How can the developing world escape poverty without climate change calamity?

This article is the result of some very interesting discussions below a recent TEC article on the potential of coal, nuclear and wind/solar to supply the rapidly growing energy needs of the developing world. In that article, I estimated that nuclear is roughly an order of magnitude less scalable than coal, but more than double as scalable as wind/solar. These estimations were challenged by both nuclear and wind advocates and, as such critical discussions often do, have prompted much closer investigations into this issue. In particular, data pertaining to the near-term prospects of nuclear energy in China, the nation accounting for fully 43% of nuclear plants currently under construction, has been analysed in more detail. — SCHALK CLOETE

Schalk Cloete’s superpower is the ability to execute and explain exactly the analysis required to penetrate a difficult, controversial topic. And there are a few others – you know who you are. 

Schalk’s recent article Can Nuclear Make a Substantial Near-Term Contribution? supports answers to my “most important questions”:

  1. How can we help China to maintain high enough growth to yank the rest of the rural peasants out of poverty, while NOT cooking the planet?
  2. How can we help Africa and India to achieve high enough growth to yank the rest of the rural peasants out of poverty, while NOT cooking the planet?

Cumulative CO2 avoidance potential over lifetime of investment (Gton CO2)

If you study this chart for a few minutes I think you will conclude as I have that we need to pull out all the stops to accelerate deployment of mass-manufactured “nuclear batteries”. I mean simply SMRs that can be rapidly installed by burial, connected to the grid, then left alone for a decade or four until the maintenance crew arrives to replace the “battery”, trundling the original off to the factory for refueling. Please see the footnote [1] why the nuclear avoidance potential is greater than the above China-data based chart.

Africa is not going to be deploying significant nuclear electricity in the next decade, more likely the next two decades. The massive urbanization and growth is going to be enabled the same way it happened in Europe, N and S America – building relatively cheap coal and gas plants as fast as they can be built. That trajectory will end badly unless we get serious about what happens next. We can create a happy ending if, inside the next two decades, we achieve the capability to produce affordable nuclear plants that can be installed and operated without losing two more decades developing a deeply-trained nuclear workforce and supply chain. 

It’s obvious that some of these SMR designs must be substitutable for the thermal heat sources that got built in the rushed deployment of coal and gas. We can do that, and it will be a lot easier and cheaper if these dirty plants are designed for just that evolution: dirty heat out, clean heat in.

There’s heaps more to be learned by studying Schalk’s essay, so get on over there. If you find any flaws in his work, please contribute to the dialogue there on TEC (I am subscribed to those comments).

Footnotes from Shalk’s essay:

[1] It should also be mentioned that the Chinese tariff system favors wind over nuclear by paying a fixed feed-in tariff of $83–100/MWh to wind and $70/MWh to nuclear. Another important factor to consider is the reduced value of wind relative to nuclear due to the variability of wind power (see my previous articles on this subject here and here). Wind power also requires expensive high voltage transmission networks to transport power from good wind locations to population centres, something which is creating substantial challenges. Thus, if the playing field were to be leveled, the difference between nuclear and wind scaling rates should increase substantially.

What can we do before it is too late?

This depressing chart is from Roger Pielke Jr.'s Clean Energy Stagnation.

As I’ve been thinking through “what can we do before it is too late?” the easy out is to leave our fate in the hands of China. If current trends continue China, India and their fast-developing brethren nations, will account for the majority of GHG emissions in the next century. China and India are also among the short-list of nations that are actually doing something about decarbonizing.

If the west continues “fiddling while Rome burns”, China will eventually offer to sell us the nuclear machines that will allow us to escape from our folly. Actually, it would be wonderful to wake up tomorrow to read that China has already covered our collective frivolous bums, having just closed a turn-key contract to supply Indonesia with 100 new 25 to 500 MWe nuclear plants. That would mean that Indonesia's fast-growing industrial economy will soon have affordable electricity all over the archipelago.

But do we really want to just give up, and leave the innovation, engineering, production challenges all to China? Surely the west still has something of value to offer? If we do have useful knowhow, then we would be smart to make the best deals with China that we can before the price of our decaying skills drops any further. If we can create a joint-venture cooperative fast-track with China everybody wins, and westerners can make big piles of money. Maybe even get to create some nuclear jobs and skills back home.

