The Unexpected Perspective
The Implications of Darwin and the Big Bang for Christians ... and Everyone Else

Perspectives

Students around the world are exhorting their elders to do something about climate change. Have they got it right? Should we be listening more? Or have they identified the right problem, but the wrong solution?

            Pretty much as long as there have been schools, students have looked for reasons to cut class.  Inspired by a Swedish teenager named Greta Thunberg, students around the world have found a new reason: protesting against perceived inaction on climate change.  Their fear is that if we don't get more serious about climate change, the real victims won't be today's older generations, it will be today's young people, and the generations to come after them.

            They've got a point.  Some of the effects of greenhouse gas-induced climate change are already apparent, but the really serious changes probably won't arrive for 30+ years from now. Baby boomers and the generation before them will largely have passed on, but today's millennials – the ones out protesting – will be middle aged, and a whole new generation will have arrived in time for a potential eco-catastrophe.

            These young protesters are trying to shake the rest of us into action.  Great idea!  Unfortunately, I'm afraid they're proposing the wrong solution.  It's the same wrong solution embodied in the Green New Deal.  We definitely need to address the problem of climate change, but if we think that concerted governmental action through taxes and regulation will solve the problem, we are totally fooling ourselves.  Instead, as I demonstrate below, the only way we're going to solve the potentially catastrophic problem of greenhouse gases is through improved technology.  If government is to play any truly effective role, it should be to foster the development and distribution of better technology.  That's where we should be directing our attention.

            The attached world map graphic from the United Nations provides some useful clues.  The chart shows per capita energy consumption around the world.  Energy consumption is a pretty good proxy for greenhouse gases.  Worldwide, only about 25% of electricity is generated by renewables – still mainly hydropower - and the rest through burning fossil fuels.  Of course, transportation is almost entirely based upon CO2 emitting vehicles. 

            As the chart shows, the required energy to have a good standard of living is indexed at 100, and the worldwide average is 79.  What immediately jumps out is that we in the USA are true "energy hogs", coming in at a per capita of 290!  Thus, it's really important for the USA to make a wholesale switch to renewable energy.

            Here's the problem.  We could make a draconian switch to renewables in the USA, as many are advocating, but it wouldn't come close to solving the problem.  Not only that, even if much of the rest of the world similarly made a draconian switch, it still won't solve the problem.  

            To show why this is true, let's divide the world into two groups.  In the first group we'll include the USA, Canada, the European Union, China, Japan, Australia and New Zealand.  With the exception of China, all of these are Western style democracies that are economically advanced.  The conventional wisdom is that the core of the climate change problem is in these countries.  The argument is that we need drastic action, largely through governmental intervention, to get the necessary reductions in these countries.

            If we could project the same map into the future, say in 30 years or so, that strategy might make sense.  However, the situation is very likely to be dramatically different in 30 years.  The reason is because the rest of the world, where the majority population is, and where likely all of the population growth will occur during the rest of the 21st century, is rapidly growing.  Even if we have a massive reduction in greenhouse gas emissions in the USA, Canada, the European Union, China, Japan, Australia and New Zealand, all the progress we make in those countries will be offset by emissions growth in the rest of the world.

            Let's take a look at the math.  At present, the world has about 7.6 billion people.  The combined population in the USA, Canada, the European Union, China, Japan, Australia and New Zealand is about 2.5 billion, meaning that the current population of the rest of the world is 5.1 billion.  Let's assume for a moment that through concerted action, these countries could reduce their greenhouse gas emissions by 75%.  That, of course, would be a fantastic result!  Unfortunately, we wouldn't be able to cheer the result until we consider what happens in the rest of the world.

            If the rest of the world increases its per capita energy use by 48 units on the UN index, it would completely offset the 75% reduction made by the USA, China, the EU, Japan, Canada, Australia and New Zealand.  It gets worse!  Many experts project a worldwide population of 9 billion by mid-century, a net increase of 1.4 billion.  Most likely, nearly all of that growth would be in the less developed parts of the world.  It's unlikely to happen in places like the EU, China, and Japan, where populations are actually starting to shrink. 

            If net population increases by that projected 1.4 billion, then even if we get the 75% reduction in the USA, EU, China and the other countries, the entire reduction will be offset if the rest of the world increases by 38 on the index.

            Is such an increase realistic?  Absolutely.  If India itself has zero population increase but moves to the projected average good standard of living – 100 on the scale – it alone would offset 38% of the reduction from the advanced economies.

            What this points to is a need for a three part strategy.  Part one is to make a major reduction in greenhouse gases in countries like the USA, China, and the EU.  Part two is to help the developing grow without greenhouse gas emitting energy.  Part three is to develop a way to recycle at least some of the excess CO2 we've already put into the atmosphere.  There are dire predictions that even if we emit no more excess CO2, what's already in the atmosphere will create serious problems.

            So let's go back to the student protesters, the Green New Deal, and those advocating a strategy of taxation and massive governmental intervention to solve the climate change problem.  This approach could work if, and only if, the world stands still economically and population-wise.  Of course, it's not going to do that.  Because it won't do that, solving "part one" of the problem – drastic reductions of CO2 in the USA, Canada, the EU, China, Japan, Australia and New Zealand – just won't solve the worldwide problem.  We need something that also prevents the growth of CO2 emitting energy in the developing world (part two), and we also still need a way to recycle excess CO2 that we've already put there (part three).

            The only way we can realistically do all three of these things is through better technology.  We've already seen over the past 20 years or so the benefits of new technology to avoid greenhouse gas emissions.  These include solar technology, wind power technology, hybrid and all-electric vehicles, and battery storage.  The crazy thing is that over the past 20 years, the USA has actually led the world in CO2 reduction.  It didn't do this through taxation and governmental regulation.  It accomplished it because of the development and dissemination of better technology.

            If we focus our efforts on improving technology, we can address all three parts above.  Better technology will result in greater adoption of renewables in places like the USA, China, and the EU.  It will also be key in the developing world, especially if we pursue what I call an "avoidance strategy".  This approach has worked before.  The mobile phone industry is a perfect example.  Large parts of the developing world completely missed landline telephones, going instead directly to mobile phones.  Low carbon energy is analogous.  If we can somehow get the developing world to focus on investing in renewables technology, it will avoid the energy equivalent of landlines.

            How can we get the developing world to avoid investing in CO2 emitting technologies?  The strategy of government intervention completely breaks down here.  It's one thing for the Green New Deal to mandate renewables in the USA, but there's absolutely no way to mandate the same in Latin America, Africa or Asia.  Yet, as shown above, those are precisely the places where the growth of the next 30+ years will occur.  It is already happening.  In fact, we in the developed world have a largely outdated view about the rest of the world.  If you have any doubt about this, I commend to you Hans Rosling's Factfulness.

            Then, of course, there is the problem of all the CO2 we've already dumped into the atmosphere.  We've got to find a way to get rid of at least some of that.  Again, no amount of taxation and regulation will fix this because at present, other than planting an incredible number of trees, we don't know how to get rid of the excess CO2 we've already emitted.   We need to create new technology.

            If technology is the core to solving the greenhouse gas problem worldwide, how can we fulfill the demands of the student protesters to take serious action?  Chances are, over time the necessary technology will be developed.  The problem is that if we leave it to the marketplace, it probably won't happen quickly enough.  Absent increased effort, the necessary technology won't be developed quickly enough to prevent huge problems in 30 years.

            Of course, a huge obstacle is the lack of consensus about the issue.  Unfortunately, the current approach being taken to convince skeptics is, frankly, crazy.  Why do we think calling people stupid ignorant fools that we'll persuade them to change their minds?  Of course it's going to fail!  Not only that, even many people who believe the climate science are very leery of taxation and governmental regulation as the way to solve the problem.

            So how could this chasm be bridged?  As I've written before, I believe the issue needs to be re-framed.  I think the best way to do that is to emphasize the economic benefits of removing excess carbon and other greenhouse gases from the atmosphere. Rather than preach environmental doom and gloom, focus the message on the economic benefits to all of removing excess carbon from the atmosphere - the next giant worldwide economic opportunity.  If it can be shown to be a huge economic opportunity for investors, climate "politics" should recede into the background.  When we start realizing that removing excess carbon from the atmosphere is potentially a trillion dollar opportunity many times over, the problem definitely gets reframed!

            For those who believe that government is critical, the good news is there is plenty to do, it just isn't quite what's been previously proposed.   Government can help in three specific ways.  First, government can encourage basic research, typically that which is done by major universities and research institutes.  It should focus on making solar technology more efficient, battery storage better, and finding ways to recycle carbon out of the atmosphere.  The benefit of this should be the development of products and services that will make renewable energy cheaper and more efficient than greenhouse gas emitting technology.  If we want to prevent the developing world from adopting more greenhouse gas emitting technology, focus on making the alternative cheaper and better.  The more economically attractive we can make solar, wind, electric vehicles and battery storage, the more the problem will solve itself.  Not only that, people who might otherwise dislike climate science will probably want to sign on IF they can be shown that removing carbon from the atmosphere is a profitable initiative.  Why do you think we switched from horses and horse carts to hydrocarbon powered vehicles a century ago?

            Second, governments can help by making it easier and less expensive to finance new projects, particularly in the developing world.  Renewables technology is already pretty cost competitive.  Government, however, could help nudge things along.  One simple way would be to provide incentives to Western financial institutions to make these types of loans.  Providing various government backstops to private financing could be very helpful.

            Third, governments at all levels can help encourage entrepreneurship.  Getting basic technology translated into new products and services depends upon people like Tesla's Elon Musk.  To the extent that governments at various levels can help such entrepreneurs, everyone should benefit.

         Those of us in the older generations tend to ignore or dismiss younger people protesting in the streets.  We really shouldn't do that to the Greta Thunberg's of the world.  They're making a good point: we need do something about climate change.  However, no amount of taxation and governmental mandates will solve the problem. What we need to do is find ways to improve technology.  It is really only through the application of better technology that we will avoid the environmental Armageddon that so many fear.

 

 

 

 

 

 

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Scientists in Australia Have a Developed Another Possible Way to Fight Climate Change

            If we're going to get CO2 and other greenhouse gas emissions under control, we can't count on just one solution.  Instead, we're likely going to need a variety of strategies, something I refer to as a "portfolio approach".  The "portfolio of strategies" may soon get just a little bit bigger, based upon some exciting news out of RMIT University in Melbourne, Victoria, Australia.

