Paths to a capped carbon economy: 6 ways we can really make a change

September 22, 2020 |

By Russ Freeman, PE Retired

Special to the Digest

Through publications and Webinars, The Digest has done a remarkable job of keeping interested parties informed about the global impacts of a fossil-based once-through society and growing efforts to transform it. From the substantial body of information presented and a big-picture viewpoint, it is clear we can achieve a remarkable, sustainable economy with the potential for revitalizing our democratic society. This vision of the future is one in which:

Humans have multiple opportunities for a meaningful role in society, freedom to live where they choose and freedom to pursue their dreams based on a stake in the productive engines of a society in which machines do much of what was once considered work.

However, to achieve such a vision, bold action is required. Our leadership must not settle for initiatives which tweak existing components of systems of the past. They must envision the future and take actions intended to move society toward that vision, all the while guarding against unintended consequences and adjusting for lessons learned from steps taken.

Some considerations to be addressed are:

One: If excess atmospheric carbon is a primary cause of climate change and externalities associated with climate change are considered, then the value of zero net carbon substantially significantly ought-weighs the cost.

Two: Society needs to do more than achieve zero net increase in atmospheric carbon. Levels must come down substantially!

Three: The first two factors require government intervention to create market value for carbon reduction and ensure that such value is factored into private market investment decisions.

Four: Risk is an important consideration, at least over a transition period while carbon levels are drawn down, and disasters continue to threaten large sectors of the economy.

And finally: Sustainability requires execution of a transformation structured to support a future society, not one which sustains the past.

Positive Signs

There are some positive signs. For example, California leadership in a carbon cap transformation has stimulated nation-wide investment in zero-net-carbon products to serve State policy-driven markets. However, it is also clear that California can not do it alone. There is little benefit to the local market where the zero-net-carbon fuel is produced in the Midwest and shipped to the State for sale at higher prices it can command there. Thus, one should expect an eventual back-leash against zero net carbon products coming into California from other regions to command premium prices, unless there is a clear move toward similar carbon-negative transformation among other states. While there is some move toward interstate cooperation, it will likely require federal leadership will be required to prevent eventual collapse of the California initiative.

The good news is that there is growing recognition of the need for such a new approach among a variety of leaders, from candidates for national office to leaders of business and finance. These innovations, chronicled in recent Biofuels Digest webinars (see Digest Connect), will not be repeated here. But, from a Big Picture view, there is a switch from investor focus on financial return to consideration of a broad range of returns from investment of capital or labor. The author learned, from initiatives to value pollution abatement, that inflation results in an increase in gross regional product. However, like pollution, inflation is universally thought of as undesirable. This led to significant revision in federal models for determining the value of pollution abatement. This was a forerunner of change now being considered by both government entities and investors. Value and damages from externalities are relatively simple concepts, but they are also ones influenced by local perception. People working at an Oregon sawmill do not know or care whether the lumber they are providing will be used to build new homes or replace ones burned in a California wildfire. This means they will advocate for their jobs, while effected Californians might rather see investment in fire prevention. To help rationalize such issues, the author advocates inclusion of local interests in decision-making where possible.

Thoughts from Jennifer Holmgren, Mark Cuban, Andrew Yang, and others

If risk and local interests are considered, one need is to heed thoughts of Jennifer Holmgren (CEO, Lanzatech – at ABLC 2020) regarding approach and numbering up to scale. Her thoughts:

The economy of the future can be expected to be quite different. It is not likely that it will be achieved by tweaking old systems which are not working. It will also be less risky if centered on techniques which are implemented through a micro-network of smaller sized units.

This is because: (1) Such a microgrid network might be damaged but total wipe out by a disaster would be less likely; and (2) Multi-unit networked units allow each unit to address local priorities. As an example, municipal solid wastes provide a readily accessible source of carbon managed by local government. Wastes could be delivered to reprocessing centers that replace presently used landfills and transfer stations. Such centers could then be configured to transform carbon into food, housing, energy, or products such as renewable polyethylene. Such an approach would permit consideration of local priority-needs for jobs, food, housing, etc., while also freeing up local waste management expenditures to support other local budget priorities.

Local preferences could have a profound impact of everything from markets to wealth distribution, transportation, and work.  Two examples come from other sources on the web. In a recent exchange between Mark Cuban and Andrew Yang (Yang Speaks at https://www.youtube.com/watch?v=4hREh9jywNU). They expressed the idea that information will be important to success in the future, and that investment in improving data systems will be a key to maintaining a world-leading position. A similar position has been presented by Norman Anderson, Chairman & CEO of CG/LA Infrastructure in a Jun 17, 2020,02:01pm paper entitled “Infrastructure Investment – What Is Your Vision?” (https://www.forbes.com/sites/normananderson/2020/06/17/infrastructure-investmentwhat-is-your-vision? ). An excerpt from that article:

Think of the hodgepodge of connectable dots in your mind: driverless vehicles, million mile batteries, drone delivery, big data, artificial intelligence, blockchain, smart cities, electric vehicles, 3D printing, BIM – just the tip of the iceberg in terms of technology. The idea of spending anywhere from $1 trillion to $3 trillion on 1950’s infrastructure is beyond outdated; investing in highways and bridges has all of the power to quicken our hearts and minds, and bring in the future as does a call for a rise in the gasoline tax when we are transforming our vehicle fleets to electricity (and hydrogen).