Deploying all of the advanced nuclear designs is the best way I know to select out the best tools to end energy poverty while protecting the planet. Consider such as TerraPower, FHR, IFR, MSR, LFTR, PB-AHTR. Reading that short list of innovations – it is so obvious that America hasn't the social capability to deploy even one of them. In the current political state, the Yanks just cannot do it. Given the political will, the Brits, French and Swedes could work together to make a big contribution. Otherwise the energy future belongs to Asia.

That's fine with me – what is important is to see coal plants being replaced by nuclear everywhere. More posts on nuclear cooperation worth China…

 

James Hansen: World’s Greatest Crime against Humanity and Nature

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If you’ve not yet read James Hansen’s latest letter I encourage you to do so. I hesitated to write anything after reading it – I didn’t want to write something inflammatory. Most of this will be familiar to those who have been thinking about climate and energy policy. Still, Dr. Hansen’s words are heavy with the frustration that we all feel. Following is an excerpt regarding the enormous cost of the worst US policy decisions:

Nuclear scientists were ready in 1976 to build a demonstration fast nuclear power plant. However, the project was stopped by President Jimmy Carter in his first State-of-the-Union message. Research continued at a low level until 1993 when President Bill Clinton delivered an intended coup de grace, declaring “We are eliminating programs that are no longer needed, such as nuclear power research and development.” Clinton was caving in to a quasi-religious anti-nuke minority in the Democratic Party, whose unrealistic “belief” was that diffuse renewable energies could satisfy all energy needs.

R&D on advanced technologies, including thorium reactors with the potential to ameliorate remaining concerns about nuclear power, was stifled, seemingly because it was too promising. Powerful anti-nuclear forces had their way with the Democratic Party. “Green” organizations had indoctrinated themselves in anti-nuclear fervor, and their intransigence blinded them to the fact that they were nearly eliminating the one option for abundant clean electricity with inexhaustible fuel and a small planetary footprint.

The enormity of anti-nuclear policy decisions would be difficult to exaggerate. It meant China and other developing nations would have no choice but to burn massive coal amounts, if they wished to raise their living standards. It meant our children and grandchildren faced near certainty of large climate change. None of the developing nations and none of our descendants had any voice in the decision.

I cannot blame President Clinton. We scientists should have made clearer that there is a limited “carbon budget” for the world, i.e., a limit on the amount of fossil fuels that could be burned without assuring disastrous future consequences. We should have made clear that diffuse renewables cannot satisfy energy needs of countries such as China and India. It seems we failed to make that clear enough.

The United States, as the leader in nuclear R&D, had an opportunity not only to help find a carbon-free path for itself, but also to aid countries such as China and India. Indeed, such aid was an obligation. The United States had already used its share of the “carbon budget” and was beginning to eat into China’s.

Perhaps our leaders, and certainly the public, did not really understand the implications of decisions made more than two decades ago. But there can no longer be such excuse. If we do not now do what is still possible to minimize climate change and eliminate air pollution, will it not be a crime against future generations and nature? Will it not be a crime of one people against another?

(…snip…)

I have been promoting intensifying nuclear power cooperation with China to accelerate China’s substitution of nuclear for coal; to bring forward the date of “China’s last coal plant”. Dr. Hansen is pressing hard for the same goals:

What the United States should do is cooperate with China and assist in its nuclear development. The AP- 1000 is a fine nuclear power plant, incorporating several important safety improvements over existing plants in the United States, which already have an excellent safety record. There has been only one serious accident among 100 reactors, at Three Mile Island in Pennsylvania, and it did not kill anyone. However, further advances in nuclear plants beyond AP-1000 are possible and the large demand in China allows rapid progress and building at a scale that can drive down unit cost.

China has initiated nuclear R&D programs, including cooperation with American universities and firms. Cooperation with our universities and the private sector could be expanded rapidly, and areas of relevant excellence persist in some Department of Energy Laboratories despite inadequate levels of support. Training of nuclear engineers and operators in the U.S. could help assure safe operations during a challenging period of rapid expansion. Benefits of cooperation in technology development can eventually circle back to United States industry and utility sectors as cost effective power plants are perfected.

