Cuomo Bans Fracking in New York

California’s Brown Opens Up the Monterey Shale Starting January 15 -

It has been a terrible year for environmentalists. Anti-environmental interests had huge wins in the Congressional midterms. State legislatures became even more entrenched. Republicans, who now control Congressional funding, will challenge relentlessly the EPA.

So if a line in the sand is to be drawn, it will be by the handful of politicians who control blue states. The most important of these states are California and New York. Remarkably, Governor Jerry Brown signed on September 20 a bill allowing fracking in California’s Monterey Shale. Environmentalists considered Brown’s endorsement of fracking a huge setback. Ironically, the Monterey Shale adjoins some of the most dangerous earthquake faults in the world.

Governor Jerry Brown

Then on a huge news day – starting with President Obama establishing diplomatic relations with Cuba – Governor Andrew Cuomo did something unusual for a New York politician. He turned his back on Wall Street by banning fracking in New York State.  Much of the fracking boom is fueled by Wall Street speculation.  The political pressure on Cuomo was enormous. At stake were New York City’s water supply and the state’s most important agricultural region.

Cuomo’s decision was a win for environmentalists as well as New York City Democrats who feared the loss of support if the governor had sided with the drilling interests.

Andrew Cuomo

Like fracking, Wall Street supports the hard sell on nuclear power, and, more recently, Canadian oil sands.  Fracking, like nuclear and oil sands, is fraught with health, environmental and even geological dangers. The fact that Cuomo made this decision as oil and gas prices are plummeting to new lows gave the governor some political cover. But the political reality is that New York has a ban and California does not.

Howard Zucker, the acting Commissioner of Health, announcing the ban, said:  “I cannot support high volume hydraulic fracturing in the great state of New York.”

Zucker made the statement during the year-end cabinet meeting held by Gov. Cuomo at his office in Albany.  According to The New York Times, “It came amid increased calls by environmentalists to ban fracking, which uses water and chemicals to release natural gas trapped in deeply buried shale deposits.”

In 2012 environmentalists feared Cuomo was going to allow fracking in limited areas of New York State.  The Times reported, “Mr. Cuomo had focused a great amount of attention on trying to improve the economic climate in upstate New York, and fracking appeared to offer a way to bring new life to struggling areas atop the Marcellus Shale, a gigantic subterranean deposit of trapped gas that extends across much of New York State, Pennsylvania and West Virginia.”

The long anticipated, yearend decision is Cuomo’s holiday present to the many environmental groups that worked tirelessly for the ban.

Books Blame Capitalism for Climate, Water Crises

Adam Smith’s invisible hand — the supposedly benign force in laissez-faire capitalism that promotes economic efficiency — is actually steering the world to environmental catastrophe by ruining our air and water.  At least that is the argument a pair of Canadian author/activists make in powerful new manifestos: This Changes Everything by Naomi Klein and Blue Future by Maude Barlow.

Klein’s book, released in September, is a national bestseller that has been widely praised for its thorough research and rigorous analysis of climate change. Predictably, it has also been panned by supporters of unfettered capitalism. Barlow’s book came earlier in the year and has not yet received the notice it deserves.

Klein writes that the climate change threat has set up a battle to the death between deregulated capitalism and the planet, as we know it. “The battle is already under way, but right now capitalism is winning hands down,” she says. “It wins every time the need for economic growth is used as the excuse for putting off climate action yet again.”

For Barlow, the future of fresh water comes down to whether it will be preserved as a basic human right or — if capitalistic impulses triumph — it becomes a commodity controlled by a tiny minority of the wealthy. “We are creating a perfect storm for an unprecedented world water crisis,” Barlow writes, adding that as a “water cartel” emerges, the poor are losing the race for access to water.

The battles over air and water are distinct issues, but the authors make it clear that they are highly interrelated. For example, rotting vegetation in reservoirs behind the world’s great dams release massive amounts of greenhouse gases that accelerate climate change (including nearly 20% of India’s total greenhouse gas emissions), while climate change itself causes epic droughts.

Klein offers an insightful perspective on the forces at work behind the scenes at last week’s United Nations Framework Convention on Climate Change in Lima, Peru. The Lima confab is a warm-up to a major U.N. summit next December aimed at limiting the rise in global temperature to 2 degrees Celsius (2C) by 2100, the consensus maximum before warming triggers severe social disruption. Nearly 200 governments have agreed to a March 31, 2015 deadline for submitting national plans for limiting greenhouse gas emissions. But prospects for achieving the 2C goal are not good, many analysts say.

