by Dennis Markatos-Soriano

As world leaders gather in Copenhagen to negotiate international strategy to lower global greenhouse emissions, I’d like to share a vision for part of the solution. Greenways and other improvements in bicycling and pedestrian infrastructure can make make a huge impact lowering emissions in the coming decade. Some economists and politicians who drag their feet regarding climate action complain that lowering emissions could come with a difficult price tag. But at least half of Obama’s 2020 goal can be achieved alongside large savings if we seize the opportunity to increase our use of renewable human power for transportation.

In 2009, US greenhouse gas emissions are ~10% above the goal Obama and the House have set for US emissions in 2020 (17% below 2005 levels). So, how do we lower pollution levels in the 2010s?

Transforming our Transportation System from Polluter to Solution

Transportation is currently one of the biggest polluting sectors, accounting for ~28% of US greenhouse gas emissions (US EIA, 2008). Carbon dioxide-spewing cars, trucks, and planes make up most of our national means of transportation. According to a recent study, only ~12% of Americans utilize active transportation regularly today (9% walk, 1% bike, and 2% take the bus or train). By increasing the bicycling and walking share by just 12.5% per year in the decade to come, we can achieve an active transportation share of more than 36% in 2020.

Such an increase in walking and cycling would cut transportation-related greenhouse gas emissions by over 20%, translating into a >5% drop in total US emissions. That’s more than half the goal Obama is aiming for over the next 11 years, and it comes with serious savings rather than costs. The shift would lower our need to import expensive oil by 25% or more than $60 billion per year (based on $70/barrel oil this would cut our trade deficit by more than 10% from 2009 levels). And by reducing demand for oil, it could help prevent a huge spike in oil prices in the 2010s as oil production becomes more difficult from hard-to-reach sites such as deep offshore fields and polar regions.

A 36% share for active transportation is not far-fetched, since countries such as The Netherlands and Sweden already enjoy 50-65% shares. And the health benefits from more active transportation would help keep health care costs from rising so quickly in the future.

There are some investments necessary to make this transition a smooth one. We need to foster more respect between drivers, cyclists, and pedestrians. And we need to improve cycling and walking infrastructure — building greenways so that non-motorized users have a safe, accessible route without competition with dangerous cars and trucks.

The East Coast Greenway is a perfect example of a transportation corridor that is vital to achieving a 36% active transport share. By connecting neighborhoods to schools, work, and play within cities and between cities, this developing 3,000-mile greenway makes everyday use and long-distance travel achievable by everyone from children to seniors. Where financing is lacking for greenways, we are incorporating low-cost but high-impact improvements in bicycling infrastructure such as bike lanes and signage to achieve the safest route possible in the near-term. And we look forward to working with our friends at the Alliance for Biking & Walking and elsewhere to make this vision one that communities and regions all over the US and beyond can embrace.

While efficiency, solar, and wind power are poised to provide the remaining emissions reduction, an increase in the use of our own renewable muscles can help stabilize our global climate in the decade to come. Achieving emissions reductions never felt so good!

Onwards in the Sustainable Energy Transition-

Today, the oil price convincingly passed $60 per barrel as the dollar fell to $1.377 per euro (10% weaker than its peak several weeks ago). Oil had previously touched $60 before retreating during the last few days. But this time, a weekly report from the US Energy Information Administration (EIA) showed a larger drop than expected in US inventories of crude oil, at 2.1 million barrels or .6%. This drop followed a bigger 1.2% drop the week before. Therefore, even though oil storage levels remain above average, the emerging trend of decline has caused speculators to bid the price up.

Gasoline May Spike to $2.50

Gasoline storage levels fell 2.1% to below the average range, its second big drop in as many weeks. With prices now at $2.33 per gallon and wholesale prices that translate into $2.50+, we are likely to see a continued spike in gasoline’s price in the week ahead. In fact, without extremely bad economic news derailing the rally – average gasoline prices seem destined to rise above $2.40 and toward $2.50 soon.

