The Bahamas and the Political Economy of Climate Change

by Larry Smith

(Sustainable development) meets the needs of the present without compromising the ability of future generations to meet their own needs.' -- Brundtland Report, ‘Our Common Future’, UN World Commission on Environment and Development, 1987

With the Bahamas Electricity Corporation about to fork out over $80 million for a new oil-burning power plant on New Providence, it's worth taking a look at the unfolding political economy of climate change to check out our options.

Big conferences on this issue have been held all over the place recently, with more to come. Even George Bush has got into the act - in Australia last week he urged Pacific countries to band together to tackle global warming. And he has invited the world's major polluters to an unprecedented climate change meeting in Washington later this month.

Closer to home, the Caribbean Tourism Organisation will explore the implications of climate change for the region's number one industry at its annual conference in Puerto Rico next month. Featured speakers include a top Canadian contributor to the United Nations Intergovernmental Panel on Climate Change.

And UN Secretary-General Ban Ki-moon will convene an informal high-level event in New York next week to help lay the foundation for a new global consensus on climate change to be constructed at a major conference set for Indonesia in December.

It's all part of a building momentum toward striking a new international deal in an area where "complex science and entrenched ideologies test the limit of our abilities to deal with a great threat," as Australian climatologist Tim Flannery put it.

Just last month, 158 countries met in Vienna to finalise the details of a global carbon trading market set to launch in January, as called for by the Kyoto Protocol. Kyoto is a supplemental agreement to the 1992 UN climate change treaty that requires industrialised nations to cut their greenhouse gas emissions (read pollution) to below 1990 levels by 2012.

A big fly in the ointment on that score is that the world's biggest polluter (the United States), rejected Kyoto because the treaty didn't require developing nations like China (the world's second biggest polluter) to make similar cuts. And achieving those cuts was not seen as cost-effective by the Bush Administration.

But the most recent findings are that emissions of greenhouse gases "need to peak in the next 10 to 15 years and then be reduced to very low levels by mid-century", if the world is to avoid rising sea levels, collapsing ecosystems and more droughts, floods and severe storms.

But this article is not really about climate change. It's about pollution. And more specifically, the economics of pollution. Some experts argue that there is a pent-up demand for new products and services to serve a post-carbon economy that is beginning to trigger a powerful market-driven response.

Perhaps the best example of this is the so-called carbon market. This is a way for countries to contribute to the overall goal of cutting greenhouse gases by offsetting their emissions via something called the Clean Development Mechanism. That's a Kyoto provision which lets rich countries invest in emissions cuts in less developed countries (like ours) in order to gain reduction units that can be applied to their own emissions targets.

Those units can then be traded on the international carbon market. Outside the European Union - which set up a mandatory market in 2005 - this trading scheme is voluntary and unregulated at present. But many millions are already being spent on "carbon credit" projects around the world.

And when the UNs global market comes on stream in January, the Financial Times predicts that "The burgeoning regulated market for carbon credits is expected to more than double in size to about $68.2 billion by 2010, with the unregulated voluntary sector rising to $4 billion in the same period."

The idea of emissions trading is not that revolutionary, by the way. It goes back more than a century to economists Alfred Marshall and Henry George. Their insight was that assigning property rights to the environment was a good way to protect it. The theory is that unless someone owns the environment, polluting it – in the absence of state regulation – costs nothing.

So what does all this mean for us?

Well, apart from the fact that much of our low-lying coastline may be waterlogged before the century is out (it's already happening to some Pacific islands, and scientists predict a three-foot rise in sea levels over the next few decades - about the same as our current tidal range), it means we could probably get the Europeans and others to finance costly renewable energy projects here that would solve our power generation problems, pollution woes and skyrocketing fossil fuel bill all at once.

Global forecasters say that governments and the private sector will invest $20 trillion in the world energy sector over the next 20 years. And a good chunk of this - about $210 billion annually they say — should be directed to alternative energy, carbon storage and energy efficiency technologies.

The Bahamas could tap into this investment through the Clean Development Mechanism. To qualify under this scheme, carbon offsetting projects need to show that they will reduce emissions compared to what would have happened in business as usual. Projects are certified by a special UN board and must be channeled through a "designated national authority". In our case, that is the BEST Commission.

