Someone who loves nature can only be angry at this. In June of last year the President Obama called for international lending institutions to stop funding coal-fired plants overseas. The World Bank and the US Export-Import bank both agreed not to fund such plants except in the poorest of countries where there was no alternative. You just think some progress has been made and now US lawmakers propose a bill to prevent the Export-Import bank from blocking fossil-fuel investments on the grounds that it would harm US exporters.
This is all wrong.
First, a government providing export credit to domestic manufacturers runs against a belief in free and fair markets and common sense business. There is a reason why you don’t sell to risky countries – there is a high probability that the customers won’t or can’t pay. So what business has the government knowingly and willingly taking such a risk? To support domestic jobs. In this matter there is no difference between a communist government which manufactures goods oblivious to the natural, market demand of customers, and a capitalist government which provides export credit guarantees; since that provision implies that there is no natural demand for the product at a market price which fully reflects the risks of the sale. Thus the capitalist government is promoting manufacturing for its own sake, just like its communist counterpart.
Second, this move is untenable from the point of view of an ecological morality. Manufacturers of coal-plant and their political allies know the harm done by fossil fuels. People intelligent enough to run coal-plant companies are intelligent enough to listen carefully and attentively to the science. Their failure to attend to this is a mark of cowardice.
But a more important observation emerges from this situation, to do with the effectiveness of government.
Laws work because the majority of people don’t intend to break them anyway. Laws against theft or random violence, for example, broadly work because most people already culturally know that those things don’t pay. So these laws are needed in order to remind the majority and constrain only a small minority.
The trouble with laws about emissions of greenhouse gases is that they seek to constrain a majority. Everyone is looking for a way around them, since there is no deep-set cultural acceptance of them, no cultural rejection of emissions. These laws are a fragile fix and will be as long as the majority are intent on evading or avoiding them.
Rules, regulations, taxes and incentives don’t make bad people good. They help nudge our thinking in the right direction. But as long as coal-plant manufacturers (like manufacturers of hand-guns) think it is culturally ok to sell their lethal technology, they will do all they can to do so, and seek to overturn any law which stands in their way, by fair means or foul. Only when those technologies become culturally and socially unacceptable, will the laws which constrain them be robust.
This has implications for climate change policy. It is not enough to come up with clever schemes. You have to change the hearts of the people. As written many times in this blog, the best way to do that is shamelessly and intently to bring people to love nature.
Indeed, it is rather sad that the moment some minimal, yet real sacrifice is involved, the US govt is expected to back off…
well argued point about the constraining of the majorities and the minorities, congrats! And I fully agree that rational arguments will never win the climate battle…we will need a religion, probably..
István
James,
I agree that exim financing is often shameless industrial policy which should be avoided. However, there are cases when the sovereign assuming the credit / investment risk makes sense. For example, had Argentina’s oil company, YPF, been owned by the US government rather than Spain’s Repsol, the Argentine government would not have nationalized it. But the Argentine government did, and this will cast a long shadow over the country’s energy export future. To wit: Argentina has enormous shale gas reserves, and these could be produced for export. Argentina consumes about 4 bcf per day; the increase in gas production from just the Marcellus (a natural gas shale play located primarily in Pennsylvania, here in the US) was 4 bcf / day in the last year.
In other words, Argentina could be increasing its gas exports by a quantity equal to its total consumption every year for several years. But to get that out of Argentina, you’ll need to convert the gas to LNG. And LNG plants costs billions of dollars. So who is going to plonk down an LNG plant in Argentina when there’s every expectation that it will be expropriated? That’s where sovereign assumption of country risk could be helpful.
As for coal plants. In an ideal world, all energy would be renewable. But we don’t live in an ideal world, so the question is what trade-offs are we willing to make.
Coal, in general, costs about half as much per kWh as power from natural gas. In advanced countries, the trend has been away from coal, as natural gas remains largely affordable. In developing countries, however, coal is the power of choice. In India or China, coal plants make up almost 80% of power production, and this share is likely to remain high for many years. For them, jobs and electricity are critical to improving the standard of living. Super critical coal plants and scrubbers can be quite helpful in reducing particular and various SOx and NOx emissions. They don’t do much for CO2. But it does help if the scrubbers are actually turned on (which apparently they often are not in China).
As for CO2, if you dislike coal, there is no reason to like natural gas. If coal emits 2x the CO2 of natural gas, then natural gas will also increase CO2; it will just take twice as long. But in the big scheme of things, whether it takes 50 years to get to some level of CO2 or 100 years to get there, doesn’t make much difference in humanity’s long term outlook.
For the time being, we’ve had no increase in global temps for 10 to 17 years, depending on which database you use. At the same time, CO2 emissions have soared on the back of China’s development. If there’s a material linkage of CO2 to temperatures, it’s not visible in the last decade or so. If it becomes so, expect greater action. But for now, I think we could focus on more prosaic pollution issues, like cleaning up the air in Beijing.
Cheers, S.
The last paragraph is a bit scary, Steve. It’s like saying: My kid hasn’t been unemployed yet, so why should I send him to school?
Germans are climate-friendly, however, their CO2 emissions in 2013 increased. Why? Since they must have fossil-fueled reserves for their green wind and solar parks. Without coal there would be no electricity in the socket at the moment…
This is the matter of the state of technology, not morality.
It depends on what you mean by climate friendly. Yes, they have good intentions but industry still comes first.
It’s partly a matter of technology. But there is moral question in why you think that you should have the right to the cheapest form of energy just because it is cheap? Your right to cheap energy today is depriving someone of the right to water and food in the future. You might choose to ignore that question but it’s still there.
The US Export-Import Bank and their British, French and German equivalents currently provide government guarantees to over 40% of all new Boeing and Airbus built aircraft. Many of these aircraft are being exported to countries such as China and India which have blatantly said that they will not comply with EU ETS and will probably not comply with the aspirational goals of a global ICAO carbon reduction scheme from 2020.
Aviation is the fastest growing source of carbon emissions. If these countries continue to flout European laws then why should Europe continue to provide subsidised aircraft finance to them?