Lower Imports & Lower Demand

Crude oil imports averaged less than 9 million barrels per day (Mbd), down more than 5% from last year. But this still isn’t a problem for the short-term because inventories are so high and recessionary demand remains more than 5% below 2008 levels. Last week’s demand for gasoline, distillates, and propane fell 1.4%, 13% and 4.7%, respectively. The timing and speed of economic recovery along with the pace of oil field decline rates will determine prices going forward.

Fuel Efficiency Crucial

Obama’s announcement yesterday to raise fuel efficiency standards in the US market to 35.5 mpg by 2016 was a great step forward. The Union of Concerned Scientists estimates this policy will save Americans at least $30 billion dollars per year (reduced gasoline expense, etc.) in 2020 based on a gasoline price of just $2.25 per gallon. The efficiency standard will also lower our oil import needs by 1.4 million barrels that same year (enough to replace dwindling shipments from Mexico).

Bottom Line: A focus on efficiency will be crucial to keep our economy from suffering an even worse oil shock than 2008 in the years to come. This same efficiency is a big part of the climate mitigation effort we need to deploy in the US and worldwide. Solid policy like strengthened fuel efficiency standards accelerate the Sustainable Energy Transition, helping our environment and our wallets simultaneously.

Onwards-

Year-to-date, a .8% drop in electricity generation has decreased consumption of all fossil fuels. Coal use is down a small .1%, natural gas a large 6.8% and oil a whopping ~25%. Hydro and wind are up ~5% and almost 39%, respectively. This fall in electricity use is poised to be the first annual decline since 2001 and may be a deeper decline. The EIA projects electricity use to fall again in 2009, hopefully allowing grid operators to postpone building new fossil fuel power plants until Carbon Capture and Sequestration (CCS) technology can be integrated or the plants can be replaced by renewables. And with the whole electricity pie shrinking, wind power can significantly grow in market share in 2009 even if its growth is 25-40% slower than this year, as recent announcements suggest.

The climate implications of these September numbers are an even deeper cut in emissions than I projected after the Short Term Energy Outlook last week. It now appears US emissions in 2008 may be almost 3% below their 2007 level. Achieving 1990 levels by 2020 seems to be getting easier and easier — as long as we base economic recovery on the deployment of efficiency and renewables. We’ll see if Obama & Co. aim to cut emissions further toward the 1Sky goal of 25% below 1990 level by 2020 (as I’m sure Al Gore urged him to last week) if emissions fall a good deal further.

Onwards in the sustainable energy transition-

Step 1: The issue must be high enough in the positive public consciousness to win the attention and campaign promises of Presidential candidates. Check: Obama said he would set in motion a cap and trade bill to get US emissions to 1990 levels by 2020 and then 80% lower by 2050 and he emphasized the potential this sustainable energy transition has to create five million green-collar jobs.

Step 2: The issue must get the honor of joining the post-election message board. Check, as of yesterday: Obama spoke by video to an governors conference on climate change held in California on Tuesday. He renewed his campaign pledges on climate, and said the US would “help lead the world toward a new era of global cooperation on climate change.”

This is an excellent start for our country and the health of our Earth’s climate. But now we get to three more difficult steps (as detailed in John Kingdon’s “Agendas, Alternatives, and Public Policies“) that are in the recipe for US climate progress…

1. Keep climate change at the forefront of people’s minds

Political theorist John Kingdon called this pillar of progress the “problems” stream. The public has only a few problems at a time that it focuses its attention on, and energy/climate must stay high on the public’s list of concerns for Obama & Co. to spend their political capital on climate change bills. With energy prices lower than the records of mid-2008, it will take work from climate and energy advocates to keep “Joe Sixpack” from forgetting about the Southeast’s gasoline shortages in September, the $4+ per gallon pump prices experienced just a few months ago, and the hotter, more erratic climate we are creating at our current rate of fossil fuel consumption. The key will be to show that climate progress will make us richer (cutting energy costs through efficiency and creating new jobs in renewables development, manufacture, and deployment). Only if climate advocates craft and publicize a bill that can help us recover from our recession (like an efficient cap and trade system) that converges the economy and energy/climate problems streams, will the US move forward in 2009.

