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With Earth Day activities in progress across the Unites States and the rest of world, I am wondering what relevance this day of activism still has. In an excellent blog post, my colleague Lena Davie rightly points out that it is great that people dedicate a day to the environment, but action on just one single day each year is hardly going to have much effect. This is a timely reminder. While Earth Day has become part of American national culture and as such is important on a symbolic level, it is questionable how effective it really is in light of today’s environmental challenges.

Historically, Earth Day certainly was significant. A recent study by the historian Adam Rome, The Genius of Earth Day, reminds us of the scale of the original 1970’s event, and tracks its impact. Rome shows how the idea of a nation-wide environmental teach-in, proclaimed by Wisconsin Senator Gaylord Nelson on September 20, 1969, inspired more than 12,000 events across the country on the original Earth Day on April 22, 1970. This success was largely due to the fact that Nelson was smart enough to hire dedicated staffers to organize the teach-in but also allowed his idea to go viral by not insisting on top-down control of the individual events and their messaging.

And so a diverse group became a movement, consisting of liberals looking to better the quality of life; scientists concerned with, and documenting, the level of pollution of water, ground and air; middle-class women worried about their deteriorating environment; young activists interpreting the fight for the environment as just another incarnation of the fight against the ‘system;’ and conservationists active since the era of Teddy Roosevelt. Nelson didn’t mind these groups taking ownership of his idea, and this helped the idea to go viral and ultimately to form a generation of environmentalists and environmentally conscious citizens. So nothing is as powerful as an idea whose time has come, it seems. And indeed: Earth Day 1970 highlighted an environmental crisis in the U.S. that quickly became apparent and tangible to every citizen. Remember, this was before any efficient regulation of polluting industries was in place.

Rome’s study also shows, however, that the original Earth Day was about much more than these tangible quality-of-life issues. While pollution of rivers, lakes and the oceans, of air and soil certainly stirred up much attention, it was also largely noncontroversial that this was not a good thing. The questions posed by the movement in 1970, however, were more fundamental. I find two points are of particular interest today: What I would call the question of a sustainable way-of-life, and the question of sustainable growth.

Inquiring about a sustainable way-of-life, for instance, was largely questioning the suburbanization of the United States. A lot of attention in the late 1960s was given to the fact that with the growth of suburbia the natural land is shrinking, and often valuable habitats are destroyed. This criticism of suburbia has great implications, because suburbia is the home of hydrocarbon man and to a large degree based on the availability and affordability of cars and fuel. With suburbia come motorways, and traffic, and the national fixation on the gas price. Living in New York City it is easy to forget, but my impression from recent travels is that the Earth Day movement did not succeed in changing this, but that the development of ever more suburban sprawl continues today. And with it, the issue of sustainability.

The question of sustainable growth is even more interesting. The argument was that gross national product (GNP) is an insufficient indicator of wealth because its logic suggested that polluting and cleaning up would be more desirable than not polluting because the cleaning-up effort would also contribute to total GNP and thereby factor into the national wealth. If this ‘wealth’ includes negative environmental impacts, the argument goes, it is questionable that ‘wealth’ is so desirable after all. Sustainable growth would need a combination of quantitative and qualitative measurements which would allow marking pollution and counting it as a negative. Again, as fascinating as this argument is, I am not sure that this idea has much traction amongst economists and the informed public today. (It would certainly create a number of issues on its own.)

Coming back to the question of Earth Day’s significance today, I’m afraid it is a mixed bag. While it is great to have a dedicated, nation-wide day to think and learn about the environment and about sustainability, tangible action would be much preferred. I personally think that the only way to achieve real change would be an adequate price on pollution. Recent experiences with carbon trading in the European Union do not support much optimism.