When commissioning a new generator at BEC's Blue Hills power plant last year, former energy & environment minister Dr Marcus Bethel said he would seek to lessen our dependence on petroleum (which carried an import bill of $706 million last year alone) by exploring the introduction and commercialisation of alternative sources of energy.

"I am satisfied that we are up to the task," he said. "We are fully energised with our responsibility to bring about sustainable energy supplies - whether it be solar or wind energy - and in the long term to reduce our dependence on fossil fuels, in particular gasoline."

For evidence, Dr Bethel pointed to a pilot project between BEC and the American-operated Island School in South Eleuthera, which supplies solar- and wind-generated electricity to the community of Deep Creek. But despite glib talk about exploring alternative energy options, our politicos don't appear to have the slightest interest in stepping outside the box on this issue.

The prime example is BECs pending investment of $80 million to build a third conventional oil-fired power plant at Clifton that will add tens of millions of dollars to our national fuel bill and further pollute our environment. And Tough Call is aware that at least one substantial European investor tried to interest the Christie administration in a wind farm off the south coast of New Providence recently, but was rewarded with a series of blank stares.

Meanwhile, there are over 770 registered projects in the UNs Clean Development Mechanism scheme. They include hog farm methane recovery programmes in the Philippines, waste to energy plants in India and Brazil, wind power plants in China, Korea and the Dominican Republic, landfill gas extraction in Argentina, and oil field gas recovery in Qatar.

According to some experts, a growing acceptance of the reality of climate change combined with rising oil prices have helped build global interest in clean-energy technologies. Investment in wind power, for example, is projected to grow from $18 billion in 2006 to $60 billion within a decade; while solar power will expand from a $15.6 billion industry to $70 billion by 2016.

"This level of growth is more akin to the PC, wireless, and Web industries during their heyday than the usually staid and slow-moving energy sector, according to Clean Edge, Inc, a US-based market research firm that focuses on the renewable energy sector.

But more to the point, why are we spending millions of taxpayer dollars on oil-fired power plants around the country when there are private interests out there who are willing to invest in various energy generation projects? And when we haven't made the slightest effort to promote energy efficiency and conservation - through (for example) the use of compact fluorescent bulbs and solar water heaters?

The up front cost of renewable projects may still be high, but we don't necessarily have to come up with the cash - just the willingness. And encouraging individuals and companies to install their own micro-generators (such as rooftop solar panels) could make a huge impact by spreading the investment load.

Comments

[EB Christen]

Larry,

Great article, as usual. However, Bahamians are so lackadaisical on the 'basic' (ie garbage) pollution of neighborhood areas, beaches, schools and other public areas, which are readily visible and highly tangible, that asking them to think about coastal erosion, air quality and future sea levels, which are abstract, seems almost insurmountable.

I am not pointing this out to discourage, so much as to demonstrate that a lot of work is needed to change public environmental thinking. The battle for the environment must be fought vigorously on all fronts, but it really starts with teaching the young Bahamian kid that throwing his/her KFC, soda pop or candy wrapper on the ground is awful. It should then also be fought on the front of recycling, which is non-existent here.

By fighting on these two fronts vigorously, it won't be hard to push Bahamian consciousness towards clean energy for cars and power generation.

The goal is an environmentally aware and conscious Bahamian society on all levels because our ecosystem is far too fragile for us to be lackadaisical any longer.

That's my 2 cents.

[larry smith]

Of course you are quite right - and a lot of this stuff will go over the heads of a lot of people. But how many times can you say "don't litter" and get an interesting article.

I do know that the lawyer/politicos read this stuff avidly, and you just have to keep plugging away at them. Hopefully something will eventually filter through.

[Bob Knaus]

The CDM money helps to get around the one major stumbling block to wind and solar projects -- their high capital costs. With a guaranteed flow of CDM credits, financing becomes possible.

The larger problem with wind and solar is unpredictable availability. These technologies simply do not work for supplying the base load requirements of a power grid. They can only work as icing on the cake. Given the small size and highly distributed nature of the Bahamian electrical market, oil generation will continue to provide the bulk of electricity in the near and mid term.

