CCL NH Energy Strategy

Strategy For A
Low Energy Cost, High Economic Growth
Future For New Hampshire

Based on Global Greenhouse Gas Emissions Reduction Commitments
and Growing Support to Price Fossil Fuel Carbon Emissions Nationally

Summary

We vote for fossil fuel options with our wallets despite the costly problems we know their use and dependence cause.  Those external costs indicate a failure of the energy market.  Every country in the world has committed to reducing greenhouse gas emissions from fossil fuels, so the economic opportunities of providing clean energy solutions make addressing our nation's energy market failure a strategic imperative.  Growing resolve to act is indicated by the rapid growth of the House Bipartisan Climate Solutions Caucus to 86 members, half from each party, which formed in 2016.  Political will is building to correct the energy market failure at the federal level with a market-based, revenue-neutral solution:  a steadily increasing, fully refunded fee on the production of fossil fuels based on their greenhouse gas emissions, with border carbon adjustments.

States that anticipate and prepare will benefit most when Congress acts.  New Hampshire has a lot to gain from that type of national carbon pricing policy.  State leaders can increase this advantage by using proxy carbon pricing in current policy analysis, making efficiency and renewable energy a priority, and promoting smart-grid and electric transportation infrastructure.  Our state can help accelerate the national schedule by endorsing a policy like Carbon Fee and Dividend as some municipalities in New Hampshire and other states have done, and by joining the US Climate Alliance to signal our responsibility and commitment to transition to a clean energy economy.

New investments in natural gas infrastructure are likely to become stranded costs and result in higher energy costs for New Hampshire due to events beyond our state's control.  Rather than place bets on a fossil fuel-oriented future, our state should promote local businesses that provide clean energy solutions here at home and can be sold into the rapidly growing global clean energy market.  New Hampshire's combination of a strong manufacturing base, technically skilled workforce, and proximity to higher education puts us in a position of great advantage if we align state policies with global energy trends.  We should bet our state's future in the same direction that every other country, and every major scientific organization around the world, is taking on energy.

Based on the science, it is clear that the world must make the switch to clean energy for our children's future, as well as for the rest of life on Earth.  Based on the business opportunity, our state should be a leader in this switch to benefit as much and as soon as possible from the economic opportunities the global switch to clean energy presents.

Outline

1. Energy Market Failure

2.  Global Energy Trends and Market Opportunities

3.  National and States' Energy Trends

4.  National Carbon Pricing Options, Support, and Benefits

5.  A New Hampshire Energy and Growth Strategy

Energy Market Failure

Economics 101

    • Market Failure occurs when there is an inefficient allocation of resources in a free market. Market failure can occur due to a variety of reasons, such as monopoly (higher prices and less output), negative externalities (over-consumed) and public goods (usually not provided in a free market) - link
    • Negative Externalities occur when the consumption or production of a good causes a harmful effect to a third party - link

    • "Climate change is the greatest market failure the world has ever seen.”Nicholas Stern, author of The Stern Review, lead economist and adviser to Prime Minister Tony Blair and a former chief economist of the World Bank, estimated that the costs of climate change, if not addressed, will be equivalent to losing 5 percent (and potentially as much as 20 percent) of the global gross domestic product (GDP) “each year, now and forever.” Hundreds of millions of people could be threatened with hunger, water shortages, and severe economic deprivation - link

External costs of using fossil fuels

    • $5 trillion in global annual external costs due to using fossil fuels - WSJ link & IMF report link
    • World Economic Forum 2016 Global Risks Report - summary link & report link
      • Identified the failure of climate change mitigation and adaptation as the #1 most impactful threat to business in the next decade
      • Climate change will exacerbate water crises, increasing conflicts and forced migrations
      • Food security risks will increase due to climate change
    • US Taxes:  e.g. $30 billion per year spent on our Middle East military bases & shipping to "protect our oil interests" - link
    • US Subsidies: $6 billion in annual direct tax subsidies (oil depletion allowance, federal land lease deals, etc.)
    • 10,000 US deaths, and over $100 billion per year in health care costs and lost productivity from fossil fuel pollution - link & link
    • Property rights losses; energy price instability; national security threat multiplier
    • Trillions of dollars in current and future costs associated with global warming, climate change, sea level rise, and ocean acidification - link
      • Disaster relief and lost economic potential (e.g. added strength and rainfall in 2017 Hurricanes Harvey, Irma, and Maria = $300 billion) - link
      • Meta-study estimate of cost of fossil fuel emissions in US: $125/Ton CO2e - link link