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The German government is unlikely to support import tariffs for solar panels made in China despite domestic opposition to their policies. Veterans of the German renewable energy community, such as Hans-Josef Fell, have suggested that the German government’s decision to significantly reduce Feed-in-Tariffs for solar photovoltaic energy would be destroying the German solar industry. While it is true that the entire sector has come under increasing pressure, this is hardly a phenomenon that is limited to Germany. China, in fact, currently seems to suffer just as much as any other country, as the recent bankruptcy of Suntech suggests. And despite the recent stock price surge for First Solar, this doesn’t seem to be much different in the U.S., despite the trade war the country started with China.

It is important to keep in mind, that behind the push for protectionism in the U.S. is a German company, SolarWorld, which has a significant manufacturing footprint in the United States. In a paper published last year by Germany’s Heinrich Böll Foundation as second installment of a series on the German Energy Transition, Craig Morris explains why. The quick answer is, as a leading exporter Germany cannot afford a trade war with China. Morris quotes Fell acknowledging that.

More importantly, however, is the business case behind it. And Morris lays out how Germany benefits economically even if the panels installed are made in China. There are two main reasons for this. Firstly, the German solar industry is strong all along the value chain which leads to the fact that products made in China will likely lead to some value creation in Germany. Germany is particularly competitive in the equipment sector which exports production lines to China which is a more sophisticated technology than producing solar panels. Secondly, the value of services and components that are needed to install and connect the panels is actually higher than the value of the panel, and the services can only be sourced locally. Morris estimates that more than 50% of the total value creation is local.

So far, so good. Morris states that a large solar market helps Germany to secure these advantages. And here is where I would start questioning his very positive assessment of the economic benefits on Germany. The fact is that the solar boom in Germany is paid by all consumers of electricity, with energy-intensive industries paying a much-reduced fee. The size of the German market is driven by the level of Feed-in-Tariffs that the German renewable energy law guarantees. So to answer the question whether Germany really profits from local installations of solar panels made in China, we would need to consider the question whether (a) the subsidies are necessary and (b) efficiently allocated.

It seems to me that while German electricity consumers are doing the world a favor by driving down the cost of solar with the demand created by the Feed-in-Tariffs, they may not profit that much themselves as the total cost is still quite high. Morris is right to call for the U.S. to jump into solar now, because with the more beneficial weather conditions the cheap panels make even more economic sense. The U.S. would only need to brush aside bureaucratic hurdles, and a solar boom may be coming.

As to the question of why Germany is against a solar trade war, I think Morris is right: The question of Feed-in-Tarrifs aside, free trade is Germany’s best option.

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The Washington, DC office of the Heinrich Böll Foundation, a think tank close to Germany’s Green party, recently concluded a series of short papers on Germany’s Energiewende (energy transition) which aims to explain what is going on with Germany’s energy policy, and why. As the question what the world could learn from Germany’s experiment, if anything, is a major concern of my blog posts, it is worthwhile reviewing the articles individually.

The first installation of the series, Angst or Arithmetic?, by Paul Hockenos, a Berlin-based American writer and author of a well-received book on Joschka Fischer and the German green movement, is looking to put the German energy transition into perspective. The author is making the case that Germans are neither irrationally afraid of nuclear energy nor is the nuclear phase-out driven by “postwar angst”. Quite to the contrary, the author claims, Germany finds itself in the midst of other European nations such as Sweden, The Netherlands, Belgium and Switzerland, all of which are phasing out nuclear as well. What does make Germany’s energy transition unique in the author’s eyes, however, is the fact that the country is aiming to phase-out nuclear while maintaining its status as an industrial heavyweight and meeting ambitious decarbonization goals.

To make his point, Hockenos skillfully lays out the development of the anti-nuclear protest movement in Germany, starting with demonstrations in the early 1970s in Wyhl, where conservative farmers were joined by conservationists and left-wing environmentalists to force a powerful utility company to cancel plans for a nuclear power station. This headline-making success catapulted the movement to national prominence and consequently helped to form its national footprint. Decisive then, in Hockenos’ eyes, was the fact that experts, some from Germany’s nuclear industry, like Klaus Traube, joined the movement to create a fact-based approach which was, if you want, political education based on liberal enlightenment ideas. These experts published widely read bestsellers and also formed think tanks, such as Öko-Institut, or Institute for Applied Ecology, which still exists today. Finally, Chernobyl, which almost created mass hysteria, with closed playgrounds, destroyed produce, and kids and pregnant women ordered to stay inside, made the risks of nuclear energy obvious to everyone. The author concludes that the nuclear phase-out is not “the reaction of a spooked people to Fukushima” but that it “has arguably been part of Berlin’s energy agenda since the early 1990s.”

