computers from oil-derived plastics. Without oil, our whole societal ball of yarn begins to unravel.

But the era of cheap, easy petroleum is over; we are paying steadily more and more for what we put in our gas tanks—more not just in dollars, but in lives and health, in a failed foreign policy that spawns foreign wars and military occupations, and in the lost integrity of the biological systems that sustain life on this planet.

The only solution is to do proactively, and sooner, what we will end up doing anyway as a result of resource depletion and economic, environmental, and military ruin: end our dependence on the stuff. Everybody knows we must do this. Even a recent American president (an oil man, it should be noted) admitted that, “America is addicted to oil.” Will we let this addiction destroy us, or will we overcome it? Good intentions are not enough. We must make this the central practical, fiscal priority of the nation.

In my 2006 book, The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism and Economic Collapse, I laid out a simple formula that could guide us in systematically reducing our global dependence on oil. The same general plan could be adapted for use with all other nonrenewable resources. At the time, I naively thought that environmentalists would eagerly take up the idea, and that a few courageous politicians would champion it. So far, there has in fact been very little interest in the Protocol. It turns out that nearly everyone likes the idea of using less oil, but nobody wants to take the step of actually mandating a reduction in its production and consumption, because that would require us to dethrone our Holy of Holies—economic growth. It’s so much more comfortable to spout support for the intention to build more electric cars—a technology that in fact will take decades to gain even moderate market penetration.

Fair enough. But where does that leave us? In an oily mess at the bottom of the Gulf of Mexico… and entangled in what may be the ultimate Catch 22: We want more petroleum-fueled economic growth, but we hate what the pursuit of petroleum is doing to us (not to mention the environment), and it looks as though “more” may not be an option much longer in any case.

There’s just no easy answer here, folks.

By Ruy Teixeira

Ruy Teixeira, a senior fellow with the Center for American Progress

Conservatives have done their best to promote the idea that global warming is not happening. And recently they have been pointing to some polls that purport to show increasing public skepticism about global warming. But new Roper data released by Stanford University show that the public, when asked a straightforward question about whether global warming “has probably been happening,” endorses the idea that global warming is real by an overwhelming 74-24 margin.

Nor is the public shy about the need for action on this front. In the same poll, a query about whether the government should “limit the amount of greenhouse gases that U.S. businesses put out” yielded a thumping 76-20 majority in favor of such limits.

Finally, the public is not buying the conservative argument that action on global warming will cost jobs. Just 18 percent accept that argument, while 50 percent think such action will actually produce more jobs (another 31 percent say no effect).

The public’s view is clear. Now it’s up to policymakers to get things going.

Ruy Teixeira is a Senior Fellow at the Center for American Progress. To learn more about his public opinion analysis go to the Media and Progressive Values page and the Progressive Studies program page of our website.

By Lester R. Brown

Lester Brown founded the Earth Policy Institute and Worldwatch Institute

Cars promise mobility, and in a largely rural setting they provide it. But in an urbanizing world, where more than half of us live in cities, there is an inherent conflict between the automobile and the city. After a point, as their numbers multiply, automobiles provide not mobility but immobility, as well as increased air pollution and the health problems that come with it. Urban transport systems based on a combination of rail lines, bus lines, bicycle pathways, and pedestrian walkways offer the best of all possible worlds in providing mobility, low-cost transportation, and a healthy urban environment.

Some of the most innovative public transportation systems, those that shift huge numbers of people from cars into buses, have been developed in Curitiba, Brazil, and Bogotá, Colombia. The success of Bogotá’s Bus Rapid Transit (BRT) system, TransMilenio, which uses special express lanes to move people quickly through the city, is being replicated not only in six other Colombian cities but in scores elsewhere too, including Mexico City, São Paulo, Hanoi, Seoul, Istanbul, and Quito. By 2012, Mexico City plans to have 10 BRT lines in place.

Beijing is one of 11 Chinese cities with BRT systems in operation. In southern China, Guangzhou officially opened its BRT in early 2010. Already carrying more than 800,000 passengers daily, this system is expected to serve one million passengers per day by the end of the year. In addition to linking with the city’s underground Metro in three places, it will soon be paralleled throughout its entirety with a bike lane. Guangzhou will also have 5,500 bike parking spaces for those using a bike-BRT travel combination.

In Iran, Tehran launched its first BRT line in early 2008. Several more lines are in the development stage, and all will be integrated with the city’s new subway lines. Several cities in Africa are also planning BRT systems. Even industrial-country cities such as Ottawa, Toronto, New York, Minneapolis, Chicago, Las Vegas, and—much to everyone’s delight—Los Angeles have launched or are now considering BRT systems.