The world has a one-in-three chance of exceeding a 4C rise by 2100, Climate Action Tracker, a consortium of climate analysis firms, reported Dec. 8. CAT projects that current government policies will lead to a 3.9C rise. But if new unconditional government pledges are met, that would fall to 3.1C, and if conditional pledges are also met, the rise would be 2.9C. Unfortunately, that still exceeds the 2C danger line and, in any case, governments tend to backslide. “We are seeing a major risk of a further downward spiral in ambition, a retreat from action, and a re-carbonization of the energy system led by the use of coal,” said Bill Hare, director of Climate Analytics, a lead contributor to CAT.

According to CAT, to keep warning below 2C, the world must stick to a strict carbon emission budget (which it is now exceeding by roughly 70 percent).

Such a budget, Klein says, sets carbon emission limits that no major oil and gas company can afford to meet without abandoning its business model and its investors. Each year, investors expect energy giants like Exxon, Shell, Chevron and BP to develop new proven oil and gas reserves that exceed current production. If a company’s reserve-replacement ratio falls below 100 percent, its stock price is apt to be punished. As conventional fossil fuel sources have been drying up, the companies have turned to non-traditional new sources, such as high-volume hydraulic fracturing of shale rock, drilling deep offshore and mining the Alberta tar sands. The new sources tend to be especially potent carbon emitters.

To keep warming under 2C by 2100, the world’s carbon emission budget for the 2011-2049 period is 565 gigatons (565 billion metric tons), according to the London-based Carbon Tracker Initiative. But fossil fuel giants have already formally claimed reserves equivalent to 2,795 gigatons of carbon emissions. “Those numbers tell us,” Klein writes,” that the very thing we must do to avert catastrophe — stop digging — is the very thing these companies cannot contemplate without initiating their own demise.”

That is why, her argument goes, the fossil fuel industry fights so fiercely to dismantle environmental rules that would crimp its ability to add unconventional reserves while it busily promotes the climate change denial movement.

So groups like the Heartland Institute encourage the pretense that there is a genuine disagreement among independent scientists about the data behind climate change. They even call climate alarm a “hoax” perpetrated by those seeking to use the green movement as a Trojan Horse for Marxist socioeconomics. The ideological disinformation blitz is proving to be a winner. Klein cites polls showing that in 2007, 71 percent of Americans believed that burning fossil fuels alters the climate. The share dipped to 51 percent in 2009 and 44 percent in 2011.

Instead of fighting back, several major environmental groups have simply rolled over. Klein blasts the Nature Conservancy for operating its own natural gas well on a Texas reserve intended to protect the Attwater prairie chicken. And the once-tough Environmental Defense Fund, under Fred Krupp’s leadership, has turned non-confrontational and business-friendly. It would never draw a regulatory line in the sand. Commenting on the EDF’s Krupp-led makeover since the 1980s, Klein writes: “The group prided itself on putting ‘results’ above ideology, but in truth Krupp’s EDF was highly ideological — it’s just that the ideology was the pro-corporate groupthink of the day, one that holds that private, market-based solutions are inherently superior to simply regulatory ones.” Not every Big Green non-profit caved, but even the Sierra Club and Natural Resources Defense Council bought the fossil fuel industry’s story line that natural gas could be a “bridge fuel” to renewables.

As industry was neutering the big environmental non-profits, many in the green movement held high hopes that enlightened billionaires would focus their big bucks and creative energy on delivering a magically simple solution to climate change. But the promises of self-promoters like Richard Branson have turned out to be chimerical. So too have hopes of “dimming the sun” to reduce warming. Intentionally triggering sun shields in the sky to mimic the cooling effects of the 1991 volcanic eruption of Mount Pinatubo in the Philippines — the Dr. Frankenstein approach — invites a host of new grave risks to the planet.

In Klein’s view, the world’s best hope springs from global grass roots resistance to exploitative fossil fuel extraction projects. The phenomenon, which she calls “Blockadia,” targets export terminals in British Columbia, the Keystone XL pipeline and dozens of smaller pipelines across the United States, gold mining in Greece, fracking in Romania and countless other bids to turn communities into “sacrifice zones.”

Galvanized citizens are all the more likely to engage in another promising trend: financial divestment from fossil fuel companies. The divestment movement, if it gains critical mass, could eventually starve extractive industries of capital. The world’s modern market economy and fossil fuel development grew up together and have reinforced each other for generations. In fact, James Watt produced his first commercial steam engine in 1776, the year Adam Smith suggested in his classic “The Wealth of Nations” that an “invisible hand” in a free economy tends to allocate capital, goods and services efficiently.

