Sunday, October 07, 2007
A Humanitarian Approach to Climate Change
The overarching objectives of our energy policy must be to reduce dramatically the world's dependence on petroleum products and emissions of greenhouse gases. As the most egregious offender on both counts, we have a moral duty, not just an obligation, to lead the world in addressing these critical issues. While we must lead, it is neither essential nor advisable for all the elements of our energy policy to be implemented within our borders. Initiatives such as mandating substantially higher automotive fuel efficiency standards, switching to compact fluorescent lamps, shifting to nuclear power generation and developing the technologies for cellulosic ethanol and coal-fired power generation with carbon sequestration clearly belong in the US, but others don't.
Crude oil prices and greenhouse gases recognize no borders. When Chinese demand pushes oil prices up, gasoline prices are pushed up all over the world. Wherever the smokestacks and exhaust pipes that belch carbon dioxide may be, the effects will eventually be felt by all. Conversely, if those smokestacks and exhaust pipes get cleaner, all of us benefit. This is the concept underlying carbon trading systems.
The concept can be taken further. Sugarcane is eight times more efficient a source of ethanol than corn. A wise energy policy would promote and fund the production of sugarcane ethanol wherever it can be produced most cost effectively, without concomitant deforestation, rather than subsidize the production of horrendously inefficient corn ethanol in Illinois.
A wiser energy policy would avoid the diversion of fertile land to the production of biofuels. Imagine a biofuel that can be produced from feedstock from land that has little or no other economic utility. Imagine further that this crop can be cultivated by the poorest people in the world, with such cultivation lifting them out of dire poverty to a level where they can send their children to schools rather than menial labor. Imagine, if you care, how we would be viewed by the world if America were to be the prime mover behind such a program.
Biodiesel from jatropha curcas is such a fuel. A lot has been written about jatropha – it thrives, with little tending, on land that many poor countries classify as fallow and uncultivable. The primary inputs of agricultural are land, labor, water, fertilizers and capital equipment. Jatropha grows on semi-arid land, needing neither fertilizers nor farm equipment. The poorest people in poor countries are landless agricultural laborers. The UN defines extreme poverty as living on less than a dollar (at purchasing power parity) per person per day. Assuming an average household size of 5.5 people, this translates to about $2,000 a year per household. Mere poverty is defined as $2 per capita per day. Tens of millions of households in poor countries would jump at the prospect of $4,000 a year (at PPP). Just two hectares (five acres) of jatropha would give them more than that and deliver biodiesel at below current market prices, sans subsidies.
A Humanitarian Proposal
Together with the other OECD countries, fund a global program to cultivate jatropha curcas in semi-tropical poor countries and produce biodiesel. The US would provide at least half the funding and the program would be implemented by a suitably skilled international agency, perhaps the UN.
Work with countries in Africa and the Indian sub-continent to identify and acquire land for the program (keeping corruption within tolerable limits), with a target of a hundred million hectares - under 10% of the area of these regions, excluding deserts, forests, reserves and agricultural land. Lease the land solely to landless menial laborers and marginal farmers, at two hectares per household. Require them to grow jatropha on this land. Transfer title to these laborers after authenticity and productivity have been clearly established.
Help fund the cost-efficient design and construction of oil mills and processing plants for converting jatropha oil into biodiesel (the technology exists). Establish contractual norms for purchasing jatropha oil - the oil mills could be owned by cultivator cooperatives and the processing plants by petrochemical companies. Biodiesel from jatropha will yield far more byproduct (10%) glycerin than the world currently consumes. Technology for handling this glut needs to be developed.
What can such a program achieve?
The annual production of biodiesel from 100 million hectares (area of Texas plus New Mexico) of jatropha will be just shy of America's consumption of diesel and furnace oil, 4.7 million barrels a day in 2006, or 5.5% of global oil consumption. Note that the bio-diesel produced need not be consumed in America - it ought to be consumed where it makes the most economic sense.
Predicting the impact on oil prices of changes in supply and demand is a mug's game. That conceded, a 5.5% demand drop is likely to lead to at least a $10 a barrel drop in oil prices. America imported 4.5 billion barrels of oil and products in 2006. Had prices been $10 a barrel lower, we would have saved $45 billion. The Middle East's export revenue would have been $72 billion lower.