While the historical facts are correct, it strikes me that the initial question is only superficially answered, if at all. Hockenos is certainly right when he claims that the German anti-nuclear movement was well entrenched in Berlin’s political class, if not hegemonic, before the Fukushima nuclear disaster. Just think of the first Atomausstieg (nuclear phase-out), which the Schröder-Fischer government (“red-green” coalition) negotiated with the nuclear power utilities in 2000 and which became law in 2002. But he fails to address the question, why this was the case. Here are three factors which I believe need to be taken into consideration:

Firstly, Germany’s anti-nuclear movement is, to a large extent, a not-in-my-backyard coalition which prima facie is interested in (a certain understanding of) the good life, here and now, but does not necessarily act politically responsibly. Hockenos provides great insights in the local roots of the movement and its broad coalitions, from Wyhl to Gorleben (which was long planned to be the permanent repository site for nuclear waste), but fails to analyze this critically. I would argue that a small group of anti-nuclear protesters, mostly academically educated activists from urban areas with experience in previous protests (using tactics they learned from the American civil rights movement), used the protective instincts of conservative local groups and skillfully turned this into a movement. The nuclear power plant was not supposed to be built here. This legacy still resonates when, today, local “green” groups protest against desperately needed grid extensions to transport wind power from the North to the South because they literally do not what the pylons in their backyard. Politically, this is obviously not very satisfying, because it does not provide a solution to the problem but only criticism. (Arguably, the national leadership of Germany’s Green party is aware of this now and addresses this critically and responsibly.)

Secondly, the German perception of nuclear energy can only be understood in the context of the cold war and the fear of nuclear annihilation. This fear proliferated in Germany from the 1970s onwards and culminated in the Friedensdemonstration, or peace demonstration, in Bonn, the old governmental seat of West Germany, in 1982. Roughly half a million citizens protested NATOs “double-track decision” and, more broadly, American nuclear weapons on German soil. While the history of the so called Friedensbewegung, or peace movement, is complex, it is fair to say that is built on 1950s protest against German rearmament, 1960s radicalism and criticism of the Vietnam war, as well as specifically German ideas of a “third way” between Russian communism and American capitalism which have a long intellectual genealogy in Germany and which gained momentum in the 1970s. The German anti-nuclear movement is intimately linked to the peace movement, and managed to link the public’s fear of nuclear annihilation with questions about the civil use of nuclear energy. So when German’s think nuclear, they think death. I am not so sure that this is rational, even while I may have the same thoughts, as I am a (German) child of my time.

Finally, Hockenos fails to address the German Technikskepsis, or skepticism of technology, which is deeply rooted in the country’s political culture and crucial to understand the German debate on nuclear energy. While Germany has a globally renowned engineering expertise, there is also a long intellectual history of fearing the (unintended) consequences of widespread use of technologies. Note that the German term Technik only inaccurately translates into the English word technology. Technik it is much closer to the Greek τεχνικός (technikós) which includes human systems, and is distinct from the German Technologie, a distinction that is absent in the English language. Technikskepsis, again, is a complex matter, and while this blog-post cannot adequately spell out its genealogy, it is worth noting that it has roots in Martin Heidegger’s philosophy from where it spread to political ideas on the left with Herbert Marcuse, a student of Heidegger who later joined the legendary Institute for Social Research. It’s most influential rendition is arguably Hans Jonas’ The Imperative of Responsibility (Das Prinzip Verantwortung, German 1979, English 1984) which lays out an ethical principle for the age of technology: “Act so that the effects of your action are compatible with the permanence of genuine human life.” And this imperative, of course, is precisely what the critics claim nuclear energy cannot meet. If, and how, these ideas are compatible with a sustainable energy transition in Germany is a different question which I will address in another blog post.

