Why R&D in clean energy is the best government policy [Economics]

Introduction

Our generation is the first to widely accept the theory that coal consumption is (negatively) affecting our atmosphere. Coal does this when humans light it on fire and use it as a fuel in coal powered steam power plants. Consequently, it is one of the oldest and most mature methods of electricity generation known to man and is used globally as a primary means by which countries keep their lights on. The unfortunate part is by burning coal that brings it with the nasty side effect of increasing global greenhouse emissions. For comparison in 2000, 74% of global GHG emissions were due to energy demands leading to the by-product of carbon dioxide – the gas created once coal is lit afire. Global greenhouse emissions are tied to increases in global temperatures and have been credited over the years, with the more random weather we’ve experienced. Freak storms are predicted to increase even more with these higher occurrences of freak storms, it is the primary driver behind the global awareness campaign that is global warming.

Engineering aside

From an engineering point of view, when I hear skepticism of this causation being correlation, it annoys me. Specifically, that an increase in CO2 emmissions having no effect on global temperatures. If I believe that there’s a 10% chance of a specific action being catastrophic, and you believe the percentage is more like 0.1%, then under every imaginable scenario you buy insurance to hedge your bet (or you change your action to mitigate its effects). To think it’s correlation rather causation, it is an uneducated opinion and when I try to explain why my generation (one that is better read on climate change matters) believes it’s causation rather than correlation, I understand why it’s important to continue to raise awareness on the subject matter. Awareness and facts are the engineering way of changing minds and pressing government policy makers that inaction is costly.

— Back to the article —

Coal consumption really took off after a British engineer (James Watt) created the steam engine back in the mid 1700’s. To put this into perspective, coal consumption has increased 800 fold since the adoption of the steam engine in 1769. This was basically the first engine, that did work, & ran off of some kind of (high-pressure) steam. The steam in the engine turns a turbine (a magnet that’s inside of another magnet), creates AC power and that’s what we use whenever we turn on the lights, flip open our computers or even charge our phones. Two of the primary engineers to create this system were (as mentioned above) James Watt & Nikola Tesla – the guy who understood AC power and yes the guy the car company is also named after. To create this steam, humans usually just burn stuff, whether it’s uranium to power nuclear power plants, or coal to power coal powered power plants. We even use renewable forms which create no material side effects (e.g. production of greenhouse gas emissions) however they usually have other side effects (side effects).

For non-renewable forms of energy, you can always build the turbines that provide the electricity but it’s sometimes difficult to find the fuel to turn the turbine a la power the plant. This is because there can be hurdles which increase initial costs to establishing hydro electric power (no waterfalls), nuclear power (less expertise), wind and solar (still developing technology) as well as coal (may be expensive to import from other countries). When coal is found domestically, it can bring with it more widespread electricity production but with a corresponding increase in greenhouse gas emissions. It still brings the country more prosperity in a GDP sense. This is what’s happened in the last 150 years all over the western world and is poised to happen in the near future to India also. It’s a primary means by which India’s new prime minister is seeking to bring electricity to the remaining 300M Indians who don’t have it. Overall with more people having access to electricity, this allows people to be more productive because now when the sun goes down, people can continue to work or read or educate themselves rather than presently. This is the global trend and since the Western World already went through their period of using coal to fuel growth the rest of the East will go down this same path.

Why strictly domestic policies are going to be ineffective 

It’s predicted that worldwide coal use will increase by 37% by 2040, regardless of actions undertaken by the Western world due to this increase in the East phenomenon. Which brings me to what can the Western World do about it. Sitting in our closet and crying is not an option. The euphemism that a butterflies shutter in China can create a hurricane in the USA Midwest could also never have been so applicable. All the West can do is continue R&D and investment into solar. Whether it be nanotechnology that allows for efficiencies of solar to go from the 20-25% efficient they are now to the (hopefully) 90% range,  it will be a direct result of investment in renewable techonology. Tax breaks in that sector will spur growth and greater training of the student workforce in nanotechnology could surely make this a reality. Analysis from a recent $7B investment announced by the Wynne Liberals of Ontario shows she’s ready to budget $375M of the $7B on research & development or 5.4% of the total announced. Engineering companies typically spend 30% of total profits on R&D but since the government doesn’t declare profits, it’s hard to quantify the investment – especially when there’s no sign as to which projects in particular, the funding is going to. Without knowing which projects the funding is going to it’s difficult to know whether the funding was effective or not and really this just speaks to the lack of traceability for government funds.

P.S. Found a really neat tool online that let’s you visualize the top 10 producers of coal and their usage over the last 10 years here

 

Article was written by gtareguy (Greater Toronto area real Estate guy) . I release a new article every Friday and I write about economics, the nba and real estate in the GTA. 

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Author: gtareguy

Real Estate Investor Raptors fan (don't cry for me this year) Mech Eng Graduate

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