Burning 4.7 million barrels a day of biodiesel instead of petro-diesel will reduce annual CO 2 emissions by about 580 million tons, a tenth of what America emits.
About 300 million people in Africa and the Indian sub-continent will be lifted out of crushing poverty. The chances of the children in these families being well nourished, educated and not condemned to menial labor will increase dramatically. America's reputation will be burnished.
What will it cost?
Paying for seed nurseries and the land to be granted under long-term leases, funding most of the cost of oil mills, providing risk capital for processing plants and administering the entire program may cost somewhere in the region of $50 to $75 billion. If the funding were to be spread over ten years, with America bearing half the cost, our annual contribution will be in the $2.5 to $3.75 billion range. To provide perspective, the proposed fiscal 2008 budget authorization for "military operations" in Iraq and Afghanistan is $141 billion, expenditure on "international affairs" was $30 billion in 2006, our annual expenditure on farm subsidies is over $20 billion and that on cosmetics is far higher.
Opportunities for the 300 million citizens of the world's wealthiest country to benefit by helping a like number of the world's poorest citizens are indeed rare. This is one. We must grab it, America.
Labels: Climate Change, Global Warming
Saturday, April 28, 2007
Will Southern Chief Ministers Don Green Shawls?
A few days back, I was invited to sign Greenpeace’s petition to “Ban the Bulb”. I declined, despite subscribing wholeheartedly to their goal. Banning incandescent light bulbs (ILBs) seemed like a ham-fisted approach, smacking of self-righteous stormtrooperism. A well designed set of disincentives, incentives and promotional projects holds far greater promise, I believe.
Before getting to those, we should understand why ILBs are worse than compact fluorescent lamps (CFLs). ILBs use about five times as much electricity as CFLs to produce a given amount light, they waste most of the input energy in generating heat. Further, they are said to last only about a tenth as long as CFLs. On the other hand, CFLs emit bluish light and contain tiny amounts of mercury, requiring careful disposal.
Let us consider what all this may mean for the states in the rain shadow of the Western Ghats. The estimated population of Andhra Pradesh, Karnataka and Tamil Nadu in 2007 is about 200 million. No amount of diving into that vast ocean of all knowledge, the internet, could reveal the number of ILBs installed in these states. So, let me rashly assume that it is 200 million. Let me further assume that the average wattage of these bulbs is sixty and that they are on for an average of 2.5 hours a day. This gives an annual energy consumption of almost eleven million megawatt-hours.
Were all these ILBs to be replaced with equally bright CFLs, annual power consumption would drop by almost nine million MWH. That is the net delivered power (assuming 70% load factor and 10% technical transmission losses) from a coal-fired power plant with a name-plate capacity of 1,600 MW. Such a plant costs about Rs 7,000 crores and will emit about eleven million tons of CO2 (plus other nasties) annually, as much as five million diesel engine cars (1300 - 1500cc engine).
Biodiesel
This brings us to biodiesel, much talked about these days. Relative to petro-diesel, the reductions in emissions with biodiesel are: CO2 – 80%, CO – 50%, SO2 – 100%, hydrocarbons – 93%, and particulates – 30%. Smog causing NOx emissions, however, are 13% higher. Western analysts are concerned that this clean fuel will not be competitive without subsidies. They determine the cost of biodiesel by starting with the cost of vegetable oils, soy or palm, build up to a plant-gate cost (over Rs 40/litre) and compare that, unfavourably, to the wholesale price of diesel.
[$ = Rs 41, Crore = 10 million, Rs 1 crore = $ 243,900]
This methodology is inappropriate for India. The three southern states together have over twelve million hectares of land classified as fallow or uncultivable. This land lies fallow solely because it has no economic utility whatsoever. Jatropha Curcas is a robust, inedible plant. It is native to India and has long been used as natural rural fencing. It is not otherwise cultivated, since it has low economic value. But, it thrives in areas receiving just 600 mm of annual rainfall, with scant tending, enriching the soil on which it grows. Its seeds contain over 35% oil, which can be expressed through manual or simple mechanical means. This oil can be refined into biodiesel at less than Rs 5/litre. The seedcake left over is a nitrogen rich organic fertilizer that is worth 50% more than the cost of crushing. The resulting net production cost of biodiesel is about Rs 3.50 per litre. Unrefined oil can be used as a clean burning fuel in rural households (eliminating firewood, the kitchen fuel in over 50% of Indian households) and in slightly modified tractor and pump-set engines.
