Multinational Monitor

MAR/APR 2009
VOL 30 No. 2


A New Life for the IMF: Capitalizing on Crisis
by Robert Weissman


Burden of Proof: The Precautionary Principle
an interview with Peter Montague

A Carbon-Free Future
an interview with Arjun Makhijani

Green Stimulus
an interview with Robert Pollin

The Green Chemistry Revolution
an interview with Paul Anastas

A Bias to the Local: The Subsidiarity Principle
an interview with Jerry Mander


Behind the Lines

Big Ideas to Save the Planet

The Front
Global Job Meltdown - Prosecution Prognosis

The Lawrence Summers Memorial Award

Greed At a Glance

Commercial Alert

Names In the News


A Carbon-Free Future

An Interview with Arjun Makhijani

Arjun Makhijani is president of the Institute for Energy and Environmental Research. He is the principal author of the first study ever done (completed in 1971) on energy conservation potential in the U.S. economy. Most recently, Makhijani authored Carbon-Free and Nuclear-Free: A Roadmap for U.S. Energy Policy (2007).

Multinational Monitor: Why should the U.S. pursue a carbon-free future?

Arjun Makhijani: There are two very big reasons. One is that fossil fuels are the main source of carbon dioxide emissions, and carbon dioxide is the main pollutant that is causing severe climate change. So we need to get rid of carbon dioxide emissions in this country and globally.

The second reason is security. Wars centered on oil were one of the defining characteristics of the 20th century. Even Alan Greenspan said the war in Iraq is largely about oil. We've got to put the era of war for oil behind us.

MM: What's the overall U.S. expenditure of carbon-based energy, and what's the allocation among different sectors of the economy?

Makhijani: In the U.S. we are about 85 percent dependent on fossil fuels for energy supplies. We consume about 100 billion BTU of energy. In the electricity sector, about 70 percent of electricity comes from fossil fuels (about 50 percent from coal and 20 percent from natural gas and a small amount from oil). About 20 percent is from nuclear. The rest is from hydro and renewables. About 70 percent of the electricity is used in the residential and commercial sector - that is, in buildings.

MM: What kind of trajectory are we on?

Makhijani: Actually, there is good news in terms of the energy trajectory. I was in Washington during the first energy crisis in 1973, working for the real father of energy policy in this country, S. David Freeman. We were on the energy policy project of the Ford Foundation. At that time, it was thought that energy growth and economic growth were inseparable twins. And we set out to show that it would be possible to have zero energy growth without hurting economic growth. And that actually happened for 12 years after 1973, with good energy policies from President Carter.

Since 1973, economic growth and energy growth haven't become disconnected, but energy growth has more or less tracked population growth. The increase in wealth per person has been achieved partly through efficiency, and partly through exporting energy-intensive industries to China and elsewhere. In the last six to eight years, because of the volatility in energy prices, and industry and others like California taking the lead, we haven't had much energy growth in the United States at all, although we have had some economic growth, up to 2007.

But the U.S. is still a very inefficient energy user - close to the bottom among industrial countries in terms of energy use per unit of production. We can actually reduce energy use while maintaining economic growth. It's not that we need to go on in the way we have with more cars and more sprawl and so on, but I think we can get rid of fossil fuels and nuclear power even within the conventional thinking about economic growth.

The main story - efficiency - is still the same as it was back in 1973. Relative to its potential, we still have not yet incorporated efficiency firmly into policy incentives, regulation and institutional structures. There is a new side of the story - the coming of age of renewables. In the 1970s, we did not have economical wind electricity technology; today we do. And the dramatic changes in the solar energy sector will make solar electricity competitive within a few years. A smart grid, which we can begin building with today's technology, makes it possible to incorporate intermittent sources (wind and solar) into the electricity system in a big way - small-scale, intermediate-scale and large-scale.

MM: What is obtainable now, in terms of efficiency, and what is foreseeable in the near future with innovations on the efficiency side?

Makhijani: In terms of new housing, for example, we can eliminate 40 to 50 percent of the energy footprint of the house, without significantly changing the cost of the house. With modest investment - a few dollars a square foot, perhaps $10 a square foot - we could possibly eliminate 75 or 80 percent of the energy footprint. For detached residential structures, we can go for zero net energy houses - that is, houses that produce as much energy as they use - within five or 10 years. And most of that change would come from efficiency and sound construction practices.

