[This is an excerpt of a very interesting senate hearing that looks at how war can be caused by climate change (drought, hunger, rising sea levels), how climate change will affect infrastructure, how the European emissions trading scheme and renewable subsidies has been working out, the enormous amount of wood being burned in Europe to meet renewable standards, and so on. It’s also of interest to know what our representatives are thinking and who they are listening to. Much of the testimony not shown is about why we should export our natural gas and oil to Europe so that they aren’t held hostage by Russia. But why should we export LNG when Europe has 80% as much natural gas as America does? Alice Friedemann www.energyskeptic.com]
HRG. 113-623. 2014-7-22. U.S. Security implications of international energy and climate policies and issues. U.S. Senate 113th congress, 2nd session, 97 pages
EDWARD J. MARKEY, SENATOR MASSACHUSETTS
Right now dozens of wars and conflicts dot our world map, from the Sudanese desert to America’s longest war in Afghanistan. Two major factors have emerged in the modern era that act to strain the strands of stability until they snap—climate change and energy security. In two regions of our world, climate and energy have recently played major roles in exacerbating what were already tense times. In December 2010, a Tunisian street food vendor lit himself on fire in protest of government corruption and extreme poverty. That spark spread in Tunisia and ignited the Arab Spring. Yet, feeding this anger over years of corruption and autocratic rule was a more immediate hunger. In 2010, terrible droughts in Russia, in China, and floods in Pakistan decimated wheat harvests and created a global shortage. The price of wheat increased dramatically. The Middle East, home to the world’s top nine wheat importers, felt it acutely, especially since the region’s farmers struggled with their own parched fields. Much of Syria was gripped with the worst drought it had ever experienced. The price of bread skyrocketed across the region and demands for regime change were not far behind.
Another weapon has already been deployed in the Russian-Ukraine conflict and in wars across the globe—energy. Russia has already shut off the natural gas spigots to Ukraine. That is more than half of Ukraine’s gas supply gone. When winter arrives and natural gas demand spikes, this could become another political and humanitarian crisis, bringing suffering to Ukrainian families and challenges to the new government. Because of Europe’s reliance on Russian gas, Putin’s energy weapon gives him unparalleled leverage to continue his bullying tactics.
Energy profits can also inflict damage. ISIS, the rebel group destabilizing Iraq, was funded initially by Sunni oil sheiks. ISIS is no longer an upstart insurgency. They are a legitimate threat, consolidating their power around energy holdings as much as sectarian alliances. They have captured Iraqi oil fields. They control much of Syrian oil production, and now they are selling this oil on the black market. Revenues from these operations buy them credibility, weapons, and loyalty—valuable commodities for building a so-called ‘‘caliphate’’ in this volatile region.
Since the Industrial Revolution, our world has burned fossil fuels, increasing temperatures and destabilizing our climate. Since that time, we have become more dependent on these same fuels that have destabilized countries and drawn America into international conflicts.
Tunisia is not the first time famine has played a role in a regional conflict. In a 2007 congressional hearing of mine, one general told the story of Somalia, how drought had caused famine, famine had encouraged conflict, how U.S. military forces were sent to ensure food reached those people who needed it and was not used by warlords to gain further power, and how 18 U.S. soldiers lost their lives in what we now call Blackhawk Down.
Russia is not the first country to use energy as a weapon in geopolitics. Much has changed in the U.S. energy sector since OPEC’s devastating embargo four decades ago. The shale revolution has boosted U.S. oil production to record levels.
Yet much remains the same. Oil still commands a monopoly over our transportation sector. We remain dependent on foreign suppliers to meet nearly one- third of our needs, roughly the same share as 1975, when we banned the export of American oil.
We must do everything in our power today to mitigate the threats that will require military intervention tomorrow. If we fail in our responsibility, it is our men and our women in uniform that will get called upon to try to clean up the mess.
DANIEL Y. CHIU, PH.D., DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR STRATEGY AND FORCE DEVELOPMENT, U.S. DEPARTMENT OF DEFENSE, WASHINGTON, DC
Department of Defense’s primary responsibility is to protect our national security interests around the world. To do this, we need to … prepare for the possibility of unexpected developments, both in the near and long term, such as the effects of climate change, sea level rise, shifting climate zones, and more severe weather events, and how these effects could impact our national security. Some of these effects are already being seen today on military bases, installations, and other DOD infrastructure, such as increased flooding from sea level rise and storm surge. The effects of climate change may also compound instability in other countries and regions by affecting things like the availability of food, water, by instigating human migration and competition for natural resources. This could create significant instabilities and potentially provide an avenue for extremist ideologies and conditions that could foster terrorism or other challenges to U.S. national security.
AMOS J. HOCHSTEIN, DEPUTY ASSISTANT SECRETARY OF STATE FOR ENERGY DIPLOMACY, U.S. DEPARTMENT OF STATE, WASHINGTON, DC
Recent developments splashed across the front pages of newspapers around the globe serve as the latest reminders of the interplay between energy security and foreign policy. The critical nature of the geopolitics of energy is easily on display when you look at global oil supply disruptions, which are at historic levels of over 3 million barrels per day due to reduced output in Libya, Sudan and South Sudan caused by political instability, politically motivated declines in Nigeria and Venezuela, and reductions in Iran’s exports by over 50% due to effective U.S. sanctions.
Competition for access to and control of energy sources and supply routes can indeed be a source of conflict, and revenues from energy sales can provide funds that prolong conflict. Poor governance of natural resources can also contribute to conflict by allowing pervasive corruption to undermine accountability, deprive economic growth, and encourage civil unrest. As your former colleague Senator Lugar said in sponsoring his legislation, ‘‘the ‘resource curse’ affects [the United States] as well as producing countries. It exacerbates global poverty, which can be a seedbed for terrorism, it empowers autocrats and dictators, and it can crimp world petroleum supplies by breeding instability.’’
Senator MARKEY. The bottom line is that we fight trade wars over automobiles or computer chips. We fight real wars over food and energy. That is what differentiates those commodities. We have to keep that always in the front of our mind.
RADM (RET.) DAVID W. TITLEY
There are four important global trends which will provide additional fuel to the accelerating risks of climate change.
- Global population growth. Half a billion people have been added since the MAB completed its first report in 2007 and another half billion will be added by 2025. Most of this growth is in Africa and Asia, two of the areas likely to be most impacted by climate change.
- Urbanization. Nearly half of the world now lives in urban areas with 16 out of 20 of the largest urban areas being near coastlines. The result is more of the world’s population is at risk from extreme weather events and sea level rise.
- Global increase in the middle class, with an accompanying growth in demand for food, water, and energy. The National Intelligence Community predicts that by 2030 demand for food would increase by 35%, fresh water by 40%, and energy 50%. Even without the climate change, it will be a challenge to meet these growth targets. Climate change will further stress the world’s ability to produce food and drinkable water at levels necessary to meet demand. A 2012 National Intelligence Council assessment found that water challenges will likely increase the risk of instability and state failure, exacerbate regional tensions, and divert attention from working with the United States and other key allies on important policy objectives.
