Feral Cat, What Say You?

30 11 2010

Back in August I came close to posting a blog “Enough of the Empire State Building Already” but that one faded away.  In case you never read anything about energy savings and sustainability, the building is undergoing a $20 million renovation to improve energy efficiency.  The project would shave the facility’s $11 million energy bill (a cool $4 per square foot) by 38%.  Johnson Control ran ads in every trade magazine I get and various publications, including major newspapers, ran articles by the dozens.

Coming in a close second to the Empire State Building was the Northland Pines High School in Eagle River, WI.  Apparently it was the first LEED Gold certified High School for New Construction Version 2.1.  Ok.  It seems everybody associated with the project ran an ad for their greatness: manufacturers and vendors of stuff used for construction, contractors, service providers, congress people, the governor, priests, rabbis, dog catcher, and the feral animals themselves.  This went on for months.

Well it all hit the fan.  As I was flipping through my stack of trade magazines this long holiday weekend, I saw in HPAC (short for Heating Plumbing and Air Conditioning but they actually go by HPAC – HPAC.com) in their August issue that a group of stakeholders including the building committee, a couple licensed professional engineers, and other taxpayers are appealing the certification with the USGBC.  They claim the design does not and cannot meet indoor air quality standard ASHRAE 62, minimum energy performance, ASHRAE Standard 90.1, OR the minimum commissioning requirements.  Ouch!  What do you feral animals have to say for yourselves now?

I’m not going to do a ton of investigating of this crime but I have no reason at all to believe the appellants are not standing on firm ground.  What is interesting is the firestorm of HPAC reader comments, which read like blog comments of far left and far right cutting each others’ livers out.  Jeezo, the comments are still swirling three issues AFTER the first mention of it in August.  Comments include the following, each of which I respond to:

  • One of the points I raised concerned legal liabilities and the USGBC’s refusal to accept responsibility for advice about guideline compliance.

o   The USGBC shouldn’t have responsibility for advice it gives.  It’s up to the design and construction teams.  The guidelines are available.  If they can’t read, find new firms to do the job.

  • The USGBC seems to prey on undereducated, uninformed owners and the public.

o   Nice.  There are certainly uninformed folks, but I’m sure the USGBC is a deceitful money grubbing outfit headed by Gordon Gekko’s offspring.  The guy would probably dump a five gallon bucket of used motor oil in the lake if you paid him $100.

  • LEED is a standard of relative greenness, not a contract for overpaid lawyers and underemployed engineers to litigate.  …the LEED process has been a powerful force bringing green design mainstream.

o   Agreed.

  • LEED is bogus.  Let common sense prevail.  Why can’t you simply tell the architect/engineer firm(s) to design the most EE building you can without a third party intervening?

o   Because cheap and crappy always wins the bid and the average firm doesn’t really know squat about REALLY producing an efficient, comfortable, and code-compliant facility.

  • I agree [not me – the next guy reader/commenter].  USGBC does not check if equipment is installed per drawings.

o   If it did, it would cost a fortune and no one would do it.

  • [in response to the previous statement the next guy says] Get a life.  LEED is a standard of relative greenness… blah blah.  [The exact same statement as above by the same guy, published two months in a row]
  • [in response to the previous]  Mr. Perkins just doesn’t get it.  Building green just to get LEED points, rather than building a building that will improve the health of occupants[with minimal] lifetime costs, is total BS… Too many folks just care about LEED certification, not if a building really works.

o   In my opinion, LEED actually improves the odds that a building “really works”.  It requires somebody to at least fake their way through commissioning and at least think about designing for efficiency and healthy environments.  To say LEED diverts designers and contractors away from these things is irresponsible.

I mentioned before in this blog that our MO is to fix immediate problems first and take corrective action later.  Too frequently building owners/stakeholders go after the party they think is responsible and meanwhile the building festers away.  The second too-frequent approach is to hire the same fools responsible for the kludge to fix it.