We can increase the efficiency of existing structures from 30 to 50 percent with modest investment. But we need to attend to the details, like taping up the ducts and making sure that we have appropriate appliance efficiency rules, so that you can't buy an inefficient refrigerator or room air conditioner. We have to have stringent efficiency standards.

For transportation, people think we live in the modern age with internal combustion engines. In a way, they are a marvel of engineering, running at a couple of thousand revolutions per minute, day after day for years. But they're very inefficient. In terms of moving the people in the car; only about 1 percent of the energy in gasoline is actually used to move people. About 14 percent is used to move the steel and the plastic. And the rest, 85 percent, is waste heat. So we're very inefficient. If we go to electric transportation where the batteries are charged by solar or wind energy, we can get the equivalent of 150 miles per gallon today, and I think 250 miles a gallon in 15 or 20 years.

In other words, we can make most of this energy use disappear with the same energy services - the same miles traveled. We should remember that sunshine and food are the only energy sources we really need; for the rest, we just need the services like heating, transportation, cooling and lighting that energy provides. If we do the same things with much less energy inputs, we are generally better off (as a rule of thumb).

MM: In terms of the technologies for efficiency, to what extent is it an endless series of little things - taping up or re-insulating around windows?

Makhijani: In existing buildings, it's a lot of small things. It's appliance efficiency, it's better windows, it's improving insulation, it's taping ducts - and this can be done at the time of sale, for example.

In new buildings, it's also attention to detail, but a lot of it is different. For instance, you have to remember where south is. It's a very simple thing, but windows in the northern hemisphere have to be south-facing in cold climates, and you have to have shading in the summer. You have to pay attention to the basics of building design insulation, to whether you're in a humid or dry climate; you should design according to the climate and orientation. If that is done, and you use efficient appliances, you can have beautiful, brilliant houses, and very low energy consumption.

Most of it is attention to detail. Some of it is new technology. In the transportation sector, I think the battery technology is now coming of age. I wouldn't say it is economical now, but we can see it around the corner - five years or less.

MM: Just to reiterate, you're saying that these efficiency gains based on technology that is now available is zero cost or very low cost?

Makhijani: Very low cost. I talked to a builder who builds custom homes near Dallas. At least a few months ago there were still lines out of his shop - without advertising. And I asked him what it would take to eliminate 50 percent of the energy footprint of a new house. I was ready for an answer of $5 or $10 per square foot. But he said, "Zero. If you leave the design decisions to me, then it's zero. If you want to make the design decisions, the cost can go up." So, for instance, if you have mountains to the north and want north-facing windows, it will cost you to reduce the energy footprint. But then it will also cost you in higher energy costs if you don't build efficiently. You are really not paying for the energy; you've decided you want to spend some money for the view.

MM: This is without off-setting costs against the savings on energy bills?

Makhijani: Right. The energy-bill savings are on top of that.

What we need are efficiency rules. Developers have no incentive, institutionally, to build a more efficient house since they don't pay the energy bills. Moreover, people's purchasing decisions often emphasize design features like granite counters and the type of flooring and garden that don't give a high priority to efficiency. I'm not saying those things are not important; they are important, because houses are for living in, not worrying about the energy bill. Ideally, we shouldn't have to worry about energy pollution or energy bills. Developers will build efficient houses if they don't lose out against the competition in doing so. That's why we need a level playing field with tough regulations for developers, so all developers have to build efficient houses; that way we won't wind up with housing that has lousy efficiency.

MM: What can renewable energy sources deliver?

Makhijani: In the electricity sector, wind and solar are the big things that we need to create a renewable electricity sector.

The United States is really a renewable energy paradise. People say it's like the Saudi Arabia of wind. That's not even close. Just the land-based wind energy potential of the United States is roughly equivalent to the oil production of all of the OPEC countries put together. It's really much bigger than Saudi Arabian oil. And then you can add the off-shore potential, which is also great.

Off-shore is very important because off-shore wind is close to the population centers - the Great Lakes, the East Coast, West Coast.

Solar is an even bigger resource than wind. From a 10,000 square mile area in the Southwest, you could supply all the current electricity requirements of the United States. I'm not saying we should do it in that centralized a fashion though. Actually, we can supply much of the electricity requirements from commercial rooftops, parking lots, shading the highways, things like that in urban areas. This doesn't even require new transmission lines so it can be done quickly - in months. Pacific Gas and Electric and Southern California Edison are each doing 250 megawatt solar photovoltaic (PV) projects in urban areas. Together, the projects can supply electricity for about 120,000 average California houses. In addition, PG&E is also contracting to purchase 250 megawatts of urban solar PV output - another 60,000 houses or so.