Global Trends

Growing world commitment to address global warming from fossil fuel carbon emissions

    • Scientific consensus was reached decades ago that the Earth is warming due to human activities, mainly from greenhouse gas emissions from fossil fuels - Fourth National Climate AssessmentNASANASA testimony to Congress in 1988, every scientific organization around the world has come to the same conclusion (including these 200)
    • Paris Climate Accord 2016 - All 197 countries of the world committed to greatly reduce their greenhouse gas emissions
      • If the US withdraws twelve states (making up 40% of national GDP) will honor their commitments.
    • 40 countries (making up 25% of the global economy) have already put a price on carbon emissions and many more are in the process of doing so - link & link
      https://www.vox.com/energy-and-environment/2017/6/15/15796202/map-carbon-pricing-across-the-globe

    • Globally, carbon pricing initiatives will play an increasing role in the economy, with about 100 parties - accounting for 58 percent of global GHG emissions - planning or considering these instruments - link
    • France and UK - no new fossil fuel powered cars may be sold starting in 2040 - link
    • UK - reduced greenhouse gas emissions by 40 percent since 1990 while growing the economy by over 60%
    • European Commission roadmap - cut greenhouse gas emissions: 40% by 2030, 60% by 2040, and 80% by 2050 (below 1990 levels) - link
    • Fourth National Climate Assessment - 2017 - link
    • Specific natural disasters can be attributed to Global Warming - link

International Commerce & Trade Policy Changes

    • CORSIA - global aviation fuel market-based carbon pricing policy - link

China

    • 2017 - Planned construction of 100 new coal plants canceled - link
    • 2017 - Will invest $361 billion in clean energy over the next three years - link
    • 2017 - National auto cap and trade policy planned as part of goal to eliminate fossil fuel powered cars - link
    • 2019 - National carbon emissions trading system will cover 25% of industrial emissions - link

Global Market Opportunity

Energy spending makes up 8% of global GDP - link
The 197 countries that signed the Paris Climate Accord will spend an estimated $13.5 trillion on clean energy in the next 15 years - link

Who will meet the world’s enormous clean energy demand signaled by the Paris Climate Accord?

China

  • Centrally directed economy
  • Focused on producing clean energy solutions
  • Making significant investments
  • Putting a price on carbon this year

Germany

  • Major commitments to move to clean energy - link

United States

  • Direct subsidies strongly favor fossil fuels:  fossil fuel industry $6 billion/year, clean energy $1.3 billion/year
  • Hundreds of billions of dollars/year of external costs from the use of fossil fuels (indirect subsidies to the fossil fuel industry
  • Energy market failure is causing misinformed consumer preferences and short-sighted business investments
  • Free market forces are not operating efficiently, which is reducing our potential and therefore our chances for success

National Trends

Momentum is Building to Correct the Energy Market Failure

  • Citizens' Climate Lobby - 10 year old grassroots organization, endorsed by James Hansen, George Shultz, etc. - link
    • A national policy solution:  Carbon Fee and Dividend - link, (two minute video link)
    • James Hansen's TED Talk (Science, Economics, and Activism) - video link
    • CCL: Making Friends and Influencing Congress - link
    • http://www.greenenergytimes.org/2017/06/23/climate-activity-that-makes-a-difference/

