‘Twas the week before Christmas, when all through the House of Representatives, not a creature was stirring, except for lobbyists from all across the country securing deals on the Omnibus Appropriations and Tax Extension legislation.
It’s the end of the year in Congress, and some in the energy industry have been naughty, and some have been nice… though that doesn’t really impact who wins and who loses in Washington, does it? Let’s end the year by accounting of who in the energy industry got candy canes and sugar plums in their stocking, and who ended up with a lump of coal.
The Oil Industry
First up is the oil industry, who will open a present from Republicans in Congress of an end to the 40 year ban on the export of oil. Unfortunately, they won’t be able to play with their present for a few years, as oil imports are rising and low global oil prices have pushed the spread between WTI and Brent Crude (effectively the domestic US oil price and the global oil price) to near zero. Low oil prices are driving many small oil drillers out of business, and domestic American production of oil is starting to decline, after a surprisingly robust 2015 in the face of lower prices. If and when the price of oil goes back up, the oil industry may get some profits from exporting American crude, but in the meantime, there will only be a small amount of exports to refineries in Mexico or Europe that are short on the light, sweet crude that the U.S. is awash in. The real winners of this, though, are global markets and free traders. CONTINUE»
In my last post, I showed that the highest levels of the American government have made engagement with the Caribbean a priority, and that they see energy security as one of the key ways to build that relationship.
But – what does that mean? Unlike the Venezuelan government, the US government is not about to provide subsidized oil directly to Caribbean governments: I’m sure that Congress would have something to say about that! When President Obama arrives in Jamaica on April 9, he will have a suite of options to present for how the US can help build energy security for the Caribbean, none of which will cost American taxpayers.
This is about U.S. government leadership and coordination. In a series of public-private partnerships, the US government will act more as a coordinator than a funder. There actually are many funders, whether its official development assistance from European, Canadian, or other governments, or whether it is non-profit foundations. However, there has been little coordination until recently. The unique convening power of the U.S. government can bring the right people to the table, who can then move projects from the planning stage to completion.
The energy revolution in the US – in both renewables and fossil fuels – also gives the US the market to provide the support for building energy security.
First, the Caribbean may be the world’s best natural environment for renewable energy. While the Caribbean islands may be short on natural resources in the traditional sense, they are rich in wind and sun. We know that the sun shine and the trade winds are consistent and predictable. When combined with the high prices for consumer electricity, the Caribbean is one of the few places in the world that renewable energy doesn’t need subsidies for operations.
In his latest in the series on Caribbean Energy Security, Andrew Holland details why American leaders see the need to build energy security in the Caribbean.
In the United States, too often we think of the Caribbean as a very nice place to visit. Throughout our history, though, it has been far more important. Last week, ASP released a report looking at the unique challenges of energy security in the Caribbean. This will be the first of a series of articles showing the challenges faced in the region by energy insecurity, why that is important, and give some solutions.
The islands of the Caribbean have always been too small to control their own geopolitical destinies – they are blown by winds far from their shores: colonialism, slavery, or the Cold War.
Around the Caribbean was where the Monroe Doctrine, designed to keep Europeans from interfering in the Americas, was tested throughout the nineteenth and early twentieth centuries. It was where the U.S. first learned that it could be a regional and then global power on the world stage.
On Wednesday in Beijing, President Obama and his Chinese counterpart Xi Jinping announced a series of agreements at a surprisingly fruitful APEC summit. The US and China came to agreements on issues as diverse as military relations, trade, investment, visas, and a range of other issues. Certainly, the Chinese are not acting like they’re dealing with a U.S. President hobbling into a lame-duck period.
The biggest agreement, however, comes in the area where President Obama still has a great amount of power, both domestically and internationally, to take action: climate change. This is also an area where action by the Chinese government both has meaning for a domestic constituency and among the international community. While observers had expected some sort of deal on climate change, the scope and ambition of the deal were a surprise. Last year, I had written that “U.S. – China Agreement on Climate Shows Promise” – and with this announcement, we see that the promise is on its way to bearing fruit.
Of course, we can only judge the effectiveness of any deal on climate change over a long horizon. This deal does appear, though, to put both the US and China – and the rest of the world with them – on a track to beginning to actually meet the challenges of climate change.
The Terms of the Agreement: Ambition on Both Sides
Under the deal, the United States will cut emissions 26 to 28 percent below 2005 levels by 2025, while China agrees that its emissions will hit a peak and begin declining by 2030 at the latest, while also increasing its share of non-fossil energy to 20 percent in that same period. The White House claims its emissions cuts can be met “under existing law” (so, no need for Congressional action) and China, meanwhile, will deploy up to 1,000 gigawatts (a terawatt) of new nuclear, wind, solar and other zero-emissions generation to meet its goal. The targets are there, and so are the means.
