Marshall Kaplan

About Marshall Kaplan

Marshall Kaplan was former Dean of the Graduate School of Public Affairs at University of Colorado and directed the Wirth Chair in Energy, Climate Change and Community Development related issues and policies.  Before that, he served in the Carter, and Kennedy Administrations and was the principal in the policy advisory firm of Marshall Kaplan, Gans and Kahn. Mr. Kaplan has advised numerous federal, state, and local governments as well as non-profit groups and businesses on diverse public policy alternatives. He also facilitated consensus of international leaders at Aspen Global Forums focused on issues of economic development, privatization of energy, and financing infrastructure. 

Mr. Kaplan came to Orange County in Feb 2004 to lead the Merage Foundations, and recently established the non-profit Pathways to Opportunities with Merage Foundation support. He has written numerous articles as well as several books on urban, economic and social welfare policy. A winner of the ADL Proclaim Liberty Award in Denver, he is a graduate of both MIT and Boston University.

What does Billie Holiday have to do with natural gas?

rudy_vallee-heigh-ho_everybody._this_is_rudy_valleeHow many of you remember Billie Holiday, Tommy and Jimmy Dorsey, early Bing Crosby and Rudy Vallee? No, this is not a test for Medicare. Your answers will not be screened by the IRS nor will your thoughts be recorded by voice- or thought-recognition machines. If you do remember these singers and musicians, you must also remember natural gas vehicles which were sold and (mostly happily) used in the 1930s, contrary to the impression given by some in the media that using natural gas as a power source for vehicles is a recent innovation and phenomenon.

What happened to natural gas as a fuel? Cheap oil (and the power of oil companies) overpowered it during World War II and became the primary consumer fuel choice. Decades of repetitive oil shortages combined with concern over U.S. oil dependency and growing environmental sensitivities to increased pollution and GHG emissions continue to make natural gas table conversation among advocates for alternative fuels. Regrettably, Detroit has not really joined the dialogue in a serious sustained way — a fact probably related to fear of consumer interest and related natural gas vehicle costs as well as profitability. Detroit’s historic alliance with oil companies also played a role in the U.S. hesitance to support open fuel markets.

Are we on the cusp, or as some call it the “prelude” to the cusp, of change? Recently, The Wall Street Journal announced that America’s Natural Gas Alliance (ANGA), stimulated by the increased production of natural gas and predictions of a 60-100 year supply of natural gas, will publically preview several natural gas-powered vehicles in Southern California. According to the Journal, ANGA will demonstrate about a half dozen natural gas-powered vehicles to demonstrate use of CNG in retrofitted popular vehicles. As relevant, given ANGA’s episodic marketing to date, the preview will be followed by an extensive educational campaign to generate consumer interest.

Almost simultaneous with the Journal’s article, Bloomberg BusinessWeek published an almost gushing piece about how shale gas juxtaposed with rising gasoline prices is changing the perceptions of investors and producers concerning the use of natural gas as a fuel for vehicles. In sum, according to the publication, there is new enthusiasm that natural gas-powered autos and trucks are the wave of the future and the future is starting now.

Not so fast! Natural gas has many advantages as a fuel. It is safer, burns cleaner and emits fewer pollutants, including GHG emissions. It records cheaper maintenance costs, is abundant and is less expensive than gasoline. But the need for storage capacity for natural gas cars to permit them to achieve 200–250 miles on a tank of CNG limits storage space compared to similar gasoline fueled vehicles with higher mileage totals per tank. While the numbers differ from news article to article and while there is consensus that they are increasing, there seems to be only about 1,500 natural gas fueling stations in the country, some of which only service fleets. Consumer fear of running out of natural gas, while driving long distances, has placed a premium on bi-fuel vehicles — vehicles that can run on natural gas and gasoline but adding additional costs to the purchase price. Natural gas cars cost about $8,000–$10,000 more than similar conventional cars and conversion packages now on the market range from $1,000 (small tank) to several thousand dollars. The big hang-ups concerning conversion are federal regulations concerning changes in fuel composition and EPA certification.

The nation has some way to go before natural gas as a fuel becomes really popular and natural gas cars are able to significantly penetrate the auto market. But where there is light, there is hope! Yes, natural gas is a fossil fuel and not perfect with respect to emissions. But saying this, it is important to note that natural gas is much better for the environment and emits less GHG as well as other pollutants than gasoline. It is also cheaper. As part of a transitional strategy taking us to renewables, conversion of older vehicles to natural gas and the increased ability to purchase flex-fuel vehicles using natural gas are in the public interest.

I have no relationship with ANGA, but if I did or was asked for advice, (without charging), I would suggest it support the coalition of 22 states fostered by Gov. Hickenlooper (D) of Colorado and Gov. Fallin (R) of Oklahoma. The group has agreed to replace outmoded conventional state vehicles with natural gas vehicles, if Detroit agrees to find ways to lower vehicle prices. The initiative, in which Detroit carmakers recently have concurred, will generate technology and marketing innovations that will ultimately lower the cost of natural gas vehicles to consumers. I would also (nicely) suggest to ANGA that they pressure Detroit and perhaps the government to speed up investment research to lower natural gas car costs, both in terms of new vehicles and conversion packages for existing cars. Finally, if I could, I would ask ANGA to work with environmental, business, foundation, and government leaders to develop consensus and support for transitional fuel policies and needed regulatory changes.

If I were a betting person, I would bet that natural gas could play as important or a more important role, in at least the near future, as a source or feedstock for alternative fuels than as a direct competitive marketplace replacement fuel. For example, methanol, a derivative of natural gas, does not require major additional costs either for new or converted existing cars to use efficiently, and the price now is far less expensive.

