Asia's Carbon Noose: Part Two

Lucknow, Uttar Pradesh, India -- If, as I pointed out in my first posting on this subject, stories about the prices of coal for electricity get buried in the press in both India and the U.S., stories about gasoline or diesel prices get top billing. It's quite simple -- voters buy gasoline and diesel, only a few companies buy coal. And imported oil is a much bigger economic threat to Asian economies like India's than coal has been to date -- because they are far less well endowed with liquid fuels than the dirty hard stuff in the ground.

But at least in India there is a robust debate about what to do about the oil problem. Diesel fuel, for example, is subsidized, because allowing it to rise when global prices spike would drastically raise costs of growing and shipping food -- so politicians can't accept the cost of market pricing of diesel, even if they know the subsidy is a bad idea.  Gasoline, however, is taxed, not subsidized -- as a result, more and more of the passenger vehicles sold in India are powered by diesel, not gasoline.  The government dislikes this, because it is driving up the cost of the diesel subsidy, and it doesn't really want to subsidize upper middle class drivers. Indian environmentalists like the Center for Science and the Environment hate it because Indian diesel fuels are far more polluting than gasoline, and incomparably dirtier than the compressed natural gas whose mandatory use in taxis and commercial vehicles once cleaned up the pollution in Delhi dramatically.  So serious proposals are being offered to place a hefty tax on the purchase of diesel cars, to shift the market back toward gasoline models -- manufacturers are objecting, but the concept has real legs. Just try floating that idea in today's Washington!

India is also proving more nimble than the U.S. in dealing with energy efficiency issues as well. While the U.S. gets bogged down in debates about the use of consumer ratings vs. mandatory standards to encourage more efficient appliances, for example, India has cleverly combined them. Appliances are rated by energy efficiency, given 1-5 stars.  Periodically, the Bureau of Energy Efficiency raises the standards, so that appliances which previously qualified for 1 star can  no longer be sold, and to earn the same star rating, every appliance must perform better. Since companies know, well in advance, what the next round of standards will be (it simply eliminates the lowest category from the market) they can plan. And innovators know that they will have a period during which they can sell highly efficient appliances to early adaptors, but eventually the market will have to meet their performance, so investors in new products have certainty as well. Major customers, who drive the market, don't typically buy the lowest rated product, because they are concerned about service and support for it in the future.

But these adaptive responses operate best in arenas where Asia has known for a long time that innovation was essential. The reality that coal is no longer going to be cheap is just a paradigm shift for this region that it simply doesn't, yet, know how to adapt. The latest demonstration comes from Bangladesh. The country is even more hydrocarbon poor than India. It recently decided to build a series of coal fired power plants to meet its electricity needs, but controversy has amounted over the simple question, "Where does the coal come from? And what does it cost?"

Bangladesh has significant coal deposits. But proposals to extract them have run into intense local opposition.

The first of the coal fired power plants would be Phulbari.  Bangladesh President Sheikh Hasina recently promised that Phulbari and other coal plants would instead be fired with imported coal, because all five of the big coal deposits in the country lie underneath densely population areas and tens of thousands of people would be displaced to get the coal out. Hasina also noted that people have been killed while protesting against coal extraction in the township of Phulbari.

But many fear that once Phulbari and other coal plants are built, and it turns out that Indonesian and Australian imported coal is too expensive, this promise will evaporate and coal mining will be initiated in Bangladesh.  Indeed, the chairman of the Bangladesh's Power Development Board, Alamgir Kabir, commented that the new plants will "initially utilise imported coal" but that "local coal will be utilised once the country starts extracting local coal significantly"

And Bangladeshi energy experts are openly scoffing at the economics of relying on imported coal. Once again it is clear -- the coal industry's strategy is to build power plants without an honest analysis of the costs -- economic and environmental -- of fueling them, in the hope that once built, the plants will be operated even if their ultimate cost is higher than cleaner alternatives would have been.

And scandalously, WikiLeaks has revealed that the U.S. Ambassador to Bangladesh, James Moriarity, has been pushing the government hard to reopen coal mining at Phulbari . (The apparent motivation is that US investors are heavily involved in the scheme.)

The overall pattern, to me, seems fairly clear. If Asia can avoid a premature rush to build new coal fired power plants, and acts in time to find alternatives to oil, it has a shot, maybe a good shot, at avoiding coal lock-in, and achieving its development goals. In turn, the world would gain a reasonable chance to solve the climate crisis while it is still a crisis, not a catastrophe -- if the rich nations then do their part. But if the carbon lobby is able to lock Asia into coal and oil dependency, neither economic development nor climate sustainability can be achieved -- and the battle is being joined right now.

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