            Researchers at RMIT recently reported in the journal Nature Communications

that they had successfully turned CO2 into a coal-like solid at room temperature.  The news has been reported in scientific journals, various press releases, even in YouTube videos.

            It's potentially a big scientific breakthrough, but possibly not.  You may recall in the 1980's there were breathtaking reports that two scientists in Utah, Stanley Pons and Martin Fleischmann, had been able generate a nuclear fusion reaction in a test tube at "cold" temperatures.  Sadly, the report was premature, and scientists were never able to replicate the experiment

            The RMIT researchers appear to have been much more careful and thorough, however, and appear to have some promising results.  Let's take a look at what they did, then address the significance of the experiment. 

            Dr. Torben Daeneke and his associates conducted the research at RMIT in Melbourne.  Their basic idea is to expose air containing CO2 to a bath of liquid metal that also contains the element Cerium.  The liquid metal bath served as a catalyst to convert gaseous CO2 into something else.  That something else was flakes of carbon.  In effect, the catalyst turned gaseous carbon dioxide into solid carbon flakes.  Mind you, the flakes were only about 3 nanometers thick.  To put that in perspective, a human hair has a width of about 80,000 to 100,000 nanometers, and there are 25.4 million nanometers in one inch.  Not exactly a lump of coal, but the researchers confidently reported that it was solid carbon.

            More importantly, they also confirmed in the experiment that the carbon flakes did not come from the catalytic agent, or any other external source for that matter.  They confidently reported the carbon flakes were definitely a byproduct of the chemical reaction.  Obviously, if there was even a small chance that the carbon flakes came from some other source, the experiment wouldn't have been especially significant.

            The idea of trying to turn gaseous CO2 into a solid isn't new.  A similar type of experiment has been performed previously.  However, what is particularly noteworthy about the findings of the RMIT researchers is that their experiment was conducted at room temperature.  Previously, other researchers have converted CO2 into a solid, but the experiment was conducted at 600 degrees Celsius (1,112 degrees Fahrenheit).  That would be fine if you were either on the planets Mercury or Venus.  The average temperature on Venus is 462 degrees Celsius (864 degrees Fahrenheit), and in the case of Mercury, the temperature ranges from -173 degrees Celsius at night to 801 degrees Celsius during the day (-279 degrees to 1,474 degrees Fahrenheit) . Thus, even if you could construct a plant to convert gaseous CO2 to solid carbon on either Mercury or Venus, it could only be operated part of the day.

            Of course, remember that the problem we face with excess CO2 is right here on planet Earth.  In theory, we could scale up a process to extract CO2 and turn it into coal flakes at 600 degrees Celsius (1,112 degrees Fahrenheit), but the energy required to do that would likely mean no net energy savings.  In the process of generating the heat to make the process work, we'd generate as much waste CO2 as we would extract out of the air!  By being able to catalyze CO2 at room temperature, it likely won't require lots of energy.

            The Melbourne scientists also found that they could create coal flakes in the process without the side effect of "coking", the build up of carbon in the catalyst.  That important because if coking occurred, it would cause the conversion to break down due to build up. If "coking" occurred, it would likely be necessary to clean up the coke on a regular basis, thus reducing the production of carbon flakes.

            If the RMIT process can be commercialized, it could be a far superior solution.  Most of the other approaches to CO2 capture do not involve creating a solid.  Instead, these other approaches capture CO2 and either inject the CO2 into liquids (e.g., creating carbonated beverages) or inject it into the Earth.  In each case, the CO2 remains in gaseous form.  The great fear is that so long as CO2 remains a gas, it could potentially escape back into the atmosphere.  Thus, we might capture a high percentage of the excess CO2 in the air by some process and bury it underground, then accidentally have it escape back into the atmosphere.  By converting the CO2 gas into a solid, that problem is avoided.

            At the same time, in their paper the RMIT researchers hinted at the possibility of using the carbon flakes produced in the process might be useful in making high performance capacitor electrodes.  Such electrodes can be used to store energy in a battery.  Thus, the RMIT process might offer the dual benefit of removing excess CO2 from the air, as well as helping to create a useful battery storage technology.

            Assuming the basic process outlined by the Melbourne researchers can be commercialized, are there adequate raw material resources available?  Some high technology involves rare earth metals which are not abundant in Nature.  Fortunately, Cerium, the key catalytic element in the experiment, is widely available. 

Cerium itself is element 58 in the Periodic Table.  It was discovered in 1803 and is named after the asteroid Ceres.  It's a soft, ductile silvery metal that is often used because it tarnishes easily.  Nevertheless, it's found a range of products.  Traditionally, it's been used in the flints of cigarette lighters, the reason being that it will create a spark when you strike it with a match.  The only other metal with that property is iron.  As there is ever less need for cigarette lighters, those who mine Cerium have fortunately found new uses for the metal, including in flat screen televisions, low energy light bulbs, and floodlights.  Cerium is more abundant than tin or lead, but not quite as abundant as zinc.

            The other key component of the catalyst is the liquid solution.  In this case the Melbourne scientists mixed the Cerium into a gallium based alloy. Such alloys appear ideal for such an application because they are liquid at room temperature, are non-toxic, and are capable of dissolving most other metallic elements, Cerium included.

Thus, the RMIT scientists have found a way to remove CO2 from the air by using a catalyst at room temperature to produce metallic flakes.  The process doesn't violate the laws of physics, doesn't require lots of energy, doesn't require the use of lots of highly obsure materials, and can be done at room temperature.

            It looks like a promising technology.  Of course, Stanley Pons and Martin Fleischmann thought they had a promising cold fusion technology.  Unfortunately, no one could replicate their "cold fusion" experiment.  The challenge now is to get other researchers to replicate the findings of the RMIT researchers.  Let's hope it can be done.

            Even if the results can be replicated, that doesn't mean it's ready for prime time.   In fact, it might take many years to commercialize the technology.  Unfortunately, immediate solutions are needed to remove the 40 or so gigatons of CO2 we're collectively dumping into the atmosphere.  If the RMIT continues to be promising, scientists need to pursue two tracks.  The first track is to develop a device that can capture air and expose it to the catalytic agent, effectively replicating what's been done in the laboratory.  They'll then need to do on-going engineering work to make the device practical at capturing CO2.  Not only that, the device will need to be easily manufacturable so that thousands can be deployed around the world.

            The second track will be to continue research into alternative catalytic agents to remove CO2.

            Given the need to come up in short order with practical ways to remove CO2 from the atmosphere, it could well make sense to run some type of an X Prize competition.  The idea is to award a large cash prize to the first team that can produce a commercially viable version of what the Melbourne researchers have developed.  The original X Prize was $ 10 million, so why not offer a $ 10 million prize to the first team that builds a device that can take ordinary air, convert a certain percentage of the CO2 from that air into carbon flakes, then packages the carbon flakes for deposit in the ground?  To spur competition even more, maybe make the prize bigger, say $25 million?  Alternatively, create multiple prizes for various aspects of the problem.

            Even if the device can be built, it won't be a panacea.  Instead, it can and should be just part of a total portfolio of solutions.  Among other parts of the portfolio are photovoltaic cells to capture sunlight, battery storage, and wind turbines. 

            Two years ago, what the Melbourne researchers have done would have been considered a crazy dream.  A commercially viable version of what these researchers have developed remains a dream today, but concerted effort could make it a reality, possibly in short order.  The question for policymakers continues to be, how can such research be spurred?  It won't be taxes and it won't be government mandates or regulations, the classic recipe offered for solving the CO2 crisis.  Instead, it will likely be scientific innovation that is nudged along by proper incentives.  What the Melbourne researchers have developed is certainly an exciting first step.  We need to help them, and others, take the next step.

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If we can just re-frame the problem, there's a solution to the border wall standoff that might please everyone.

            Imagine US President Donald Trump sitting at his Oval Office desk, flanked by House Speaker Nancy Pelosi and Andres Lopez Obrador, the President of Mexico, overlooking President Trump signing into law a bill to create a true border wall, and also providing that Mexico will pay its fair share of the wall.

            Crazy, nonsensical fiction?  Actually, a real possibility.  Below I present a scenario wherein this Oval Office scene REALLY could occur.  It would be the truth, just not quite the truth everyone is walking around with presently in their heads.  But it could be a desirable reality, if only we can re-frame a difficult, complex issue.  Let me show you how.

            US President Donald Trump loves things to be big and bold.  Even better is if the big and bold idea has his name on it.  The idea of building a giant border wall between the USA and Mexico fits the bill perfectly, and the President has been doggedly pursuing it ever since he started running for President.

            His even bigger idea has been to get the government of Mexico to pay for it. 

            Many of the rest of us have been equally dogged in our opposition.

            So how do we get from the present reality to that hypothetical Oval Office scene?

            If it can be done, it won't be a classic "win/win" negotiation, something Trump doesn't seem to like.  Instead, it will actually be a "win/win/win".

            So what would that "win/win/win" strategy be?  Build a fiber optic "wall".

            I'm not claiming this is a new idea, as others have proposed something similar.  What I'm proposing is a "re-framing" of this in such a way that others might want to sign on.  More about that below, but first, let's look more closely at the idea.

            Mexico and the USA share a land border that stretches 1,954 miles from the Pacific Ocean to the Gulf of Mexico.  Prior to 1990 the border had little or no fencing.  Beginning that year, fencing was put up in the San Diego sector of the border.  The Secure Border Fence Act of 2006 called for the construction of about 700 miles of fencing.  As of 2016, that fence construction was basically complete.  What Trump and many conservatives want to do is reinforce the existing physical walls, which are principally located in urban areas such as San Diego, CA and El Paso, TX and "fill in" the remaining 1,200 miles with a "big beautiful wall": 1,954 miles of big, beautiful wall to be exact.

            The idea of that "big beautiful wall", especially in desert and mountain areas, is opposed by a broad range of people, including me, for a lot of different reasons: excessive cost; likely ineffectiveness at preventing illegal crossings and drug smuggling; causing disastrous impacts to wildlife and the environment; and because it would be an ugly symbol not in keeping with the character of our country.  Contrary to what many supporters of the physical wall claim, the majority of America opposes the "big, beautiful wall" not because we want an open border, and don't care about border security, it's just we don't think the "big, beautiful wall" is the way to get the job done.

