Of all the things we had to be thankful for last week, the climate-change report that the Trump administration tried to bury by releasing it on a Friday when no one was working wasn’t one of them — at least not on the surface. It paints a tale of a huge pending economic mess if we don’t get serious about slowing down carbon use and global warming.
But here’s the good news: The report also makes the case quite clearly that the economic costs of climate change — beginning now — are much, much higher than the bill for the main moves we’re taking, and need to take, to curtail rising temperatures. Add in some knowledge of what else is going on in carbon-reducing technology like wind power and electric cars, and you can begin to see the solution taking shape.
In other words, phasing these subsidies out as current law contemplates is the biggest false economy in human history. If there’s a risk of wasting money by subsidizing adoption that would eventually happen anyway, it’s a chance worth taking to force adoption sooner.
Better, you can see how a modestly skillful politician can turn this issue against Donald Trump and a set of policies that are courting disaster. Most of what it takes — and this is simplified slightly, but not too much — are electric cars and clean electricity like wind and solar, supplemented by natural gas and nuclear, and eliminating coal and its whole, entire, 10,750 jobs in “extraction.”
“We’re standing in front of the biggest disruption in energy we’ve ever had. What we thought was unsolvable and we had to live with is solvable,’’ says electric-car pioneer Henrik Fisker, CEO of Fisker Inc. “I think we’re still timely enough to make the change.”
Indeed, the incentives needed from the government are relatively modest because the technology is just about ready to address this — both technically and economically. The solution is at hand. Government will have a role to play — but most of the work in the U.S. will be up to consumers like you, and buying decisions you make in the next decade.
Put simply, you have to buy an electric car — and it will not cost you as much as you think it will. And you have to make sure you buy electricity that comes, as much as possible, from wind and solar power — backed up by lower-carbon natural gas and by nuclear power, which is carbon-free despite its other environmental challenges — while America, and later the world, phases out coal for good.
These are most of the answer, since about 70% of greenhouse-gas emissions come from energy use.
The economics of a carbon-free future
Here’s what I mean.
Seven years ago, clean-energy venture capitalist Vinod Khosla made a startling observation to me, or so I thought: No one would pay extra for electric cars or solar power to be virtuous. If an energy revolution to save Earth from climate change were to come, it had to be a financial, rather than scientific, event above all.
The solution is at hand.
Today, that’s good news — because clean energy’s economics now work. Even as environmentalists counsel despair, we’ve tripled the portion of U.S. electricity generated by wind and solar power — and can easily double or triple it again, with a few incentives.
Cars that run on electricity are available in nearly every market segment — with hundreds more model choices coming soon, driven by the EV market’s expansion from tinkertoy Priuses and costly Teslas into SUVs and crossovers most Americans drive. They’re catching on because costs of clean power and next-generation cars are now at parity with traditional, carbon-based forms of doing business or will be in five to seven years.
In the last decade, we’ve tested clean-tech approaches to see which ones work — and now we know. We threw public money at wind electricity and solar power, electric cars and biofuels, during the administrations of Barack Obama and George W. Bush. (The failure of biofuels — where Khosla had large bets — explains precisely why former Sen. Rick Santorum, now a biofuels lobbyist, made himself look foolish on TV this weekend claiming that grant-funded academics are all about chasing cash).
Plus, we embraced fracking of natural gas as a temporary measure, to speed up the phaseout of coal-burning electricity plants that emit twice as much carbon as gas-fired plants. Together with wind, gas has made coal — described only this weekend by The New York Times as a fuel strangely resistant to being phased out — lose 40% of its U.S. power-market share since 2005.
The verdict: To delay or reduce the pretty-apocalyptic effects of climate change, we need carbonless electricity, led by wind power, to power electric cars. Because those are the new technologies whose economics work.
Better, we know we can adopt them without breaking the bank — either the national bank or the household bank. That means it’s happening, no matter what Trump says. It depends more on you, dear reader — and increasingly painless buying choices you make — more than it does on him.
Today, it’s fashionable to despair over climate change. The New York Times magazine devoted an entire issue to arguing we blew it in the 1980s, missing opportunities to forge an international deal on carbon before carbon emissions reached critical mass. Now the world faces a realistic prospect of global average temperatures rising three or so degrees Celsius over pre-industrial revolution levels by late this century, causing flooding, uninhabitable coastal cities, and natural destruction.
This weekend’s report added lots of detail — and numbers. It forecasts hundreds of billions of dollar in damage — every year — by late this century if carbon emissions don’t fall quickly.
Some of this is obvious: Coastal flooding will distort what the report calls a multi-trillion dollar market for waterfront real estate, including downtown districts in minor little burgs like Manhattan. (The cost of rebuilding Freedom Tower alone was more than the federal government’s annual cost for wind-power subsidies).
But a lot of it is not obvious: The tab includes the time spent recovering from more-frequent and more-powerful hurricanes, from agriculture that gets distorted as regions grow too hot to grow their traditional crops effectively, even the rising cost of power needed for extra air conditioning.