Some cities are reducing traffic congestion and air pollution by charging cars to enter the city, including Singapore, London, Stockholm, and Milan. In London—where until recently the average speed of an automobile was comparable to that of a horse-drawn carriage a century ago—a congestion fee was adopted in early 2003. The initial £5 (about $8 at the time) charge on all motorists driving into the center city between 7 a.m. and 6:30 p.m. immediately reduced the number of vehicles, permitting traffic to flow more freely while cutting pollution and noise.

In the first year after the new tax was introduced, the number of people using buses to travel into central London climbed by 38 percent and vehicle speeds on key thoroughfares increased by 21 percent. In July 2005, the congestion fee was raised to £8. With the revenue from the congestion fee being used to upgrade and expand public transit, Londoners are steadily shifting from cars to buses, the subway, and bicycles. Since the congestion charge was adopted, the daily flow of cars and minicabs into central London during peak hours has dropped by 36 percent while the number of bicycles has increased by 66 percent.

In January 2008, Milan adopted a “pollution charge” of $14 on vehicles entering its historic center in daytime hours during the week. Other cities now considering similar measures include San Francisco, Turin, Genoa, Kiev, Dublin, and Auckland.

Paris Mayor Bertrand Delanoë, who was elected in 2001, inherited some of Europe’s worst traffic congestion and air pollution. He decided traffic would have to be cut 40 percent by 2020. The first step was to invest in better transit in outlying regions to ensure that everyone in the greater Paris area had access to high-quality public transit. The next step was to create express lanes on main thoroughfares for buses and bicycles, thus reducing the number of lanes for cars.

A third innovative initiative in Paris was the establishment of a city bicycle rental program that has 20,600 bikes available at 1,450 docking stations throughout the city. Access to the bikes is by credit card, with a choice of daily, weekly, or annual rates ranging from just over $1 per day to $40 per year. If the bike is used for fewer than 30 minutes, the ride is free. The bicycles are proving to be immensely popular—with more than 63 million trips taken as of late 2009.

At this point Mayor Delanoë is working hard to realize his goal of cutting car traffic by 40 percent and carbon emissions by a similar amount by 2020. The popularity of this bike sharing program has led to its extension into 30 of the city’s suburbs and has inspired cities such as London to also introduce bike sharing.

The United States, which has lagged far behind Europe in developing diversified urban transport systems, is being swept by a “complete streets” movement, an effort to ensure that streets are friendly to pedestrians and bicycles as well as to cars. Many American communities lack sidewalks and bike lanes, making it difficult for pedestrians and cyclists to get around safely, particularly where streets are heavily traveled.

This cars-only model is being challenged by the National Complete Streets Coalition, a powerful assemblage of citizen groups, including the Natural Resources Defense Council, AARP, and numerous local and national cycling organizations. Among the issues spurring the complete streets movement are the obesity epidemic, rising gasoline prices, the urgent need to cut carbon emissions, air pollution, and mobility constraints on aging baby boomers. The elderly who live in urban areas without sidewalks and who no longer drive are effectively imprisoned in their own homes.

The National Complete Streets Coalition reports that as of April 2010, complete streets policies are in place in 20 states, including California and Illinois, and in 71 cities. One reason states have become interested in passing such legislation is that integrating bike paths and sidewalks into a project from the beginning is much less costly than adding them later.

Closely related to this approach is a movement that encourages and facilitates walking to school. Beginning in the United Kingdom in 1994, it has now spread to some 40 countries, including the United States. Forty years ago, more than 40 percent of all U.S. children walked or biked to school, but now the figure is under 15 percent. Today 60 percent are driven or drive to school. Not only does this contribute to childhood obesity, but the American Academy of Pediatrics reports fatalities and injuries are much higher among children going to school in cars than among those who walk or ride in school buses. Among the potential benefits of the Walk to School movement is a reduction in obesity and early onset diabetes.

Countries with well-developed urban transit systems and a mature bicycle infrastructure are much better positioned to withstand the stresses of a downturn in world oil production than those that depend heavily on cars. With a full array of walking and biking options, the number of trips by car can easily be cut by 10–20 percent.

As the new century advances, the world is reconsidering the urban role of automobiles in one of the most fundamental shifts in transportation thinking in a century. The challenge is to redesign communities so that public transportation is the centerpiece of urban transport and streets are pedestrian- and bicycle-friendly. This also means planting trees and gardens and replacing parking lots with parks, playgrounds, and playing fields. We can design an urban lifestyle that systematically restores health by incorporating exercise into daily routines while reducing carbon emissions and eliminating health-damaging air pollution.