            Instead of an old fashioned wall, how about a high tech wall, in the form of a fiber optic cable?  Companies such as Optasense and Sensuron have developed technology that turns an ordinary fiber optic cable into a motion detection device.  It's been deployed in a range of industries.  As an example, fiber optics is now used for leak detection on pipelines.  Fiber optic cables can detect the motion of objects crossing over the cable.  Not only that, additional technology can discriminate between vehicles, animals, and people crossing.   The thinking goes as follows: why not put a fiber optic cable along the border, then rely upon existing systems to act when there is evidence that vehicles or people have crossed?  The Border Patrol already has lots of resources in place to act when there is evidence of such movement?  Because humans who cross the fiber optic "wall" will be immediately identified, then likely picked up by the Border Patrol using tried and tested methods, the "wall" will accomplish the desired objective of controlling illegal entry, just like the "big beautiful wall".  It will have some very attractive additional benefits that the "big beautiful wall" won't: much lower cost; far fewer environmental impacts; and no ugly symbol of exclusion.  The most compelling argument for this is that the cost savings of the fiber optic cable could be applied to hiring more Border Patrol personnel and systems.

            The fiber optic cable idea is supported by a range of different people.  Perhaps the most interesting supporter is Congressman Will Hurd of Texas.  Hurd has "a dog in the fight", as his Congressional district is right on the border – about 700 miles of it.  Not only that, Hurd is a Republican. 

            So there's support for the idea, but why do I think Mexico might want to pay for at least part of it?  The answer is because Mexico could gain economic benefits from the fiber optic cable.

            Fiber optic cables have revolutionized communications.  They help power the Internet, but also mobile telephony.  The great thing about a fiber optic "wall" is that while the "wall" cable is being used to track illegal crossings of the border, it could also be used to help provide high speed Internet and telephony along the border.  The rural portions on both sides of the border lack good Internet and telephony. 

            Mexico would probably be interested in helping to pay for the fiber optic wall for these reasons.  The other reason is because such a cable could also benefit maquiladora plants along the border.  Maquiladoras are plants that manufacture or assemble a broad range of products, providing a great deal of employment.  Based upon the free trade agreement in place between the USA, Mexico and Canada, these maquiladora plants generate considerable economic output.  The addition of the fiber optic wall could help those plants.  The other thing the fiber optic "wall" cable could do would be to encourage higher tech facilities to locate along the border.  That could benefit both countries.

            Given the comparatively lower cost of building a fiber optic "wall", along with the potential economic benefits, Mexico could very well be persuaded to sign on.  As such, President Trump could legitimately claim he'd accomplished his goal.  Given the potential benefits, Mexico would likely be happy to help out.

            Every party to this giant controversy could win.  The advantage to Trump is that he could claim not one, not two, but three campaign promises filled: 1) a "wall" from sea to sea; 2) Mexico paying at least part of it, and doing the latter willingly; and 3) economic development for a part of rural America.  When you think about it, most of the US/Mexico border is classic "flyover" territory.  It needs economic development, and this could help.

            Nancy Pelosi and the Democrats could claim a victory because they wouldn't be seeing a giant ugly wall.  Not only that, part of the savings from building the fiber optic "wall" might go to other programs of interest to Democrats.

            Mexico could claim a victory because it wouldn't have to see the "big, beautiful wall", and the fiber optic "wall" could provide very beneficial economic development, as mentioned earlier.

            So if this is such a good idea, why doesn't everyone jump aboard?

            Up to now, it's because the entire issue has been framed as a "false choice": either you support the idea of a "big beautiful wall" or you want open borders.  This "false choice" has led us to a standoff.  The best way to overcome the standoff is to re-frame the issue.

            Instead of thinking in term of the "false choice", think of it as "border security and economic development".  The question then becomes, is there a way simultaneously to improve border security and economic development, as well as avoid some of the perceived drawbacks of the "big beautiful wall"?

            The answer, in the form of a fiber optic "wall" is "YES!"

            This idea is big and bold.  The only thing missing that might really make this appealing to Donald Trump is that there won't be anything you can see with his name on it.  There is one more piece to this idea that will solve that problem.

            There's an ongoing need to improve the technology of border security, the fiber optic "wall" being just a starting point.  A good strategy for spurring technology development is to create something like the X Prize.  Why not create an X Prize equivalent for border security technology? 

            As I've written before, the original X Prize was created to spur the development of a reusable rocket that could be launched into space at least twice within a two week period.  When the $ 10 million prize was first dreamed up, the idea of such a reusable rocket was a pure pipe dream.  Funny thing is, researchers often get highly motivated when there's a chance to earn $ 10 million.  The question is, how many researchers out there who might be highly motivated to develop technology to make the fiber optic "wall" even more effective?  Why not try?  I think I know a certain national leader who would love to have his name on such a prize.  As part of building the fiber optic "wall", why not create the Donald J. Trump Prize for innovation in border sensing technology?

            Sounds crazy, but why not?  The goal is to spur the development of high tech solutions to major problems. X Prize competitions can be highly effective.  Not only that, such prizes can be given out repeatedly.

            Building a fiber optic "wall" rather than a physical wall along the 1,954 miles of the US/Mexico border could provide a big, bold, and beautiful solution both to border security and economic development; and it really could lead to the Oval Office scene I envisioned above, with Donald Trump, Nancy Pelosi, and Mexican President Andres Lopez Obrador all smiling.

            It could provide a way to resolve the present impasse.

            It could be done, if only we're willing to rethink another "false choice" we've created, and re-frame the problem in a new and creative way.

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Rather than try to bludgeon utilities into retiring coal plants, why not consider a more subtle strategy?

            How do you get businesses and people to make the right choices?  It's an age old question.  Is it better to hold the proverbial "gun to the head" via taxes and regulation, or might other, subtler ways achieve the same result?  In the debate over what to do about climate change, many argue that the only solution is regulations and taxes.  Unfortunately, there's a lot of opposition to regulations and taxes, even from those who very much believe climate change is a very real problem.  Instead of that "gun to the head", why not try to nudge people to make the right decision?  It's a lot more gentle approach, but it could be way more effective.

            Recently the Tennessee Valley Authority (TVA), a Federal government entity that operates electric utilities serving ten million people in seven southeastern states of the USA, decided to close two aging coal-fired power plants, one near Paradise, Kentucky and the other near Knoxville, Tennessee.

            The politicians howled, all the way to President Donald Trump, because of the loss of coal jobs.

            Not to be deterred, Bill Johnson, CEO of the TVA said, "Let me tell you what this decision is not about – it's not about coal.  This decision is about economics." Economics indeed!  The TVA estimates it will save about $ 1.3 billion by closing the plants due to not needing to make costly plant upgrades.  When you bandy about numbers like that, even climate skeptics will pay attention.

            The economics of closing these plants may well be a "flash of the blindingly obvious."  In lots of other cases, however, it may not be quite so clear.  Yet it seems pretty clear that if we're going to get a significant reduction in greenhouse gas emissions, more such plants need to be closed.

            So if you want to get these plants closed, what alternative is there to regulation and taxes?  It could be a gentle "nudge".  Nudge theory was originally developed by Professor Richard Thaler.  While he has worked on the concept for many years, it became well known in 2009 when Thaler, along with law professor Cass Sunstein, published a book on it.  

            The "nudge" concept is to use positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals.

            How important is the concept?  Well, Thaler received the Nobel Prize in Economics in 2017 for this work.

            Let me show you some examples of nudge theory, then show how it might be applied in the case of greenhouse gas emissions.

            Consider the problem of getting people to donate organs.  Lots of people say, sure, I'd be willing to donate an organ.  Most states provide a simple way to make this offer through a driver's license.  The problem is, lots of people are honestly happy to do this, but fail to follow through.

            The country of Spain, applying Thaler's nudge theory, came up with a solution.  Spain started automatically enrolling people in an organ donation scheme.  Realizing that some people would object, they also provided a way to "opt out".  The result is that Spain now has the highest percentage of organ donors in the world – all thanks to a little nudge.

            A few years ago the United Kingdom found that many people were not doing a good job saving for retirement.  The government had a pretty good pension scheme available, and surveys showed a high percentage of people knew it was important to save.  Unfortunately, like would be organ donors, they just didn't get around to signing up.

            The solution was a little nudge in the form of automatic enrollment in the pension scheme with an "opt out" clause for those who didn't want it.  The result was an increase in participation from 2.7 million in 2012 to 7.7 million in 2016, and it came without the usual hollering and screaming there would have been if government had mandated the solution.

            A further example of a nudge is how children are enrolled in free school meals programs.  The system was changed from opt in to opt out, resulting in a significant increase in participation.        

            Simply put, a nudge can be an effective way to achieve a desired result without "holding a gun to someone's head".

            Of course, it's one thing to try to nudge individuals to consider organ donations or enrollment in a pension scheme, but quite something different to try to nudge a company to stop emitting greenhouse gases into the atmosphere.

            Or is it?  A simple examination of utility economics may tell a different story.

            The two aged TVA coal fired plants mentioned earlier are definitely not atypical.  According to the US Energy Information Agency, 51% of power generating capacity in the USA was built before 1980, and 88% was built between 1950 and 1990.  The capacity weighted age of those coal plants is 39 years.  Put another way, most of those coal plants are ready for retirement .

            TVA isn't the only utility trying to decide what to do about old coal fired plants.  The great fear is that these utilities will either upgrade existing plants to keep them running, or replace them with new coal plants or possibly plants powered by other fossil fuels such as natural gas.  Natural gas plants are better than coal plants because they emit only about half as much greenhouse gas, but that could still be a lot of greenhouse gas.

            The good news is that most utilities aren't thinking about replacing these aging plants with new coal plants, but they could very well replace them with natural gas plants.  However, some conveniently placed "nudges" might get them to act differently.

            How might utilities be nudged to act differently?  The key way is through the utility ratemaking process.  Most electric utility rates are set by state government agencies.  The utility presents data to the commission on how much it costs to operate the plant, as well as the capital cost of the facility.  The rate is calculated in such a way to provide the utility a defined rate of return on the assets.  The utility could be "nudged" through slight changes in the allowed rate of return on the assets, or in how the expenses are treated.