Anyone with eyes sees this happening now. If you live near where I do (in New Jersey), look out the window of an NJ Transit train to Manhattan to see what Superstorm Sandy did to train tunnels under the Hudson River. If you live in North Carolina, look at what Hurricane Florence did to Wilmington and New Bern this fall, and ask how truck traffic got around the floods that closed Interstate 95, the biggest north-south road on the East Coast.
Looming over this is Trump, even more of a babbling baboon on climate issues than everything else, yapping about saving the coal industry and the 10,750 “extraction” jobs it still sustains by taking America back to the dirtiest and increasingly most-expensive electricity we have. (In other words, Trump has spent years cavilling over losing one solid day’s worth of U.S. job creation).
The president has committed to pull the U.S. out of the Paris climate accords, roll back Barack Obama’s Clean Power Plan, and erase Obama’s boost in vehicle fuel-economy standards.
Here’s why a contrarian says that despair’s wrong: Economics always trump the sound of Trump’s voice. Stock markets ignore his blather about trade, and energy markets shake off his babble that renewable energy means bigger utility bills and dead birds beneath windmills. This means U.S. carbon emissions are falling sharply — 14% since 2005 — and will keep falling.
Maybe even fast enough to reduce or delay the worst climate-change scenarios.
The best proof of this is what has happened with wind-powered electricity since 2008 — and is still happening.
Wind is cheaper than coal
Wind is now the most popular form of new electricity in America, drawing $145 billion in recent investment highlighted by Berkshire Hathaway
Not coincidentally, costs of building wind plants have dropped sharply — driven by cheaper turbines produced at greater scale, and by systems that waste less of the energy captured, said John Hensley, research director for the American Wind Energy Association. According to data from the investment bank Lazard, wind is now, on average, cheaper than coal.
Indeed, wind now provides 30% of the electricity in four states (Iowa, South Dakota, Kansas and Oklahoma) and, and is growing fastest in Texas, where wind supplies 15% of power, all states that are home to otherwise-flinty conservatives, and 6.3% nationwide.
At the same time, coal’s market share is collapsing — it supplies only 30% of U.S. electricity, down from 51% in 2005, hammered by falling natural-gas prices, with the one-two punch from renewables just arriving. Consultants at Bloomberg New Energy Finance see coal’s percentage falling to 11% globally and virtually zero in the U.S. by 2050.
If you watched a lot of Republican presidential debates in 2016, you would also think, first, that this shift never happened, and, second, that when it does happen, it will have a catastrophic effect on electric rates and household budgets. Sen. Marco Rubio was especially heated about this, but Trump chimed in too.
But, facts are stubborn: The consumer price index for electricity has risen just 1.4% annually since 2009. With costs of new wind plants falling further, there’s little reason to expect conversion away from coal to begin driving inflation now. Indeed, we’ll get 55% of U.S. electricity from wind, solar and hydropower by 2050, Bloomberg New Energy projects. Europe will get 87%. One reason: Bloomberg projects wind-generation costs will fall another 40% by 2030.
Take Xcel Energy
, a big Minneapolis-based utility serving 3.3 million electric customers in eight states that has already met the Paris’ accords’ goal of a 26% to 28% carbon reduction between 2005 and 2025 — and plans.to double its carbon reduction by 2030.
Electricity bills? They fell.
Xcel has gone from 9% renewable electricity in 2005 to 27% today, and including nuclear plants gets 40% of its juice without burning carbon. By 2022, that will cross 60%, as Xcel executes its plan to close 40% of its coal-burning capacity and add a dozen new wind farms.
“I will tell you, it’s not a matter of if we’re going to retire our coal fleet in this nation, it’s just a matter of when,” Xcel CEO Ben Fowke said in June.
Much the same thing is beginning to happen in the car market.
Obscured by antics of Tesla
CEO Elon Musk, nearly all global auto makers now sell either electric cars or plug-in hybrids, and about 250 new models are due on the market by about 2022.
Electrics’ share of the car market is still only 1%, but on track to hit 35% by 2030 and accelerate from there, shortly after the average cost of an electric car crosses the average price of an internal-combustion powered vehicle around 2025, according to Bloomberg New Energy Finance. Fisker says it will happen sooner — around 2022.
“Customers will begin to switch en masse once [EVs] are demonstrated to be cheaper on both a total-cost-of-ownership and an up-front basis,” Bloomberg said in its annual EV forecast.
Already, EVs’ total-cost-of ownership is coming toward parity with similar cars — especially when you include valuable tax credits for EVs. (More on them in a minute). Chevrolet’s
Bolt can be leased for $349 a month — still pricier than the $179 for a gas-powered Kia Soul that’s about the same size, but close to parity considering that Motor Trend magazine found that the Bolt cost $1,000 less to drive 17,000 miles. A slightly smaller Nissan
Leaf leases for $229 a month, making the economics even closer to the Kia’s.
At the upper end of the market, there’s little sign customers are very price-sensitive — but costs are coming into balance anyway. All three Teslas — the luxury-sedan Model S, Model X SUV, and more mass-market Model 3 (which hasn’t yet delivered on Tesla’s promise to produce a car near the $35,000 average price of new vehicles sold in the U.S.) — have taken the #1 position in their market segments. Customers don’t think they’re too expensive.