Owners and stakeholders should first fix the problem by hiring somebody who knows what they are doing.  This does two things, both of which they want to fix a screwed up building: (1) gets the building working optimally as soon as possible and (2) by doing so gives them leverage with the responsible parties for some sort of settlement.

Attacking USGBC for establishing green building methods and metrics but not enforcing them with an iron fist is ridiculous.  Why not go after ASHRAE for not coming down on people like a ton of bricks for not following ASHRAE’s standards?  Energy codes that are state law in many states aren’t even enforced in some of them.  I’m not sure about the rest of the parties involved with LEED projects but engineers have codes of ethics.  I would say blowing off owner desires, cutting corners and lying about what was or was not done probably violates these ethics.  How about attacking these losers and scoundrels and running their underwear up the flagpole instead?

Tidbits

I would guess you haven’t heard but the Chicago Climate Exchange is shutting down.   At one point in this blog I explained I think that trading something that has no value in and of itself is unprecedented.  Currency is only thing I can think of that has no intrinsic value but currency is actually a means to put value on things.  I can buy groceries with currency.  I can’t buy anything with a carbon credit.

Numerous corporations were buying carbon credits and even “supporting” the legislation in the event some sort of cap and trade passed.  The legislation disintegrated and there remain only a few ashes of political will to even whisper the phrase.  The carbon value that existed was 100% speculation.  The value that remains is 100% nothing.

As I mentioned in a recent post, if cap and trade didn’t pass during last congress with unstoppable majorities in both houses and the White House, I don’t see it happening.  This does not rule out the EPA creating their own laws to put a price on carbon dioxide.

In “The Nebulous Green Job” I ranted about Green Jobs, of all things.   As it turns out the green jobs stimulus portion of the stimulus has not been too stimulating.  The Washington Post reports that the recently green-educated graduates are having difficulty finding work in solar energy installation, green landscaping, recycling, and green building demolition.  Well, heeeyeah!  Electricians and plumbers are on the prowl for PV and solar water heating systems.  There is already a live and well recycling and building demo industry.  I just burned up “the tube” in my microwave oven this weekend and the nice local do-everything, small but mighty superman store otherwise known as Coon Valley Dairy Supply replaced it.  I asked what they did with the old ones.  A local guy picks them up and strips them down into piles of materials to be sold to buyers – no government green-job intervention included.  Cool!  If there is a market people will find it and fill it.

written by Jeffrey L. Ihnen, P.E., LEED AP





Dow Chemical Finds Free-Market Religion

27 07 2010

I was going to talk about sane solutions for ground transportation this week and I was going to lead with a tidbit, but that snowballed into the entire rant of its own.

Last week I was reading The Wall Street Journal on my 1994 organic cotton-stuffed futon when I had a “Ha!  You scheming, scamming, shysters!” moment.    In Law of Gravity Repealed, I accused for-profit corporations who are in favor of carbon caps of essentially getting in bed with the political hacks in Washington to form the rules of the game such that they come out ahead of their competitors.  First off, this is a really stupid and naïve strategy that has been demonstrated time and again.  The saying goes if you’re not at the table, you’re on the menu.

Companies have three choices when a bill that will deeply affect their business is being debated: (1) fight it with everything they’ve got, (2) help form the legislation whether it will be good for them or not, and (3) ignore it and hope for the best.  I would say that most times when they cede power to the government and think they can come out ahead, they get burned badly.  This happened with big pharma and the insurance industry with the recently passed healthcare bill.  Big pharma thought they could greatly increase their sales with 30 million new customers.  What idiots.  Hello?!!  And they suppose Washington is going to let them charge “market” rates for these 30 million new customers carried entirely by the government.  What morons.  With perhaps the exception of utilities that will be able to more easily recover costs due to their monopoly status, other large corporations will get burned in the same way with any cap and trade bill that is passed.  The exception may be General Electric where the pathetic CEO Jeffrey Immelt is putting all the company’s chips on successfully bribing a majority in Washington to save the company.  Otherwise tell me, how is a HUGE energy consumer like Dow Chemical or producer/user like Exxon Mobil going to come out on top.  Don’t mess with Washington.  You’ll get the horns.