Klein and Barlow have their doubts. If Klein would be the guardian of the atmospheric commons, Barlow has written 16 books on water and spearheaded efforts to convince the United Nations to adopt a 2010 resolution recognizing the human right to safe drinking water and sanitation. She argues that certain resources — particularly air and water — are vital to human existence and therefore must be protected for the common good, not appropriated for private gain.

So it is no surprise that Barlow picks a fight with Peter Brabeck, chairman of Nestle, the Swiss food and water giant with annual sales of $91 billion. Brabeck promotes private control of water, and he runs the world’s largest bottled water operation. She notes that he once described the notion that water is a human right as “extreme.” Barlow excoriates companies like Nestle, Suez, Coca-Cola and Pepsico for treating water like any other commodity to be bought and sold.

She is also a harsh critic of a global wave of private takeovers of municipal water systems. Many of these for-profit privatizations have been poorly managed and financially ruinous, she reports. Across Europe, several jurisdictions have held referenda that resulted in lopsided votes to return to publicly-controlled local water.

Meanwhile, provisions in existing trade agreements like NAFTA — and proposed new U.S. trade agreements with Asia and Europe — grant corporations the authority to challenge environmental laws that they claim undercut their property rights or profitability. For example, under NAFTA, Lone Pine Resources, an American energy company, is suing the government of Canada over the province of Quebec’s 2011 moratorium on fracking for shale-gas, an initiative undertaken taken to protect water resources.

Barlow and Klein share outrage over granting corporations the right to sue governments over environmental laws. Those trade pact provisions, they say, wrongly restrict the ability of governments to enforce the common rights of the citizens who elected them. That is pretty clearly a case of the invisible hand reaching for the cookie jar. Seems that calls for a good slap.

How Much Is Nature Worth?

A recently published article estimated the total value of the environment to people at $145 trillion per year. That’s about twice as much as the total output of the global economy – nearly $75 trillion in 2013.

Ecosystem services – clean water, clean air, temperature regulation, food production, etc. – are the myriad ways in which people benefit from nature.  Environmental economics is a growing field that, in part, tries to put a price tag on how much nature benefits people. The hope is that policy-makers and businesses will be more likely to preserve nature if they understand its importance.

Robert Costanza

The article is an update on a 1997 study by the same lead author, Robert Costanza. In 1997, Costanza and his co-authors estimated global ecosystem services to be worth $33 trillion per year. What’s behind the big increase? Costanza uses data from other studies to estimate values for ecosystems and biomes. For a simplified example, Costanza takes a weighted average of all the studies that have tried to value coral reefs to estimate a dollar per hectare average. That average is then multiplied by the number of hectares worldwide that have coral reefs. Costanza’s global estimate is going up mostly because other studies are assigning higher values to ecosystem services. That is a reflection of the improving science of environmental economics and a better appreciation for the value of different services that nature provides.

$ amount per hectare X number of hectares = $ amount worldwide

Unfortunately, ecosystems are declining globally, reducing the supply of ecosystem services. For instance, between 2000 and 2010, more than 240,000 square kilometers of the Amazon rainforest were deforested – an area almost as large as the United Kingdom. In addition to other important services, forests play an important role in climate change regulation. As trees grow, they take in carbon dioxide and store it as biomass, and when they are burnt or cut down to make way for agriculture, that carbon dioxide is released into the atmosphere, contributing to climate change. In Latin America and the Caribbean, about two-thirds of greenhouse gas emissions are related to forestry and agriculture.

Greenhouse Gas Emissions by Sector in Latin America and the Caribbean (IDB 2013)

The study found that the provision of ecosystem services between 1997 and 2011 has declined by $4.3-20.2 trillion per year. Our economic activities are destroying huge amounts of value generated by ecosystems.

The key point from the article is: “A better understanding of the role of ecosystem services emphasizes our natural assets as critical components of inclusive wealth, well-being, and sustainability.” Environmental campaigns sometimes focus on iconic species like the polar bear, orangutan, or jaguar, and attempt to pull at the public’s heart strings. Costanza and other proponents of valuing nature are shifting the conversation to point out that there are actually selfish reasons why people should also care about nature.

There are a number of arguments against this approach. Many critics claim that attempting to value nature is one step removed from commoditizing it. Nature has some intrinsic, non-anthropogenic value, that is left out of this equation.