            One obvious nudge would be to permit a higher rate of return to the utility if it will replace the coal plant with a solar or wind powered unit.  The allowable rate of return might only be adjusted slightly, possible one half of one percent.  That may not sound like a lot, but it could make a big difference to the utility's management and shareholders. 

            Another possible change might be to adjust the depreciation schedules on certain classes of assets for a new plant.  For example, the utility commission might allow faster depreciation of a new plant, thus increasing the effective utility rates in the short term.

            These are examples of simple economic nudges that could get the utility to do one of the following: 1) retire an old coal plant rather than do upgrades/retrofits; or 2) retire an old coal plant and replace it with a wind or solar plant rather than a natural gas one.  When all is said and done, it's about economics.  The challenge is to provide appropriate nudges to each utility in order to get them to make decisions that are more beneficial for the environment.

            Of course, at the end of the day, the kinds of economic nudges described above would have the same impact as a carbon tax, the preferred tool of the typical economist.  The idea of a carbon tax is to take into account the effective cost of greenhouse gases.  The nudges proposed above could have the same impact as a carbon tax, just without enacting a carbon tax.  The nudges might increase the cost of power in the short term, much as a carbon would.  However, once a new plant is in place, the cost of operation would likely decrease.  In fact, over a period of time, the customers of the utility might end up paying a lower total cost than before because the older, more expensive plant will be replaced by a lower cost, more environmentally friendly one.

            Another feature of this nudge strategy is that it can be tailored to location conditions whereas something like regulations or taxes tend to be more "one size fits all".  Even within a given state, the appropriate nudges for different facilities may be different.  Thus if the goal is to get a given plant retired more quickly, and ideally replaced with an alternative energy plant, the following generic strategy makes sense: 1) determine the magnitude the required economic nudge; 2) identify possible ways the economic nudge might be implemented; 3) select the nudge that seems most likely to fit the local political conditions; and 4) identify potential allies to help get the nudge implemented.  Surprisingly, utility management might be an ally, but not really that much of a surprise when you consider that the leaders of electric utilities can see which way the wind is blowing. 

            A key reason utility management might be an unexpected ally is because the economics of alternative energy have changed so drastically in the past few years.  A new alternative plant will likely be less expensive to operate than a coal plant, or even a natural gas one.  Utility managers aren't blind to that.  They just may need a nudge to make the change now instead of later.

            Of course, this isn't a panacea, but it could be a much more effective strategy than trying to "hold a gun to everyone's head", the problem with most taxes and regulations.  As previously noted, most of these coal fired electric utilities are getting very old.  They're expensive to maintain.  There's a very good chance the electric utility owners will be very happy to get rid of them.  Just like putative organ donors and people needing to sign up for a pension scheme, all they need is a little nudge.

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Artificial leaves hold great promise. Just how much is not yet known.

            We humans always seem to be searching for the Holy Grail, the "magic bullet" that will solve all of our problems, or at least some of them.  The funny thing is, in the case of one of our biggest problems today – climate change – we may be onto the path of finding it. 

            Don't get out the champagne yet, because there's still a huge amount of work to be done, and even if the work is done, there still is no guarantee.

            So just what is this veritable Holy Grail for greenhouse gas induced climate change?  An artificial leaf, which is being developed by a variety of scientific researchers.

            In a sense, we already have the Holy Grail for climate change. It's called photosynthesis.  Trees can take carbon dioxide and water and convert them into simple sugars and oxygen.  You might even recall the equation for this from high school biology or chemistry:

            6CO2 + 6H2O à   C6H12O6 + 6O2

A tree can take six molecules of carbon dioxide and combine these with six molecules of water to create one molecule of simple sugar plus six molecules of oxygen.    We humans, as well as other animals, expel carbon dioxide with each breath we take.   Trees recycle that into oxygen and sugar.

            For most of history that process has been in balance.  Unfortunately, with the Industrial Revolution the burning of fossil fuels such as oil and gas has thrown more carbon dioxide into the atmosphere than trees can recycle.  If we could plant enough trees and shrubs, in theory we could solve the greenhouse gas problem without changing our current fuel use habits.  Simon Lewis, a climate expert at the University of Leeds in the UK, observed in 2009 that "tropical forest trees are absorbing about 18% of the carbon dioxide added to the atmosphere each year from burning fossil fuels."

             Right now, worldwide we're generating about 40 billion tons of excess carbon dioxide.  How many trees would it take to absorb all of that?  The average mature tree can absorb about 48 pounds of CO2 each year, and a forest that covers one acre can absorb at 2.5 tons/year.  For those of you more familiar with the metric system, one acre is 4046.8 square meters.  Thus, if we could plant about 16 billion additional acres of trees, we could absorb the excess 40 billion tons of CO2 each year.  This, of course, assumes that we won't keep increasing the amount of carbon dioxide into the air each year.  That may be a bad assumption, at least at present, but let's be optimistic for a moment.  How much land area would it take to soak up the current 40 billion tons?

  • The total surface area of the Earth is 196.9 million square miles
  • There are 640 acres in a square mile, so there are 126.016 billion acres of land mass on the Earth
  • The required 16 billion additional acres of forest would cover about 12.7% of the Earth's surface.

That's an awful lot of surface area, but actually something that is feasible.  Just very unlikely!

            If we're not prepared or able to do that, there may a second Holy Grail in the works: the artificial tree mentioned before.  Now I'm not talking about the kind of tree many of us decorate for Christmas.  This would be a veritable "metallic cousin" to your artificial Christmas tree, just that it would have the amazing capacity to convert CO2 into something else.

            Scientists have been working on this technology for a number of years.  One place where such research has been underway is Harvard University.   In fact, Scientific American and the World Economic Forum named Harvard's artificial leaf as the breakthrough technology of 2017

            Harvard isn't only place where such research is being done.  Recently, scientists at the University of Illinois at Chicago (UIC) reported that they had developed an artificial leaf that has two very important characteristics:

  • It is about ten times more efficient than an ordinary tree at removing CO2 from the air
  • UIC's artificial leaf can absorb CO2 at the level of concentration typically found in the natural environment.  It didn't need to be highly concentrated, as for instance from an exhaust pipe of a process plant.

As reported by the University of Illinois at Chicago,  Meenesh Singh, assistant professor of chemistry, and his colleague Aditya Prajapati, a graduate student in his lab, proposed solving this problem by encapsulating a traditional artificial leaf inside a transparent capsule made of a semi-permeable membrane of quaternary ammonium resin and filled with water. The membrane allows water from inside to evaporate out when warmed by sunlight. As water passes out through the membrane, it selectively pulls in carbon dioxide from the air. The artificial photosynthetic unit inside the capsule is made up of a light absorber coated with catalysts that convert the carbon dioxide to carbon monoxide, which can be siphoned off and used as a basis for the creation of various synthetic fuels. Oxygen is also produced and can either be collected or released into the surrounding environment.

"By enveloping traditional artificial leaf technology inside this specialized membrane, the whole unit is able to function outside, like a natural leaf," Singh said.

According to their calculations, 360 leaves, each 1.7 meters long and 0.2 meters wide, would produce close to a half-ton of carbon monoxide per day that could be used as the basis for synthetic fuels. Three hundred and sixty of these artificial leaves covering a 500-meter square area would be able to reduce carbon dioxide levels by 10 percent in the surrounding air within 100 meters of the array in one day. 

            Of course, turning carbon dioxide into carbon monoxide is a "good news/bad news" proposition.  Getting rid of the carbon dioxide helps with the climate change problem, but carbon monoxide is bad news, too.  The UIC system will have to provide a way to turn that carbon monoxide into a usable fuel, otherwise it will need to be sequestered.  The UIC researchers seem to think it can be done.

            If the University of Illinois "artificial leaves" are ten times more efficient than natural trees at absorbing CO2, how many would it take to remove the 40 billion tons of excess CO2 presently being emitted each year?

  • As mentioned earlier, the UIC researchers reported that a single array of 360 leaves covering 500 square meters could remove about one half ton of CO2 daily, meaning about 180 tons/year
  • We would need 220 million such artificial leaf arrays to remove the 40 billion tons of excess CO2 each year (assuming each molecule of CO2 could be converted into one molecule of carbon monoxide (CO))
  • The surface area of the Earth is about 510.2 trillion square meters
  • The necessary arrays would cover a surface area of about 110 billion square meters, representing 0.02% of the surface area of the Earth.

If the UIC leaves are reportedly ten times more efficient than a natural tree, so it may take about ten times more of these arrays than the above calculations would suggest.  If the natural forests would require 12.7% of the land, the UIC artificial leaves may require 1 or 2% of the land.  Either way, that's a lot of surface area, but presumably substantially less than the area a natural forest would take to remove the comparable amount of CO2.

            Once again, a Holy Grail is possibly in sight, but not anytime soon when you consider what it would take to build all these "natural leaf" arrays.  The requisite land is one thing, but the capital cost would be another huge hurdle.  Not only that, there remains the problem of converting that carbon monoxide into a usable fuel.  This of course begs the big question, who is going to pay for this? 

            Economists will tell you that this is a perfect application of a carbon tax.  The proceeds from such a carbon tax could be used to acquire the necessary land, as well as to pay to construct the artificial leaves.

            Once again, don't get out the champagne. 

            So what conclusions can be drawn from this?  If there is no practical way either to get all those natural forests planted, or to get artificial leaf arrays constructed, why pay any attention?  The reason is because of the potential for additional research to produce even more efficient natural leaf arrays.

            The obvious analogy is to Moore's Law.  Back in the mid-1960's, Gordon Moore of Intel Corporation noted that the number of transistors that could be packed on a chip was doubling every 18 or so months.  Based upon that observation, made using only a handful of data points, Moore forecast the creation of vastly more powerful computers in just a few years.  Moore's Law has continued to work for 50 years!  Today's computers can do things only in the realm of science fiction when Gordon Moore first developed his "Law".  Moore's "Law" worked because of huge amounts of research done to pack ever more transistors onto a chip. 