To get back on track regarding last week’s WSJ –  [reprinted in this news source because it is no longer available on the WSJ’s website]  Dow Chemical, one of the companies I mentioned a couple months ago has seen the political light, which is actually the dark side because there is no bright side in Washington.

Suddenly when cap and trade was shelved last week and Harry Reid started talking instead of a wimpier policy to encourage the use of natural gas, Dow found free-market religion.  Using natural gas in place of nearly any other fossil fuel will reduce CO2 emissions.  But wait!  Dow is suddenly opposed to reducing greenhouse gasses.  In a letter supported by many companies and other “special interests”, they write to call on the Senate “not to include any provisions in energy legislation that would ‘artificially’ increase demand for natural gas in the power and transportation sectors.”  Let’s see.  Cap and trade; artificial pricing pressure and market manipulation.  Nope, I’m not seeing any difference here.  I don’t understand Dow’s reversal.  What happened to the do-gooder spirit?

Purely guessing, Dow probably has millions of carbon credits that are worthless without cap and trade.  They may also think they can increase their insulation sales with its passage.  I would also like to see the other corporate signatories on that letter.  T Boone is most likely not a signatory.

In another non-irony, the National Corn Growers Association also opposes the “artificially” high priced natural gas.

[Courtesy pause here while you finish laughing out loud]

I cannot think of more manipulated markets than the ones for corn and ethanol.  First, federal programs to pay farmers to NOT produce crops have been around for decades.  I recall as a kid, we had to “divert” xx% of baseline corn acres.  So what did we and everyone else do – diverted the acres where nothing grew (sandy patches) or acres that were at high risk of being flooded.

Second, there is the fattest sacred cow of them all: ethanol.  The ethanol lobby that includes weaklings like Archer Daniels Midland along with the Corn Growers Association has bagged a permanent 50 cent per gallon subsidy courtesy of me and a few million other Americans, the taxpayers.  In addition to this handout, it may be the most trade-protected industry in the country, save for maybe sugar.  Imports would be slapped with an insurmountable 54 cent per gallon tariff so we can’t import cheaper ethanol from places like Brazil where cane-sugar-derived ethanol has allowed them to be energy independent since 2006.  A 50 cent subsidy plus a 54 cent tariff on imports: more than a dollar a gallon direct artificial price manipulation.  I can’t think of a more favorably manipulated market than the one the corn industry has.

To demonstrate the damage heavily manipulated markets wreak, many ethanol companies went bust starting a couple years ago as the price of their feedstock, corn, soared to record highs.  Nobody saw those prices coming.  Maybe they should have hedged against the risk of soaring feedstock prices  – whoop!  Can’t do that anymore because of the recently passed financial overhaul.  More manipulation and interference…

Epilog:  I’m practically from Iowa and my family has grown a lot corn for many years.  Even though it is all fed to livestock, the artificial upward pressure on the corn market would seem to help because it makes growing livestock more expensive, driving down meat and poultry supply and improving prices.  But like the tobacco industry that was strictly controlled with government quotas, farmers would benefit from the trashing of government manipulation.  Income rises and surprise!  Farms get smaller – just what everyone seems to want!

written by Jeffrey L. Ihnen, P.E., LEED AP





The Nebulous Green Job

13 07 2010

“Green jobs” have been all the buzz for quite some time, probably before Barack Obama was elected president, but I don’t know for sure.  What the heck is a green job anyway?  Some real answers include those like we have at Michaels Engineering with 20+ engineers working full time on real energy-saving projects.  Another example is the guy who operates the humongous crane that helps erect humongous wind turbines.

But politicians and academic eggheads aren’t talking about jobs like we have at Michaels, although they probably do agree the crane driver has a green job, but it goes far beyond that to Alice’s wonderland.  Take this Mark Izeman guy’s interview.   I’ll paraphrase the questions and answers for brevity here.

