Carbon cap-and-trade system coming soon, energy adviser says

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Daniel Kammen is one of those youthful, self-assured brainiacs who inspires even other brainiacs to sing his praises.

A PhD in physics from Harvard and Cornell, Kammen is a leading expert on renewable-energy technologies and energy policy.

He’s the founding director of the University of California’s Renewable and Appropriate Energy Lab at Berkeley, and a co-ordinating lead author for the UN’s Intergovernmental Panel on Climate Change (IPCC).

So when Kammen talks, others — especially energy execs and environmental-policy wonks — listen.

This week, Kammen was in Alberta, delivering the eighth-annual

Epcor distinguished lecture — his topic: innovations for a low-carbon future — and meeting with faculty at the Centre for Applied Business Research in Energy and the Environment, in the U of A’s School of Business.

With the U.S. economy in trouble, and millions of Americans unemployed, many pundits felt Obama might delay his plans to curb greenhouse gas emissions through a European-style carbon cap-and-trade system for at least a couple of years.

But Kammen insists that’s not in the cards. It’s coming soon, he says.

“Obama already asked, in his recent address to Congress, for cap-and-trade legislation to arrive on his desk in 2009,” Kammen notes.

“People were stunned. They’re saying, ‘My goodness, this is a president who clearly campaigned as if he believed what he was saying.’ That comes as a shocker to a lot of people.”

Obama’s system would force coal-fired power plants — which generate half of U.S. electricity — and other large emitters, including oil and gas producers, to buy permits to release carbon into the atmosphere.

Under such a scheme, Obama wants to impose a hard cap on emissions — as opposed to the intensity-based cap now in place in Alberta — and an auction of permits starting in 2012.

If adopted, the scheme — effectively, a stealth carbon tax — could generate tens of billions of dollars a year in new government revenues, to help fund the rollout of renewable energy technologies, such as wind and solar.

The plan is sure to face a huge battle in Congress, of course, and opposing factions are already girding for war. The stakes are enormous, especially for the many Democratic politicians who represent big coal states.

In 2007 alone, American utilities spewed some 2.4 billion tonnes of carbon dioxide into the air. Based on recent prices on London’s European Climate Exchange, it would have cost those utilities roughly $39 billion US to acquire commensurate emissions permits, Bloomberg News reports.

For his part, Kammen prefers to focus on the positive side of the story. With every crisis comes opportunity, he says, and the U.S. now has a chance to “reset” its fossil-fuel-fired industrial economy by converting to clean, green renewable energy technologies.

In the process, this transformation would create millions of new jobs, he believes, helping to lift the U.S. economy out of the ditch. But it won’t happen unless there are financial incentives in place. In other words, stiff penalties for carbon emitters, and meaningful subsidies for new green technologies.

“It’s the financing innovation that is completely needed now, and largely lacking. It’s going to have to come through some shift in fundamentals,” he says.

“Some mix of penalizing fossil-fuel emissions, and rewarding clean energy, will have to be much more aggressively (pursued) than what we’re seeing now,” he adds.

“If we had those financial mechanisms, politicians would be able to back up their talk about going green. And if we had good financial mechanisms, a lot of traditional Wall Street firms and venture capitalists would see this as an interesting area to get into, irrespective of the green angle.”

Kammen doesn’t mince words. He says the coal industry would eventually die off. But he argues that many utilities that rely on coal could switch over to wind power and solar power, in time. In particular, he sees big opportunities in wind power.

“I spend a fair amount of time visiting utilities who own lots of coal assets, in places like North Dakota. They all say that given the right economic environment, they’re equally well-positioned to be big wind players,” he says.

“And the fact is, there is an exceptional wind resource running right down from Central Canada, through the U.S. plains states, to Texas. It’s not just a nice thing to have, it’s a unique opportunity, like the tar sands.”

As for Alberta’s oilsands, Kammen says their long-term viability depends on how quickly and successfully producers can roll out the technologies — such as carbon capture and sequestration — needed to reduce their environmental impact.

“I think it’s a question of innovation, to find ways to have as low an environmental impact as possible. But in the long run, it’s a real worry if the goal is to maximize short-term revenues, and not build a sustainable industry,” he says.

It’s hard to argue with any of this. Kammen makes a lot of sense, and as his credentials attest, he is clearly a brilliant scientist.

But that’s also what worries me. He’s a scientist and policy wonk, with access to Obama’s ear. He’s not an economist, a former CEO, or someone who has built a business from scratch.

So when Kammen talks in generalities about the greening of industrial America, he glosses over all the messy stuff that this will likely cause.

And when he talks about Wall Street bankers happily funding this transition, I can’t help but note that those very bankers just finished destroying the U.S. economy.