EFT WhirePaper

april 2012

B©2012 The New York Times Company

Table of Contents

Executive Summary

Welcome

Breakfast Session

Opening Keynote: What Will the Energy Landscape Look Like in 2030?

Opening Plenary: The Energy Chase

Plenary: Can Countries Be Energy Independent?

Ignition: Mitja Hinderks

The Columnist Conversation

Keynote Address: Jose Sergio Gabrielli de Azevedo

Discussion: What Do We Do With Natural Gas?

Head to Head: China and Russia

Ignition: Peter Rugg

Plenary: Rub of the Green

Closing Plenary: Counting the Cost

1©2012 The New York Times Company

Executive Summary

The New York Times Energy for Tomorrow conference began with a panel on politics, presented by journalists who are following the Romney and Obama campaigns. The decision to hold this panel first pointed to a theme that recurred through the day: both on a macro, global scale and at the local individual level, energy is intertwined with politics. The intense debates around fracking, the question of subsidies, international power struggles and the pocketbook concerns of struggling American families in different ways are all hotly contested political battlegrounds. Climate change looms in the background, a swiftly evolving situation that necessitates its own collaborative and thoughtful response.

The energy landscape is shifting, as are patterns of supply and demand. A new oil discovery off the coast of Brazil will influence geopolitics in the region, granting Brazil more power on the global stage. Fracking may give America the economic boost that it needs; Germany, on the other hand, is transitioning toward a renewable energy economy. As developed nations attempt to rein in their emissions, emerging economies are consuming more, their citizens moving towards a middle-class lifestyle that reflects 20th century developed nation patterns.

A few shining examples demonstrate what can be done when the political will exists: Mexico City worked hard to clean up its carbon emissions, transforming itself from a place where birds fell dead from the sky and children grew ill, to a cleaner, healthier city. China is pouring vast resources into developing solar and wind power. The challenges are unique to every country but they require an overarching global response.

Key discussion points

• Determine where our energy will come from over the next 30 years.

• Find a balance between energy needs and environmental sustainability.

• Implement regulation that will ensure that fracking can take place safely. Provide funding to enforce the industry and listen to local communities and work with them in this process.

• Ensure that subsidies are transparent and beneficial to the public.

• Develop clean technologies and renewables.

• Decrease waste across the world. For instance, if it lowered its energy consumption to the OECD average, Russia, would save per day what the U.K. consumes annually.

• Accept that climate change is real and is happening across the world: put it at the forefront of national agendas.

• Acknowledge that these issues are global and not just about the U.S.

• Cooperate with other countries to share information and know-how.


Opening Session: Welcome

Arthur Sulzberger Jr, chairman and C.E.O., The New York Times Company and publisher, The New York Times

Gerald Marzorati, editor, editorial development, The New York Times

Welcome

At a time when energy is such a critical part of the world’s economy and its future, we need a balanced and honest debate. That’s what The New York Times’s Energy for Tomorrow conference aimed to provide. The conference on this complicated topic was editorially unbiased, and represented views across the spectrum, a fact that Times publisher Arthur Sulzberger Jr. stressed in his opening speech.

“I do not think that enough attention is being paid to this critical topic,” he said. “Many countries in the world are in economic stagnation and energy could drive economic growth. This is a topic worthy of full exploration from varying points of view.”

Gerald Marzorati observed that the issues are controversial. To address them requires deep and long-term thinking. “What are the geopolitical complexities and risks that might be dominating our front pages in the years to come?” he asked. “What can we expect from the fifth energy source, efficiency? What are the opportunities to reimagine an energy sector that can provide the growth and jobs that leaders all over the world are looking for?”

He added that current events had conspired to ensure that the topics discussed were even more relevant than organizers had guessed, with rising oil prices hurting the U.S. economy, and creating the possibility of political fallout in the November election.

As Sulzberger welcomed the audience — which was also a diversely represented group — he noted that energy should be at the top of the agenda for most nations, especially the U.S. in this electoral year. “But is it?” he asked. This simple but pertinent question returned over the course of the many discussions that followed.


Breakfast Session: Energy on the Campaign Agenda

Moderated by Rick Berke, assistant managing editor, The New York Times

Helene Cooper, White House correspondent, The New York Times

Ashley Parker, campaign reporter, The New York Times

Jim Rutenberg, domestic correspondent, The New York Times

Highlights

• Energy will be a central part of the 2012 election campaign.

• For Republicans, the narrative focuses on the Keystone Pipeline and gas prices. For Democrats, the stance is about renewable, clean energy.

• Climate change received little attention in the Republican primaries. It is up to journalists to report this topic and give it coverage.

• Gas prices are a pocketbook issue that directly affect voters and may influence the election outcome. $5 a gallon would mark a turning point in Obama’s fate.