I won’t say enjoy World’s Greatest Crime against Humanity and Nature, but please do share.

Nuclear City: it’s happening in Shanghai and Berkeley

As we try to understand what is really going on in China’s advanced reactor developments, one of the sources has been Mark Halper @markhalper. Mark covered the Thorium Energy Conference 2013 (ThEC13), held at CERN in Geneva last November China eyes thorium MSRs for industrial heat, hydrogen; revises timeline

From Mark’s reports I learned that one of the presentations was by a key figure, Xu Hongjie of the Chinese Academy of Sciences (CAS) in Shanghai. Hongjie is the director of what China dubs the “Thorium Molten Salt Reactor” (TMSR) project. One of his slides is shown above, presenting an overview of the TMSR priorities (left side) and the timelines. Happily the Chinese are also focused on the process heat applications of the PH-AHTR (hydrogen to methanol etc.) and the huge benefits to a water impoverished region like China. The Chinese are demonstrating systems-thinking at scale.

There are two Chinese MSR programs:

  • TMSR-SF or solid fuel, which looks to me to be very similar to Per Peterson’s PB-AHTR program at UC Berkeley
  • TMSR-LF or liquid fuel, which I gather is similar to popular LFTR concept.

Both designs are derivative of the Weinberg-driven Oak Ridge (ORNL) molten salt reactor program (that was cancelled by politicians in the 1960s). I understand the PB-AHTR to be most ready for early deployment, which will lay critical foundations for the liquid fuel TMSR-LF (LFTR) implementation a decade or so later. UC Berkeley’s Catalyst magazine has a very accessible summary of the PB-AHTR program.

Mark Halper reported from the Geneva Thorium Energy Conference. The 

I proposed a few days ago a China – OECD cooperation to fast-track deployment of nuclear instead of coal. Fortunately, the Chinese and several of the US labs and universities seem to have figured this out without my help. This is probably all detailed somewhere online, but I’ve not been able to find it so far. These are the parties to the China – US cooperation:

  • Chinese Academy of Sciences (CAS) in Shanghai
  • Oak Ridge National Laboratory (ORNL)
  • University of California Berkeley
  • University of Washington

I apologize to anyone I’ve left out.

 

Nuclear City: updates

Haiyan.png

Update: Will F @NeedsMorePower in Melbourne (Will’s blog) sent me the announcement Construction of Chinese ‘Nuclear City’ to start at Haiyan in Zhejiang province. And Martin Burkle sent the same press release with the comment 

Since we spent twice the money to build the same thing as China spends, we need about 350 million to get the city started. That seems unlikely.

Indeed – China can make progress faster in the “politically sensitive zones” that aren’t favored by the establishment. So where is China on the road to fast deployment of zero-carbon nuclear energy? So far I’ve not been successful to find out what progress has been completed with the “China Nuclear Power City” since the initial press release (I am finding mostly 404 bad links). Here’s an excerpt from the original press release that Will and Martin sent me:

Plans are advancing for the construction of the first industrial park in China to help with the rapid development of the country’s nuclear power industry, with detailed engineering and construction preparation work at the site in Haiyan, Zhejiang province, expected to start soon.

The coastal city of Haiyan, on the Yangtze Delta, has been selected to house the ‘Nuclear City’. It is some 118 kilometres (70 miles) southwest of Shanghai and close to the cities of Hangzhou, Suzhou and Ningbo. It also lies midway along China’s coast, where several nuclear power plants have been constructed or are planned.

…CNNC and the Zhejiang government plan to accelerate the construction of the nuclear components centre and training centre in Haiyan. The central area of the industrial park and the exhibition centre was to be launched first in July 2010. Enterprises in the industrial park will enjoy priority for bidding quota, bidding training, qualification guidance and specific purchasing with CNNC.

China will reportedly spend some $175 billion over the next ten years on developing the 130 square-kilometre Haiyan Nuclear City.

The Haiyan nuclear industrial park is entitled to all the preferential benefits granted to national economic and technological zones and national hi-tech industrial zones.

The Nuclear City is expected to have four main areas of work: development of the nuclear power equipment manufacturing industry; nuclear training and education; applied nuclear science industries (medical, agricultural, radiation detection and tracing); and promotion of the nuclear industry.

