Energy Leap Year?

The complex uncertainties affecting energy markets will probably undo most of the forecasts that analysts and economists seem obliged to offer, as the new year dawns. I prefer to highlight the trends I'm following, since those tend to be more durable. Monday's look back at 2007 focused on oil prices and climate change. I expect both to feature prominently in 2008's energy-related news, connected in interesting ways with the Presidential election cycle. In addition to domestic politics and geopolitics, there is a growing list of key energy technologies that bear watching, with the possibility of developments that could change our perspective on the long-term future of energy. However much the global situation has begun to resemble a re-run of the 1970s, we have never had more energy options, or greater incentives to pursue them.

Oil prices have started the year at near-record levels, and the predictions that oil will shortly break $100/barrel seem pretty safe. The larger question is whether it will remain there, or gradually fall back, as demand growth moderates and the global oil industry produces as much of a supply response as it can. Warnings of a collapse below $40/bbl seem exaggerated, but no one investing in renewable energy or other alternatives can afford to ignore them entirely. That downside risk can be managed, but it could be an expensive distraction.

With regard to climate change, the negotiations on the Bali framework for a follow-on agreement to the Kyoto Protocol are unlikely to conclude this year, particularly since the international community recognizes that it could be dealing with a very different set of US counterparts beginning next January. It remains to be seen whether climate change will become a key election issue, in light of concerns about the economy, immigration, and other urgent problems. The fact that it hasn't, so far, is a reflection of the relative agreement among the Democratic candidates on the need for urgent action, and among most of the Republicans that climate change is real but can wait. Once they have chosen their nominees, the parties owe the country a lively debate on the their divergent views on this subject, since the enactment of limits on greenhouse gas emissions could transform our economy and way of life more than anything else the candidates are proposing.

Even if it doesn't become fodder for the election debates, the urgency of tackling climate change is likely to grow. The most prominent American climate scientist recently revised downward his assessment of the ultimate concentration at which atmospheric CO2 must be stabilized, to a level below the current 381 parts per million, in order to prevent catastrophic warming. Since achieving a stable 450 ppm was already going to require a 70% reduction of global emissions from current levels by mid-century, getting to 350 ppm effectively means cutting developed-world emissions radically, starting more or less now, and short-circuiting the prodigious growth of emissions in the developing world. If this view becomes the consensus, expect a lot more focus on preparing humanity to adapt to a hotter planet, because a lot of folks are going to conclude that 350 ppm can't be attained.

On a more optimistic note, the sheer number of companies and universities working on new energy technology greatly increases the chances of dramatic developments in biofuels, solar power, energy efficiency and other areas. 2008 could see the start-up of commercial-scale--if not yet economical--cellulosic ethanol production, and the start of construction on an advanced coal-fired power plant with full sequestration of its CO2 emissions. Meanwhile, a battery breakthrough along the lines of the "nanowire" battery recently announced by Stanford University would provide a big boost to the electrification of transportation via plug-in hybrid or all-electric cars, or potentially enable wind and solar power to compete into more attractive peak-load electricity markets.

I'll also be observing with great interest whether the growing public and media interest in "green" becomes embedded in a new set of greener social values, manifested by a shift in consumer and voter priorities. Governments can lead and markets nudge, but unless voters are prepared to support measures that will cause themselves personal pain, or hundreds of millions of consumers to change their preferences and usage patterns, it's going to be a long wait for technology alone to solve our problems.

No discussion of the trends affecting energy this year would be complete without at least a mention of macro-economic factors. The unfolding debt crisis, weak dollar, and increasing linkages between food and energy all bear watching. Throw in the inevitable Wild Cards--random, unpredictable events, such as last week's assassination--and 2008 promises to be at least as interesting in energy terms as 2007 was.

A Greener Christmas

I'm fascinated by the shifting emphasis this holiday season towards "greener" practices and greener presents. There's a growing trend toward holiday lights employing LED technology, which is much more efficient than incandescent bulbs, but without some of the drawbacks of the compact fluorescent lights (CFL) that are appearing in millions of homes and businesses. I've even received email solicitations suggesting emissions offsets as suitable holiday gifts. Now, I don't want to sound like the Grinch, here, but although these modest steps are all to the good, I think they still fall short of a genuinely greener Christmas. Efficient holiday lights are fine, but they're not going to halt global warming in a month's usage each year. If we're serious about solving the vast problems of climate change and energy security, the evolution of "green" into a marketing strategy can only be one element in a much larger effort.