Photo credit: www.musicstack.com

A tale of two mistaken initiatives — Tesla, choice, GHG, oil and Dom Perignon

shutterstock_3786019I was amused and contemplative about two happenings affecting how we and the world make decisions concerning the use of energy and transportation fuel. Neither of them seems to have reached the national media. Both of them suggest how difficult it is to make serious decisions about the future of the planet and individual as well as community wellbeing.

North Carolina, the state that gave us the missing governor, is now trying to preclude the direct online sale of electric cars, including Tesla cars. Why this intrusion in the marketplace? Apparently, unless the story is a late April Fool’s Day joke, local car dealers, who are politically very strong in the state, oppose Tesla’s effort to sell cars on the Internet or directly. With lots of energy, they have secured legislative support for a bill to make it illegal for Tesla to go it alone without dealers. While there are other states with such laws or which are being pressured now by auto dealers to enact such laws, most states have made accommodation to the 20th and 21st century technological breakthroughs and online sales. I am not a lawyer, but I suspect North Carolina’s efforts will be challenged concerning restraint of trade.

Selling its models in dealer showrooms doesn’t fit the Tesla economic model. Of all the electric car startups, Tesla seems to be moving fastest toward financial viability. I’m not sure that the statement put out by Tesla’s vice president that compared a Tesla in a showroom of subcompacts and SUVs to selling Dom Perignon in the local mall’s food court reflects great political wisdom, particularly given the company’s support from the federal government. Neither did the representative of North Carolina auto dealers somewhat sarcastic comment, “You tell me they’re [Tesla’s] gonna support the little leagues and the YMCA?” Yes, they are! It is likely that the folks, who, at present, want to buy Teslas because they can afford it, include many people who give to charity, including the YMCA and the little league, because they have kids who play or played their first baseball in the little league.

Tesla’s success, likely, will generate lower-cost electric cars from its own factories and other much larger conventional car makers. Because Detroit will be operating on more traditional financial models, many franchises in North Carolina will benefit, as will large numbers of consumers who will gain vehicular and fuel choices. As important, the nation will benefit because of lower GHG emissions.

To hobble Tesla with the costs of a dealer system would certainly slow down its ability to reach sustainable profit levels and market penetration. I understand that many dealers fear the loss of sales, income and jobs. Their problems could be lessened if they were able to secure a better dollars-and-cents agreement with Detroit. They also might think about cutting a reasonable deal with Tesla for service and maintenance. Clearly, the value of competition and the nation’s ability to move to alternative fuels would be frustrated by efforts to protect special interest groups.

Canada is a wonderful polyglot of a country. Many of its French citizens in Quebec Province still want to separate from the British-dominated nation. Its natural resource minister has threatened to take the European Union to the WTO over its plans to define oil from tar sands as “highly polluting.” Although it should be, the argument among grown men and women isn’t about data and analysis. Tar sands are highly polluting, over 10 to near 25% more emissions than oil produced in Europe. It’s about perceptions of economic impact.

The Canadians have not yet called out the Royal Mounties and the European Union has not yet thought about Dom Perignon to soften the heated tar sands dialogue. Maybe to resolve the issue in good spirit, we should bring both to Tesla’s front office for extra bottles.

Obviously, the Canadians are worried that if their oil sands are tarred with the label of “highly polluting,” they will lose possible sales of oil and market share, particularly in countries that have strong environmental movements and concerns. Some worry that the label of highly polluting will add to the conflict in the U.S. over the Keystone XL pipeline.

The tension over the attribution of the phrase “highly polluting” is important to think and talk about on four grounds. One tests government’s truthfulness and the degree to which governments are willing to tell the truth or will waver when short-term economic objectives appear to intervene. The second tests the nations of the world, and regional groups, concerning their willingness to legitimately set standards and stick with them when contrary to the views of individual governments, or pressure from the private sector. The third provides insight into the difficulties in making decisions, ostensibly, involving significant competing public interests (e.g., Canada’s economic and environmental interests and European’s interest in lowering GHG emissions) when data and analysis rest on some uncertainty. The fourth and final one analyzes the ability of nations and regions to consider alternative transitional fuels when faced with environmental, social welfare, security and economic issues concerning oil.

MIT strikes again — the meaning of Tesla’s success and rich people

shutterstock_126145124I am proud of my alma mater and read the magazine linked to it, the MIT Technology Review. Its coverage of alternative fuel issues is generally solid. Its more scientific and engineering-related articles, while at times requiring me to read them several times, are often insightful. (I was the only student in city planning who, in a class project, planned a bridge that went under instead of over water. Good for population control but little else! I decided then and there to not become an architect or design planner. The world has survived!)

The current issue of the MIT Technology Review has a provocative article titled “Why It’s Okay that Tesla Makes Cars for Rich People.” The author, Kevin Bullis, suggests, no, actually he unequivocally states, that “there are many valid reasons for objecting to the DOE’s funding of Tesla — or for any startup for that matter — [but] the fact that the car it makes is expensive isn’t one of them.” He has a point.

No doubt, as a result of Tesla’s innovative approach to cars like the Model S, the automaker will generate lessons learned for all other car makers concerning battery development. While the existing Model S is pricey ($65,000 to well over $100,000), I am convinced that experience and further development will allow electric vehicles, including Teslas, to go longer distances on one charge with less costly, longer lasting batteries and therefore less costly vehicles. Consumer Reports recently gave the Model S rave reviews concerning its design, its efficiency, its drivability and its great range. Indeed, Tesla’s Model S, now, can go approximately 265 miles on one charge.

So hats off to Tesla! While they still have financial issues to resolve, it looks like they have turned the corner, or at least one corner.

Tesla confirms my belief in strategic federal help to meet public interest objectives and the need for public-private partnerships that have emerged concerning renewable energy. The support of Tesla is probably justified, given its likely ability to generate future models with cheaper, better batteries for vehicles. This, in turn, will ultimately lead to competitive electric cars able to secure larger market penetration among middle and lower-income Americans. It’s important that, as sales increase over time, all Americans will see benefits in terms of a cleaner environment and reduced GHG emissions.

