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Chu: “A price on carbon is essential”

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"Chu: “A price on carbon is essential”"

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Do you think that having a price on carbon is crucial?

I do. I absolutely believe a price on carbon is essential — that will send a very important long-term signal. [But] if it’s five years from now, I think it will be truly tragic, because other countries, notably China, are moving ahead so aggressively. They see this as their economic opportunity to lead in the next industrial revolution.

That’s from an interview of Energy Secretary Steven Chu, by Fareed Zakaria of Newsweek and WashPost.  Here’s more Q&A with the Nobel Prize-winning physicist:

Q: How would you describe Obama’s energy policy in a few sentences?

A: We look at all the factors and we say, How can we get to the lowest possible level of carbon as quickly as possible and not only at the lowest cost, but with the greatest possible economic opportunity for the U.S.?

When people look at the fiscal stimulus, some say, “If only they’d taken this opportunity to make major investments in energy, science and infrastructure.” Do you believe you are making those investments?

I would say that we are making those investments, though in some areas the effort is just to get something started. The Department of Energy is responsible for the entire energy innovation chain — from basic science research to applied research, to even beginning to help deploy and scale [new technologies]. You fund for a very short period of time — two years, three years maximum — in hopes of opening up something big. So we are saying, “Swing for the fences.” Now if you swing for the fences, you may strike out more. But we want a few home runs.

Is the “smart grid” the Interstate Highway System of the 21st century?

The analogy is very apt. It will take several decades to be able to get this to [work], and the cost will be very large. Before I took this job I [participated in] a National Academy study called “America’s Energy Future.” The total cost, public and private, that I heard was half a trillion dollars or more.

We still overwhelmingly use fossil fuels — renewables, all told, probably add up to 5 percent [of U.S. energy consumption]. What’s a realistic 10-year goal?

We’re at about 4 percent now. President Obama made a target to double that by 2012 and we are on target. I expect that to continue. In 10 years’ time we hope to have carbon capture and sequestration technologies starting to be deployed. Hopefully we’ll have restarted the nuclear industry and we’ll be building several nuclear reactors.

What is the blue-sky technology that you are most hopeful about?

I see the cost of [solar] photovoltaics going down and down. Right now it’s about $4 per watt for full installation. In 10 years’ time, it will certainly be less than $2. If it’s $1 or $1.25 then everyone will put it up without subsidy. What else do I see? A new generation of biofuels that are direct substitutes for gasoline — so, better than ethanol — using agricultural waste: weed straw, rice straw, corn cobs, wood surplus.

If you look at the top 30 companies in battery, wind and solar technology, there are only four American firms on the list. Do you think that will change? Are we going to become the leader in clean energy?

Well, I certainly hope so. We still have a lot of really high-end, innovative stuff. But you also need to send consistent signals to allow that to be deployed at scale. That’s a policy issue — technology policies, R&D policies, incentives for high-value manufacturing. We are very determined. Can we lead the world in the lowest cost? No. But we can lead the world in high-quality stuff that will create quality jobs for Americans.
When you look at the cap-and-trade bill that is floating around Congress, is it strong enough to do what you think needs to be done?

This is my belief: Get it going. The Clean Air Act in the early ’90s started slowly. But it got [things] going. The important thing was that the cost ended up being far lower than anybody projected, including the [Environmental Protection Agency], who you might think have a vested interest in trying to lowball the cost. It was four times lower than even the EPA estimate. Once you get it going and start making progress, very clever people start to dream up better solutions. So rather than wait around for a perfect bill that that might be delayed for four or five years, or forever, get it going.

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16 Responses to Chu: “A price on carbon is essential”

  1. Ken Johnson says:

    “… a price on carbon is essential … because other countries, notably China, are moving ahead so aggressively.”

    Does China have a price on carbon?

    “How can we get to the lowest possible level of carbon as quickly as possible … at the lowest cost …”

    Which will it be: lowest possible emissions, or lowest possible cost? There is a trade-off. Can anyone clearly articulate the objective of regulatory climate policy?

    “The Clean Air Act … the cost ended up being far lower than anybody projected … four times lower than even the EPA estimate.”

    Maybe more like TEN times lower, at current trading prices: $36/ton-SO2, while the body count is far higher than anybody projected.

  2. paulm says:

    Its refreshing to see that he absolutely gets it. I hope we can get there within a democratic frame work.

  3. Leif says:

    Ken, #1: “Does China have a price on carbon?” They have cash from all the stuff sold to the west and money that they loaned us to buy fuel from the Middle East. Plus we pay a large interest on that credit bill as well. You can blow kisses to the GOP and their efforts to preserve the status quo.