Solar and wind are very plentiful resources, but they are intermittent. However, new technology is available and offers solutions to the storage problem. We can store heat in molten salt, for example, so when the sun is shining you would melt the salt, and then you use the stored heat to generate electricity at night.

This technology is now commercial. Arizona Public Service, the largest utility in that state, is building a concentrating solar-thermal power with six-hour heat storage. And they'll be able to generate electricity for 90 percent of the day on summer days, including in the evening after the sun has set.

There are other ways to deal with intermittency. A smart grid will reduce the problem of intermittency considerably.

MM: What is a smart grid, and why is it important?

Makhijani: We're living in an age with a grid model that is sort of the equivalent of a mainframe computer with punch cards. It was really brilliant in its time, but its time is past. Today's grid has no communication between the consumer and consuming device and producing devices, other than the flip of a switch. You flip the switch, the electrons always have to be there, the generating machines always have to be ready. It's very inefficient and wasteful. For example, you have to install a large amount of excess capacity that is just waiting for the peak of the summer when, for a few hundred hours of the year's 8,760, all the air conditioners are on at the same time and people also start switching on TVs when they come home. This is a dumb grid. It's a wasteful grid.

Instead of that, for instance, we could have a machine that makes ice when the wind blows. You have wind turbines, the wind blows at night, you need air conditioning in the daytime. You make ice when the wind blows and you get your air conditioning from the coldness stored in the ice. And this machine is now commercially available. Companies are willing to work with utilities. This is a way in which you could essentially eliminate the peak load in the summers and shift it to the times when renewable energy is available.

But to do it, you need the air conditioning and ice making machines to be able to talk to the meteorological tower near the wind turbine. That takes a smart meter. It takes a control point at the user's end and it takes a control point at the generating end and the two need to be connected. That is the promise of a smart grid - software, electronics, the Internet.

Once you have a smart grid, you're in a different universe than the one with 1,000 megawatt machines that are always waiting on you hand and foot.

MM: Are the wind and solar technologies you are discussing available now, or are you projecting that they will be available in the future?

Makhijani: Wind energy is more economical than nuclear today.

I've done a study of a specific utility - San Antonio's municipally owned utility, CPS Energy. They are thinking of buying 40 percent of two nuclear plants proposed for south Texas - 1,080 megawatts. And I showed that this utility would save between $1.4 billion and $3.1 billion by going for efficiency - solar electricity, ice storage, and combined heat and power. This last is a technology for local electricity generation using natural gas or biogas that uses waste heat for air-conditioning and space heating.

There is a limited amount of money to solve the climate problem, and we can't afford to waste it. There is a limited amount of time to solve the climate problem, and we can't afford to waste it. And nuclear energy does both.

It was a surprise for me to conclude that we could get rid of nuclear energy and fossil fuels in a reasonable amount of time, and have a very reliable and much more secure energy system than we do today. I didn't think that it could be done, but when I did the research, the facts showed otherwise.

MM: Is it fair to say that these questions are ultimately of political will - that we could completely substitute wind and solar for all the electric generation now if we simply chose to do it?

Makhijani: It can be done right now. In terms of the storage technology, some of the storage technologies are here. It will take time to do the whole transition, but we can definitively say now that we can accomplish this transition. We should begin now. Forget about the 20th century model of electricity grids. Forget about sticking radioactive rods in a pot of water to boil it - which is really what a nuclear reactor is. Make a thorough and full commitment to a modern and safe energy system. We can do it.

There's one technology that is more expensive than wind energy and somewhat more expensive than nuclear today, which is solar thermal. But the cost of solar thermal is coming down, and the cost of nuclear has been going up. And it's widely anticipated that the problem with solar thermal will be solved within five years.

So we have the technology. Not everything today adds up in dollars and cents, but we're not talking about replacing the whole infrastructure today. We're talking about replacing it over a period of about 30 years.

MM: In the transportation sector, what's available now to replace gasoline?

Makhijani: Even within the internal combustion engine framework, we can make cars that get 45 to 50 miles a gallon. There's absolutely no reason why we shouldn't have efficiency standards of 50 miles a gallon by 2020.