- The world is becoming more politically complex and economically and financially interdependent, so we believe it is no longer adequate to think of the projected climate impacts to any one region of the world in isolation. Climate change impacts, combined with globalization, transcend international borders and geographic areas of responsibility.
Accelerating risks around the world affect U.S. National Security
The world around us is changing. In recent years we have observed changing weather patterns manifest by prolonged drought in some areas and heavier precipitation in others. In the last few years we have seen unprecedented wildfires threaten homes, habitats, and food supplies, not only across the United States, but also across Australia, Europe, Central Russia, and China. Low-lying island nations are preparing for complete evacuation to escape rising sea levels.
Globally, we have seen recent prolonged drought act as a factor driving both spikes in food prices and mass displacement of populations, each contributing to instability and eventual conflict. In Syria, 5 years of drought decimated farms and forced millions to migrate to urban areas. In overpopulated cities, these climate refugees found little in the way of jobs and were quickly disenfranchised by the government. The ongoing strife in Syria has been exacerbated by drought and rural to urban migration. In this way climate change has exacerbated a region already torn by political and ethnic tensions, serving as a catalyst for conflict.
Over the coming decades we are concerned about the projected impacts of climate change on those areas already stressed by water and food shortage and poor governance—these span the globe, but present the greatest short-term threat.
In the longer term it is those areas that will be threatened by rising sea level that are most at risk. There will be only so much we can do to keep the sea out, and in some areas the sea will flow over the walls we build, in some it will flow under or around the walls and make the land and aquifers not useable. We are concerned about low lying islands in the Pacific and great deltas including the Mekong, the delta of Bangladesh, the Nile delta in Egypt, the Mississippi delta and whole regions like the Everglades. Seawater inundation will drastically cut food production in many of these areas and cause millions to lose their ability to live on these retreating areas. Migration will become a larger form of adaptation. We will need to learn how to accept large transnational migration of people peacefully.
Increasing Impacts on Military Readiness
We expect to see an increased demand for forces across the full spectrum of operations.
Domestically in response to extreme weather events and wildfires in the U.S. will increase demand for National Guard, and Reserves. The frequency, severity, and probability that these events may happen simultaneously will also likely increase demand for Active Duty Forces to provide defense support for civilian authority (DSCA). This causes us concern because, in a leaner military, many of our capabilities reside in the Guard and Reserve and if they are being used domestically they are less available to respond to worldwide crisis. We saw this impact following tropical storm Sandy.
Climate change will be a catalyst for conflict in fragile areas and U.S. military involvement could be an option in response to the conflicts.
Our bases will be increasingly at risk from the effects of climate change. Our bases are where we generate readiness. It is where we train, garrison, repair, maintain and prepare to deploy. Our bases are vulnerable to sea level rise, extreme weather including drought, which restricts training because of the threat of wildfire, and in the future increased precipitation in the form of rain and snow may limit training.
Climate change will cause the military to be deployed to harsher environments. Higher temperatures will stress equipment and people
The Nation depends on critical infrastructure for economic prosperity, safety, and the essentials of everyday life. Projected climate change will impact all 16 critical infrastructure sectors identified by Homeland Security. We are already seeing how extreme heat is damaging the national transportation infrastructure such as roads, rail lines, and airport runways. We also note that much of the Nation’s energy infrastructure—including oil and gas refineries, storage tanks, power plants, and electricity transmission lines—are located in coastal floodplains, where they are increasingly threatened by more intense storms, extreme flooding, and rising sea levels. Projected increased temperatures and drought across much of the nation will strain energy systems with more demand for cooling, possibly dislocate and reduce food production, and result in water scarcity. Since much of the critical infrastructure is owned or operated by the private sector, government solutions alone will not be able to address the full range of climate-related challenges.
DAVID L. GOLDWYN, NONRESIDENT SENIOR FELLOW, ENERGY SECURITY INITIATIVE AT THE BROOKINGS INSTITUTION, WASHINGTON, DC
The national security challenges the United States faces across the globe have inherent energy components. The most prominent issues include the threat posed by Iran’s nuclear program, continued Russian efforts to foment instability in Ukraine, the emergence of the Islamic State of Iraq and the Levant (ISIL) as a destabilizing force in Syria and Iraq, continued instability in North Africa, and the recent acceleration of the Israeli-Palestinian conflict. These are conflicts involving a great percentage of the world’s major energy suppliers. We face additional challenges to the stability of Central America and the Caribbean, as Venezuela’s economic deterioration puts its ability to provide credit support for regional energy purchases through Petrocaribe at increasing risk. Energy poverty in Africa and South Asia pose risks to stability in those regions. The way in which each of these issues is managed or resolved has implications for global energy markets and by extension our own economic growth and prosperity.
Climate change itself poses a significant risk to national security. The Pentagon’s Quadrennial Defense Review, released in March 2014, identifies climate change as a threat multiplier capable of exacerbating poverty, environmental degradation, political instability, and social tensions—all of which contribute to terrorist activity and other forms of violence.1 A report issued by the government-funded CNA Military Advisory Board, released in May 2014, drew similar conclusions and discussed, among other issues, the contributions of climate-induced drought toward fomenting regional and ethnic tensions in the Middle East and Africa.2
Natural gas is the obvious fuel choice to serve as a bridge to scalable renewable energy. While we should continue to pursue a future with abundant use of renewable energy, renewables will not be able to be adopted for grid based systems at scale in the developing world until the battery storage challenge is addressed.
1 Quadrennial Defense Review 2014, United States Department of Defense, March 2014, p. 8.
2 National Security and the Accelerating Risks of Climate Change, CNA Military Advisory Board, May 2014.
3 Jan H. Kalicki and David L. Goldwyn, ‘‘Energy and Security: Strategies for a World in Transition,’’ Woodrow Wilson Center Press and Johns Hopkins University Press, 2013
4 W. David Montgomery, et al, ‘‘Macroeconomic Impacts of LNG Exports from the United States,’’ NERA Economic Consulting, December 2012; Daniel Yergin, et al., ‘‘U.S. Crude Oil Export Decision: Assessing the impact of the export ban and free trade on the U.S. economy,’’ IHS Global Insight, May 2014.
5 ‘‘World Energy Outlook 2013,’’ International Energy Agency, November, 2013.
6 Peggy Hollinger, Christian Oliver, and Jack Farchy, ‘‘Europe risks ‘significant’ gas shortages this winter,’’ Financial Times, July 11, 2014.
7 Tim Gosling, ‘‘Slovak gas link to give Ukraine ‘chance of lasting through the winter’,’’ Financial Times, July 8, 2014.
8 For more information about this issue see: David L. Goldwyn, ‘‘DOE’s New Procedure for Approving LNG Export Permits: A More Sensible Approach,’’ Brookings Institution, June 2014.
9 David L. Goldwyn, ‘‘Refreshing European Energy Security Policy: How the U.S. Can Help,’’ Brookings Institution, March 2014.
10 Conglin Xu, ‘‘Global Oil Market Well Supplied Despite Disruptions to Producers,’’ Oil and Gas Journal, July 47 2014.
11 David L. Goldwyn and Cory R. Gill, ‘‘Uncertain Energy: The Caribbean’s Gamble with Venezuela,’’ Brookings Institution, July 2014.