For now it suffices to conclude that Hockenos short analysis is a great start of what should be a much bigger project: to bare the roots of the German anti-nuclear movement and the Energiewende.

In a recent interview with the German business webpage manager magazine online, Arnold Schwarzenegger, the Austrian-born bodybuilder, actor and former governor of California, sharply criticized U.S. energy policy, or, as he put it more pointedly, the lack thereof. Schwarzenegger, a champion of renewable energy during his tenure as governor, says he admires Germany’s determination to switch to (a mostly) renewable energy production in a single generation, while he despises what he sees as a lack of strategy and coordination of energy policy in the U.S.

Schwarzenegger’s endorsement of German energy policy is pretty light on facts. He doesn’t bother to discuss the Energiewende’s issues, which committed readers of this blog may be familiar with. But he is not alone in criticizing the lack of vision and coordination in U.S. energy policy. In fact, both business leaders and environmentalists are united in their criticism of current policies.

Tellingly, Schwarzenegger doesn’t offer any pragmatic proposals. He doesn’t map out which fixes would help the U.S. to become more like Germany in energy terms. He suggests that the German energy transition is better policy altogether because it is a daring plan. While enthusiasm for planning in the realm politics has yielded mixed results in the past, there is an underlying question here which deserves some scrutiny: Is Germany’s approach to energy policy more effective and more politically and economically sustainable (i.e. smarter and cheaper) than Obama’s “all of the above” strategy? I.e., is the Energiewende, which could be dubbed “either/or” in policy terms as it plans to first phase out nuclear and then fossil fuels altogether, better suited to tackle climate change and cheaper than Obama’s approach? Note that this question is asking for actual effects rather than lofty rhetoric and long-term planning objectives.

The question couldn’t be timelier, as with last week’s nominations for the relevant cabinet positions, the outlines of Obama’s second term energy policy became clear. It is marked by three goals: (1) Provide affordable energy for a growing economy and a recovering middle class while (2) reducing the United States dependency on energy imports from unfriendly and/or undemocratic nations and (3) pragmatically tackling climate change. While Germany’s Energiewende may tackle the latter more explicitly, and may render Germany more energy independent in the far future, it is certainly failing on the first goal and moreover relying on Russian imports for about a third of its natural gas.

But let’s have a look at the U.S.: Obama nominated Ernest Moniz, MIT physicist, as energy secretary, and Gina McCarthy to lead the Environmental Protection Agency, where she is currently working as assistant administrator. At MIT, Moniz currently runs the school’s energy initiative, a position in which he oversaw research on pretty much any energy source known to mankind. After the Fukushima nuclear disaster, he wrote an influential article in Foreign Affairs, defending nuclear power on environmental grounds: Nuclear power plants don’t emit any CO₂ which is why we need them to tackle climate change. McCarthy may be less outspoken, but her job at the EPA may require precisely that. Coral Davenport reported in the National Journal, that Obama remains quiet about Climate Change for strategic reasons, but his administration is determined to tackle the problem nonetheless: not through legislation, which is currently unthinkable in Washington due to Republican denial of climate science and their determination to kill any relevant bill, but through the regulatory authority of the EPA, and in consultation with industry and other business leaders. She writes:

“Inside Washington, in a warren of back rooms at EPA, dozens of environmental officials are working to craft landmark climate-change regulations that they hope will curb industrial pollution—and withstand a tsunami of legal and political attacks. To help them do it, they’re inviting in heads of the industries and businesses that will soon be forced to implement the rules. Business leaders, although they’re not happy about the coming regulations, are jumping on the opportunity to communicate their concerns and perhaps help shape the rules they’ll have to live by. And the Obama administration hopes that the dialogue will help defuse some of the opposition to come.”

