Washington, DC – In anticipation of President Barack Obama’s return from Asia, the free-market Institute for Energy Research (IER) today released and delivered a policy brief for the president and his advisors on China’s booming energy economy and growth.

Thomas J. Pyle, president of IER, issued this statement:

“By all accounts, the president’s trip to Asia was a successful one, and we welcome him home. However, it’s critical to highlight the commonsense energy policies that China is pursuing. Because of China’s aggressive pursuit for affordable, reliable and secure energy – of all forms – their nation continues to be one of the world’s most powerful economic engines. And our team of experts have prepared a compelling outline of ways the U.S. can learn from China and once again make energy a top priority in this country.

“China is manufacturing coal-fired power plants by the week, nuclear plants every few months, the largest hydro-electric dams on earth, windmills and solar panels for export, and securing up oil and gas reserves around the world. They understand that affordable energy is key to economic activity, growth and prosperity.

“Unfortunately, policymakers in Washington are working to increase the cost of energy and limit access to our most affordable resources while others work tirelessly to shut down our nation’s power plants, regardless if it results in the loss of jobs and higher energy costs. Litigation and inaction from federal bureaucracies continues to delay responsible offshore energy exploration. And while China is deploying next generation nuclear technologies, our government continues to say no to low-carbon nuclear energy.

“We hope someday that expensive and unreliable alternative and renewable energy forms can exist in the market place without significant taxpayer assistance and government mandates. And we hope the president reads this paper with an open mind.”

NOTE: Click HERE to view the briefing paper sent to the President today.

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“The joke among China hands goes like this: If the Americans and the Chinese start talking about a major project today, in two years the Chinese will be done and the Americans will still be talking and applying for permits.” – Michael Economides

China’s economy is growing at a rate of 9 percent per year, and forecasts have its fast pace of economic growth continuing, though at a slightly lower rate.[i] Eager to bring more of its citizens out of poverty, China will not let energy be a bottleneck for such growth. Because it has limited domestic oil and gas resources, China is investing globally to ensure supply. The world’s most populous country is also expanding its coal-fired electricity capacity at breakneck speed and making a major commitment to nuclear energy. In smaller quantities, and under international pressure from the environmental community, China is also constructing solar- and wind-powered generating facilities, to the point that 30 percent of its wind capacity cannot be supported by its electric grid. Yet even with all these other technologies, coal will remain China’s mainstay for a very long time since coal is its most abundant and least expensive resource.

All this is happening in a developing country that learns from others, and quickly outperforms them by manufacturing the same materials at significantly less cost, thus increasing its export market. It is also a country where there is a lot less red tape: regulations, legal delays, and financing issues do not stand in the way of its energy construction progress.[ii]

Coal

China currently gets 70 percent of its energy from coal[iii] and is expected to retain this fuel as its major source of energy at least through the next several decades. China ranks third in the world in recoverable coal reserves,[iv] after the U.S. and Russia. Its annual coal production and consumption is the highest in the world, more than twice that of the U.S.[v] Both China’s generating sector and its industrial sector rely heavily on coal, with 79 percent of its electric generation being coal-fired.[vi] The Energy information Administration (EIA) expects that 75 percent of China’s electric generation will still be coal-fired in 2030.[vii]

That EIA forecast expects 600 additional gigawatts of coal-fired capacity to be built in China between 2006, the most recent year of reliable data, and 2030.[viii] That equates to 50 plants a year of 500 megawatt (MW) capacity, or 1 coal plant coming on line each and every week for 24 years. From current reports, China is meeting this goal by planning to build 500 coal-fired plants over the next ten years.[ix] That means: every week to 10 days, China will open another coal-fired power plant that is big enough to serve all the households in Dallas or San Diego.[x]

Wind

Not only is China building coal-fired plants to increase its generating capacity; it is building them to back-up wind power when the wind doesn’t blow or when the grid is inadequate to handle the wind capacity. Last year, as much as 30 percent of China’s wind power was not connected to the grid. Adding to the problem is poor connectivity between regional transmission networks, which makes it difficult to move surplus power from one part of the country to another and thus requires each region to have sufficient reserve capacity.[xi]

Even with these problems, China has a goal to produce 15 percent of its energy from renewables by 2020.[xii] To help meet this goal, China is planning to build the world’s largest wind farm in the northwest part of the country. The plan is for 5 gigawatts in 2010, expanding to 20 gigawatts in 2020, at a cost of $1 million per megawatt,[xiii] or $1,000 per kilowatt, about half the cost of an onshore wind unit in the U.S., according to the Energy Information Administration.[xiv]

While China is manufacturing wind turbines for domestic use, few of its wind turbines are currently being exported. But that may soon change if the U.S. allows a consortium of Chinese and American companies to build a 600-megawatt wind farm in West Texas, using turbines manufactured in China.[xv] One-third of the wind farm’s funding will be from federal stimulus money and about 330 jobs will be created in the U.S., mostly temporary construction jobs. The labor-intensive work of building the turbines will also create thousands of jobs in China. GE will provide the gearboxes of the turbines, but they too will be made in China.[xvi] GE, a major U.S. wind turbine producer, already owns three facilities in China that produce turbine components.[xvii] And GE is planning a factory in Vietnam that will employ 500 local workers and export 10,000 tons of components to GE Energy assembly plants around the world.[xviii]

Solar

China leads the world in solar cell manufacture, although 95 percent of its production is exported.[xix] Currently, China itself generates very little electricity from solar power. At the end of 2008, about 0.01 percent of its grid-connected electric generating capacity was from solar.[xx] However, in September, Arizona-based First Solar signed a deal to build the world’s largest solar farm in China by 2019, which will supply power to 3 million homes.[xxi]

Realizing that the U.S. may be a good market for solar, China’s Suntech, the world’s largest supplier of solar panels, announced plans to build a solar manufacturing plant in Phoenix, Arizona, with production beginning next year. Arizona was chosen because its Renewable Energy Standard requires that 15 percent of the state’s electricity generation be supplied from renewable power by 2025 and because Arizona favors distributed generation, whereby power is provided locally for homes or businesses.[xxii] Suntech’s factory will create finished panels from subcomponents that will be manufactured in the company’s Chinese facilities. According to Suntech, locating the assembly in the U.S. will lower delivery time and costs, as well as reduce the overall carbon footprint of getting finished panels to U.S. customers.