Q:  What should graduates look for by way of green jobs?

A:  Look into areas of energy efficiency, renewable, cap and trade, and local food, which is a red hot issue.

These are shot gun recommendations for everyone leaving college with cap and gown stuffed in a suit case: physical education, political science, sociology, library science, foreign relations, mass communication majors included.  Quite frankly, I don’t know what people with these sorts of academic backgrounds are going to do unless they want to weld and assemble wind turbines and electric cars.  Otherwise, there are always more PR jobs like the guy being interviewed in the article, but what good does that do?  It’s like hiring cheerleaders to double as special teams experts in the NFL.  What we need is more players and fewer cheerleaders (strictly speaking about the “green jobs” industry and not the NFL).

And then he says buying local food.  What are you going to do with that?  Start your own vegetable farm?  I think there is a lot of cheap land available in Detroit for this.  There are more jobs available working for Dole, which grow strawberries in CA, bananas from Guatemala or Ecuador or someplace like that.  I’m sure there are a lot of management, marketing and sales jobs and stuff like that with these companies.  Oh, I forgot.  These aren’t “green jobs”.  Never mind.

RA (real answer):  Think before selecting a college major.  With an engineering degree you will have the flexibility to fill or create any number of green jobs.  Library science guy?  Not so much, for real anyway.

Q:  Has the stimulus created “green jobs”?

A:  Fifty thousand “green jobs” have been saved or created.

Can we count the 20 plus engineering jobs we “saved” in this total?  Why did “jobs created” morph into “jobs created or saved”?  Obviously, the latter can mean anything.  Since the 4 million jobs have disappeared while the unemployment rate has gone up (down most recently because the workforce is shrinking as people quit looking for work), it’s pretty hard to claim jobs have been created.

Fifty thousand is a pathetic number, even if it represented “created jobs” only.  Here’s a sneaky secret:  you know when you apply for a federal grant, which seems to be part of nearly everyone’s business model nowadays, one of the selection criteria is you guessed it, “jobs created or saved”.  Well my new LED street lighting job is going to create or save at least 200 jobs.  This probably gets as much scrutiny as an Energy Star dust mop.

RA:  Nobody has a clue, really.

Q:  How many “green manufacturing jobs” will replace lost manufacturing jobs?

A:  Lieberman/Kerry cap and trade will create 200,000 jobs per year over the next 10 years.

RA:  In China and India.

Q:  How do you define “green jobs” in the first place?

A:  He doesn’t know but the Bureau of Labor and Statistics is figuring it out.

Why?  A job is a job, so if my job is a green job, I guess that’s one less engineering services job.  It’s one or the other.

RA:  Whatever it takes to capture enough jobs for some political end.

Q:  What is the outlook for “green jobs” sector over the next 40 years?

A:  “Greening the economy and creating new jobs, which will become so plentiful and normal we won’t label them “green jobs”.

RA:  The outlook is good.  I don’t think this will be going away, but let’s dispose with the “green jobs” moniker, which is just political wrapping paper to pass massive spending bills.

Demand for green stuff is growing on its own.  Take LEED, which is run by a non-profit United States Green Building Council.  It has been wildly successful and as far as I know, it has taken very little if any money from federal, state, or local governments.  I don’t see a single government employee on the board of director committees.  Gee.  I wonder if there is a connection between wild success and lack of government bureaucrats??  You don’t suppose.

Wal-Mart has probably produced more “green jobs” per the definition provided in the article/interview noted above than the federal government could ever hope to accomplish.  People buy hybrid cars on their own volition.  Leading hybrid-producing car companies didn’t need any government largess to be successful in this market.  I do think they will need government handouts for development of electric vehicles which, I am guessing will go on the scrap heap of bad ideas, right on top of the fuel cell vehicles that we should have been driving by the thousands by now.  More on this later.

written by Jeffrey L. Ihnen, P.E., LEED AP





Law of Gravity, Repealed

18 05 2010

Yay!  I’m outside working on my computer for the first time this year.  Alright, who cares?