2. Build political alliances to pass a climate bill

Kingdon called this pillar the “politics” stream. With Democrats generally more environmentally-inclined than their colleagues on the right, the election seems to have aligned the stars for climate progress in 2009. But alliances across regions of the US must be forged to ensure a majority of representatives in the House and a filibuster-proof critical mass of 60 Senators are on-board. For instance, the bill must show that one region will not benefit and leave the rest of the country with the costs. Increased support for research centers that help each region develop their unique resources (such as wind in the Great Plains, solar in the Southwest, and bio-mass in the East) can help gather the political support necessary.

3. Refine the policy proposal to actionable form

The Lieberman/Warner-style bill of 2007 (which I discussed last week here) will evolve through a committee process in each chamber over the next several months before it is ready for passage. While the bill’s general framework is understood (from its successful application in a 1990 Clean Air Act Amendment to mitigate acid rain from coal plants), there are numerous details to be determined. Federal officials will decide a percentage of the emission permits they would like to auction rather than give away and how exactly they will administer the revenue generated from the auction. Climate advocates will need to regularly engage this federal “policy” stream to ensure compromises among policymakers and lobbyists do not dilute the bill to ineffectiveness.

Once these three streams of problems, politics and policy converge, a window of opportunity will arise for climate progress. There is a danger that we may put off climate mitigation because of short-term economic concerns. Therefore, those of us who understand the devastating impact of runaway climate change must raise our voices. Our letters-to-the-editor, Op-Eds, YouTube videos, and public events are necessary to keep the low cost of action today from preventing us to address the high costs of inaction in the years ahead.

Stay tuned for more info to help us achieve a sustainable energy transition…

As a result, oil prices dipped toward $60 again, and the average US price of gasoline is fast approaching $2.30 per gallon. It appears ready to fall another 10 cents or so before potentially stabilizing on next week’s IEA report that highlights rapid oil field depletion and as winter heating demand picks up. Yesterday, the weekly US Energy Information Agency (EIA) oil report showed US crude inventories remained around average levels while products such as gasoline, distillates/diesel, and propane remained low. But decreased demand allows these lower levels to suffice for now. If the lower prices bring demand back up then the price would stabilize or even climb a bit.

In natural gas, the EIA reported today that storage for the winter reached slightly above the five-year average but below last year’s record. Our high domestic production keeps US prices lower than the tighter regional markets in East Asia and Europe, especially since lower US industrial manufacturing slows our demand growth.

With the IMF predicting US GDP growth of -.7% in 2009, this is certainly a difficult time for the Obama Administration to take the reins. But it also provides a new beginning, where creative initiatives that drive job growth through efficient and clean energy technology can keep cutting our greenhouse gas emissions even as our economy churns toward recovery in late 2009.

Tuesday, November 4th, brought a huge shift to the US political landscape. The Obama landslide opens up an opportunity to update our energy policy for 21st century leadership. After eight years of stagnant federal climate change engagement, the Obama Administration promises no less than a sustainable energy revolution that moves our country toward climate responsibility.

But, as always, effective civic engagement from organizations like Sustainable Energy Transition (SET) and its allies will be necessary to ensure such progress occurs. The good news is, with your help, SET is poised to contribute to American leadership on climate change. We will need to rise to the occasion on the following three challenges over the next four years.

Challenge #1: Preventing a Rush to Coal

Our country is rich in coal resources. Our reserves roughly equal the combined total of the world’s next top countries, Russia and China. And with oil and natural gas prices more than double their 2002 level, there will be pressure to substitute some of that energy with domestic coal.

But increased coal consumption has serious environmental consequences. The main threat of coal, on top of air and water pollution from mercury and sulfur dioxide, is that it releases more carbon dioxide per energy unit than all other fossil fuels.

