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Posts Tagged ‘Cleantech’

MARGOT ROOSEVELT, The Los Angeles Times, December 12, 2008

california_mapCalifornia regulators adopted the nation’s first comprehensive plan to slash greenhouse gases on December 11th and characterized it as a model for President-elect Barack Obama, who has pledged an aggressive national and international effort to combat global warming.

The ambitious blueprint by the world’s eighth-largest economy would cut the state’s emissions by 15% from today’s level over the next 12 years, bringing them down to 1990 levels.

Approved by the state’s Air Resources Board in a unanimous vote, the 134 page plan lays out targets for virtually every sector of the economy, including automobiles, refineries, buildings and landfills. It would require a third of California’s electricity to come from solar energy, wind farms and other renewable sources — far more than any state currently requires.

Gov. Arnold Schwarzenegger, who has been a vigorous advocate of the plan, vowed that it would “unleash the full force of California’s innovation and technology for a healthier planet.”

Businesses, however, are sharply divided.

Automakers oppose California’s pending crackdown on carbon dioxide emissions from cars, a regulation that more than a dozen states have pledged to adopt. Manufacturers want regulators to lower the cost of complying, saying it will lead to billions of dollars in higher electricity costs.

“This plan is an economic train wreck waiting to happen,” James Duran of the California Hispanic Chambers of Commerce told the board, saying that it would cause financial hardship to minority-owned companies.

But Bob Epstein, a Silicon Valley entrepreneur, led a coalition of energy, technology and Hollywood executives, including Google Chief Executive Eric Schmidt, in endorsing the plan as a spur to the state’s lagging economy.

Investors have poured $2.5 billion into California cleantech companies in the first nine months of the year, up from $1.8 billion for all of 2007, he said, a level that eclipsed the software industry.

“This plan is a clear signal to investors to invest in California,” Epstein said.

Schwarzenegger, a sharp critic of President Bush’s opposition to climate legislation, said, “When you look at today’s depressed economy, green tech is one of the few bright spots out there.”

California’s plan will be “a road map for the rest of the nation,” he predicted.

After an aborted attempt last spring, Congress is expected to renew its efforts to craft climate legislation next year. Many of the elements in contention are addressed in California’s blueprint, including a cap and trade program that would allow industries to reduce emissions more cheaply.

In 18 months of public hearings and workshops, hundreds of people testified and more than 43,000 comments were submitted. More than 250,000 copies of the plan have been viewed or downloaded from the air board’s website in the last two months.

The state’s blueprint will be implemented over the next two years through industry specific regulations. Republican legislators have called on Schwarzenegger to delay the plan, citing the dire state of California’s economy and criticism of the air board’s economic models.

Fears were also expressed by city and county officials who said the plan’s effort to force land use changes infringes on local powers. Environmentalists want more ambitious strategies to curb the sprawl that has led to a rapid increase in driving, and thus in greenhouse gases.

Worldwide, emissions of planet warming gases, which are mainly formed by burning fossil fuels, have been growing far more rapidly than scientists had predicted. California is expected to experience severe damage from climate change by mid-century, including water shortages from a shrinking snowpack, increased wildfires, rising ocean levels and pollution aggravating heat waves.

Given the state’s fast growing population and sprawling suburban development, its emissions are on track to increase by 30% over 1990 levels by 2020. The new blueprint would slash the state’s carbon footprint over the next 12 years by a total of 174 million metric tons of greenhouse gas emissions — the equivalent of 4 metric tons for every resident.

Despite the reach of the state’s effort, it would barely make a dent in global warming: The state’s emissions account for about 1.5% of the world’s emissions. Nonetheless, air board Chairwoman Mary Nichols said California’s leadership has spurred other states to move ahead. “We are filling a vacuum left by inaction at the federal level,” she said.

More than two dozen states have committed to capping emissions since California passed its landmark 2006 global warming law, the trigger for this action by the Air Resources Board.