The relevant question in India is whether the value of jatropha oil, netted back from the wholesale price of diesel, will be enough to attract poor rural families to jatropha plantations. The answer is a resounding yes. Based on government surveys, the current consumption expenditure per land-owning farm household averages Rs 3,000 a month in these three states. Rural households in the bottom half of the economic ladder spend way less than that. Expenditure generally exceeds income in these Micawberian households. This suggests that Rs 3,000 a month should look highly attractive to the poorest rural families. A hectare of jatropha will, agriculturists estimate, yield around 2,700 litres of jatropha oil annually. So, jatropha diesel will be deemed sustaining at Rs 15/litre and munificent at Rs 20/litre by a family owning a one-hectare plantation. With two hectares, the family will be comfortable even at a crude oil price of $40 a barrel. With such economics, a veritable jatropha rush is likely. No wonder Reliance is keen.
Bulbs and Biodiesel
We can now link the two issues. Or rather, southern CMs can, if they are willing to don green shawls. They can launch programs structured along the following lines.
Make ILB Unattractive and CFL Attractive:
Impose an energy tax of 25 paise per watt on ILB. Double the tax to 50 paise after four years.
CFLs are economically attractive despite their higher prices. With electricity tariffs of Rs 3/kwh, even a Rs 120 CFL pays for itself in a year and will last years longer. The energy tax, Rs 15 for a 60 w bulb, will reduce the payback period to ten months. This should wean people away from ILB within about six years. As they switch into higher priced CFLs, VAT revenue will increase. The increased revenue from the energy tax and incremental VAT should amount to more than Rs 500 crores over about six years for the three states combined.
Promote CFLs through advertising campaigns explaining their economic and environmental benefits.
Nudge CFL manufacturers to lower their prices as volumes increase and to produce lamps emitting warmer light.
Constitute a technical committee with members from leading technical institutions to select the best three CFL brands each year, based on lumens/watt, price and warmth of light. In partnership with media, give wide publicity to the winners.
Fund the Promotion of Jatropha Planting and Biodiesel Production & Use:
In consultation with agricultural experts, identify one million hectares, in large clusters, of fallow land for planting jatropha.
Establish public-private institutions in each state (major oil companies are probable partners) to finance the purchase of this land by landless farm labourers, at two hectares per nuclear family. These institutions could retain a minority revenue interest in the land for a decade or more.
Through these institutions, provide subsidized jatropha seedlings (2,500 per hectare) and help finance small-scale jatropha oil mills.
Champion the production of vehicle engines and agricultural pump-sets using 100% biodiesel (B100) or jatropha oil.
Have the above technical committee choose the two best car, commercial vehicle, tractor and agricultural pump-set diesel engines – based on fuel efficiency, emissions & reliability. Publicize the winners, as above.
Convert all government owned vehicles – metro and state transport buses, cargo vehicles, cars, etc. – to B100. Have the railways do the same (locomotives on the Delhi-Mumbai line already use a jatropha diesel blend).
Partly subsidize the conversion of all electric agricultural pump-sets to jatropha oil. Rapidly phase out free electricity, if any, for agricultural pump-sets.
Set ad valorem tax rates for biodiesel well below those for petro-diesel.
Work Through International Agencies to Earn Carbon Credits for the Above Programs:
The price of carbon credits, which are actively traded in Europe, has fluctuated widely due to gross mismanagement by the EU. It should stabilize before too long, perhaps at levels around fifteen to twenty euros per ton of CO2 equivalent. If it does, potential earnings are enormous.
If the three states do all of the above effectively and expeditiously, the benefits will be:
· Enough biodiesel to fuel the equivalent of two million cars.
· A dramatic reduction in emissions of greenhouse gases and other pollutants, driven by economically sensible programs (unlike America’s crazy corn-ethanol program).
· Land ownership and a lower-middle-income standard of living for over 500,000 desperately poor families.
· Creation of thousands of small-scale industrial units in poorer rural districts.
· Reduction in respiratory ailments in urban areas.
· Reduction of over $750 million in our annual oil import bill.
· A large, economically sound, public-private program that can employ socially inclined graduates from our better universities and institutes.
Sounds a whole lot better than a ban to me. What do you say, chief ministers?
Labels: Global Warming, India
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