12 Jed Bailey, Nils Janson, and Ramon Espinasa, Pre-Feasibility Study of the Potential Market for Natural Gas as a Fuel for Power Generation in the Caribbean, Inter-American Development Bank, December 2013.
13 EIA Electric Power Monthly, June 23, 2014.
MICHAEL BREEN, EXECUTIVE DIRECTOR, TRUMAN NATIONAL SECURITY PROJECT & CENTER FOR NATIONAL POLICY, WASHINGTON, DC
While advances in technology have improved America’s energy posture in the short term, many of our long-standing vulnerabilities persist and are likely to worsen in the longer term.
The lack of diversified energy sources around the world continues to create undue risk to American national security, the security of our key allies, and global stability and prosperity.
The United States relies on oil for more than 93% of our transportation sector, and most advanced economies are in a roughly similar position. Given that oil is a globally traded fungible commodity, this single-source dependence on oil as a transportation fuel exposes the U.S. and our allies to the full range of risk associated with a complex and frequently manipulated global petroleum supply system. In other words, security and oil are deeply intertwined, with largely negative effects.
Oil resources and infrastructure are therefore key strategic points on the battlefield, shaping the course of the conflict at the tactical and operational levels of war.
One of ISIL’s primary objectives during its recent offensive in Iraq was the refinery in Baiji, the largest in Iraq. Kurdish military action in the conflict to date has been almost entirely defensive, with the sole exception of an early push to secure oil fields. KRG’s seizure of Kirkuk oil province, in part intended to establish defense in depth for Kurdish areas, will also give the Kurds even greater financial and political autonomy from Baghdad. Regional instability and conflict within and between states across the MENA region is driven, in part, because of the uneven distribution of energy resources. This is certainly true in Iraq. Nearly 75% of Iraqi oil production is focused in the Shia-majority south, and the main export terminal in Basra is located there as well. Baghdad’s failure to redistribute revenue from that oil production evenly across Iraq has been a major driver of sectarian and regional conflict. Prized oil fields in the south currently remain productive, but are vulnerable to insurgent attacks and remain an important military prize for all parties to the conflict. Companies will most likely evacuate workers, and quickly, if there are serious security concerns in Basra, a real possibility. This is critical, because continued conflict in Iraq has a significant destabilizing effect on the deeply interdependent global oil market. This instability is already leading to economic and geopolitical consequences around the world, and could impact our economic recovery here at home.
Dramatic increases in Iraq’s oil production are an essential element in most projections of global supply growth. In IEA’s World Energy Outlook, for example, the most likely scenario projects Iraq to double its oil production to 6.1mb/d by 2020, and 8.3 mb/d by 2035.
The IEA projects that Iraq will provide nearly 45% of anticipated global supply growth over the next decade. All of that projected progress is currently at risk. Longer term dynamics, while more difficult to predict, are potentially even more disturbing.
Investments in the Middle East may fall short of projections if armed conflict and cascading instability across the region persist, leading to a potential supply shortfall in the 2020s.
Even as Russia has used energy dependence as a sword against Ukraine, it has employed similar dynamics as a shield against Western European interference in the conflict. Sixteen percent of Europe’s total natural gas consumption comes from Russia through Ukraine.
Earlier this year, Russia and China signed a 30-year gas supply agreement worth approximately $400 billion. This agreement may draw the 2 great powers into deeper alignment, with negative repercussions for the U.S. and our allies.
More than 26% of Japan’s electricity came from nuclear power plants before the Fukushima disaster. Now, with all of its nuclear plants on indefinite suspension, Japan is the world’s leading importer of liquefied natural gas. Japan alone consumed 37% of global LNG in 2012. To meet this need, Japan is reportedly considering a natural gas pipeline to Russia to bring in LNG from Siberia. While this would have some benefits for Japan, Russia’s demonstrated willingness to use energy supplies for coercion should give us pause.
IEA projects that U.S. tight oil production will reach a plateau in the 2020s, before dropping to 9.2 mb/d by 2035—leaving us in much the same position we were in before the shale revolution. The global market is projected to remain fairly tight overall along the way, meaning price volatility will continue to be a problem over the next several decades.
This places the U.S. and our allies at risk of continued overreliance on the same large-scale holders of conventional resources, creating cascading risks and impacts around the globe and across the full range of human activity.
Given these dynamics, a singular focus on fossil fuels production and export simply plays into the strengths of our competitors while leaving the U.S. and our allies with continued vulnerabilities.
MARY HUTZLER, DISTINGUISHED SENIOR FELLOW, INSTITUTE FOR ENERGY RESEARCH, BERLIN, MD
EUROPEAN UNION EMISSIONS TRADING SCHEME
The Emissions Trading Scheme (ETS) was launched by the EU in January 2005 as an attempt to comply with the 1997 Kyoto Protocol. It was the world’s first cross-border greenhouse gas emissions (GHG) trading program, regulating more than 11,500 installations and about 45% of total EU carbon dioxide emissions. Under the ETS, European companies must hold permits to allow them to emit carbon dioxide. A certain number of those permits were distributed at no cost to the industries that must reduce their output of carbon dioxide emissions. If businesses emit less carbon dioxide than the permits they hold, they can either keep the excess permits for future use or sell the excess permits and make a profit on them.
The early results of the program were that EU emissions were not significantly lowered until the global recession hit in 2008, which lowered emissions for all countries.
There were also misuses and abuses in the system because of its complexity, politicized decision-making, and the incentive to manipulate it.
Before the global recession hit, some EU countries saw faster carbon dioxide emissions growth than the United States, which was not subject to the policy. From 2000 to 2006, the rate of growth of European emissions under the cap-and-trade policy was almost 5 times higher than the rate of growth in emissions in the United States. 1 After the global recession, however, EU carbon dioxide emissions in 2009 were almost 8% below 2008 levels. 2 Due to the global recession, carbon dioxide emissions, in many cases, were lowered below the targets set by the cap-and- trade policy, so companies did not have to take further actions to reduce their emissions. 3 Severe downturns in economic activity result in significant reductions in emissions.
Because the free allocation of permits was based on future estimates of higher emissions levels, which did not materialize, there were too many free government-issued permits. As a result, companies hit hard by the recession were able to make profits by selling the excess permits but chose not to pass those savings onto their customers. Consumers ended up paying higher energy and commodity costs; taxpayers paid for the program’s implementation; and a new middleman was created to run the carbon permit trading program. 4
Europe found the costs of the program to be large. In 2006, individual business and sectors had to pay $24.9 billion for permits totaling over 1 billion tons. In 2011, the global carbon markets were valued at US$176 billion, with 10.3 billion carbon credits traded.5
The World Watch Institute estimated the costs of running a trading system designed to meet the EU’s Kyoto obligations at about $5 billion. The costs of a trading system to meet the EU’s commitments of a 20% reduction by 2020 (against a 1990 baseline) were estimated to be about $80 billion annually. 6
Unlike traditional commodities, which at some time during the course of their market exchange must be physically delivered to someone, carbon credits do not represent a physical commodity, which makes them particularly vulnerable to fraud and other illegal activity.