However, I do worry about the negative public and, among some, political response to equity issues regarding the federal support to Tesla. The “feds” have yet to come up with an explicit, powerful, convincing rationale for supporting Tesla as well as other renewable and alternative transitional fuels. They can! It clearly should be based on the long-term interests of the nation and the short-term benefits to its diverse population, particularly low, moderate and middle-income households. Remember, in this context, that Tesla received a loan, not a grant. It recently promised to pay it back early. Even though Tesla is a startup, the loan was about a tenth of the loan provided to Ford. I wish that the mega-billion dollars in tax subsidies granted every year to the oil companies were loans, premised on need and public interest, and required a payback. According to the Congressional Research Service and the Heritage Foundation on, the funds were not needed for production. The oil subsidies, however, are lost forever.

Clearly, the federal government’s relationship with Tesla would be more acceptable to the public if it were defined in the context of a set of overall alternative energy as well as transitional and renewable fuel objectives that ultimately included benefits to non-affluent folks. But up to now, the justification has suffered from fear of the critics more than describing the real opportunities for America and its people.

Budget decisions, ostensibly, mirror who we are as a people. But, the budgeting process in the U.S. is a bizarre one, often informed more by lobbyists and special interests than by national objectives, priorities and even a hint of risk analysis. The process has taken one of my favorite (non-MIT) political scientist theories to the extreme. Dr. Charles Lindblom provided intellectual support for the “science of muddling through” to resolve complicated policy issues, in light of data limitations as well as economic and political problems. Unfortunately, Congress has often forgotten the “science” and just muddles through the development of federal budgets. The most flagrant violation is sequestration, a process that diminishes the very reason we elect our favorite Congressional folks — to think, reach consensus and make efficient and equitable decisions.

The public has a right to be skeptical about how we allocate scarce resources. What we have now is a budget system that appears to the public to grant privilege to the already privileged. We have socialized the rich and privatized the less affluent. Need proof? Recall the “too-big-to-fail” financial institutions and the recent bailouts as well as the varied federal housing insurance programs which protect the lenders and foreclose on the borrowers. Combined with justifiable concern for the deficit, the flawed behavior of some in finance, the extensive unnecessary subsidies to the oil industry, the reduction of some valuable discretionary programs to aid low- and moderate-income people, and the well-publicized failures of some of the early loans and grants aimed at stimulating invention in the energy sector, public and political support for future federal involvement to wean the nation from oil remains uncertain. This support could be bolstered if alternative fuel, environmental, business and nonprofit groups would find common ground and develop a logical strategy supporting replacement or alternative fuels and renewables as two parts of the same policy coin, separated only by the transition from the former to the latter when they are able to compete in an open fuel market.

Strategic planning — moving the fuel markets from irrelevance to relevance

harlequinI wrote a book in the early ‘70s called the “Irrelevance of Planning in the ‘60s.” It was published by The MIT Press. The reviews were good. It sold enough copies to permit me to eat out at a middling restaurant (as long as I didn’t order at the high end of the menu). I had planned to republish with a Harlequin cover — you know, with the tall, dark and handsome man holding a beautiful woman with half their clothes seemingly ready to come off. MIT didn’t quite think it fit. Little did the MIT folks know what was coming in the book publishing business.

I mention the book only to reference the fact that I am still debating in my own mind, and with friends, the wisdom of long-range planning. I accept the fact that our political system relishes short-term ribbon cutting and often understandably prefers short-term decisions to longer-term strategic plans when faced with powerful interest group advocacy. Conversely, I remain concerned that long-term planning, at times, seems to mute or blur the priority interests of the disenfranchised.

But having recently focused much time on energy issues, particularly related to the transportation fuel sector, I am convinced that a well-defined, long-term transparent strategic planning process might make sense with respect to policy decisions concerning fuel needs and use. Why?

There is something like a Tower of Babel across the country concerning the relationship between climate change, security, the economy and the nation’s present reliance on oil and its derivative gasoline for vehicular fuel. In his State of the Union address, the president indicated we must wean ourselves from oil, a laudable goal, given the still-high price of oil and gasoline and uncertainty as to the likely direction of the prices of both in the future. The president also spoke clearly of oil and gasoline’s environmental and GHG emission defects when compared to alternative fuels. His comments, in this respect, are concurred in by most in the scientific community.

However, there is no consensus in Congress or in the nation about getting America off of oil and opening up the constipated, constrained gasoline market to alternative fuels. While quasi-monopolistic conditions reflected in the transportation fuel market are a drag on the economy and the effort to clean up air, ground and water pollution, the demand to do so has not yet stimulated large-scale debate in Washington nor public passion — the kind of passion associated with dialogue concerning the Vietnam War, or that allowed civil rights legislation to move through the Congress in the ‘60s.

Why? No crisis is apparent to most of the American public. Arguments or debate occur at the present time, primarily, in policy and academic journals or among interest groups, sometimes in the media. There is more shouting than dialogue. At this juncture, the debate is, at times, over numbers and differing assumptions, and at other times, motivated by ideology, right and left. Arguing causalities concerning the impact of alternative fuels and possible oil surpluses on fuel prices, the environment, America’s security and the economy tests the mettle of Washington leaders and is not the stuff that family dinners are made of. Media hype concerning the federal government’s handful of flawed efforts to develop more efficient batteries for cars or solar energy to power utilities and homes is often mistakenly, and sometimes purposely, linked by politicians and interest groups to issues related to alternative fuels.

Recent headlines about the Saudization of America, based on oil shale development, worry advocates of alternative fuels — both fossil and renewables. Some feel that pressure from the auto industry and oil companies, because of a projected oil surplus, will frustrate the logic and politics of opening up the gasoline market to competition.