By Regan Nelson
Senior Oceans Advocate, NRDC, Washington, DC

Nelson is a senior oceans advocate with the NRDC

I landed in New Orleans at noon yesterday, and by 2 p.m. was on my way to Venice, Louisiana, nicknamed “the end of the world” for being the last community accessible by automobile down the Mississippi River.  Venice is now famous for another reason, of course.  This tiny community, which has only recently rebuilt from Hurricane Katrina, has become one of the staging areas for the cleanup effort in the Gulf.  Usually a quiet industrial town, Venice is teeming with people, cameras, National Guard trucks, official vehicles, and, yesterday, for a brief moment, President Obama.

As perhaps the newest face in Venice, I got a barrage of questions yesterday.  As the oil slick sits just offshore, people want to know what damage it’s doing out there, and specifically, folks wanted to know what we knew about the chemical dispersants that BP has been spraying over the surface of the slick, and which they are now spraying directly onto the leaks at deep ocean depths.

To paraphrase a Bush Administration Cabinet Member:  “There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. These are things we do not know we don’t know.”  And that basically sums up the story about chemical dispersants.

The important thing to remember about chemical dispersants is that they do not reduce the total amount of oil entering the environment.  There is a perception that chemical dispersants are like an industrial soap that somehow cleans the water of oil, and that is fundamentally untrue.

Chemical dispersants change the chemical and physical properties of oil, essentially breaking up oil that is congealed at the surface, and sending oil droplets down into the water column.  (By dispersing oil into deeper waters, away from human eyes, dispersants can also have the welcome public relations effect of making the spill appear smaller).  The primary objective of chemical dispersants is to avoid sending oil slicks into the nearshore marine environment.  We know from years of studies following the Exxon Valdez disaster that oil can persist in sediments for decades and can lead to long-term impacts to generations and generations of fish, shrimp, and crabs that rely on coastal habitat, so it makes sense that we do our best to keep oil from reaching the nearshore environment.  Additional goals include reducing impacts to mammals and birds that are vulnerable to floating oil slicks and encouraging bacteria to degrade the oil.

That being said, the use of chemical dispersants is a trade-off.  It is an explicit decision to weigh impacts to mammals, birds, and coastal habitat over impacts to fish and invertebrates, and possibly bottom organisms. In other words, it may be the lesser of two evils in some circumstances.

Known Unknowns and Unknown Unknowns

The National Academy of Sciences published a report outlining the major gaps in knowledge regarding the efficacy and effects of chemical dispersants.  Here are some of the things we know we don’t know:

• Toxicity level and effects from chemically dispersed oil (chemically dispersed oil may be more toxic than naturally dispersed oil)
• The fate and effects of dispersed oil in areas with high suspended solids and areas of low flushing rates (e.g. Louisiana marshes)
• The short-term and long-term effects of chemical dispersants and chemically dispersed oil to marine organisms in the water column

Chemical dispersants have the effect of mixing oil throughout the water column.  During this mixing, the oil forms an oil-water emulsion, which is toxic (though not well studied).  Because the emulsion is mixed with water, it has the effect of doubling the volume of the contaminated area.  The hope is that this leads to increased exposure to bacteria that break-down the oil before it comes ashore.  But this process takes on the order of weeks to months. It is during this temporary phase when the toxic cloud of oil and water droplets gets carried by the currents that people are most concerned; it undoubtedly harms the marine life it encounters.

The type and extent of these impacts are the true unknown unknown in this story.  Right now we just don’t know that much about the effects of dispersants and we aren’t putting enough resources into studying it. There are a lot of important, unanswered questions about them, including how they affect the water below the surface, the toxicity from exposure, how dispersed oil passes through the food chain. And research funds in the United States to support oil spill response options in general are extremely limited and declining.

But there are others, too.  Skeptics argue that the dispersants often do not achieve their primary objective of effectively dispersing the oil.   Improper application or unfavorable environmental conditions can hinder the necessary mixing with oil.  Effectiveness – which is not well studied – is influenced by many factors including oil composition, turbulence of the ocean, temperature, and salinity.  Sometimes the dispersants appear to work but relief workers find the oil has simply reassembled elsewhere.   In these cases, coastal habitats are not spared the suffocating effects of the oil slick, and further undesirable chemicals have been released to the environment.  In addition, some studies indicate that chemical dispersants suppress bacterial degradation of oil.

