RealCurrents

I was reading Jessica Mah’s post on how a lot of her high-school and college-age friends are really scared about global warming. Here in the U.S., it’s often reported that folks in other countries are more concerned than the average American, but little attention has been given to how the issue is impacting younger Americans.

It occurred to me that they need a little perspective on this. I grew up in the 1970s, and for those of us Americans who went through this period when the U.S. was in a severe technophobic angst, and there were constant pronouncements about all the terrible things that were going to happen, I suppose we’re just not so quick to be convinced the world is coming to an end every time scientists start preaching doom and gloom.

This was a very long list of crises that 1960s-70s experts insisted were soon to befall us, most of which I’ve probably (thankfully) forgotten, but which included such calamities as pollution, endangered species, population, overcrowded skies, the San Andreas and yes, even a looming ice age. I guess being terrified of nuclear armageddon just wasn’t enough anymore. The funny thing was, very few of these scientists were talking about an energy crisis.

Of course, even the “energy crisis” didn’t last long, once investors started pouring hundreds of billions into oil, which was $35 when I got out of high school but less than $10 when I got out of college. Jessica titled her post “Scared of Global Warming? Bring in the entrepreneurs!” and so yes, I think she’s right that entrepreneurs and the free market are a lot of the answer to global warming.

In general, though, I think we ought to stop and notice something. It sure seems to me that scientists can get into a negative funk about stuff, and end up focussing too much on the problems rather than the solutions. In fact, I can’t help wondering if it’s sort of the same dynamic as with investment newsletters - negativity and fear apparently sell a lot more newsletters, and a crisis may, sadly, be the only thing that will finally garner a research project any funding.

Now, this is certainly not all the scientists’ fault, nor is the business world off the hook. Just look at the American car industry, one of the most pitiful examples of research budgeting in modern history. Perhaps GM, Ford and Chrysler may be excused for being caught unprepared on fuel economy in the early 70s, since they were already struggling with new emissions restrictions. On the other hand, here we are again thirty years later and, sadly, it seems that only the recent combination of high oil prices, a dropping dollar, and concerns over carbon emissions was finally enough to get them serious again about improving fuel economy.

Amidst all the prognostications, it’s still not clear how global warming is going to play out. Besides the many questions of specific effects in specific places, there’s at least three basic questions involved. First is the question of how fast temperatures will go up. Second, how much will they rise long-term (or is it a runaway increase with no end in sight)? Third, if temperatures can be stabilized, will (can?) they then head back down?

We hear virtually nothing of potentially beneficial effects, but clearly there’s going to be some winners among the many losers from effects of global warming. Interestingly, so far the Russians seem to be the only ones thinking ahead about any positive outcomes from it. As Jessica suggests, entrepreneurs ought to be also. Again, though, we must keep a proper perspective - a long-term perspective.

While there’s a lot we don’t know, we can say that at least for practical purposes, whatever we can do will take place over decades. Realistically, it’s far too late to do anything about changes that may take place within the next decade or so. In other words, whatever research and changes - technological or political - that are to be made must be done consistently over a decades-long time frame.

This is, for example, why I strongly disagree with the basic Kyoto (Treaty) framework. Already China is producing as much carbon emissions as the U.S., and will likely continue to increase. Kyoto might be effective in reducing the emissions of Western industrialized nations, but given these reductions and the continued growth of China, India and other large industrializing countries, within a few years this extremely costly plan will prove ineffective in reducing the bulk of emissions.

We’ve heard from the scientists on global warming, but have yet to hear from the engineers, who are going to be the folks who have to make reductions in carbon emissions actually happen. We need to think about cost/benefit ratios. We also need to think about sustaining research investments over decades, which as the history of NASA indicates, is awfully difficult to do when you start out with crash-program type overbudgeting.

I think it’s a good bet that a lot of these new technologies are going to come from both big American businesses (such as Boeing with its new 787) and American entrepreneurs. This realization may not play well overseas, but any approach such as Kyoto that hobbles the American economy is going to be counterproductive.

Like it or not, the U.S. is still a (if not the) major innovation engine in the world. Companies in Silicon Valley (1, 2, 3) and elsewhere in the U.S. are working on hundreds of different technologies, everything from emission controls to cheap solar to electric cars to wind power and so on. Here in Texas, it’s become common to see the giant parts of wind turbines rolling down the highway on their way west, where hundreds are being put up.

We must remember that innovation, not political decrees, is the only way to solve the problems from global warming, and while we’re at it, let’s not forget to also think about taking advantage of the benefits.

I wrote on my site AeroGo about Brazil’s decision to go ahead and pay Russia for a ride for its astronaut trainee, rather than keep waiting on NASA and a seat on the shuttle.