  4. mike roddy says:

    I’m interested in lighter, cheaper heliostats for solar thermal arrays in the desert. There are promising ideas that are coming online- such as eSolar’s- and parity appears closer to me than with PV thin film. Better microprocessors and stronger alloys can go a long way here, and solar thermal (unlike PV) has storage potential. There is potential in better structural support geometries, too.

    Did Dr. Chu mention PV and not solar thermal for any particular reason, or does he still see a big future for grid scale heliostat arrays? If so, does he see ways for Federal research organizations such as Lawrence or Oak Ridge to contribute basic research?

  5. James Newberry says:

    Great idea to belatedly price carbon waste through a polluter pays principle. If we are not to be myopic (thinking inside the carbon box), perhaps we should price radioactive waste, in the marketplace, also. Then all generators of nuclear waste should pay for that cost as well, instead of current state and federal policy which transfers this cost of business to taxpayers. Besides, these heat sources dump most of their heat into ocean waters or rivers which contribute directly to ocean heating (with direct and indirect marine animal mortality) which is exactly what we don’t want in the era of global heating.

    Today, northeastern states record the largest rainfall totals for the month of March in recorded history while world record climate events overwhelm localities across the globe.

  6. Bob Wallace says:

    China not only has a lot of money, they also have a command economy.

    If the Chinese leaders decide to build more wind farms, install more solar panels, whatever all they have to do is say “Make it so”.

    We, in the West, play a much more difficult game.

    The price of renewables is rapidly coming down. If we were to charge the actual cost (including health costs, military costs, etc.) of burning fossil fuels we could keep up with China. Just boost the cost of coal generated electricity a few cents per kWh and watch renewable build speeds accelerate.

  7. Dan says:

    Secretary Chu’s points about the intersection of technology and policy are spot on. There is no doubt that the US has the brains to solve this. What’s needed are consistent policies that drive innovation and, most importantly, deployment of clean energy technologies.

    Also, the point about creating quality technology, rather than just the lowest cost, is quite apt.

  8. Ken Johnson says:

    Bob Wallace: Why does China, with its command economy, employ pricing incentives like feed-in tariffs? Why don’t they just set a hard carbon cap and say “Make it so”?

    Has the lack of a command economy been a significant impediment to Germany?

  9. Bob Wallace says:

    Let me suggest that political conditions in Germany have been such to allow their government to offer significant subsidies which have rapidly built out their renewable industry.

    And China, being a command economy, most likely still likes to keep people happy if possible. Using carrots rather than sticks makes it less likely you’ll have to deal with a rebellion. And if you are an “absolute” ruler and have a surplus cash you don’t have to worry a lot about giving the opposition party something to use against you in the next election cycle.

    Here, in the US, with a significant portion of the population belonging to the Party of NO!, it might not be possible to crank up subsidies very much more and increasing the deficit. Putting a price on carbon might be a little more doable and would bring in some income as opposed to raising spending….

  10. Wit's End says:

    I agree with Chu, we should “get it going.”

    However, if we are really talking about a WWII effort, we should institute rationing. All sorts of things were rationed during WWII, and the population accepted it as necessary for survival.

    Put a cap on how much each individual can drive, fly, run unnecessary machines like lawn mowers, and heat/cool their home and swimming pool. Make it fair. Why should rich people be able to spew more carcinogenic toxins into the air that my kids have to breathe than poor people?

  11. Ken Johnson says:

    Bob Wallace:

    “Using carrots rather than sticks makes it less likely you’ll have to deal with a rebellion.” Precisely. It would also make political rebellion less likely in the U.S.

    Germany’s feed-in tariff program has motivated an increase in renewable electricity to 15% in 2008, and is targeted for 30% by 2020. The program is supported by utility rate premiums, which add about 3 euros to a typical household’s monthly electricity bill. But that cost is largely offset by multiple economic benefits. For example, in 2006 the rate premium was offset by reduction in electricity prices resulting from renewable electricity competition in the spot market. (See this report, pate 37.)

    Renewable energy could alternatively by financed from carbon fees. But what is important about Germany’s and China’s approach is that they are not trying to stimulate the renewables market by trying to impose high costs on carbon throughout the economy. They are focused more on price support mechanisms to make renewables economical and to expedite renewables’ evolution toward grid parity. The price incentive of even a very modest carbon fee could be magnified tenfold if the revenue is applied primarily to subsidize renewables. The resulting emission reductions could greatly exceed expectations if the reductions are not nullified by cap-and-trade.

