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27.9.2011 Kauppapolitiikka

Dan Steinbock’s Global Trends


Ever since his arrival in the White House, President Obama has challenged America to take a decisive shift toward clean energy. As of yet, the administration’s measures have been inadequate.

Last January, President Obama advocated a far more ambitious investment into clean energy development and job creation in the State of the Union speech: “By 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas. To meet this goal, we will need them all. “

Is the goal near?

Disruptive Shifts Unlikely

Today, the United States is the 2nd largest energy consumer in terms of total use, while ranking 7th in energy consumption per-capita. The bulk of this energy is derived from fossil fuels: in 2009, from petroleum (37%), natural gas (24%) and coal (21%). Other energy sources played a more marginal role, including nuclear power (8.5%), biomass (4.3%), hydroelectric power (3.2%) and renewables, such as geothermal, solar/PV and wind (1.1%).

In contrast, Germany, among the G-7 nations, almost tripled the share of electricity produced from renewable energy to 17 percent of the national total in 2010.

For half a century, U.S. energy consumption has increased at a faster rate than energy production. The difference is met through imports. The shift in energy independency came in 1950, when coal was surpassed by both petroleum and natural gas.

The rise of oil as the preeminent energy source for the U.S. has closely paralleled the emergence of the automobile as a major force in American culture and the economy. Two-thirds of oil consumption in the U.S. is in the form of its derived transportation fuels.

In secular energy consumption, shifts are slow and gradual.

The Next 25 Years

According to current projections, U.S. energy consumption in 2035 will be derived from petroleum (41%), natural gas (27%), and coal (24%). Other energy sources continue to play a more marginal role, including nuclear power (9.1%), biomass (3.1%), hydroelectric power (5.3%) and renewables (3.4%)

With current policies toward greenhouse gas emissions, carbon dioxide emissions grow slowly and do not return to 2005 levels until 2027. However, proposed environmental regulations could alter the power generation fuel mix.

Some observers have been excited over the growing extraction of natural gas from shale rock in the United States through the use of hydraulic fracturing (“hydro-fracking”). Indeed, advocates of shale gas believe it can provide a large share of America’s energy needs in the future.

However, the use of toxic chemicals in the fracking process poses a threat to municipal water supplies, which has led lawmakers in a number of states to begin placing restrictions on the practice.

What happened to energy innovation?

The era of cheap energy is over. Still, efforts to use innovation to reverse the grim energy future remain inadequate. Currently, the federal government spends less than $5 billion a year on energy R&D. In comparison, $30 billion is spent annually on health research and more than $80 billion on military R&D.

In June 2010, the American Energy Innovation Council, which includes Microsoft’s Bill Gates, General Electric’s CEO Jeffrey R. Immelt and venture capitalist John Doerr, urged the government to more than triple spending on energy R&D, to $16 billion a year.

Unfortunately, even a dramatic escalation in R&D expenditures is no assurance of breakthrough innovation.

In late August, as I was near New York City’s financial district, a 5.9 magnitude quake struck in Virginia not far from the nation’s capital, rattling buildings and nerves from Capitol Hill to Wall Street. Barely a week later, hurricane Irene, one of the 10 costliest catastrophes in the nation’s history, swept up the East Coast, first as a hurricane and later as a tropical storm, knocking out power to millions of homes and businesses, killing more than 40 people and causing nuclear reactor shutdowns across the eastern seaboard.

The “extreme weather phenomena” are neither anomalies nor erratic whims of nature, but logical manifestations of climate change. It is time to consider the present tremors just a prelude to massive energy quakes that will shake the world.


Dr. Dan Steinbock is Research Director of International Business at the India, China and America Institute. He is also on the editorial board of the African Journal
of Business Management.