• The focus on energy could be a positive sign for Democrats: at least it’s not (directly) the economy.

The day before The New York Times Energy for Tomorrow conference, Rick Santorum had dropped out of the presidential race. That had surprised some of the reporters but, on the issue of how much his departure might change the political energy, the answer was: not much.

Yet energy is already forming a central part of the attacks and counter-attacks of the upcoming election battles. Romney will argue that President Obama is not coming up with energy projects that will create jobs, said Ashley Parker, who is following the Romney campaign. Obama will paint Romney as the candidate of big oil. Helene Cooper pointed out that the Paul Ryan budget allows about $40 million in tax subsidies for oil companies. Obama wants to present the situation as though he’s running against those companies.

At the same time, rising gas prices are pushing the president into a corner. And although White House staff are confident about the November election, one Democrat told Cooper that if gas prices hit $5 a gallon then all bets would be off the table.

“When I talk to voters after events, I’ve rarely had a voter say ‘fracking is at the top of my list,’ or even the Keystone Pipeline,” Parker said. “But gas prices come up. Last week I was in Scranton and it’s what they’re thinking about.”

Until recently, Romney has had little to say about energy. But starting in March he began mentioning energy at events, foregrounding the Keystone Pipeline. This is a tricky issue for Obama, who does not want to alienate his base. “A lot of people on the left don’t really trust him on this,” said Cooper. “He’s trying to keep this till after the election.”

Solyndra also lurks in the background, featuring in ads paid for by American Crossroads, the superpac founded by Karl Rove.

However, it is possible for Democrats to see the focus on energy in a positive light, Cooper said. This election was meant to be about the economy — and if the economy is faring better, energy issues are next in line.


Breakfast Session: Energy on the Campaign Agenda

A member of the audience asked why climate change had received such scant attention. The panelists noted that this subject was unlikely to appear in the Republican primary discussions. “On his way out, Santorum was throwing everything he had at Romney,” explained Jim Rutenberg. “One of his biggest lines was: ‘He believes that men are responsible for global warming!’ In the Republican race you don’t want to advertise that at all,” he continued. “I wonder if the Democrats have been scared off climate change.”

In those circumstances, Rutenberg said, “It is up to journalists to plumb it and research it and report it hard.”


Opening Keynote: What Will the Energy Landscape Look Like in 2030?

Daniel Yergin, Chairman, IHS Cambridge Energy Research Associates, and author of “The Quest: Energy, Security, and the Remaking of the Modern World”

Highlights

• Decide who is responsible for the world’s energy supplies.

• Figure out what the sources of energy should be in 30 years’ time.

• Investigate and resolve issues of cyber-vulnerability.

• Find the right balance between energy needs and a sustainable environment.

The world’s energy supply has changed over time and perhaps never more rapidly than now. Daniel Yergin assessed shifting trends in energy production and use, and where things stand today.

As America approaches election season, Yergin noted that several things differ from the election in 2008. The relationship between Iran and the U.S. is at a decisive moment. Conversely, progress in alternative energy sources and renewables means that peak oil is no longer a concern.

“We’re talking about energy for tomorrow, for security, for the environment,” Yergin said. “It’s a long-term quest to achieve these goals. But I have reasoned optimism.”

One of the biggest questions that shape contemporary discussions on energy is the one of abundance and scarcity. There have always been periods of oversupply and times of shortage when people feared that supply would run out. But changes in the global economy have given the latter a new urgency.

In the past, the U.S., Western Europe and Japan have consumed most of the energy while the rest of the world trailed behind. But economic shifts, combined with demographic change, mean that demand has peaked in the developed world, while demand in the emerging markets is growing.

So how will we meet this new need? The renewables industry, created in the 1970s and 1980s, is now a vigorous business. Wind generation is 10 times what it was a decade ago. The U.S. is seeing a combination of increased productivity and efficiency: since 2008, American oil production has grown by 10 percent while consumption is at 1995 levels.

The second big issue is geopolitical. “We are moving into uncharted waters in terms of Iran today,” Yergin said. Europe has placed an embargo on Iran and countries like China are also expressing concern. “Are alternative supplies there? Will there be serious Iranian negotiations? It’s going to be very volatile,” Yergin stated. “We’ll be responding not just to what’s on the business pages but what’s on the front pages of the newspaper.”

The last major issue we face is energy and the environment. This is a tough issue and a global one. Innovations are occurring in the sector that may ultimately resolve our problems.

Yergin concluded with an anecdote about an engineer who wrote a pamphlet in the 19th century about how the motor power of fire had enriched civilization (and enabled the British to defeat Napoleon). Energy and related innovations have a similar role in society today, he said, and we must ensure secure supply. “We need it to continue so that we do indeed have the energy that will be necessary for the world tomorrow.”



