The Energy Challenge

Stephen DeAngelis

June 12, 2006

The New York Times has been running a series of articles on energy and the challenges the world is having trying to meet demands. The reason that energy is a topic in a blog focused on resiliency is because it spawns horizontal scenarios across so many other sectors that it simply can’t be ignored. As I have noted before, I’m by nature an optimist. I believe that we will solve the energy challenges. Tom Barnett, the Senior Managing Director of Enterra Solutions, is fond of saying, “Humans didn’t leave the stone age because they ran out of rocks.” His point is that we will move on to cleaner fuels, not because we run out of dirty carbon-based fuels, but because we will find a better course of action for meeting the challenges. Unfortunately, the world will probably feel a lot more pain before it finally comes to grips with them.

In an article published Sunday (11 June), the Times discussed the problems being generated by China’s coal-burning plants [“Pollution From Chinese Coal Casts a Global Shadow,” by Keith Bradsher and David Barboza]. Just as the acid rain produced by America industry affects Canada, pollution generated by China affects everybody downwind from it as well. The article warns:

Unless China finds a way to clean up its coal plants and the thousands of factories that burn coal, pollution will soar both at home and abroad. The increase in global-warming gases from China’s coal use will probably exceed that for all industrialized countries combined over the next 25 years, surpassing by five times the reduction in such emissions that the Kyoto Protocol seeks. The sulfur dioxide produced in coal combustion poses an immediate threat to the health of China’s citizens, contributing to about 400,000 premature deaths a year. It also causes acid rain that poisons lakes, rivers, forests and crops. … A warmer climate could lead to rising sea levels, the spread of tropical diseases in previously temperate climes, crop failures in some regions and the extinction of many plant and animal species, especially those in polar or alpine areas. Coal is indeed China’s double-edged sword — the new economy’s black gold and the fragile environment’s dark cloud.

Of course, China could buy state-of-the-art equipment that helps reduce the pollution created by coal-fired plants, but it fears that doing so could put the brakes on its economy, something it believes it can’t do at this stage of its development. As a result, it buys antiquated equipment from local manufacturers, burns indigenous coal, and refuses to ask consumers to pay for measures that could protect their health. The article estimates that 400,000 people a year die in China from pollution-related illnesses. As its population ages and the long-term effects of pollution begin to kick in, the piper that China refuses to pay today will cost even more tomorrow in healthcare costs and subsequent productivity reductions.

Right behind China is India, which is in a race with China for economic dominance. Both countries have tasted the fruits of economic globalization. They are hooked on its pleasures, but refuse to acknowledge the pain that is beginning to assert itself. America is hardly in a position to point fingers, considering how large its energy consumption remains. In fact, China and India point accusing fingers at America and its refusal to adopt the Kyoto Protocol as an excuse for their own polluting ways.

We are decades away from having an economy in which alternative fuels provide a significant portion of our energy. When I talk about energy, I primarily mean the generation of electricity. Electrical power opens up the world for Gap countries. It extends productive hours and improves lives. Those living without electricity have no refrigeration (decreasing the shelf life of food while increasing the risk of eating food that is tainted). In areas of China where electricity is not available, people cook their meals over coal fires whose toxic fumes poison the very food they must eat to survive.

There are some interesting forms of clean, cheap power generation on the horizon. Scientists have reportedly invented a plastic solar cell that can be sprayed onto a surface and then used to turn the sun’s rays into electrical energy, even on a cloudy day, because the solar cells are the first to harness the sun’s invisible infrared rays. This breakthrough could turn large stretches of desert — geographic features that keep many Gap countries poor — into profitable acreage. Researchers envision “solar farms” of the plastic material rolled across deserts to generate enough clean energy to supply the entire planet’s power needs [Lovgren, Stefan, “Spray-On Solar Power Cells Are True Breakthrough,” National Geographic News 14 January 2006.]

While that may be a bit optimistic, such technologies hold tremendous promise for providing Gap states with the energy they require. There has been a lot of talk of moving from a carbon to a hydrogen economy. The problem is that freeing hydrogen from the compounds which contain it, takes energy and lots of it. Nuclear power is one way of providing that energy. Of course, environmentalists fear that nuclear waste will cause as many problems as the clean energy it produces will solve. New “pebble bed” reactors are also a promising technology.

With oil prices continuing to break records, the time is rapidly approaching when it will become economically feasible to pursue alternative fuels. Despite the pain we feel at the pumps, the benefits of increasing our use of alternative fuels will be worth it in the long run. A few companies have already begun to see how “being green” makes them more resilient — both to the vagaries of the energy market and by attracting “green” consumers and investors. Another New York Times article [The Greener Guys; A Few Companies Take Special Steps to Curb Emissions,” by Jad Mouawad] discusses their strategies for reducing their carbon footprint.

Some of these strategies can take novel forms. Take, for example, Timberland, which realized that part of its carbon footprint had to do with producing leather for its products. The largest source of greenhouse gases in that process comes from the methane produced by cows from which the leather is obtained.

While Timberland figures out how to reduce these emissions — it is examining ways to change the feed for cows — the company has already cut its greenhouse gases by 17 percent from their 2002 level and aims to become carbon-neutral by 2010 by offsetting its emissions through renewable or alternative energy sources.

One suggestion that has been around for a number of years is buying and selling emission credits. The article reports:

In Europe, for example, companies that go over their emission limits must buy carbon credits to comply. Under the continent-wide trading system, the cost of a carbon credit reached a high of 30.5 euros for each metric ton, or about $39, last month. (In the last month, prices have dropped by half as many power plants reported much lower emissions than expected.)

Many developing countries would love to see this kind of system enforced world-wide. They could earn valuable investment money by selling credits to countries like China and the U.S., which could then be used to help them develop plants that use clean fuels (permitting both development and a continued income from selling credits) — a win-win situation. Of course, the hope would be that eventually countries and companies would be weaned from carbon emissions altogether making the trading of credits unnecessary. The bottom line is that we can meet energy challenges and we will, once the pain of delaying tough decisions gets too exquisite to bear. Resilient companies will make those decisions well ahead of their competitors.