On its website, the Haiyan Nuclear City said that it will be based on the Burgundy region of France, which successfully became an industrial centre for the French nuclear industry. Several small and medium sized French nuclear-related companies moved to Burgundy to actively participate in the global market.

Whatever has happened since the announcement, I take this as a positive indication that the Chinese leadership is thinking seriously about how to accelerate the deployment of low-carbon nuclear. 

Working out what is really happening in China is challenging. For example, reading the WNA China Nuclear Fuel Cycle, I find the identical quote (as above) on “China Nuclear Power City” in Haiyan. Then at the bottom of the section on Industrial Parks I find this:

In May 2013 CGN and CNNC announced that their new China Nuclear Fuel Element Co (CN- FEC) joint venture would build a CNY 45 billion ($7.33 billion) complex in Daying Industrial Park at Zishan town in Heshan and Jiangmen city, Guangdong province. It was to be established during the 12th Five-Year Plan and be fully operational by 2020. However, in July 2013 the plan was abruptly cancelled. The 200 ha park was to involve 1000 tU/yr fuel fabrication as well as a conversion plant (14,000 t/yr) and an enrichment plant, close to CGN’s Taishan power plant.

Dear readers – I would appreciate links to current information. Comments?

Nuclear City: how to help China choose to build new nuclear instead of coal power

Carbon emissions increase 3% per year

Fig. 4. (a) Energy intensity, defined as energy consumption (Gt of oil equivalent) divided by real gross domestic product (trillions of 2005 U.S. $), and (b) carbon intensity, defined as fossil fuel carbon emissions (GtC) divided by energy consumption (Gt of oil equivalent). Energy intensity of China is normalized to 1.56 that of the United States in 2005. — James Hansen 2014

How are we doing on transitioning off fossil fuels? Renewables activists would have us think we are making more progress every year. In truth, we are making less, not more, progress towards zero-carbon emissions. The global production from non-hydro renewables is about equal to one years growth in energy consumption. At the end I’ll offer further evidence on just how serious our situation is.

As a thought experiment, imagine that less developed regions (LDRs) such as Brazil, China, India, Indonesia were building 100% new nuclear plants instead of coal plants. In this imaginary future, we would be close to stabilizing the GHG concentration of our atmosphere. I say “close to”, because if the LDRs are willing to choose nuclear over coal, there is no-problem-whatever with USA, UK, EU accomplishing the same.

Can you imagine China and other fast-growing LDRs giving up coal? I absolutely can imagine it.

Rich country politicians and media spend most of their time talking about what rich countries should do. Not about what China will decide to do based on self-interest. For now, let’s stop talking about rich countries. Instead, let’s talk about what we can do that makes China decide to grow their energy supply using only low-carbon options.

To keep it simple, let’s just talk about China – as a proxy for all the less developed nations (LDRs). China has already demonstrated that:

  • The leadership wants to decarbonize their economy.
  • They will not sacrifice significant economic growth to build zero-carbon power.
  • China will do whatever it takes to avoid a shortfall of energy supply relative to demand.

If we could deliver to Beijing the whole technology package for low-cost, fast-build nuclear the leaders would be very interested. I do not think that political motivation to decarbonize is the main problem in China.

Alternatively, we can keep doing what we are doing. In the absence of any serious political leadership, dedicated scientists and engineers in the national labs, universities and a few startups are working hard to innovate. They are developing new nuclear designs that are walk-away safe, fast to mass-manufacture, mass/volume efficient and fast to deploy. None have enough funding to innovate at any reasonable speed.

Worse is that to actually bring their new design to the market is effectively impossible – both in cost and elapsed time. The innovators must pay the entire cost of teaching the NRC staff about their new technology, then pay to the NRC the entire cost of certification, then pay the cost of building first of a kind commercial scale plant, while creating a complex supply chain that suits the new technology. And so forth. Such institutional barriers also mean that nuclear innovation does not suit venture capital funding, where most funds would expire long before the product began to earn a return.

To make this innovation remotely feasible requires a complete reform of the regulatory framework, and a top level commitment by the national leadership to actually decarbonize. What do you think is the chance that this is going to happen in America? At least before such time as Norwegian beachfront becomes a hot vacation property market.