So what should we do? This lack of knowledge leaves experts with inadequate information to be able to confidently support a decision to apply dispersants. Despite the problems and unknowns, many experts reluctantly turn to the use of dispersants because there are no good, reliable options once the oil is spilled.  Response technologies are consistently oversold by the oil industry; the truth is there is nothing that really completely undoes the harm of spilled oil.

By Lester R. Brown

Lester R. Brown

As economic decisionmakers—whether consumers, corporate planners, government policymakers, or investment bankers—we all depend on the market for guidance. In order for markets to work and economic actors to make sound decisions, the markets must give us good information, including the full cost of the products we buy.

Unfortunately, markets largely ignore the indirect costs of goods and services, thus grossly distorting the structure of the economy. The market price of burning coal, for example, includes only the direct costs, those of mining the coal and transporting it to the power plant. By neglecting the substantial indirect costs of burning coal—the costs of air pollution, acid rain, devastated ecosystems, and climate change—the market is giving us bad information. As a result of this and other distortions, we are making bad decisions.

The most effective way to correct this massive market failure is to restructure taxes—lowering taxes on income while raising those on environmentally destructive activities. Widely endorsed by economists, tax shifting helps make sure the price of products reflects their full costs to society.

The first step in creating an honest market is to calculate these indirect costs. Perhaps the best model for this is a U.S. government study on smoking from the Centers for Disease Control and Prevention (CDC). In 2006 the CDC calculated the cost to society of smoking cigarettes—including both the cost of treating smoking-related illnesses and the lost worker productivity from these illnesses—at $10.47 per pack.

This calculation provides a framework for raising taxes on cigarettes. In New York City, smokers now pay $4.25 per pack in state and local cigarette taxes. Since a 10-percent price rise typically reduces smoking by 4 percent, the health benefits of tax increases are substantial.

The many indirect costs of using gasoline—including climate change, oil industry tax breaks and subsidies, oil supply protection, and treatment of auto exhaust-related respiratory illnesses—total around $12 per gallon ($3.17 per liter), based on a conservative estimate by the International Center for Technology Assessment. If this external or social cost were added to the roughly $3 per gallon average price of gasoline in the United States, a gallon would cost $15. These are real costs. Someone bears them. If not us, our children.

Gasoline’s indirect cost of $12 a gallon provides a reference point for raising taxes to where the price reflects the environmental truth. Gasoline taxes in Italy, France, Germany, and the United Kingdom—averaging more than $4 per gallon—are a good start. That the average U.S. gas tax is less than 50¢ per gallon helps explain why the United States uses more gasoline than the next 20 countries combined. The high gasoline taxes in Europe have contributed to an oil-efficient economy and to far greater investment in high-quality public transportation, making it less vulnerable to oil supply disruptions.

Phasing in an incremental gasoline tax rising by 40¢ per gallon per year for the next 10 years and offsetting it with a reduction in income taxes would raise the U.S. gas tax to the $4 per gallon tax prevailing today in Europe. This will still fall short of the $12 per gallon indirect costs, but combined with the rising price of producing gasoline, it should be enough to encourage motorists to use improved public transport and to buy plug-in hybrid and all-electric cars as they come to market.

If gasoline taxes in Europe, which were designed to generate revenue and to discourage excessive dependence on imported oil, were thought of as a carbon tax, the $4 per gallon would translate into a carbon tax of $1,650 per ton. This is a staggering number, one that goes far beyond any carbon emission tax or cap-and-trade carbon-price proposals to date. It suggests that the official discussions of carbon prices in the range of $15 to $50 a ton are clearly on the modest end of the possible range of prices.

Tax shifting is not new in Europe. A four-year plan adopted in Germany in 1999 systematically shifted taxes from labor to energy. By 2003, this plan had reduced annual carbon dioxide (CO2) emissions by 20 million tons and helped to create approximately 250,000 jobs. It also accelerated growth in the renewable energy sector.

Between 2001 and 2006, Sweden shifted an estimated $2 billion of taxes from income to environmentally destructive activities. Much of this shift of $500 or so per household was levied on road transport, including hikes in vehicle and fuel taxes. France, Italy, Spain, and the United Kingdom are among the countries also using this policy instrument. In Europe and the United States, polls indicate that at least 70 percent of voters support environmental tax shifting once it is explained to them.