If we accept that Obama will tackle climate change through enhanced regulation by the EPA, two major differences between the U.S. approach and the German approach remain: Nuclear power, obviously, but more importantly shale gas. While Moniz’ nomination was sharply criticized by environmentalists because of his favorable position on fracking (even if DoE does not have jurisdiction over that issue, as some acknowledge), Germany is effectively rendering fracking in the country impossible and is instead using lignite to back-up the intermittent renewable energy production. This negatively affects Germany’s over-all CO₂-emissions, because gas burns cleaner than lignite. While the U.S. is reducing its carbon footprint by switching from coal to gas, Germany is struggling to do the same even though it invests heavily in renewable energy.

This means, however, that despite the lofty rhetoric around Germany’s Energiewende – and Mr. Schwarzenegger’s endorsement, the de facto effects of these policies are not that convincing. The U.S. “all-of-the-above” energy policy may be better policy – if it includes serious attempts to tackle climate change. And it may be politically and economically more viable.

The liberal blogosphere in the U.S. is full of ridicule and mockery of FOX News these days. Not that this is a new thing, but at issue today is a rather funny claim by Shibani Joshi, the network’s business reporter. In a recent show, she claimed that Germany is more successful in developing its solar industry than the U.S. because it is smaller – and has more sun.

Anyone who ever visited Germany – or recently looked at a map – knows that the country is not exactly known for a holiday in the sun. Berlin is located further north than Calgary, Munich is roughly on the same latitude as Seattle, and none of these places are known to be particularly sunny. Some of my readers may know that New York City is located slightly further to the south than Naples in Southern Italy, which leaves most of the lower 48 States exposed to much more direct sun and therefore more intense solar radiation than Germany could ever dream of. Phoenix, Arizona, for instance, is roughly the same latitude as Baghdad in Iraq, and a similarly great location to harvest the energy of the sun. To make a long story short, in light of these facts the U.S should be the much better place to invest in solar than Germany.

Yet Ms. Joshi’s mishap and the upheaval it triggered in the blogosphere point to a more relevant and interesting issue: Policy and energy investments. While the entire episode on FOX was apparently designed to discourage the Obama administration from handing-out additional solar subsidies, Ms. Joshi correctly stated that policy plays a major role for any energy source in the U.S.; a point so important that she reiterated it in her correction on the network’s website.

This statement might have actually benefited from a closer look at the German case. As I have previously stated in this blog, the German renewable energy boom is purely policy driven, and as such a great success. Germany’s Energiewende, or energy transition, does however create myriad challenges, such as exploding costs and energy prices, grid instability and volatile (intermittent) renewable energy production, and the urgent need for conventional back-up capacity without a business case to support it. Successful as the German feed-in-tariffs may be in unlocking investment in solar, a serious discussion could point to the fact that even successful energy policies have a downside. But once they are instated are very difficult to change. From there you could draw conclusions for the U.S.

Ms. Joshi unfortunately missed that opportunity.

This is a particular shame because, in light of these facts, she could have discussed new and innovative financing models for solar that are currently being developed, and may prove to be more cost efficient than Germany’s feed-in-tariffs. As the New York Times recently reported, the U.S. renewable energy industry is looking into using existing tax advantages like the master limited partnership and the real estate investment trust to help make financing for solar easier and cheaper. To Ms. Joshi’s point that all energy development relies on policy, these two investment structures would use tax breaks that are usually connected to oil and gas or real estate industries to create a business case for solar. In a similar vein, the Financial Times reported that bankers are currently creating solar bonds that are backed by cash flows generated from leasing solar panels to businesses and homeowners.

Both of those approaches could lead to the U.S. benefiting from its abundant sunshine while protecting taxpayers’ (and energy users’) pockets from the largess of Germany’s feed-in-tariffs.

And American energy consumers could enjoy more holidays in the sun.