Every week I plow through news-clipping services to see what is going on, to build my topic list, which is piling up faster than the weeks pass.  This week I had to shelve 4-5 great topics to again take on the recently arisen climate bill.

Many huge utilities and other giant energy users and associations are lauding the Kerry-Lieberman-Graham bill.  These institutions include the American Wind Association, Duke Energy, Dow Chemical, Florida Power and Light, T. Boone Pickens, National Resources Defense Council, Steelworkers Union, Shell Oil, and Westinghouse. 

Support from some of these groups is obvious.  What stinks to high heaven though is the for-profit giants who support this bill.  Company motives are driven by profit.  Per news accounts, I’ve read Dow has done a fantastic job at reducing energy consumption.  My guess is they are stockpiling carbon credits, like AEP has been doing.  Buy low and sell high.  A climate bill will greatly increase the value of carbon credits.  Rest assured, I would say these companies are positioning themselves to make a killing, not save the planet.

Florida Power and Light is a major wind power company.  You may not realize it, but a huge portion of the wind energy generation in Iowa, Texas and all over the place is owned by FPL – probably by their unregulated arm.  They aren’t building wind farms in Iowa and Texas at a loss so they are jockeying for more of the same.

Westinghouse is poised to tee off on the nuclear power business.  I support nuclear power as it is the only realistic ultra-low carbon source of electricity.  Did you know Westinghouse is 77% owned by Toshiba of Japan?  I didn’t think so.

General Electric ditto both FPL and Westinghouse.  T. Boone’s mind changes direction with the wind.  I’m not sure whether he thinks or talks first.  He was going to invest a bazillion dollars in wind power and then reneged for some reason.  Perhaps it was because it costs more to produce than it costs from conventional plants and he realized there aren’t enough Volvo/Subaru/Prius driving boutique energy buyers.  I.e., not enough demand.  Or maybe he thinks cap and trade isn’t going to happen anytime soon.

I have no idea what the steelworkers are thinking.  Actually, most likely it isn’t the steelworkers that are behind this.  The union bosses are probably peddling this and it looks like a pure political play.  Like many environmental groups, unions are political first, and serve their members second.  Why in the world would they want to raise the cost of making steel in the U.S.?  It’s not good for the steelworker.  It IS good for crony politics.

The common thread in all this is: if we just enact this federal bill it will generate millions of jobs and the land will flow with milk and honey.  I can see water running uphill again.  Washington now has power to repeal the laws of gravity.  I was always skeptical of Mr. Newton.  He is Gordon Gekko with long hair.  Just look at them.

I can’t disagree that it will create jobs.  We would have thousands of workers building and installing wind turbines and a bunch of other junk.  But on the macro level, capital will be pouring into these projects rather than real wealth-generating enterprises.

Alternative energy costs more than conventional energy sources, but an electron is an electron.  It doesn’t taste better, look better, do more work, last longer, or drive better.  People will be paying more for energy, which takes spending money out of their pockets.  Artificially making a commodity more expensive cannot increase net prosperity.  Why don’t we just turn off all the aqueducts and canals that feed California and drain the reservoirs?  Instead, build desalination plants to make fresh water.  Creates jobs right?  Just ask the pecan and almond farmer in the valley.

At least with energy efficiency, even lousy projects, consumers pay less, not more.  And the same “benefits” of “creating jobs” exist because somebody somewhere is making stuff for and implementing these projects.

Here is something 99% of the populous probably doesn’t know: the free market has done an amazing job with energy efficiency.  From 1990 through 2005, the U.S. economy has increased energy efficiency to produce an equal quantity of goods and services using 44% less energy!  Energy intensity in Btu per dollar of gross domestic product dropped 44%.  You may be thinking, “Well duh, half our manufacturing has moved overseas and we’ve become a service economy.” Moved where overseas?  China, you may be thinking?  China’s economic energy  efficiency has increased by 66%!  Of about 150 countries reporting, only 4 became less efficient over the period: Congo, Haiti, Saudi Arabia and someplace I can’t pronounce.