Carbon markets, like other financial markets, are at risk of exploitation by criminals due to the large amount of money invested, the immaturity of the regulations and lack of oversight and transparency.
The illegal activities identified include the following :
- Fraudulent manipulation of measurements to claim more carbon credits from a project than were actually obtained
- Sale of carbon credits that either do not exist or belong to someone else;
- False or misleading claims with respect to the environmental or financial benefits of carbon market investments
- Exploitation of weak regulations in the carbon market to commit financial crimes, such as money laundering, securities fraud or tax fraud;
- Computer hacking/ phishing to steal carbon credits and theft of personal information.
German prosecutors searched 230 offices and homes of Deutsche Bank, Germany’s largest bank, and RWE, Germany’s second-biggest utility, to investigate 180 million euros ($238 million U.S.) of tax evasion linked to emissions trading.
The U.K., France, and the Netherlands also investigated carbon traders, who committed fraud by collecting the tax, and disappearing without returning the tax funds.
According to estimates from Bloomberg New Energy Finance, about 400 million metric tons of emission trades may have been fraudulent in 2009, or about 7% of the total market.8
Tax evasion linked to emissions trading is still a problem. This year Frankfurt prosecutors sought the arrest of a British national in connection with suspected tax fraud worth 58 million euros ($80 million).9
Another problem is the lack of predictability regarding the emissions permit price. Companies need to know the price for long-term planning to decide on what actions they should take. The EU permit price ranged by a factor of 3, but even at the higher price range, it was insufficient to meet the emission reduction targets before the global recession hit. 10
A cap-and-trade policy is a highly complex system to implement because there are a large number of participants and the components of the system are difficult to get right as EU’s experience has shown.
Last year, the EU commenced phase three of the ETS toward meeting their target of a 40% reduction in greenhouse gas emissions below 1990 levels by 2030.11 Phase 3, which has a number of significant rule changes, will continue until 2020. As of 2011, carbon dioxide emissions of the original 27 member EU were just 8% below 1990 levels, and the majority of the reduction was achieved by the global recession.
That means the EU has a long way to go to meet its target. In the meantime, energy prices have increased and more and more Europeans are facing fuel poverty, meaning they pay more than 10% of their household income for energy. For example, industrial electricity prices are 2 to 5 times higher in the EU than in the United States and are expected to increase more. Europe’s once comfortable middle class is being pushed into energy poverty as a result of the carbon reduction measures and EU’s renewable programs. According to the European Commission, electricity prices in the Organization for Economic Cooperation (OECD) Europe have risen 37% more than those in the United States when indexed against 2005 prices. By 2020, at least 1.4 million additional European households are expected to be in energy poverty. EU’s ETS and clean energy programs have not significantly reduced emissions, but rather have dramatically raised energy prices, increased national debt, driven businesses out of Europe, led to massive job losses and unemployment, greatly increased energy poverty, and have been plagued by fraud and corruption. This economic malaise, in turn, has made Europe less capable of expending funds for their national defense needs and has contributed to the weakening of multilateral defense organizations like NATO. The European members of NATO are now spending less than 2% of their GDP on defense spending, which is below NATO guidance. 12
AUSTRALIA’S CARBON TAX
Australia implemented a carbon tax in 2012. The carbon tax, which is currently set at $24.15 Australian currency ($22.70 U.S.) per metric ton, was initially implemented in July 2012 and was designed as a precursor to a cap and trade scheme, with the transition to a flexible carbon price as part of the trading program beginning in 2015. The tax applies directly to around 370 Australian businesses. But the September 7, 2013, election put a damper on the program. Australia’s new government wants to dismantle the legislation that levies fees on carbon emissions and replace it with taxpayer funded grants to companies and projects that reduce emissions. The Emissions Reduction Fund would be funded at A$2.55 billion ($2.4 billion U.S.). 13
Repealing Australia’s carbon tax on July 1, 2014, is estimated to :
- Reduce the cost of living of its citizens—the Australian Treasury estimates that removing the carbon tax in 2014 to 2015 will reduce the average costs of living across all households by about $550 more than they would otherwise be in 2014 to 2015.
- Lower the cost of retail electricity by around 9 percent and retail gas prices by around 7 percent than they would otherwise be in 2014 to 2015.
- Boost Australia’s economic growth, increase jobs and enhance Australia’s international competitiveness by removing an unnecessary tax, which hurts businesses and families.
- Reduce annual ongoing compliance costs for around 370 entities by almost $90 million per annum.
- Remove over 1,000 pages of primary and subordinate legislation.
Australia’s lower House of Parliament voted to scrap the carbon tax on July 14, and the Australian Senate voted in favor on July 17, 2014.15 According to Tony Abbott, Australian Prime Minister speaking at a news conference, ‘‘Today the tax that you voted to get rid of is finally gone, a useless destructive tax which damaged jobs, which hurt families’ cost of living and which didn’t actually help the environment is finally gone.’’ The repeal will save Australian voters and business around A$9 billion ($8.4 billion U.S.) a year.16 Australia’s residents found the carbon tax experience to include soaring electricity prices, rising unemployment, income tax hikes, and additional command-and-control regulations. Electricity prices increased 15 percent over the course of a year (which included the highest quarterly increase on record), and companies laid off workers because of the tax. Further, government data shows that the tax had not reduced the level of Australia’s domestically produced carbon dioxide emissions, which is not surprising, since under the carbon tax Australia’s domestic emissions were not expected to fall below current levels until 2045.17
To reduce greenhouse gas emissions to comply with the Kyoto Protocol, Europe (EU) set mandates for renewable generation (20% of its electricity to be generated by renewable energy by 2020) coupled with hefty renewable subsidies as enticements.
The Europeans have found that these subsidies have grown too large, are hurting their economies, and as a result, they are now slashing the subsidies, so enormous that governments are unilaterally rewriting their contracts with renewable generating firms and reneging on the generous deals they initially provided.
RENEWABLE SUBSIDIES IN EUROPE
In order to enhance renewable energy sources in Spain, the Government enacted legislation to reach 20% of electric production from qualified renewable energy by 2010. To meet this target, the government found it needed to provide incentives to ensure the market penetration of renewable energy, including providing above-market rates for renewable-generated electricity and requiring that electric utility companies purchase all renewable energy produced. In 1994, Spain implemented feed-in tariffs to jump start its renewable industry by providing long-term contracts that pay the owners of renewable projects above- market rates for the electricity produced.18
Because renewable technologies generally cost more than conventional fossil fuel technologies, the government guaranteed that renewable firms would get a higher cost for their technologies. But, because the true costs of renewable energy were never passed on to the consumers of electricity in Spain, the government needed to find a way to make renewable power payments and electricity revenues meet. Since 2000, Spain provided renewable producers $41 billion more for their power than it received from its consumers. 19 (For reference, Spain’s economy is about one-twelfth the size of the U.S. economy.) In 2012, the discrepancy between utility payments to renewable power producers and the revenue they collected from customers was 5.6 billion euros ($7.3 billion), despite the introduction of a 7% on generation. 20 The 2012 gap represented a 46% increase over the previous year’s shortfall.