California has joined with four Canadian provinces and seven western states to form a regional cap and trade program. Under the program, the states would set a total allowable amount of emissions — as California did in its blueprint. Utilities and other large industries would be required to obtain allowances to cover their emissions. If companies cut emissions more than required, they can sell their extra emission reductions to firms that are not able to meet their targets.

A cap and trade system has been adopted in Europe, where it was initially fraught with logistical problems and afforded windfall profits to many industries. California’s system, which would apply to industries responsible for 85% of its emissions, is the most controversial aspect of its plan.

Groups representing low income residents of polluted urban areas testified that allowing industries to trade in emissions would lead to dirtier plants in their neighborhoods. Under California’s plan, industries would also be allowed to buy “offsets” — emission reductions from projects in other states, or possibly foreign nations, to avoid making their own reductions.

However, the board assuaged many environmentalists Thursday when it pledged that it would gradually move toward a system to auction 100% of greenhouse gas permits, rather than give the permits away for free, as was initially the case in Europe.

Bernadette del Chiaro, an energy analyst for Environment California, predicted the auctions could bring in $1 billion at the outset and up to $340 million per year by 2020.

“This is huge,” she said. “Revenue from polluters would be used to transit to a green economy.”

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MARTIN LAMONICA, CNET, November 5, 2008

Energy and environmental policy is poised for dramatic change under an Obama administration even with a slumping economy.

With the incoming administration and Congress, renewable energy advocates and environmentalists said they anticipate a comprehensive national energy plan focused on fostering clean-energy technologies.

“The election is over. Now the hard work begins,” wrote Dan Farber, a professor of law at the University of California at Berkeley and a member of the lobbying group Cleantech & Green Business for Obama. “Change is on the way.”

Obama’s energy plan, detailed fully earlier this year, is ambitious. It calls for a $150 billion investment in clean technologies over 10 years, aggressive targets for greenhouse emission reductions, and programs to promote energy efficiency, low-carbon biofuels, and renewable energies.

But a troubled economy–among other barriers–means that bold, new energy legislation, notably caps on greenhouse gas emissions, is unlikely to pass in the first years of an Obama administration, according to experts.

Instead, the Obama presidency is expected to first push for smaller yet significant measures, such as efficiency and renewable energy mandates, and then lay the groundwork for far-reaching climate initiatives, they said.

“One of the biggest setbacks is trying to find the money to pay for all of this. This isn’t free,” said David Kurzman, managing director of Kurzman CleanTech Research. “Reality will set in and trying to find money…is really going to temper the possibilities over the next 12 months.”

Winners and losers
Cleantech company executives note that during the campaign, Obama articulated his belief that environmental protection and economic development can be closely related. During Obama’s acceptance speech Tuesday night, his reference to “new energy to harness and new jobs to be created” could be read in two ways–a call for political involvement or for alternative-energy sources.

In an interview with Time magazine in October 2008, he said, “From a purely economic perspective, finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy.”

Cleantech professionals expect that energy and the environment, which were hot-button issues during the campaign, to continue to command the attention of politicians and the electorate. And the combination of a Democratic-controlled Congress and Obama administration means that government stimulus spending targeted at the energy business is a strong possibility.

“There’s a growing sense that investing in infrastructure, even if it means more deficit spending, is a good thing because it will help economic growth in the short and long term,” said Ethan Zindler of research firm New Energy Finance. “And green energy has come to be regarded as a 21st-century infrastructure play.”

Some technologies stand to benefit more than others if Obama’s administration is successful in implementing its proposals.

Renewable energies. Obama has called for a national renewable portfolio standard to mandate that utilities get 10% of electricity from renewable sources–wind, solar, and geothermal–by 2012, and 25% by 2025. “That’s the backbone the country needs to invest in,” said Rhone Resch, president of the Solar Energy Industry Association.

Although more than half the states already have renewable portfolio standards, many southern states have balked at national standards because they say they do not have sufficient renewable energy resources.

In this case, having an activist federal government, as Obama’s proposals suggest, may meet resistance from the states because electric utilities are regulated by a mix state and federal agencies. “It’s not just a question of money. It’s also a question of governance and public policy,” said Jim Owen, a representative for the Edison Electrical Institute.