Some 2,500 economists, including nine Nobel Prize winners in economics, have endorsed the concept of tax shifts. Harvard economics professor and former chairman of George W. Bush’s Council of Economic Advisors N. Gregory Mankiw wrote in Fortune magazine: “Cutting income taxes while increasing gasoline taxes would lead to more rapid economic growth, less traffic congestion, safer roads, and reduced risk of global warming—all without jeopardizing long-term fiscal solvency. This may be the closest thing to a free lunch that economics has to offer.”

Environmental taxes are now being used for several purposes. For example, a number of cities are now taxing cars that enter the city center. Some governments are simply imposing a tax on automobile ownership. In Denmark, the registration tax on the purchase of a new car exceeds the price of the car by 180 percent. A new car that sells for $20,000 costs the buyer $56,000. In Singapore, the tax on a $14,200 Ford Focus, more than triples the price, pushing it to $45,500.

Cap-and-trade systems using tradable permits are sometimes an alternative to environmental tax restructuring. The principal difference is that with permits, governments set the allowed amount of an activity and let the market set the price of the permits as they are auctioned off or given away. With environmental taxes, in contrast, the environmentally destructive activity’s price is incorporated in the tax rate, and the market determines the amount of the activity that will occur at that price.

The use of cap-and-trade systems with marketable permits has been effective at the national level, ranging from restricting the catch in an Australian fishery to reducing sulfur emissions in the United States, but it also has serious limitations. Edwin Clark, former senior economist with the White House Council on Environmental Quality, observes that tradable permits “require establishing complex regulatory frameworks, defining the permits, establishing the rules for trades, and preventing people from acting without permits.” While economists largely prefer tax shifting for its efficiency, transparency, and predictable prices, both carbon taxes and cap-and-trade schemes are likely to result in a higher cost for burning carbon, thereby helping to correct the current market failure.

A market that is allowed to ignore the indirect costs in pricing goods and services is irrational, wasteful, and self-destructive. The key to building a global economy that can sustain economic progress is the creation of an honest market, one that tells the ecological truth. To create an honest market, we need to restructure the tax system by reducing taxes on work and raising those on carbon emissions and other environmentally destructive activities, thus incorporating indirect costs into the market price. If we can get the market to tell the truth, then we can avoid being blindsided by a faulty accounting system that leads to bankruptcy.

• To read about the Plan B proposal for phasing in a carbon tax of $200 per ton by 2020 to help stabilize climate, visit this webpage.

(This excerpt was adapted from Chapter 10, “Can We Mobilize Fast Enough?” in Plan B 4.0: Mobilizing to Save Civilization (New York: W.W. Norton & Company, 2009), available on-line at the Earth Policy Institute.)

By Steven Chu

Steven Chu, U.S. Secretary of Energy

For the next few decades, energy efficiency is one of the lowest cost options for reducing US carbon emissions. Many studies have concluded that energy efficiency can save both energy and money. For example, a recent McKinsey report calculated the potential savings assuming a 7% discount rate, no price on carbon and using only “net present value positive” investments. It found the potential to reduce consumer demand by about 23% by 2020 and reduce GHG emissions by 1.1 gigatons each year — at a net savings of US$ 680 billion.

Likewise, the National Academies found in 2009 that accelerated deployment of cost-effective technologies in buildings could reduce energy use by 25-30% in 2030. The report stated: “Many building efficiency technologies represent attractive investment opportunities with a payback period of two to three years.”

Some economists, however, don’t believe these analyses; they say there aren’t 20-dollar bills lying around waiting to be picked up. If the savings were real, they argue, why didn’t the free market vacuum them up? The skeptics are asking a fair question: why do potential energy efficiency savings often go unrealized?

I asked our team at the Department of Energy to review the literature on savings from home energy retrofits. We are pursuing energy efficiency in many areas — from toughening and expanding appliance standards to investing in smart grid — but improving the efficiency of buildings, which account for 40% of US energy use, is truly low hanging fruit.

In this review, we looked only at studies that compared energy bills before and after improvements and excluded studies that relied on estimates of future savings. We found that retrofit programs that were the most successful in achieving savings targeted the least efficient houses and concentrated on the most fundamental work: air-tight ducts, windows and doors, insulation and caulking. When efficiency improvements were both properly chosen and properly executed, the projected savings of energy and money were indeed achieved. In science, we would call the successful programs an “existence proof” that efficiency investments save money. Too often, however, the savings went unrealized, due to a number of reasons, including poor efficiency investment decisions and shoddy workmanship.

There are other reasons why energy savings aren’t fully captured. Market failures include inertia, inconvenience, ignorance, lack of financing and “principal agent” problems (e.g., landlords don’t install energy efficient refrigerators because tenants pay the energy bills). To persuade the skeptics and spark the investments in efficiency we need, the Department of Energy is now focused on overcoming these market failures.