Moderated by Joe Nocera, columnist, The New York Times

Lester Brown, founder and president, Earth Policy Institute

Lee Edwards, president and C.E.O., Virent Inc.

Robert A. Hefner III, owner, The GHK Companies, and author, “The Grand Energy Transition”

John Krenicki, president and C.E.O., GE Energy

Daniel Yergin, chairman, IHS Cambridge Energy Research Associates, and author, “The Quest”

Highlights

• Wind will be the centerpiece of the new energy economy. (Lester Brown)

• The politicization of energy prevents good ideas from being implemented. (Lee Edwards)

• Natural gas is abundant and can replace coal. It will provide an enormous economic stimulus. (Robert A. Hefner III)

• More than 800 natural disasters occur every year. Whatever our forms of energy production, we must ensure that they can withstand these shocks. (John Krenicki)

• The Chinese are “doing everything” because they need huge amounts of energy to supply their jobs, transportation and housing needs. (Daniel Yergin)

Diverse perspectives were presented in this first conversation. Lester Brown is an advocate of wind energy; Lee Edwards represents the interests of innovative technology and small business; Robert A. Hefner III is a natural gas producer; John Krenicki is president and C.E.O. of GE Energy; and Daniel Yergin is a Pulitzer Prize-winning author who has written widely on oil. The audience also provided a number of challenging questions for the panelists.

For Brown, wind energy will be at the center of future energy production. It has begun to really penetrate markets especially in countries like Germany, which has been closing nuclear power plants since the Fukushima disaster. Three states in northern Germany obtain between 40 and 60 percent of their electricity from wind. In the U.S., Iowa and South Dakota get 20 percent of their electricity from wind; China has enough wind energy to allow it to multiply its current electricity consumption by 14. Wind, Brown stressed, is abundant — and it’s efficient. Ranchers are happy to have wind turbines on their land because they receive payment for them and can still graze their cattle.

But electricity is just one energy need. Edwards pointed out that energy for mobility — gas and oil — remains the big issue, especially for small businesses. The high gas prices are a continued source of frustration. Hefner pointed out that natural gas is the only fuel that can replace coal and oil in the transportation sector. It has been an enormous economic stimulus for the U.S., where energy prices are much lower than in Europe or Asia. “We’re creating a $250 billion advantage,” Hefner said. “Natural gas is launching a new industrial renaissance.”

Moderator Joe Nocera noted that many members of the public are unhappy about hydraulic fracturing, the process by which much natural gas is sourced. These concerns were reflected in audience questions and a representative query was as follows: “Natural gas is not renewable. Why are we investing in such resources knowing we’ll be facing the same challenges later?”

©2011 The New York Times Company



Hefner acknowledged that natural gas is a bridge. If we push renewables into the market when they are not quite ready, he argued, there is a risk that the economy will slow down. In this context, “Natural gas is the one. It’s been a godsend for this country that the innovation is happening now, and it can do the job.”

Yet the environment was a recurring preoccupation. One participant asked: “Why do panelists keep ignoring the acceleration of global warming? Should that not be a greater concern than purely economic considerations?” Another asserted: “What about the health and community impacts of fracking that don’t show up in the price paid for gas?”

Hefner said that other current forms of energy such as coal also harm the environment and it’s a matter of balancing risks and benefits. Brown was more urgent, giving the example of a heatwave in Moscow in 2010 that affected the harvests and drove up world grain prices. If it had occurred in Chicago, most grain-importing countries would have faced difficult times.

Where fracking and nuclear and other forms of energy production take place, natural disasters can cause widespread damage. If the world has 800 such disasters a year, that adds up to 12,000 over a 15-year period, John Krenicki calculated. He asked, “How robust is our system?”

China hovers on the horizon as the challenger to American dominance. As Yergin pointed out, China has vast energy needs and is simply doing everything it can to fulfill them. As a result the Chinese are open to all sorts of innovation. “Things like electric cars, renewables, they see these as commercial things,” he said. “They intend to be a global factor.”

But all these concerns, including climate change, may not be the only drivers of our energy use. There is also demographic change. “Young people are not buying cars the way our generation did,” Brown pointed out. “They socialize over the Internet, not in cars. The U.S. automobile fleet is beginning to shrink.”





