Media

Al Jazeera America arrives on the U.S. cable TV scene in a bid to win goodwill and market share through an increasingly rare news-heavy format, says expert William Youmans.

Jeff Tollefson has an excellent new piece in Nature exploring the debate within the scientific community over Keystone XL. It makes two things pretty clear. As a matter of substance, there’s pretty much no one beyond Jim Hansen willing to come close to endorsing the “game over” claim. Yet there’s still a ton division among scientists – it’s over political tactics instead. Ken Caldeira captures the situation well: “I don’t believe that whether the pipeline is built or not will have any detectable climate effect,” he tells Nature. Nonetheless, here’s his bottom line: “The Obama administration needs to signal whether we are going to move toward zero-emission energy systems or whether we are going to move forward with last century’s energy system”. That sort of sentiment is political– and there’s nothing wrong with it – but, as the Nature article nicely shows, it’s distinct from any scientific debate. That’s why some of the political coverage of the article is so mind-bogglingly frustrating. Here’s Politico’s Morning Energy: “The journal Nature wades into the long-simmering debate between scientists who agree that Keystone XL is ‘game over’ for the planet and others who say focusing on that one pipeline is distracting from bigger climate change concerns.” Policymakers and the public are told, over and over, that the Keystone debate is between people who think the pipeline would be a climate nightmare and people who think it would not be. What the Nature article rightly establishes is that, among scientists, that is not a real debate. Yet when the Nature article is translated for a DC audience, some irresistible force somehow recasts it as “scientists disagree”, thereby losing a perfect opportunity to help people understand what scientists really know. This is of course not a phenomenon unique to the Keystone debate, but it sure is prominent when it comes to the pipeline. We hear, for example, that some economic experts believe that Keystone would substantially raise Midwest gasoline prices, while others disagree. In reality, empirical work (along with theory) makes pretty darn clear that whatever the impact of Keystone on regional oil price differences, that wouldn’t have a meaningful knock-on effect for gasoline itself. (One can legitimately debate the costs and benefits of maintaining current oil price differentials, but that’s distinct from talking about gasoline prices.) The only serious debate, once again, is over whether brandishing these claims is a useful political tactic for people who want to stop Keystone, and, more generally, for people who want deal with climate change. After all, if people really thought that Keystone would raise gasoline prices, they’d presumably conclude that it would curb gasoline consumption and therefore cut emissions too. It’s taken decades to (mostly) get past the he said-she said style of reporting on even the most basic climate science. That practice can’t have done anything but sow unwarranted confusion among policymakers and people at large, making serious climate policy less likely (even if it’s far from the only factor behind slow-moving climate policy). If we want to see serious and well-informed policymaking to deal with our climate problem, it’s going to be just as important to get past a similar culture of he said-she said reporting on climate policies in instances where there isn’t actually real scientific debate. This is something on which everyone who wants to see ambitious climate policy – and therefore wants just-the-facts reporting on the (limited) costs of many serious emissions-cutting policies rather than falsely balanced nonsense about claims like "carbon pricing might kill the economy" – should ultimately be able to agree.

Tesla has had an extraordinary year: strong sales, its first quarterly profit, and rave reviews for its Model S sedan. Investors, who have pumped the company’s stock up to strongly that Tesla’s market cap is now close to $12 billion, clearly expect more of the same to come. Tesla’s success ought to be celebrated. In an op-ed in the Wall Street Journal today, though, I caution against excessive excitement and warn that three of Tesla’s biggest strengths – its small size, outsider status, and successful strategy of selling to an upmarket niche – could be its biggest liabilities This says something not only about Tesla but about the future of the electric car more generally. Small and novel companies may be most likely to generate the big innovations necessary to push electrification ahead – but precisely those same companies may be less resilient and thus most likely to fatally falter. (The big auto companies, of course, have shown ample capacity for imploding too.) I don’t discuss this in the op-ed, but it strikes me that this raises questions for government efforts to support innovation in the electric vehicle world. People mostly celebrated when Tesla paid back its DOE loan early. But was that a good thing? To be certain, it reduced the immediate risk of financial loss to the taxpayer. But it’s tough to argue that it didn’t also increase the risk that Tesla will fail. The original point of the loan program wasn’t to spend as little money as possible – it was to cost-effectively raise the odds that electric cars would become competitive, helping the United States and the world cut oil consumption and emissions, which has its own long-term economic payoffs. If the proceeds from early payback were used to support other efforts to cut oil use, as might have been possible if a dedicated fund to support energy innovation were set up, that would be one thing. Given our current approach to funding energy innovation, though, policymakers ought to think about the downsides of policies that allow support to be withdrawn (potentially) too soon.

