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ASSA/AEA Annual Meetings 2012:
J. Barkley Rosser:
This is going to be a bit of a hodgepodge. There’s lots and lots and lots of issues, so I’m going to be running all over the place, and I may disagree slightly with Bob Gordon on just a couple of minor things, although I welcome some of his other comments that some people here might disagree with.
Okay, one very important distinction that people need to keep in mind when we think about all the various sources of energy and uses, in terms of sustainability there’s both inputs and outputs. This may be sort of obvious. On the input side you’ve got this problem of, okay, you may run out of the stuff that you need to produce the energy. So if you’re using depletable resources, non-renewable depletable resources that are limited in supply, then, you know, you’re going to run into a sustainability at some point, one way or another.
On the output side, it’s a question of does this energy source generate pollution or other kinds of effects, maybe on species, or whatever, that are damaging. And of course particularly if we’re talking about GHG’s, greenhouse gasses, particularly carbon dioxide, but there are some other ones as well. So there are two different issues: On any given kind of energy source, you kind of have to look at both sides, and a kind of general conclusion is, I guess, the old Tom [?], there ain’t no such thing as a free lunch. There’s no completely pure, clean, sustainable energy source. It looks like—I’m going to basically be running through a whole bunch of them and kind of looking a them one by one. But pretty much all of them either have a problem on the input side, or a problem on the output side, or in lots of cases both. So it’s kind of a balancing act here of where do we want to put our eggs, and which problems do we want to look at the most.
Okay, so here, looking at the US here energy sources 2010, I might note that there’s some different numbers around; but oil is 37%. A great deal of that of course is going to transportation, auto bills. That one is one that’s bad, I think, on both the input side and the output side, including national security issues, which is a concern of this group. Obviously it’s a terrible contributor to carbon emissions and so forth. Natural gas is next at 24%, and that is rising. And coal is at 22 %--that’s actually lower than I thought. Coal is almost entirely going for electricity or steel refining, somethings. Nuclear is about 9; renewables are at about 8. Among the renewables, here’s the rough breakdown: hydro, hydroelectric is 31—that’s one that really is not going to grow. We’re pretty much at the potential for that one. And even there, part of the reason you’re not going to have it grow is that, while it’s sort of very clean on the outside, and it’s actually relatively cheap, you have environmental problems. People don’t want to dam up things. And if anything we’re going around knocking down dams, although most of those dams aren’t producing electricity; they’re just leftover dams from some old industrial site in New England or something that’s not being used. But for ecological reasons we want fish to be able to swim more easily, and [for] some other ecological issues we’re actually getting rid of dams. And so hydro is not going to grow, although it’s a very clean one.
Wood is mostly, of course, for heating. That one also actually can be quite polluting. A lot of people are—In the ‘70s there was this big fad, let’s all go get cast-iron stoves, we’re going to burn wood. But in fact wood burning is terribly polluting. It’s really not so great, although the source is renewable.
Bio fuels: Of course that’s an issue where we’re cutting back the subsidies, as Bob noted, on ethanol and some other things. We’ve had huge distortions of policy. Some people are advocates of this, and there may be some that haven’t been—certain grasses and so on that may be useful, especially in emerging countries; but I’m a little skeptical about that one doing too much.
Wind is 11%; bio mass is 5%; geothermal is 2%--that’s not going to grow too much in the US. Geothermal, you’re pretty much tied to certain sources. Certain countries like Iceland have gotten really good geothermal sources, good for them. That’s really lucky if you’ve got it; but most places don’t.
Solar is at 2 percent. Of course there’s a lot of attention on that one. Solar and wind, by the way, are two of these that are the ones that are growing the most rapidly. I’m going to spend a fair amount of time talking about them. There’s also some other more exotic ones out there that are possible that aren’t really being used, potentials like tidal power—I’m not going to go through the whole list; but there’s a bunch of potential ones that people talk about. But this is what’s actually in place.