OK, so it isn’t going to happen in America. Not in Germany. Not even in France. Keep in mind that among the western nations there are powerful, entrenched political and economic interests who are quite happy with the status quo. And extremely unhappy with the prospect that the old hydrocarbon economy would be uncompetitive against carbon free nuclear energy.

These institutional impediments are similar to that faced by low-performance political systems. You can easily name many such nations just in South America and Africa. China had a similar problem coming out from under the curse of Mao. Deng Xiaoping knew he had to liberate the Chinese economy, including attracting foreign direct investment from the “running dog capitalists.” If Deng had tried to reform the entire Chinese nation at once, well he would have had his legs cut off in a heartbeat. The Army and the wealthy who controlled the SOEs would make sure that the status quo was not destabilized.

Deng wondered whether the Hong Kong model could be replicated in new locations that would not threaten the entrenched interests? Maybe in a place like Shenzhen (one of the first four Special Economic Zones). If that worked, then politically it would be much easier to progressively extend the new successful rules to the rest of China. That is roughly the path that Deng Xiaoping set for China.

Oversimplifying, Deng’s SEZ initiative is similar to the concept that prof. Paul Romer has been evolving around the term “Charter Cities“. These are new development zones “chartered” with proven-successful rules. These charters allow families to opt-in to live and work there; allow investors to opt-in to build infrastructure and factories. Therefore creating a competition of cities: competing for residents, investors and markets.

Why can’t we adapt the Charter City concept to create a Nuclear City SEZ? A place where:

  • Taxes and rule-of-law are attractive to investors.
  • Efficient, suitable regulations can be developed.
  • Ample sites are available for constructing new reactors, from demonstration to commercial scale.
  • The new nuclear supply chain can be grown.
  • Factories and skilled labor can be developed to produce as many designs as can compete.

Where would be the ideal place to locate your Nuclear City? China is the obvious place because they have:

  • An almost insatiable need for enormous amounts of carbon-free energy.
  • The political commitment to economic decarbonization.
  • Ample low-cost capital to invest in new plants whose costs are front-loaded.

To progress from imagining to reality we need two things:

  1. Nuclear life-cycle cost to be comparable to coal.
  2. Nuclear deployment rate at least as fast as coal.

How can we accomplish this? Particularly in a climate where America is having to shut down paid-for, nearly zero-carbon nuclear plants? Where Germany is closing ALL of their paid-for, nearly zero-carbon nuclear plants? And Japan? The MDRs (more developed regions) are setting a shockingly awful decarbonization example for the LDRs.

I believe that nuclear fission can be built out at the cost, scale, and rate required to substitute nuclear for coal. This is a decision for China, not a decision for Western politicians. That means developing and deploying low-carbon energy that is dispatchable, scalable, and “cheaper than coal” in terms of System LCOE (including intermittency costs, not just LCOE).

Serious people talk about the expense of new nuclear. In fact the challenge is even bigger than achieving cost parity – a necessary but not sufficient condition. Aside from low cost, we need to make rapid progress on many human fronts. We can thoroughly simulate new reactors on our super-computers, yet this kind of fast-paced effort depends on real people:

  • Growing the nuclear people skills.
  • Growing the safety culture.
  • Growing a sensible regulatory capability.
  • Creating a new high volume supply chain.

Now, imagine that China has committed to creating such a Nuclear City. How can the old nuclear powers marshal their resources to dramatically accelerate the day when nuclear deployment is so attractive to China that they substitute nuclear for coal. Here’s a sketch:

  • The nuclear-technology nations (US, UK, France, et al) offer a nuclear cooperation and technology sharing agreement with China. The idea is to put your best ideas, your best people and your capital into this project — for the long term (decades).
  • Reform the legal framework that prohibits exporting peaceful nuclear power technology.
  • Lose the popular political idea that “We are competing with China”. Substitute the idea that “We are working together to save the planet while we get rich together”.
  • Lose the idea that dirty energy must be expensive. Substitute the idea that clean energy must be cheaper.
  • Invest national R&D funding into the Nuclear City cooperation.