A massive rate deficit should not come as a surprise. For 5 years, IER has warned of this problem beginning when Dr. Gabriel Calzada released his paper on the situation in Spain and testified before Congress.21 He found that Spain’s ‘‘green jobs’’ agenda resulted in job losses elsewhere in the country’s economy. For each ‘‘green’’ megawatt installed, 5.28 jobs on average were lost in the Spanish economy; for each megawatt of wind energy installed, 4.27 jobs were lost; and for each megawatt of solar installed, 12.7 jobs were lost. Although solar energy may appear to employ many workers in the plant’s construction, in reality it consumes a large amount of capital that would have created many more jobs in other parts of the economy. The study also found that 9 out of 10 jobs in the renewable industry were temporary. 22, 23
Spain’s unemployment rate has more than doubled between 2008 and 2013. In January 2013, Spain’s unemployment rate was 26% the highest among EU member states.24 Spain’s youth unemployment (under the age of 25) reached 57.7% in November 2013, surpassing Greece’s youth unemployment rate of 54.8% in September 2013. 25
The Spanish Government did not believe Dr. Calzada 5 years ago, but they have now been hit in the face with reality. To recover the lost revenues from the extravagant subsidies, the Spanish Government ended its feed-in tariff program for renewables, which paid the renewable owners an extremely high guaranteed price for their power as can be seen by the deficit. Currently, renewable power in Spain gets the market price plus a subsidy which the country deems more ‘‘reasonable.’’ Companies’ profits are capped at a 7.4% return, after which renewable owners must sell their power at market rates. The measure is retroactive to when the renewable plant was first built.26 Therefore, some renewable plants, if they have already received the 7.4% return, are receiving only the market price for their electricity.
Wind projects built before 2005 will no longer receive any form of subsidy, which affects more than a third of Spain’s wind projects. As a consequence of the government’s actions to rein in their subsidies and supports, Spain’s wind sector is estimated to have laid off 20,000 workers.
The Spanish Government also slashed subsidies to solar power, subsidizing just 500 megawatts of new solar projects, down from 2,400 megawatts in 2008.27 Its solar sector, which once employed 60,000 workers, now employs just 5,000. In 2013, solar investment in Spain dropped by 90 percent from its 2011 level of $10 billion.
Spain’s 20% renewable energy share of generation from wind and solar power has come at a very high cost to the nation.
In Germany, as part of the country’s ‘‘Energiewende,’’ or ‘‘energy transformation,’’ electric utilities have been ordered to generate 35% of their electricity from renewable sources by 2020, 50% by 2030, 65% by 2040, and 80% by 2050. To encourage production of renewable energy, the German government instituted a feed-in tariff early, even before Spain.
In 1991, Germany established the Electricity Feed-in Act, which mandated that renewables ‘‘have priority on the grid and that investors in renewables must receive sufficient compensation to provide a return on their investment irrespective of electricity prices on the power exchange.’’ 28 In other words, utilities are required to purchase electricity from renewable sources they may not want or need at above-market rates. For example, solar photovoltaics had a feed-in tariff of 43 euro cents per kilowatt hour ($0.59 U.S. per kilowatt hour), over 8 times the wholesale price of electricity and over 4 times the feed-in tariff for onshore wind power. A subsequent law passed in 2000, the Renewable Energy Act (EEG), extended feed-in tariffs for 20 years.29 Originally, to allow for wind and solar generation technologies to mature into competitive industries, Germany planned to extend the operating lives of its existing nuclear fleet by an average of 12 years. But, the Fukushima nuclear accident in Japan caused by a tsunami changed Germany’s plans and the country quickly shuttered 8 nuclear reactors and is phasing out its other 9 reactors by 2022, leaving the country’s future electricity production mostly to renewable energy and coal. 30
Coal consumption in Germany in 2012 was the highest it has been since 2008, and electricity from brown coal (lignite) in 2013 reached the highest level since 1990 when East Germany’s Soviet-era coal plants began to be shut down. German electricity generation from coal increased to compensate for the loss of the hastily shuttered nuclear facilities. Germany is now building new coal capacity at a rapid rate, approving 10 new coal plants to come on line within the next 2 years to deal with expensive natural gas generation and the high costs and unreliability of renewable energy.31 As a result, carbon dioxide emissions are increasing.
While the United States is using low cost domestic natural gas to lower coal-fired generation, in Germany, the cost of natural gas is high since it is purchased at rates competitive with oil. Also, Germany is worried about its natural gas supplies since it gets a sizable amount from Russia. While domestic shale gas resources are an alternative, particularly since the Germans are hydraulic fracturing pioneers and have used the technology to extract tight gas since the 1960s, Germany’s Environment Minister has proposed a prohibition on hydraulic fracturing until 2021 in response to opposition from the Green Party.33 According to the Energy Information Administration, Germany has 17 trillion cubic feet of technically recoverable shale gas resources.34
Germany has some of the highest costs of electricity in Europe and its consumers are becoming energy poor. In 2012, the average price of electricity in Germany was 36.25 cents per kilowatt hour,35 compared to just 11.88 cents for U.S. households, triple the U.S. average residential price.36 These prices led Germany’s Energy Minister to recently caution that they risk the ‘‘deindustrialization’’ of the economy.
In addition to high electricity prices, Germans are paying higher taxes to subsidize expensive green energy. The surcharge for Germany’s Renewable Energy Levy that taxes households to subsidize renewable energy production increased by 50 percent between 2012 and 2013—from 4.97 U.S. cents to 6.7 cents per kilowatt hour, costing a German family of 4 about $324 US per year, including sales tax.37 The German Government raised the surcharge again at the start of this year by 18% to 8.61 US cents per kilowatt hour representing about a fifth of residential utility bills,38 making the total feed-in tariff support for 2014 equal to $29.6 billion US.39 As a result, 80 German utilities had to raise electricity rates by 4%, on average, in February, March, and April of this year.
The poor suffer disproportionately from higher energy costs because they spend a higher percentage of their income on energy. As many as 800,000 Germans have had their power cut off because of an inability to pay for rising energy costs, including 200,000 of Germany’s long-term unemployed.40
Adding to this is a further disaster. Large offshore wind farms have been built in Germany’s less populated north and the electricity must be transported to consumers in the south. But, 30 wind turbines off the North Sea island of Borkum are operating without being connected to the grid because the connection cable is not expected to be completed until sometime later this year. Further, the seafloor must be swept for abandoned World War II ordnance before a cable can be run to shore. The delay will add $27 million to the $608 million cost of the wind park. And, in order to keep the turbines from rusting, the turbines are being run with diesel. 41 42
Germany’s power has been strained by new wind and solar projects both on and offshore, making the government invest up to $27 billion over the next decade to build about 1,700 miles of high-capacity power lines and to upgrade existing lines. The reality is that not only is renewable energy more expensive, but it also requires expensive transmission investments that existing sources do not, thus compounding the impact on consumers and businesses.
