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American Response to Global WarmingThe U.S. is ready to confront the major challenge of global warming. America generates roughly one quarter of the globe's greenhouse gases every year. 174 countries adopted the Kyoto protocol to reduce carbon levels, however, the U.S. did not. The U.S. has resisted taking action on the global warming issue that threatens the survival of our coasts and farms, our health and the stability of our economy.
We have not achieved consensus on how to solve the problem. Industries on the one hand have made few positive plans and on the other hand, environmental groups have proposed wide-reaching solutions that may seriously harm economic growth. America needs to adopt an aggressive, effective plan that accommodates concerns of the environment as well as economic prosperity.
The U.S. needs to stop the negative impact of climate change and ensure the survival of our lifestyle for future generations without seriously damaging the economy.
Charge on Carbon Emissions
A key step will be to levy charges on carbon emissions. When we charge users for emitting carbon, the equation is tipped in favor of alternative fuels and away from fossil fuels. A cap-and-trade system may establish ceilings for carbon output and allow companies with positive balances to sell credits to companies that need the credits. The net impact will be that carbon levels will fall. Businesses will gain from being green so that should drive investment and research dollars into renewable energy and efficiency.
The Kyoto Protocol was a preliminary attempt to create type form of system with the target of having developed nations reduce their carbon emissions an average of 5% below 1990 levels by 2012. The Kyoto system attempted to offer incentives to reduce greenhouse gases and promote investment in clean technology through carbon trading. However, Kyoto lacked a number of important participants. Developing nations such as China, India and Indonesia were removed from the Protocol in order to avoid slowing their expanding economies. In 2001, the U.S. rejected this preferential treatment and abandoned Kyoto.
Because of the global nature of the carbon problem, it made no sense to exempt factories in China because reductions in U.S. emissions would not result in any net environmental benefit if emissions by other countries increase at the same time.
Cap and Trade Program
However, when and if the U.S. eventually adopts a national cap-and-trade program, the Lieberman-Warner (LW) Bill may merit significant credit. In 2007, the Bill moved from the Senate's Committee on Environment and Public Works to the Senate. The bill called for reducing carbon from most sources to 2005 levels by 2012 and 70% below 2005 levels by 2050.
LW or Senate Bill 2191 imposes strict upper limits on the emission of six greenhouse gases (GHG's) with the primary emphasis on carbon dioxide (CO2). The mechanism for capping these emissions requires emitters to acquire federally created permits (allowances) for each ton emitted. The cost of the allowances will be significant and will cause significant increases in the cost of energy. Because the allowances will have an economic effect, the increase in energy costs will create large wealth transfers from private energy consumers to special interests such as technology groups.
LW has not received a full vote in the Senate. It will face opposition from the White House as well as from many Republicans and Democrats from coal-dependent states. The primary concern about the cap-and-trade proposal is that it would put enormous burdens on our already struggling economy. A study by the National Association of Manufacturers, an industry trade group, estimated that LW might reduce employment in the U.S. by up to 4 million jobs by 2030 and at the same time reduce GDP by roughly $669 billion per year.
It is clear that the solution to eliminating climate change may be expensive. An EPA study determined that under LW, GDP would grow 1% less between 2010 and 2030. That also did not take into account the potential economic benefits. Utility agencies such as PG&E recognize that a cap and trade system may be inevitable.
A carbon cap will likely boost electricity and gas prices for consumers in the short term before carbon-free alternatives will be available to the market. There are potential solutions to assist energy customers. For example, a cap-and-dividend system could return the revenue raised by a cap-and-trade system to customers through rebates similar to the oil-industry dividends from the Alaska government that Alaskan citizens receive.
Many of the American states have adopted or are considering adopting cap-and-trade systems for carbon. Groups of states in the West and the Northeast have committed to or are considering mandatory carbon caps under which regional greenhouse-gas trading blocs are being launched.<
In 2006, in California, Governor Schwarzenegger signed the strongest carbon regulation in the country. California has implemented law AB32 mandating that the state's greenhouse-gas emissions be cut to 1990 levels by 2020, a reduction of about 25%. It is essential that the federal government adopt a nationwide program; otherwise industries simply escape from California and other adopting states to unregulated states and no improvement will be obtained.
The economic impact is unclear. For example, a 2006 report by the University of California stated that AB32 would increase California's GDP by $60 billion and create 17,000 jobs by 2020 because the entrepreneurial tech culture will add many new companies in the energy efficiency field. Clean-technology start-up companies are being established in California. The American Solar Energy Society has estimated that there are 8 million jobs in the clean-tech sector and that field could grow to 40 million by 2030 as a result of new energy laws.
An important component of a global-warming-reduction program involves improving efficiency with the fossil fuels. The U.S. can no longer afford to be wasteful about expensive energy consumption.