            It seems reasonable to believe something similar could happen with respect to artificial leaves.  If the University of Chicago's artificial leaves can operate at ten times the efficiency of a natural tree, is it beyond the realm of possibility that could be increased another ten or twenty fold?  Following the logic of Moore's Law, a ten or twenty fold increase would be merely a "warm up".   If artificial leaves have a Moore's Law "encore", in about 10 years the artificial leaves developed by UIC will be about 120 times more efficient.  That doesn't mean you'd only need about 2 million arrays worldwide, because there's only so much CO2 any given array can pull out.  However, a much more efficient array might be able to pull out a high percentage of CO2 exhaust from a power plant.  As such, in 10 or 20 years it may be possible to have artificial leaves doing the bulk of removal of excess carbon dioxide.  The Holy Grail might then be within our grasp.

            Even if a "Moore's Law" solution can only make a given array capable of pulling only so much more CO2 out of the air, it might help reduce the capital cost of the array dramatically, making it much more practical to implement this solution.

            Once again, don't get out the champagne just yet.  Instead, this suggests that we should pursue a "portfolio approach" to CO2 removal.  The various parts of the "CO2 removal portfolio" would include the following:

  • More investment in alternative energy
  • Additional research into artificial leaf technology
  • Additional planting of natural forests
  • Additional research into CO2 sequestration technology
  • Additional investment in nuclear energy.

The latter has the problem of nuclear waste, so that portion of the "portfolio" might be a bit risky.  The key point to make, however, is that just as the pros tell us to make sure we have a diversified portfolio of investments to ensure financial security, we should have a diversified portfolio of investments to deal with the greenhouse gas problem.  Additional research into "artificial leaf" technology should be an integral component of the portfolio.

            The latest news out of the University of Illinois at Chicago is certainly encouraging.  However, the clock is continuing to tick.  We don't have enough time to go about the task of greenhouse gas removal at a leisurely pace.  Continued investment in alternative energy technology is extremely important.  The alternative leaf may be an unexpectedly valuable tool in the fight against greenhouse gases – maybe even a Holy Grail.

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The Green New Deal sounds great, but won't solve the problem. Here are seven steps to make it a great solution.

             What should be done to prevent potential catastrophic climate change?  Democratic Representatives Alexandria Ocasio-Cortez and Edward Markey are proposing a modern day version of Roosevelt's New Deal, this time to deal with climate change.

            Meantime, a significant percentage of Republicans continue to believe that the problem has been way overblown.   In their minds, enacting something like the proposed Green New Deal would be wasteful and ineffective, especially because many continue to doubt that humans are causing climate change.

            Greenhouse gas induced climate change is a very real problem that needs to be addressed.  Republicans are making a mistake by continuing to downplay it.  But at the same time, the Green New Deal as envisioned by Democrats isn't going to work.  It won't solve the problem.

            Action is extremely important, but it needs to be the right kind of action.  It will only work if the solution is truly bi-partisan.  All we have to do is look at the history of Obamacare to know why getting a truly bi-partisan solution important.   Thus, I offer a seven step strategy that I believe could create a real bi-partisan solution, one that both sides will like.  More importantly, I think it will work!

Step 1: Stop Acting in an Insane Manner

            You've probably heard the definition of insanity: doing the same thing over and over and expecting a different outcome.  By that definition, both Democrats and Republicans are insane when it comes to climate change:  Democrats, because they keep thinking that doomsday scenarios will scare everyone into acting on climate change; Republicans, because 20+ years of closing their eyes and hoping it will go away just hasn't worked.  The Republican strategy risks a repeat of Obamacare, but on a way, way bigger problem!

            Unfortunately, the "insane" behavior on each side is actually rooted in a false choice.  The false choice for the Democrats is, "you either believe in a nightmare scenario of global warming, or you're a climate science denier." 

The false choice for the Republicans is, "if we embrace climate science, it means more big taxes and big government, so the alternative is to deny the science; and eventually the issue will go away."

             If each side persists in framing the issue according to its respective false choice, neither will ever build the needed consensus for real action (or maybe "inaction" in the Republican case).  So what should each side do?  Consider step 2.

Step 2: Re-frame the Problem

            In order to stop behaving insanely, each side should attempt to re-frame the problem.  The funny thing is, I think it could be re-framed in a way that both sides will find acceptable, even likeable.  The greenhouse gas problem should be re-framed as, "how could carbon elimination be the next giant American industry, the next big way to make money?" 

             Re-frame it as a strategy for economic growth.  Focus on the economic side, not on preventing doomsday.  Yes, it should reduce the climate change risk, but do it because it could be so beneficial for the economy.  Instead of trying to drag Republicans kicking and screaming, frame the problem in a way that they'll want to participate.

            The funny thing is, there's a historical precedent for this, on a related issue.  Back in the 1970's when Congress was debating the Clean Air Act, the utility industry fought legislation to eliminate fly ash.  At the time, all they could think was that getting rid of fly ash would simply increase their costs.

            Then someone realized that fly ash could be useful in making concrete.  Suddenly, the fly ash became a resource that could be monetized.  It was and is to this day.  The challenge was to reframe the problem (getting rid of fly ash in the atmosphere) as a business opportunity.

Twenty years ago, the economics of carbon were very different, and Republicans had a good point: alternative energy would be more costly than conventional fuels.  Trying to solve the greenhouse gas problem through taxes and regulation wouldn't work very well.  Today, thanks to better technology and innovation, the economics have totally changed, and alternative energy has the better economics.

            Because the economics have changed so much, it really makes sense now to reframe the carbon problem as a business opportunity.  The problem of greenhouse gases can be solved without resorting to the kind of big tax/big regulation solutions that Republicans fear, even abhor.

             Two approaches come to mind.  First, what are the best ways to extract carbon from the atmosphere to create economic growth and, by the way, maybe save the planet?  Second, could energy be produced at lower cost by avoiding carbon altogether? 

            If you can re-frame the "carbon in the atmosphere" problem as a business opportunity,

and the role of the government is to encourage the development of that business opportunity, not impose a solution, Democrats could provide a way to get Republicans to get on board.

            That re-framing will definitely help, but there's a crucial second re-framing – step 3.  Let's now turn to that.

Step 3: Make a Carbon Dividend the Basis of Your Solution

            Economists have almost universally agreed that the first step in trying to get and keep carbon out of the atmosphere is to find a way to increase the cost of carbon emissions.  The generally agreed way to do that is to impose a tax on carbon emissions.

            A carbon tax, though, is dead on arrival because of Republican opposition.  However, there now is an excellent way to get around the problem, and it's actually a Republican idea.

            I've written previously ( see "When a Rose Is Not a Rose Is Not a Rose" ). Even better, check out Ted Halstead's TED Talk.  Halstead's brilliant solution is to pair a carbon tax with a carbon dividend: all of the money collected through the tax is then re-distributed to the population pro-rata.  It is progressive, not regressive, because lower income people will then to benefit more than the wealthier.  Republicans should find it acceptable because it isn't really a tax – it's a transfer pa.  It should be a cornerstone of any Green New Deal.

             Beyond Halstead's solution, the best thing the government could then do would be to help find ever better ways to reduce the cost of alternative energy, making it even easier for people to make money.  The best way to do that is to sponsor basic research and new technology.

Step 4: Focus Attention on Basic Research and New Technology

            The key to increasing adoption of alternative energy is improved technology, especially improving battery storage and the technology to capture sunlight and wind efficiently.  One of the very best things that could come from a Green New Deal is more funding of basic and applied research in alternative energy and carbon extraction.  Such research at major universities and research institutes, should result in the creation of new companies that can exploit technology that results from it.  It's already happening, it just needs to happen more rapidly, and on a bigger scale.  Any Green New Deal should emphasize this.

            Such research will also help to lead to step 5.

Step 5: Encourage Experimentation

            One of the best things the government might do is to encourage experimentation.  Two forms of experimentation come to mind.

            The first is what I call the X Prize strategy.  The original X Prize was created by entrepreneur Peter Diamandis to encourage the creation of a reusable space rocket.  To win the prize, one needed to send the same rocket into space within a two week period, a seemingly impossible task.  The impossible became possible, and the original $ 10 million prize has been awarded, as have prizes in numerous other comparable competitions.

            The government could encourage people like Diamandis to offer more prize competitions, for example, via tax credits, to create novel carbon capture technologies, or it could even sponsor such competitions itself through the Department of Energy, for example. 

            Such X Prize style competitions are already underway for carbon capture and elimination.  Consider, for example, the efforts of a company in Wyoming to win a $ 7.5 million prize.  The good news is, it is no longer necessary to prove that carbon capture or alternative energy are viable economic propositions.  That's already been done.  Now the only thing necessary is to create an environment that encourages even more creativity and experimentation.  Doing this won't require a huge bureaucracy, or lots of rules and regulations, just proper incentives.

            The other strategy is to encourage such experimentation at the state and local level.  A lot of that already is going on, but much more is possible.

            Further encouragement of entrepreneurs to develop novel solutions to carbon capture and alternative energy will keep the USA as the world leader in reduction of greenhouse gases, the position the USA has held for the past 20 years.

Step 6: Help Businesses Make the Transition

            Businesses both large and small now understand that alternative energy is a winning business proposition, and more and more new investments are underway.  The problem is the speed of eliminating older investments.  As an example, it would be great to eliminate all of the old coal burning electricity plants now and replace them with clean energy.  The electric utilities would definitely benefit because of the lower operational cost of alternative plants.  Who, however, is going to pay the cost of conversion?  Part of any Green New Deal should include incentives to retire older plants more quickly.  Lots of creative possibilities here.  A great thing a Green New Deal could do would be to help utilities develop and implement a cost effective strategy to eliminate all coal fired plants within 10 years.  Do it not by holding a gun to their heads, as regulations might do, but by creating the right economic incentives.

            What is often forgotten is that even with all of the foot dragging on climate change, the USA has been the world leader in eliminating carbon from the atmosphere over the past 25 years

            Which points to the Achilles Heel of the Green New Deal, and why it could have limited benefit.  The problem is that even if the USA is hugely successful in eliminating greenhouse gases, the real problem lies outside the USA, particularly in the developing world.  The only way the worldwide greenhouse gas problem can be solved is through step 7, which I turn to now.

Step 7: Export the Solution

            Somehow, someway, the rest of the world needs to succeed at carbon elimination. If the USA eliminates 100% of its human-caused  greenhouse gases, but the rest of the world stays on the same path, we won't solve the problem.  Somehow, any Green New Deal has to export its ideas to the rest of the world.

