By Jerry J. Toman, ScM
This, the fifth article in the series The Two-Headed Dragon ~ Energy/Water/Food Scarcity and Climate Change. Top Ten Policies that Feed it, and Two New Technologies that Could Enable us to Slay It and Save the Planet discusses why the short term mindset that prevails in our culture is preventing us from addressing the existential problems of climate change and rapidly disappearing fossil energy reserves. It touches on our nation’s irrational tax code, which provides a powerful incentive for wasteful practices and continued reliance on fossil fuels. It also suggests that the profound ignorance in energy matters is one of the key reasons why we have such poor energy policy, suggesting that our politicians should attend an energy boot camp and learn the fundamentals of energy.
Why an Effective Climate Change Agreement is Out of Reach
It should be clear to anyone concerned with climate change and energy shortages, that there is precious little hope that any meaningful agreement can be reached among all the countries of the world to reduce carbon dioxide emissions. This is because–when it comes to accepting blame for “past behavior” by a few countries which have a long history of burning fossil fuels and emitting carbon dioxide—the “certainty” of damage to their economy (defined by illogical measurement tools such as GDP), “trumps” any “harm to the environment” concerns.
It is well known that, short-term “pocketbook” issues are framed by the media as being the overriding concern of the public when it comes to winning elections. Under the cover of AGW denialists, whose message is often underwritten by corporate funding, politicians of any stripe are likely to conclude that the possibility of environmental catastrophe is “only theoretical” (IPCC reports notwithstanding). The politicians “de rigueur” are therefore disinclined to assign any degree of “equivalence” between the two concerns. What’s “done is done” they reason, and nebulous future threats should be “trumped by real economic concerns” when rules which define future policy are under consideration.
Given the above attitude, however, it should not come as a surprise that, when a huge, rapidly industrializing, country such as China is asked to stop building coal-fired plants (many inefficient by western standards), they respond with the following: “While, as a country, we may be emitting more carbon dioxide than any other, we’re still quite far back in the pack when judged on a “per capita” basis. Furthermore, if cumulative emissions are considered, we are still a half a century behind any of the western countries.”
While it could plausibly be argued that some of the West’s past energy use actually had the “beneficial” effect of increasing industrial activity and contributing to “growth”, much of it was, in fact, simply wasted through inefficient transportation practices, along with the “created” need to heat and cool huge, inefficient houses, office buildings and factories. All of these systems were designed under the “Flat Earth” model—with the assumption that resources, now known to be finite, would continue to be cheap and abundant forever.
Wasteful Industrial Practices Continue, Due to Perverse Tax Accounting Incentives
It’s not just in housing or transportation where wasteful practices continue. Considerable amounts of industrial energy continues to be wasted, adding to the West’s already massive “carbon footprint.” In the USA, for example, large, fossil-fuel installations, such as “gas processing plants”, which extract gas from the ground and condition it for pipeline transport, consume huge amounts of electricity. The electricity is needed in order to power massive compression trains used for purification of the gas through liquefaction. Rarely is any attempt made to recover useful work from the heat released by the compression. Such wasteful practices are “allowed” by a fragmented, patchwork tax code which fails to provide the incentives necessary to generate projects which are able to recover a significant fraction of this heat and convert it to electricity. Given proper incentives, compression schemes that use more stages, which use inter-stage cooling in-between, could be installed, reducing electrical consumption in addition to reducing the carbon footprint.
“Gas processing plants” should not be singled out as the only example where energy is wasted in industry. The scenario is repeated on an even greater magnitude at all the petroleum refineries in North America, which waste more energy than do “gas plants”, due to lack of tax incentives needed for investment in “heat recovery” projects. The same lack of incentives applies to the chemical industries as well.
The Recycled Energy Development Co. states: “The United States has 10,000 megawatts of installed industrial recycled energy capacity in operation, the equivalent of ten large nuclear plants. This installed capacity represents roughly 10 percent of the identified potential to recycle industrial waste energy.”
A recent study for the U.S. Environmental Protection Agency documented another 95,000 megawatts of potential recycled industrial energy generation capacity.”
When it comes to processing energy that must be imported, it seems incomprehensible that companies are allowed to deduct ANY internal or even domestic energy usage from the gross income before calculating taxes. After all, if home owners or renters are NOT allowed to deduct utility expenses from gross income, why should it be allowed for businesses?