Because of Chinese and other Asian competition, the cost of solar panels dropped 50 percent in the past 18 months.[xxiii] Due to lower operating costs in China, a U.S.-based firm, Evergreen Solar, after receiving over $58 million in incentives from the state of Massachusetts, is moving its assembly plant to China.[xxiv] (In 2008, Massachusetts’s industrial electricity prices were 115 percent higher than those of Arizona.[xxv] Industrial electricity prices in Massachusetts are lower in 2009, making the differential in prices through August 2009 only 69 percent.[xxvi]) The push to get China into the solar power market seems to have some environmental consequences. China is a major worldwide producer of polysilicon—the key component of sunlight capturing wafers. The manufacturing of polysilicon, however, produces a highly toxic substance, silicon tetrachloride, which can be recycled back into the production cycle. In China, however, many factories are dumping the waste product because of the high investment costs and time required for the recycling process, and because of the enormous energy consumption needed to heat the substance to more than 1800 degrees Fahrenheit. People close to the sites where the substance is being dumped are complaining of illness, crop failures, acrid air, and dead fields. But owing to the shortage of polysilicon, the Chinese Government is willing to overlook these complaints.[xxvii]

Nuclear

China is also building nuclear power plants, with 20 nuclear reactors under construction and more starting construction this year.[xxviii] Four AP 1000 reactors are under construction at 2 different sites: Haiyang and Sanmen.[xxix] These are the same reactors that the U.S. Nuclear Regulatory Commission (NRC) has ruled need additional analysis, testing, or design modifications of the shield building to ensure compliance with NRC requirements.[xxx] China expects to achieve a total nuclear capacity of 60 gigawatts by 2020, and 120 to 160 gigawatts by 2030,[xxxi] surpassing the total nuclear capacity of the United States.

Natural Gas

China is not well-endowed with natural gas, having only 1.3 percent of the world’s reserves. Nonetheless, it is expected to build an additional 23 gigawatts of gas-fired electric generating capacity by 2030, almost doubling its gas-fired capacity, according to the EIA.[xxxii] To fuel these generators, China will need to continue its dependence on natural gas imports, which will provide one-third of its total natural gas consumption by 2030. China opened its first LNG regasification facility in 2006 at Guangdong, and 2 others are planned to open this year. The first imports of natural gas into China by pipeline are expected in 2011, via a new pipeline running from Turkmenistan through Kazakhstan.[xxxiii]

Conclusion

China is on a fast track to bring online new generating units using coal, nuclear, solar, and wind power, which will allow its economy to continue to grow. However, because China is endowed with a sizable amount of coal resources and because coal is still the cheapest energy source in China, coal-fired generating additions will far outpace those of other technologies. “No matter how much renewable or nuclear is in the mix, coal will remain the dominant power source,” said Ashok Bhargava, a China energy expert at the Asian Development Bank in Manila.[xxxiv] By continuing to rely heavily on currently available coal technology, China will remain the number one emitter of carbon dioxide, almost doubling its carbon dioxide emissions by 2030, according to EIA’s forecast.[xxxv]

The U.S., on the other hand, has made it difficult to build generating plants in this country. Prospects of cap-and-trade legislation and reviews and re-reviews by the Environmental Protection Agency have slowed the construction of new coal-fired plants. NRC requirements, financing difficulties, and slow fulfillment of the nuclear provisions of the Energy Policy Act of 2005 have slowed the construction of new nuclear power reactors. Even renewable energy projects have been halted by “not in my back yard” (NIMBY) protesters. They have blocked energy projects by organizing local opposition, changing zoning laws, opposing permits, filing lawsuits, and bleeding projects dry of their financing.[xxxvi] Without reasonably priced energy, it will be difficult to achieve high levels of economic growth, and U.S. industry will just move offshore where energy is more affordable.

[i] Energy Information Administration, International Energy Outlook 2009, http://www.eia.doe.gov/oiaf/ieo/index.html

[ii] USA Today, “China Pushes Solar, Wind Power Development”, http://www.usatoday.com/money/industries/energy/environment/2009-11-17-chinasolar17_CV_N.htm

[iii] Energy Information Administration, International Energy Annual 2006, http://www.eia.doe.gov/emeu/cabs/China/Background.html

[iv] Recoverable reserves are those quantities of coal which geological and engineering information indicates with reasonable certainty can be extracted in the future under existing economic and operating conditions.