Western Europe and Japan are far more energy efficient than the U.S., largely because their higher energy costs necessitated improved efficiency. A research report by McKinsey Global Institute (MGI) indicates that projected growth in the world energy demand can be reduced by one half by 2020 simply by using opportunities to reduce waste. MGI says annual industry-wide investments of $170 billion per year in efficiency improvements such as green buildings and higher-mileage cars could yield an additional $900 billion per year in savings by 2020.
In 2007, the federal energy bill raised corporate average fuel economy (cafe) standards for the first time in three decades, to 35 m.p.g. for cars by 2020. Efficiency standards should be implemented for household appliances and lighting. Rules should be applied to buildings because one half of U.S. greenhouse-gas emissions emanate from buildings so that there is an enormous savings opportunity by simply mandating green design. Furthermore, efficiency would increase if utilities were granted the right to charge variable pricing so customers would be charged more for power during periods of peak demand and less during off periods.
California has implemented a pilot program for variable pricing. Utilities should install smart meters that provide real-time information about customer energy use and make billing more precise and savings clearly known. Energy demand has fallen 13% in the pilot program. In California, various efficiency programs have kept per capita energy use flat for the past three decades, even though energy use per person in the U.S. overall increased by 50%. California's green policies have eliminated the need for 24 power plants over the past 30 years that is known as demand destruction.
Because of the energy demands of developing world, we must create a new energy system that is independent of carbon. There are many thousands of bright engineers working on new alternative energy solutions. Venture capital funding in the clean-tech sector amounted to $5.18 billion in 2007, an increase of 44% from 2006. Silicon Valley has the largest group of start-up environmental firms due to the combination of California's progressive environmental measures, available scientific pool and entrepreneurial culture.
For example, there are teams of scientists working on ways to genetically modify bacteria to improve biofuels. A company called Amyris is attempting to engineer yeast or bacteria that can metabolize biofuel feedstocks like wood chips and dramatically increase the amount of biofuel that may be extracted from them.
The government can play a major role in accelerating the process of conversion away from fossil fuels. A firm carbon price will accelerate creativity by making alternatives that more competitive. Currently, the Federal Government budgets about $5 billion per year for research and tax incentives for renewables and energy efficiency. The federal budget in 2008 amounts to $2.9 trillion so that there are funds available if the energy crisis is prioritized. For example, Congress may consider a proposal to eliminate $18 billion worth of tax breaks for the oil industry and employ those funds to support research into renewable fuels.
Photovoltaic solar panels have made significant improvements, but additional research is required to achieve economic parity with fossil fuels. For instance, more research on solar thermal power plants should be undertaken. A solar thermal plant will be constructed in the Nevada desert. That installation involves a 300-acre array of 182,000 mirrors that are aligned to focus the sun's energy and heat synthetic oil that runs in a pipeline and produces steam that drives turbines to generate electricity. Moreover, mirrors and turbines are comparatively inexpensive and do not require high technology.
Wind power that is a mature renewable technology is growing rapidly. However, more research should be undertaken on methods to store electricity when the winds are calm. There are other alternatives such as tidal power, geothermal energy and even nuclear fusion.
The federal government should make available substantially more research funding without attempting to decide which technology is best in advance. The ethanol biofuel fiasco was created because the government's blind support for corn ethanol flooded the market with a fuel that created too many other problems such as deforestation and higher food prices.
A national renewable portfolio standard that would mandate that a certain percentage of the nation's electricity supply must come from renewable sources would require utilities to adopt alternatives on a broader scale and allow market forces to decide which technologies produce the most efficient results. The government should eliminate the billions of dollars of subsidies to the fossil-fuel industry. Those subsidies simply reinforce the oil sector's pre-existing advantages.
Micro-policies such as tax credits can make solar power and green building more efficient on a house-by-house basis. These credits have helped initiate the wind and solar industries, however the laws establishing them periodically expire.
For instance, the solar investment credit that was part of the 2005 energy bill provides a 30% tax credit for the purchase of solar power. Fortunately, it was extended for 8 years, thereby allowing the solar companies to do their work.
The Lengthy ProcessWe need to pass a national cap-and-trade system and stronger energy-efficiency requirements and encourage significant new public and private investment in green technologies. The changes required to overcome global warming will be expensive and absorb 2% to 3% of GDP a year. On the other hand, if global warming continues unabated, global health and prosperity will inevitably decline. We need to invest substantial funds and take concerted international action in order to reduce emissions radically over the next half-century, stabilize global warming and create a post-carbon world.
Global warming is a war that needs to be waged over several generations through intelligent policies that will operate over many generations. In this global energy crisis, the United States as the dominant global country with many innovative businesses, will apply new technologies and substantial financial resources to solve the global warming crisis.
The U.S. will use its influence and diplomatic powers to bring the other countries into the green framework. By leading the Green movement, the U.S. will gain greater international stature.