Obama’s home state of Illinois is a major producer of coal and Obama/Biden have supported the use of “clean coal” throughout the campaign. But clean coal is more of a PR term than a reality today. Carbon Capture and Sequestration (CCS) [the idea that we can take the carbon from coal’s emissions and bury it in the ground for centuries] has not yet been deployed commercially — so it cannot be seen as a first-term option for Obama except on a pilot project scale. Coal companies will put pressure on Obama to support new coal plants, but civil society must raise a strong enough voice to prevent such a move unless these plants are CCS plants. The US could benefit tremendously if we advance CCS technology toward rapid deployment throughout the world (we could export CCS technology along with the fuel – an extremely lucrative potential in a carbon-constrained world).

Challenge #2: Maintaining progress on conservation & efficiency with sub-$2.50 gasoline

With pump prices below $2.50 per gallon for gasoline and approaching $3 for diesel, public support for fuel efficiency may wane from its highs last summer. As a result, Big 3 automakers may revert to their old identity as producers of gas-guzzlers (which was very profitable until recently) and resist more aggressive fuel efficiency standards for their products. Such a move would be woefully short-sighted as the cheap oil age is coming to a close and today’s lower prices are mostly the result of recessionary lower demand. Prices are likely to rise once the economy turns around and oil supply stagnation rears its head in 2010+, especially if US consumers go back to SUVs and trucks like before 2008.

Again, it will take an active civil society to help the Obama Administration and Democratic Congress have the backbone to stay focused on efficiency and other climate-friendly alternative transportation methods. Just look at the Clinton Administration, with climate champion, Nobel laureate Vice President Gore. Under their watch, fuel efficiency actually fell as their federal government-automaker partnership ended up supporting US vehicles growing larger and faster rather than getting any greener.

Challenge #3: Keeping their eyes on the long-term climate prize

The Administration has inherited a double whammy of recession and huge fiscal deficit/massive public debt. The short-term economic pain will be a strong influence on policy, as it should be. But civil society must help politicians keep the long-term threat of climate change high in the public (and thus political) consciousness to ensure our country addresses this critical issue of the 21st century. If we drag our feet through the first administration, it may get too late to prevent runaway global warming and its dangerous symptoms.

I call it the climate prize for a reason. Not only are the long-term costs of climate inaction high, but the medium-term benefits of action are great. The US can create millions of jobs, making our economy more efficient and utilizing the plentiful wind of our Great Plains and sunshine of our Southwest to lower dependence on foreign oil. After developing these solar, wind and other climate-friendly technologies, we can export them to the huge markets of the EU, Asia and beyond that will demand such clean tech in our carbon-constrained future.

The best way to begin our transformation to global climate leader is to pass an economy-wide cap and trade system in 2009. Such a system would set annual caps on emissions (like 1990 levels in 2020, falling to 80% below today’s emissions by 2050) and allow companies and institutions to trade emission permits to minimize the cost of the emissions reduction. The Obama Administration and Congressional Democrats are committed to such a program, but public pressure is critical to make sure it becomes law. A similar cap-and-trade system, passed under the first Bush Administration, has helped us significantly reduce acid rain caused by sulfur dioxide-belching coal plants. This bipartisan precedent may prove crucial to prevent a Senate filibuster of the bill. A climate cap and trade bill passed in 2009 would put us on the right track and give post-Kyoto international negotiators the message that the US is ready to lead again.

It is wonderful to have an Administration that consistently calls climate-friendly energy policy a top priority. The $150 billion promised over the next 10 years to further progress innovation in the clean tech sector can transform America from a dependent, crippled consumer to a prosperous leader in the future global energy order. Only if we turn up our efforts of public education and advocacy will we accomplish our goal of responsible federal climate policy.

Progressive philanthropists, you showed your financial support can help push change in an election. Now those of us from Sustainable Energy Transition to Environmental Defense Fund to Transportation Alternatives need you to support a strong enough climate civil society to ensure these new leaders achieve their potential. Just like the election of 2008, the stakes are too high for any of us to sit this one out. The stability of our climate depends on US political will to seize today’s opportunity and build a sustainable energy revolution that creates jobs, lowers costs, and frees our country from the shackles of foreign oil dependence.