Interestingly, some environmental groups and leaders have expressed opposition to the use of alternative fuels. Despite shaky assumptions, they fear that continued reliance on fossil fuels, like natural gas, will postpone the advent of renewable fuels, even if alternative fuels reflect significant public interest objectives. There is hope! Both advocates of alternative fuels and some key environmental organizations (and their leaders) are increasingly working together on strategies to lessen oil’s rigged market dominance and allow consumers fuel choices at the pump. The ties that bind them relate to an increasing awareness that alternative “replacement” fuels would be better for the environment and would reduce GHG emissions. They agree on the concept of open fuel markets and flex-fuel cars. Some time, hopefully sooner rather than later, when renewables are able to scale up to meet the needs of low, moderate and middle income consumers concerning costs, convenience and distance, they will be very competitive.

Somehow, the nation needs to get its act together with respect to alternative fuels. Maybe it’s time to establish a transparent strategic planning process aimed at increasing competition in the fuel market and providing the nation and consumers a break.

Contrary to planning in the ‘60s, if I had my way, it would include balanced representation from all interested and relevant parties and, through the use of technology, the public. Again contrary to the ‘60s, it would place long-term goals in the context of short-term doable strategies and grant environmental, economic, fiscal, security and social welfare issues equal weight at the table. Options considered would be based on the preponderance of solid data and analysis, recognizing that perfectibility, not perfection, with respect to both are required, if the public interest is to be achieved in our lifetimes. It would acknowledge that precise cause and effect relationships are often hard to determine from a policy perspective. Governed by cost and time constraints, as well as good will, the process can access sufficient data and analysis to evaluate and ultimately present supportable strategies and initiatives to the president, Congress and the public.

Who should run this strategic planning process? No current polls show great confidence in public or, indeed, most private institutions. Maybe a bipartisan commission appointed by the White House and, perhaps, Congress — a “bipartisan coalition of the willing” — could be formed to lead the proposed strategic planning process. Who could be against finding efficient, environmentally and economically sound, safe and equitable ways to open up the transportation market to competition? Leaders who do risk sounding like hypocrites or worse, in light of what I bet are their frequent luncheon and dinner speeches supporting capitalism, free markets, and the American way of life.

Garbage in, garbage out

shutterstock_136349735Free traders of the world unite; you have nothing to lose but the garbage that binds you. Oslo, Norway has pointed the way to a sustained profitable garbage trade. The city converts household trash, industrial waste (even toxic and dangerous waste) to energy. According to The New York Times, half the city and most of its schools are heated by burning garbage.

Yet, there is sadness in Oslo land. Its efforts to substitute renewables for fossil fuel may run out of gas (excuse the pun). Oslo is running out of garbage and is thinking about importing it from the U.S. and Asia. Getting it from Europe, at least on a big scale, is out of the question, given that Europe is less profligate than the U.S. in production of refuse of all kinds and shapes. Europe also has underutilized capacity to convert garbage to energy. Besides, “old” Europe doesn’t want to risk importing waste from other less cultural and less profound nations — after all, clean energy means good old European energy, none of that energy from the multitudes in other nations who eschew foie gras and cannot speak French or other relevant ancient languages. Clearly, old Europe doesn’t want to be garbage dependent on any country, particularly the U.S. It goes beyond security to pride. Garbage nationalists argue that we can and will be as garbage productive as America!

Now it is my understanding that the U.S. government, business and environmental leadership is uncertain what to do about exporting our surplus garbage. Congressional hearings will be held soon on the “geopolitical effect” of garbage exports. There is a push from the new “Protect Our Garbage” political party. They fear, oh do they fear, about what we might export next if we start exporting garbage — our high technology, our way of life, our values? They also worry about the price of garbage, if we export it. Norwegians since the Vikings have always been good at bargaining. As HBO has indicated, those with Viking DNA are crisis-oriented and are always looking for conquests.

If we set a low price, it is likely to become the world price and garbage collectors will lose their incentives to secure product. Unless we build a home-grown, waste-to-gas industry, the market for garbage in the U.S. will not grow significantly. While we might save some environmentally sensitive land from being used for storage, waste-to-energy initiatives could well find it tough to survive as costs of garbage collection, storage and transportation exceed the global price. If the price we get is high, there will be landfills everywhere and Easter egg hunts will be replicated every weekend as garbage hunts. Our children will become orphans, while their moms and dads are out looking for garbage. They will be watching reruns of soaps like “Our Sad Life,” “Opportunity Knocks, But Not Frequently” and “Searching for Love and the American Dream.” Maybe they will turn to rock music and worse. Remember the warning of the Music Man in River City? This could be the precursor of intense problems for the American family, already suffering from a weak economy, budget deficits and high gas prices. Could it mean the breakup of the American family!?

A second group has become visible in opposition to the export of garbage. It has joined Weight Watchers (a growing powerful political group of Obesity Hunters), the “Society for the Protection and Preservation of Everything,” some nice nerds in the Pentagon as well as business leaders worried about America’s security. Their arguments range from, “If we export garbage, it will lead to more incentives for encouraging waste,” and “Overconsumption in the U.S. will cause obesity to triumph.” If the hole is empty or emptier, garbage will fill it. If the landfill or the waste-to-energy plants in the U.S. are underutilized or, conversely, fail to get built because we are sending garbage to other nations, it will just stimulate more garbage.

Now the Pentagon also is worried about the exports of secrets that are hidden in garbage (as is, according to the movies and cable T.V., the Mafia). Business leaders are concerned about the theft of things like credit card numbers left on old receipts captured by garbage pickups. Some researchers who have written little-read energy policy reports have recently joined the coalition against garbage exports. They appear frightened that extra copies of their documents will be found in faraway landfills and other storage facilities and subsequently criticized anew in refereed journals or the media. Let them lie in peace!