Global versus the US: Even though the US is a major coal producer and exporter, global share for coal is 30%, compared to 22% for the US. I was a little surprised, actually, that the US is lower than the global share; but I would note that both India and China are very very heavy users of coal. And a practical thing here, and here I think Bob didn’t state this explicitly, but you can’t get too far away from the market here. Something is less something, especially when you get to emerging countries, it’s fine to come in and say, oh, here we are in the US, and we’re green, and we’re cool, and we’re moral, and so on; and you should have this very expensive clean technology. And they’re just not going to go for it. They are in much more difficult situations, especially in India; and if it’s not inexpensive they’re just not going to go for it. They will give you—and I’heard these speeches—I’ll give you very great speeches about the immorality. We’ve got women in the countryside dying because they’re burning, their energy source is dung, cow dung, and they’re getting all these terrible diseases. We’re going to get rural electrification, and you, and the US, and high-income countries, and even China, which is mostly rurally electrified, don’t tell us not to burn coal to get rural electrification—just forget it.
On renewables, curiously enough, actually the rest of the world is higher. I’m not quite sure what’s going on there. They’re twice as much, 16%. Some of this may be things like wood. I haven’t seen the breakdown on that; but a lot of that may be wood in some of the poorer countries.
Okay, so the status of nonrenewables: Of course all the major […?]. Oil is coming into somewhat shorter supply potentially, inspite of some new fields being found and some expansion of new technologies and so on. Coal is very abundant, but it’s one of the worst in terms of both—there’s dangers in terms of the production. People are dying in coalmining accidents. There’s all sorts of ecological problems from the methods of production. And of course it’s very polluting, not just CO2, but probably the worst pollutant of all, sulphur oxide comes from coal, although we’ve done a pretty good job of getting that under control in a lot of countries. And I think Bob says let’s get off oil. I don’t know anybody who says let’s go more oil and coal, although, as a matter of fact, oil production in the US is going up right now.
In terms of natural gas, this is one that’s now really going up, and Bob supported expanding this. It is a CO2 source, but it’s much less intensive as a source of CO2 than either oil or coal, and there are a lot fewer other pollutants relative to that. So I mean compared to oil and coal it’s relatively clean, but it’s not perfectly clean. It is a still a carbon source.
We do seem to have an increased availability—much of this has to do with this technological breakthrough with hydrofracking. This is very controversial. I’m not going to spend time talking about this, I don’t have time; but some of the more dramatically positive forecasts about natural gas have assumed we’re not going to have any problems with hydrofracking, it’s go baby go. I can tell you that where I am in Virginia, it’s the one place where they may be hydrofracking for natural gas, and we even have local Republican, very conservative county boards and supervisors who are really not keen on this. And it’s not just worry about water supply; it’s things like hydrofracking—there’s lots and lots of big trucks that come and damage country roads. The guy who’s the chairman of the county board is worried about increased expenditures on rural roads to handle all the stuff going in and out to do this. So there’s a lot more involved with hydrofracking than just oh, you may be squirting chemicals into the ground water. There’s a lot of stuff going on in the ground that’s not so great.
But in any case it looks like at least for the near term, in terms of what’s really going to happen, we’re going to be opening a lot of natural gas plants here in the US one way or another.
The status of nuclear: Here actually I was kind of pleased to see Bob—he didn’t get into it—sort of noting that nuclear may be a way to go. Of course the Fukushima situation is terrible, and this has reinforced a lot of people saying that we don’t want nuclear. Germany has just decided that they’re going to just get rid of all nuclear. So Fukushima reminds us that there is a danger, there’s a danger from accidents. Also there’s other problems: waste disposal problems with thousands of years of half-life, and uranium mining is also very polluting. By the way, people who are opposed to Yucca Mountain or Carlsbad Cavern, such as where some stuff is being—where people should think about where is it being stored. It’s being stored onsite, which strikes me as being really kind of dangerous. People don’t really think about this. This disturbs me a great deal, but that’s where it’s going on.
Now I would note that most of the plants where we’ve had major disasters—Chernobyl, Fukushima—these have tended to be very old technology plants. Some of the bigger problems are in earlier plants with some really bad technologies. I’m a fan here, and I will note, of going the thorium route. India is actually pursuing this very seriously. We’ve known about thorium for a long time; the first thorium reactor experiment was in 1954 in the United States. There’s a huge long list of potential advantages. There’s a lot more input; it’s much less polluting to mine that input; the radioactive waste is much less and much shorter half-lives—300-year half-life; if you get the molten salt reactors this is a passive technology that is much much safer. It does not produce plutonium, so you don’t have a nuclear weapons aspect. The passive aspect is very—you don’t have human error. If you get an earthquake or a volcano or a tsunami it just shuts down. Some of these problems that you have with existing reactors, they’re just not there. And it’s scalable; you can make these things very small. Current technology, you have to have these great big things. If they shut down, it leads to terrible problems. You can make these things much smaller.
