By September 24, 2015 Read More →

No substitute for oil in short-term, which is why Clinton’s climate pact is doomed

Clinton’s climate pact won’t work because it focuses on energy supply, not demand

Hillary Clinton’s North American Climate Compact proposal suffers from an underlying flaw that afflicts most decarbonizing arguments: That policies targeting oil supply somehow work, while ignoring the importance of consumer demand for cheap, affordable transportation.

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Hillary Clinton, Democratic candidate for presidential nomination.

Along with her Wednesday announcement opposing the Keystone XL pipeline, Clinton unveiled a “comprehensive strategy to modernize American energy infrastructure and forge a new partnership with Canada and Mexico to combat climate change across the continent.”

If the current President has come under fire for an aggressive climate change agenda in his last term, especially the past two years, then Clinton’s Climate Pact will be Barack Obama squared. She proposes to “accelerate clean energy deployment,” create a national infrastructure bank that leverages public and private capital, thereby dramatically cutting oil consumption and pollution.

The key here is Clinton’s focus on infrastructure, which is primarily about the supply side of the equation, such as American shale production or the Canadian oil sands.

Why is her strategy wrong-headed?

There are two primary sources for greenhouse gas emissions: electricity generation (coal in the US) and transportation (oil).

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Coal-fired power plants emit twice the CO2 of natural gas-fired power plants.

Electricity generation actually lends itself well to supply-side solutions. Utilities can shutter coal power plants and replace them with a combination of combined cycle natural gas, wind turbines, and solar farms while maintaining a stable grid and low prices. Consumers flick on the light switch in the nursery or manufacturers fire up their CNC lathes and no one notices a difference.

I recently reported on San-Antonio-based CPS Energy’s strategy to meet its targets under Obama’s Clean Power Plan. The utility currently uses 56 per cent natural gas, 24 per cent coal, and some nuclear and wind to power about 700,000 homes and businesses. Two coal power plants will be closed, an 800 megawatt combined cycle natural gas plant was purchased, along with 400 MW of solar power from an independent power producer. As wind and solar prices continue to drop, CPS Energy will install more of that type of generation capacity, backstopped by natural gas for when the wind doesn’t blow and the sun doesn’t shine.

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Photo; CPS Energy.

Spokesperson Rudy Garza told me CPS Energy expects no technical issues in the transition to cleaner energy and should be able to reduce its GHG emissions by 25 to 30 per cent with ease.

Supply side strategies work for power generation. And the Clean Power Plan will drive much of America’s high-carbon emitting power infrastructure out of business by 2030.

But supply side strategies don’t work for transportation.

For starters, there is no technology substitute for oil and gasoline. To be more specific, Electric Vehicles (EVs) are not ready for primetime.

They suffer from short range: The best the Tesla D can do is 300 miles to a charge and the Nissan Leaf manages just 160 miles. EVs are also expensive: The Tesla starts around $70,000 and the Leaf is well past $30,000 when an equivalent gas engine car is half the price.

While Tesla’s Gigafactory, under construction in Nevada, holds promise to improve range and lower cost a bit, EVs will not be competitive with automobiles until there is a breakthrough in battery technology, and that appears to be at least a decade or two away.

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Tesla Motors CEO Elon Musk with one of his EVs.

Let’s not forget American consumers are still in love with their SUVs, trucks and luxury cars. As American Energy News reported a few weeks ago, as gas prices fell in 2015, Americans bought more gas guzzlers and drove more miles.

The only supply side strategy that might break America’s love affair with the car is to jack up the price of gasoline to European levels, which are about double current US prices, and force people into buses, light rail trains, and other forms of public transit.

While that strategy may appeal to the central planning crowd, Americans have shown no willingness to embrace it wholesale. And neither have Canadians, frankly.

So, if Clinton’s objective is a “clean energy economy,” why not pour research and development dollars into EV battery technologies?

ClintonIf Clinton really wants “a future where the United States will once again lead the world,” EVs would be the place to start. Domestic manufacturers Tesla, GM and Ford all have EV or hybrid technology. If American companies could leapfrog into first place in the EV marketplace with products that are superior in performance and price to gas engine cars, then consumers would naturally adopt the new technology and oil consumption would decline over time.

Which is the way markets are supposed to work, right? Offer a better product at a better price and transitions to new technologies go remarkably smoothly.

Imagine the boost this would give to American manufacturing. There are currently 1.1 billion cars on the planet and that number is expected to double over the next two or three decades as consumers in China, India, and other Asian nations begin to enjoy higher incomes.

Offering a demand-driven substitute for gas engine vehicles – and by extension, oil – could be the greatest single American contribution to combatting climate change.

But swimming against the stream by restricting or outlawing the supply oil or increasing the supply of clean energy – which is underway already thanks to the Clean Power Plan – is a recipe for disaster. Such a strategy will lead America to top-down policy prescriptions that ultimately fail and cost the public treasury dearly.

That, unfortunately, is the direction Hillary Clinton is headed with her North American Climate Pact.

Voters in the Democratic primaries should reject the idea. If Clinton becomes president, Canada and Mexico should politely decline her invitation to discuss such a pact.

 

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