Germany knows reforms are necessary. On January 29, the German Cabinet backed a plan for new commercial and industrial renewable power generators to pay a charge on the electricity they consume. As part of the reform of the Renewable Energy Sources Act, the proposal would charge self-generators 70% of the renewable subsidy surcharge, (i.e. the 6.24 cents per kilowatt hour). Under the proposal, the first 10 megawatt hours would be exempt for owners of solar photovoltaic projects that are less than 10 kilowatts. According to the German Solar Energy Industry Association, about 83% of solar self-generators would be subject to the new charge. Another reform being considered is a reduction in the feed-in tariff from the current average of 23.47 U.S. cents per kilowatt hour to 16.56 U.S. cents per kilowatt hour.43 On July 11, Germany’s upper House of Parliament passed changes to the Renewable Energy Sources Act, which will take effect as planned on August 1. The law lowers subsidies for new green power plants and spreads the power-price surcharge more equally among businesses.44
Unlike Spain and Germany, the United Kingdom (U.K.) started its feed-in-tariff program to incentivize renewable energy relatively late, in 2010.45 Hydroelectric, solar, and wind units all have specified tariffs that electric utilities must pay for their energy, which are above market rates. Like the other countries, the U.K. has a mandate for renewable energy. The United Kingdom is targeting a 15% share of energy generated from renewable sources in gross final energy consumption and a 31% share of electricity demand from electricity generated from renewable sources by 2020.46 The U.K. generates about 12% of its electricity from renewable energy today. The increased renewable power will cost consumers 120 pounds a year (about $200) above their current average energy bill of 1,420 pounds ($2,362). 47 The U.K. is closing coal-fired power plants to reduce carbon dioxide emissions in favor of renewable energy. In the U.K., 8,200 MW of coal-fired power plants have been shuttered, with an additional 13,000 MW at risk over the next 5 years, according to the Confederation of U.K. Coal Producers. 48 The U.K.’s energy regulator is worried that the amount of capacity over-peak demand this winter will be under 2%—a very low, scary amount for those charged with keeping the lights on—and the lowest in Western Europe.
Beginning in January 2016, the European Union will require electric utilities to add further emission reduction equipment to plants or close them by either 2023 or when they have run for 17,500 hours. Because the equipment is expensive, costing over 100 million pounds ($167 million) per gigawatt of capacity, only one U.K. electricity producer has chosen to install the required technology. Most of the existing coal-fired plants are expected to be shuttered since only one coal-fired power plant has been built in the U.K. since the early 1970s.
To deal with the reliability issue, the U.K. Government is hosting an auction for backup power, but it is unclear how it will work. According to the Department for Energy and Climate Change, electricity producers will be able to bid in an auction to take place this December to provide backup power for 2018. The program, called a capacity market, is expected to ensure sufficient capacity and security of supply. The Department estimates that the U.K. power industry needs around 110 billion pounds ($184 billion) of investment over the next 10 years. The Renewable Energy Foundation (REF) estimates that consumers currently pay more than £1 billion ($1.66 billion) a year in subsidies to renewable energy producers—twice the wholesale cost of electricity. Those subsidies are expected to increase to £6 billion ($10 billion) a year by 2020 to meet a 30% target of providing electricity from renewable energy. 49 As a result, a growing number of U.K. households are in energy poverty. In 2003, roughly 6% of the United Kingdom’s population was in energy poverty; a decade later, nearly one-fifth of the nation’s population is in energy poverty.
As a result, the government has proposed that renewable companies sell their electricity to the national grid under a competitive bidding system. The new proposal limits the total amount of subsidies available for green energy, which were previously effectively limitless. The reduction in subsidies has led to renewable developers scrapping plans amid claims that the proposal will make future renewable development unprofitable.50
The U.K. is both cutting the level of their feed-in tariffs and the length of time they are available. Effective July 1, 2013, the feed-in tariff for solar generated electricity was reduced from 15.44 pence (24 cents U.S.) to 14.90 pence per kilowatt hour. In October 2011, it was 43.3 pence (67.5 cents U.S.) per kilowatt hour—almost three times the reduced level.51 Also, the length of time for the subsidy entitlement is being reduced—for example, it will be 15 years instead of 20 years for wind farms built after 2017.
The reductions indicate that the original subsidies were overgenerous and that wind turbines are unlikely to have an economic life of 20 years. 52
But, according to the Climate Change Committee (CCC), without tougher action, Britain will miss its 31% target of cutting emissions, managing only a 21% reduction instead, which will hinder meeting its commitment to cut greenhouse gas emissions by 80% of 1990 levels by 2050. The CCC called for more progress on insulating homes, promoting the uptake of ground source and air source heat pumps,
Similar to Germany and Spain, Italy also used feed-in tariffs to spur renewable development, and found it too costly. In 2005, Italy introduced its solar subsidy plan, providing solar power with premiums ranging from Euro 0.445 ($0.60 U.S.) per kilowatt hour to euro 0.490 ($0.66 U.S.) per kilowatt hour. 54 That subsidy resulted in the construction of more than 17,000 megawatts of solar capacity. In 2011, Italy’s solar market was the world’s largest, but that market has slowed due to the removal of subsidies. Italy ceased granting feed-in tariffs for new installations after July 6, 2013, because its subsidy program had reached its budget cap—a limit of 6.7 billion euros ($8.9 billion) as of June 6, 2013. The law restricts above-market rates for solar energy a month after the threshold is reached. Without tariffs, the Italian solar market will need to depend on net metering (where consumers can sell the power they generate themselves to the grid) and income tax deductions for support.55
Italy also undertook other measures. In 2012, the government charged all solar producers a 5-cent tax per kilowatt hour on all self-consumed energy. The government also curtailed purchasing power from solar self-generators when their output exceeded the amount the system needed. Those provisions were followed in 2013 by the government instituting a ‘‘Robin Hood tax’’ of 10.5% to renewable energy producers with more than $4.14 million US in revenue and income greater than $414,000 US. 56 According to Italy’s solar industry, the result of these and other changes has been a surge in bankruptcies and a massive decrease in solar investment.
EUROPE’S WOOD CONSUMPTION
Besides incentivizing wind and solar generation, EU is also consuming wood to satisfy its renewable mandate of 20% of generation from renewable energy by 2020.
According to the Economist, wood, the fuel of preindustrial societies, represents about half of all renewable energy consumed in the European Union in some form or another—sticks, pellets, sawdust. 57
In Poland and Finland, wood supplies more than 80% of renewable energy demand. In Germany, despite its push and subsidization of wind and solar power, 38% of non-fossil fuel consumption comes from wood.
According to the International Wood Markets Group, Europe consumed 13 million metric tons of wood pellets in 2012 and its demand is expected to increase to 25 to 30 million tons a year by 2020.