[v] Energy information Administration, International Energy Outlook 2009, Table 9, http://www.eia.doe.gov/oiaf/ieo/index.html

[vi] Ibid, Tables H10 and H13

[vii] Ibid

[viii] Ibid, Table H4

[ix] http://windfarms.wordpress.com/2009/01/29/china-building-500-coal-plants/

[x] The New York Times, “Pollution From Chinese Coal Casts a Global Shadow”, http://www.nytimes.com/2006/06/11/business/worldbusiness/11chinacoal.html?_r=1

[xi] The Wall Street Journal, “China’s Wind Farms Come with a Catch: Coal Plants”, September 28, 2009, http://online.wsj.com/article/SB125409730711245037.html

[xii] USA Today, “China Pushes Solar, Wind Power Development”, http://www.usatoday.com/money/industries/energy/environment/2009-11-17-chinasolar17_CV_N.htm

[xiii] The Wall Street Journal, “Wind Power: China’s Massive and Cheap Bet on Wind Farms”, July 6, 2009, http://blogs.wsj.com/environmentalcapital/2009/07/06/wind-power-chinas-massive-and-cheap-bet-on-wind-farms/

[xiv] Energy information Administration, Assumptions to the Annual Energy Outlook 2009, Table 8.2, Electricity Market Module, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html

[xv] www.reuters.com/article/pressRelease/idUS200008+29-Oct-2009+BW20091029

[xvi] Dallas News, “Wind turbine jobs blow in China’s direction”, November 19, 2009, http://www.dallasnews.com/sharedcontent/dws/bus/columnists/jlanders/stories/DN-landers_17bus.1.ART0.State.Edition1.3f095e8.html

[xvii] “Overseas firms collecting most green energy money”, October 29, 2009, http://investigativereportingworkshop.org/investigations/wind-energy-funds-going-overseas/

[xviii] “Vietnam’s first turbine component plant underway”, May 13, 2009, http://www.vietnewsonline.vn/News/Business/Companies-Finance/6072/Vietnams-first-turbine-component-plant-underway.htm

[xix] http://www.guardian.co.uk/world/2009/may/26/china-invests-solar-power-renewable-energy-environment

[xx] http://en.wikipedia.org/wiki/Solar_power_in_China

[xxi] USA Today, “China Pushes Solar, Wind Power Development”, http://www.usatoday.com/money/industries/energy/environment/2009-11-17-chinasolar17_CV_N.htm

[xxii] Business Week, “China Solar Panel Maker Sets First U.S. Plant”, November 15, 2009, http://www.businessweek.com/technology/content/nov2009/tc20091115_970512.htm

[xxiii] USA Today, “China Pushes Solar, Wind Power Development”, http://www.usatoday.com/money/industries/energy/environment/2009-11-17-chinasolar17_CV_N.htm

[xxiv] The Boston Globe, “Evergreen Shifts Work to China”, November 5, 2009, http://www.boston.com/business/articles/2009/11/05/evergreen_shifts_work_to_china

[xxv] Energy Information Administration, Electric Power Monthly, March 2009, Table 5.6B, http://tonto.eia.doe.gov/ftproot/electricity/epm/02260903.pdf

[xxvi] Energy information Administration, Electric Power Monthly, November 2009, Table 5.6B, http://www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html

[xxvii] Washington Post, “Solar Energy Firms Leave Waste Behind in China”, March 8, 2008, http://www.washingtonpost.com/wp-dyn/content/article/2008/03/08/AR2008030802595_2.html

[xxviii] “Nuclear Power in China”, World Nuclear Association, November 6, 2009, www.world-nuclear.org/info/inf63.html

[xxix] Westinghouse News Releases, “Westinghouse and the Shaw Group Celebrate First Concrete Pour at Haiyang Nuclear Site in China”, September 29, 2009, http://westinghousenuclear.mediaroom.com/index.php?s=43&item=200

[xxx] “Westinghouse Statement Regarding NRC News Release on AP1000 Shield Building”, http://westinghousenuclear.mediaroom.com/index.php?s=43&item=203

[xxxi] “Nuclear Power in China”, World Nuclear Association, November 6, 2009, www.world-nuclear.org/info/inf63.html

[xxxii] Energy Information Administration, International Energy Outlook 2009, Tables 6 and H3, http://www.eia.doe.gov/oiaf/ieo/index.html

[xxxiii] Ibid, Chapter 3, Natural Gas

[xxxiv] The New York Times, “China Far Outpaces U.S. in Cleaner Coal-Fired Plants”, http://www.nytimes.com/2009/05/11/world/asia/11coal.html

[xxxv] Energy Information Administration, International Energy Outlook 2009, Tables A10, http://www.eia.doe.gov/oiaf/ieo/index.html

[xxxvi] For a repository of stalled and stopped energy projects, see U.S. Chamber of Commerce, “Project No Project Energy-Back On Track”, http://pnp.uschamber.com/

Washington, DC – Offshore energy exploration and production in the United States is safe and environmentally sound. Over the past 50 years, the U.S. oil and gas industry has developed innovative, 21^st century technologies and exploration techniques that are efficient, pose little threat to the environment, and ensure worker safety.

According to the National Academies of Science, less than 1 percent of the oil found in the North American marine environment comes from oil and gas development. Nearly 60 percent, however, is the result of natural seeps.

Thomas J. Pyle, president of the market-oriented Institute for Energy Research (IER), issued this statement in response to today’s Senate Energy Committee hearing on environmental stewardship and offshore energy production:

“Technology and innovation remains key to delivering more homegrown, job-creating American energy, both onshore and off. The facts and history demonstrate that offshore energy production, with today’s 21^st century technologies, poses little to no threat to our marine environment. In fact, marine life actually flourishes in waters shared with energy infrastructure.

“Unfortunately, a de-facto ban on safe, responsible offshore domestic energy development remains in place today, despite the fact that a clear majority of American people want access to the energy that is rightfully theirs. Advanced technologies currently deployed throughout the western Gulf of Mexico – which help deliver huge amounts of energy to keep our economy fueled and moving each day – are testament to the strides made to ensure environmental safety.