The world as a whole has increased economic energy efficiency by 39%, in just 15 years.  That’s about 2.2% per year.  Real demand for power isn’t rising that fast (in the US).  I don’t think there’s an energy efficiency program in the country that saves that much.  There’s no question programs contributed to this, but I know of no programs driving savings in China.

Competition with some nudging from utility programs seems to be doing a fine job driving energy efficiency.  We don’t need a bunch of clueless Washington bureaucratic hacks who wouldn’t survive in the private sector for 6 months telling us what is good for us.





This is not Tee-ball

16 02 2010

Carbon taxes or cap and trade seem to have been a foregone conclusion in our industry of energy efficiency.  I’m not so sure.  I, like many other engineers in the energy efficiency business have always been cynical about global warming, which for some reason is now known as climate change.  I would argue that a relatively small portion of anti-carbon people are true believers, that carbon is having or will have a significant effect on the climate and I have no problem with that.  What I do have a problem with is the vast majority of people and organizations who portend to be doing the right thing and saving us all from ourselves when in actuality they are in it largely for the financial gain or political reasons.

The past year has seen one body blow after another to the climate change movement.  In November, we were served with Climategate out of the University of East Anglia, “the worst scientific scandal of our generation” per the London Telegraph.  Penn State’s leading climatologist Professor Michael Mann, Mr. Hockey Stick, is under investigation for falsification of data.  Nothing significant came out of Copenhagen, except let’s party again sometime.  The press had a field day reporting on the carbon spewed to put on that convention.  Phil Jones, head of the Climate Research Unit, dropped some bombs in an interview with the BBC.   Washington gets drubbed with a one-foot snowstorm it seems every week.  Actually, all 50 states have had snow on the ground and all 50 states most likely had snow on the ground at the same time – last Friday!  Wow!  Has that ever happened before?  And last but not least, this is subterranean on the average person’s list of concerns so who has the political will to push this?

Most people who want climate regulation do so as long as they can either make money on it or have somebody else pay.  Not even eco-friendly (supposedly) Boulder, in a league with Berkeley, Caracas, and Havana is willing to put money and action where their mouths are.  And this is a college town, so you know they are well cushioned from the lousy economy.  These people aren’t even willing to shell out what is the equivalent of one night out for dinner for an energy audit of their home – a heavily subsidized audit at that.  The art dealer drives a Prius and uses compact fluorescent bulbs but refuses to close his door during the heating and cooling seasons – “the most basic of conservation measures”.  I can see it now.  Auditor:  “Uh, close that door.”  There’s probably a picket line on the street right now.  One UC professor says Boulder deserves credit for trying.  No.  Credit for trying ends when seven-year-olds graduate from tee-ball.

Furthermore, last fall Boulder voted into the city council people who plan to moderate the environmental initiatives.  At the same time they voted down a simple public low-interest loan program for low-interest loans.  Now to meet their objectives, they plan a take a sharp marketing turn from environmental benefits to saving money.  Touché.

So let’s get honest.  Energy efficiency and being green is probably 80% financial benefit and 20% hobby for individuals, and for most businesses and institutions it is 99% financial benefit.  Wal-Mart isn’t reducing energy costs and holding its suppliers to green standards to save the world.  Certain utilities aren’t promoting cap and trade to save future generations from catastrophe.  People don’t pay for LEED® and put their plaque in the closet.  I would say that only a very small percentage of the public and a larger portion of our tiny energy efficiency industry are passionate about reducing waste, preserving natural resources, and minimizing environmental impacts – AND willing to live accordingly.  The rest is pure financial gain, but there’s nothing wrong with that, unless crises are manufactured and lying is involved.

written by Jeffrey L. Ihnen, P.E., LEED AP





What’s the Game?