            For example, other countries need to adopt some type of carbon tax, too.  They should seriously consider Halstead's "carbon dividend" strategy.

            Besides "exporting" the carbon dividend solution, the best thing a Green New Deal could do would be to encourage future construction of clean energy overseas, as well as the replacement of existing facilities such as coal plants.  To accomplish that, the government might encourage the following:

  • US companies to develop ever better technology that could be exported;
  • Tax incentives to encourage Americans to invest in power generation facilities overseas;
  • Support for the World Bank to invest in alternative energy projects overseas.

Unfortunately, the level of control the USA has over foreign investment in

carbon elimination is problematic.  We cannot impose a solution on the rest of the world.  The best thing we could do, however, is invest in things that will continue to drive down the cost of alternative energy, then make that technology available around the world.  The more we can show the rest of the world how to make money by eliminating carbon, the more likely we are to succeed. 

            The greenhouse gas problem needs to be solved.  If we think we can do it by imposing taxes and regulation, we're fooling ourselves.  However, if we can show the world how to make money by getting carbon and keeping carbon out of the atmosphere, we have the basis for a winning solution.  Which choice will we make?

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Sometimes things just aren't quite what you think they are. Here's a great example.

            "A rose is a rose is a rose."  So wrote Gertrude Stein in her 1922 poem "Sweet Emily".  By this she in a more elegant way said, "it is what it is".  Sometimes, though they may be undesirable or unpleasant, things just are what they are.

            But sometimes they aren't.  In fact, sometimes you might say that "a rose isn't a rose isn't a rose".  Every once in a while, things just aren't what you think they are.

            The best example I can think of is a proposed carbon tax that really isn't a tax.

Economists of virtually every stripe – from diehard conservative to wildly progressive - have said that the best way to deal with the problem of greenhouse gases is to impose taxes on carbon.  As an example, each gallon of gas you would buy when you fill up your car would have an additional fee placed on it.  The idea is that the additional fee (a tax by any other name) would make the product more expensive, encouraging people to switch to other power sources.  In general, such taxes cause people to change behavior.  You probably recall that from Economics 101.

           The problem, of course, is that someone has to pay the tax, and nobody likes to pay taxes.  Least of all, Republicans.  As such, the idea of imposing new taxes – especially new taxes to deal with climate change, which many Republicans like to believe is a hoax – is a complete non-starter.  That's made carbon tax legislation "dead on arrival".

            Until now.  The funny thing is that the carbon tax proposal cited above is endorsed by a number of prominent Republicans – not just Republican economists, also Republican politicians.   On the face of it, this seems highly unusual, particularly because even though the word "tax" is only three letters, it is the equivalent to the most vulgar four letter word many, maybe most, Republicans can contemplate.  The fact that a number of prominent Republican economists and politicians can heartily endorse the idea of a carbon tax may suggest that there is something palpably different about this particular version of that three letter vulgarity.  In fact, there is.  You see, the carbon tax contemplated by these economists isn't really a tax, it's a gigantic transfer payment.

            A transfer payment is money transferred from one set of taxpayers to another.  Amongst the best examples of transfer payments are Social Security, Medicare and Medicaid.  Taxes are collected from one group of people, then payments of various sorts go to the recipients of these various social welfare programs.

            They may be referred to as transfer payments, ultimately, they are still taxes, and they have the effect of making certain groups a little bit poorer and making another group a little richer.  One can spend years and years of paying Social Security taxes without seeing a nickel of benefit.

           The carbon tax being proposed here, however, is fundamentally different.  That's because all of the money collected is then distributed equally to every American citizen.  Absolutely no current governmental tax regimes come even close to this. 
            The tax becomes a "carbon dividend".How much money would be involved?  A lot.  In one initial proposal, the carbon tax would be $ 38.00/ton of carbon dioxide generated.  It would be collected when the fuel is sold, meaning at the gas pump, or on electric utility bills.  Initial estimates are that a $ 38.00/ton of carbon will increase the cost of petroleum at the gas pump by 38 cents/gallon. The Energy Information Administration of the US Department of Energy says that the USA is emitting about 5 million kilotons of CO2 each year by the burning of fossil fuels
.  That's about 15.5 tons/person/year in the country.

            Of course, some greenhouse gas is emitted from other sources, and those wouldn't likely be covered by this carbon tax.    Assuming a price of $ 38/ton of CO2 emitted, users of fuel would collectively pay a tax of $ 190 billion USD in a year.  To put that in perspective, the US government currently collects about $ 3.5 trillion in taxes each year, so this would be equivalent to about a 4.8% tax increase. 

It would be a tax increase of about 4.8% overall IF the government collected it and then spent it, the thing so many Republicans fear.

            However, before you start howling at the tax increase, understand that the $ 190 billion would then be equally divided amongst every person in the USA, and a check would be sent out.  Using these numbers, the average person would receive a check for $ 594!  For the typical family of four persons, that would be $ 2,386, almost the same as the average tax refund from the IRS, which is reported to be $ 2,782/tax filer. 

            Here's the thing that makes this particularly enticing.  Obviously, not everyone consumes the same amount of fuel each year.  In fact, wealthier people to consume a good deal more.  That's because they are more likely to travel; have bigger houses that require more heating and cooling; and drive cars to consume more gasoline.  Other things being equal, that means wealthier people will pay more of this tax, but they will receive no more money than the poorest of the poor.  Conversely, the latter will receive the same checks as the wealthy, but they will clearly not be spending as much money on fuel.  The very definition of a progressive tax.  Some claim that the "carbon tax plus carbon dividend" proposal is regressive.  It would be regressive if the government kept the money and spent it on some program.  However, because it would distribute the dividend equally to everyone, a regressive tax actually turns into a progressive one!  In contrast, lotteries and sin taxes, tend to be regressive.  That's because poorer people tend to buy more lottery tickets, and smoke more cigarettes, than wealthier people.  The nice thing about lotteries and cigarette taxes is that you don't have to spend a nickel to benefit.  One can easily go through life never buying a lottery ticket or a pack of cigarettes, but enjoy all the benefits of the taxes collected.                   

            The proposed carbon tax flips this formulation on its head.  One can do everything possible to minimize expenditures on fuel, yet still expect a nice check from the US Treasury.  Which is precisely the objective.  Economists long ago demonstrated that as the price of a good goes up, it will be consumed less if there are substitute products.  There clearly are substitute products available, so the carbon tax should have the intended effect of reducing consumption of carbon.  

            That's especially true when you consider the second part of the plan.  That would be to increase the carbon tax each year.  Some proposals call for a $ 2.00 increase/year/ton emitted.  That means burning carbon will get increasingly expensive.  It will also mean, absent a reduction in demand, the average person will receive a bigger check each year.   Not only that, but the more the carbon tax increases, the more progressive it becomes. 

            Hopefully, the average person won't get a bigger check each year because the amount of carbon goes down – the real goal of the plan.  Sooner or later, as the carbon makes the cost of carbon-based fuels more expensive, consumers will select lower cost alternatives. 

            The plan could even be used to create an additional benefit, one not previously contemplated by its authors.  Let me now turn to that.  The recent government shutdown brought lots of attention to a terrible problem facing the average American family – an inability to save for a rainy day.  Every day during the recent 35 day government shutdown, lots of attention was paid to families and individuals in increasingly desperate situations.  The loss of a regular paycheck left them close to destitute. 

            Financial planners for years have been saying that the average person should have six months of savings for emergency situations.  An unfortunately large percentage of Americans don't have anywhere near that.  I'm confident if we polled the average person, he or she would readily acknowledge the importance of having emergency savings.  They'd also acknowledge that they should quit smoking and exercise.  Unfortunately, these things can be very difficult to do.  In fact, it may be more difficult for the average American to save emergency funds than to quit smoking or exercise on a regular basis. 

            What could be done?  Why not turn the carbon tax redistribution plan described above into an automatic savings plan?  When the checks are distributed to the average family or individual, the money could be put into a savings account.  If and when the person/family experiences an emergency, they could draw the money out. 

            Imagine such a plan had been in place for just one year when the latest Federal shutdown occurred.  The typical family of four would have had about $ 2,300 of savings in an emergency account.  That could have made life a lot easier for many of those people.  Imagine if that money could build up over time in an interest bearing account?  Ordinary Americans could build up significant savings. 

            Why would anyone want to stick their carbon dividend check into a savings account if they could just cash the check?  They might do it if it had features similar to a Roth IRA, where earnings could accumulate tax free. 

            This could potentially create a fairly significant source of savings.  Not only that, it provides something for both sides of the aisle.  It provides an excellent way to address the problem of greenhouse gases without really increasing government spending.  It also provides a way to create both emergency savings, as well as a way to accumulate savings not subject to taxes. 

            An obvious question to ask is, would it negatively affect payments into IRA's, 401k's, and 403b plans?  The think that's unlikely because the money in latter programs cannot be accessed easily, or without penalty, if someone is less than retirement age.   

            The proposed carbon tax would certainly not be a panacea.  It could, however, help reduce demand for greenhouse gases more effectively than any other method.  That's the reason practitioners of the "dismal science" like it so much.  The nice thing about this proposal is that the money collected from the tax would be distributed back to everyone.  In effect, it isn't a tax. 

            Not only that, as outlined above, it could provide a neat and convenient way to solve a huge problem facing ordinary Americans: the lack of emergency savings. 

At least in some cases, a rose is not a rose is not a rose.  Yet it could still be as sweet as Gertrude Stein's "Sweet Emily", wherein a rose is a rose is a rose.

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While he suffered a big defeat with the government shutdown, Donald Trump could actually turn things around, if he'll just remember some of the basics of good negotiation

            His political spin-meisters will doubtless try to do their best.  They'll get on the various political talk shows, and write various opinion pieces, all trying to say that Donald Trump didn't suffer a defeat at the hands of Nancy Pelosi and the Democrats over the 35 day governmental shutdown.

            They're wasting everybody's time.  Unquestionably, it was a disastrous outcome for the President.  He almost invariably describes things he does using superlatives.  This one was a superlative failure.

            But like so many times in life, an initial failure could turn into a triumph.  Not only that, it could be an even bigger triumph than the one he was hoping to get – building a $ 5.7 billion dollar concrete or steel wall along the US-Mexico border.  At the same time, it could actually be something that not only would his "base" like, it might even be something that Democrats, and independents like me, could really like.