“Last summer the American people spoke, and Congress responded when it retired the nearly 30-year ban. It’s time for this administration to unchain the federal government’s stranglehold on so much of our nation’s job-creating energy resources offshore. Slow-walking this commonsense action could make the next energy crisis pale in comparison to the pain of $4 gasoline working families and small businesses felt during the summer of 2008.”

NOTE: Here is brief overview of some of the advanced, 21^st century offshore energy exploration technologies:

Advanced 3-D seismic and 4-D time imaging technologies: enable offshore operators to locate oil and gas resources far more accurately to necessitate less drilling and allow greater resource recovery.

Storm chokes: placed on all offshore wells to detect damage to surface valves and shut down production during an emergency.

Blowout preventers: continuously monitor the subsurface and subsea-bed conditions to prepare for unexpected changes in well pressure.

Waste product reuse technology: transforms drill cuttings, a waste product of rock pieces and drilling fluids produced when drilling a well, into raw material for bricks, roads, and even rebuilding Louisiana’s wetlands.

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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This is completely misleading. It is true that the vast majority of the surveyed economists believe that climate change poses a threat to the economy. However, this alone doesn’t mean that their work endorses the pending legislation. In fact, we will show that many of the responses in the survey underscore that Congress’ proposed “solutions” to climate change violate the recommendations of even those economists who are very concerned about climate change.

The Existence of a Threat Alone Doesn’t Justify Any Government “Solution”

The most-hyped result from the survey was the fact that 84 percent of the surveyed economists agreed with this statement: “The environmental effects of greenhouse-gas emissions, as described by leading scientific experts, create significant risks to important sectors of the United States and global economy.”

Already we see that the question is loaded; a more neutral question would have been, “Do you think greenhouse-gas emissions create significant risks to the economy?” There are many economists who have expressed skepticism about the computer models and techniques used to generate some of the scarier projections. But with the phrasing of the question, they were technically being asked to take the climate models at face value, and assess what the impact of their projections would be on the economy.

But that’s a minor quibble. The real problem with the hype placed on this particular result, is that it does not follow that the Waxman-Markey or Kerry-Boxer bills are appropriate to dealing with this potential risk. For an analogy, if we surveyed doctors and asked, “Is there a significant risk to the public from H1N1?” presumably a large percentage would say, “Yes.” If the Obama Administration then proposed vaccinating every American three times a month for the next 20 years, that would clearly be a waste of resources and detrimental to public health.

The same is true with the threat of climate change. As we will show, the pending Congressional legislation actually violates many of the recommendations of the economists in the survey. Yet one would never get that impression from reading the NYT coverage, or story in USA Today.

Surveyed Economists Favor “Market-Based” Approach and Auctioned Allowances

Another completely misleading result from the survey shows that an overwhelming 91.6 percent of the respondents favored a “market-based” approach to curbing greenhouse gas emissions. In the news stories linked above, as well as the Executive Summary of the survey itself, this statistic is offered as apparent endorsement of the cap-and-trade legislation currently being debated in Congress.

On the contrary, the economists endorsement of “market-based” approaches really shows how inefficient the pending legislation is. By “market-based” approach, the economists mean that the government should place a price penalty on carbon dioxide emissions, either through a cap-and-trade system or a straightforward carbon tax. And then…the government should mind its own business. In particular, policymakers should not try to micromanage the particular ways that business and consumers scale back their emissions, but rather the (augmented) profit and loss system will lead to the most efficient response to the new incentives. As the study itself explains:

Nearly all respondents—92%—also agreed or strongly agreed that market-based mechanisms, as opposed to command-and-control approaches, are the preferred way to cut greenhouse gas emissions and place a price on carbon. As such, most economists would support the cap-and-trade structure proposed by the main legislative options now pending before Congress. [Emphasis added]

Yet contrary to the non sequitur in the quote above, if a straightforward “market-based” approach is what the expert economists favor—by an overwhelming majority—then the economists would likely reject the monstrous hunks of legislation that passed the House and are being debated in the Senate. We at IER have already shown the tremendous thicket of new regulations contained in the House-passed Waxman-Markey bill, besides its cap-and-trade system. At best, only one half of Waxman-Markey could even be called cap-and-trade, leaving an additional 700 pages of inefficient regulations. The 91.6 percent of economists who favored a “market-based” approach were rejecting the top-down central planning contained in Waxman-Markey and Kerry-Boxer.

Speaking of cap-and-trade, the IPI survey also found that 80.6 percent of respondents favored auctioning emission allowances rather than handing them to favored groups for free. Presumably then these economists would join with IER in condemning this thinly veiled transfer of an enormous amount of wealth from low- and middle-class energy consumers into the pockets of politically-connected shareholders.

What the Media Hype Didn’t Report

We have seen that the two most-hyped results of the survey actually do not support the pending legislation, and if anything actually undercut it. What’s interesting is that if one looks at pages 18-19 of the actual survey [.pdf], one learns:

The survey asked what percentage of benefits from emissions reduction would accrue to the United States. The average response was 7.7%, and the median was 4%….Given the global extent of the problem, each individual country has an incentive to “free ride” on the efforts of others—it is important for all countries to act to overcome this incentive or else appropriate controls will not be put in place.

The lay person who simply reads the news coverage or Executive Summary would be stunned by the above concession. Many economists support a reduction in greenhouse gas emissions because they calculate that the global benefits will outweigh the global costs. But as the above quotation makes crystal clear, if the U.S. restrains its own emissions while other major governments do not, then the impact on the U.S. economy—which the CBO estimates could be as high as 3.4 percent of GDP by 2050—will result in benefits that will accrue largely to foreigners.