In the recently passed financial bailout package, solar energy received an eight-year extension of federal tax credits, while wind received only a one-year extension. The election increases the chances that wind energy will be extended further.

Efficiency and smart grid technology. Obama’s plan calls for a power grid modernization program and stricter building efficiency codes in federal buildings. That means efficiency products such as demand response, advanced metering and sensors to monitor usage should further benefit from government incentives, said Kurzman.

A federal initiative to establish interconnection standards and bulk up interstate transmission lines would make power generation of all kinds more efficient and allow utilities to use more renewable sources. “A 50-state role to transmission just doesn’t get the job done. You need a federal planning and facilitation,” said Rob Church, vice president of research and industry analysis at the American Council on Renewable Energy (ACORE).

Biofuels. Hailing from the corn-producing state of Illinois, Obama is expected to continue supporting ethanol. However, Brooke Coleman, executive director of the New Fuels Alliance, noted that Obama appears to understand that the biofuels industry needs to transition to nonfood feedstocks, such as wood chips or algae, in order to be sustainable.

Coleman said that strong federal policies are required for biofuels to crack into the fossil fuel industry.

“There is not a free market in the fuel sector. There’s no real competition in the wholesale supply chain–it’s completely owned by oil,” Coleman said. “You have to be pretty heavy-handed to fundamentally correct this market.”

Auto. Obama has called for increasing fuel efficiency, tax credits for plug-in hybrid cars, and loan guarantees so that automakers can “retool.”

But struggling auto makers–said to be running dangerously low on cash–will need government aid in the coming months to prevent larger harm to the economy, argued David Cole, the chairman for the Center for Automotive Research. For that reason, he expects government leaders of all kinds to be supportive.

“Politically, the issue here is pretty stark and cost of keeping the auto industry in game is whole lot less than of a major failure,” Cole said.

Fossil fuels and nuclear. During the campaign, Obama said he would allow increased domestic oil and gas drilling as well as investments in so-called clean coal technology where carbon emissions are stored underground. Companies that have coal gasification technologies stand to benefit because they are cleaner source of electricity, said Kurzman.

In the campaign, Obama voiced caution on storing nuclear waste. But during the second presidential debate, Obama said he backs nuclear power “as one component of our overall energy mix.”

Skip Bowman, president of the Nuclear Energy Institute, said Tuesday he expects the new Congress and administration to continue its support of nuclear because it addresses energy and climate change.

Counting carbon
Longer term, the broadest policy change on energy and environment will be climate-change regulations. Obama has called for an 80 percent reduction of greenhouse gas emissions from 1990 levels by 2050 through a federal cap and trade system. Pollution rights would be auctioned, at least partially, which would create a fund for clean technology programs.

Large polluters, like chemical companies and utilities that rely heavily on coal, are the ones that will be most affected. But given that there is stronger political will to tackle energy security than climate change, policies to promote domestic energy production and efficiency are likely to take precedence over cap and trade, said New Energy Finance’s Zindler.

Still, the new administration can accomplish a great deal on renewable energy without having to pass multibillion-dollar legislation, said Scott Sklar, a renewable energy lobbyist and president of the Stella Group. Using only the federal government’s purchasing power to integrate green building technologies and addressing grid interconnection issues, for example, can be done without passing laws.

“Existing programs can be tweaked to accommodate the new vision,” Sklar said. “Depending on how you structure things, you could have a quick and profound impact on new technologies.”

New Fuel Alliance’s Coleman said that the biggest danger to the Obama administration and new Congress is not “overplaying their hand” and pushing more extreme environmental policies.

“I firmly believe that the linchpin to this entire game is allowing agriculture to play a role in diversifying our energy, whether it be wind, solar, using rural areas for geothermal or wind corridors,” he said. “More extreme positions like trying to end coal result in failure and missed opportunities.”

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MATT NAUMAN, San Jose Mercury News, October 1, 2008

Venture capital investors continue to look beyond the current financial crisis and see clean technology innovations as a prime place for their money. The segment posted another record period in the third quarter of 2008, with a total of $2.6 billion worth of investments globally.