    • CCL volunteer membership growth from 1000 to 90,000 in four years - link
  • Climate Leadership Council - new in 2017, endorsed by Ted Halstead, Henry Paulson, James Baker, Laurence Summers, etc. - link
    • The Conservative Case for Carbon Dividends - link
    • Ted Halstead's carbon pricing TED Talk - video link
  • State actions
    • States' Carbon Pricing Initiatives - link
    • Surge of State Carbon Pricing Initiatives - link
    • California: Carbon Fee and Dividend endorsement, Cap & Trade bill passed) - CA link
    • Vermont's Gov. Phil Scott's Climate Action Commission - link
    • Municipal endorsements for carbon pricing - link
  • 68% of Americans support requiring fossil fuel companies to pay a carbon tax - link
  • U.S. Conference of Mayors -- representing over 1400 cities -- overwhelmingly adopted a goal supporting 100% clean, renewable energy in cities across the country (accounting for  42% of U.S. electricity) - link
  • Town actions: since January 2016, 49 towns have committed to move to 100% renewable energy.  In May 2017, Hanover voters commuted to a goal of 100% renewable energy during a town meeting - link
  • FERC 2017 Technical Conference - pricing carbon emissions is the one thing all attendees could agree on - link
  • NESCOE and ISO-NE - agree carbon pricing is the efficient solution - link
  • ISO-NE - considering integrating NE states carbon reduction targets (80% drop by 2050) with carbon pricing via IMAPP - link
  • Rex Tillerson - the business case for revenue neutral carbon pricing - video link

Bipartisan House Climate Solutions Caucus

  • Created to enable Congress to discuss climate change and work on solutions in a nonpartisan way
  • Formed in 2016, growing rapidly, now at 66 members of Congress (half Republicans and half Democrats) - link
  • Cracking Washington's Gridlock to Save the Planet - link

The Expense of Betting Long on Natural Gas

  • GE cuts 12,000 jobs because of bad bets on natural gas over renewable energy - link

Growing Awareness of the Urgency of the Problem

  • The Fourth National Climate Assessment - 2017 Climate Science Special Report (see the Executive Summary) - link
  • Funding for Pentagon study of climate change impacts on national defense (46 Rs voted with Ds) - link & link
  • Yale Climate Communications - 72% of Americans are Alarmed, Concerned, or Cautious about human-caused global warming - link
    Global Warming’s Six Americas
  • Miami ($400 million bond for pumps), Boston (potential sea wall will cost more than the big dig) - link & link
  • General Motors switching to all electric vehicles - link
  • The most accurate climate models are turning out to be the ones that predict the worst ahead - link

New Hampshire Business Support for Clean Energy

  • NH Sustainable Energy Association - link
  • Worthen Industries - link

America’s Paris Accord Back-out Reaction

  • States are acting (12 joined the US Climate Alliance - representing 30% of US population, 40% of US GDP) - link
  • 369 US Climate Mayors (including Concord, Nashua, and Portsmouth) - committed to meeting Paris emissions reductions - link 
  • Cities are endorsing Carbon Fee and Dividend (e.g. Portsmouth City Council) - link
  • Businesses are acting (efficiency measures, proxy carbon pricing)
  • ⅔ of Americans want to stay in the Paris Agreement

Carbon Pricing

We can fix the broken energy market by "internalizing the negative externalities".  In other words, add the external cost of the use of fossil fuels into the cost of production so that it is reflected in the price of the product, enabling producers and consumers to make fully informed purchasing decisions. - video link
    • Shi-Ling Hsu - The Case for a Carbon Tax (Precis) - link
    • US Treasury - Methodology for Analyzing a Carbon Tax - link
    • What's a Carbon Tax - link
    • Carbon Tax vs Fee - link
    • 88 countries that have submitted their nationally determined contributions to the Paris Agreement have stated that they are planning or considering the use of carbon pricing as a tool to meet their commitments." - link

    Business support for carbon pricing

    Reasons for Business Support

    • Addresses risk
    • Avoids regulation
    • Predictable
    • Simple, transparent, fair
    • Allows each to compete effectively

    What O&G Majors Like about Carbon Pricing

    • Drive efficiency improvements
    • Favor natural gas over coal
    • Support carbon capture sequestration
    • Enable an orderly and efficient transition