Of course, there is nothing wrong with foreign aid per se; Americans are quite generous with their wealth. Furthermore, many people believe that the Western countries ought to bear the lion’s share of the pain from emissions cuts, because they historically benefited from plentiful energy supplies in the form of fossil fuels. Even so, average Americans are being misled when they believe the pending legislation will benefit the U.S. economy on net. Even according to the “consensus” models, it will not benefit if the U.S. acts unilaterally.

Conclusion

The media blitz surrounding the new IPI survey tells Americans that economists as well as climate scientists support government intervention into the energy sector. Yet a little digging shows that if anything, the economic consensus rejects the particular legislation pending in Congress. Just because many experts agree there is a problem doesn’t automatically mean Congress has the solution.

Not true, as you can see here.

This week Senator John Kerry, the lead author of the legislation, told the Senate Finance Committee that “the reason” we need to pass his cap-and-trade energy tax is that “over the last eight years, emissions in the United States of America in greenhouse gases went up four times faster than in the 1990s.”  Also not true.  In fact, he’s off by a factor of 32.

As the video shows, greenhouse gas emissions increased far slower in the 2000s than the 1990s. According to data from the Energy Information Administration,[1] U.S. carbon dioxide emissions increased by 15.14% between 1990 and 1999, but from 2001 to 2008 carbon dioxide emissions only increased by 1.88%. If Senator Kerry were correct, U.S. carbon dioxide emissions would have increased by 60.5% over the last 8 years, but they only increased by 1.88%.  Senator Kerry overestimated U.S. emissions by a factor of 32.

These are the authors of the Kerry-Boxer cap-and-trade energy tax legislation.  If our leaders can’t stick to the basic facts to support their argument for a national energy tax, and the lead author of the bill is this far off the mark on “the reason” Congress needs to pass it, Americans might reasonably question the validity of their estimates on how much the bill will cost them and our nation’s already-struggling economy.

Even more troubling, Senator Lindsey Graham is now working with Senator Kerry on a “compromise” in which Senators’ would accept the cap-and-trade plan in exchange for “opening new areas for offshore drilling.”  This would have been a bad compromise last year, but given the fact that the Outer Continental Shelf (OCS) is now open—and has been since Congress allowed its ban on offshore drilling to expire on October 1, 2008—it appears to be an even worse compromise this year.

If the compromise is anything like the “Gang of 10” plan offered last year in the months before the Congressional ban on drilling in 85 percent of the OCS was set to expire, the only thing we’d be compromising is the progress we’ve already made. That’s because the Gang of 10 plan would have created a permanent ban on drilling in 78 percent of our offshore areas—areas that are now open.

But at the end of the day, it doesn’t matter what the compromise may be.  The long-term costs cap-and-trade legislation would inflict on our economy and our way of life would be so devastating, that no compromise – offshore drilling or anything else – would justify its passage.

Washington, DC – As part of the ongoing efforts in the US Senate to enact sweeping, energy-rationing legislation, the Senate Finance Committee held a hearing today entitled “Climate Change Legislation: Considerations for Future Jobs.” Following the hearing, Thomas J. Pyle, president of the non-partisan, market-oriented Institute for Energy Research (IER), issued this statement:

“There is perhaps nothing more misleading surrounding the ongoing global warming debate than claims that cap-and-trade legislation will be a jobs boon and will spur economic activity. Look no further than the DeSoto Solar Center in Florida – a Florida Power and Light installation. On his recent visit, President Obama touted the center as the ‘largest solar field in the United States.’ However, the president failed to mention that the panels and other items were all manufactured abroad. The solar cells came from the Philippines; the steel mountings from Canada; the electric boxes from Germany. And how many ‘green jobs’ have been created there? Two full-time employees, six part-time groundskeepers that will work one week a month during the rainy season.

“Cap and trade backers often cite European countries, like Spain and Germany, as a model for the US follow. Yet both of these nations have failed miserably at delivering affordable and reliable energy and creating jobs. Spain’s government has committed more than $753,000 per ‘green job’ over the past 9 years. And in Germany, per worker annual taxpayer subsidies have reached $240,000. Beware of the politician promising you a green job in one hand because he is pick-pocketing you with the other.

“Washington must craft comprehensive energy policies that do not empower Congress or bureaucrats to determine which energy forms win or lose in the market. Cap and trade aims to increase the cost of our most affordable, abundant and reliable energy forms, including coal, oil and natural gas. With unemployment now at a 26-year high, raising energy costs across the board and making it more difficult for us to compete in the global economy is not the right solution to help put Americans back to work.”

READ MORE: Key experts from a recent Washington Post article entitled “Painting a street green hasn’t stimulated one new job”:

In Baltimore, the 300 block of East 23 1/2 Street is getting patched up in time for winter. One economic stimulus program is paying to insulate 11 rental rowhouses, another is paying for furnaces and a third is covering the cost for reflective roofs to be installed by prison inmates in a job-training program.

The block is part of one of the biggest initiatives ever undertaken by the federal government, a nationwide push to improve the energy efficiency of buildings. But as the national unemployment rate crosses into the double digits and Republicans question the stimulus program’s impact, the work on East 23 1/2 — even with all of its activity — has so far not produced a single job.