As I just recently relocated to New York City from Berlin, Germany, this year’s Super Bowl was my first to watch since I moved to the United States. I do not particularly care for American Football, but the sporting event, arguably America’s most important each year, is worth watching for the commercials alone. (Which by the way were not that great this year, writes Stuart Elliott.) If you tuned in, however, you witnessed a colossal power failure which interrupted the game for more than half an hour. Maybe it’s the German in me, but if this does not trigger a national debate on energy infrastructure in the U.S., I think the outlook may remain very grim.

William Galston of the Brookings Institution just recently argued that the crumbling U.S. infrastructure has real economic costs. While he is mostly referring to roads and train tracks, ports and airports, this fact is particularly obvious regarding the electricity supply. In our information age, almost all value is created with the help of electricity. A 2006 study by researchers of the Carnegie Mellon Electricity Industry Center states that the average electricity consumer in the United States has to deal with 214 minutes without power per year compared with 29 in The Netherlands, 6 in Japan, and 2 minutes in Singapore. In the U.S., the study shows, the average electricity customer loses power once every 9 months. In Japan, it is once every 20 years. My guess is this gap has only grown, despite the Fukushima nuclear disaster.

Faced with the Super Bowl power failure, E. J. Dionne, a journalist and professor at Georgetown, quickly started the debate on national infrastructure with a tweet, while Stephen Walt, a Harvard Professor, made the point that the power outage will (further) eclipse American power. A country that cannot keep the lights on during its most important sports event may have trouble maintaining its status as a global superpower. Brand Plumer of the Washington Post then started the serious debate on infrastructure, asking whether a smart grid would have prevented the black out.

We can only hope that this debate continues.

In a recent interview with Welt am Sonntag, Günther Oettinger, the European Commissioner for Energy, urged the German Chancellor, Angela Merkel, to create a German Energy Ministry after the general election this fall. While his advice is somewhat presumptuous because Ms. Merkel first has to win the election before she would have that opportunity, it is a timely request.

Germany’s Energiewende proves to be much more challenging than Ms. Merkel initially thought when, in the wake of the Fukushima nuclear disaster, she called for a nuclear phase out and a predominantly renewable electricity generation within a generation. The energy issues her government is facing are manifold: from sluggish grid extension and black-out threatening volatility of renewables to exploding electricity prices, rising CO2 emissions and lacking investments in traditional generation capacity.

Political leadership, however, is hard to find.

This is partially due to the fact that today, the German energy portfolio is contested between four different Federal Ministries: The Ministry for Economics regulates electricity markets, traditional electricity generation and grids while the Ministry for the Environment oversees nuclear power plants and subsidies for renewables. Energy efficiency and electric mobility, however, are partially claimed by the Ministry of Transport, Building, and Urban Development, while many research grants are awarded by the Ministry of Education and Research. This is obviously confusing, if not counter-productive, particularly considering the on-going quarrel between the Federal Minister for the Environment, Peter Altmaier, and the Federal Minister for Economics, Philipp Rösler.

One ministry with the entire energy portfolio could remedy that.

Mr. Oettinger argues on a tactical level: He claims that Germany’s position on energy issues is often neglected in Brussels because there are too many voices to be effective. But his request is in line with demands from industry leaders and lobbyists. Some pundits, however, are more cautious. Ms. Merkel could be quite happy with the current arrangement: While her Ministers are fighting about the energy portfolio, she is the one in control and calls all the shots.

This may be the case. But as the policy output continues to deteriorate, Ms. Merkel may soon learn that she may need someone in charge for energy who takes the blame. Otherwise voters may hold her personally accountable.

So chances are that Mr. Oettinger will get what he wishes for.

We are witnessing an energy revolution, Walter Russell Mead, professor at Bard College and editor-at-large of The American Interest, recently proclaimed in a series of blog posts (parts one, two, three, and four); a revolution “much bigger, and more consequential than the Arab Spring;” a revolution, moreover, that will result in “a powerful boost to American power.” Mead sees a “new age of abundance for fossil fuels” in the making which proves peak-oil theories wrong and renders chatter about American decline irrelevant. Due to now extractable resources in tar sands oil in Canada and shale oil & gas in the U.S. the “center of gravity of the global energy picture is shifting from the Middle East to … North America.” This energy revolution will consequentially bring about a new American century.