The battery technology is here to have all electric cars. China started marketing a plug-in hybrid for $22,000 in December 2008, that goes more than 60 miles without using any gasoline. It's not certified for the U.S. market; we don't know what it would cost here. I think the main roadblock for electric cars is we don't have mass manufacturing of the batteries. The battery production for cars is still on a custom basis. It's done in tens of thousands of units rather than in millions or tens of millions of units. That makes a very big difference.

We do need to go to electric transportation, and to do that we will need to build infrastructure. Not all of that transition can be accomplished by plugging a car into your garage outlet. Not everybody has a garage outlet to plug into. Sometimes you might need to charge your car rapidly. And we need to convert the truck transportation system.

As much as possible, the land transportation system needs to be converted to electricity. It's a very good, clean way to get rid of oil. If we're going to go renewable, then we will be fueling our cars through renewable energy. That combination really needs to be accomplished.

An important part of the solution is, again, smart meters. You need to be able to park in a parking lot, say at an airport. Then, that airport can make a deal with the utility - so many cars are plugged in at given times during the week - it doesn't have to be the same cars. Then the grid operator can use some of the charge that is stored in the cars to balance out some of the intermittency of solar and wind, making sure that you always have enough residual charge on your car according to your contract. With the software available today, we can do this. But it needs to be tested on a large enough scale. And of course, we need the electric cars.

MM: The kind of transition you're talking about would, it seems, eliminate the fossil fuel and nuclear industries as they currently exist, but maybe not threaten any other existing industry. So why is there so much reluctance to change?

Makhijani: It doesn't eliminate the companies necessarily, if they're awake. It doesn't threaten GM if it is awake, but the problem with GM is it has been asleep, trying to persuade the American public to buy cars that consume lots of gasoline, that look very muscular. Until recently, people have seemed to like that image, both on the producing and consuming end. But things changed in many ways last year in the oil and car businesses.

However, big bureaucracies have a giant inertia. They know how to do things in a certain way. It's very difficult for them to accept quickly that they have to change course and to do it fast. Innovation comes from the margin for a reason. Small companies and individuals are more nimble, and in large companies there is very little real communication between the people in the middle - in the trenches, so to speak, where new ideas are often born - and the top.

Secondly, large companies have huge investments in the existing infrastructure and they want to make sure they squeeze all the profits they can out of it. Changes in rules, prices on carbon, and so on, threatens that. So they exercise their financial muscle in the political sphere to make sure that business as usual continues.

And, in this country, there is a bit of a reflexive anti-regulatory attitude on the part of big business, in contrast, to some extent, to Europe.

I think we need industry in this country not to be such laggards. ExxonMobil was financing climate change skepticism for quite a while until it subtly changed a year or two ago, while Europeans were going ahead and developing the technology. This has a penalty for us here. The United States was the leader in solar thermal electric generation and built several hundred megawatts of that in California in the 1980s. Those plants are still operational. But now Spain is a leader; Arizona Public Service's solar power plant is being built under a contract with a Spanish company. I'm not against that, mind you; I'm just saying that being a laggard in rules and regulations has industrial and jobs and technology consequences for the United States.

MM: To make the transition happen, you lay out a policy plan with a range of different initiatives. Can you give an overview of how you see this being forced from the policy side?

Makhijani: If President Obama stood up and said the United States is going to phase out fossil fuels by the middle of the century, it would have a dramatic impact. We're going to have to do something close to that anyway in order to achieve his goals, although most people don't realize that. Eighty percent reduction of greenhouse gases below 1990 levels will require something close to a complete elimination of CO2 emissions from fossil fuels. It's harder to get rid of nitrous oxide emissions and methane emissions [other leading greenhouse gases] to that extent. We're going to have to do a nearly complete elimination of fossil fuels. So why not make necessity into a virtue?

We're going to have a harder time saying we're going to phase out nuclear power plants. On that front, what I recommend is that the government say, "You've had enough subsidies. If Wall Street will fund you, fine. We will make sure the regulation is tough." Without subsidies, I think the nuclear industry will just go away.

So we need those two policies. We need a very firm statement that we are going to get rid of fossil fuels and intermediate steps to achieve that goal. And, we need to get rid of subsidies for fossil fuels and nuclear.