Carol Browner, former energy czar to the Obama administration

Jochen Flasbarth, president, Federal Environment Agency, Germany

Steve Nadel, executive director, American Council for an Energy-Efficient Economy

T. Boone Pickens, chairman, BP Capital Management

Jim Rogers, chairman, president and C.E.O., Duke Energy

Highlights

• We should embrace the Keystone Pipeline and work with the Canadians. (T. Boone Pickens)

• Anyone who cares about the climate should favor nuclear energy. (Jim Rogers)

• A transition to a low-carbon economy based on renewable energy and efficiency is a viable strategy that countries like Germany are pursuing. (Jochen Flasbarth)

• A government role in regulation helps to ease public concerns and thus to enable the introduction of controversial forms of production like fracking. (Carol Browner)

• Ultimately the U.S. will have to reduce energy subsidies — for wind, and for oil and gas. (Steve Nadel)

Public policy, China, Germany’s role as a model of energy consumption, and comparative perceptions of climate change in the U.S. and Europe were topics that dominated this discussion. If a consensus was reached, it was that the U.S. has a long way to go if it is to achieve energy independence. One participant, Jim Rogers, thought that energy independence was the wrong goal in the first place — we live, after all, in an interdependent world.

The chairman of BP Capital Management, T. Boone Pickens, criticized American policy, saying that the U.S. looks foolish, hesitating on the Keystone Pipeline and trying to manage what’s happening in the Middle East. “We’re sitting there as the energy police of the world and we’re only getting 10 percent of the oil out of the Middle East,” he said. In contrast the Chinese have secured oil sources across the world.

Thomas Friedman asked Jochen Flasbarth what Europeans thought of U.S. policy. “I have travelled a lot to the U.S. during the last few years. What I understood is that the typical European view doesn’t meet the reality in this country,” Flasbarth replied. “Behind the differences is one very important thing: in Germany, people believe in climate change and believe that there is a need to act appropriately. If you have a public that, in its majority, doubts this is reality it is easy to understand that it is hard to bring in measures to address this.”

In Germany the Green party entered mainstream politics and changed the political status quo. Along with phasing out nuclear energy, Germany has pursued an aggressive energy policy in its desire to reach greenhouse gas targets.

Steve Nadel noted that climate change has become something of a four-letter word in U.S. public life. Yet in spite of this, a realization that energy efficiency is needed has trickled down, even in cases where scientific knowledge is absent. “Energy efficiency has been taking off. We have blue, purple and even red states that have addressed energy efficiency policy. It’s a win-win situation. Energy efficiency tends to be lower cost than the alternative. I think energy efficiency can be a key contributor towards independence,” he said.




Could a grand bargain ever occur, with climate change and oil people sitting together at a table to discuss energy standards? The question of government intervention inspired diverse responses. Carol Browner felt that on fracking, government standards would give security to an anxious public. It would be a shame if some states declined to pursue fracking because of public concern. For Nadel, “We would need decent environmental protection, it’s not just anything goes. Most operators know how to do a good job but there are some rogues that are giving the industry a bad reputation.”

But others were skeptical about government involvement in energy issues. “I don’t believe in the dream of energy independence,” said Rogers. “I don’t believe in the tooth fairy and that’s what a grand bargain is all about, given the reality in Washington.” Rogers argued that new technologies, not public policy, had helped to lower the demand for energy in the U.S. In the future too, technology will drive policy, not the other way around. To this, Browner countered: “The reason those technologies get an opportunity in the market place is because of public policy decisions that we make.”

In the U.S. a history of vested interests continues to dog effective energy policy and production. Rogers complained that America has failed to connect the dots. But Browner thought that the fact we are talking about these issues is itself a positive sign. “We could give ourselves a little bit more credit than we tend to. On this one we are making progress.”



Ignition: Mitja Hinderks

Mitja Hinderks, C.E.O., The Litus Foundation

Highlights

• The Litus Foundation plans to introduce to market new uncooled engines. Engines are currently cooled, losing between 30 and 50 percent of their energy in the process.

• The Litus Foundation engines would be lighter, simpler, more efficient and cheaper to run than current engine models and would quickly catch on. World CO2 emissions would go down.

• Education is also vital to increase awareness about small ways of decreasing CO2 emissions.

The Litus Foundation aims to reduce global warming by introducing uncooled engines. The engines of modern cars use air and water to stop them from overheating. But in this cooling process, they waste between 30 percent and 50 percent of their fuel and Litus is working on an uncooled engine prototype that will not undergo this process.

This engine would be much more efficient and would release much less CO2 into the atmosphere. It would be simpler and lighter than current designs, and much more reliable.

The Litus Foundation plans to have preproduction prototypes developed by the end of 2013 at a cost of $15 million. Once the product is launched, Hinderks has high hopes for it. The world will swiftly change over to these more efficient engines, leading to a massive decrease in CO2. If investments in solar and wind technologies also occur, it is conceivable that man-made CO2 could be reduced by up to 50 percent.

“All of a sudden global warming doesn’t look as hazardous and threatening and unsettling as it now does,” Hinderks said.