I dug around, and it turns out, why didn’t we go thorium earlier? Well, this is a dark side related to issues that Economists for Peace & Security are interested in. It turns out that you go back to the 1950s, and probably the most important reason why we went for uranium was precisely that we wanted to be able to produce nuclear weapons, we wanted the stuff to be able to produce plutonium. We didn’t want this wimpy nuclear technology that didn’t produce nuclear weapons. But now, the heck with that, we need to rethink these things. It’s going to be a while before people get at this—the Indians are leading the way, of all people. They’ve got a lot of thorium, by the way. The number one thorium supplier is Australia. We’re number two, I think India is number three. So the US is very well set up if we want to do it, and there’s been a lot of research to do it. But we’re not.
A very long-term possibility of course is fusion. For decades I’ve been hearing, oh, fusion is around the corner. Now I’ve stopped waiting for it, but you never know. There is one that, if you could really finally get it, would really resolve problems. But that still seems to be far away.
Here are average costs-- Before I go through this, I want to note something that may be more important--and I probably should have put the slide up--is the variation. There’s this huge range issue. So when you look at these averages and say, oh, that one’s more expensive than that one, but it’s not so simple. There’s enormous variation depending on where you are and a lot of other details; so there’s a lot of overlap. So you might say, well, this one looks like it’s more expensive than that one; but in a certain location they may be reversed for a variety of reasons. So it’s not such a neat list. But again, in terms of costs, it’s important to keep these kinds of things in mind.
So this is from US Energy Department 2010, US dollars per megawatt hours. Conventional coal, $94.8. Coal with carbon sequestration, which may be […?], $136.2, although recently it seems there have been a lot a lot of problems with the carbon sequestration. The effort to do that has not been going very well. Natural gas, conventional, $66.1—there’s one of the reasons you can see why natural gas is going—it’s pretty cheap. I mean this has got a big cost advantage, even without worrying about extra [?]. Advanced nuclear, $113.9. Wind onshore, $97. Wind offshore, $232. I’ve been a big fan of wind offshore, but I didn’t quite realize it was so much more expensive. I actually was having lunch with somebody who’s from Germany who’s studied this and said, oh yeah, they’re pushing for it, but oh yeah, it’s much more expensive than the onshore wind. Again, you can see the onshore is indeed reasonably competitive with some of these more conventional [means]. So wind is in there in terms of cost, and a lot of people know this. Solar photovoltaics is still pretty high, $210, but that one is coming down very rapidly. In terms of what’s coming down really fast, solar is coming down really fast, which is one of the issues. Geothermal is pretty cheap, but you’ve got to have it. Biomass is competitive if you want it. Hydro is not so expensive, but again, we’re not going to get anymore of that.
Let’s talk about some of the renewables. The most rapidly increasing ones are wind and solar. Wind capacity—it actually increased 50% in 2008. It only grew 8% in 2011. It’s growing less rapidly, but it has gone up a whole lot. Solar capacity has doubled between 2005 and 2011, and the growth there is continuing at about the same rate; it’s really going up. One of the big reasons why it’s really coming on: The price of the main input, polysilicon, has gone down 94% in three years, and that’s about 25% of the cost of a photovoltaic cell. We may be running out of innovations, but one area that would be really good to have some nice innovations would be in these kinds of things, in some of these better energy technologies that are more sustainable, we could really use some innovations. Things are really really happening in the solar area very recently. That’s something that’s potentially very positive.
Another problem, and this is actually kind of a serious problem, and it’s also for solar and for hybrid cars, is the reliance on rare earth elements. This has become a big issue very recently. So neodymium and dysprosium are used in the magnets for wind, and China controls about 90% of the production of these things. And there’s lot of pollution from the production of those things. So wind may be clean when you’ve got it, but it’s not so clean in terms of producing the inputs to get it, and we may be running into some severe input limits, particularly with these rare earth elements.