Instead of doing the “right thing”, the corporate “bottom line” is enhanced by NOT making the investments necessary to recover more of the tremendous volumes of “exergy” (potential work) flows at industrial facilities. Aided and abetted by a “Tax Code” (probably written by them in exchange for campaign contributions), they choose instead to allow it to be degraded to “waste heat” which can easily be disposed of (externalizing costs) into the air (entropy creation), while they concentrate on expanding the “profit center” of putting “conditioned” gas into a pipeline for public consumption.
Similarly, in the 1996 book, “Take the Rich off Welfare”, Zepenzauer and Naiman state: “There’s a fourth tax break we can’t count because we can’t estimate its size; for details on it, see the section on “master limited partnerships” in the chapter called What we’ve left out. But miscellaneous smaller tax breaks and subsidies add an additional $400 million a year to the oil industry’s wealthfare, which brings the total to $2.4 billion.
Instead of throwing $2.4 billion a year at the oil companies, we could encourage them to cut down on waste during production and transport. Each year, the equivalent of a thousand Exxon Valdez spills is lost due to inefficient refining, leaking wells and storage tanks, spills at oil fields and from tankers and pipelines, evaporative losses, un-recycled motor oil and the like.”
ABYSS OF IGNORANCE with regard to Energy Matters
With very few exceptions, politicians tend to be as ignorant, if not more so, than the general population as far as energy (efficiency) matters are concerned. While some may believe that making energy policy is “something new”, for politicians to deal with, the fact of the matter is that “energy policy” is, and always has been embedded in the Tax Code. From “Teapot Dome” to the infamous “Energy Depletion Allowance”, to today’s petroleum policy in cash-strapped California, where the problem is solved on the backs of the poor, the sick and the uneducated, opportunities to reduce consumption of this valuable resource have been and continue to be squandered. The simple idea of charging a “severance” allowance for crude taken out of the state’s reservoirs is considered to be “too high a price to pay” for Chevron & Company with its minions of Happy Motoring acolytes. Relieving road congestion to save time by charging more for gasoline, is today’s equivalent of “blasphemy” and therefore doesn’t even appear on the radar screen of a politician trying to solve the state’s problems.
When they do modify the “tax code” as they have done in the recently implemented CARS or “Cash for Clunkers” program, not only do they subsidize the same companies that caused much of the harm in the first place (remember the huge ad campaign for the Hummer?), they often make the overall, long-term economic picture “worse”.
I previously discussed under “Driving to Destruction”, that driving “slightly smaller” cars alone would not go far enough to resolve the gasoline consumption problem, much less make a dent in the problem of traffic congestion. I pointed out that the “real problem” was instead, Single Occupancy Vehicles. With regard to the “clunker law”, the irony is that “foreign” automobile companies (Toyota) are not only better positioned to take advantage of it, they seem to be the quickest ones “out of the box” to take advantage of it—the “ripple effect” of the legislation initially appears to be one of sending capital and jobs overseas, as well as to devastate dealerships that deal primarily in “used cars” which are not included in the program, however frugal they might be in terms of gasoline consumption.
As this is being written, it appears that the program has been suspended due to rapid consumption of the allocations Congress has made for it. It should not come as a surprise to anyone, that laws which have anything to do with modifying energy policy have been botched. California’s MTBE laws, now rescinded, which cost both businesses and the state billions of dollars while causing groundwater pollution, is another example of the stellar handiwork of politicians (egged on by faux environmentalists) which comes to mind.
To be fair, it’s also true that some developing economies, such as China, in their rush to grow their “economy” at the fastest possible rate, have built industrial facilities which are far worse in terms of efficiency than in the West. Their energy consumption as a fraction of GDP is calculated to be several times greater than our own. Yet, through low labor and transportation costs, these countries are able to produce “goods” that they export to us, because they can do so at a significantly lower cost than we are currently able to make them. One would be hard-pressed to assign exactly on which side the blame lies, but in this case the term “globalization” comes to mind.
Is an ENERGY/ENVIRONMENTAL BOOT CAMP Needed for Politicians?
Maybe what is needed as a first step to counter this “abyss-of-ignorance” is to require EVERY MEMBER of Congress to attend a two-week-long “Energy Boot Camp” in which industry, universities, environmentalists and political leaders all get a chance to tell their own side of the story to “Congress-critters” through a series of classes.
Alternatively, we could rely on the “knowledge-base” provided to them by lobbyists for “special interests”, as a basis for formulation of future legislation in the area.