Exporting garbage has allies. Many businesses and some government leaders, and their economic consultants, believe that exporting garbage will be good for America. We have a surplus of garbage and if we can get rid of it at a decent price, it would be good for the economy and jobs. When asked, “Why not keep our garbage in the good ol’ U.S.A. and pursue increased waste-to-energy projects, as well as related new jobs for Americans?” they remain relatively quiet. Some respond by arguing that exporting garbage will help other countries use renewables to power heat and electricity and someday soon, vehicles. They, correctly, argue that nutrient-rich organic matter, like garbage, is a largely untapped source of renewable energy. If converted to biogas and natural gas, it could reduce GHG and provide environmentally safe and clean power, as well as low-carbon transportation fuel. But they, often, look away sheepishly when asked, “If that is true, why export garbage and risk higher global prices, why not do the conversion here first?” America first!

This garbage thing is tough to wrestle with — the dialogue gives off a foul odor. But we are Americans. Ain’t no garbage mountain too high , no valley filled with garbage too low, no river wide enough with garbage flows to overlook

I should close this piece by indicating that any relationship between my narrative and the current debate over exports of natural gas is unintended and probably inconsequential.

Chris Paine speaks on “The Resurrection of the Electric Car” (maybe)

220px-Who_Killed_The_Electric_Car_coverGood for you, Chris Paine! Paine, if you remember, was the filmmaker who produced “Who Killed the Electric Car?” His recent opinion piece in The Washington Post took on the supposed mythologies about the demise or slow progress of electric cars. For the most part, his analysis, except for some unnecessary embellishments and a bit of irrational exuberance here and there, seemed right on target.

Paine suggests that the electric car, despite the financial and battery-supply problems faced by Fisker Automotive, is still alive and ready to kick butt. He quotes a new report from the IEE, a part of the Edison Foundation, that projects “between 5 million and 30 million electric cars will be on the road by 2035.”

In a similar vein, Paine debunks “range anxiety” or the fear that drivers will run out of power far from their destination and a power station. He notes that the technology is improving and that, on a normal day, the Tesla Model S can travel up to 265 miles on a single charge. He also calls attention to hybrids, like the Chevy Volt, the Toyota Prius and the Ford C-MAX, which all use electric power for the first 20-50 miles, and then are able to switch to gasoline for the relatively infrequent longer trip.

Paine seems to understand that consumers are hesitant to endorse electric car charges that take a long time, including anything between 8 and 24 hours. He points out that charging docks sold with plug-in vehicles can cut the time to 4-8 hours, and that public charging stations can power electric cars even faster.

Paine cites the Union of Concerned Scientists 2012 Report that electric cars powered by coal-generated electricity may not be much better for the environment than small gas-powered vehicles. But he also highlights the comment in the report that states that less than 40% of the U.S. electricity now comes from coal and that this percentage is likely to go down in the future as natural gas and renewables are substituted for coal. Owners of electric cars or plug-ins can feel good that, over time, they will earn their environmental laurels and that they will do their part in reducing GHG emissions.

Paine agrees that the Fisker Karma and Tesla Model S were, and remain, nice baubles for the more affluent. At the same time, he describes the efforts by several car companies to bring down the costs of electric cars. With the tax benefits, for example, the Nissan Leaf costs only about $20,000, and with $1,999 down, it leases for only $199 a month.

Chris Paine’s optimism is infectious. However, it needs a dose of reality. For example, even if the IEE estimate, described above, concerning total electric cars on the road by 2035 is correct, they will constitute only a relatively small number of existing vehicles. IEE’s broad range projection of 5 to 30 million electric cars indicates that the factors governing production and sales are still guesstimates. Similarly, while it is likely that charging stations will multiply, they will still be relatively few and far between when compared to gas stations. “Road anxiety” will remain a factor until technology and investment for infrastructure to power cars catches up with consumer desires.

Major cost reductions will be related to consumer demand and consumer demand will be predicated, in part, on reasonably priced batteries able to power automobiles much farther than 100 miles (now prevalent) and power stations conveniently located along highways. Detroit will continue to produce electric cars, but their decisions to enter into the market in a big way will be tempered by their already fixed investment in the internal combustion engine and the desire of their partner oil companies to restrict the fuel market to gasoline. Don’t expect a big leap forward immediately unless required or subsidized (even higher than they are now) by government—both highly unlikely in the current, and likely future, political environment.

Paine’s article deserves discussion. It suggests that electric car advocates and flex-fuel as well as replacement fuel supporters should join forces. There will be an interim or transition period, while we are waiting for electric cars to catch up with policy needs. It may last a decade or more. During this period, individuals and groups sharing environmental objectives and concerned about global warming should work together to open up the now almost monopolistic fuel markets to cleaner, cheaper, environmentally safer replacement fuels and flex-fuel vehicles. As soon as electric vehicles are really ready for prime time, that is, when their costs are low enough to appeal to a broad market, when road anxiety is eliminated because of battery innovation and when infrastructure is readily available and accessible, they will find a broad market. Their ability to produce zero or almost zero emissions at reasonable fuel costs will make them very competitive in an open fuel market. America will benefit when this time comes; America will benefit if, until this time comes, we open up the gasoline market to competition from replacement fuels.

Fine wine is at risk – Merlot in the Arctic Circle? Are replacement fuels a remedy?

wineI am not a tree hugger. I am proud, however, to be called an environmentalist and not so proud to be called a lot of other things. I do believe I have a personal obligation to try my best to sustain the ability of future generations, including my grandkids and their kids, to live a healthy productive life in a healthy environment. It is in this context that I am concerned about global warming. Most of the world’s respected scientists think it is happening and many link warming to longer droughts, intense storms, larger floods, changing landscapes, migration patterns, food scarcity and more. The list is long. Even some skeptics (not all) have yielded to the view that warming is occurring in the world caused “in part” by man-made emissions. The fight now seems to be over how much is caused by human beings in our daily activities.