Similarly, we can anticipate that a sustainable future will be one in which people are important compared to capital. Thus, the author believes that a key to success will be a means of allowing ordinary citizens to acquire access in investments aimed at providing public good, such as flood works, forestry fire prevention, public transportation or other such infrastructure improvements. Indeed, he has promoted a public financing mechanism, set up as an infrastructure bank, which would facilitate such a process. The key to such a transformation is to recognize the status-quo as a capital base. This is like what California has developed to achieve publicly approved carbon emissions. As a result, where such emissions can be eliminated or reduced, an increment of change can then be sold as property-based offsets. This leaves value in the private sector, and that value is driven by “other requirements” which are also explicitly set by public regulators. In the case where an overall reduction is required, part of any transaction is captured as a contribution to such a reduction. Similarly, a portion of the captured value can be “assigned” to the public. Then the infrastructure bank can continue to market that value for individual owners as a means of transfer or conversion of an ever-increasing value into liquid (spendable) assets. Value will continually increase newer technologies (which still require a new emissions license or permit) displace older ones. To do so they will need to capture at least a portion of the old emission right by offering an amount attractive enough to entice the owner to sell. This may sound far-out, but it is just the real property model for land, which has facilitated historic growth from family homesteads to modern urban centers.

6 ways to get there

So, in summary, the first step in achieving a desired future is to form a vision of that, including the sets of goals one wishes to achieve through creation of that future vision. Then such goals frame an action plan for moving from “what is” to “what should be”. These also lay a foundation for addressing financial interests, such as what benefits can come from a proposed investment in change. Some “type-of-thinking” examples are suggested as follows.

1.    People: Live where they choose as they work from home and society increasingly turns old “jobs” into machine work leaving people free to pursue much different means of making a living.

2.    Real estate: Work from home becoming mainstream will lead to repurposing large office buildings, commuter facilities which lose commuters as riders and parking slots which remain empty. This will free large blocks of center cities for repurposing into more people-friendly applications.

3.    Markets: Goods will increasingly be acquired over the internet, electronic banking transformation is well on the way, mail is going electronic with Email and Twitter.

4.    Governance: A great deal will also go electronic: IRS already encourages electronic filing of taxes and refunds are mostly by direct deposit; the Census now allows electronic reporting; Vote-by-mail will soon prove to be too cumbersome, and electronic voting is sure to follow. Other programs will also increasingly switch to electronic interface with electronic-transfer payment of fees and distribution of benefits.

5.    Transportation: Significant changes will result from both electronic shopping and work from home. People’s interests will no longer be dominated by needs for a daily commute. Recreational use, vacation travel will become more important, Access to uber and mass transit will mean that people can look for convenience and/or more cost-effectiveness.

Of the freight side, driverless long-range trucking is more likely to evolve market area depots where local delivery vehicles are dispatched to deliver directly to consumers – more along the FedEx model. Look for such local delivery vehicles to go electric, with ships, trains and over the road big rigs providing a more limited market for synfuels to replace traditional fuels. Finally, a recent observation has been a switch away from large aircraft to an increase in small local carriers, with their smaller aircraft also switching to electric propulsion as batteries get better.

6.    Energy: There is already a move to grid decentralization, and a shift away from coal as a significant fuel. Step one is switch to natural gas for base-load power with increasing use of solar and wind. The difficulty is that this approach is just a patch on the existing system. However, there is a parallel move to load based generation, as large power consumers tend to look to conservation and waste to energy systems. The author’s view is that there is significant untapped value in the waste to energy market. This has been hindered by historic experience with acid rain and other such impacts. However, modern waste to energy systems can meet the most stringent regulatory requirements. Another consideration is that wastes often degrade in landfills and dumps, transforming their carbon content into atmospheric methane, which has the worst impact on climate change. It such fugitive emissions are considered, waste to energy can become totally carbon neutral. In addition, wastes from the power-user source can fuel their waste to energy system which can enhance economics. Finally, the author has worked out a power swap relationship where the local energy provider gains green-energy credits in return for a backup power commitment that provides enhanced supply reliability for the waste to energy user. There are companies now looking for and helping large energy users capture the benefits of such waste to energy applications.

One other innovation has been interest in a large equity investor in decentralized grid application of waste to energy technologies. The goal is to develop clusters of small waste conversion units within a larger metropolitan area. Cluster financing can gain investors economy of scale in both capacity and finance, while also preserving for local energy providers service to key utility customers who might otherwise be scavenged from their systems as outlined above. In the authors view, this represents a means of providing base-power stability for the larger grid, while also avoiding transmission losses and helping with grid decentralization championed by solar and wind advocates. In addition, modern information control technology can provide large facility economies of scale for micro-grid complexes. A micro-grid with integrated management and control can achieve operations and maintenance costs generally available only to large generation stations. The expectation is that micro-grids will become the footprint for electric utility growth and capacity replacement in the future.

This article was written by Russ Freeman, PE Retired. He can be reached via email at [email protected] or phone at 970 946 6615.

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