Longer term, the Bahamas are ideally suited to ocean thermal energy conversion (OTEC). See http://en.wikipedia.org/wiki/Ocean_thermal_energy_conversion and http://www.nrel.gov/otec/what.html

This would provide 24/7 power to the Bahamas with no pollution and no carbon emissions. As a side benefit the generation plants produce desalinated water. If the new administration wants to try something visionary... here it is!

[larry smith]

You are right that there is no magic bullet. But a variety of approaches can help a lot with our relatively small demand. And the government could easily shift a lot of the financing burden to private interests, so we could better use that taxpayer money for schools, hospitals, roads, etc.

BEC cannot supply demand in this - or other islands - yet it remains illegal to co-generate. That is pure madness.

I have discussed OTEC before:

http://www.bahamapundit.com/2007/06/in_pursuit_of_o.html#more

It has a lot of potential here but involves high capital costs and is not yet commercially feasible.

[C.Lowe]

At least the government eliminated duty on solar panels and windmill generators.(I believe) But to make it effective, the same should be done for all associated equipment needed.
I.E. charge regulators, inverters, deep cycle batteries (different from car batteries)
Large guage D.C. voltage cables(copper) etc. And Solar concentrators.(reflective devices)
Even so, it is still quite expensive per K.W. generated.
The biggest barrier of course is up front cost.

[Bob Knaus]

Larry - I should have know you would already have covered OTEC, my apologies for not searching before commenting!

C.Lowe - your comment points out the general problem with policy-making through tax exemption. How does the central planner envision all the complexities? I think Larry... and others... might have written a thing or two about the problems with the Bahamian tax code :-)

On the broader subject of alternate energy solutions, I think the Bahamas should pitch itself to the industrialized nations as a research and test facility for solar, wind, OTEC, whatever. The nation features harsh environmental conditions (which is what you need for testing); a literate, educated, English-speaking workforce (which is what you need for research facilities); and a stable political/economic/legal system (which is what you need for long-term investments). If Bahamians were able to work alongside world-class scientists and engineers at such facilities, it would give them technical skills which they must now emigrate to obtain.

[Steffan Antonas]

Great article Larry,

The need to start focusing investment heavily on green technologies, especially petroleum substitutes is exacerbated, of course, by the rise of China and India on the world stage. Experts at the World Bank recently announced that the rapidly growing energy needs (especially for oil) of these two economic giants will significantly skew global energy production and consumption by 2030, which will subsequently lead to (among other things) a sharp rise in the global price of oil. This fact should not be overlooked by the Bahamian Government.

For those readers interested in what's happening around the globe with respect to the economic growth of China and India, there's an excellent book by Robyn Meredith called "The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us". The book provides answers to the questions "why and how" India and China have gotten to be where the are and is full of amazing insights on how the rest of the globe will be affected over the next 2 decades. Energy and Pollution, not surprisingly, are at the top of the list for global concerns.

[Interested]

Nice article as usual. However unfortunately the subject matter though relevant and important is technically and pragmatically beyond the scope and practice of the Bahamas at this time and for he forseeable future.

When we become capable of solving some of our most basic problems, simple ones, like fixing the potholes in the roads, providing simple and functional parks and recreation for the populace, or even keeping up to date with our tourism product which is our moneymaker, then and only then can we even began to deal with cutting edge ideas.

Unfortunately we just do not have the depth of talent in the country to be competitive globally in these types of pursuits.

[larry smith]

Here's an interesting perspective on global warming..

http://www.theglobeandmail.com/servlet/story/RTGAM.20070917.wdung0917/EmailBNStory/Science/home

[EB Christen]

Friedman at the NYTIMES makes some very pertinent points.

http://www.nytimes.com/2007/09/19/opinion/19friedman.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1190213727-kDPmujOMLaVrZLAiZN7KDQ

[Ben Deveaux]

I know several out island build projects who are too far from BEC to sensibly get power who have had to go on diesel generators but were not allowed to use windmill/ wind turbines, etc. Ludicrous!!