The Columnist Conversation

Dr. Steven Chu, secretary of energy, United States and co-winner of the Nobel Prize for Physics (1997), in conversation with Thomas Friedman, columnist, The New York Times

Highlights

• The sourcing of natural gas through fracking can be responsibly achieved, but it must be regulated.

• China is making great strides but America is still the most innovative country in the world.

• On climate change: sea level is rising faster than we thought. The number of violent storms is increasing faster than we thought.

• Energy should not be politicized. It’s simply a strategy that makes sense in the current environment.

Since Dr. Steven Chu took on the role of U.S. secretary of energy three years ago, many changes have already occurred — with more on their way. Thomas Friedman’s conversation with the Nobel laureate covered a range of topics relating to policy, politics and international relations.

The development of U.S. natural gas resources has dramatically affected the energy landscape. Dr. Chu asserted that he believes fracking can occur responsibly. If that happens it will have enormous benefits for U.S. citizens and for industry. If prices are carefully managed, he said, it could “create a lot of wealth for the U.S.”

Fracking companies have an interest in responsible development, since errors are likely to increase public opposition. But, Dr. Chu said, “I think there has to be a regulatory role.”

Clean tech has also made great strides, he said, especially solar and energy storage. Nuclear will remain part of the picture: “Companies are still looking at it because they don’t want to put all their eggs in a single basket. You want a diverse supply.” Modern reactors are safer than older ones, such as those used at Fukushima, he said.

Friedman asked what lessons the administration had learnt from the Solyndra loan controversy. Dr. Chu pointed out that the program was understood to involve risk from the start — Solyndra was a repercussion of that. But he hoped it wouldn’t spoil the American appetite for fostering green technologies. “It was unfortunate what happened, but it is what it is,” he said. “We think it [the loan program] has done a lot of good.”

Dr. Chu follows climate change debates closely and reads the original scientific papers. Although in the short-term the findings can appear muddy and complicated, over the long term, the effects of climate change are very clear. “You don’t have to be 90 percent certain. You can just say there are big risks.”

Commentators in the audience were sceptical and asked a raft of detailed questions. “What about the concerns about increased earthquakes from fracking? How can the government address this?” asked one, while another remarked: “Who is buying all of this great tech? As a government energy rep, I am sad to have to turn away so many small innovative solutions because of a lack of funds.”

Overall, Dr. Chu was upbeat about America’s energy future. “All I can say is these are incredible opportunities,” he said. “We’re a great, innovative country. Let’s take advantage of that.”


Keynote Address: José Sergio Gabrielli de Azevedo

José Sergio Gabrielli de Azevedo, chief planning officer of the state government of Bahia, Brazil, and former C.E.O of Petrobras, Brazil’s state oil company

Highlight

• Global energy consumption patterns are changing. While OECD nations are reducing their consumption, populations in developing countries are moving towards 20th century levels.

• A major oil discovery off the Brazilian shore will cause supply to shift from the Middle East towards the South Atlantic.

• Brazil will consume more oil and will become an important supplier, changing its political position on the global stage.

• Emerging economies are also investing in renewable and clean technologies such as solar and wind power and vehicles powered by ethanol.

• Along with focusing on the role of the U.S., we should consider the part other nations play in global oil supply and consumption — and how that may change.

In this keynote address, José Sergio Gabrielli de Azevedo offered the view from Brazil. Citing demographic shifts along with a discovery of oil off the Brazilian coast, he suggested that the geopolitical realities to which we have become accustomed will soon change. New power relations will emerge.

First, he noted that we face a dramatic dilemma. We need to reduce greenhouse gas emissions and increase energy efficiency; but instead energy consumption is growing at a fast rate. Citizens of developing nations are moving towards 20th century consumption patterns — not yet the more restrained patterns of 21st century OECD nations. In 2010 oil consumption peaked: that year China alone saw an increase in consumption of 11.2 percent on the previous year.

Renewables and new technology will be part of the answer but as Gabrielli remarked, mobility still uses oil. “And mobility and transportation are a part of modern life.”

Along with this shift in demand, a shift is occurring on the supply side of oil production. “Offshore Brazil there is a very big discovery and the possibility for growth of production is very fast,” Gabrielli said, relating that by some estimates Brazil will be the world’s fastest growing addition to oil-producing countries, producing more than six million barrels a day by 2020. Brazil’s higher place within the international oil market will change the geopolitics in the South Atlantic.

Environmentally this will create risk. “As operators, we should be more careful and on the more conservative side of the risk-taking process. If you try to take more risks you may face problems,” he said.

With an eye on climate change, emerging economies are paying attention to renewable and clean energy. China has invested in solar and wind power systems, while 46 percent of Brazil’s energy comes from renewable sources.