In fact, a report to be released today by the Cleantech Group reveals that investments in companies working in solar, the smart electrical grid, algae for fuel and other categories so far this year already have topped all of what was invested in 2007. That’s $6.6 billion in the first nine months of 2008 compared with $6 billion in all of 2007.

Nearly $419 million in the third quarter (and more than $1 billion so far in 2008) went to companies based in Silicon Valley, the research and financial services company said.

“Clean-tech venture investing has continued to show strong growth despite the unprecedented turmoil in the credit markets,” Michael Goguen, managing partner of Sequoia Capital, said in a statement. Goguen is a member of the Cleantech Group advisory board.

Of the $2.6 billion invested in 158 companies during the quarter, $1.1 billion of it went to California companies. Of the top investors ranked by number of deals, local entities Google.org, Khosla Ventures and Kleiner Perkins Caufield & Byers, ranked in the top five.

The third quarter’s biggest deal of $200 million was invested in Solopower, a thin-film photovoltaic solar company in San Jose. The group expects fourth-quarter investments to fall, due to the various economic headwinds, but didn’t offer a specific forecast.

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ARJUN MAKHIJANI, Institute for Energy & Environmental Research, August 2007

Excerpts from Carbon-Free and Nuclear-Free: A Roadmap for U.S. Energy Policy. About this book here. Book PDF available as free download here. Executive Summary here.

The 12 most critical policies that need to be enacted as urgently as possible for achieving a zero-CO2 economy without nuclear power are as follows.

1. Enact a physical limit of CO2 emissions for all large users of fossil fuels (a “hard cap”) that steadily declines to zero prior to 2060, with the time schedule being assessed periodically for tightening according to climate, technological, and economic developments. The cap should be set at the level of some year prior to 2007, so that early implementers of CO2 reductions benefit from the setting of the cap. Emission allowances would be sold by the U.S. government for use in the United States only. There would be no free allowances, no offsets and no international sale or purchase of CO2 allowances. The estimated revenues – approximately $30 to $50 billion per year – would be used for demonstration plants, research and development, and worker and community transition.

2. Eliminate all subsidies and tax breaks for fossil fuels and nuclear power (including guarantees for nuclear waste disposal from new power plants, loan guarantees, and subsidized insurance).

3. Eliminate subsidies for biofuels from food crops.

4. Build demonstration plants for key supply technologies, including central station solar thermal with heat storage, large- and intermediate-scale solar photovoltaics, and CO2 capture in microalgae for liquid fuel production (and production of a high solar energy capture aquatic plants, for instance in wetlands constructed at municipal wastewater systems).

5. Leverage federal, state and local purchasing power to create markets for critical advanced technologies, including plug-in hybrids.

6. Ban new coal-fired power plants that do not have carbon storage.

7. Enact at the federal level high efficiency standards for appliances.

8. Enact stringent building efficiency standards at the state and local levels, with federal incentives to adopt them.

9. Enact stringent efficiency standards for vehicles and make plug-in hybrids the standard U.S. government vehicle by 2015.

10. Put in place federal contracting procedures to reward early adopters of CO2 reductions.

11. Adopt vigorous research, development, and pilot plant construction programs for technologies that could accelerate the elimination of CO2, such as direct electrolytic hydrogen production, solar hydrogen production (photolytic, photoelectrochemical, and other approaches), hot rock geothermal power, and integrated gasification combined cycle plants using biomass with a capacity to sequester the CO2.

12. Establish a standing committee on Energy and Climate under the U.S. Environmental Protection Agency’s Science Advisory Board.

Dr. Arjun Makhijani, president of the Institute for Energy and Environmental Research in Takoma Park, Maryland, is the book’s author. He holds a Ph.D. from the University of California at Berkeley, where he specialized in nuclear fusion and is a Fellow of the American Physical Society. Among his book’s recommendations:

“Continuing on a ‘business as usual’ path is unacceptable, as other experts have made clear,” Dr. Makhijani explained. “The approaches outlined in my book are all technologically feasible and economically viable today or could be made so within a decade by sound government and private investment. Nuclear power, on the other hand, entails risks of proliferation, terrorism and serious accidents. The United States can lead the world to a fully renewable, efficient energy economy, which can be achieved in 30 to 50 years.”