Now, I don’t want to make this piece overly long. But perhaps believers, skeptics and nonbelievers could come together on low-hanging fruit strategies – ones that are relatively easy to effect, like opening up the now almost-monopolistic fuel market to replacement fuels such as natural gas, methanol, ethanol and biofuels. Recent technological innovations have made most replacement fuels better for the environment than gasoline. Indeed, gasoline is the worst in terms of total carbon emissions and many other pollutants. Let replacement fuels compete with gasoline and when renewables are ready, make it easy for them to join the crowd of options at the pump.

My cup is always half full rather than half empty. Hopefully, Americans will respond to climate change before the low-hanging fruit is dried up because of warming. I think the odds may have increased that rationality and consensus building will govern public opinion and leadership in Washington.

Why? I recently noticed a brief news item in the Science Section of the New York Times. It, and a companion piece in Yahoo News, said that because of global warming, the wine-producing regions of the world are threatened…including Bordeaux and Tuscany in Europe as well as Napa and Sonoma Valleys in the U.S. “Vast swaths of France, Spain and Italy would become inhospitable to wine grapes by 2050,” including California and other parts of the world that are now growing fine wines. According to one reporter, we will probably end up buying wine from Chateau Montana. I am sure others will soon propose Cabernet from Canada and I know as the Arctic ice melts, we will get some bright marketing guy pushing Merlot in the Arctic Circle. Somehow, even if the product survives, the ambience doesn’t resonate and the taste likely will not either. Can you imagine trying to charm your significant other, with “I took you here so you could taste champagne from northern Russia?” I have nothing against any of these places though, and maybe disruptive technology or innovation will provide worthy grape and wine substitutes in many areas of the world.

If not, what are wine lovers to do? Many of you are in political life, are business CEOs, run academic institutions and nonprofit groups or are just plain good community folk. Rise up! Demand your rights as wine drinkers. Claim legitimate health and, if relevant, religious benefits. Or maybe, just articulate the benefits a fine wine brings to conversation among friends or would-be friends and colleagues. The world’s economy and social welfare often spins (hopefully not you) on a glass of wine and good cheer at lunches and dinners. Forget the fact that the French are sometimes haughty to Americans. We have coalitions to build and policies to foster. Help secure your quality glass of wine by working with your fellow oenophiles to develop low-hanging policy fruit to respond to global warming. While you may discriminate as to wine, join with non-wine drinkers, growing numbers of consumers, business leaders and nonprofits to grant a priority to opening up the transportation fuel market to replacement and, when competitive, renewable fuels. Paraphrasing a famous economist, whose name need not be mentioned, wine lovers of the world unite, you have a lot to lose if you lose your access to the best grapes and their wines.

It’s party time: natural gas and GHG emissions

partyRecently, the U.S. Energy Information Agency announced that carbon dioxide emissions from energy consumption in the U.S. during 2012 fell to the lowest level since 1994. Further, in 2012, emissions were 12.1% below the peak of 6 billion tons in 2007. The EIA cited increased use of natural gas and falling consumption of coal as the primary reasons for the drop in emissions of the greenhouse gas. Lower natural gas prices resulted in reduced levels of coal generation and increased natural gas generation — shifting power generation away from the most carbon-intensive fossil fuel (coal) to the least carbon-intensive fossil fuel (natural gas).

Why are environmentalists not shouting from the rooftops about the carbon emission reduction of our solar panel housing and the windows of our Prius, Leaf or Tesla cars? Gosh, is it not party time….or at least a glass of wine on the house?

Sure, natural gas isn’t perfect! It is a fossil fuel and still emits carbon. But it is far better than coal, concerning GHG emissions. Renewables, like solar and wind, have become more popular to power utilities and it’s good that they are in the mix. Both, however, still suffer from technological and competitive problems. Further, although not as intense with respect to natural gas drilling, a NIMBY (not in my backyard) culture combined with the occasional opposition of some local environmental groups has muted the excitement related to wind and solar energy powering utilities. Their use will grow in the next decade but their market penetration will likely be relatively slow.

So, at least, until we have access to replacement fuels including renewable energy that reflect higher public interest values and lower market pricing than natural gas to electrify the nation’s grid, we should celebrate the fact that natural gas is now ready for prime utility time.

Groups and individuals concerned with the impact of coal on global warming, GHG emissions and other pollutants played a role in sensitizing utilities to find a cleaner power source. Indeed, some environmental groups seemingly opposed to natural gas as a replacement fuel applauded and still applaud the transition from coal to natural gas.

So the nation has (sort of) reached a visible milestone in the fight against GHG emissions. It still has a long way to go. But maybe, just maybe, the 2012 GHG data could generate — excuse the pun — enough political and intellectual willpower to start talking through strategies to lessen the environmental impact of the currently restricted, almost-monopolistic transportation fuel market. Based on the lessons learned from natural gas utility experience, we, collectively as a nation, should not let the perfect become the enemy of the good. We should acknowledge that policy, program and behavior choices are perfectible over time but will not be perfect at the present time.

If I were facilitating the effort to open up the transportation fuel market, I would look at some of the promising initiatives around the nation. Thanks to Gov. Hickenlooper (D) of Colorado and Gov. Palin (R) of Alaska, 22 states have now agreed to buy new natural gas cars to replace older cars in their fleets when they run out of auto steam (remember when we powered cars by steam?) and need to retire from work. Detroit seems to have responded well to their agreement. The Big Three automakers plus Honda have agreed to produce a lower-cost natural-gas powered car. How much lower, we won’t know for a while. But to be competitive, they must at least halve the almost $10,000-12,000 difference that separates natural gas cars from similar kinds of conventional vehicles. If the project is sustained, I suspect they will come close and the new state cars will provide an impetus to produce cheaper natural gas vehicles.