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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Green Stimulus Money Going Overseas

Since September 1, 84 percent of the $1.05 billion in clean energy grants has gone to foreign wind companies. Foreign countries benefiting from stimulus funds for wind technology are Spain (57%), Germany (12.6%), Japan (9.5%), and Portugal (5%).[i] Companies began applying for grants at the end of July and awards were announced by the two joint administrators of the program, the Energy and Treasury Departments, beginning on Sept. 1. In the first round of the grants, 77% went to foreign wind developers, followed by 84% in the second round. Of the 11 wind farms that received grants, 695 of the 982 installed turbines were manufactured by a foreign company.[ii]

Further, there are few restrictions on how the grants can be used. According to the Investigative Reporting Workshop at American University, over $800 million were provided to wind farms that were already producing electricity. As required by law, all 11 wind farms started operating after January 1, 2009, but before the grants were awarded.[iii]

Turbine Manufacturing Dominated by Foreign Competitors

The U.S. currently has the most installed wind capacity in the world, but it is not a leader in the manufacture of turbines. The Investigative Reporting Workshop reported that of the turbines currently under construction in the U.S., 67 percent are slated to be purchased from foreign-owned turbine manufacturers.[iv] According to U.S. customs data for 2008, and the U.S. Trade Commission, the U.S. imported $2.5 billion worth of wind turbines last year—up from $365 million in 2003.

In the future, wind turbines and/or their component parts may be coming from China where lower labor costs have allowed Chinese-made products to dominate many manufactured goods in the U.S. GE, a major U.S. wind turbine producer, already owns three facilities in China that produce turbine components. GE is also planning a factory in Vietnam that will employ 500 local workers and export 10,000 tons of components to GE Energy assembly plants around the world.[v]

China is already beginning to develop its own strong hold for wind power in the U.S. A joint venture between China’s Shenyang Power Group, the U.S. Renewable Energy Group, and Cielo Wind Power LP to develop a 600 megawatt wind farm on 36,000 acres in West Texas, costing $1.5 billion, was announced on October 29, 2009.[vi] A-Power Energy Generation Systems Ltd., a provider of distributed generation systems in China and a fast-growing manufacturer of wind turbines, will supply the turbines. A-Power Energy entered the wind power industry last year.[vii] Delivery of wind turbines for the West Texas wind farm is scheduled for March 2010.[viii]

Graphic courtesy Investigative Reporting Workshop

Solar Cells Manufactured Overseas

Not only are wind turbines mostly manufactured in countries overseas, but so are photovoltaic (PV) cells. Florida Power & Light (FPL) started operating its 25 megawatt photovoltaic solar plant in southwest Florida in conjunction with a visit to the plant by President Obama on October 27. [ix] The DeSoto plant in southwest Florida is the first of a total of 110 megawatts of solar capacity that FPL will install at 3 different sites by the end of 2010. Although Obama praised FPL’s work in the solar arena, he did not tell the American public that the components of the DeSoto plant are from foreign countries. While the PV cells were provided by a firm from California, they were made in the Phillipines. The steel PV frame holding the cells was produced in Canada, and the electrical parts and boxes were made in Germany, where solar power has been given heavy subsidies by the German Government. While German manufacturers have been producing PV technology for their country’s solar expansion, they are now concerned that China will take over their market due to costs that are 30% lower.[x]

Conclusion

The Obama Administration has told the American public that it will produce jobs and stimulate the U.S. economy through green energy technology. He has also touted that stimulus funds will be used for goods made in America. Yet, the the Investigative Reporting Workshop at American University finds that this is not the case. And, more examination of green energy development in the U.S., shows Asian and European countries well established here in providing the component parts for green energy technology.

The problem is not with international trade per se. In a genuinely free market, where politicians do not pick winners or losers, the most efficient firms would capture market share, be they American or foreign. The result would be the best products at the lowest prices for American consumers.

The real problems are a government “stimulus” plan and efforts to centrally plan a “green economy.” The government can only “stimulate” by spending money that it has first taxed or borrowed from the private sector. It would be bad enough for the government to destroy jobs in American fossil fuel industry while spending money on domestic producers of “green energy.” But it is particularly absurd for the U.S. government to cripple American industry while shoveling the lion’s share of the pork into the hands of foreign beneficiaries.

[ii] Ibid.

[iii] Ibid.

[iv] Ibid

[v] “Vietnam’s first turbine component plant underway”, May 13, 2009, http://www.vietnewsonline.vn/News/Business/Companies-Finance/6072/Vietnams-first-turbine-component-plant-underway.htm

[vi] www.reuters.com/article/pressRelease/idUS200008+29-Oct-2009+BW20091029

[vii] “Lone Star, Meet Red Star: China’s $1.5 Billion Wind-Power Deal in Texas”, October 30, 2009, http://blogs.wsj.com/chinarealtime/2009/10/30/lone-star-meet-red-starchina%e2%80%99s-15-billiob-wind-power-deal-in-texas/

[viii] www.reuters.com/article/pressRelease/idUS195122+29-Oct-2009+PRN20091029

[ix] http://www.instituteforenergyresearch.org/2009/10/26/highest-cost-generating-plant-comes-on-line-in-florida-to-obama-fanfare/

[x] “Solar-Power Incentives in Germany Draw Fire,” Vanessa Fuhrmans, Wall Street Journal, September 28, 2009, http://online.wsj.com/article/SB125383541153239329.html

Washington, DC – Today, the U.S. Senate Environment and Public Works Committee passed a global warming bill. Following the panel’s vote, Thomas J. Pyle, president of the non-partisan, pro-market Institute for Energy Research (IER), issued this statement:

“The winners today are rent-seeking corporations, Washington special interests and our global competitors, especially China. The timing of this vote – which will weaken America’s ability to compete in the global economy – is particularly ironic, given that just yesterday a U.S. global warming envoy official told Congress that ‘No country holds the fate of the Earth in its hands more than China.’