Gabrielli assured his audience: “Not only is Brazil a growing country as a producer but it is taking care to do the homework for the increasing renewables, especially ethanol and wind power and solar energy.”




Mark Brownstein, chief counsel of the Energy Program, Environmental Defense Fund

Michael Levi, senior fellow for energy and the environment, Council on Foreign Relations

Dave McCurdy, president and C.E.O., American Gas Association

Steve Mueller, president and C.E.O, Southwestern Energy Company

Highlights

• Fracking represents a paradigm shift in U.S. energy supply, giving the nation a source of natural gas for generations to come. (Steve Mueller)

• Fracking is a cleaner energy source than coal and could help reduce global warming. (Dave McCurdy)

• Fracking itself can cause leaks of methane, which is a powerful greenhouse gas. (Mark Brownstein)

• There is a lack of public trust on this issue — which can only be addressed through strong regulation, implementation and enforcement. (Mark Brownstein)

• Natural gas must be a bridge in U.S. energy consumption and not a goal. It must not be allowed to push out other energy sources. (Michael Levi)

Times columnist Joe Nocera moderated a calm and open debate on this controversial topic. But a series of vocal questions from the audience gave an indication of just how inflammatory the subject is. As Michael Levi put it, “This is the perfectly dysfunctional fight. A lot of folks in the environmental community are convinced this cannot be done safely. And a lot of folks in the industry believe that if we up regulation it will destroy the development.” That being the starting point, the discussion began.

Steve Mueller took the bold step of likening fracking developments to the discoveries of Copernicus. “We figured out that the rock that would never produce, produces.” Although industry players have got things wrong before, they have also changed the paradigm, he suggested. “We’ve given the nation something that we can use for several generations now and we can do it safely today.”

For Brownstein, it’s all about how it is done. If fracking is poorly conducted, there are risks to public health and the environment. People’s anxieties are understandable, because they derive from the errors and problems of the past. The answer is strong regulation, backed up by resources that drive implementation and enforcement. “What you’re seeing today is a real lack of public trust in many parts of the country because communities have yet to believe that this can in fact be done with minimal risk,” Brownstein said. “We also have to stop pretending that there are no problems.”

Mueller agreed, adding that self-policing is also necessary. And he said the industry had learnt from its mistakes. “The thing everyone needs to know is fracks is evolving. The fracks we were doing five or six ago aren’t the fracks we are doing today.”

The question of state or federal regulation is unresolved. Some panelists thought the states could play a part because of geographical variety and local conditions. But there is still a role for supervision at a federal level. “Having some basic minimum standards makes a lot of sense,” said Levi.




Dave McCurdy observed that in a digital age, states and organizations can learn from each other swiftly, offering Pennsylvania as an example. There, when public health and the environment were damaged, the learning curve went “from 0 to 60 pretty quickly,” he said. Nocera pointed out, “The Pennsylvania experience was what scared New York so much!”

Colorado was another victim. “The Colorado studies are very serious,” Brownstein said. “They should be a wake-up call to the industry, to regulators, to policy makers about the importance of air emissions and regulating air emissions. But frankly those are not the first alarm bells that have gone off.”

It’s worth noting that fracking can have some environmental benefits. Natural gas is preferable to coal and will slow down the rate of climate change. This, along with the fact that technology has improved since the Colorado and Pennsylvania episodes, led the panel to agree that fracking has a future. But community concerns must be addressed. It’s clear that the public remains vividly engaged, and with reason. As one audience member put it, “Who pays when people’s drinking water can catch fire?”



Head to Head: China and Russia

Moderated by Clifford Krauss, energy correspondent, The New York Times

Kevin Jianjun Tu and Adnan Vatansever, senior associates, Energy and Climate Program, Carnegie Endowment for International Peace

Highlights

• Russia and China are in transition.

• China’s carbon emissions from coal were 10 percent more than total carbon emissions in the U.S.

• Russia’s role as an energy supplier is larger than Saudi Arabia’s.

• Russia leans heavily on legacy Soviet oil fields and needs to develop new greenfield sites.

• If it decreased its energy consumption to the OECD average, Russia would save per day what the U.K. consumes annually.

Two analysts, covering China and Russia respectively, sat down with Times energy correspondent Clifford Krauss to discuss the main issues in the two countries. For both, there was one central theme: these are nations in transition.

Kevin Jianjun Tu described China as a hybrid economy. Despite its wealth, its per capita GDP is just 10 percent that of the U.S., so that while the country is rich, the Chinese people are poor. Its energy needs are vast and growing — in 2009, carbon emissions from coal combustion alone were 10 percent higher than national emissions of carbon dioxide in the U.S. China’s nuclear development is also at a crossroads, with vested interest groups pressuring the government to increase capacity.

