Food for Thought

Image source.

I don't plan on talking politics in my blog (I'll leave that to the other DC student blogs, thanks) but earlier today, President Obama signed the Food Safety Modernization Act, making it law.

Originally introduced in the Senate as S. 510 in March 2009, it was finally passed by the Senate in November 2010.  Amendments were presented and this act emerged in the House as H.R. 2751. People didn't expect it to go anywhere from there with the turnover of the House to Republicans and this act being put on the back burner.  Surprisingly, H.R. 2751 was passed in the House in June of 2009 and then passed in the Senate on December 19, 2010 (73 for, 25 against) - right before the turnover.

This legislation affects the FDA only, which regulates all foods except for meat and poultry, which is regulated by the Department of Agriculture.  This marks the first time that food regulation in the US has enjoyed major change since 1938.  It also marks the first time that the US has set food safety standards for imported foods.

Note: this post originally published on my personal blog.

So... what's going to happen with BP and how will the government respond?

2) What are the business implications?  What are the political implications?  And, most importantly perhaps, how are these intertwined?

Team Hayword vs. Team Obama.  Let's not make it a draw a la World Cup.  Image source.

As with most national catastrophes, in this situation Big Business and Big Government has seemed to be in cahoots.

BP is in shambles as of late.  Their stock price has plummeted in accordance with their involvement with this disaster.  Though once lauded by those less knowledgeable about alternative energy as seeming to put emphasis on renewable energy, they have proven that "Beyond Petroleum" wasn't BP but BS.  The question remains though, can BP return from this?

The US government, meanwhile, has also been criticized and blamed, though also lauded and praised.  President Obama has been accused of using this event to further push his own agenda, particularly when it comes to cap and trade.  He has also been praised for taking a strong stance against BP's nonsense.  (Though, as with most events in politics, also criticized by Britain for trying to ruin their economy.  All right, England, let's save it for the World Cup.)  The question from this stance is will the government use this disaster to finally and seriously attempt much needed energy reform or will it allow Big Business to roll all over it, as it often does, and we go back to business as usual?

Read on for a breakdown of what BP's business implications are and what government is doing.

Obama Has Decided to go to Copenhagen! - What does this mean for US?

On our last day of classes, President Obama will be making a speech at Copenhagen.

So what? What is the significance of Copenhagen? Heard different rumors about it? I'll try to answer some questions which I think are relevant...

And if I didn't get some of your questions? Come to EcoAction's Danishes for Copenhagen study break on Friday, December 11th from 11am - noon in ICC 203.



What is Copenhagen?
Copenhagen is the capital of Denmark. (Haha, sorry. Couldn't resist!)

I've heard a lot about some conference in Copenhagen that's supposed to be a big deal. What's up with that?
The United Nations is hosting the United Nations Climate Change Conference 2009 in Copenhagen, Denmark. It's a meeting of UNFCCC (United Nations Framework Convention on Climate Change) members. It's also called the Earth Summit. It is a meeting where the world, essentially, can come to talk about the effects on climate change and to create actions to diminish these effects.

When is it being held?
It's to be held from December 7th through December 18th.

What does it have to do with COP 15?
Although Copenhagen starts with the letters "COP," it does not have to do with the city name. COP stands for Conference of the Parties. The meeting in Copenhagen is the 15th annual meeting.

What are its predecessors?
It was preceded by the famous Kyoto Protocol (COP 3 - 1997). This is probably one of the most famous Earth Summits because it created a legally binding agreement for signatories to reduce their emissions from 6-8% of 1990 levels between 2008-2012. It's been somewhat successful; responsible for a huge amount of decreased carbon emissions and, undoubtedly, the increase of clean energy throughout much of Europe. However, it was also notable for the huge failure of the United States to ratify this treaty. (Technically, the US signed it, but it was never sent to Senate for ratification, making their signature worthless.)
The other ones were located in Berlin (COP 1); Geneva (COP 2); Buenos Aires (COP 4); Bonn, Germany (COP 5); the Hague (COP 6); Marrakech, Morocco (COP 7); New Delhi (COP 8); Milan (COP 9); Buenos Aires (COP 10); Montreal (COP 11); Nairobi, Kenya (COP 12); Bali, Indonesia (COP 13); and Poznan, Poland (COP 14).

