06.25.09

How Wall Street Will Ruin the Environment

The House of Representatives votes today on cap-and-trade legislation that will make pollution a tradable commodity. Robert Bryce on why the Sierra Club’s favored legislation is full of methane.

If only we could turn bullshit into energy. Armed with that technology, the House could skip today’s much-anticipated vote on the cap-and-trade bill, a 1,201-page grab bag of ideas that has been dubbed the “American Clean Energy and Security Act of 2009.”

The bill aims to reduce America’s carbon-dioxide emissions through a myriad of new mandates on renewable energy and efficiency. It will create a system that caps carbon-dioxide emissions from large industrial plants like power generators and refineries by establishing an ever-shrinking pool of carbon allowances that could be traded among various companies and investors. The measure also aims to increase the use of carbon capture and sequestration, increase the use of electric cars, prevent destruction of tropical forests, and create something called the Clean Energy Deployment Administration.

In short, given its length and complexity, the cap-and-trade bill would be better named “The 2009 Lawyer-Lobbyist Full Employment Act.”

The idea behind the bill is to cut U.S. carbon-dioxide emissions by 80 percent by 2050—a level at which America’s per-capita emissions would be on par with the current-day emissions levels from such economic powerhouses as North Korea, Syria, and Cuba. (I’m not making this up.) What will the bill cost? No one knows. Proponents claim it will cost American families “less than a postage stamp per day.” Opponents claim the bill will further hamper the U.S. economy and be particularly hard on states like West Virginia, Indiana, and Wyoming—all of which get more than 90 percent of their electricity from coal-fired power plants. Thus, consumers in those states would end up paying far more under cap-and-trade than residents in states like Idaho and Oregon, both of which rely heavily on hydropower.

In short, given its length and complexity, the cap-and-trade bill would be better named “The 2009 Lawyer-Lobbyist Full Employment Act.” Proponents are ignoring the fact that Enron (remember Jeff Skilling and Ken Lay?) desperately wanted caps on carbon dioxide because they saw huge profits in being able to trade carbon allowances. And now Congress wants to give Wall Street traders—the same pirates who helped engineer the financial meltdown—a mandate that requires a massive new trading business that has the potential to be gamed in the same way that Enron gamed the California electricity market? Hello?

While Democrats are confident they can pass the bill through the House today, its chances in the Senate are far less certain. What is certain: The U.S. should immediately launch a Manhattan Project to create a new bullshit-to-energy technology, with applications that extend far beyond the halls of Congress. The need for such a breakthrough became obvious last month when I appeared on CNBC opposite Carl Pope, the executive director of the Sierra Club. (Yesterday, the Sierra Club and a number of other environmental groups announced their support for the cap-and-trade bill.)

In about two minutes, Pope repeated nearly every hackneyed idea about energy that’s been put forward over the past 10 years—none of which is supported by anything remotely connected to reality. Among Pope’s claims: The U.S. should be “energy independent.” When I challenged Pope on his use of the phrase, he insisted that he had a different definition of energy independence, and that for him it means that “for a very, very long time” the U.S. has “passed up enormous opportunities” to reduce its use of foreign oil. Fine. Pope wants a little energy independence. Alas, that’s a lot like being a little pregnant.

But what really stuck in my craw was that Pope mindlessly repeated a spate of spurious claims about ethanol and Brazil. When asked about alternative energy for the transportation sector, he replied, “In Brazil, they have used sugar cane and other, much higher than corn, much better than corn, feedstocks, to generate cellulosic biofuels. We need to be doing that in the U.S. It’s going to take some time.”

What a load of methane.

Perhaps it not surprising that Pope mentioned Brazil. Over the past few years, a variety of people—from New York Times columnist Thomas Friedman to Bill Clinton, to neoconservative ideologues like former CIA director James Woolsey—have held up Brazil as an example that the U.S. should follow.

But as John Adams famously noted, facts are stubborn things. Here are a few stubborn facts about Brazil’s energy business:

• Brazil’s success in the energy business has little to do with ethanol and almost everything to do with the substance environmentalists love to hate: oil. Over the last few years, Brazil has become nearly self-sufficient in oil, not because of ethanol, but because Petrobras, the country’s national oil company, is arguably the best in the world when it comes to the super-high-tech business of drilling in deepwater. Thanks to its success at finding and developing huge offshore oil deposits, Petrobras has nearly doubled its oil production over the past decade. It now produces about 2.4 million barrels per day—nearly as much as Venezuela—and over the next decade, Petrobras expects to double its oil production again.

• Ethanol provides a minor fraction of Brazil’s motor-fuel needs. The country produces about 6.8 billion gallons of ethanol per year. That’s the energy equivalent of about 300,000 barrels of oil equivalent per day. Brazil’s total oil consumption, according to the Energy Information Administration, is 2.5 million barrels per day—that’s about eight times as much energy as is produced from their much-lauded sugar cane ethanol sector.

• Brazil’s sugar cane business depends heavily on slave labor. One of the best exposés of the problem appeared in January in Der Spiegel. Reporter Clemens Hoges wrote that sugar cane ethanol may be “considered an effective antidote to climate change” but the reality is that “thousands of Brazilian plantation workers harvest the cane at slave wages.” The story, which includes photos of the squalid camps where the cane harvesters live, quotes Father Tiago, a 66-year-old Scottish priest who has been working in Brazil for decades. “The promise of biofuel is a lie. Anyone who buys ethanol is pumping blood into his tank,” said the priest. “Ethanol is produced by slaves.” The photos are available here.

• Pope claimed Brazil is producing “cellulosic biofuels.” Wrong. Brazil is producing ethanol from the sugar squeezed out of the cane. That sugar juice is then fermented in a process nearly identical to that used to make rum. Cellulosic ethanol is produced from wood chips, grass, straw, or other plant materials. The next time you go to the liquor store, tell them you want to buy some rum—or any other liquor—made from grass or wood chips. Good luck with that.

• Pope said the U.S. should be producing cellulosic biofuels. Where? How? Despite more than three decades of hype about cellulosic ethanol—much of it provided by Pope’s fellow traveler, energy prognosticator Amory Lovins—there’s still not a single company in the U.S. that is producing commercial quantities of ethanol from cellulose. Why not? The production process is too expensive. And even if it were somehow made viable, the amount of land needed to grow enough plants to produce large volumes of fuel would quickly begin to compete with agricultural land needed to grow food. Me, I’d rather eat than drive.

I could continue smacking Pope around. But I must say that I agree with him on one point that he made: The U.S. could be using more natural gas in the transportation sector. That’s a good idea. And it will likely gain traction over the next few years—with or without help from Congress. Alas, there’s not a single mention of natural-gas vehicles in the cap-and-trade bill.

And while the bill is silent on natural-gas vehicles, it does contain yet more pork for the ethanol scam, including a provision that could require every new car sold in the U.S. to be capable of burning fuel containing 85 percent ethanol. The bill doesn’t explain where, or how, that ethanol will be produced. But that doesn’t matter. In our new bullshit-powered economy, the U.S. will have energy independence, zero carbon-dioxide emissions, and every gas station will be selling Brazilian ethanol dispensed by smiling female attendants—every one of them a dead ringer for Gisele Bundchen.

Robert Bryce’s latest book is Gusher of Lies: The Dangerous Delusions of “Energy Independence.”