We need the federal government to put its own house in order. The federal government should go zero net carbon in 20 years. They should revamp their existing buildings, have strict rules for new federal buildings and revamp the fleet of vehicles that is owned by government. It should help state and local governments to do the same.

I'm not much for subsidies on renewables. I think investment tax credits and the like are OK in the initial stages - for five or 10 years. But the main thing we need is government to purchase the most advanced technology, like electric cars and buildings that have a zero net energy footprint. That will transform the marketplace in itself.

I think we need regulations for buildings. We need efficiency standards for appliances and cars, and we need to make sure the transmission rules are in place to get renewable energy to market.

Obviously, we need to strengthen our research and development. Converting micro-algae into liquid fuels is not yet commercial. Hot rock geothermal, where you inject liquids into hot rock and then use the hot liquids to generate electricity, is not yet commercial. So we need to build a demonstration plant for this. Hot rock geothermal was ready for a demonstration plant in 1994, and that project was scrapped. We cannot have a yo-yo R&D policy, where the price of oil goes up and we jack up the amount of money in research; the price of oil goes down and we cancel research projects.

There has to be a price on carbon, or we're going to have to regulate fossil fuels away. We could have a 100 percent renewable portfolio standard for electricity. And like CFCs, we could ban fossil fuels by a date certain. There are many approaches. We need to decide on one - a clean, transparent one that will lead inexorably to a renewable energy system.

MM: How do we get there? A cap-and-trade system, a carbon tax or some other way?

Makhijani: If we have a clean system of allowances, where users of fossil fuels have to buy allowances from the government, then they should be able to sell those allowances to another user of fossil fuels, depending on whether they want to use the allowance, or invest in efficiency to not need that allowance.

If there is a cap-and-trade system, there should be one national market for allowances, with no offsets, so you don't get to burn coal but then someone plants a tree in Montana or Guatemala or India, or wherever. Trading allowances and generating credits between countries that have CO2 emission limits and those that do not (or have lax limits) is especially damaging. There is a lot of funny money in carbon trading. One of the biggest lessons of how Europe implemented the Kyoto Protocol was that the system of offsets is really a poor way to go. Free allowances are also a problem. It's like printing money. That's another lesson we should learn from Europe.

If we cannot get a system of carbon allowances that's neat, I favor a carbon tax. It's simpler, it's easier, there's less room to wriggle.

I think regulations might be much better in some sectors. When economists say that regulations are somehow bad and increase the price, I think that they sometimes do not look at real life. We had regulations for appliance efficiency, the most dramatic being refrigerators. The efficiency of refrigerators (electricity use per cubic foot per year) since the 1970s has quadrupled in response to efficiency standards, and the real dollar cost of refrigerators has come down at the same time that efficiency has gone up.

So when you have a level playing field through realistic but tough regulations, you can actually improve the technological scene because companies and entrepreneurs have a real incentive to innovate, provided you have a competitive marketplace. Refrigerators have a competitive marketplace, and we've seen a dramatic result.

MM: But is it feasible to go through every single appliance and establish an efficiency standard?

Makhijani: If you have BTU per square foot standards for buildings, that takes care of most of it, because for new buildings you can actually get rid of most of the energy requirements by substituting efficiency for fuel use.

If you have regulations that existing buildings have to meet a certain standard at or around the time of sale, then you have the right incentives for people. You have to be able to finance the transfer, you have to have an audit system, you have to have an inspection system. We were able to do that with radon, where we have routine inspections for existing houses.

We can do that with appliances and heating and cooling. Most of the energy use in the house is focused in only three areas: space heating, water heating and air conditioning. All the fancy stuff - the computers, the cooking, the refrigerators and freezers - are only about a fourth of the energy use. In commercial buildings, lighting plays a much bigger role. But energy for lighting can be about 80 percent eliminated with new lighting, better design, and bringing sunlight indoors with new lighting fixtures that are designed to spread sunshine indoors.

So you don't actually need to micromanage every household and tell them what to do, you just change the marketplace. That's what happened with refrigerators and air conditioners. In the 1970s, air conditioners were miserably inefficient. We've increased the efficiency of air conditioners by 50 percent to 80 percent. The best air conditioners today, the geothermal heat pump air conditioners, are three or four times more efficient than the air conditioners in the 1970s.

So the bottom line is: Are we going to commit ourselves to an eminently feasible and practical future that is also very exciting and visionary?


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