            Let me explain how such a dramatic turn of events is possible. 

            It comes down to something really, really simple.  It has to do with one of the "basics" of dealmaking: good negotiating skills.

            Whether you like him or not, Donald Trump is a very good negotiator and dealmaker.  However, as experts sometimes do, he's forgotten some of the basics.

            How could a skilled person forget the basics?  It could be because he/she overfocuses on part of an issue and overlooks something else important.  Some people have joked that Donald Trump has an "Edifice Complex", as opposed to an "Oedipus Complex".  Trump seems to like edifices of all sorts, especially if they are big, shiny, and have his name on them, or at least associated with them.  In fact, he seems so pre-occupied with that objective, it might lead him to overlook something important.

            What he seems to have overlooked/forgotten is a basic principle of good negotiation: negotiate your "interest", not your "position"

            What do I mean when I say, negotiate your "interest", not your "position"?  Your "interest" is what you ultimately are trying to accomplish.  In contrast, your "position" is what you tell your negotiation partners, and third parties, you want.  They are oftentimes not exactly the same thing.  In the current case, Trump's "position" is crystal clear: we need to build an edifice, meaning a bigger physical wall on the southern border of the USA, and also fill in the gaps on the existing border wall.  Build something that looks like the border wall between Israel proper and the West Bank.

            The Democrats – Trump's negotiation partners – have rejected that out of hand.  Polls indicate the majority of Americans also reject this physical wall.  Most likely, so long as Trump insists on his "position" – getting his physical wall - he will continue to be rebuffed.  So what should he do?

            He could continue with his current strategy and try to push through his physical wall.  The chances of that succeeding, however, are the proverbial "slim" and "none".

            Instead, he could go back and see if he can modify his "position" in a way that will achieve his real "interest"

            What is Trump's real "interest"?  It's to have a secure southern border and a better immigration system.  The problem is that he has created a world with only two possibilities: a giant physical wall or an insecure border.  Unfortunately, that is what I call a false choice.  There are other ways to achieve a secure border without a bigger physical wall.  Thus, if he would be willing to abandon his "false choice" of a "physical wall or open border", he could begin to explore alternative ways to achieve his real interest – a secure southern border and better immigration system.

            Now even after his latest defeat, he may still think he can get his "edifice" built.  Not likely.

            So what are possible ways to achieve his "real interest" without getting his "edifice"?  One is to create an "electronic wall" using state of the art technology.  Another is to spend more money on the Border Patrol to help them do a better job.  Another is to change the immigration rules to reduce incentives for desperate Central Americans to apply for asylum.  Still another is to expand the E-Verify system, and enforce it more diligently, so that it is more difficult for undocumented people to work in the USA.  There are others, but these are some of the obvious ones.

            Once a good negotiator understands his "real interests", he/she needs to think about the real interests of the other side. Negotiation is often a process of trying to discern what those real interests are.  In the case of immigration, it could very well be that the Democrats and independents have the very same "real interest" of having a better immigration system.  For example, Democrats want to solve the Dreamer problem.  You'll recall, the Dreamers are the young people brought to the USA as children by their parents, but who are undocumented.  Besides the Dreamers, the Democrats want to do something about the eleven million undocumented people already in the country.

            But even if Republicans and Democrats don't have the exact same interest, there are some potential ones that might form the basis of a deal.  Two come to mind.  First, Democrats want a permanent solution to the Dreamer problem.  That permanent solution would be some pathway to citizenship, or at least permanent residency.  Second, a "real interest" is likely just to come up with some kind of solution to the immigration issue, if for no other reason than to permit everyone to move on to other issues.  How about health care, or infrastructure, or any number of other things? 

            Getting away from the current "position" on a wall, which is built upon the false choice described above, the President could try to create a deal that would achieve his "real interest" and get the other side to buy in because it could help them achieve some of their "real interests".  Let's try out some possibilities:

            Possibility #1: get funding to build an electronic wall plus more money for the Border Patrol in exchange for a permanent solution to the Dreamer problem.  An electronic wall could achieve the same things as a physical one, without creating a physical monstrosity.

            That could achieve Trump's real interest of securing the border, and also achieve the opposition's goal of a permanent solution to the Dreamer problem.

            Possibility #2: go even further than Possibility #1.  Besides the electronic wall, and more funding, but no physical wall, there could be reform of the asylum rules so it is harder to try to get asylum in the USA.  That would appeal to Trump's "base", and certainly would be in his interest.  But if he wants to do that, he'll have to make a bigger concession to the other side to fulfill some of their interests.  That might be changes that will permit lots more undocumented people in the USA to become normalized – maybe even a pathway to citizenship.

            Possibility #3: go even further than Possibility #2 by expanding the E-Verify system.  That system permits an employer to know whether his/her employees are legally able to work.  Put real teeth in the law with fines against employers who fail to follow the rules.  Seriously enforcing this could make it very difficult for undocumented people to work in the USA.  If they cannot work, they're likely to exit the country without even being asked.

            E-Verify is a pretty drastic solution.  But even that might be okay with Democrats if they're given something big enough in return.  How about a path to citizenship or legal residence for all, or nearly all, of the undocumented people in the USA who have not committed serious crimes?  Pretty drastic, but one possible deal would be to give the Republicans one pretty drastic thing they want in exchange for one pretty drastic thing that the Democrats want.  Just so long as one of the things isn't a physical wall.

            Just as badly as Donald Trump wants a physical wall, the Democrats want to avoid the wall.  As such, that actually creates a great negotiating opportunity for Trump.  He could tell Nancy Pelosi and Chuck Schumer, we won't build a physical wall, but in return for this concession, I want a gigantic increase in funding for the Border Patrol, and/or a change to merit based immigration system.

            These are but a few of the myriad possibilities.  Again, the only possibility he should take off the table is the physical wall because that has proven to be a non-starter.  Unfortunately, he won't likely take the physical wall off the table until he stops thinking in terms of the false choice of physical wall or unfettered immigration.

            So you may ask, if this is such a good idea, why hasn't Trump, the master negotiator, already done it?  I admit, it's a head-scratcher to me.  The funny thing is, as suggested earlier, good negotiators sometimes forget the "basics", forget to do the obvious.  I think this may be one of those cases. 

            Trump is actually in a great position to "reframe" the debate.  After all, he has demonstrated quite a knack for changing the subject when things aren't going his way.  Well, they're not going his way on the wall debate, but he could make a "change the subject" move by re-framing the issue from physical wall to something more generic, such as "fundamentally fix immigration".

            The crazy thing of all this is, Trump could actually achieve what he really wants: securing the southern border.  He just won't be able to do it quite the way he had in mind with the physical wall.  The even crazier thing is that Democrats and others might be happy, because as part of the bargain, they'll get things they want.  They've already hinted at possibilities.

            But nothing will happen until the President does two things.  First, stop thinking in terms of the "false choice" of "physical wall or open borders".  Realize there are alternative ways to achieve his real interest of a secure southern border.  Second, remember to negotiate your "interests", not your "position".

            I'm very confident that Nancy Pelosi hasn't forgotten this basic principle.

            Now some people are likely to say, taking the physical wall off the table would be caving in.  Not at all!  It's only a "cave in" if you embrace the false dichotomy of physical wall or unfettered immigration.  Trump can overcome this if he reframes the issue as "effective border security".  If he does that, it will be much more difficult for his opposition to dismiss the issue. 

            Many in Trump's "base" will claim that the Democrats have no interest in securing the southern border.  I disagree, because the Democrats have clearly indicated they want to come up with a permanent solution for the Dreamers, as well as a better way to handle asylum seekers.  There are other things.  These "interests" become the basis for forging an agreement with Trump, so long as Trump takes the "non-negotiable" physical wall off the table.         

            Yes, Trump still has a great opportunity to snatch victory from the jaws of defeat.  He still could end up being a hero to his base.  He even has the possibility of doing something in a bi-partisan manner, something that seems impossible.  All he has to do is eliminate the "false choice" of physical wall or unfettered immigration and negotiate his interests not his position.

            For the master dealmaker, it really shouldn't be that hard.  After all, sometimes truth is stranger than fiction.

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An amazing true story of intrigue that is both instructive, and cautionary

            It really is true.  Sometimes truth is stranger than fiction – maybe even dramatically stranger.  For evidence of this, one need only look at Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice, a book by William Browder, that I recently completed.

            I try to read a lot of books, and this was definitely one of the best I've encountered in recent memory.   The book's subtitle certainly is tempting.  After all, lots of us love good murder mysteries, and we quite often like to read heroic tales of people fighting for justice.  This book has both, and even throws in some high finance intrigue, without delving into "eye glazing" detail that would bore most people to tears.

            But the book really does more than simply weave all of these enticing elements together. 

            One thing that makes it such an interesting true story is three highly unexpected things the reader learns about the author, Bill Browder.  The first is that Browder is the grandson of Earl Browder, once the head of the American Communist Party.  Browder the author comes from a long and distinguished line of left-wingers.

            With such a pedigree, what's the most unexpected thing he might be or do?  Go to Stanford Business School, then launch a career as a very successful hedge fund manager.  The offspring of a bunch of leftwingers/communists becomes an uber-capitalist!

            How Browder became an uber-capitalist is the second truly unexpected thing.  As he points out, the logical career path for graduates of Stanford and other top level graduate schools of business is consulting, investment banking, or working for well known Fortune 500 firms such as Procter & Gamble and General Electric.  Browder, himself, begins with one such firm, but quickly heads off to do something else.

            His "something else" is to begin investing in Eastern Europe and Russia at the time of the fall of the Iron Curtain.  He was truly on the "frontier", and largely dismissed by his co-workers and superiors at the time.  Through perseverance, plus some timely good fortune, Browder created a very successful hedge fund in Russia.  He literally became the "go to" guy when everyone else discovered that Browder was on to something big.  Very big!  The unexpected outcome of all this was that Browder's Hermitage Capital turned into a billion dollar hedge fund at the turn of the 21st century, and Browder was well on his way to financial mogul-dom.

            Until he ran into trouble with the leadership of Russia.  I won't go into detail about this, other than to say that Browder was denied entry to Russia, and has been battling the Russian government since 2005, in the past few years fearing for his life.