So, why would the various players be motivated to cooperate? Let’s summarize some perspectives:

Update — James Hansen proposes nuclear cooperation  2/24/14 I’m reading Jim’s latest letter this morning Renewable Energy, Nuclear Power and Galileo: Do Scientists Have a Duty to Expose Popular Misconceptions? I just came to the part of his letter where he addresses the topic of this post. Here’s a fragment:

Second, the United States and China should agree to cooperate in rapid deployment to scale in China of advanced, safe nuclear power for peaceful purposes, specifically to provide clean electricity replacing aging and planned coal-fired power plants, as well as averting the need for extensive planned coal gasification in China, the most carbon-intensive source of electricity. China has an urgent need to reduce air pollution and recognizes that renewable energies cannot rapidly provide needed base-load electricity at large scale. The sheer size of China’s electricity needs demands massive mobilization to construct modern, safe nuclear power plants, educate more nuclear scientists and engineers, and train operators of the power plants.

The United States nuclear industry and universities have much to offer, and in turn they have much to gain by cooperating in development of modern safe nuclear power in China. Opposition to nuclear power in the U.S. has slowed but not stopped progress in nuclear technology. However, the realistic size of the market in the U.S. for improved nuclear designs, as well as for evolving still more advanced designs, is limited, at least in the near-term. Furthermore, for reasons that do not need to be debated here, construction time for a nuclear power plant in the U.S. is of the order of a decade, while it is as short as 3-4 years in China. Thus deep nuclear cooperation between the China and the U.S. over the next 1-2 decades could produce both (1) base-load electricity in China that allows China’s carbon emissions to peak within a decade and then decline, as is essential if climate is to be stabilized, (2) an opportunity for both countries to achieve progress in nuclear technology and thus a basis for comparing the merits of the most advanced renewable and nuclear technologies.

Jim has a lot more to say, a whole page on this general topic — I highly recommend that you read his new letter.

What is in it for “China”?

  • Manufacturing, deployment and operations capabilities will be developed locally (as with AP1000 deal).
  • Chinese human resources can be developed faster when working alongside western scientists, and when taught by the western experts (many of whom are retiring, their deep knowledge soon to be lost to society).
  • Chinese leaders do have to live in their high-pollution cities, a daily reminder of the priority to transition away from coal.
  • Fundamentally this is a very large scale engineering and project-management undertaking — China’s politicians are comfortable with that kind of approach.

What is in it for the existing IP stakeholders?

  • Long term profits. Instead of going out of the nuclear business (like Siemens), they have a chance to be part of the biggest revolution since the beginning of the industrial age.
  • A chance to be shareholders in the new energy infrastructure – to be part-owners in the new utilities and infrastructure.
  • The IP to be contributed is now owned by governments and shareholder companies. A necessary condition is that the existing IP owners must be satisfied that this cooperation will allow them to protect their share of the return on existing IP, as well as the return on the future IP. That’s a negotiation – Silicon Valley law firms can help with options.
  • In this planet-scale effort, it is better to be cooperating than competing.
  • Scientists at the national labs, at experienced suppliers like B&W, these people know that China et al can contribute many very capable engineers and scientists. The scale of the Chinese contribution is being demonstrated already by such as the well-funded MSR development program at the Shanghai Institute of Applied Physics (CAS/SINAP). In 2012 the project had a $350 million budget and a staff off 334 that was supposed to grow to 750 by 2015.

What is in it for the investors?

  • The scale of this planet-wide market opportunity is easily big enough to attract private investors if the political risk is covered.
  • Building the first large scale deployments in China, by itself, eliminates much of the political risk.
  • The nation-partners will have to put up enough risk insurance to lubricate a public-private partnership. I think that means largely insurance against political risk. Against the risks of the familiar Greenpeace lawyering and demonstrating, but also the Rule of Law risk in the non-western jurisdictions. It’s an interesting question: how far will Greenpeace get demonstrating in front of new Chinese nuclear plants?
  • China has demonstrated the political capability to generate MUCH larger amounts of capital than needed to get this going. So DFI (Direct Foreign Investment) may be a case of the outsiders knocking on the door, asking to be let in.

What is in it for Western politicians?

  • I don’t know, because there isn’t much reward here within their motivational framework of about two years. Suggestions?