This is possible partly because prices of EV batteries fell 80% from 2010 to 2017 and are still dropping, Bloomberg NEF head of energy-storage analysis Logan Goldie-Scot says. If customers switch as fast as Bloomberg NEF forecasts, it will save 7.3 million barrels of crude oil a day — not counting fuel saved as commercial trucks go electric.
“What’s happening in the [battery] market would not be happening if not for the demand from automotive,” Goldie-Scot said. “The virtuous cycle is very broad: Cheaper batteries mean more batteries, in more segments, which pushes costs down further.”
The coming new EVs run from updated Leafs and Hyundais
to exotica like a second bite at the apple from Fisker, the former BMW design chief whose Fisker Automotive made the beautiful-but-impractical Fisker Karma EV before it went out of business.
New battery technologies will cut costs even more than the projected drop in familiar lithium-ion batteries, Fisker said (Tesla’s betting on lithium-ion remaining the standard). Battery costs and cheaper parts allowed by economies of scale will make EVs cheaper than other cars in four years, he said.
“That lets you market profitable, high-volume vehicles,” Fisker told MarketWatch. “By 2030, electric vehicles will be expected, whether we like it or not. You want the U.S. to be there with a great product that can compete.’’
There are two big barriers left — one technical, and the other a matter of policy.
The technical issue is developing different batteries that can store renewably produced electricity — there are lots of competing solutions, one or more of which will surely work, both technically and economically. The policy issue is keeping up enough government support — yes, subsidies — for another decade to make sure the revolution gains critical mass.
America already subsidizes wind power, through a tax credit on plant construction. That tax credit, though, is being phased out by 2019 — and the amount of new wind power in the pipeline is falling off already, according to AWEA data.
The credit only costs the Treasury $4.5 billion a year, according to Congress’ Joint Committee on Taxation. For perspective, property damage from Hurricane Florence, estimated by Moody’s Analytics, is $17 billion to $22 billion.
So as we deal with a list of climate problems including more, fiercer hurricanes, consider this: We can pay for the #1 policy solution to provide more carbon-fee electricity, for four or five more years, by avoiding just one large Category 1 storm like Florence. And during those years, costs will fall further, and carbon will get even more uneconomic.
Other clean-tech subsidies don’t cost much more: Tax expenditures to subsidize solar power are $1.6 billion, the JCT says. The credit that lets electric-car buyers subtract $7,500 from federal taxes (some states add more tax goodies) costs about $400 million. Yet it turns a $50,000 Tesla Model 3 — including a premium package and long-range battery, but not all-wheel drive — into a $42,500 car no more costly than an Audi A4 or Chevy Tahoe.
Those credits expire once each car maker sells a specified number of cars. They could easily be extended for a few more years as technology drives market-based costs lower.
In other words, phasing these subsidies out as current law contemplates is the biggest false economy in human history. If there’s a risk of wasting money by subsidizing adoption that would eventually happen anyway, it’s a chance worth taking to force adoption sooner. Especially when the cost is a lousy $6 billion a year or so, which we already know is enough to drive change.
“Electric cars will happen for sure now,” Khosla said. “I never count on government policy to drive technologies — except in the very short run.”
Notably — and importantly, for political purposes — all of this happens without slapping punitive carbon taxes on gasoline-fired cars while they’re still popular. They would make sense on a certain level, but the punitive taxes are luxuries now. The carrots of tax incentives to go green are the ballgame.
And not pushing the carbon tax means Democrats don’t lose elections to troglodytes who accuse them of wanting to take away SUVs — because an electric SUV powered by clean electricity is a clean car. Slap ‘em into Chevy Suburbans as big as entire suburbs! We won’t care.
The other remaining puzzle to solve is how to move clean electricity around effectively. That means upgrades to the electric grid and, especially, utility-scale batteries that can store wind and solar power generated when the sun’s out and wind’s blowing. The grid and batteries are also key to moving renewable power from places it’s convenient to produce it to where it’s needed. That’s complex, but manageable.
Trump thinks this is all a bad idea, and has moved hard to stop it.
But to adapt a line a graceless Trump staffer uttered about then-dying Sen. John McCain, who cares about Trump? He’ll likely be at Mar-a-Lago full-time in 2021 anyway, with his party having just lost the House election by eight percentage points, in a way that bespeaks losing at least 296 electoral votes in 2020. If not, people will still do what’s micro-economically rational, just as Khosla predicted in 2011. Thanks to decades of work by engineers and policy wonks, that now includes going green.
People will make adjustments, but they’ll be relatively painless. Including mine. My siblings and I collect rent on land leased by an oil company for a Jersey City, N.J., gas station. I asked Fisker how we’ll have to change. Easy, he said, and most people’s experience will be similar.
“It will become an electric-car charging station,” said the man who hopes to help make it so. “You’ll still sell people their energy — and a Diet Coke.”
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