Advantages and disadvantages of solar: Like wind, unlimited ongoing input sources, although you have some local variations due to cloud cover and so forth. Also no greenhouse gasses or other pollution on the outside side. Costs are dropping rapidly, but still expensive compared to conventional competitors. But the other big problem they have is that they also have this rare earth input problem, particularly tellurium and indium and some other ones. And again, that’s a problem both at the polluting sources, as well as very rare. That’s why they call them rare earth. They’re rare. So if you start talking about, oh, we’re going to really replace oil and coal and nuclear with solar and wind, then, there’s a whole rare earth problem becomes very very serious, very serious.
Policy issues for wind and solar: what to do about Chinese dominance of earth, around 90%. In 1985, China was producing zero of these things. US was a third of global production. US is producing something like 5%. Actually this is one of these tradeoffs. We shut down much of our production precisely because it was polluting our biggest producing sources of the Mountain Pass Mine in California. We shut it down because it was polluting. Well now we’re kind of sitting here saying, well maybe for national security reasons, or whatever, maybe we better open some of these things up. We probably will be reopening or opening some new rare earth mines in the US; but we have a lot of resistance to this because production of these things is polluting. There’s a real problem there.
Okay. There’s an issue here of industrial policy. Here’s where I may be in my biggest disagreement with Bob. He was, let’s stop subsidizing solar and wind and these things. One the things that’s happened, China’s half the market for solar. They’re basically taking over the solar industry. And one of the things that lies behind that, besides the fact that they’ve got the rare earth, is that they are massively subsidizing—massively. We’re not going to do it because of the Solyndra scandal, but I just note here—that’s killed it politically. But as a matter of fact, there literally was no scandal. There was no bribery. I read very carefully major reports on this. What was the big scandal? Oh, Barack Obama visited the plant. What’s so scandalous about that? What’s the scandal if the president visits this plant that he has hope for doing well? Well then it didn’t do well; it went out of business. So people who contributed to him were involved with it. Well, that doesn’t look good, but there’s absolutely no evidence that they were successfully pulling any strings. Things were done in a pretty straightforward way. There was no particular corruption or bribery. There was really no scandal. The big scandal was, oh, they went out of business. We lent them this money. Well why did they go out of business? Basically because of this collapsing price, especially coming out of China. So dah! They couldn’t keep up. This is not a scandal. It’s a very mixed bag, what’s going on here. So that’s not really an argument for, oh, let’s not do any of this; but obviously politically this has become a real hot potato. Bob I think is right on the politics of this. I’m not sure he’s s ultimately—But you know this issue, if you really want to have green energy, you may have to very consciously engage in industrial policy and do some things that a lot of people will say, no, you shouldn’t. And indeed, of course there always is the danger of some kind of corruption, or scandal, or something; but that really is not what’s going on here. There has not been corruption and scandals. It’s been subsidization by the Chinese pushing down the prices of these things and knocking out predatory pricing.
Policy for oil—I’m almost done here. So the last thing is policy for oil […?]. Obviously this is a big one. Again, I remind you, our biggest source of energy is oil. A major proportion of that is going to automobiles and cars. So mass transit, I agree with Bob, would be nice; but it’s really only useful in urban areas. There’s also this problem that we’ve put a lot of money in mass transit, but boy people like their cars. They just really do. It’s really hard to get them out of their darn cars, even when you make it harder for them to park in big cities, and so on. They really like their cars. In the longer term there may be some other alternatives—hydrogen, solar, electric—but in the near term some of these things—well, we’ re really not doing hydrogen or solar. The biggest play has been the push on electric, the Chevy Volt. But now the Chevy Volts aren’t selling very well, they’re very expensive, this is a rich man’s car, rich person’s car, $100,000 apiece, and there’s huge amounts of subsidies. And now we have this problem that they’re catching fire, the batteries are catching fire. Uh-oh. In the near term, that’s not doing so well.
This is a test 08:42:05 Real time m concerned that may be the one to really-- where we may have our best bet on that one in the near term is get more hybrids out there, by whatever policy. We’re cutting back on subsidies for that. Put the subsidies back in. There’s lots of externalities involved here.
Kind of at the very bottom at the end here, this is in fact the closeout, is I remind everybody with regard to oil that this is again this national security issue. We’ve had wars in the past, or we’ve got a bad situation with Iran going on right now. I don’t want to get into the details of that, but Iran is threatening to shut off the Straight of [?]. We’re threatening to embargo their oil. The more we get off oil, the less we have to worry about these threats to global peace, as well as the environmental and economic issues. Thank you very much.
Economists for Peace and Security