First, the Department is working to develop a strong home retrofit industry. We are creating a state-of-the-art tool that home inspectors can use on a handheld device to assess energy savings potential and identify the most effective investments to drive down energy costs. We’re also investing in training programs to upgrade the skills of the current workforce and attract the next generation. The Department is also focused on measuring results — to both provide quality assurance to homeowners and promote improvement. For example, we’re pursuing new technologies such as infrared viewers that will show if insulation and caulking were done properly. Post-work inspections are a necessary antidote and deterrent to poor workmanship.

To address inconvenience and to reduce costs, we’re launching an innovative effort called “Retrofit Ramp-Up” that will streamline home retrofits by reaching whole neighborhoods at a time. If we can audit and retrofit a significant fraction of the homes on any given residential block, the cost, convenience and confidence of retrofit work will be vastly improved. Another goal of this program is to make energy efficiency a social norm.

To help pay for investments, we’re working with the Department of Housing and Urban Development to encourage new financing tools. For example, homeowners might pay back energy improvement loans via an assessment on their property tax bill. Out-of-pocket expenses are eliminated and energy savings will exceed the increase in property tax. Both the savings and the loan payments would stay with the house if the owners decide to sell.

Another opportunity comes when a property changes hands. Banks require a structural inspection and a termite inspection; they should also ask for the last year’s worth of utility bills, which speaks directly to the home’s affordability. If improvements are needed, the costs could be seamlessly tacked onto the mortgage.

The greatest gains can be realized in new construction. By developing building design software with embedded energy analysis and building operating systems that constantly tune up a building for optimal efficiency while maintaining comfort, extremely cost-effective buildings with energy savings of 60-80% are possible.

Regardless of what the skeptics may think, there are indeed 20-dollar bills lying on the ground all around us. We only need the will — and the ways — to pick them up.

In 2009, the number of cars scrapped exceeded the number of new cars sold.

(This article, originally entitled U.S. Car Fleet Shrank by Four Million in 2009 – After a Century of Growth, U.S. Fleet Entering Era of Decline, previously ran on the Earth Policy Institute website. Lester R. Brown is president of the EPI and author of Plan B 4.0: Mobilizing to Save Civilization.)

By Lester R. Brown

America’s century-old love affair with the automobile may be coming to an end. The U.S. fleet has apparently peaked and started to decline. In 2009, the 14 million cars scrapped exceeded the 10 million new cars sold, shrinking the U.S. fleet by 4 million, or nearly 2 percent in one year. While this is widely associated with the recession, it is in fact caused by several converging forces.

Future U.S. fleet size will be determined by the relationship between two trends: new car sales and cars scrapped. Cars scrapped exceeded new car sales in 2009 for the first time since World War II, shrinking the U.S. vehicle fleet from the all-time high of 250 million to 246 million. It now appears that this new trend of scrappage exceeding sales could continue through at least 2020. (See data.)

Among the trends that are keeping sales well below the annual figure of 15–17 million that prevailed from 1994 through 2007 are market saturation, ongoing urbanization, economic uncertainty, oil insecurity, rising gasoline prices, frustration with traffic congestion, mounting concerns about climate change, and a declining interest in cars among young people.

Market saturation may be the dominant contributor to the peaking of the U.S. fleet. The United States now has 246 million registered motor vehicles and 209 million licensed drivers—nearly 5 vehicles for every 4 drivers. (See data.) When is enough enough?

Japan may offer some clues to the U.S. future. Both more densely populated and highly urbanized than the United States, Japan apparently reached car saturation in 1990. Since then its annual car sales have shrunk by 21 percent. The United States appears set to follow suit. (See data.)

The car promised mobility, and in a largely rural United States it delivered. But with four out of five Americans now living in cities, the growth in urban car numbers at some point provides just the opposite: immobility. The Texas Transportation Institute reports that U.S. congestion costs, including fuel wasted and time lost, climbed from $17 billion in 1982 to $87 billion in 2007.

Mayors across the country are waging a strong fight to save their cities from cars, trying to reduce traffic congestion and air pollution. Many are using a “carrot-and-stick” approach to reduce costly traffic congestion by simultaneously improving public transportation while imposing restrictions on the use of cars.