Why didn't the US ratify the Kyoto Protocol?
A lot of reasons, which can't really be pinpointed. There was the fear of being held responsible of our own action (gee... what a concept!) and how other countries would implement this. Additionally, there were some issues with the Kyoto Protocol that the Senate didn't really feel comfortable with, such as the iffy timetables. Also, they wanted to be sure that other countries, at the time China, would be held to as high a standard as the US.

So if it's an annual event, why is it such a big deal this year?
Because the US and China, who have recently been in somewhat serious talks regarding carbon emissions - something which has never happened before, are being pressured to take a stand on climate change. There's a huge hope that all the major countries in the world, the ones that actually contribute the most to carbon emissions (i.e. the US).
Additionally, in Bali (COP 13), the participating nations decided to finalize their next binding agreement in two years - for COP 15. It's important now especially because 2012 is rapidly approaching. (The time when Kyoto expires.)

What about the cap-and-trade agreement? Does this have any effect on it?
Yes and no. The agreements decided upon at these COP meetings are a total agreement. Therefore, if by some miracle the Senate passed the Kerry-Boxer bill, then it would be in concurrence with whatever is agreed upon at Copenhagen. It was the original hope of the administration that they would be done with cap-and-trade before Copenhagen, so the US could show up at COP 15 and not be so embarrassed about their state of affairs and have something to show for it - i.e. well, we basically screwed up Kyoto- but we have been able to rein ourselves in on our own. However, the current healthcare debate has pushed cap-and-trade to the side for now.

How does cap-and-trade even work?
Okay, not really directly related to Copenhagen, but I know there are people confused about it, especially with all the propaganda that's been floating around lately. Cap-and-trade is a policy plan which prices carbon emissions and puts them on the trading market. It is pretty simple.
So say there are 10 million units of carbon. Each company would get a certain amount and be able to sell their surplus in the open market. If a company was going to emit more carbon, it would have to buy more carbon. Ultimately, the hope would be that the supply of the carbon would decrease and therefore total carbon emissions would decrease.

Why is it so controversial?
The government's role is super important. The government must decide how many units of carbon emissions each company gets and then must buy back the carbon emission allowances from the open market, ultimately decreasing total emissions.
FROM A CONSERVATIVE POV
Conservative members claim 1) that this doesn't work and 2) that it will be expensive - and essentially a tax. To rebut that, I say that as anyone who has taken a basic economics class knows, it will work if implemented correctly. Furthermore, as someone who has worked at a brokerage firm, I can confidently say that carbon emissions are ALREADY trading on the open market, though more popular in other countries, and companies have been making buckets of money off of them. (Yes, I'm very much MSB.) Number 2, yes, it will be expensive. And I don't really think there's any way to get around that. You have to consider the alternatives (anyone who has taken basic economics or finance, again, knows these as opportunity costs). What's the cost of inaction? What's the cost of a Katrina 2.0? What's the cost of waiting a few more years with a couple million more people clamoring for the same limited resources in addition to the monstrous populations of both India and China who want to consume as much as Americans do?
FROM A LIBERAL POV
Liberal members claim that 1) it's not the best solution and 2) it doesn't go far enough. There have been other solutions floating around the blogosphere, such as a flat carbon tax, which would be straightforward and easy-to-understand, but difficult to pass. There was also another idea floating around called cap-and-dividend, which I think may have been mentioned on this blog but never really discussed. Cap-and-dividend essentially caps carbon emissions, much like in cap-and trade. So every company would get a certain amount of carbon credits, but essentially the public would own the carbon credits, versus the government like in cap-and-trade. Therefore, whenever a company buys carbon credits, the money would be distributed equally to the public (i.e. a dividend).
FROM MY POV
I believe that it's going to be vastly difficult for any Senate to pass any sort of act on climate control, especially with this economy. Mostly, people are fearful of the inconvenience it will cause to them. I say that it's in fact necessary for something to be done. I think that cap-and-trade will pass much easier than cap-and-dividend. Seeing where the Kerry-Boxer bill is and where Waxman-Markey was, that isn't saying much. I think we have to accept that cap-and-dividend is way too difficult for people to understand right now - and therefore won't be passed. (Though Rep. Van Hollen (D-MD) wrote a cap-and-dividend bill earlier this year... which seems to currently be in limbo.) As an ex-science major (i.e. a believer in science) and someone who has studied carbon emissions and believes in global warming and a current finance major, I think the time is now to address these issues that will only hurt us more if left unaddressed.