“Enacting burdensome policies – such as cap-and-trade – will drive energy prices up and make it more difficult to create jobs, wealth and prosperity here in the U.S. China’s hand, however, will only grow stronger, as they continue to aggressively access and develop all forms of energy in their country and across the world. This, in large part, is what has enabled their enormous economic growth and expansion.

“While the members of this committee who voted to advance this legislation may attempt to downplay their vote to increase energy costs for American families, seniors and small businesses as an inside-the-beltway procedural motion, the fact remains that job-killing, carbon regulating legislation has cleared a major hurtle and is a major step closer to becoming law.”

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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Washington, DC – According to a recent Oregonian investigative report, state government officials in Oregon intentionally misled the legislature by withholding critical costs estimates of an extremely expensive ‘green’ energy subsidy program, known as the Business Energy Tax Credit, which would ultimately cost taxpayers millions more than the disclosed amount.

The Oregonian’s Harry Esteve reports this:

According to documents obtained under Oregon’s public records law, agency officials estimated in a Nov. 16, 2006, spreadsheet that expanding the [green energy] tax credits would cost taxpayers an additional $13 million in 2007-09. But after a series of scratch-outs and scribbled notes, a new spreadsheet pared the cost to $1.8 million. And when energy officials handed their final estimate to the Legislature in February 2007, they pegged the added cost at just $1.2 million for the first two years and $4.1 million for 2009-11.

The higher estimates were never shown to lawmakers. Current and former energy staffers acknowledged a clear attempt to minimize the cost of the subsidies.

Thomas J. Pyle, president of the non-partisan market-based Institute for Energy Research (IER), issued the following statement:

“Green jobs and green energy are simply not feasible without massive government subsidies, mandates and sometimes – as it appears in the case of Oregon – outright deception and dishonest acts. What was uncovered this weekend in Oregon is only the tip of the iceberg. Many rent seeking, corporate-welfare searching ‘green energy’ businesses seem more concerned with securing taxpayer-funded government handouts than producing jobs, dividends, growth, and reliable energy.

“Like Spain’s experience with green jobs, Oregon’s wind energy and other green jobs are temporary and simply would not exist if it weren’t for massive government subsidies and huge corporate handouts, bankrolled by hardworking everyday taxpayers.”

NOTE: Since 2007, when the Oregon legislature approved the governor’s massive Business Energy Tax Credit increase, unemployment has more than doubled, rising from 5 percent in January 2007, to 11.5 percent today.

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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China’s Coal Consumption

China already consumes more than twice the amount of coal as the U.S., but by 2025, its coal consumption is expected to be 3.7 times larger than ours[I1] . Reports suggest that China is building two coal-fired electric generating plants a week,[5] while the U.S.’s coal-based generating construction program is stymied by EPA reviews, re-reviews and legal delays. Forecasters have shown that under the climate change legislation currently working its way through Congress, U.S. coal consumption will be severely reduced and replaced by nuclear and renewable generating technologies, which are more costly forms of energy. And while China has professed that it will meet renewable generation goals, it will not partake in meeting targets for greenhouse gas reductions that will hurt its projected economic growth and its future status as a major world power.[6] Instead, China is willing to make reductions in greenhouse gas intensity (greenhouse gas emissions per unit of GDP), a measure proposed by the U.S. almost a decade ago, that allows for both economic growth and lower emissions per unit of GDP from improved efficiency and technology.[7]

Let’s compare energy consumption in China and the U.S. today to each country’s projected consumption in 2025. Data for 2006 is taken from the Energy Information Administration’s (EIA) International Energy Annual (IEA)[8] and the forecasts are taken from EIA’s International Energy Outlook (IEO)[9] for 2009. [10]

China’s Renewable Energy Production

China’s energy consumption today is dominated by coal, which supplies 70 percent of its demand, followed by oil, which supplies 20 percent. Renewable energy in China is largely hydroelectric power, particularly from the 18,200-megawatt Three Gorges Dam project, whose final generator went on line in October 2008. This project is the largest hydroelectric undertaking in the world. China has other hydroelectric projects planned, totaling an additional 57,720 megawatts of new capacity that will come on line in 2009. China has established a 30,000-megawatt target for installed wind capacity by 2020 (15 percent of its energy needs), and is currently installing wind power at a rate of at least 3,000 megawatts a year.

However, wind growth in China isn’t without its problems. The Wall Street Journal reports that China’s transmission network currently can’t absorb such high rates of growth in renewable energy. Last year, as much as 30 percent of China’s wind power capacity wasn’t connected to the grid.[11] As a result, more coal is being burned in existing plants and new coal plants are being built as backup to wind energy. Wind resources do not conform to the normal hours of peak demand and require flexibility in the transmission and distribution system to take down other generators when the wind blows. Unfortunately, coal-fired capacity was not designed to be quickly taken on and offline as the electricity from wind fluctuates.

