What the Gulf Oil Spill Tells Us About Innovation

It will probably take some time to fully understand what went wrong in the Deepwater Horizon oil spill, and what ought to be done to make sure it doesn’t happen again. But at least one thing is already perfectly clear: recent technological advances in extracting oil in deep water offshore have been dramatic, whereas unfortunately the same cannot be said for technological advances in spill prevention and cleanup techniques.

Why is this the case?  Innovation is complicated, but we do know something about it.  In the private sector, the profit motive is a primary driver of innovation.  Because of the world’s seemingly insatiable demand for petroleum products (mainly gasoline and diesel), oil companies have invested hundreds of millions of dollars in offshore drilling technology (just one company, GE Oil & Gas, reported offshore oil and gas drilling-related R&D spending of $150 million from 2009-2011) in order to reap tens of billions in proceeds from fuel sales (for fiscal year 2009, MMS reported oil production worth $20.2 billion from the Gulf of Mexico federal outer continental shelf). According to the U.S. Energy Information Administration (EIA), oil production from federal offshore areas accounted for 29 percent of total domestic oil production in 2009. In 2009, ultra-deepwater offshore drilling (drilling in more than 5,000 feet of water) accounted for about a third of total federal offshore oil production, and ultra-deepwater production tripled from 2005 to 2009. Until recently there has been no comparable incentive for spill prevention and cleanup techniques:  the pre-Deepwater Horizon spill record had been excellent, lulling both regulators and oil companies into complacency. 

The free market by itself cannot motivate investment in spill prevention and cleanup technology, because spills themselves yield public damage, not private profits.  Our government, on behalf of the public interest, could have put rules in place that would have motivated the private sector to make such investments – such as requiring oil companies to actually demonstrate that spill prevention technology works as a condition for obtaining drilling rights. 

We have an analogous situation with respect to energy security and climate change.  The free market by itself is driving innovation, but in the wrong things: in energy investments that are warming the climate and making us ever more dependent on foreign oil.  We need our government to intervene on behalf of the public interest to motivate private investment and innovation in clean energy, through comprehensive energy and climate legislation. 

The catastrophe in the Gulf is still unfolding, and will ultimately provide many lessons relevant to our energy and environmental future.  But one lesson we can take to heart and act on right away is that there is a profound public interest in spurring innovation in clean and safe energy and that the private market on its own will not adequately provide it.  It is our job as the public to demand it, and it is our government’s job to use all the tools at its disposal – from regulations to incentives to penalties – to make it happen. 

Judi Greenwald is Vice President for Innovative Solutions

A Big Tent for Fuel Economy Standards

Through a recently signed Presidential Memorandum, Barack Obama is continuing the push to regulate greenhouse gas emissions from the transportation sector using its authorities under the Clean Air Act (CAA) and the Energy Independence and Security Act of 2007 (EISA). While the memorandum includes provisions for passenger cars, light-duty trucks, and support of an electric vehicle charging infrastructure, the most notable component involves vehicles that have eluded fuel efficiency regulators.

When it comes to GHG emissions and the transportation sector, the elephant in the room has been medium- and heavy-duty vehicles (freight trucks). The recently released memorandum will bring these vehicles under the regulatory umbrella and increase the likelihood that the transportation sector will contribute its share to economy-wide GHG emission reductions.

Can 6,000 Businesses All Be Crazy?

Listening to opponents of clean energy and climate legislation and their predictions of American economic ruin if we try to reduce greenhouse gas pollution, you could scarcely imagine that even one business would be crazy enough to support energy and climate policy.  Yet today, a group of 60 leading organizations and businesses representing over $1.2 trillion in revenue and over 1 million American employees sent a letter  to the President and the Senate proving that idea wrong.  These groups collectively said:

“The time to act is now. The U.S. needs a comprehensive energy and climate policy that will get us back on track by creating American jobs in the new, low-carbon economy…We face a critical moment that will determine whether we will be able to unleash homegrown American innovation or remain stuck in the economic status quo. Much as the transcontinental railroad ushered in an unprecedented era of expansion, innovation and economic growth, the transition to a diversified clean energy economy offers extraordinary opportunities for environmental and economic rewards. Americans need and deserve a comprehensive energy and climate policy and we urge you to take action without delay…It’s time for Democrats and Republicans to unite behind bipartisan, national energy and climate legislation that increases our security, limits emissions, and protects our environment while preserving and creating American jobs.”

Comprehensive Climate Science Reports Released Today

Today the National Academy of Sciences (NAS) released three of its long-awaited “America’s Climate Choices” (ACC) reports. A fourth report will be released later this year, as will an overarching synthesis report. The three reports released today focused on advancing the science of climate change, adapting to unavoidable climate change, and limiting the ultimate extent of climate change. The reports and background information on the study are accessible from the ACC web site.