How does that fit into Copenhagen?
Regardless on the agreement that's made in Copenhagen, a strong climate law will help the US reach its part of the agreement. It's expected that at COP 15, much like in Kyoto, the nations will agree on a specific cap on carbon emissions. Having a strong cap-and-trade agreement in place (or any policy limiting emissions for that matter), will only help the US reach the UN decided levels.

What are the implications for the US?
It depends a lot on what is agreed upon at Copenhagen, since they're essentially writing a bill. From what I've read, the world's nations are getting ready to really address these issues and to put a specific goal out there. Also from what I've read, the Obama team has been reluctant to agree to a specific goal, instead pushing for guidelines and suggestions. Though I think it's time for the Obama administration to wake up and to put its money where its mouth is (what happened to all the we're-going-to-save-the-world rhetoric we heard during campaigning??), the fact that Obama is going, and may be ready to commit, is a big deal. Though it is worrisome that he was hesitant to go in the first place - seeing as this is the biggest event regarding climate change all year.

How is it going to affect me?
If all goes well, i.e. if the US realizes that it can not continue to steamroll over the rest of the world and instead starts to act in accordance with other nations, we should see a lot of changes. There will be a new emphasis on clean energy. There will be an influx of green-collar jobs, a relatively new term to describe engineering and mechanic jobs related to building solar panels and wind panels, etc. We can look to countries like Switzerland, Norway, and Sweden, all known to have low carbon emissions. But more importantly, in my opinion, we can look to a country like Germany, who has greatly lowered its carbon footprint in recent years yet still has one of the highest GDPs in the world, and is arguably in a better economic position than the US.

My final two-cents...
The time is now for Obama and the US to show the world that it's a leader. If you believe in global warming, this could be the most important meeting since Kyoto. If you don't believe in global warming, I suggest you take a basic chemistry class and then come talk to me.

Assessing the Climate Bill

If you’re at all serious about climate change, you’ve hopefully been following the recent negotiations over the so-called “Waxman/Markey” bill, because it’s pretty much the biggest game in town right now when it comes to the environmental movement. The bill, introduced by Democratic representatives Henry Waxman and Ed Markey and known formally as the American Clean Energy and Security Act of 2009, will clear a major procedural hurdle this week if it can make it through a vote in the House Energy and Commerce Committee.

Notably, the bill would create a nationwide “cap and trade” system to oversee the long-term reduction of US carbon emissions. If you’re not quite up to speed on cap and trade, it essentially means that a national “cap” would be set on carbon emissions, decreasing over time to theoretically insure an 80 percent reduction by 2050. Emitters of carbon dioxide would then be able to “trade” emissions credits if they come in under the cap, or be forced to buy credits if they continue to emit more than the permitted amount of carbon dioxide.

Cap and trade systems are widely considered to be the most politically and economically viable way to reduce emissions on a large scale. Our country already operates a cap and trade system to contain emissions of sulfur dioxide, which has been highly successful. The world’s largest cap and trade system for carbon dioxide emissions has been operating in Europe since 2005; they call theirs an “emissions trading scheme,” which does sound decidedly more European.