    Business Support for a Revenue Neutral Carbon Fee

    • Business Climate Leaders - link
    • CLC Founding Members - link
    • World Bank: Why Business Leaders Support Carbon Pricing - link
    • ExxonMobil - on the benefits of using a revenue neutral carbon fee (like Carbon Fee and Dividend) to address the issue - link
    • Fifty New Hampshire businesses urge state leaders to endorse clean energy policies - link

    The Carbon Fee and Dividend Policy Proposal

    A market-based, revenue neutral, federal legislative carbon pricing solution that is viable, beneficial, & global in scope - link
    1. A fee based on greenhouse gas emissions is charged on fossil fuels when they enter the economy (at the source of production - well, mine, port of entry), starting at $15/ton CO2e and increasing $10/ton each year

    2. All the money collected (minus administration costs) is returned to American households monthly on an equal basis (1 share per adult, ½ share per child up to two children per household)

    3. A border adjustment tariff is placed on goods imported from, or exported to, countries without an equivalent price on carbon
    Carbon Fee and Dividend directs the power of efficient free market forces at the problem, protects household purchasing power and US jobs, and encourages global participation.

    Carbon Fee And Dividend Benefits

    Macroeconomic results - link

    CCL commissioned Regional Economic Modeling Incorporated (REMI) to do an independent study on the economic and environmental effects of Carbon Fee and Dividend over the first twenty years

    • REMI Report National results - link
      • Environment:  50% reduction of CO2 equivalent emissions
      • Economy:  Add 2.8 million jobs (net) and $1.375 trillion to GDP
      • Health:  Prevent 230,000 deaths from air pollution from coal
    • REMI Report Regional (New England) results - link
      • Net gain in jobs and local economy
      • $1000 gain in real personal income in 10 years, $1600 in 20 years

    Micro-economic results by New Hampshire District - link

    CCL sponsored an independent household impact study of Carbon Fee and Dividend by district in the first year, resulting in a working paper by Kevin Ummel in the Energy Program at the International Institute for Applied Systems Analysis (IIASA)

    • NH District 02 household impact study - link
      • 72% of all NH District 02 households break even or come out ahead
      • Strongest benefits are concentrated in the lower three-fifths by household income

     Additional Benefits

    • Position US and New Hampshire investment and industry to be competitive in the 21st century global market
    • Reduce associated land, air, and water pollution
    • Protect citizens' property rights
    • Reduce geopolitical tensions (ie. Middle East, Russia), improve national security
    • Save hundreds of billions each year in US health care, FEMA, and defense costs

    New Hampshire Energy and Growth Strategy

    A steadily increasing fossil fuel carbon emissions fee is likely at the national level for the reasons provided above.  By increasing efficiency and reducing fossil fuel usage now, New Hampshire can prepare to have relatively lower energy prices compared to other states in the future.  A successful energy strategy will also focus on providing businesses and consumers with the tools and metrics they need, building the electric infrastructure to support our future transportation and distributed generation needs, and incubating the skills, jobs, products, and services that will be in demand this century as the world shifts off fossil fuels:
    1. Reduce Future Energy Costs Relative to Other States and Countries
      • When a price is put on carbon emissions nationally, the states with relatively small carbon footprints will be more competitive
      • Prevent stranded costs (e.g. from new natural gas infrastructure)
      • Reduce state carbon footprint in preparation for national carbon pricing
      • Discourage new fossil fuel use (Avoid Concord Steam-type regressions)
      • Promote (preferably local) clean energy
      • Promote efficiency:  to save money, create jobs, incubate products
      • Promote smart grid and storage technology development and use

    2. Keep NH Energy Money In-state
      • Reduce spending on out of state resources ($4.9 billion in 2014)
      • Buy less (NH is #21 in energy efficiency - far behind other NE states)
      • Avoid making new fossil fuel infrastructure investments like the $400 million wasted on coal scrubbers for Merrimack power and the $25 million that will be spent converting state buildings to use natural gas rather than retrofitting Concord steam to use biomass - link & link