Collectively, the ACC reports are the most comprehensive study the NAS has conducted on climate change. The project was mandated by Congress and requested by the National Oceanographic and Atmospheric Administration in 2008. Unlike past NAS efforts, the ACC reports emphasize how the nation can move forward on solving the climate change problem.

NAS president Ralph J. Cicerone said, “These reports show that the state of climate change science is strong.” The study emphasizes that our current understanding of human-induced climate change is supported by many independent lines of evidence that have weathered intense debate and serious exploration of alternative explanations: “Climate change is occurring, is caused largely by human activities, and poses significant risks for – and in many cases is already affecting – a broad range of human and natural systems,” the report says.

A statement about the ACC by our center's president Eileen Claussen is available here.

We will be sure to let you know when the remaining pieces of the ACC report come out later this year.

Jay Gulledge is Senior Scientist and Director of the Science & Impacts Program

The Senate Approaches a Critical Crossroads

With the long-awaited release of the Kerry-Lieberman clean energy and climate bill (The American Power Act) and EPA’s final action on its “tailoring” rule, two important clues emerged this week to the unfolding mystery of whether or not we will have climate legislation this year.  And buckle up and enjoy the ride -- two more major developments are just around the corner. On Wednesday, the National Academy of Sciences will be releasing three of its panel reports on America’s Climate Choices and sometime in the next two weeks Senator Murkowski may bring forward for a vote her effort to overturn EPA’s endangerment finding.

The release of the K-L bill demonstrates both how far we have gone and how distant the goal remains.  The bill achieved support from some key elements of the business community and goes much further in adding in elements (nuclear power and a hard price collar) that could expand its base of support.  But the loss of Senator Graham as a co-sponsor and the absence of any bipartisan backing underscore the challenges it faces in achieving the 60 votes it will need to avoid a filibuster in the Senate.  The Senate clock also continues to wind down making it harder to find floor time to move a comprehensive bill forward.

EPA’s recently issued interpretation of when greenhouse gases become regulated pollutants and its final tailoring rule show EPA’s willingness to make reasonable use of  the existing Clean Air Act to tackle climate change. By delaying the effective date when new source review will apply to greenhouse gases, and limiting new source requirements for best available control technology to only the largest sources (estimated to impact approximately 900 additional major sources annually), the agency put to rest the fears of some that the Agency’s rules would sink the economy and harm small businesses.  The rule shows that the existing Act, though cumbersome, can be used as a tool to reduce greenhouse gas emissions.

Both EPA’s action and the upcoming National Academy panel reports provide the perfect preface to the expected vote in the Senate on overturning EPA’s endangerment finding which links greenhouse gas emissions to health and welfare impacts from climate change.   To argue for overturning the finding, some Senators will point to recent controversies: the errors in the IPCC report; the hacked e-mails referred to as “climategate;” and even the DC snowstorms of last winter as evidence that the science of climate change is somehow suspect.  Despite the media attention these have received, none in any way undercut the overwhelming case underlying concerns about climate change.  Three independent investigations have each cleared the scientists who authored the e-mails of charges that they manipulated data or infringed on the peer review process.  The IPCC has corrected the two mistakes (the expected date of the melting of Himalayan glaciers and the percent of land in the Netherlands under water) uncovered to date in its reports – out of a total of thousands of pages, two mistakes neither of which undercuts the IPCC’s key conclusion that “warming of the climate system is unequivocal” and “that most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic GHG concentrations.”  Finally, notwithstanding Washington D.C.’s blustery winter, globally 2009 proved to be one of the warmest years on record.  The NAS panel reports this week are likely only to reinforce these conclusions, further calling into question any votes in support of overturning EPA’s endangerment finding based on denying what we know about climate science. 

Others in the Senate, including Senator Murkowski, make the case that the goal of overturning the endangerment finding is really about the need to take the worst option (EPA regulations) off the table and thereby protect our economy from the potentially dire consequences of EPA action particularly on small businesses. They argue that this would allow our elected representatives the opportunity and time to address this issue. But the limits EPA adopted in its tailoring rule (and its earlier decision to delay implementation) appear to take off the table these concerns about widespread and costly controls on small sources.  Although legal challenges to the tailoring rule are possible, they would take time to work their way through the courts, and if they were successful, Congress would then be in a far better position (and have a more compelling case) to provide a narrow legislative fix addressing a specific problem.   

When the debate on overturning EPA’s endangerment finding moves to the Senate floor (10 hours of debate is permitted), many will be wondering why the Senate isn’t instead focusing its debate on finding the common ground solutions urgently needed to get our nation on a path that enhances our energy independence, spurs the growth of new technologies, and slows climate change.

Steve Seidel is Vice President for Policy Analysis