Almost every U.S. city is either introducing new light rail lines, new subway lines, or express bus lines, or they are expanding and improving existing public transit systems in order to reduce dependence on cars. Among the cities following this path are Phoenix, Seattle, Houston, Nashville, and Washington, D.C. As urban transit systems expand and improve, commuters are turning to public transit as driving costs rise. Between 2005 and 2008, transit ridership climbed 9 percent in the United States. Many cities are also actively creating pedestrian and bicycle-friendly streets, making it easier to walk or bike to work.

Forward-looking cities are also reconsidering parking requirements for new buildings. Washington, D.C., for example, has rewritten its 50-year-old codes, reducing the number of parking spaces required with the construction of both commercial and residential buildings. Earlier codes that once required four parking spaces for every 1,000 square feet of retail space now require only one.

As parking fees rise, many cities are moving beyond coin-fed parking meters and replacing them with meters that use credit cards. The nation’s capital is making this shift in early 2010 as it raises street parking fees from 75¢ to $2 per hour.

The United States is entering a new era, evolving from a car-dominated transport system to one that is much more diversified.

Economic uncertainty makes some consumers reluctant to undertake the long-term debt associated with buying new cars. In tight economic circumstances, families are living with two cars instead of three, or one car instead of two. Some are dispensing with the car altogether. In Washington, D.C., with a well-developed transit system, only 63 percent of households own a car.

A more specific uncertainty is the future price of gasoline. Now that motorists know that gas prices can climb to $4 a gallon, they worry that it could go even higher in the future. Drivers are fully aware that much of the world’s oil comes from the politically volatile Middle East.

Perhaps the most fundamental social trend affecting the future of the automobile is the declining interest in cars among young people. For those who grew up a half-century ago in a country that was still heavily rural, getting a driver’s license and a car or a pickup was a rite of passage. Getting other teenagers into a car and driving around was a popular pastime.

In contrast, many of today’s young people living in a more urban society learn to live without cars. They socialize on the Internet and on smart phones, not in cars. Many do not even bother to get a driver’s license. This helps explain why, despite the largest U.S. teenage population ever, the number of teenagers with licenses, which peaked at 12 million in 1978, is now under 10 million. (See data.) If this trend continues, the number of potential young car-buyers will continue to decline.

Beyond their declining interest in cars, young people are facing a financial squeeze. Real incomes among a large segment of society are no longer increasing. College graduates already saddled with college loan debt may find it difficult to get the credit to buy a car. Young job market entrants are often more interested in getting health insurance than in buying a car.

No one knows how many cars will be sold in the years ahead, but given the many forces at work, U.S. vehicle sales may never again reach the 17 million that were sold each year between 1999 and 2007. Sales seem more likely to remain between 10 million and 14 million per year.

Scrappage rates are easier to project. If we assume an auto life expectancy of 15 years, scrappage rates will lag new sales by 15 years. This means that the cars sold in the earliest of the elevated sales years of 15–17 million vehicles from 1994 through 2007 are just now reaching retirement age. Even though newer cars are more durable than earlier models, and may thus stay on the road somewhat longer on average, scrappage rates seem likely to exceed new car sales through at least 2020. Given a decline of 1–2 percent a year in the fleet from 2009 through 2020, the U.S. fleet could easily shrink by 10 percent (25 million), dropping from the 2008 fleet peak of 250 million to 225 million by 2020.

At the national level, shrinkage of the fleet combined with rising fuel efficiency will reinforce the trend of declining oil use that has been under way since 2007. This means reduced outlays for oil imports and thus more capital retained to invest in job creation within the United States. As people walk and bike more, it will mean less air pollution and fewer respiratory illnesses, more exercise and less obesity. This in turn will also reduce health care costs.

The coming shrinkage of the U.S. car fleet also means that there will be little need to build new roads and highways. Fewer cars on the road reduces highway and street maintenance costs and lessens demand for parking lots and parking garages. It also sets the stage for greater investment in public transit and high-speed intercity rail.

The United States is entering a new era, evolving from a car-dominated transport system to one that is much more diversified. As noted, this transition is driven by market saturation, economic trends, environmental concerns, and by a cultural shift away from cars that is most pronounced among young people. As this evolution proceeds, it will affect virtually every facet of life.

Copyright © 2010 Earth Policy Institute

As a young girl, I spent every summer at the Jersey shore.  I loved the beach! I’d stand by the water’s edge and simply marvel at the vastness of the ocean. With my red plastic bucket in hand, I would spend countless hours exploring the small tide pools and discovering the diversity of life that lived within the ocean current. It was fascinating to me and, looking out over the horizon I always imagined to myself, “What is out there?”

