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Why the U.S. Debt Crisis is Just the Tip of the Melting Iceberg

Boyd Cohen | Tuesday August 9th, 2011 | 13 Comments

Boyd Cohen, Climate Strategist

As many of this column’s readers know, I am from the U.S. and have lived in Europe and most recently Canada for the 10 years since getting my Ph.D. at the University of Colorado.  While I am no economist (my Ph.D. is in business), I believe that the recent U.S. debt crisis and the complete and utter failure of our politicians from the President on down to find common ground is just the tip of a melting iceberg for the U.S. economy.

The U.S. is in debt which is going to continue to climb faster than the rising sea levels.  Recent antics in the White House and Congress have exacerbated the problem, leaving the world’s markets questioning the ability for the U.S. to actually reach agreement on anything, let alone lead the world out of this recession.  If the recent downgrading of U.S. credit worthiness leads to a 1% increase in the cost of borrowing, it would grow the U.S. debt $1.3 trillion over 10 years.

However I am even more concerned about the long-term prospects for the U.S. economy. The U.S. is way behind Europe, Brazil and China in making strategic investments in a low-carbon, clean economy. And worse still, the U.S. was built on the assumption of infinite and low-cost fossil fuels.

It is virtually impossible to argue against the role of green and low-carbon sectors in contributing to economic and job growth in the future. That is of course a core argument in my book with Hunter Lovins called Climate Capitalism wherein we illustrate how cities, countries and companies can profit from the transition to the low carbon economy across many key sectors of the economy such as energy, buildings, transportation and agriculture.

Besides losing the clean-tech arms race, there is an even more fundamental element of the U.S. economy that needs to be considered.  Since World War II, the U.S. economy has been based on the assumption that cheap and virtually limitless fossil fuels would continue forever.  As former President George Bush famously pointed out, America is addicted to oil.   While it can be said that the U.S. highway system in the post war era marked the beginning of an unsustainable phase of development in the U.S., I feel that the real problems began shortly thereafter with the widespread adoption of the suburban lifestyle.  As James Howard Kunstler quipped in the End of Suburbia, “We’re literally stuck up a cul-de-sac in a cement SUV without a fill-up.”

The suburban utopian dream has been a key driver of the current recession. Furthermore, we will see much more economic carnage, not just at the federal level but in our suburbs too. Every time a new suburban subdivision is approved, the municipality (not the homeowners or the developers) is on the hook to develop new infrastructure such as roads, water and sewage.  Then, the municipality must continually maintain that infrastructure in increasingly distant suburbs.  Researchers have suggested that by 2025 the U.S. may have a surplus of more than 20 million large-lot homes as people move back to the cities.  Of course many people have already begun abandoning their large lot homes as they were either forced to through foreclosure or because they could no longer justify owing so much.

By comparison, European cities were built to support density and smart growth.  Most have high quality public transit systems and rail networks connect one city to the next.  While the Obama administration has paid lip service to high-speed rail, in the current economic and political climate I wouldn’t count on anything important happening in this arena during his presidency.  In a recent analysis I commented on how cities around the world are reducing emissions and preparing to adapt to a changing climate, 5 of the top 10 cities in the world were European.  Only two were in the U.S. and they were 7th and 8th respectively.

So Europe is more prepared for a low-carbon future where endless and cheap fossil fuels are a thing of the past?  Of course, the EU has taken the most progressive action to address climate change via its commitment to Kyoto.  While there are uncertainties looming in Europe due to its own financial crisis, the EU still has a 20% GHG reduction target to reach by 2020.  I am hopeful negotiations will get back on track and some form of a carbon market will remain post 2012.  Regardless, the EU economy has already moved forward incentivized by the carbon market and financial gains from the low-carbon economy.  The U.S. is stuck in a rut and it is difficult to imagine with the polarized congress that any meaningful action on climate change will happen in the next several years.

What many Americans and lawmakers seem to be missing is that our lack of action on climate change and sustainable development is partially to blame for our current economic predicament.  Recently I published a post about how the failure to have a price on carbon led to a loss of jobs and revenues associated with American Airline’s purchase of more fuel efficient aircraft.  Airbus, operating in the EU, has been gearing up to provide more fuel efficient aircraft to support EU airlines in their need to reduce emissions.  This gave them a competitive advantage in securing a deal from American Airlines who itself is in financial difficulties, in part because of its inefficient, aging fleet.

We in North America need to take some lessons from the EU regarding how we build cities and how we ween ourselves from fossil fuels if we want to remain competitive and grow our economies.  If not, we are going to have a lot of abandoned McMansions and several more standoffs about raising the debt ceiling.

***

Boyd Cohen is the CEO of CO2 IMPACT, a carbon origination company based in Vancouver, Canada and Bogota, Colombia. Boyd is also the co-author of Climate Capitalism: Capitalism in the Age of Climate Change.

Twitter: boydcohen

This series uses the hashtag #climatecapitalism

(image from Flickr User natalielucier)


▼▼▼      13 Comments     ▼▼▼

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  • http://www.triplepundit.com/author/sldi/ Terry Mock

    Good summary Boyd. Your conclusion confirms the action of Sustainable Land Development Initiative (SLDI) to go carbon negative:

    Fossil fuels are carbon-positive — burning them adds more carbon to the air. Ordinary biomass fuels are carbon neutral — the carbon captured in the biomass by photosynthesis would have eventually returned to the atmosphere through natural processes — burning plants for energy just speeds it up. Sustainable land development biochar systems can be carbon negative because they retain a substantial portion of the carbon that would otherwise be emitted by the plants or waste matter when it rots. The result is a net reduction of carbon dioxide in the atmosphere… http://www.triplepundit.com/2010/09/sldi-project-carbon-negative/

    As far as the current concerns about the long-term prospects for the U.S. economy associated with making unsustainable policy decisions, SLDI offered a formal proposal to help the incoming administration boost the US economic recovery plan and policy agenda – and save the country billions in the process. Unfortunately, the politics of money has continued to rule Washington and little has been done to improve our dire circumstance.
    You can view the public SLDI proposal to the incoming US administration here – http://www.triplepundit.com/2010/09/sustainable-hope-amid-sea-despair-demands/

    Sustainable Land Development Initiative
    http://www.triplepundit.com/author/sldi/

  • Beverly Peterson Dulaney

    It’s time for some political activism from even lazy people like me who have been sitting back and watching this happen.

