Energy Transitions: Handle With Care
Beginning October 31 and running through November 12, the U.N. Climate Change Conference known as COP26 will be held in Glasgow, Scotland. Over the past few months, in the runup to the event, we’ve seen a lot of climate stories, some offering responsible information, others with exaggerated scare headlines.
As the conference approaches, recent events in the world economy have sparked a temporary spike in coal usage in China and Europe—except France, which stuck with nuclear power to provide 70 percent of its electricity.
In Germany, which decided to ditch nuclear power, natural gas prices are soaring, prompting a switch of utilities to coal. This is allowed under the EU’s Emissions Trading System. Prices for ETS permits have doubled, according to Reuters, but prices for natural gas have quadrupled. Coal prices are also rising, but less so.
In China, the situation is much worse. China still relies on coal for 70 percent of its energy needs. According to Foreign Policy magazine, more than half of China’s provinces have been rationing electricity for weeks, affecting tens of millions of people. Some neighborhoods are doing without power for whole days. In September, industrial output declined for the first time since China began its recovery from COVID-19. Since China is still the world’s factory floor, there’s a good chance this will affect your Christmas shopping.
Some of this, analysts say, is due to COVID-19 disruptions that are not of China’s making. Observers have also blamed a lack of coordination between various parts of the Chinese government, such as those responsible for energy and those charged with increasing economic performance and output. But the deeper reason for “the worst electricity crisis China has faced in decades” is the state’s rules that don’t allow markets to work. On October 12, the Chinese government finally allowed power plants to charge market prices for energy.
None of the recent disruptions means that the transition away from coal won’t continue in the long term. But they do indicate caution in managing energy transitions. Germany’s decision to get rid of nuclear power has placed it in a bind and left it dependent on Russia’s natural gas supplies. China’s heavy-handed attempts to regulate the energy markets have resulted in an energy crisis that may dent its GDP for this year, not to mention disrupting the lives of millions of its people.
We in the U.S. are debating our own energy transition. There seems to be a growing societal consensus about the goal. Even energy companies are proclaiming their efforts to reduce carbon emissions. Some large companies have begun their own efforts to reduce their carbon impacts, ahead of any government compulsion.
There is still vigorous debate about the means toward that goal. Debate about such a drastic change in our economy is fundamental in a democracy.
The inland waterways are already the greenest mode of transportation per ton-mile. What is needed are positive incentives to encourage the change, if that is what we want, without unduly burdening the ability of operators to operate profitably and safely.
In this issue, we take a look at the recent Vanderbilt University report prepared for ABS, “Decarbonization of the Inland Waterways Sector in the United States.” It’s the essential starting point for anyone concerned about this issue as it plays out on the waterways. It lays out the pathways and challenges comprehensively. It’s the perfect time for such a report, as the Biden administration is studying possible climate measures and regulations as part of its declared “whole of government” approach to climate issues. We hope it gets a wide reading, especially in those agencies and departments most closely concerned with the inland waterways.