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The next few months will probably not witness new record global prices due to low recession demand almost everywhere (even China had 1.1% lower 3rd quarter GDP growth, though it was still at 9%). But the quick declines must be noted by our Presidential candidates as they prepare to govern over the next 4-8 years. Assuming the next President lasts for both terms, it is highly likely that the harsh reality of peak oil will become apparent under their watch. By the end of Obama or McCain’s Administration, imports from Mexico, Norway, Russia, and the UK (the source of almost 2.5 Mbd [18% of our imports] last year) will likely disappear as their production declines more than our 2007 import level. Sure, there are some prospects to replace these lost imports such as Brazil, Azerbaijan, Kazakhstan and Canada. But China, India and many others will be clamoring for their oil as well. Thus, modernizing our transit systems and becoming a leader in efficient and electric vehicle production should be a substantial focus for the incoming Administration.

Richard Heinberg wrote last week that he thinks July 2008 will be the global peak of crude oil production, due to the credit crisis slowing financing for new projects and OPEC’s upcoming cuts. He says the rapid decline of Mexico’s Cantarell will be mirrored in a growing number of other large mature fields worldwide in the coming years. Replacement fields will likely be smaller and more expensive to develop, ultimately yielding a lower global output.

Whether Heinberg proves correct, most oil analysts I follow believe that peak production will occur by the end of our next president’s second term, 2016. Obama’s platform concentration on demand reduction makes more sense than vain attempts to “drill, baby, drill” for significant increases in US production. Within a few short years, we will likely need to lower our oil demand faster than oil production declines, a rate as high as 5% per year though probably lower at first. Without success in lowering our demand, 2008’s record prices and Southeast gasoline shortages are likely to be eclipsed by the end of McCain or Obama’s Administration.

The silver lining: lowering oil demand not only fixes the oil crisis but it is also a critical element of our climate change mitigation to slow the melting of ice sheets around the world.

When I say debate the plan’s merits, I will not focus on whether it works as a vehicle to win the election – though that may be the most important factor under consideration for both parties. I will rather talk about whether such a plan can help US citizens handle the difficult spike in energy prices.

We have just over 700 million barrels (Mb) of oil in Louisiana salt caverns. The SPR was set up as a response to the oil shocks of the 1970s when embargoes caused serious shortages of oil in the US and other major importing countries. The SPR is a useful tool in the case of future embargoes or major oil disruptions. For instance, if there were an attack on Iran and the country responded with a blockade that curtailed 3 million barrels per day (Mbd) of flow — a release of ~1.5 Mbd for several weeks could help replace the Saudi Arabian oil that we would lose access to. Assuming somewhat quick resolution that allowed most of the oil to flow again within a few months (a la the first Gulf War), the SPR release would help avert a physical shortage and bullish chaos in oil prices during that period. The SPR would unquestionably help maintain some stability during a difficult time.

But what about the current situation, when the oil market is characterized by the last six years of rapid demand increases that producers struggle to supply? The benefits versus costs of an SPR release at this time are more ambiguous, since it acts as a temporary band-aid to what may be a much deeper problem of oil supply stagnation (and even imminent decline).

The proposal: Since I have not seen the exact details of Obama’s plan I will estimate his proposal is similar to ones put forward by members of Congress. Averaging ideas in their discussions, I will consider a 50 Mb release over 100 days (September 1-early January) at .5 Mbd that lowers the SPR by ~7% to ~650 Mb.

1. Will it help reduce prices?

Maybe in a miniscule way. This would reduce our import need by ~4% (.5/12.5), but prices are determined globally — where .5 Mbd is less than .6% of global oil flow. Based on an equation I have put together that matches supply/demand balance to prices over the last 15 years, this change may reduce prices by ~3% or 10 cents/gallon. So, the change may reduce average drivers’ gas bills by ~$14 during the 100 days.