Lots of work is being done around the nation by scientists and engineers to convert existing cars to natural gas and its derivative methanol. In both areas of concern, Russia, interestingly, has apparently beat us to a scaled-up production line. I know if we put our minds to it and screen current policies, statutes and regulations for relevance to the production of replacement fuels and flex-fuel autos, we can quickly overcome their lead. We should retain regulations that are necessary to protect the environment, limit GHG emissions, and sustain fuel and auto safety. But we should eliminate archaic regulations that only serve to ensure that gasoline — a significant pollutant and GHG emitter — is the sole choice of consumers at the pump. We are not in a competition with the Russians or anyone else. Let’s do what we are doing in space…collaborate for the better of humankind.

Steal Russian secrets, be two years behind — natural gas and flex fuels

crookRemember the Cold War! Remember when the Russians launched Sputnik 1! It caused some of our political leaders to go up the wall. The Russians had seemingly beaten us in space; they were ahead in the race to the moon and beyond. How could they do that? “They stole our secrets,” it was said by many in the media and on Capitol Hill — seemingly a bit of an oxymoron since they did break out of the atmosphere first. Mort Sahl, one of my favorite Cold War comedians, was known for quipping, “Maybe the Russians will steal our secrets, and then they’ll be two years behind.”

Well, all’s well that ends well. We were not far behind the Russians. We actually overtook them with superior space technology and resources in the mid to late ’60s. By the early ’90s, although the Russians tried to keep up, our ability to outspend them in the contest to secure the best military weapons and space technology helped lead to the collapse of the wall and the Soviet Union.

A recent article in The New York Times described Russia’s state-run energy monopoly, Gazprom’s recent efforts to make, distribute and sell natural-gas cars brought back memories of Russian accomplishment as the “first in space.” According to the Times, Gazprom priced natural gas at 120 rubles, a little more than a gallon of regular unleaded fuel in the U.S. Interestingly, the buyer could drive 140 miles on his or her purchase, or what would take three gallons of gas for most Prius Hybrids in the U.S. Natural gas in Russia is priced about $2 less than gasoline.

Gazprom, over time, hopes to shift from oil to natural gas for transportation. Assumedly, if consumers overcome safety fears and buy into the idea or eventually were required to because of future government policy, Russia could boost its economy by exporting its more expensive oil and, at the same time, reducing its over-abundance of inexpensive natural gas. The unanticipated benefits, at least in Russia, would be fewer GHG emissions and other pollutants that result from gasoline. The zero-sum environmental game would be good for Russia, but not good for the nations buying its gas.

Simultaneously, Russia will initiate sale of natural-gas fueled cars and will likely foster the expansion of the sale of kits allowing conversion of older cars to become natural gas-fueled vehicles. Natural gas kits now produced, without regulation or with lax regulations, cost fewer than $1,000. By comparison, kits in the U.S. cost between $12,000-18,000.

Are the Russians ahead of us in the technology to produce flex-fuel cars and to extend use of alternative fuels? Probably not. What happened, I believe, is that Russia’s leaders and its bureaucracy (which, based on my own experience, is in almost all respects more leavened than ours) made an economic decision to take advantage of Russia’s growing supply of relatively cheap natural gas.

Natural gas and its derivative methanol are valued replacement fuels. As the president desires, both would help wean the U.S. off of gasoline. They are cleaner, spew less pollution, emit less GHG emissions and are cheaper than gasoline, a spinoff of oil. They will also reduce our dependence on imported oil and, in the process, increase our security. Opening up the presently restricted transportation fuel market to natural gas and methanol would offer competition to gasoline and likely lower prices, as well as minimize or flatten gas-price spikes.

Are the Russians smarter than we are? Are they more technologically advanced than we are with respect to natural gas and flex-fuel autos and trucks? Have they stolen our secrets? No, to all three questions.

If this were a fair competition, Russia would be the tortoise and the U.S. would be the hare. U.S. auto companies and private engineers have years of experience with both natural-gas cars and conversion kits. Ford, Chevy, Dodge and Honda are now selling a relatively small number of safe, efficient natural-gas cars.  While still a relatively small portion of the total number of vehicles in the U.S, there are near ten million flex-fuel cars in the nation. While regrettably J.D. Powers has not done a satisfaction survey, anecdotes suggest their owners think they are as good, if not better, than gas-only fueled autos.

In this context, ask your friendly auto shop or next door mechanic about his or her ability to convert older autos to natural gas or methanol fueled vehicles. Their answer would be “yes we can,” if conversions were legal. Succinctly, we don’t need to steal Russia’s secrets and be two years behind.

Why are we not selling lots and lots of new natural gas or flex-fuel cars or trucks, and why are we not using kits to convert existing cars to run on flex fuels? The answer, my friend, is not blowing in the wind, the answer, my friend, is found in hundreds, if not thousands, of pages of archaic government policies and regulations that frustrate the production of cheaper, safer, environmentally better natural gas and flex-fueled cars and unnecessarily limit the use of flex fuels like methanol.  The answer, my friend, is also the hesitance of the auto companies and the resistance of the oil companies, as well as other related oil and gas interest groups, to open up both the auto and fuel markets to more than symbolic competition.  We, assumedly, are a capitalist nation that appears hesitant to foster open competitive replacement fuel markets.  We, ostensibly, are a nation that is committed to reducing ghg emissions that seems immobilized by conflicts among environmental friends concerning the wisdom of using environmentally better less expensive fossil fuels such a natural gas and methanol to compete with or substitute for gas until, sometime in the future, renewable fuels  — probably a decade or more — are available.