Iraqi oil production has boomed in recent years, and Chinese companies have been deeply involved in producing and buying the oil. That prompted headline writers to go with this for a New York Times story on Sunday: “China Is Reaping Biggest Benefits of Iraq Oil Boom”. There’s a lot of good stuff in the article, but the headline rests on a wrongheaded view of how oil trade is intertwined with countries’ economic fortunes. Indeed one could easily argue that the United States, not China, has been the biggest winner (aside from Iraq) from the surge in Iraqi supplies. Every major country is involved in international oil markets in two ways: through its companies’ production activities overseas and through its consumption of imported oil. Chinese companies have done well in Iraq in substantial part because they’ve been willing to invest in oil production projects without taking an equity stake (or some approximation of that) in the fields involved; Western majors, in contrast, tend to be averse to that sort of arrangement. It’s difficult to estimate how much money Chinese companies are making from that role, but you can put an upper bound on it. It’s rare to hear of companies charging Baghdad more than a couple dollars a barrel to develop Iraqi oil (and numbers are often lower, particularly once you subtract costs). Now assume that Chinese companies are producing half of Iraq’s oil, i.e. about 1.5 million barrels a day – likely a very large overestimate but still useful for setting an upper bound on Chinese profits. That would yield a profit of about a billion dollars a year. But China and the United States also benefit from Iraqi production as consumers. Let’s say Iraqi production is a million barrels a day higher than it would otherwise have been. And assume a fairly high long-run elasticity of oil demand of -0.25. Then added Iraqi production should have reduced world oil prices by around four dollars a barrel. Now let’s cut that by three-quarters to account for countervailing moves by other producers that may have balanced off the Iraqi increase, and say that Iraqi production has lowered world prices by just one dollar a barrel. This is a modest estimate of the possible Iraqi price impact. In 2010, China imported 4.8 million barrels of oil a day, while the United States imported 9.2 million. If oil prices were a dollar a barrel lower as a result of increased Iraqi production, the United States benefited to the tune of nearly $3.4 billion a year as a result. China, by contrast, benefited by only $1.8 billion. Juxtapose this with the estimates for production profits and it’s pretty easy to see how the United States could well have benefited even more than China from the boom in Iraqi oil production. (And that’s ignoring profits that U.S. firms, including service companies, are realizing in Iraq.) This carries a broader lesson: It’s critical to think separately about countries as oil producers and oil consumers. Muddling the two together typically leads to confusion.

Innovation will be critical to confronting the world’s energy problems, but the promise of energy innovation has too often been oversold. In an essay in the new issue of Issues in Science and Technology I explain why. In the wake of the Copenhagen debacle and the collapse of cap-and-trade, Americans have been searching for new ways to tackle climate change. One of the most popular ideas to emerge has been a call to focus on energy innovation. Proponents of this approach argue that focusing on making clean energy cheaper rather than on making dirty energy more expensive would transform the domestic and international politics (and perhaps economics) of climate and energy policy. I argue in my essay that a focus on innovation will need to involve serious policy in order to be effective, but that innovation policy itself entails a host of tricky political and economic challenges. At the domestic level, there is considerable opposition to the regulatory, spending, and tax tools that it would need to use; there are also serious hurdles to implementing innovation policy properly. At the international level a focus on innovation may ultimately replace a fight over dividing the burden of emissions reductions with a new fight over dividing the spoils of clean energy markets. And, after all that, innovation alone is exceedingly unlikely to solve our climate and energy problems. The article isn’t an argument against promoting energy innovation through markets and policy. It is, however, a caution against expecting too much and hence neglecting other essential elements of an effective approach. It also offers up some ideas for how to tailor innovation strategy so that it has a greater prospect of sustained acceptance and effectiveness. I encourage you to buy a copy of Issues – there are other interesting articles in the current edition. You can also download a pre-print version of the article here.