But there are no guarantees that prices would be reduced significantly because a futures market would discount the oil today by the fact that less oil is available in the SPR tomorrow. And OPEC producers may welcome the .5 Mbd addition to the world market by reducing their own production by an equal amount to maintain current prices, thus making the SPR release impotent. It is in their interest to do such cuts to maintain their astronomical revenues.

2. Will it generate optimal revenue? The release (or sale to refiners) could generate ~$6 billion (50 million barrels*~$120/barrel) in revenue.

The opportunity cost of releasing the oil in 2008 would be the 7% less security and reduction in assets for the future. If we think that prices should be heading down in the future then releasing oil makes financial sense as the federal government would make higher revenue selling it to the market now and would help to mitigate a temporary market imbalance. But if the demand/supply imbalance were long-term as current trends appear to support, then our government may miss out on the opportunity to sell our SPR at a higher price in the future. For instance, the 50 Mb would generate $12.5 billion (not $6 billion) if it were sold to a $250 per barrel oil market. But we need to discount that opportunity with a discount rate (let’s say its 3.5%/yr, so if the price of oil increases faster than 3.5%/yr then it is not a sound decision based on long-term revenue potential to sell it now versus later as a nominal $250/barrel in 2028 is ~the same as $125/barrel in 2008).

3. Would an SPR release help the economy avert a major recession?

The last question is whether an SPR release would act as a sort of stimulus package to help relieve temporary economic difficulties, helping to lower the inflation rate and giving consumers a few more dollars to pay off their credit card debt or contribute to their mortgage payment. But the case could also be made that such a release will give people the counterproductive idea that it’s OK for them to stay addicted to oil at current levels.

In sum, an SPR release is set up to provide temporary relief to mitigate supply deficits. As long as Obama’s proposed release isn’t too large, such a policy probably couldn’t cause much harm and may do some good. But the big picture remains: increased oil demand in emerging economies and Middle East producers while oil production is declining throughout most of the non-OPEC world make US consumption levels dangerously high. Our oil focus needs to be on the efficiency and deployment of plug-in hybrid electric vehicles and transit/bike/ped infrastructure throughout the next two Presidential Administrations at least. And of course such a focus could help us mitigate the threat of rapid climate change as well.

Since gas prices are almost four times what they were when Bush came into office, you’d think it would be easy for Democrats to mobilize public outrage over energy prices for a change of the guard to their choice of Obama. But how that plays out remains to be seen. I hope that the big picture remains in view. Just as today’s Russian production totals for July at 1% below last year remind us, supply is struggling to keep up with demand. The biggest lever we have is our ability to transport ourselves and our goods more efficiently. And we can act in a matter of weeks to lower our bills, rather than wait years to see ANWR and offshore oil change our prices by a few small percentage points.

Let’s choose the sustainable energy transition.

Well, Saudi Arabia pumped 300,000 more barrels of oil a few months back and it had little effect. Also, the news of 200,000 additional barrels of oil in the global market was dented today. In Nigeria, 120,000 barrels of oil stopped flowing from Chevron in the delta after Movement for the Emancipation of the Niger Delta (MEND) insurgents exploded a pipeline. And the President of OPEC, Libyan Shokri Ghanem, said that some producers may cut production to offset Saudi increases.

But what has been effective is when US demand fell in the first quarter of 2008. But that demand response has been tempered by increased consumption in oil producing countries and emerging economies such as China and India. But US citizens are shifting to mass transit much further than in the first quarter of this year as Amtrak ridership swelled to a record in May. The more efficient we get, the less $150+ oil will hurt our economy.

The Presidential candidates are bringing different policy responses to the oil price crisis. McCain is pushing greater exploration and production of offshore oil, which will have a negligible effect on prices until at least five years from now. Obama, on the other hand, is promoting further federal support for an expanded Amtrak service and efforts to help our domestic automakers quickly adapt to an efficiency revolution (while McCain has been an opponent to recent Amtrak subsidies). McCain has promoted climate change responsibility stronger than most Republicans, but Obama’s policies seem to be the most effective to co-mitigate high oil prices and climate change.