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Letter to the Editor, The New York Times, January 21, 2008

Candidates looking for an integrated economic stimulus package: look no further! Clean energy and green technologies are the wave of the future. Prime alternative energy industries promote “smart,” digitally driven electric-grid technologies; give tax breaks to consumers and producers of innovative technologies; use progressive procurement policies on all government levels (for example, for all hybrid vehicle fleets).

Start a Healthy Cities Program for green buildings, rooftop gardens, walking paths, biking lanes, open space, traffic control and improved public transport — all measures that reduce air pollution, curb the “urban heat island effect” and stimulate industries with low carbon technologies.

With so much market liquidity (paper wealth) shriveling, shifting public and private investments into real wealth makes financial and fiscal sense. A large investment in our common future would create a new clean/green machine for the global economy, and help stabilize the climate.

Paul R. Epstein
Boston, Jan. 14, 2008
The writer, a physician, is associate director, Center for Health and the Global Environment at Harvard Medical School.

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San Francisco, CA January 17, 2008

$5.18 Billion Over 2007 & Sixth Consecutive Year of Growth; Q407 with 100 Percent Year-Over-Year

The Cleantech Group™, LLC, released today YE2007 and Q407 results for Clean Tech investments indicating the sixth consecutive year of sustained investment growth.

North America (NA) and Europe produced stronger than expected growth in Q407, with total Clean Tech investment across the regions more than doubling year-over-year, from $676 million in Q406 to $1.38 billion in Q407. This brings the level of venture investment in NA and Europe for 2007 to $5.18 billion and historical results for the Clean Tech category as:

2007: $5.18 billion
2006: $3.6 billion
2005: $2.5 billion
2004: $1.8 billion
2003: $1.7 billion
2002: $899 million
2001: $714 million

NA Clean Tech investing in 2007 grew by 38 percent, from $2.87 billion invested in 2006 to $3.95 billion invested in 2007. The number of deals increased by 15 percent, from 233 in 2006 to 268 in 2007. The average deal size increased by 20 percent, from an average of $12.3 million in 2006 to $14.7 million in 2007.

European Clean Tech investing grew by 34 percent, from $915 million in 2006 to $1.23 billion in 2007. The number of deals increased by 56 percent, from 67 in 2006 to 105 deals in 2007. Average deal size in Europe increased by 26 percent from $7.8 million in 2006 to $9.8 million in 2007 (excluding the outliers of the $395 million Airtricity financing in 2006 and the $205 million Isofoton financing in 2007).

North American companies continue to receive the lion’s share of Clean Tech venture investing, with North American-based companies receiving over 3x the investment of European-based companies.

“Despite strong headwinds building in the global economy and tightening credit markets, the medium and long-term value propositions for Clean Tech opportunities sustained the sixth consecutive year with unexpectedly robust growth,” said Nicholas Parker, co-founder and Chairman, Cleantech Group™. “High carbon-based energy prices, global resource competition and increasingly favorable policy frameworks provide stronger than ever fundamental drivers for cleantech investors, and we foresee continued growth over 2008 as the Clean Tech market cycle moves from early adoption to mainstream driver of wealth and job creation.”

2007 Top Five Clean Tech Investment Sectors

The Clean Tech investment category is composed of 11 industry segments. Over 2007, the top five categories by total financings were:

Energy Generation: $2.75 billion; 172 deals
Energy Storage: $471 million; 20 deals
Transportation: $445 million; 20 deals
Energy Efficiency: $356 million; 41 deals
Recycling & Waste: $291 million; 17 deals

Energy Generation remained the forerunner over 2007. Within the NA and European markets, companies based in California received the majority of financing, representing $966 million, a 38 percent increase over 2006 levels.