For our proposed cap and trade bill, negotiations in the Energy and Commerce Committee have been pretty contentious. Republican Rep. George Radonovich of California called the Waxman/Markey bill “environmental socialism,” while Rep. Joe Barton (R-TX), the ranking Republican member on the committee, displayed with the following quote why the his party has little credibility left on any matter related to science:

"Wind is God’s way of balancing heat. That’s what wind is. Wouldn’t it be ironic if in the interest of global warming we mandated massive switches to wind energy, which is a finite resource, which slows the winds down, which causes the temperature to go up? I mean, it does make some sense."

Yeah…not exactly.

Despite the predictable Republican opposition, however, with large majorities both on the committee and on the full House floor, most of the debate over this bill has actually come within the Democratic Party, with centrist representatives from coal-producing areas (Pennsylvania, Ohio, West Virginia, etc.) especially concerned about the potential economic impacts of putting a price on carbon. Rep. Artur Davis (D-AL), who leads the centrist New Democrat Coalition, was responsible for leading an effort a couple of weeks ago to put the Waxman/Markey bill on the shelf indefinitely. “In the throes of a recession,” said Davis, “more of a burden on industry is not a good idea.”

Waxman, who chairs the Energy and Commerce committee, has forged ahead in search of a compromise. And as Mike noted last week, it hasn’t necessarily been pretty. The climate bill, released in final draft form last Friday and set for a vote potentially by the end of this week, has been watered down considerably from Waxman and Markey’s original proposal, and from President Obama’s own cap and trade preferences as laid out in his 2010 budget. As Mike mentioned, the initial emissions reduction target has been lowered from 20 percent by 2020 to 17 percent by 2020. This doesn’t seem like the biggest cut, but still – it’s the little things. More significantly, though, the bill, which originally proposed that 100 percent of emissions allowances under the cap and trade plan be auctioned off by the federal government, will now provide for 85 percent of the allowances to be allocated freely to utilities, oil refiners, heating companies, and various heavy industries like cement and steel. This is potentially troubling because the decision not to auction permits not only minimizes the incentive to invest in cleaner technologies; it also results in the loss of a significant revenue stream for the federal government that makes the debt-related concerns about Obama’s budget begin to shine brighter and brighter. Some of the money from the cap and trade scheme, estimated in Barack’s original budget proposal at over $600 billion, was also intended to promote renewable energy development. Without those funds, this becomes considerably more difficult, along with the quest to make Waxman and Markey’s bill “budget-neutral.”

There are a host of other concerns that should give pause to people concerned about the bill’s potential effectiveness. Standards for renewable energy use in electricity generation have also been trimmed, while provisions also exist for carbon emitters to “lower” their emissions by investing in carbon offsets, which essentially means taking the easy way out and not actually transitioning away from dirty technologies.

In light of all these compromises, how, as environmentalists, should we view the climate bill in its current state?

While I sympathize with Mike’s criticism that “negotiations in the Energy & Commerce Committee have severely limited the potential impact of Reps Waxman and Markey's cap and trade legislation,” I think I’d have to disagree with his characterization of the committee’s negotiations as a “FAIL.” We need to recognize that the most important thing right now, above all, should be putting a system in place, and establishing the fact that from this point forward, there will be a steadily decreasing cap on America’s carbon dioxide emissions. As long as this system works okay, even passably, the tinkering can come later to optimize the environmental and economic results.

We should ask ourselves what’s better: do we hold out for a perfect system that is (albeit sadly) probably not politically feasible right now, given the concerns among powerful members in our own party, with an understanding that this approach would probably compromise the more important goal of putting a price on carbon as soon as possible? Or do we understand that the legislative process is going to result in some compromises, and realize that this bill, while imperfect, is still a tremendous and necessary step in the right direction?

Take Europe for example. In setting up the EU Emissions Trading Scheme (EU ETS), they basically had the same debate about seven years ago that we’re currently having. The European Commission (the EU’s executive body), in the spirit of getting a functioning system together, worked closely with industry leaders and EU Member States to arrive at an initial ETS with a few key provisions that were against the Commission’s preferences. One of the areas in which the Commission caved? The EU’s decision to allocate allowances freely.