Another critique is of the actual valuation studies and the many reasons to question their accuracy. First, modeling and economics have a difficult time with ecological complexity. Take the Amazon rainforest. Destroying one percent of the Amazon reduces the ecosystem services provided by the rainforest by X amount. But if you destroy twenty percent of the Amazon, it doesn’t reduce services by 20X. Since the rainforest actually generates most of the rainfall that trees use, destroying twenty percent of the rainforest would lead to lower rainfall in other parts of the Amazon. Drought would lead to tree die off, more forest fires, and the possible collapse of the entire ecosystem. There are tipping points beyond which the Amazon cannot recover. If the tipping point for the Amazon is twenty percent, the cost of destroying twenty percent is much more than 20X, it could be as much as the entire value of the rainforest.

Valuation methods also have troubling implications for equity concerns. Markets distribute resources based on purchasing power and price signals (the value of a good is the price paid for it), not where the resource would be best used. If you have a finite quantity of ecosystem services, people with the most money will “buy” most of the ecosystem services.

Last, any valuation study will have to deal with time and discount rates, which is a controversial subject. Any financial analysis discounts future earnings by a discount rate because earnings today are worth more than future earnings. But what should the discount rate be? The opportunity cost of capital – what you would earn on investing earnings today – is typically used as the discount rate. But using such a rate – between three and ten percent – is going to dramatically reduce the value of future earnings. Discounted at five percent, five trillion dollars in 2100 is only worth 72 billion dollars today. That means that we place a very low value on benefits to future generations. Given that ecosystem degradation and climate change are long-term phenomena whose damages will be felt most severely by future generations, there are obvious implications.

Despite the problems with valuation, I think it is still an important step forward because it is (slowly) changing the conversation about nature. The exact number in Costanza’s study is less important than the conclusion that: nature provides great value to people, even if we don’t pay for it.

FIFA – The World Cup – Global Warming and Emissions Offsets

When Arjen Robben scored Holland’s fifth goal against Spain, the Arena Fonte Nova in Salvador, Brazil felt like it was overflowing with emotion. The Dutch ecstatic, the Spanish devastated, and neutral fans like myself thrilled just to see such an exciting game.  After watching the Netherlands team take a well-deserved victory lap, we poured out of the stadium into Salvador’s streets, singing until our throats were horse.

As a lifelong soccer fan, getting the opportunity to watch the World Cup in Brazil has been an unforgettable experience. In addition to the games themselves, I’ve also been able to explore Salvador and soak in all its sights and sounds. What an amazing city! While there have been riots in other cities, the locals I’ve spoken to have been extremely welcoming to the hundreds of thousands of foreigners visiting for the World Cup. With everyone wearing their national team’s jerseys – the red of Spain and Switzerland, bright Australian yellow, blazing orange for Holland – it feels like a global party.

All the different jerseys and languages got me thinking: how much energy did it take for all these people to come Brazil? An estimated 500,000 people will travel to Brazil for the World Cup, flying and driving from thousands of miles away. Personally, I flew from Washington DC to Miami to Sao Paulo to Salvador; the round trip will be over 12,000 miles. Given that each passenger mile flown results in about 0.5 pounds of CO2 emitted, I’m personally responsible for 6 tons of greenhouse gas emissions! And that leaves out all the food I eat, all the taxis I take, air-conditioning I cool off in, and many other impacts. All told the World Cup will result in about 2.7 million tons of greenhouse gas emissions – equivalent to the annual emissions of more than 500,000 cars.

Recognizing this impact, FIFA has done a thorough breakdown of the direct and indirect emissions related to the World Cup. The estimate leaves out some related emissions, such as construction of stadia and other infrastructure for the world cup, but attempts to capture the impact from most other sources. The most remarkable part of the study is that 97.9% of the 2.7 million tons come from fans’ travel.

Although FIFA is technically a non-profit organization, it is hugely profitable, with over $4 billion in revenues and $600 million in profits between 2007 and 2010. As such, it has a business interest in addressing the environmental impact of its signature event. In order to lessen the impact of the World Cup, FIFA has an emissions offset program, which will offset the emissions from about 50,000 fans – approximately 250,000 tons. The offset projects will reduce carbon emissions in a variety of ways. Some, by reducing emissions from deforestation, will invest in improved forest management and agricultural practices. Others, by reducing fossil fuel use, will increase renewable energy generation.

In the ideal world, the World Cup wouldn’t result in any greenhouse gas emissions. But for now, offsetting is one way that businesses and people can lessen that impact. In the midst of all the elation of the World Cup, it’s a sobering thought.