The U.S. has missed an opportunity to build goodwill with the largest country in South America. At a time when the Bush administration is trying to stem a rising tide of socialism in the region, apparently no one was even thinking about how space might play a diplomatic role. Instead, U.S. insensitivity has pushed Brazil toward the Russians, who haven’t exactly been a model of democracy lately.

While Russia still understands how its space program can play a political role, space has been off the radar screen for decades in Washington. As a result, once again we’ve lost an opportunity to reap some return on our investment in the space program. A lot of these returns are intangible or at least difficult to measure, such as spinoff technologies and industries, but considering the enormous expense of the space program, we need to see it pay off in as many ways as possible.

Pittsburgh Business Times is reporting that the Nuclear Regulatory Commission has approved Westinghouse Electric’s design for its AP1000 pressurized water reactor. This could lead to the building of new reactors in the U.S. by 2010. Westinghouse reportedly already has a contract with Duke Energy for two AP1000s.

Well, it’s about time that nuclear gets another shot in the U.S. When you consider all the health effects from hydrocarbon pollution, plus acid rain and potential greenhouse warming, nuclear can come out looking pretty good. I have long felt that if we were really serious about energy in the U.S., nuclear would be an important part of the picture.

The big problems with nuclear in the U.S. have been management of reactor construction, extensive legal interference by those opposed, and disposal of nuclear waste. Of these, the first is industry’s fault, whereas the latter two are mostly political (and with waste, somewhat technological).

Regarding management, the U.S. historically had a lot of problems because reactor designs were not sufficiently standardized. France took a different approach, developing a standard 900MW reactor. Such standardization brings both economic and safety advantages, and it’s important that the new AP1000 design, which also may be built in China, be managed in this way.

Protests and legal wrangling have been a big problem in the U.S., and I hope that the government and industry (what little is left of it) can somehow educate the public better about the relative safety of nuclear power. While natural gas is pretty clean burning, most places would probably be far better off with a nuclear plant than a coal-burning one. Of course, one of the reasons nuclear is garnering attention now is because of the rapid rises in natural gas prices. A lot of gas power plants have been built here in Texas since deregulation, and their economics are certainly not as attractive as they once were.

Disposal of nuclear waste is really the biggest sticking point. I think a lot of the protesting would really diminish if this issue was satisfactorily resolved. Compared to Western Europe, the U.S. is in a great position for handling wastes, with much dry and virtually unpopulated land, seemingly geologically stable, but politically it’s been difficult to move forward on a permanent site. Of course, the close majorities in the U.S. Senate in recent years increases the power of even a small-population western state to stall the project.

The French developed a vitrification process for containing some waste, which is an example of how technology could provide an extra margin of safety that might make a permanent site more acceptable. I haven’t looked into the French nuclear industry in a number of years, but their approach in the past seemed much more intelligent than ours, and we could probably learn a lot from them.

I guess that’s really the bottom line. An intelligent nuclear policy is what’s needed in the U.S. I just hope it’s politically feasible.

Capitalism works great until it doesn’t, and I’m wondering if in the energy sector we’re somehow reaching one of those economic eddies where things don’t just work themselves out. I’m not convinced yet that this is the case, but I’m really beginning to wonder how high oil has to go before we see some serious investment by the energy industry.

Okay, the term “serious investment” really isn’t fair, because that’s something they do as a matter of course. But here in Houston, Texas, the energy capital of the world, you’d think companies would be hiring like crazy. Oil is up about seven times (unadjusted for inflation) since the lows of the late 1980s.

Apparently I’m not the only one wondering about that. Reuters is reporting that European Union finance ministers meeting in England “issued a statement saying they … wanted oil companies to increase investment in oil exploration, production and refining capacity as well as alternative energy services.”

Back in the late 80s, when oil was really down, there was a bumper sticker in Houston that went “Dear God, Please give us $28/barrel oil again. We promise not to waste it this time.” For a long time, I assumed this more prudent mindset explained the oil industry’s rather non-aggressive stance (the economic devastation in the oil business was a lot worse than most people realize). Now I suspect oil exploration may well be restrained by the realities (?) of the global Hubbert curve, if indeed worldwide production is presently peaking.

In any event, it seems clear that worldwide energy demand is by no means peaking, mainly because of China and India, so oil companies may have to once again get aggressive about alternative energy sources (maybe it’s a good time to buy real estate in Parachute, Colorado - I wonder what happened to all those empty houses).

It may not be wise to press the oil companies too much to increase oil production through conventional drilling, but in a capitalist economy, when the price goes up steadily, consumers are sending a clear signal to producers to increase supply, and increased investment by producers is part of what justifies the premium profits they get in such situations.

I really don’t see how the energy companies can seriously be thinking we are presently in danger of seeing excessive investment in their sector. Oil would have to drop by nearly two-thirds just to get down to $28. I hope the oil companies will re-invent themselves as diversified energy companies or at least pay out the profits in dividends quickly so someone else can invest them in our energy future.