A member of the audience asked: “There could be more cooperation than competitiveness between China and U.S., but how?” For Tu as well, China must increase its international collaborations, but it should get rid of its developing nation mentality. Instead of partnering with BRIC nations it should meet with countries from CURE – China, the United States, Russia and Europe. Tu argued that with the U.S., China could collaborate on almost all major energy and environmental issues especially coal, nuclear and climate change; with Russia it could cooperate on energy conservation and energy security; and with Europe China could learn about clean tech, and how to increase the environmental consciousness of its citizens.

Russia is currently just ahead of Saudi Arabia in oil production. In terms of gas it is tied with the U.S. Russia is also the most wasteful of G20 economies, and if it lowered its energy output to the OECD average it would save, per day, what the U.K. consumes annually. (Vatansever noted that Russians are skeptical about climate change.)

The Russian energy sector is in a period of transition. “It needs to start developing a new generation of oil and gas fields,” Vatansever said. “For the past 20 years, the oil sector in particular, has been coasting on the Soviet legacy fields.”

Rapid development of new energy sources is needed for Russia to play a greater part in global energy supply. But that requires change: to fund future greenfields development Russia should reform its taxation. It also needs foreign development and technology yet current policies dissuade foreign involvement.

The reserves are there but the future is uncertain. Vatansever observed: “Russia will not have new faces in the political leadership but they will face new challenges.”


Ignition: Peter Rugg

Peter Rugg, founder and C.E.O., MacArthur Energy

Highlights

• The U.S. Department of Energy estimates that coal usage will increase over the next 30 years.

• Techniques exist to remove harmful elements from coal before combustion so that it burns more cleanly.

• To transition from being a disposal society to one that recycles, we must work on the purification of our fuels.

Despite its negative properties, coal is being used more and more as the world’s energy needs shoot up. That’s because it’s cheap, it’s abundant, and its retrieval is free of geopolitical tensions. The U.S. Department of Energy estimates that over the next 30 years, coal will only continue to grow as a source of power.

“The D.O.E. and others are looking for ways to burn coal more cleanly while we search for a new paradigm that will move us to a carbon-neutral energy environment,” Rugg explained.

MacArthur Energy has developed some techniques to clean up coal, removing chlorine, mercury, moisture, some sulphur and nitrogen from coal before it is burned.

This creates a partly renewable resource which itself may have useful properties. Rugg explained that sulphur, chlorine and other chemicals can be recovered and used for industrial purposes following treatment. His firm is also working with a university to develop a transportation fuel made of coal and algae, which is similar to diesel.

This cannot be a goal, but it is a bridge towards cleaner energy, as we move from being a society that disposes to one that recycles.



Moderated by Clifford Krauss, energy correspondent, The New York Times

Manuel Camacho Solis, Mexico’s former secretary of urban development and the environment and former mayor of Mexico City

James Prendergast, executive director, Institute of Electrical and Electronic Engineers

Phil Radford, executive director, Greenpeace USA

Richard K. Sullivan Jr., secretary of energy and environmental affairs for the Commonwealth of Massachusetts

Highlights

• The effects of climate change are visible and we must act quickly to prevent it from getting worse. (Manuel Camacho Solis)

• The technology is in place. We now need political will to fund and support it. (James Prendergast)

• In the 1980s we passed the point at which the world could renew itself. Ever since then we have been using up the resources of our children. (Phil Radford)

• The discussion cannot be just about costs. You have to look at benefits too. (Richard K. Sullivan Jr.)

• The U.S. Great Recession has decreased energy consumption; but it has also pushed important issues like global warming into the back seat. (Clifford Krauss)

Times energy correspondent Clifford Krauss began this panel with a memory he had of Mexico City during the 1970s and 1980s. He had lived there when the pollution was so bad you could hardly breathe. Birds were falling from the sky and children were getting sick. Now, though, it is much better, and he asked Manuel Camacho Solis how they had done it.

It had been such an emergency that the response had to be decisive. “One whole floor of the government was dedicated to new technologies,” Solis recalled. “We did everything we thought could work with all our determination, and with a lot of social discipline. We invested huge amounts of money.”

More generally, though, developing nations are now on a more risky path, treading the same route that led to the crisis in Mexico City. More cars are on the streets and public transport is not getting enough attention. “We know we are going the wrong way but we keep on following the same pattern, same paradigm,” Solis said.

James Prendergast, however, was more upbeat. He said some of China’s major cities are much cleaner than they were a decade ago, while solar and wind power have taken off. “Technology creates a lot of the problems that we have but it will also be a savior in terms of problems that we have.”