            That battle has set the stage for the third highly unexpected thing about Browder.  He has gone from being the uber-capitalist head of a major hedge fund to being a major human rights advocate.  Besides his own problems with the Russian government, Browder's "conversion" to humans rights advocate is because of a Russian tax lawyer named Sergei Magnitsky.

            You might have heard of something called the Magnitsky Act.  The Magnitsky Act, passed by the US Congress and signed by President Barack Obama, places sanctions and travel restrictions on certain Russians deemed to violate a range of laws.  The Russian government, beginning with Vladimir Putin, absolutely hates it! 

            The driving force behind the Magnitsky Act was Bill Browder.   

            So what turned Browder from uber-capitalist into uber-human rights advocate?  The torture and death of Sergei Magnitsky at the hands of the Russian government.  Magnitsky's death so impacted Browder that his entire life has been transformed.  As such, he's joined the ranks of other ordinary people who have had life-altering, transformative experiences:

            Moses, who after an encounter with God (in the form of a burning bush), led the Israelites from captivity;

            Rosa Parks, who became a civil rights leader after failing to give up her seat on a segregated bus in Montgomery, Alabama in 1955;

            Candy Lightener, the woman who founded Mothers Against Drunk Driving (MADD) after her daughter was killed by a drunk driver;

            Malala Yousafzai, a Pakistani teenager who became a human rights advocate after an unsuccessful attempt on her life.

            Yes, Browder's life has totally been transformed by Magnitsky's death.  The Russian government is now going after Browder, himself.  Russia has asked Interpol, the international police agency, to issue what's called a Red Notice.  Browder, if he crosses an international border, runs the risk of being arrested and deported to Russia to stand trial.  But he also should be fearful, even if he doesn't cross an international border, when one considers what happened to Sergei Skripal and his daughter.  The two were poisoned by Russian agents in Salisbury, England.  The evidence suggests that the Russian government will stop at virtually nothing to eliminate its perceived enemies – and Browder is clearly in that elite circle.

            But, if anything, the danger merely makes Browder even more determined.  His book is his latest effort in his ongoing battle with the Russian government.

            Which leads to the final reason Red Notice ought to be of great interest.  That's because it touches upon the great question, what causes some people to embrace an idea, or a mission, in such a completely captivating way?  Leaders of businesses and other organizations often ponder the question, how do I motivate my people?  The conventional answers are more money and perks, and better working conditions.  These things are somewhat helpful, but no one develops the motivation of a Bill Browder because of money, perks, and working conditions! 

            Consider all of the people besides Browder I mentioned earlier – Moses, Rosa Parks, Candy Lightener, Malala Yousafzai.  What's motivated each of these people is a cause far greater than themselves.  Browder's cause – avenging Magnitsky, as well as exposing human rights abuses – is what animates him.

            Which points to an answer to the question, how do you truly motivate people?  The answer is, find a truly compelling idea, then enlist yourself and your people in its achievement. 

            Things like increasing your sales or profits by 20% won't inspire your people.  Great motivational talks aren't likely to do it either.  Instead, it's finding something truly inspiring, and far greater than any individual, that will provide the seeds for true inspiration, and truly compelling results.

            As with Moses, Rosa Parks, Candy Lightener, and Malala Yousafzai, Bill Browder's the truth of Bill Browder's compelling tale, Red Notice, is clearly stranger than fiction.          

 

 

 

 

 

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A major electric has made an environmental pledge that could well be a brilliant business decision

            It seems almost every day we wake up to Earth-shattering headlines.  The funny thing is that lots of really significant news gets lost amidst all the "Big Headlines".  A great example of this was the recent report that Xcel Energy, a major electric utility based in Minneapolis, MN, plans to become 100% carbon neutral by 2050, a mere three decades from now.

            This is big news because Xcel is the first major electric utility to pledge to become 100% carbon neutral, and, moreover, to provide a specific date.  Now 2050 is still three decades away, and a lot of greenhouse damage will occur in that time.  The other significant thing Xcel said is that within 15 years, it will reduce 80% of the carbon emissions it had in 2005.  As such, most of the reductions should come in the next 15 years.

            Another reason this is important is because Xcel is the kind of company most environmentalists love to hate.  It's a big company – actually a big company with three major operating divisions: Northern States Power, Public Service of Colorado, and Southwestern Public Service in Amarillo.  Altogether, it has about 3.3 million electric customers and 1.8 million natural gas customers.

            Let's focus on the greenhouse gas emissions of the company.  On the positive side, it operates 27 hydro plants and two nuclear plants.  Of course, many environmentalists will object to the environmental impact of hydro and nuclear, but at least in terms of greenhouse gases, these 29 plants don't spew anything into the air. 

            In the greenhouse gas department, however, Xcel presently operates 13 coal fired electric plants that generate a combined 7,697 megawatts of power.  More than enough greenhouse gases!

            Which brings me back to the "real news".  Xcel's management isn't going to eliminate all these coal fired plants because they want to be nice guys, even though they probably are.  They're going to do it because it will make good business sense.  Oh, I'm sure, management is presently being criticized by environmentalists, and much of that criticism is quite justified, as the utility industry has a very long history of ignoring environmentalists.

            Are they doing this because of stiffer regulations?  Pretty unlikely, especially given the Trump Administration's efforts to make life easier for the coal industry.

            Instead, it's because it's a smart business decision.  So let's look specifically at why getting rid of all these coal plants is a very smart business decision. 

            It get's back to the number one job of the management of a company: make money for the shareholders.  In the case of a publicly-owned company such as Xcel, that means figuring ways to maximize the stock price.  With that in mind, let's consider how the decision to get rid of coal could help Xcel's managements drive up the company's share price.

            Stock prices are influenced by three things: company fundamentals, technical factors, and market sentiment.  Let's consider each.  The important thing to realize is that of these three factors, the management of a company can only influence one of them: company fundamentals.

            Market sentiment is really an overall collective assessment the investing world makes.  It depends upon things such as expectations of what the Federal Reserve will do with interest rates; what overall government policy is doing; and things such as the balance of trade and what's happening in foreign markets.

            The important thing to realize is that the management of a company can't do anything about market sentiment.

            The same is true for technical factors.  These include things such as the level of inflation, substitute products, and demographics.  For example, imagine that someone creates a great way for everyone to generate their own power, so it isn't necessary to depend upon the electric utility?  Pretty much outside the control of the utility company.

Which leaves just one thing that management can do to affect stock prices – company fundamentals – something very much within the control of management.  The key things here are the present value of future earnings for the company, as well as what's referred to as "free cash flow". 

            The best way for management to increase the stock price is to focus on things that will increase the company's earnings and free cash flow.  Generally speaking, that comes down to doing the following three things: 1) generate more revenue; 2) reduce costs; and/or 3) increase productivity.

            Unlike other businesses, utilities cannot do a great deal about increasing the amount of "product" or "service" it sells.  Instead, the typical utility must simply be prepared to produce the kilowatt hours and cubic feet of natural gas that customers demand.   The only thing the utility can try to do is to increase the rates charged to customers.  That, however, is subject to government regulation. 

            The management of the typical utility works very hard to convince regulators to increase the rates charged to customers.  Of course, on the other side of the table are a whole bunch of interests trying to keep utility rates low.  It's a classic political process, and management can to some extent influence stock price by pushing hard to increase utility rates.

            That leaves two other ways for management to influence stock prices: reducing costs and increasing productivity.

            Here's where the real news is.  The cost of alternative energy has gone down so much that wind and solar are now amongst the lowest cost power sources.  New wind and solar installations can generate kilowatt hours at a lower marginal rate than can coal and natural gas.

            Which means that, other things being equal, the management of companies such as Xcel can make a higher profit/kilowatt hour generated by building wind and solar capacity than by coal and natural gas.

            As wind and solar technology continue to improve, that differential is probably only going to increase.  Not only that, it will increase to the extent that fossil fuel prices go up.

            All you have to do is have some supply disruption of oil and natural gas to have the prices of those fuels go up.  Same thing for coal.  In the case of coal, regulation could increase the cost of the input. 

            Utility plants typically have a 30 to 40 year lifespan, so when management contemplates building one, it has to consider not only current costs but the cost of operation over that lifespan.  Doubtless, at the present time, the management of Xcel projects that over the next 30 to 40 years, the cost of operating a coal plant can do nothing but increase.  Technology isn't likely to reduce the cost of generation.  Conversely, the cost of a wind or solar facility has a good chance of continuing to go down over the same time period.

            Which means that if the company wants to increase earnings and free cash flow, the better choice will be a zero carbon facility.  If it makes that choice, other things being equal, there's a better chance the stock price will go up.

            So if that's the case, why not just ditch all of the coal plants right now?  Two likely reasons.  One is that management believes it lacks the capital and the management time to make such a transition more quickly. 

            It would have to borrow too much money and couldn't afford the debt service.  That problem could be overcome, especially if government regulators provide some type of relief to the company.

            However, even if management could swap out all those plants, there is still the problem of spreading management too thin.  Building a whole bunch of new plants would tax any organization.

            There is a possible way around this problem.  That's to have the company purchase alternative energy from a third party and just ditch all of the coal plants.  If management could find alternative sources of power and purchase it, it could shut down all of those coal plants more quickly.  If it could purchase enough clean power at a low enough price, it would make sense to shut all of the coal plants down as quickly as possible.  There are, of course, some important caveats to doing this, but it could make good sense.

            Of course, shutting down all those plants might create other problems.  The most likely would be the economic impact in the towns where the coal plants are located. 

            This points the way to another great economic opportunity.  Third parties could build new wind and solar plants that would provide clean power at a lower cost than the old coal plants.  Xcel's management probably realizes this.

            So why not just get third parties to build all of this new zero emission capacity and get rid of all of the coal plants?  The short answer may be that government regulation has incentivized utilities to keep operating greenhouse gas polluting coal plants.  We'll consider that in the future.

            In the meantime, Xcel's management, in my mind, is making a brilliant business decision.  I expect other companies will reach the same conclusion, and start doing the same. Which reinforces the idea that if you really want to get rid of greenhouse gases, the best way is through economics and better technology, not politics and regulation.

 

 

 

 

 

 

 

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Carl Treleaven is an entrepreneur, author, strong supporter of various non-profits, and committed Christian. He is CEO of Westlake Ventures, Inc., a company with diversified investments in printing and software.

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