Texas: for energy and emissions, the China of the U.S.

AUSTIN, Texas -- The state of Texas and China: energy and environmental bedfellows?

You betcha.

Rhodium Group energy analyst Trevor Houser and University of Texas international energy expert Michael Webber took to the stage here at the inaugural SXSW Eco conference to outline, with ample data and charts, why America's second largest state and its largest economic rival could learn a lot from each other.

First, the paradox: both regions are massively dirty polluters. But both regions are massive clean energy leaders.

Now, the question: can they lead us out of the world they so successfully exploit?

EVERYTHING'S BIG IN TEXAS

Webber first outlined the state of energy in Texas.

Key points:

• Texas is the nation's dominant oil and gas producer. It also has a lot of coal (lignite, the lowest rank of it). "If you put enough gasoline on lignite, it will burn," Webber said with a laugh.
• There are three power grids in America: East, West and Texas.
• Texas is America's largest producer of oil (one-fifth U.S. total), gas (one-third), wind (one-fourth) and electricity (a tenth). It has 26 oil refineries producing 4.8 million barrels per day.
• Texas is world's third-largest gas producer behind U.S. and Russia, ahead of Canada, Iran, Norway, Saudi Arabia.
• It's the world's seventh-largest CO2 emissions emitter.
• It's also the world's sixth-largest wind power. (China is No. 1; USA is No. 2.)
• The problem: Texas residents each use seven to eight times more energy than the average global citizen.
• Why? Big cars and air conditioners, yes, but primarily big industry. Fifty-three percent of Texas' total energy consumption is from industry. (In the rest of the U.S., it's 33 percent.)

"We are the dirty manufacturer of the United States," Webber said. "We are the China of the United States."

On responsibility: "The big question is whether we owe the world an apology for product emissions or the people who buy them? The same question can be asked of China."

On policy: competitive renewable energy zones in Texas were paid for by socializing them. "We call it uplift," he said.

On solar: "I think we'll do the same thing for solar in the next decade that we did for wind in this decade. And we're going to build 'em." Why? A lot of cheap flat land that's sunny, windy and with transmission lines helps optimize the land for solar and wind co-use.

THE ELEPHANT IN THE ROOM

Houser took the audience through a quick tour of energy milestones for China.

Among them:

• 1958: Mao takes country full of farmers and pursues Soviet-style heavy industrialization, requiring lots of energy.
• 1978: Reform period begins. "By 1978, that economic strategy was totally bankrupt," he said. Controlled energy prices were slowly liberalized; managers were given incentive to reduce cost; the cost of energy goes up. Plus, basic freedoms such as choosing your own career begin. All of this helps China rediscover the light-manufacturing, lower-energy path forged by South Korea, Japan and Taiwan.
• 2000: China represents 10 percent of global energy demand. In 1978, it was 25 percent.
• 2002: Energy intensity reverses slightly. "That little blip? That rocked the world," Houser said. In just eight years, Chinese energy demand estimates had to be revised upward by 80 percent; that rounding error is the energy equivalent of two Indias.

Today, 70 percent of energy in China is consumed by industry, Houser said. But the cars you see on the country's clogged streets are its future energy problem, not present one.

Fueling the fire is this daunting statistic: 15 to 20 million Chinese move to cities every year. It's the largest migration in human history, Houser said.

That surge in demand was met primarily with coal-fired capacity, to the tune of 70 to 80 gigawatts each year -- close to the total installed base of the U.K. or Texas.

In recent years, the country has plowed significant investment into wind power. In some projections, China will add close to 50 percent of all global capacity for solar and wind in the coming years.

"Even if China gets halfway there, they will transform the global market," Houser said -- and we mustn't forget that a lot of coal-fired plants will also be built along the way.

"China can both drive down the price of clean tech while simultaneously drive up the price of dirty tech," he said.

Unfortunately, coal production estimates are our only way to really predict the trend -- and at this scale, the degree of uncertainty results in a range the equivalent of the entire U.S. coal production today.

Call it the "China Surprise": when the country suddenly needed 1.5 million barrels of oil a day more than what was predicted, it drove up prices in the U.S. so high that American demand fell off, ensuring that the Chinese got the energy they needed.

"We've seen a significant shift in power generation from coal to natural gas here in the U.S. driven in part by natural gas prices from shale development but driven in equal part by coal prices from Chinese demand," Houser said.

The best way to combat this phenomenon is reduce our own energy consumption. But it's not so easy, Houser said.

"The impacts of climate change in the U.S. are felt most evidently on the [liberal] coast," he said. "But the folks who will have to pay the most for any effort to put a price on carbon are on the [conservative interior."

Which is why it's "economic apocalypse" for a state like Wyoming to support climate change legislation. But a switch to natural gas? That's a roughly equal economic trade, exchanging lost oil profits for natural gas gains across those states, Houser said.

"There's a pretty clear economic logic for states like Texas in switching from coal to natural gas," he said. "High coal prices from China may finally be enough to switch Texas over to gas, which is in its own interest, in a way that politics haven't been able to."

THE INTERNATIONAL FORUM

Internationally, the problem is that the U.S. shows up to the carbon emissions negotiation table saying China's the worst emitter and should do something; meanwhile, China shows up to negotiations saying that the U.S. has been the worst emitter for the last 150 years and that's unfair.

"International negotiations have limited impact on what countries are willing to do domestically," Houser said. "The exception is Europe, which is unusually sensitive to international negotiations."

Therefore, countries have to set their public goals significantly less than what they can actually achieve so they can safely achieve them. The best way to nail better targets down? Set a stretch goal in conjunction with the safe one, Houser said.

Nonetheless, participation is the first step.

"In the absence of U.S. leadership, there's very little reason for other countries [to take action themselves]," Houser said.

This post was originally published on Smartplanet.com