That, in a nutshell, is Mead’s bold thesis at which I will have a closer look in this first installment of my e-Ideas series. And just to state the obvious: the series is going to evolve around discourses, books, and studies, i.e. the impact of energy trends and innovations on society and politics adn vice versa, rather than technological innovations of which I would only have very limited understanding.

Mead’s energy revolution is driven by unconventional oil and gas resources that recently have become technically and economically extractable and/or have been discovered. These resources make Canada and the U.S. “each richer in oil than Iraq, Iran and Saudi Arabia combined.” Israel and China also have such resources and will profit accordingly.

According to Mead this new fossil fuel reality has four major consequences:

1. New Geopolitical Fundamentals
The energy revolution will substantially shift the fundamentals of geopolitics by creating “winners and losers”; namely the U.S., Canada, Israel, and China as winners, and Russia, the Middle East, and petro states such as Venezuela as losers. The economically most advanced countries of the West will become less dependent on energy imports from autocratic regimes and unstable regions such as the Middle East, Mead argues, and can shift political attention and military resources to other areas. Shale oil will also make China more independent from imports and therefore less aggressive in its drive to secure energy resources overseas. Russia, on the other hand, will lose leverage because Europe will have alternative sources of supply. The Middle East will lose its prominence on the world stage, because its resources are not as relevant any more.

2. A New American Century
This geopolitical shift will stabilize the liberal global order, stimulate global economic growth, and allow the potential rivalry between the U.S. and China to become ever more cooperative. Because energy was critical to the first American century, Mead continues, and since the energy abundance that propelled the U.S. to global leadership is back, a new American century is in the making. A less Middle East-centric foreign policy will allow the U.S. to become more of the benevolent hegemon it has been after World War II, securing the liberal capitalist global order, rather than fighting wars in the sands Iraq.

3. The Reincarnation of the American Dream
The new fossil fuel resources in the U.S. will dramatically alter the domestic situation as well, Mead claims. For the first time in decades, new well-paying blue-collar jobs are created, a second coming of the American Dream. Demand for skilled labor will change the immigration debate. Manufacturing may return to the U.S. because cheap energy will be a major competitive advantage. A new geography of power will alter politics: A shift to the Mississippi-Ohio-Missouri river system and the Midwest, where most of the new resources are located, will strengthen a pragmatic moderately conservative ideology and weaken liberals and ultraconservatives. And more of American prosperity will actually remain in the U.S., because less energy imports will significantly cut the trade deficit.

4. A Cleaner Planet
Somewhat counter-intuitive, Mead claims that the new abundance of fossil fuels will also help protect the climate and strengthen environmentalism. In his final, and most polemic, blog post he argues that cheap shale gas will accelerate the switch from coal to gas, resulting in less carbon emissions. The newly accumulated wealth will help fund more environmental initiatives. And until these resources are dried up later in the twenty-first century, the wind and solar industries can mature, become more competitive and more reliable. This will all help the transition to a cleaner, low-carbon economy.

Mead’s argument is conclusive and well thought through, even if his polemic against green energy seems widely overstated. He somewhat underestimates, however, the political risks that come with the production of unconventional oil &  gas. Hydraulic fracturing increasingly becomes a major concern not only for environmentalists in the U.S., while in Europe this extraction technology is stigmatizing as dirty and risky. The same is true for Canadian oil sands. Consequentially, American pundits such as Thomas Friedman, the NY Times columnist, are much more skeptical of a golden age of gas in the U.S. While its economic and geopolitical benefits are obvious in the short term, Friedman states in an opinion piece, the shale gas boom may delay renewable energy production. “That would be reckless,” he writes because in light of recent droughts in the U.S., climate change becomes ever more apparent, and dangerous. A warning, Fatih Birol, chief economist of the International Energy Agency, already voiced earlier this year, reacting to the EU’s labeling of natural gas as “green energy”.