According to the National Firewood Association, the 2012 European consumption of wood pellets is equivalent to over 4 million cords of wood, which equates to over 4 million ‘‘big’’ trees and over 8 million ‘‘average size’’ trees. 58
Because Europe does not produce enough timber to meet this demand, imports of wood pellets are increasing. They increased by 50% in 2010. According to the European Pellet Council, global trade in wood pellets is expected to increase five- or six-fold to 60 million metric tons by 2020. Much of that will come from new wood- exporting businesses that are booming in western Canada and the southern United States. According to a report by Wood Resources International, the southern United States surpassed Canada last year as the leading exporter of wood pellets to Europe, exporting in excess of 1.5 million tons. Those exports are expected to reach 5.7 million tons in 2015. During the third quarter of 2012, three companies announced plans for new pellet plants in Georgia and six others were under construction in the south, together adding as much as 4.2 million tons of capacity by 2015. 59 The increase in wood consumption has caused an escalation in prices. According to data published by Argus Biomass Markets, an index of wood-pellet prices increased by 11%, from 116 euros ($152) a metric ton in August 2010 to 129 euros ($169) a metric ton at the end of 2012. Since the end of 2011, prices for hardwood from western Canada increased by about 60 percent. 60
Wood use in Europe is not carbon neutral.
In theory, if the biomass used to power electricity comes from energy crops, the carbon generated from combustion would be offset by the carbon that is captured and stored in the newly planted crops, making the process carbon-neutral. The wood that Europe is using produces carbon through combustion at the power station and in the manufacture of the pellets that includes grinding the wood up, turning it into dough and submitting it under pressure. The process of producing the pellets, combusting them, and transporting them produces carbon—about 200 kilograms of carbon dioxide for each megawatt hour of electricity generated.
A researcher at Princeton University calculated that if whole trees are used to produce energy, they would increase carbon emissions 79% more than coal over 20 years and 49% more over 40 years, with no carbon reduction for 100 years until the replacement trees have matured.
EUROPE ’S NATURAL GAS SUPPLIES
Europe is worried about continually receiving the 30% of its natural gas supplies that it receives from Russia, but instead of embracing hydraulic fracturing and horizontal drilling on domestic soil, it is looking toward the United States to export LNG to them.
According to a leaked document, the European Union is making its desire to import more oil and natural gas from the United States very clear in the discussions over the Transatlantic Trade and Investment Partnership (TTIP) trade deal. The EU is pressuring the United States to lift its ban on crude oil exports and make it easier to export natural gas to Europe. The EU emphasizes the TTIP’s role in ‘‘reinforcing the security of supply’’ of energy for the member countries, pointing to the political situation in the Ukraine as a key reason to relax rules against U.S. exports. ‘‘The current crisis in Ukraine confirms the delicate situation faced by the EU with regard to energy dependence,’’ the document states. ‘‘Of course the EU will continue working on its own energy security and broaden its strategy of diversification. But such an effort begins with its closest allies.’’ 61
EU could start by developing its shale gas resources throughout its member countries.
According to the Energy Information Administration, Europe has an estimated 470 trillion cubic feet of technically recoverable shale gas resources, around 80% of the U.S. estimated endowment of 567 trillion cubic feet.62
Germany has proposed a prohibition against hydraulic fracturing through 2021. France, which has the second-largest estimated shale gas resources in Europe, has a hydraulic fracturing ban through at least 2017 and Bulgaria also forbids hydraulic fracturing. Poland, which has Europe’s largest technically recoverable shale gas resources at 148 trillion cubic feet, is interested in developing those resources, but has geology problems demonstrated by poor results from exploratory drilling. Several other European countries are now interested in developing their shale gas resources, such as the U.K., the Netherlands, Denmark, and Romania, but none of the European shale-gas exploration efforts are close to being ready for commercial development.63
As the Washington Post indicated: ‘‘Cap-and-trade regimes have advantages, notably the ability to set a limit on emissions and to integrate with other countries. But they are complex and vulnerable to lobbying and special pleading, and they do not guarantee success.’’ 64 The European Union has found this to be the case, for their cap-and-trade program did not achieve the intended targets, but made many companies wealthier which in turn resulted in higher energy prices for consumers.
Other ‘‘green’’ energy programs have had similar results in producing higher electricity prices and large subsidies for technologies that contribute only small amounts to their countries’ electricity needs. Countries that have enacted these programs have found them to be very costly and are now slashing those subsidies because the governments and the consumers cannot afford them. It is unclear what benefit the EU and Australia’s climate and ‘‘green’’ energy policies have achieved. Any reduction in carbon dioxide emissions that developed countries make will just be a ‘‘drop in the bucket’’ because total global greenhouse gas emissions will increase as China, the world’s largest emitter of carbon dioxide emissions, and other developing countries continue to improve their economies by using fossil fuels. These developing countries believe it is their turn to develop their economies and to provide energy to their citizens, many of which do not even have electricity. As a result, they either refuse to participate in global climate change programs or have track records of not enforcing such programs. The climate policies of both Europe and Australia have not only driven up their energy prices, but have also harmed their economies and reduced their security capabilities. Because Europe is dependent on natural gas from Russia, it has secretly asked the United States to speed up its review of LNG applications. Europe is clearly worried about further Russian aggression and availability of its natural gas supplies. Australia has learned and repealed its carbon tax with Senate approval on July 17. According to Tony Abbott, Australia’s Prime Minister, in releasing the news of the passage of the repeal legislation to Australia’s citizens, ‘‘We are honoring our commitments to you and building a strong and prosperous economy for a safe and secure Australia.’’ 65 Europe and the United States need to learn that energy security requires energy diversity. For example, during the cold spell in the U.S. Northeast this past winter, natural gas prices spiked because of lack of infrastructure. Lights were kept on due to the availability of coal and nuclear units. But many of those units are now being shuttered, which means that during next winter, the lights may go out in the Northeast.
Ms. HUTZLER replies to later questions. Europe is spending less on defense now than they did prior to the Kyoto Protocol, only 1.6 percent of their GDP. NATO guidance says that they should be spending 2 percent. And we are spending as much as 2.5 percent. In fact, Secretary of Defense Hagel has called on the EU to spend more because of the crisis in the Ukraine.
Carbon trading policies are very complex, which is why you see a lot more criminal activities than you do in a carbon tax. Another place where we have seen abuse in the United States is with renewable identification numbers. Refiners have to use so much biofuel when they produce gasoline, and there has been abuse where there have been fake RIN’s that these people have purchased and we have actually gotten these people—we have found most of this fraud. So it is happening in this country, too.
Some of the policies that Senator Markey seems to advocate in his questions would reduce U.S. energy production, increase oil imports and our trade deficit, and have the effect of reducing U.S. energy security. Senator Markey should understand the implications of ending the tax deductions mentioned below, which is essentially a tax increase on the oil and gas industry resulting in a reduction in domestic energy production, which would result in an increase of oil from overseas suppliers. That said, in regard to tax policy, I believe that all industries should be treated the same, irrespective of the product that the industry produces. There are those who complain about the earnings of the oil and gas companies without understanding the nature of the business, which is the most capital-intensive in the world. The oil and natural gas industry must make large investments in new technology, new production, and environmental and product quality improvements to meet future U.S. energy needs. These investments are not only in the oil and gas sector but in alternate forms of energy (e.g., biofuels). For example, an Ernst & Young study shows the five major oil companies had $765 billion of new investment between 1992 and 2006, compared to net income of $662 billion during the same period. The 57 largest U.S. oil and natural gas companies had new investments of $1.25 trillion over the same period, compared to net income of $900 billion and cash flows of $1.77 trillion. In another Ernst and Young report, the 50 largest oil and gas companies spent over $106 billion in exploration and development costs in 2011, an increase of 38% over those capital investments in 2010. Without these investments, the U.S. oil and gas industry would not have been able to make the strides in increased oil and gas production that they have made and continue to make in this country.1 Earnings allow companies to reinvest in facilities, infrastructure and new technologies, and when those investments are in the United States, it means many more jobs, directly and indirectly. It also means more revenues for federal, state and local governments.