This challenge is not really technical — it is almost entirely political. The Western institutional structure makes it effectively impossible to achieve rapid progress. France could not rapidly convert from zero to 80% zero-carbon nuclear today. Politically France-could-not-do-it-today. It’s difficult to put into words how large this challenge is. Two charts help me to visualize what is happening on the ground, first Robert Wilson’s recent essay Renewables Growth: Ignoring The Whole Equation shows how insignificant are the 2011 contributions from all hydrocarbon sources + nuclear. In other woods, renewables are detectable but insignificant . Jeff Terry summarized Robert’s essay as “…fossil fuels dominate for decades”.

2011 Everything Else swamps Renewables

Second, this chart is completely self explanatory. Nevertheless I highly recommend that you read the source: Roger Pielke Jr.’s Clean Energy Stagnation.

China’s leaders don’t want to suppress criticism of the government. In fact, they probably like it

Andrew McAfee is coauthor with Eric Brynjolfsson of Race Against the Machine. If you have not read the book, please do. Then (or first) read Tyler Cowen’s Average is Over. Then please report back here your take on the future, and how we can best navigate where we will be in 20 or 50 years.

Meanwhile, for a quick read I recommend the fascinating McAfee piece Big Data Reveal Three Surprising Facts About Chinese Censorship. The future ramifications of Big Data are impossible to foresee — but this is an excellent example of surprising results today. Excerpt:

Crimson hexagon, which King cofounded, constantly collects a huge amount of social media from around the world. By seeing which of this content later disappeared from within China the team gained an unprecedented view into a dark and fascinating topic: which aspects of its people’s speech a modern totalitarian regime wants to suppress. This view also allows us to make better-educated guesses about why and how this censorship happens. What we learn from it would have surprised even Orwell.

(…snip…) As the old saying goes, “the mountains are high, and the emperor is far away.” Not any more, since the advent of social media. Citizens use these tools to complain loud and long about corrupt local officials. This provides a great way for Beijing to know who’s stealing above their station, and hence who to crack down on when the kleptomania and/or public pressure to do something about it mount too high. It’s a perverse result, but free online speech turns out to be the top despot’s great friend, because it allows him to keep his underlings in line.

China fact of the day

Tyler Cowen:

…the pace of actual trade settlement in renminbi has failed to keep up [with its role in finance]. It still accounts for just 0.8 per cent of the global total, a lower share than the Thai baht or the Swedish krona.

That is from the FT, via Amni Rusli. The recently reported fact that the renminbi is now the #2 trade financing currency seems to be simply measuring the carry trade, not the true ascendancy of the Chinese currency as a global reserve currency.

 

An Economics Masterpiece You Should Be Reading Now: Justin Yifu Lin’s “The Quest for Prosperity”

My reading list is overflowing, but it looks like Clive Clook’s recommendation has to go on the top of the Development Economics list. Are you ready for “new structuralism”?

The most valuable new book I’ve read this year is Justin Yifu Lin’s “The Quest for Prosperity.” George Akerlof, a Nobel laureate in economics and a man not given to reckless overstatement, calls it “a masterpiece.” I’d say that’s right.

(…)

Lin … was an observer and participant in China’s economic miracle. From 2008 until earlier this year, he was the World Bank’s chief economist. Today he’s back in China, at Peking University.

Lin’s book is intellectually ambitious. He sets out to survey the modern history of economic development and distill a practical formula for growing out of poverty. It’s a serious undertaking: Lin isn’t trying to be another pop economics sensation. But “The Quest for Prosperity” is lightly written and accessible. It weaves in pertinent stories and observations, drawing especially from his travels with the World Bank. He leavens the economics skillfully.

Two Schools

Essentially, he proposes a middle way between two contending schools: structuralism, which emphasizes barriers to development that government intervention is needed to overcome, and the neoclassical approach, which stresses market forces and frowns on industrial planning. He calls his hybrid “new structuralism,” suggesting a closer affinity with the first. (That branding is a bit misleading, but I can see that the alternative — new neoclassicism — doesn’t roll off the tongue.)

(…) 

China’s Success

Structural transformation, of course, is exactly what China has achieved. Elsewhere Lin has acknowledged that China needs further policy reforms and that all is not well. Yet the country’s success of the past several decades is indisputable — and this is no Soviet-style industrialization mirage. Russian factories sold their output to captive markets. Nobody with a choice ever bought a Soviet-made car or television. China’s outward-looking producers are world-class. I’m typing this on a best-of-breed Apple Inc. laptop, manufactured in China.