In Energy Storage, the highest percentage of financings went to companies in the Northeastern United States, receiving $208 million, up from $39 million the year before. In Recycling and Waste, companies based in Western Europe received the largest percentage of total financings at $81 million, up from $17 million in 2006.

Five Largest Clean Tech Rounds in 2007 – Company Country Amount $(mil)

Isofoton SA Spain 205
Brazilian Renewable Energy Co., Ltd. Brazil 200
Project Better Place US 200
Yingli Green Energy Holding Co. Ltd. China 118
HelioVolt Corp US 101

The number of $100 million or larger rounds increased over 2006 levels, indicating increased investor confidence in the category, while 8 of the top ten solar financing rounds since 1999 occurred in 2007. Related in the solar market, a significant drop in the price of materials for silicon PV solar could come in 2008 due to increased refining capacity coming on-line over 2008-2010 timeframe.

China, India, Brazil and Australia

With results for China, India, Brazil and Australia, preliminary results show continued and significant investment growth in 2007. In addition to three successful crystalline silicon IPOs, China attracted investor interest for solar companies, including Yingli Green Energy Holding Co. Ltd., which received $118 million, and Shunda Holdings Co. Ltd., which received $82 million. In India, the top three Clean Tech investments included solar company Moser Baer Photo Voltaic Ltd. with $100 million and wind companies Vestas RRB India Ltd at $55.6 million and Regen Powertech Private Ltd. with $25 million. Interest in the Southern Hemisphere is also increasing, with Brazil securing the largest deal with a $200 million round for sugarcane ethanol-producer, Brazilian Renewable Energy Co.

Public Markets and M&As

The Cleantech Index™ (CTIUS), composed of 47 leading Clean Tech public companies across the full range of sectors within the Clean Tech category (including energy efficiency and renewable energy to advanced materials, air & water purification, water and agriculture), rose 42 percent over 2007. Top IPOs tracked included Iberdrola Renovables in Spain, Cosan Ltd. in Brazil, Polypore Intl Inc. in the U.S., and LDK Solar, Yingli Green Energy Holding Co. and JA Solar Holdings Co., all Chinese crystalline silicon photovoltaics producers. Unlike prior years, the majority of large IPOs shifted from Europe to US exchanges.

Top Clean Tech acquisitions closed in 2007 included targets Horizon Wind Energy LLC (US), SULO GmbH (Germany), Actaris Metering Systems Ltd (Germany), Metal Management Inc. (US), and Airtricity North America (US). The combined value of the M&A transactions was $8.76 billion.

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Katie Fehrenbacher from earth2tech.com January 30, 2008

Vinod KhoslaNo name is more synonymous with Clean Tech investing than Sun Microsystems co-founder turned venture capitalist Vinod Khosla. His Khosla Ventures invested between $60 million to $70 million into 14 Clean Tech startups in the first three quarters of 2007, according to third-party data; Khosla himself estimates that his firm has the largest clean tech portfolio on this planet.

He’s also highly controversial, often getting into public spats with writers, environmentalists and people who publicly disagree with his investing strategy. Critics charge he’s a lobbyist for his own investments. To us, he is one of the major engines behind building the Clean Tech ecosystem and finding the bleeding-edge technology to fight climate change. Here’s five questions we asked him during our interview for The GigaOM Show, which is going to be released on Thursday, Jan. 31:

E2T: You invest a lot earlier than other Clean Tech investors. What are the winning factors you see for very early-stage Clean Tech companies as opposed to non-Clean Tech companies?

Vinod Khosla: The factors are the same. Between 1996 and 2001, the heyday of the Internet, more than half of my investments at Kleiner Perkins were less than a million dollars. It helps the team formulate their ideas, experiment a little more, evolve, test, market, build teams. It’s not unusual for us to start with $100,000 or $200,000 or $1 million or $2 million to try out a new science idea. Just like Juniper was started with $350,000, and later we did over $100 million of funding.