Europe’s initial failures with its emissions trading scheme have been well documented. During the scheme’s first, or “trial” phase, from 2005-2007, emissions in Europe actually rose by nearly 2 percent. Though the free allowances have been blamed, this was not the only reason for the ETS’ beginning troubles. Another big issue with the ETS in the trial phase was that many countries allocated significantly more emissions allowances than the EU-wide cap provided for, resulting in an over-supply that destroyed much of the market demand for allowances and caused the price of carbon to crash to just €0.02 per ton by the end of the trading period in December 2007.

The Commission introduced some key reforms for 2008, taking greater control of the allocation process to insure that the Member States allocated fewer permits. The demand for, and accompanying price of carbon recovered accordingly, combining with the economic recession to produce a 2 percent drop in emissions for 2008. The EU also negotiated some important reforms for the trading period from 2013-2020, which will see a greater use of allowance auctioning and a generally harder line taken on European polluters. Undoubtedly, the jury will remain out on Europe’s emissions trading scheme as more results continue to emerge. But two things that Europe’s experience suggests, at least initially, are important to consider:

-First, the price of carbon will likely be far more important than how the emissions permits are allocated. When the price of carbon in Europe was high (in 2008, and also before it crashed during the first trading period), efforts to reduce carbon emissions took place. When it was too low, those efforts fell off. In looking at our own proposed cap and trade system, we should worry less about auctioning and more about making sure that sufficiently few permits are allocated so that there is enough market scarcity for the price of carbon to remain high.

-Secondly, the Commission’s willingness to compromise in order to put a system in place has resulted in an ETS that is now credible enough to allow for reforms that will make it work better in the long term. Without those compromises, efforts to get the EU ETS off the ground would likely have failed.

Waxman and Markey appear to be especially cognizant of the second fact. It’s also what Paul Krugman wrote about the other day in the New York Times when he warned against making “the perfect the enemy of the good.” Adds Krugman: “After all the years of denial, after all the years of inaction, we finally have a chance to do something major about climate change. Waxman-Markey is imperfect, it’s disappointing in some respects, but it’s action we can take now. And the planet won’t wait.”

Presumably following this same line of thinking, Al Gore has voiced his support for Waxman/Markey in its current state, as have many environmental groups. Amazingly, the negotiations in the Energy and Commerce committee have produced a scenario where industry leaders are working with, as opposed to against, environmental interests, to come up with a scheme that is widely acceptable. I would of course like to see a more stringent cap and trade proposal, but I also recognize that as environmentalists, at a certain point we’re going to have to be more than intransigent tree-huggers.

What we’re seeing right now, I think, is the evolution of the environmental movement into a credible political body that can actually get things done as opposed to continually trying to beat down the door. The continued Republican opposition to Waxman/Markey is unfortunately predictable, but Democratic leaders are apparently rallying around the bill, which may be enough to (finally!) pass a workable cap on carbon emissions in the United States. As environmentalists, we should undoubtedly continue to advocate for the best bill possible, especially as it traverses the dangerous, dream-destroying legislative waters of the United States Senate. If Waxman/Markey makes it into law, we should follow it closely and make sure it works and continues to work as best as possible.

What we can’t do, however, is make the perfect the enemy of the good. The planet can’t support too many more years without a US carbon cap, which means it also can’t support an approach to environmentalism that rejects anything and everything that is not entirely ideal, or perfectly “eco-friendly.” Even in its present state, if we can get Waxman/Markey signed into law, I think we’ll all be happy for it going forward.

(Image courtesy Allianz Knowledge)

It's About Time: Plans on Mileage and Emissions

Earlier today, President Obama announced national rules for automobile emissions and mileage standards. Though these rules won't take effect until 2012, it's a good start.

The new mileage standard will be 35.5 miles per gallon, a rise from the current rule of 25. One of the issues with regulating mileage standards is that each state determines its own. California currently has a mileage standard of about 35.5, with a few states (and the District of Columbia!) planning to adopt California's standards. Now, with a national standard, this will be unnecessary.