China’s electric generating sector today relies on coal for 79 percent of its generation and EIA only expects that figure to drop to 75 percent by 2030. China’s generating sector is also investing in nuclear power. Generation from nuclear power is expected to increase by 570 percent by 2025, according to the EIA. That increase is equivalent to an additional 40 gigawatts of new nuclear generating capacity—a lower forecast than some, who are reporting 60 gigawatts of nuclear power in China by 2020.[12]

China’s Liquid Fuels Consumption

China’s liquid fuel consumption is currently 7.2 million barrels per day, a rate of about a third of the United States. However, its projected growth far exceeds the U.S.; China is expected to increase its liquid consumption by 6.6 million barrels per day by 2025 (the largest growth of any country). At that time, China will consume about two-thirds of the U.S. level of liquids consumption. Unlike its vast coal reserves, China is not endowed with a lot of oil resources. Its oil reserves totaled 16 billion barrels in January 2009.[13] As a result, China has actively worked with other oil-producing countries (e.g. Venezuela, Angola). China has widely exchanged financial incentives for future access to oil supplies [14] including in U.S. waters in Gulf of Mexico.[15] China became the world’s second largest vehicle market in 2006, when sales exceeded those of Japan. In 2007, China produced nearly 8.9 million motor vehicles, an increase of 22 percent in production over 2006. China is the world’s third largest vehicle producer after the U.S. and Japan. The economic downturn reduced the growth in China’s vehicle sales to less than seven percent in 2008 and a lower rate is expected for 2009. Part of China’s economic stimulus package is expected to be used for infrastructure improvements in the transportation and electric power sectors.

China’s Natural Gas Consumption

While China’s use of natural gas today is only at three percent, it is expected to triple its usage by 2025. Since China is not home to much of the World’s natural gas reserves (only 1.3 percent)[16], it will rely on imports to meet much of its natural gas demand. In 2030, EIA expects imports to make up more than one-third of China’s total natural gas consumption. To meet this growing need, China opened its first liquefied natural gas facility in 2006 and is expected to have a natural gas pipeline built by 2011 from Turkmenistan via Kazakhstan. Recently, Qatar has decided to divert around 10 percent of its liquefied natural gas exports to China from the United States because China is willing to pay more for the product.[17] It is a good thing that hydraulic fracturing has helped immensely to increase domestic U.S. supplies of natural gas, although the technology is currently being threatened by federal politicians, who are looking to restrict its use.[18]

China’s Carbon Dioxide Emissions

As fossil fuels represent 93 percent of China’s current energy demand, it is not surprising that China ranks first in carbon dioxide emissions in the world, with 6,018 million metric tons released in 2006. By 2025, that number is expected to increase to 10, 707 metric tons, an increase of 78 percent from its 2006 value and 75 percent higher than expected carbon dioxide emissions in the U.S. in 2025.

Bottom Line

China wants to become the world’s largest economic power, and China’s leaders understand the fundamental reality that abundant supplies of affordable, reliable energy are essential to economic growth. This is in stark contrast to the U.S. government’s actions to severely limit access to our domestic energy resources and the current proposals to tax carbon dioxide emissions from about 85 percent of our energy (oil, coal, and natural gas) through cap-and-trade. Unlike the United States, China is ambitiously pursuing energy policies to make sure its people have enough energy to grow their economy and make their lives better.

[1] Paul Foy, Interior Secretary Sued for Revoking Utah Leases, ABC News, http://abcnews.go.com/Business/wireStory?id=7592093.

[2] Daniel Whitten, Salazar to rewrite Bush oil-shale plan, Bloomberg News, http://www.chron.com/disp/story.mpl/headline/biz/6280852.html.

[3] Jim Tankersley, Salazar puts expanded offshore drilling on hold, L.A. Times, http://articles.latimes.com/2009/feb/11/nation/na-offshore-drilling11.

[4] Institute for Energy Research, President Obama’s Budget includes $1.6 trillion in new taxes—the largest tax increase in history, http://www.instituteforenergyresearch.org/2009/02/26/president-obama-budget-includes-16-trillion-in-new-taxesthe-largest-tax-increase-in-history/.

[5] Roger Harrabin, China building more power plants, BBC News, http://news.bbc.co.uk/2/hi/6769743.stm.

[6] Institute for Energy Research, Lost in Translation, http://www.instituteforenergyresearch.org/2009/07/28/lost-in-translation/.

[7]http://online.wsj.com/article/SB125409730711245037.html

[8] http://www.eia.doe.gov/iea/

[9] http://www.eia.doe.gov/oiaf/ieo/index.html

[10] EIA is an independent statistical agency within the U.S. Department of Energy that forecasts future energy outlooks for the U.S. and the world.

[11]http://online.wsj.com/article/SB125409730711245037.html

[12] http://www.eenews.net/Greenwire/2008/12/23/

[13] “Worldwide Look at reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48 (December 22, 2008), pp23-24.

[14]Venezuela signed a $16 billion investment deal with China over three years. The deal could raise oil output by several hundred thousand barrels a day. http://www.eenews.net/Greenwire/2009/09/18/

China National Petroleum Corp. received a $30 billion low-interest loan from a state-run bank to finance overseas acquisitions, Beijing’s latest bid to secure mineral resources to fuel the country’s burgeoning economy. http://www.eenews.net/Greenwire/2009/09/09/

CNOOC and Sinopec have agreed to buy a 20 percent stake in an oil field off the coast of Angola for $1.3 billion, the latest in a series of Chinese acquisitions of overseas energy and mining assets. http://www.eenews.net/Greenwire/2009/07/20/

[15] David Pierson, China’s push for oil in the Gulf of Mexico puts U.S. in awkward spot, L.A. Times, http://www.latimes.com/business/la-fi-china-oil22-2009oct22,0,2776603.story?track=rss.

[16] “Worldwide look at Reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48 (December 22, 2008), pp. 22-23.

[17] Reuters, “Qatar diverts LNG to higher-paying China from U.S.”{, October 27, 2009, www.reuters.com/article/companyNews AndPR/idUSLR15622520091027

[18] “States to U.S. Congress: Hands Off Hydraulic Fracturing”, May 19, 2009, www.energyindepth.org/2009/05/1005/