The Republicans have won a clear victory. They will take over the Senate, expand their control of the House, and deserve congratulations for their win.
Now, it is time to govern. The challenges that this country faces are long. And governing is different than campaigning. It means dealing with problems as they come – and not always in what fits best in a 30 second advertisement.
After this election, climate change is an issue that Republicans may think they are safe to ignore. The President has made a big push to regulate carbon emissions through the EPA over the last two years. Some outside groups sought to bring climate action into the campaign. Today, the electoral results could not be more clear: Obama’s policies were repudiated at the polls. Throughout the election, Democrats in swing districts went out of their way to avoid talking about climate change or the EPA.
Republicans could think that they are safe to continue saying “I’m not a scientist” when asked about climate change. They could think this means they don’t need a climate policy. That would be the wrong lesson to take from this.
President Obama’s policies on climate change are all wrong. His Department of Energy picks winners and losers among politically connected companies. His command-and-control policies at the EPA will ensure that “no lawyer is left behind” in a flurry of lawsuits over where to build power plants, and what kind of production is allowed.
On Monday, September 22, I took part in the Climate Group’s annual kick-off of “Climate Week NYC.” We heard from political leaders like Secretary of State John Kerry, Executive Secretary of the UNFCC Christiana Figueres, French Foreign Minister Laurent Fabius, and Ban Ki-moon the Secretary General of the UN. ASP helped arrange Secretary Kerry’s climate speech, which is worth reading in its entirety.
As someone working on climate policy in Washington, I’ve heard from these speakers on these issues before. Their leadership is important; we cannot effectively address climate change without political action – but it is not novel.
Likewise, when the UN climate summit meets at UN headquarters on Tuesday, September 23, the over 120 heads of state will prove significant in providing the national leadership that will set standards and provide direction for how to address climate change in both UN negotiations and at their national level.
It appears that the war between Ukraine and Russian-backed separatists may now be coming to an end, as a cease fire agreed on September 5 looks (increasingly) durable.
However, the end of the war does not mean the end of the struggle. Western policymakers must beware of complacency. Once CNN, the BBC, and the New York Times have gone home and NATO’s leaders have turned their attention to the next global flashpoint (Iraq, as it looks to be), we know that the Russians will test Ukraine. They will test the Ukrainian people’s desire to remain truly independent. They will test the Ukrainian leadership’s ability to turn down the comforts and corrupt spoils that working with Russian businesses has brought to former leaders. They will test the West’ attention span and commitment. CONTINUE»
… We Should be More Ambitious
Licensing exports of natural gas would help American diplomacy – but this is not really about the gas, it is about American support for free trade. Since the end of World War II, the U.S. has been the world’s champion in creating a free, global trading system. The U.S. is a beneficiary of the global, open trading system and it is not in our interest to restrict trade.
The debate in the U.S. has become solely focused on natural gas exports because the Obama Administration has been negligent about promptly approving gas export licenses and opaque about the process and requirements for approving the backlog of applications. This restriction should be lifted because it tarnishes the free-trade credentials of the United States.
However, this debate must be about more than just natural gas exports. Recent statements by some Members of Congress portray U.S. natural gas exports as a “weapon” against Russia, but this overstates the influence that U.S. energy can have on this crisis in Ukraine.
Even if the U.S. government approved every export terminal application currently pending and if construction times and costs were reduced to zero, instantly giving the U.S. new Liquefied Natural Gas (LNG) export capacity, we would not see that much gas flowing to Europe because geopolitics also have to work with economics. Remember, this is not the U.S. government sending gas to Ukraine or the EU as economic aid: this is a private exchange between businesses. Because the demand for LNG is much higher in Asia, where prices are as much as double the price in Europe, we should not expect to see many tankers full of gas sailing to Europe any time soon.
I have seen a number of commentators over the last few days say that the American shale gas revolution means that the U.S. could simply announce new LNG exports and that would undercut Russian gas. House Energy and Commerce Committee Chairman Upton, for instance, said in a statement: “Expanding U.S. LNG exports is an opportunity to combat Russian influence and power, and we have an energy diplomacy responsibility to act quickly.”
Statements like this overstate the influence that U.S. energy can have on this crisis Ukraine. While it is true that a viable, functioning LNG export capacity would provide geopolitical benefits, we do not have it today and we should not think that the U.S. energy boom will help in this crisis.
The U.S. energy boom has already helped reduce Russia’s influence and increased European energy security, without a singe molecule of US Natural Gas landing on the continent. This is because, even if the United States does not directly supply Europe with oil or natural gas, because the U.S. no longer is demanding imports of liquefied natural gas (LNG) has freed up major suppliers like Qatar or Norway to send supplies to Europe.