When I went to high school, I had to meet with my high school counselor to help chart my course through high school and beyond.  The defining moment for me was when my counselor asked me, “What do you want to do in life?”  My response was clear and direct, “I want to be a marine biologist!” I said.  The counselor then asked, “Can your parents afford to send you to college?”  “No” I replied.  “Then I will put you in the Commercial Course track so that you can learn something productive and get a job.”

I spent the next three years learning how to cook, sew, do bookkeeping and stenography, be a salesperson in a “Retail Selling” course for which I received an F. Best of all I learned how to work a keypunch machine.  Not one of these courses interested me. I hated high school and I missed more than 30 days of my senior year. I graduated in June of 1970 with all As and Bs as an unmotivated, miserable, but “productive” member of society.

Getting past the obstacles

I always knew that I wanted to work with animals. But not living near a coastal environment, I decided that the next best thing to working with marine animals, would be working at the Philadelphia Zoo.  After graduating from high school I landed a summer job as the Children’s Zoo and spent the next two summers educating the public about the animals under my care.  I searched for full-time work at the Zoo and learned of an opening as a Zoo Keeper. I went to apply for the position, but was told that I was a “woman” and the job of Zoo Keeper was a job for a man.

My family was a family of very proud blue collar workers.  My father and mother, as well as my brother, grandmother and grandfather all worked for the City of Philadelphia.  One day my mom came home and told me that the City was looking to hire women as police officers.  This came as a result of a court order to settle a gender discrimination suit. I applied, took the test, and was accepted as one of the first 100 women on the police force in Philadelphia.

The next 18 years were spent working in a job that was very exciting and, in many ways, extremely rewarding.  Most of my work was undercover and I enjoyed the many roles I got to play. It also gave me the job security I needed and, as a result, I was able to help provide for my daughter so that she could attend some of the best private schools in the city where I knew there would be no barriers placed on her dreams or her opportunities.  She is now exploring a master’s degree in “green” architecture.

After almost 18 years with the City, I was retired from the Police Department due to an injury.  But I was too young to simply do nothing. Although my dream of a career in science wasn’t realized after high school, my love of animals and the environment never faded.  I set out on a new course and took my first class in college when I was forty years old.

After many years of taking courses, I now hold a Bachelor’s Degree, Master’s Degree, and four Pennsylvania Certifications in education. The one that allows me to have the most influence on young women, and all of my students, is my Principal’s Certification. With this certification, I now have the ability to successfully and enthusiastically mentor and motivate an entire generation of young women to go into the field of environmental science.  My girls – and all of my students – can be anything they want!

Taking steps toward a greener planet and a relevant education

Green Woods Charter School's Jean Wallace with last year's graduates (from left to right), Jayla Russ, Olivia Smith, and Gabriella DiGiovanni

I joined Green Woods Charter School in 2004 as the person responsible for guiding the development of, what is now, our award-winning curriculum.  After many years of hard work and the opportunity to work with a talented and dedicated team of educators, our school now enjoys both a local and statewide reputation for excellence in teaching environmental science.  Our students (boys and girls) outscore their peers in state-wide science exams.  As a result, they are recruited from 8^th grade into some of the top high schools in the city.

What is most exciting for me, however, is that my girls actively seek the opportunity to apply to the Science Leadership Academy (SLA), an amazing high school in Philadelphia that operates in partnership with the Franklin Institute.  SLA is operated by Chris Lehmann, a progressive leader in education who believes, as I do, that all children should be given an opportunity to learn in a challenging environment and that girls and boys should be encouraged and motivated to follow their dreams.  My girls and boys both go on to high school learning about how the environment works, as well as their place in it and their responsibility to it.

Through our actions, as well as our words, we should never stop challenging children to excel in school.  But, we also have to change the way that education is delivered so that children find meaning in school and understand that high school, in particular, is another step on the road to what they will be in their life as an adult.  Too many children see no point in high school as they aren’t able to see that they have any future beyond the high school years.  Believe me, I understand that feeling.  Not only was my dream of becoming a marine biologist not encouraged, it was crushed by a system of education, and a society as a whole, that either tracked my academic ability based on my financial status or decided my professional ability to do a job based on my gender.

This may sound simple, but I believe that we can all be mentors to both young women and young men.  As adults, we need to be sure that no doors are ever closed on children that will create barriers to their education or their dreams.  More importantly, as adults, we need to ensure that a quality education, for all children, remains a civil right that should not be taken away from any child.

(The Green Woods Charter School offers a K-8th grade curriculum that emphasizes interconnectedness among people and the natural environment. Learn more at its website.)