But as long ago as the 1980s we passed the point at which the resources of the world could be refreshed. “Every day we’re making our children and our grandchildren more deprived because we’re sucking up resources at a rate that’s unsustainable,” said Phil Radford, executive director of Greenpeace USA.

Radford explained how Greenpeace’s tactics had evolved. The organization exists in 42 countries. In India, where telecom towers are a big source of pollution, the group worked successfully with members of the Parliament to resolve the problem; after that, entrepreneurs began to get involved. He touched on Greenpeace’s aggressive but successful policies in reducing deforestation in Brazil (by targeting the clients of cattle farmers, McDonald’s). On the upside, across the world he has seen some positive change: the coal industry is on the ropes and clean energy is on the rise.




The growing energy demands of the developing world remain an issue. Solis pointed out that technology is wonderful but politics is also necessary. Prendergast agreed that politics is crucial. “The technology is there,” he said.

This panel generated lively audience comments, ranging from how to get people excited about “eat your vegetables” efficiency to a query about why Greenpeace’s founder Dr. Patrick Moore supports nuclear. Someone remarked, “it is not a surprise that the urgency comes from someone outside the U.S. — Greenpeace notwithstanding.”

This may be because climate change affects the developing world so visibly. “We don’t have enough time,” said Solis. “Whatever the scientific explanation is, things are happening and they are causing a lot of problems to many people in the world.” Returning to politics, he suggested that since the combined blows of 9/11, the wars in Afghanistan and Iraq and the financial crisis, America has lacked a leadership that made climate change its priority.

The weak U.S. economy has pushed environmental issues to the backseat and has made life harder for cleantech firms. Prendergast expressed a final worry — that consumers must be educated in new technologies so that they are receptive to them. But Krauss made a pertinent point. “I tell you what, if it’s going to cost less, people will like it.”





Andrew Beebe, chief commercial officer, Suntech

Marvin S. Fertel, president and C.E.O., Nuclear Energy Institute

Amy Myers Jaffe, director of the Energy Forum at the Baker Institute

Branko Terzic, executive director, Deloitte Center for Energy Solutions

Highlights

• Outside the U.S. people are astonished that the country has not done more to address climate change. “It’s actually happening and we’re still fighting about whether it’s man-made or not.” (Andrew Beebe)

• The term subsidy should not be a four-letter word. We should view the examples on a case-by-case basis. (Marvin S. Fertel)

• R&D is where government investment should be and public-private partnerships are the way of the future. (Amy Myers Jaffe)

• Solyndra demonstrated the element of risk that is present in all investments. In this case the risks outweigh rewards. (Branko Terzic)

What’s the purpose of a subsidy? It goes beyond economics. “It’s about social policy,” said moderator Joe Nocera. “As a country we are groping towards this new world and this new set of ideals around energy.” Robust audience commentary pointed to the provocative nature of this topic. “Would the panel support Senator Carper’s bill to extend production tax credit for first 3000 MW of offshore wind?” asked one individual. “So what about oil subsidies? Are they not a waste?” enquired another.

Subsidies have a long history in the U.S., financing as they did the transcontinental railroad in the 1800s. But they are an increasingly contested battleground. For governments the risk can be greater than the reward, as the Solyndra episode showed the Democrats last year.

But when they are well implemented, subsidies are “training wheels for the introduction of new technologies,” in Andrew Beebe’s description. The solar industry, he said, is an exceptional example of fruitful use of subsidies, with variation across the world as to how the industry is supported.

“People are driven not just by finding access to power but by trying to address climate change. We haven’t talked about climate change much but when I’m traveling outside the United States I do spend a lot of time defending the U.S. because people are really incredulous about why we aren’t standing up and leading on this issue.”

Each sector thinks that it receives less support than others. To this extent the usefulness of a subsidy lies in the eye of the beholder. Marvin Fertel sought to dispel a myth about nuclear. “From 1950 to 2010 the government gave out just under a trillion dollars in subsidies to energy,” he said. “We [the nuclear industry] got about $74 billion. My colleagues in renewable areas got about $73 billion. The oil and gas industry got the most, and most of that was in tax policy.”



There is a concern amongst some commentators about whether subsidies might end up supporting a floundering sector or company that would be better left to fail. “I don’t think that subsidizing a technology that’s not ready yet or a firm that’s not ready for the marketplace is the answer,” Amy Myers Jaffe pointed out. In her eyes the most suitable place for government investment is R&D, supporting research that might not otherwise occur.

Subsidies must be transparent and must offer benefits to the public. They must have a clear end-point so that entitlements do not get written into the system. They should be measurable and efficient and should generate additional gains like employment. Although attitudes towards them may be mixed, ultimately as Fertel said, “The word shouldn’t be an evil word. We should look at them case by case and see that they are doing something that makes sense.”

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