  12. Bob Wallace says:

    Wit’s – In WWII we had an “in our face” enemy which was recognized by all. It’s much easier to get the public behind drastic measures when the tiger is crouched in front of you, ready to spring.

    This time the danger is largely down the road, at least in the mind of most. People are very unlikely to tolerate government imposed rationing or any other drastic change in lifestyle.

    Put a modest price on carbon, not so much that it noticeably drives up the cost of living and then use that income to increase subsidies for renewables. Tip the scale a little more in favor of low CO2 energy and let “greed”, i.e., market forces do the hard lifting.

  13. Wit's End says:

    Bob Wallace, I seriously doubt we will have to wait for long for the tiger to be in our faces. Look at New England!

    I would settle for crumbs as a starting point though. Just like health care, we do have to begin somewhere. Once the principle is established, it can be built upon.

    The GWEN folks are sponsoring a demonstration in Washington on Earth Day (http://www.gwenet.org/). Since that is the time Joe’s latest post says climate change legislation will be introduced, it would be purely felicitous were loyal CP readers to join the effort or, if they’re not able to attend in person, go to the GWEN site and sign the petition.

    I plan to take the day off and train to DC. Hope to see other CP readers there!

  14. Lewis Cleverdon says:

    While parts of Chu’s message seem pretty opaque, the core message that the US might lose the international lead in non-fossil energies seems clear.
    But in fact that is not the case; the lead, as measured by investment, is already lost.

    The recent report by Pew Charitable Trust
    http://www.pewglobalwarming.org/cleanenergyeconomy
    confirms this with some stark 2009 investment comparisons :
    China spent about 90% more on the sector than the US, while the spending as a percentage of GDP put the US in eleventh place among the G20 nations.

    Politicians’ failure to support the critical measure for encouraging clean energy investments, namely an escalating price on CO2e output-permits due to a declining cap on national output, makes them look increasingly vulnerable to the charge of a lack of patriotic backing of the US economy. Might this critique be applied more widely ?

    The usual plaint from the pro-carbon-tax ‘Judean Peoples’ Front’ that Cap [Allocate] & Trade would nullify reductions made by un-permitted emitters, as usual misses critical points.
    1/. Emissions budget not used in a given year could readily be stripped from subsequent years’ budgets, and,
    2/. Any policy-argument that not only worsens the political practicability of negotiating climate legislation,
    but which is also indistinguishable from the delayers’ spoiling-tactics for splitting the supporters of climate legislation,
    on principle doesn’t warrant the benefit of the doubt.

    Regards,

    Lewis

  15. I am surprised and disappointed by many of the positive comments above.

    Secretary Chu views are very disappointing to me. First, almost nothing on energy efficiency where we can reduce waste by a major amount. About 60% of US energy is now non productive. We can easily cut half of this waste!

    [JR: I recently published a whole essay on efficiency by Chu!]

    Second, too optimistic about PV. The price did not go down noticeably for several years. Current silicon technology, the main stay for forty years, is too complex and we need completely new technology, not high purity silicon based. His own financial support for it is a big national waste.
    His trust in CCS is misleading, there is nothing promising in it, while there re considerable negatives in that. To allow 50% of our national power system (coal) on this dream is irresponsible. Coal should be replaced, even high efficiency natural gas, NGCC, would be superior to allowing coal to continue.

    Nothing of value on Solar Thermal, a very promising technology already on line.

    As much as I support nuclear power, he put too much emphasis on that instead of wind energy and solar thermal and energy efficiency.

    I have expected much more from Dr. Chu, but it may be that in this administration we are still unable to break with the past. Think about how much they are supporting tar-oil, the dirtiest oil there is, extremely high in GHG emission.

    All in all, it is a very poor national plan, no drive to reduce waste, no courage in it. Same standard message.

    Compare to his past messages, this is weak, very weak.

    And note that those who talk above about spending more money are not talking about how much GHG we will be cutting by alternative means. It is not the money; it is the reduction of GHG that we should focus on. Germany wasted much of its money by following emotions, not results. Wind is now 7+ %, good! But PV, that took most of the support, is less than a half percent. Is that an example we should follow?

    [JR: Uhh, the media picks the parts of the interview to run.]

  16. JR, since this is the case, and I am sure you are right, then Dr. Chu should put his own views concurrently on your own site to correct errors and misleading emphasis too.
    There are ways to have direct access to Dr. Chu.

    [JR: I don't think the secretary of energy concerns himself with this sort of thing. That's what blogs are for. But I don't think they misquoted him, but misplaced emphasis is always the danger of interview.]