But Friedman pushes further and specifically targets unconventional gas. “Extracting it can be very dirty,” he writes, essentially demanding a life cycle analysis of all energy sources. While he concludes with proposing a carbon tax, which in his eyes will level the playing field for renewables and also allow raising more taxes to tackle the U.S. federal budget deficit, his article that has been duly refuted from conservative side, shows that unconventional gas is highly politicized.

Politics may thus derail Mead’s energy revolution, if not managed professionally. A good start would be sound energy policies. As The Economist recently noted, neither presidential candidate appears to have, however, “the vision now required in energy policy.”

In a recently published study, the German National Academy of Sciences, Leopoldina, issued a devastating verdict on the future of biofuels in Germany, the EU, and the rest of the world. If the rationality for using biofuels is a reduction of CO₂-emissions, its researchers argue, life-cycle-analyses (LCAs) of current technologies and processes show that most biofuels are part of the problem rather than part of the solution. Considering all steps in production and use of biofuels, including fertilizers, labor and conversion, the study aggressively questions the reasonableness of EU’s 10 percent by 2020 biofuel goals in transportation. (The relevant EU directives are 2009/28/EC, 2009/29/EC, 2009/30/EC.) The study concludes that none of the existing the biofuel options execpt biogenic waste would sustainably help the climate.

Basically, this is not news. Biofuels have been heavily criticized by NGOs such as Greenpeace in the past, and continue to be a campaign target. In Germany, a country with famoulsy ambitious renewable energy targets, there is, however, in addition to these facts an increasingly solid scientific consensus that biofuels should not play a prominent role in the country’s energy transition. Nobel laureate Hartmut Michel of the Max Planck Institute of Biophysics in Frankfurt told the F.A.Z. in an interview.”I don’t want to support the nonsense of biofuels.” The press is now mostly critizising biofules.

Ultimately the endgame for biofuels in Germany may be looming, because there is no public voice supporting them. The association safeguarding the industry’s interest on the federal level, Bundesverband Bioenergie e.V., issued a statement against the Leopoldina on their website, stressign the role biofuels can play in the transport sector. But was virtually unheard in the debate. And major industrial biofuel players aren’t taking part as well. If the industry does not publicly make the case why biofuels are necessary and beneficial for Germany’s energy transition, the renewable energy future in this country may be without biofuels.

In a recent blog post, the Financial Times’ energy blogger Nick Butler, a former BP executive, states that uncertainty of the U.K.’s energy policy framework is here to stay. He interprets the failure of the U.K.’s Department for Energy and Climate Change and the Treasury to come to an agreement on the level of subsidies for wind energy as a symptom of a permanent public policy risk for energy investors. Energy policy change, Butler writes, can come from numerous sources: from a change of government and changing energy market fundamentals to technical leaps. (Note that the latter two are hardly public policy in a conventional sense.)

While Butler is absolutely right to point out that energy markets are fundamentally political, it depends on political culture and the actual policies in place whether the political nature of energy markets creates political risk.

Consider the success of Germany’s feed-in-tariff regime for renewables. Regardless of the question whether one is for or against this colossal subsidy scheme, it is quite obvious that it is very successful in unlocking serious investments in renewable energy, particularly PV.

This is, of course, partially due to the fact that investors think the current levels of feed-in-tariffs create a compelling business case. But equally important is the fact that they rate the risk that the German government might change its mind and retroactively cut feed-in-tariffs for existing assets (like the Spanish government has in the wake of the fiscal crisis) as very low. This trust, of course, is grounded (a) in the general credit-worthiness of the German sovereign and (b) in German political culture which rates “Rechtssicherheit” (legal certainty) very highly.

So it comes down to the question whether investors believe that energy policies create a stable investment environment, or not. With the right policies in place, I don’t see any reason why the U.K. shouldn’t be able to create this belief.