    3. Plan For a Competitive Advantage
      • Use a proxy carbon price (some other states' PUCs are already doing it)
        • Businesses using Proxy Carbon Pricing - link
        • States using Proxy Carbon Pricing - link
      • Create a state ecosystem for clean energy, efficiency, and electricity infrastructure to incubate ideas, products, and businesses that can sell into the global clean energy market (smart grid, storage, etc) which will create jobs and attract a young, educated workforce
        • Encourage clean energy (infrastructure, use, products, and jobs)
        • Encourage energy efficiency (buildings, transportation, and jobs), e.g. standardize home/building efficiency metrics
        • Job training - efficiency and clean energy deployment, manufacturing, etc.
        • Promote businesses that will meet the needs of the global energy market
      • Join the US Climate Alliance - link

    4. Prioritize Electric Infrastructure Investments
      • Transportation recharging stations
      • Prepare for smart grid deployment
      • No New Natural Gas Infrastructure is required
        • NH Carsey Perspectives Report - link
        • Down-scheduling and capacity withholding must be addressed - link
        • Big Gas' Myths Debunked - link

    5. Help Enable the US to Prosper
      • Endorse national revenue-neutral carbon pricing to help build the political will to enable Congress to pass Carbon Fee and Dividend Legislation
        • Leaders letter form - link
        • Businesses, local governments' endorsement forms - link

    Handouts

    1. Shi-Ling Hsu - The case for a Carbon Tax
    2. US Treasury - Method for Analyzing a Carbon Tax (page 26: the best results are obtained by returning all the money back to households)
    3. Climate Leadership Council - The Conservative Case for Carbon Dividends
    4. Citizen's Climate Lobby (CCL) - The Carbon Fee and Dividends Policy (and the CF&D Laser Talk as page 2)
    5. REMI Report - National Economic and Environmental Report on the benefits of Carbon Fee and Dividend over 20 years (Macroeconomic Study)
    6. REMI Report - Regional (New England) benefits of Carbon Fee and Dividend over 20 years (Macroeconomic Study)
    7. Household Impact Study - National Impact of the first year of Carbon Fee and Dividend (Microeconomic Study)
    8. Household Impact Study - Regional Impact of the first year of Carbon Fee and Dividend - NH District 1 & NH District 2 (Microeconomic Study)
    9. UNH Carsey Perspectives - New Hampshire’s Electricity Future: Cost, Reliability, and Risk
    10. Lead NASA Climate Scientist, James Hansen Testifies to Congress in 1988 to Warn about Global Warming from Fossil Fuel Greenhouse Gas Emissions
    11. Union of Concerned Scientists - Exxon Knew in 1981 Global Warming From Fossil Fuel Greenhouse Gas Emissions Was a Serious Threat - (pages 2-3)
    12. Some States are Using Shadow Carbon Pricing to Prepare for a National Policy  (aka Proxy Carbon Pricing)
    13. Fourth National Climate Assessment, Special Report 2017
    14. National Academy of Sciences: $120 Billion/Year in External Costs from Fossil Fuels in the US
    15. National Academy of Sciences:  Sixth Mass Extinction

    Other Available Formats

    History

    August 21, 2018 (JG) - Updates for OSI meeting with Jared Chicoine - added Yale public opinion results
    October 19, 2017 (JG) - Electronic submission to the Office of Strategic Initiatives ten year strategy update - SB 191
    October 17, 2017 (JG) - Oral and printed comments submitted to the Office of Strategic Initiatives for ten year strategy update - SB 191
    October 4, 2017 (JG) - NH Senate Energy Committee - Testimony for SB 125 hearing
    October 2, 2017 (JG) - Discussion with Joe Doiron, Deputy Director & State Energy Program Administrator, Office of Strategic Initiatives
    September 28, 2017 (JG) - Discussion with NH Senator Birdsell and Senator Avard about NH energy strategy
    September 8, 2017 (JG) - Presentation to BIA's Economic and Fiscal Policy group
    July 18, 2017 (JG) - Discussion with Dave Juvet about Tax Policy and NH energy strategy

    See Also

    NH Energy Considerations - link

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