The way I like to explain it is if you are at this intersection where there are six roads going up — if you pick a road too early, you only end up where the road leads. So it’s sometimes worth spending some time at this intersection exploring all the avenues a little bit more and deciding which is the best one, where you have the best advantage, and where you can assemble the best team, and then picking a path.

E2T: You are a very prolific writer and controversial. Do you want to comment on the articles on Grist going back and forth with Joseph Romm, and what you’ve said in the past about plug-in hybrids as toys?

VK: I’m happy to address any topic. I’m not shy at saying the wrong thing. Either I have an opinion that I believe or I don’t. If I believe it, then I’m happy to say it. The fact is the carbon reduction per mile driven makes no sense at all for hybrids today. Something like a Prius is more greenwash than green. And I keep saying that especially with the U.S. grid. That is what I put on the web site, in response to Joseph Romm saying I was dissing hybrids. I was clarifying the numbers, the facts, the analysis. You notice he’s never done any analysis, or at least not posted any.

What are the carbon reductions per mile or per dollar spent on capital spending? If they spend $5,000 extra on a Prius, how much carbon reduction do you actually get other than handwaving and saying its just nice to do? McKinsey just did a study that said it cost $90 for a ton of carbon to reduce carbon using hybridization of cars. It is among the most expensive.

So if somebody has a little bit of money to invest and they want to do the best for environment, they should change their light bulbs. That saves them money and it is a negative cost per ton of carbon, while a Prius is $90 a ton to reduce a ton of carbon. One has to be economic about this. This is what analysis is about and this is often what is misunderstood.

E2T: You’re well known for having big macro views as to how these things have to change. What do you think is the single biggest failure of American environmental policy that we could actually do something about?

VK: For every nuclear plant that environmentalists avoided, they ended up causing two coal plants to be built. That’s the history of the last 20 years. Most new power plants in this country are coal, because the environmentalists opposed nuclear. When you ask someone like the NRDC, ‘Do you prefer nuclear or coal?’ They’ll say ‘We prefer nuclear to coal, but we don’t want either.’ It doesn’t work that way; we need power.

They’d like to see wind and solar photovoltaics. Well, it doesn’t work if it’s 40 cents a kilowatt hour, and it doesn’t work if you have to tell PG&E’s customers: ‘We’ll ship you power when the wind’s blowing and the sun’s shining, but otherwise, you gotta miss your favorite soap opera or NFL game.’ That’s just the reality, so you have to be pragmatic about this. What is the most cost-effective way to do it?

When it comes to automobiles we’re going to ship 1 billion new cars in the next 15 years worldwide, and any technology that doesn’t make at least 50 to 80 percent penetration — 500 million to 800 million cars over the next 15 years — is not going to affect climate change. To say something that might sell 20 million cars or 50 million cars is gonna matter, well, no. A Prius-like hybrid (there are other types of hybrids that are more promising) but a Prius-like hybrid will not penetrate 500 million cars over the next 15 years. So it’s a toy when it comes to climate change.

It’s a good investment, by the way. We have two battery investments, to make better hybrid batteries. So it’s not like I think it’s a bad market. Something can be a good investment, like batteries, without it being material to climate change. Now biodiesel or diesel from waste grease in San Francisco are toys. They are never going to replace petroleum because they are not going to be cheap enough.

E2T: What do you drive?

VK: I drive a Lexis hybrid. Look, I drive a hybrid because I can afford one. What is important is to take technologies that 500 million people can afford. That is a little different.

E2T: In an article you wrote a few years ago you said ‘I don’t see a carbon cap-and-trade system being viable in the U.S in the next couple of years because it would be so difficult to get it through.’ Do you still agree with that?

VK: No, I’m getting more optimistic that we can get [there]. Five years ago I didn’t think it was likely. I think during the next presidential cycle, in the next eight years after the new president is elected, I think it is reasonably likely we will have a carbon cap-and-trade bill. I think if we were pragmatic we would reduce it to two or three areas. If we just did cap and trade for oil, for coal, for cement and for steel, we would cover more than 80 percent of the emissions in this country and get a bill much sooner and there would be fewer parties interested in fighting the legislation.

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