It is supported by both environmentalists (for obvious reasons) and the auto industry, which is currently planning its business strategy.

Read more about this plan from the New York Times or from New York Magazine, which offers a wide range of opinions.

[UPDATE: 5/20, the NYT's editorial board endorses this act in "The Earth Wins One."]

Obama, Notre Dame Speech, and Climate

I was just reading Barack Obama's commencement speech at Notre Dame, and I thought he did a great job amidst all of the controversy. He was very eloquent in his approach to sensitive issues and strongly emphasized the themes of common ground and the bond of humanity. I was also very pleased to see a mention of climate change and the environment, noted here:

"We must decide how to save God's creation from a changing climate that threatens to
destroy it. We must seek peace at a time when there are those who will stop at nothing to do us harm, and when weapons in the hands of a few can destroy the many. And we must find a way to reconcile our ever-shrinking world with its ever-growing diversity - diversity of thought, of culture, and of belief.

In short, we must find a way to live together as one human family.

It is this last challenge that I'd like to talk about today. For the major threats we face in the 21st century - whether it's global recession or violent extremism; the spread of nuclear weapons or pandemic disease - do not discriminate. They do not recognize borders. They do not see color. They do not target specific ethnic groups.

Moreover, no one person, or religion, or nation can meet these challenges alone. Our very survival has never required greater cooperation and understanding among all people from all places than at this moment in history."

A little late... but President Obama comes to Georgetown - and talks about ENERGY

You probably weren't one of the three Georgetown students who actually won the lottery to see President Obama at Gaston Hall, but he had a lot to say about, among other things, the current energy crisis. Here are some of the highlights:

"The third pillar of this new foundation is to harness the renewable energy that can create millions of new jobs and new industries. We all know that the country that harnesses this energy will lead the 21st century. Yet we have allowed other countries to outpace us on this race to the future.

Well, I do not accept a future where the jobs and industries of tomorrow take root beyond our borders. It is time for America to lead again.

The investments we made in the Recovery Act will double this nation's supply of renewable energy in the next three years. And we are putting Americans to work making our homes and buildings more efficient so that we can save billions on our energy bills and grow our economy at the same time.

But the only way to truly spark this transformation is through a gradual, market-based cap on carbon pollution, so that clean energy is the profitable kind of energy. Some have argued that we shouldn't attempt such a transition until the economy recovers, and they are right that we have to take the costs of transition into account. But we can no longer delay putting a framework for a clean energy economy in place. If businesses and entrepreneurs know today that we are closing this carbon pollution loophole, they will start investing in clean energy now. And pretty soon, we'll see more companies constructing solar panels, and workers building wind turbines, and car companies manufacturing fuel-efficient cars. Investors will put some money into a new energy technology, and a small business will open to start selling it. That's how we can grow this economy, enhance our security, and protect our planet at the same time."

"We will continue to reaffirm this nation's commitment to a 21st century American auto industry that creates new jobs and builds the fuel-efficient cars and trucks that will carry us toward a clean energy future."

"Because of our recovery plan… clean energy companies and construction companies are re-hiring workers to build everything from energy efficient windows to new roads and highways."

"For even as too many were chasing ever-bigger bonuses and short-term profits over the last decade, we continued to neglect the long-term threats to our prosperity: the crushing burden that the rising cost of health care is placing on families and businesses; the failure of our education system to prepare our workers for a new age; the progress that other nations are making on clean energy industries and technologies while we remain addicted to foreign oil; the growing debt that we're passing on to our children. And even after we emerge from the current recession, these challenges will still represent major obstacles that stand in the way of our success in the 21st century."

"It's a foundation built upon five pillars that will grow our economy and make this new century another American century: new rules for Wall Street that will reward drive and innovation; new investments in education that will make our workforce more skilled and competitive; new investments in renewable energy and technology that will create new jobs and industries; new investments in health care that will cut costs for families and businesses; and new savings in our federal budget that will bring down the debt for future generations. That is the new foundation we must build. That must be our future – and my Administration's policies are designed to achieve that future."

So... what are your thoughts?