1 Energy Information Administration, International Energy Data Base.
3 The Wall Street Journal, Cap and Trade Doesn’t Work, June 25, 2009.
4 The Wall Street Journal, Cap and Trade Doesn’t Work, June 25, 2009.
5 Interpol, Guide to Carbon Trading Crime, June 2013.
6 The Wall Street Journal, Cap and Trade Doesn’t Work, June 25, 2009.
7 Interpol, Guide to Carbon Trading Crime, June 2013.
8 Bloomberg, Deutsche Bank, RWE raided in German probe of CO2 tax, April 28, 2010.
9 Reuters, Germany seeks arrest of Briton in carbon trading scam, April 10, 2014.
10 Bloomberg, Deutsche Bank, RWE raided in German probe of CO2 tax, April 28, 2010.
11 European Commission, The EU Emissions Trading System.
12 Defense News, U.S. Pushes NATO Allies to Boost Defense Spending, May 3, 2014.
13 Huffington Post, Australia’s Carbon Tax Set for Final Showdown, July 14, 2014.
14 Department of the Environment, Australian Government, Repealing the Carbon Tax.
15 ABC, Senate Passes Legislation to Repeal Carbon Tax, July 17, 2014.
16 Wall Street Journal, Australia Becomes First Developed Nation to Repeal Carbon Tax, July 17, 2014.
17 Australia’s Carbon Tax: An Economic Evaluation, September 2013.
18 Institute for Building Efficiency, Feed-In Tariffs: A Brief History.
19 Financial Post, Governments Rip Up Renewable Contracts, March 19, 2014.
20 Bloomberg, Spain’s Power Deficit Widens by 46 Percent as Steps to Close Gap Founder, April 25, 2014.
21 Institute for Energy Research, August 6, 2009.
22 Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009.
23 Eagle Tribune, Cap-and-trade bill is an economy-killer, June 28, 2009.
24 The Failure of Global Carbon Policies, June 11, 2014.
25 Spain Youth Unemployment Rises to Record 57.7 Percent, Surpasses Greece, January 8, 2014.
26 Financial Post, Governments Rip Up Renewable Contracts, March 19, 2014.
27 Wall Street Journal, ‘‘Darker Times for Solar-Power Industry,’’ May 11, 2009.
28 Heinrich Bo¨ll Foundation, Energy Transition: The German Energiewende.
29 Institute for Building Efficiency, Feed-In Tariffs: A Brief History, Aug. 2010.
30 German Federal Ministry of Economics and Technology and Ministry for the Environment, Nature Conservation and Nuclear Safety.
31 Forbes, ‘‘Germany’s Energy Goes Kaput, Threatening Economic Stability,’’ December 30, 2013.
32 BP Statistical Review of World Energy 2014. 33Wall Street Journal, Germany’s fracking follies, July 7, 2014.
34 Energy Information Administration, Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States, June 2013.
35 Europe’s Energy Portal Germany Energy Prices Report.
36 U.S. Energy Information Administration, Monthly Energy Review.
37 Tree Hugger, German Electricity Tax Rises 50 Percent to Support Renewable Energy, October 17, 2012.
38 Reuters, Five million German families faced with higher power bills, February 24, 2014.
39 Frontier Economics, German renewable energy levy will rise in 2014.
40 The Australian, Europe Pulls the Plug on its Green Energy Future, August 10, 2013.
41 New York Times, Germany’s Effort at Clean Energy Proves Complex, September 18, 2013.
42 Renewables International, First municipal offshore wind farm awaits grid connection, June 25, 2014.
43 Bloomberg, Germany moots levy on renewable power use, February 4, 2014.
44 Wall Street Journal, Germany’s Upper House Passes Renewable Energy Law, July 11, 2014.
45 Institute for Building Efficiency, Feed-In Tariffs: A Brief History, Aug. 2010.
46 International Energy Agency, Global Renewable Energy, National Renewable Energy Action Plan.
47 Bloomberg, Green Rules Shuttering Power Plants Threaten UK Shortage, March 19, 2014.
48 Bloomberg, Green Rules Shuttering Power Plants Threaten UK Shortage, March 19, 2014.
49 The Telegraph, Wind farms subsidies cut by 25 percent, July 14, 2013.
50 The Telegraph, Wind farm plans in tatters after subsidy rethink, March 2, 2014.
51 Mail Online, Solar panel payments are about to fall again but the cost of buying them is falling too—so is it still worth investing?, June 14, 2013.
52 The Telegraph, Wind farms subsidies cut by 25 percent, July 14, 2013.
53 The Global Warming Policy Foundation, Proposals to Step up Unilateral Climate Policy Will Trigger ‘‘Astronomical Costs,’’ Peiser Warns, July 15, 2014.
54 International Energy Agency, Global Renewable Energy, ‘‘Old’’ Feed In Premium for Photovoltaic Systems.
55 Bloomberg, Italy Set to Cease Granting Tariffs for New Solar Projects, June 11, 2013.
56 Financial Post, Governments Rip Up Renewable Contracts, March 18, 2014.
57 Economist, Wood The Fuel of the Future, April 6, 2013.
58 National Firewood Association, Biomass Called Environmental Lunacy, April 10, 2013.
59 Dogwood Alliance, The Use of Whole Trees in Wood Pellet Manufacturing, November 13, 2012.
60 Argus Biomass Markets.
61 Huffington Post, Secret Trade Doc Calls for More Oil and Gas Exports to Europe, July 8, 2014.
62 Energy Information Administration, Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States, June 2013.
63 Europe wants the energy, but not the fracking, July 15, 2014.
64The Washington Post, Climate Change Solutions, February 16, 2009. 65Australia’s carbon tax has been axed as repeal bills clear the Senate, July 17, 2014.
Senator MARKEY. Thank you Mr. Breen, for raising the question of what happens with oil production in the United States, because even though we still import 30% of the oil that we consume in the United States, there are advocates for us to start exporting, and the Energy Information Agency is saying we are going to plateau relatively soon in terms of our total oil production. So that goes to a national security issue, too: How wise are we to be exporting our own oil and natural gas when we do not have a surplus today and production is going to slow down and plateau in the relatively near future? Can you talk about that?
Mr. BREEN. Transitioning municipal truck fleets, garbage trucks, buses, things like that to natural gas might help alleviate our single-source dependence on oil to fuel our transportation sector, which I would argue is a strategic risk, being so dependent on oil for that purpose.
Admiral TITLEY. The way I take a look at this as a risk-based issue, so how do we mitigate the risks