As I argued in my last column, China is a capitalist country. But how did it get that way?

Lin’s answer draws on both development paradigms. He sees a vital role for government in overcoming barriers to development. But interventions, he argues, must respect compelling market realities. Of these, the most important is international comparative advantage. Poor countries have lots of cheap labor. For them, capital-intensive heavy industry isn’t the way to go.

For today’s developing countries, Lin says, the global economy is the indispensable setting, and looking outward is the sine qua non of rapid development. On the input side, that’s because of the opportunity it affords for technologically driven catch-up growth. On the output side, it’s because the world is a market for exports. On this view, “export pessimism,” the idea that poor countries couldn’t prosper through international trade, was one of the biggest mistakes of the import- substitution school. Globalization is the poor’s best friend.

Currently $15.37 on Kindle.

The economic legacy left by the baby-boomers is leading to a battle between the generations

Voters need to understand that US demographic trends are bad for growth, and very bad for the total future tax burden. But majority rule democracy is not well-designed to find an optimize solution to the growing conflict between aging retirees and the working population that pays for the elderly benefits. 

This Economist analysis seems to conclude that inflation is the only politically feasible outcome:

(…)Sadly, arithmetic leaves but a few ways out of the mess. Faster growth would help. But the debt left by the boomers adds to the drag of slower labour-force growth. Carmen Reinhart and Kenneth Rogoff, two Harvard economists, estimate that public debt above 90% of GDP can reduce average growth rates by more than 1%. Meanwhile, the boomer era has seen falling levels of public investment in America. Annual spending on infrastructure as a share of GDP dropped from more than 3% in the early 1960s to roughly 1% in 2007.

Austerity is another option, but the consolidation needed would be large. The IMF estimates that fixing America’s fiscal imbalance would require a 35% cut in all transfer payments and a 35% rise in all taxes—too big a pill for a creaky political system to swallow. Fiscal imbalances rise with the share of population over 65 and with partisan gridlock, according to other research by Mr Eschker. This is troubling news for America, where the over-65 share of the voting-age population will rise from 17% now to 26% in 2030.

That leaves a third possibility: inflation. Post-war inflation helped shrink America’s debt as a share of GDP by 35 percentage points (see article). More inflation might prove salutary for other reasons as well. Mr Rogoff has suggested that a few years of 5% price rises could have helped households reduce their debts faster. Other economists, including two members of the Federal Reserve’s policymaking committee, now argue that with interest rates near zero, the Fed should tolerate a higher rate of inflation to speed up recovery.

The Economist does not link the IMF study which they referenced. I think it is: The Challenge of Public Pension Reform in Advanced and Emerging Economies, December 2011. Excerpt on reform options:

IMF pension reform chartA. Advanced Economies

32. Most advanced economies face the double challenge of high debt and rising age- related spending, particularly in health care (Figure 12). A number of countries with above-average levels of pension spending also face large projected increases in age-related outlays (Austria, Belgium, Finland, Greece, Portugal, and Slovenia). In some other countries with below-average levels of pension spending today, projected increases in age-related spending are substantial (Luxembourg, Korea, New Zealand, Switzerland, and the United States).

33. Pension reforms that curtail eligibility (e.g., by increasing the retirement age), reduce benefits, or increase contributions can help countries address these fiscal challenges. The trade-offs across these choices are illustrated in Figure 13. Beyond what is already legislated, with no increases in payroll taxes and no cuts in benefits, average statutory ages would have to increase by about another 21⁄2 years to keep spending constant in relation to GDP over the next twenty years.23 Relying only on benefit reductions would require an average 15 percent across-the-board cut in pensions. Relying only on contributions would require an average payroll rate hike of 21⁄2 percentage points. To keep pension spending as a share of GDP from rising after 2030, additional reforms would be needed: for each decade, retirement ages would have to increase by about 1 year, benefits cut by about 6 percent, or contribution rates increased by about 1 percentage point.

Also on future liabilities The Financial Impact of Longevity Risk, April 2012