Consider the presents we give and receive. I heard a statistic on the news the other night indicating that Americans would give out $8 billion in gift cards this year. As enthusiastic about emissions trading and voluntary offsets as I am, I don't see emissions credit gift cards overtaking the cash kind any time soon. Then consider the energy profile of some of last year's popular gifts, including those we gave ourselves. As I've noted before, one plasma TV wipes out the energy savings of multiple CFL bulbs. Even more modest consumer electronics such as cellphones, iPods and digital cameras make their own small contributions to higher energy consumption and the growing strain on our electrical infrastructure, particularly when we leave their recharging transformers plugged in all the time.

A truly Green Christmas would be one for which the most popular "gadget" gifts were either energy-saving devices themselves, such as the Kill-A-Watt meter, or more efficient replacements for existing gadgets with high energy consumption. And all gifts would come with clear disclosures of the energy used and emissions released during their production. If we're ever going to begin reducing energy consumption and greenhouse gas emissions in absolute terms, achieving a net carbon-neutral holiday season would be a great place to start.

We are a long way from that now, nor should we necessarily be consumed by guilt over this. A cultural change that deep can't happen overnight. Taking off my Scrooge hat, the good news is that it's not nearly as hard to imagine such a thing as it would have been only a couple of years ago. Perhaps we're starting to see climate change as our all-too-real Ghost of Christmas Future. Today, suggesting a carbon-neutral holiday season probably wouldn't get you laughed at, though it's not going to attract many invitations for eggnog and cookies. In that spirit, I would like to wish all my readers the joys of the season, even if it's not yet as green as it might be.

Energy Outlook will be on holiday break until 12/31.

A Green Future

Sunday's Washington Post Outlook section featured several articles prompted by last week's TXU deal, including an interesting commentary by futurist Bruce Sterling on the development of a greener society based on a fusion of environmental values and capitalism. For anyone concerned about the threats posed by climate change and energy insecurity, but daunted by the enormous scale of the required solutions, the "dot-green" boom Mr. Sterling proposes could hold the key to shortening an otherwise lengthy transition period. Green values are a pivotal uncertainty in assessing the rate of change that is possible, but despite some notable recent signposts, this remains one uncertainty among many, and a truly green future is hardly a foregone conclusion.

If you've ever had the opportunity to hear one of Mr. Sterling's conference talks, you know how stimulating and entertaining he can be. He was in full raconteur mode yesterday, extrapolating from failed states to a failed fossil fuel economy, laying out the blueprint for a world in which environmentalism becomes deeply embedded in everything we do, including the most mundane consumer choices. What he's describing goes far beyond the "green chic" on display at last weekend's Academy Award ceremony, and he's been writing and speaking on this subject since the late 1990s, when he founded the "Viridian Design Movement", built around the idea of making green deeply trendy. This is a very appealing notion, in many ways.

However, as optimistic as Mr. Sterling's view of the future might be, there are important reasons why it represents only one possible scenario, rather than quite the inevitable future he portrays. First, even if the ideas behind it take off, it will be a long time before we can know if they will have the necessary persistence. Climate change and energy security are not problems of the moment, to be solved in the moment. Both will be with us for decades, and the pessimists are right, the effects of climate change could plague our descendants for centuries. The same inertia that made it hard to discern a dangerous warming trend from the normal variation of the climate could produce an extended period in which our best efforts appear to have little or no effect, testing both our patience and our pocketbooks.

Green values could also be trumped by urgent economic and geopolitical challenges. Mr. Sterling's "dot-green" future must unfortunately compete with darker, bleaker possibilities. The same Outlook section published another op-ed, by another novelist, warning of the potential nuclear danger from a rapidly arming China. An electromagnetic pulse attack might be as crippling as anything global warming has up its sleeve. Nor is this the only security threat that could divert attention and resources away from environmental concerns. Islamic terrorism and the numerous risks of the Middle East will hardly agree to go into suspended animation, while we all address climate change.

Still, at a time when so many people are either pessimistic about the future or overtly fear it, it's important to have optimistic voices reminding us that other paths and better outcomes remain possible. Last summer I asked, "Where is the good scenario?" Bruce Sterling offers one positive answer, amid a host of scary ones.