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 Carbon Emissions Nationally

Summary

We continue to vote for fossil fuel options with our wallets, despite the costly problems we know their use and dependence cause.  Efforts are underway to fix this market failure at the federal level with a revenue neutral carbon tax.  It is growing increasingly likely that Congress will act, because every country in the world but one (Syria) has committed to aggressively reducing greenhouse gas emissions from fossil fuels. The resulting enormous clean energy market opportunity means addressing our energy market failure is a strategic imperative.  When Congress does act, states that have prepared for the change will be best positioned to prosper from it.

New Hampshire has a lot to gain from a federal revenue neutral carbon pricing policy.  State leaders can make decisions that will further increase our advantage by using proxy carbon pricing in current policy analysis, investing in and making energy efficiency 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 some other states have already done, and by joining the US Climate Alliance to signal our commitment and responsibility to move to clean energy.

New investments in fossil fuel infrastructure are increasingly likely to become stranded costs due to events out of our state's control.  Rather than place bets on a fossil fuel-oriented future, our state should promote 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 the state with the energy trends that are beyond our control.  We should bet our state's future in the same direction that every other country, and every major reputable scientific organization from around the world, have taken on energy.

Based on the science, the world must make the switch to clean energy for our children's future, as well as that of the rest of life on Earth.  Based on the business opportunity, our state should be a leader in this switch, to be able to benefit 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, Results, and Benefits

5.  A New Hampshire Strategy

Energy Market Failure

The economic theory

    • 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

    • IMF:  $5 trillion in annual external costs of fossil fuel use globally - 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, impacting conflicts and forced migrations
      • Food security risks will increase due to climate change
    • US Taxes:  e.g. $30 billion per year spent on 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 one hundred of billion of dollars per year in health care costs and lost productivity from fossil fuel pollution - link
    • Property rights losses; energy price instability; national security threat multiplier
    • Trillions in current and future costs associated with global warming, climate change, sea level rise, and ocean acidification - link
      • E.g. Disaster relief and lost economic potential (e.g. added strength and rainfall in 2017 Hurricanes Harvey, Irma, and Maria = $300 billion) - link
      • Previous estimate of cost of fossil fuel emissions in US: $36/Ton CO2e - link link

Global Trends

Growing world commitment to address global warming from fossil fuel greenhouse gas emissions

    • Scientific consensus was reached over three decades ago that global warming is caused by humans, mainly from fossil fuel emissions - NASA, 200 international scientific organizations
    • Paris Climate Accord 2016 - 196 countries have committed to greatly reducing their greenhouse gas emissions
      • Syria, a failed state, is the only country in the world not in the Accord.  The US has stated our intention to drop out but can not for three years (recently this intention has started to waver).  No other country has stated such intention.
    • Slideshow - 1990 to present - countries that have put a price on carbon emissions (in 2017 these countries make up 25% of the global economy) - 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, 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 road map - cut greenhouse gas emissions: 40% by 2030, 60% by 2040, and 80% by 2050 (below 1990 levels) - link

International Commerce & Trade Policy Changes

    • CORSIA - global aviation fuel market-based carbon pricing - 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 is 8% of global GDP.  Who will meet the world’s enormous clean energy demand?

China

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

United States

  • Direct subsidies:  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
  • 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 - video link
    • CCL: Making Friends and Influencing Congress - link
    • CCL volunteer membership growth from 1000 to 82,000 in four years - link
      http://www.greenenergytimes.org/2017/06/23/climate-activity-that-makes-a-difference/

  • 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 (e.g. California: Carbon Fee and Dividend endorsement, Cap & Trade bill passed) - link
  • FERC 2017 Technical Conference - pricing carbon emissions is the one thing all attendees could agree on - link
  • NESCOE and ISO-NE - do not support carbon pricing (beyond RGGI) at state level, but acknowledge carbon pricing is the efficient solution - link
  • Rex Tillerson - the fundamental business logic of carbon pricing - video link
  • ExxonMobil - on the benefits of using a revenue neutral carbon fee (like Carbon Fee and Dividend or Carbon Dividends) to address the issue - link

Bipartisan House Climate Solutions Caucus

  • Created to enable Congress to discuss climate change issues and work on solutions in a nonpartisan way
  • Started in 2016, now with 60 members of Congress - 50% Republicans & 50% Democrats - link
  • Cracking Washington's Gridlock to Save the Planet - link

Growing Awareness of the Urgency of the Problem

  • Funding for Pentagon study of climate change impacts on national defense (46 Rs voted with Ds) - link & link
  • Yale Climate Communications - 75% of Americans are Alarmed, Concerned, or Cautious about human-caused global warming - link

  • 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

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
  • Cities are acting (369 US Climate Mayors, Cities endorsing Carbon Fee and Dividend, e.g. Portsmouth City Council) - link & 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 into the cost of production, so that it is reflected in the price of the product downstream, and consumers can 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

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

ExxonMobil, Shell, GM, Johnson & Johnson, Pepsi, P&G, Schlumberger, Unilever, Santander, ....

  • Business Climate Leaders - link
  • CLC Founding Members - link
  • World Bank: Why Business Leaders Support Carbon Pricing - link

The Carbon Fee and Dividend Policy Proposal

A market-based, revenue neutral, federal legislative solution that is viable, beneficial, & global in effect - 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
  • CCL’s methodology, growth, and impact - link

Carbon Fee And Dividend Benefits

  • The Regional Economic Modeling Incorporated (REMI) Report:  National results in twenty years - 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
  • Regional benefits for New England:  net gain in jobs, economy and real income - link
    • REMI regional report:  $1000 gain in real personal income in 10 years, $1600 in 20 years - link
    • Local household impact report:  Benefits to low and middle income families - link
  • Directs the power of efficient free market forces at the problem while protecting household purchasing power 
  • Position US industry to compete 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, defense costs
  • Border carbon adjustments protect US jobs and strongly encourage global participation 

NH Strategy

  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)

  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)
      • Job training - efficiency and clean energy deployment, manufacturing, etc.
      • Promote businesses that will meet needs of the global energy market

  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
  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 - link
      • Businesses, local governments endorsement - 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 (Macro-economic Study)
  6. REMI Report - Regional (New England) benefits of Carbon Fee and Dividend over 20 years (Macro-economic Study)
  7. Household Impact Study - National Impact of the first year of Carbon Fee and Dividend (Micro-economic Study)
  8. Household Impact Study - Regional Impact of the first year of Carbon Fee and Dividend - NH District 1 & NH District 2 (Micro-economic Study)
  9. UNH Carsey Perspectives - New Hampshire’s Electricity Future: Cost, Reliability, and Risk
  10. Lead NASA Climate Scientist, James Hanson 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)

Presentation Format

History

October 4, 2017 (JG) - NH Senate Energy Committee - Testimony for SB 125
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 NH energy strategy

Comments