1 12 2009

Hypothetical:  Our company has about 40 employees.  We’re going to split into 4 teams and have a tournament.  What’s the game?  We have cyclists, runners, a guy who thinks he can play golf, a guy who throws hammer but not when I’m around, skiers, people who fish, people who hunt, play cards, Sudoku, video games, Frisbee golf, and play board games.  We’ve played softball games (poorly) when the economy was good.

We have people who were born when I was in college.  We have people who were in college before I was in the first grade.  Female, male, burley, squirrelly, short, tall, and I’ll just leave it at that.

What’s the game?  Downhill skiing?  A century bike ride?  Marathon?  Pinochle?  Trapshooting?  Ice hockey?  Mini-golf?  Bumper cars?  Crossword puzzles?  Pong?

Have you figured it out yet?

I’m talking about cap and trade.  What are the rules and which companies and individuals are going to benefit and who is going to get creamed?  How on earth can this be developed equitably?  For years I’ve been proclaiming that when this bill is debated, it will be the mother of all lobbying efforts.  Yes there are bills already out there.  I spent 2-3 hours browsing Waxman-Markey until I was on the cusp of a seizure.  If you dare: http://energycommerce.house.gov/Press_111/20090518/hr2454_ans.pdf I read peoples’ synopses of the bill and those aren’t clear either and they tend to be all over the place.  Regardless, this thing won’t go into law as written anyway.  There are other competing bills.  Whatever we end up with, if anything, will be “lobbied up” beyond recognition.

How does the game start?  Apparently, a large portion of the credits would be given away with a few being auctioned off by the government.  Do the freebies get distributed to the companies with the best and highest paid lawyers and lobbyists?  (the answer, at least in part is, for sure)  Does everyone get credits according to the trailing year’s energy consumption?  What about the misers who are already very efficient?  What about companies that have a legacy of spewing lots of emissions and are on the verge of building or buying a bunch of new plants or efficient equipment (such as certain utilities that tend to favor it)?  Will they get hit with a windfall profits tax?  Can I just take my money I’ve made with my manufacturing plant and quit and sell my freebie allotment on the “free market”?

Let’s get back to the portion that will be auctioned.  The energy market is very inelastic; that is, consumption changes little with price in the short term.  Sales of things that are necessities such as energy have little dependence on price.  For example, there is practically no relationship between gasoline prices and consumption.  When prices are high people keep driving, complain, and have less money to spend on other things.  Therefore, I would surmise that this auctioned portion is going to cost A LOT.  The EPA projects credits will cost $11-$15 per ton to begin with.  This is on the order of a penny per kWh – maybe 10% of energy cost.  This is either (1) not going to move companies to do much for energy efficiency or (2) at a more likely much higher cost, move companies to do something.  Something will include some combination of energy efficiency, raising prices on products and services, or offshoring to some “rogue” country like China or Mexico that has no cap and trade.

My interpretation from Waxman-Markey is that cap and trade applies to major energy users and distributers only, as far as I can tell: electric and gas utilities, petroleum, chemical, cement, silicon, aluminum, and other very energy intensive industries.  It seems to me if we wanted an effective “market based” solution, this would apply everywhere carbon is consumed.  What are electric and gas utilities going to do to reduce carbon?  Electric utilities will move away from carbon fuels over time – renewable, and realistically nuclear.  Gas utilities will… Gas utilities will… Sorry gas utilities.  Your days are apparently numbered.

Cap and trade sounds great because it sounds like a “market based solution” to reducing greenhouse gasses.  It reminds me of when we were considering designing and building a new office building for our company.  It was all fun and interesting until the hard reality of finding a decent place to build in or near downtown.  My guess is this dreamy cap and trade idea will hit a brick wall when it comes time to set up the game and rules.  I would suggest a different and more reasonable and realistic approach.  Next Time.

written by Jeffrey L. Ihnen, P.E., LEED AP