The IMF speaks, everyone should listen: subsidies, oil and alternative fuels

shutterstock_105641378I bet most of you have heard the dictum often passed on by management consultants, sometimes with humor and sometimes with tears, that you’re only an expert when you fly. Translated, the greater the distance you fly to either speak or to advise, the more you are valued by your audience or the client. Forget your resume! Fly over continents or oceans and you, generally, get picked up at the airport by your gracious hosts who often have big shining cars. But when you return home, you’re lucky if you can hitch a ride home or get picked up from the airport by your significant other.

Oh…I hear you saying to yourself, “It’s true.” But don’t grieve. It’s not really as bad as the dictum. We increasingly honor real experts, regardless of their frequent flier miles. The management pronouncement, fortunately, is out of date, given today’s communication technology. Value is, more often than not, placed on expertise and performance.

Enter Dr. David Lipton, a world-respected economist. His resume is sterling. He has been a Harvard professor and colleague of noted-economist Jeffrey Sachs, a respected private sector leader, a top Treasury official, and recently a senior White House economic advisor. He is now second in command at the International Monetary Fund (IMF).

I first met Dr. Lipton many years ago when he was working on world economic issues facing the poor. He subsequently participated in The Aspen Global Forums concerning key economic, social welfare and environmental issues (which I was privileged to convene and facilitate with world leaders). In 2005, he agreed to join the national board of The Merage Foundation for the American Dream, a foundation that I directed for philanthropist and successful entrepreneur Paul Merage.

David Lipton is an expert whether he flies or not. In this context, his recent paper, “Energy Subsidy Reform: The Way Forward,” is necessary reading if you want to know why the global economy is a mess and why the U.S. economy, while improving, is recovering very slowly.

I believe Lipton’s conclusions, based on his and IMF’s research can be fairly summarized and interpreted as follows:

  1. Energy subsidies create significant economic, environmental and social welfare problems, whether they are given to producers, suppliers or consumers, and whether they are provided by the U.S., other developed nations, or developing nations.
  2. Pretax subsidies, that is, when energy consumers pay less than the supply cost of energy, are bad for developing or emerging countries. They are costly and limit economic growth and the social welfare of their populations..
  3. Pretax subsidies are not significant enough to cause extensive economic difficulties in developed nations. But advanced nations provide extensive post-tax subsidies that cause problems. Taxes are not large enough to account for adverse effects of energy consumption (e.g., the environmental impact). According to the IMF data, this fact is particularly true for petroleum. Further, the current tax benefits (in reality, tax expenditures), provide petroleum favorable market status compared to natural gas and methanol as well as other alternative fuels.
  4. Subsidized prices crowd out investment, including investment with respect to economic growth, infrastructure, education, health care and social welfare
  5. Subsidies result in skewed resource allocation and an overuse of subsidized technologies. The post-tax subsidy for petroleum products in the U.S. totals 2.42% of GNP. It is only .27% for natural gas and .64% for coal and, I believe, much, much less for other alternative fuels. (A recent CRS Report suggested that subsidies for oil producers, particularly large producers, do not have a major effect on their drilling decisions. Yet, they are expensive. In a similar vein, recent Brookings Institution and Heritage Foundation analyses indicated the gap between producer decisions and some tax subsidies. Both also noted the costs generated by subsidies such as inefficient and inequitable resource allocation of taxpayer dollars.
  6. Subsidies increase energy consumption and as a result, pollutants and GHG emissions. For example, 70-80% of the oil used in the U.S. is used for transportation fuel. Gasoline derived from oil spews far more total GHG emissions and other pollutants than other alternative fuels — even coal. Neither coal nor gasoline ranks high as a clean energy source. Coal is dirtier, but its utilization as a fuel is relatively small compared to gasoline.
  7. Subsidies provide far more monetary benefits to the affluent among us than they do to low-income groups. Higher-income groups use more energy per capita. They drive bigger cars, drive more miles and buy more air conditioners for larger houses. Presently in the U.S., the cost of gasoline at the pump accounts for somewhere between 12% to 17% of low and moderate household incomes — far more than for higher-income households.

In light of IMF’s and Lipton’s work, where do we go from here? Both suggest we eliminate subsidies…not instantly, but gradually to better absorb possible related political, economic and social welfare problems. Lipton emphasizes the need for transparency, public involvement and clear information as well as solid analysis concerning the effect of reducing subsidies, particularly on the “winners and losers.” He and the IMF are particularly concerned about the probable harm to the poor, if energy prices, including the price of fuel, continue to rise because of the devolution of subsidies. Both suggest targeted cash or near-cash transfers, such as vouchers, as the best approach to avoid harm to low-income budgets.

I am not sure that the energy markets, particularly the present highly restrictive, almost-monopolistic transportation fuel market will respond with significant price increases, assuming a slow reduction of subsidies. Other factors will likely have a more important impact, such as financial sector speculation, tension in the Middle East and the health of the global economy. While over time, reduced subsidies will create a more efficient and ultimately fairer and transparent energy market, I am not as sanguine as IMF and David Lipton concerning the global and, indeed, the U.S.’s willingness to lower subsidies in a strategic manner. A reduction in subsidies will help make energy markets, including transportation fuel markets, more efficient. They will become more equitable, if, as suggested by IMF and Lipton, the possible advent of higher gas prices occurs parallel with support for the poor. If implemented simultaneously with initiation of a more open, competitive, fuel market, the U.S. and other developed nations would level the playing field for transportation fuel and illustrate healthier economies, lower transportation fuel prices, cleaner environments and increased security. Lipton and his IMF colleagues deserve commendation for taking us , borrowing a phrase from Robert Frost, to a road less traveled. They don’t need airplane mileage to gain our appreciation for their expertise and courage. When both speak, everyone should (at least) listen and think.