January 2012 – The Climate Post

chapel — The Nicholas Institute for Environmental Policy Solutions at Duke University

In President Obama’s third State of the Union address, he devoted more time than before to covering energy issues, calling for an “all-out, all-of-the-above” approach to boosting production of every kind of domestic energy, fossil as well as renewable.

Obama also asked the country to imagine “a future where we’re in control of our own energy,” which seemed to be a call for energy independence, a goal set out by all U.S. presidents going back to Nixon.

He also said he supports opening up more offshore areas for exploration and development of oil and gas. The president of Shell Oil said it seems the federal government has increased its pace of issuing permits for deepwater drilling.

He also expressed support for shale gas, saying the country had natural gas supplies that could last “nearly 100 years.” However, a new analysis by the U.S. Energy Information Administration (EIA) said the country may only have about half as much shale gas as the EIA’s 2011 estimate held—and the most extensively drilled shale area, the Marcellus, was downgraded by about two-thirds. For any drilling on public lands, Obama will require companies to disclose the chemicals they use.

The result was a variety of aims that could conflict, since boosting production of fossil fuels could stymie renewable energy and boost greenhouse gas emissions.

Climate change only showed up in the speech once, when Obama blamed partisan division in Congress for delaying climate legislation. He indicated there is no reason Congress shouldn’t at least set a “clean energy standard”—the kind of effort that could sharply cut emissions at low cost, according to an analysis last year by the EIA.

Changes to Taxes and Trade

Another theme in Obama’s speech was an “economy built to last,” calling for a resurgence of U.S. manufacturing. A key part of this would be clean tech, as Obama said, “I will not walk away from … clean energy.” He also touted a wind turbine manufacturer as an example of a U.S. company creating domestic jobs.

To help protect domestic jobs, he announced the creation of a Trade Enforcement Unit that will investigate “unfair trade practices in countries like China,” apparently a reference to recent scuffles over China’s support for solar panel manufacturers.

Obama also argued companies should not get tax breaks for moving jobs overseas. There has been some criticism of green stimulus money supporting jobs overseas and now Evergreen Solar, the United States’ third-biggest solar panel manufacturer, announced plans to shut down its main U.S. factory and open another in China.

Obama also called for an end to tax breaks for the petroleum industry. “We have subsidized oil companies for a century,” he said. “That’s long enough.” Obama has urged such a move several times before, as has Fatih Birol, chief economist of the International Energy Agency, who said cutting fossil fuel subsidies would get the world halfway to reaching ambitious goals for cutting greenhouse gas emissions.

However, fuel price hikes have sparked protests—as when Italy raised taxes and Nigeria lowered subsidies.

Oil Market Ratchets Up

Meanwhile, the European Union adopted a ban on importing Iranian oil, to be phased in by July 1, to try to stop Iran from developing nuclear weapons.

In retaliation, Iran is considering immediately ceasing oil sales to Europe, and again threatened to close the Strait of Hormuz, the world’s most important oil chokepoint, leading the International Monetary Fund to warn rising tensions could cause oil prices to spike, joining a chorus of earlier warnings.

In case of a shut-down, Saudi Arabia’s leaders said oil could continue flowing through alternate routes, and make up for much of the loss of Iranian oil—also admitting a preference for oil prices to remain around $100 a barrel.

In case of such oil or gas price spikes, six Democrats in the U.S. House of Representatives introduced the Gas Price Spike Act to apply a windfall tax that would capture most of the revenue that goes beyond “a reasonable profit.” The money raised would help fund fuel-efficient cars and mass transit systems.

Regardless of acute geopolitical turmoil, high oil prices are here to stay, since oil’s “tipping point has passed” and the “supply of cheap oil has plateaued,” argued an article in Nature.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

Under pressure from Congress to make a decision on the Keystone XL pipeline, planned to connect Canada’s tar sands region with the U.S. Gulf Coast, the Obama administration has decided to reject the pipeline proposal.

“This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline” that did not allow enough time to finish the environmental impact assessment, said President Obama. Republicans who supported the pipeline say they will continue to fight for it, and have asked Secretary of State Hillary Clinton to testify before Congress on the decision.

The company that wanted to build the pipeline, TransCanada, said earlier this week it was moving ahead with its plans despite the political wrangling. Also, the government of Alberta, the province at the center of Canada’s tar sands activity, had been urging the U.S. Environmental Protection Agency to ignore greenhouse gas emissions and climate change impacts when evaluating the pipeline, according to newly released documents.

But with the decision issued by the U.S. State Department, now the company will have to start over and reapply, and the government might not offer an expedited review. TransCanada may reapply within weeks proposing a new route avoiding Nebraska’s ecologically sensitive Sand Hills region, above a portion of the vast Ogallala Aquifer.

Obama reportedly called Canadian Prime Minister Stephen Harper to explain his decision, and Harper said he hoped the pipeline would eventually be approved. Harper is also supporting another pipeline to Canada’s Pacific coast that would facilitate exports to Asia, in particular to China. However, pipeline approval is more difficult in Canada than the U.S., and there is considerable opposition to a Pacific pipeline, a Reuters analyst said.

The decision was a “brave” call, said Bill McKibben, branded in the Boston Globe as “the man who crushed the Keystone XL pipeline.”

However other commentators—even those who took the decision as good news—argued it won’t stop Canada’s tar sands from flowing, and thus won’t reduce greenhouse gas emissions. Others called the decision “a gift” to the GOP.

Shale Gas Versus Alternatives

Although world oil prices and U.S. gasoline prices were at all-time highs in 2011, in the U.S. natural gas prices have been plummeting, reaching their lowest in a decade in a “classic case of oversupply.” The price has dropped lately because of a mild winter requiring less heating, a boon to consumers and businesses; the longer trend has been driven by the advent of shale gas drilling techniques, which now account for about a quarter of U.S. natural gas production.

There has been limited shale gas development outside the U.S., and prices in most of the rest of the world have remained much higher.

Although several years ago the U.S. was planning to import large amounts of liquefied natural gas and built ports to receive it in tankers, now the country is considering exporting natural gas. But such a move would have wide-ranging impacts that are difficult to unravel, according to a new report from the Brookings Institution; the U.S. Energy Information Administration said exporting natural gas would likely push domestic prices up.

And an MIT study simulated the impacts a steady supply of cheap shale gas would likely have on the U.S. economy and found it would in many ways benefit the economy over the next couple of decades, but that it could boost greenhouse gas emissions and stunt the growth of renewable energy and other alternatives.

Renewables Reach New High

Global investment in renewable energy hit a new record in 2011, reaching $260 billion, up 5 percent from 2010. Wind investment fell 17 percent from 2010, while solar investment grew by a third, so spending on solar was twice the spending on wind. The growth of solar was attributed in large part to plummeting photovoltaic panel prices.

Meanwhile, manufacturers of both solar panels and wind turbines are being squeezed by oversupply, leaving them with low profit margins.

In the U.S., renewables investment grew by a third, to $56 billion, helping the U.S. to reclaim the title of world’s biggest clean energy investor. However, in 2011 the country also saw the end of “green stimulus” money and federal loan guarantees, and its Production Tax Credit will end at the close of 2012, so future investment onward may drop unless new support for renewables is brought in.

With the drop in wind energy investment, Vestas, the world’s largest turbine manufacturer, is laying off more than 2,000 employees globally, about 10 percent of its workforce. It said it may layoff another 1,600 in the U.S. if the Production Tax Credit is not extended.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

Month: January 2012

Obama Calls for “All of the Above” Energy Strategy for America

U.S. Rejects Tar Sands Pipeline from Canada—For Now