A piece in Slate by Ray Pierrehumbert arguing that tight oil abundance is a myth is making the rounds. The essay makes some fair warnings against irrational exuberance when it comes to hundred year supplies, claims of endless energy independence, and complacency on climate change as a result of abundant natural gas. But the piece does at least as much to confuse as illuminate. Fortunately, that provides a good opportunity to look at a few important misunderstandings that frequently arise in discussions about U.S. oil. The Slate essay starts with an attack on a paper published last year by Leonardo Maugeri that had a distinctly cornucopian bent. Many, myself included, have argued that that paper was way over the top. But Pierrehumbert makes a big mistake when he claims that all of the other excitement – from the EIA, IEA, and others – have flowed from bandwagoning on the Maugeri report. Those of us who spend decent parts of our professional lives involved in this stuff know quite well that this isn’t what happened. For starters, the first prominent and enthusiastic projections weren’t from Maugeri; they were from Ed Morse at Citigroup. The EIA and IEA reports used bottom-up analyses that were independent of the Maugeri work. If people want to pick apart these studies, that’s fine, but cutting down one largely unrelated outlier won’t do the trick. The next big problem with the Slate essay – again one that many others make too – is that it appears to assume that tight oil will need to deliver all U.S. oil production. That allows it to claim things like this: “At the high end of the estimates, predicted production from Bakken and Eagle Ford together amounts to perhaps a two-year oil supply for the United States at 2011 consumption rates.... Even if it were to prove possible to achieve production rates comparable to those of Saudi Arabia, that would only mean that we would deplete the resource faster and bring on an oil crash sooner.” On top of this, while Pierrehumbert is right that some people are ignoring the fact that current tight oil prospects will peak and then decline, he errs in presenting this as a critique of mainstream estimates, like those by the IEA and EIA, despite the fact that those projections show precisely that same decline. The essay then launches in an oft-heard discussion about high decline rates and large capital costs. Geologists’ focus on this as an argument for why production will be low continues to baffle me. Do people think that the models used by government agencies and industry forecasters don’t incorporate this? Of course they do. They just find that, even when they include this, economic incentives still push things toward higher production, at least through the end of the decade. There is no law of nature that says it’s impossible to produce a lot of oil from a field whose wells are expensive and decline quickly. The Slate essay also manages to bring in one of my favorite bugaboos: energy return on investment (EROI). It is taking ever more energy, Pierrehumbert points out, to produce a barrel of oil. This is supposed to herald the disastrous coming of a day when we need to put more energy in than we get out. But not all energy is the same, and it can make very good sense to put in large amounts of energy in a relatively low-value form (e.g. gas) to get a smaller amount of high-value energy (e.g. oil) out. Once again, geology and physics are important, but economics need to be factored in. One last point: the Slate essay repeats the misleading juxtaposition of the amount oil in a massive resource (this time the Green River shale formation) with plausible emissions limits in a carbon-constrained world, in order to warn about the climate consequences of extracting the new fuels. But this suffers from the same problem that the “game over” claims for the tar sands have: it pays no attention to time scales. There is no plausible scenario in which we’ll spend the next thousand years with a totally decarbonized economy – except that we’ll burn everything in Colorado or Alberta or some other discrete carbon pool. The causal arrow runs the other way: these big pools of oil will be burned if we choose to cook ourselves; they will mostly remain in the ground if we don’t. It’s how much fossil fuels we use, not where they come from, that matters most to the planet.