  • http://www.co2impact.com Boyd Cohen

    Terry thank you for your comments. I support your initiatives at the SLDI and I wish you would have been awarded that contract! Beverly-Amen. It is time for Americans wherever we are leaving to speak out against the partisan politics and unsustainable development and to learn from others like the EU and even China about how to make the profitable transition to the low carbon economy.

  • Robert Vincin

    Firstly USA has acted to best of its ability as a global help often getting it all wrong but its USAID has saved many a nations people. One need to understand that PRC shut down for 30 years and is still addressing many of its ancient laws up to 2011 level. It is suffering most serious land water air degradation without the money or skills to fix such. So while USA Dollar commodity is damaged the PRC baseline assets soil water vegetation atmosphere are so badly damaged it is buying land to grow food across the world including Australia.
    Unless there is a serious global initiative to restore the real baseline assets the USA financial problem is but a blip on the screen for our Children to address. CO2 builds up pushed by mass deserts and volcanic activities to a potential global cooling reality. Robert Vincin
    I spent past 6 years in PRC sat on UNCTAD UNFCCC from 1996-01

  • Henry Porter

    Hey Doc,

    All the lip service Obama has given to high speed rail would, if Implemented, impact less than one tenth of one percent of personal travel in this country. No matter how you cut it, it ain’t gonna have no impact on foreign oil dependency, pollution, carbon footprints, or highway congestion.

    The only place it would be felt is in the national debt…because we couldn’t afford it even if it was good for us.

    Which it ain’t.

    • Nick Aster

      I think HSR will impact a heck of lot more than 1/10th of 1%. It has the ability to replace a huge chunk of air travel between cities of less than 350 miles apart, and if properly designed, likely would. It has almost eliminated air travel between Barcelona and Madrid, for example.

      • Henry Porter

        The average American takes 4 trips per day. That’s about 454 billion trips per year. Amtrak boasts about 28.7 million trips per year. Amtrak carries one in 15,800 trips, or six one thousandths of one percent (0.006%).

        Turns out I was being generous.

        So you think HSR would impact a heck of a lot more than 1/0 of 1%. How much? If the average American took one trp per year on high speed rail, that would be 311 million trips per year…almost eleven TIMES as many as Amtrak carries today.

        But, it would still be just 7/100 of 1% of US personal travel.

        What kind of impact would that have on fuel consumption, pollution, congestion, etc.?

        None.

        Maybe a five percent shift to HSR might begin to have an impact. But that would be an average of 73 trips on a high speed train for every man, woman and child in America.

        Our travel patterns are too diverse. High speed rail simply can not be rationalized on the basis that it would reduce fuel use, or pollution or congestion or any of the other benefits that are often ascribed to it. It’s wishful thinking that falls apart at even the most cursory arithmetic analysis.

        • Nick Aster

          Sure, but it’s not supposed to have anything to do with daily trips. HSR is for intercity travel. Of which it would take a huge chunk of. Amtrak isn’t about dail trips either.

          There are a 1000 reasons to support HSR, carbon emissions happen to be a very minor one, as you illustrate.

  • Henry Porter

    Wow…no kidding? Carbon is a minor reason? What, pray tell is a major reason? Stimulating the economy (regardless of the waste and corruption)? Create jobs (regardless of how much each one costs or how temporary it is)? Bring down the federal debt (by spending more money we don’t have)?

    Everywhere else I read about HSR, they’re saying it’s to save the planet…it’s to reduce our dependency on foreign oil…it’s to end highway congestion as we know it. Some say it’s so we don’t have to be frisked at airports any more.

    How about the ever popular “to support high density and smart growth”? Could that be a major reason?

    Is that the end state or is that just a means to the end state? Why is it that some seemingly smart people want to force us into “dense” cities and what’s so bloody smart about that? And, furthermore, how can taking us out of airplanes and putting us in trains, instead, lead to denser cities?

    I’d love you to post just the top ten (out of 1000) reasons you support HSR.

    • Nick Aster

      1) It’s cleaner, more comfortable, and more convenient that any other way between cities less than 350 miles apart. Even JetBlue’s COO agrees.
      2) It’s also FASTER than flying or driving when door-to-door times are compared
      3) Rail stimulates massive sustainable economic development around stations – reinvigorating forgotten downtowns and post industrial brownfields and creating neighborhoods that are more desirable to live and do business in.
      4) By stimulating further development of walkable neighborhoods and alternatives to car travel, HSR impacts social problems including obesity and access to jobs.
      5) Freeways and airports are increasingly congested, fraught with environmental and social externalities and very expensive to maintain and expand.
      6) People love it once they try it.
      okay that’s 6

      If you don’t understand why supporting cities and walkable neighborhoods is a good thing, then you need to do some more thinking. If you think anyone is trying to “force” something on you, then I can’t help you.

      • Henry Porter

        That’s the best you can do?

        1. My car is cleaner, more comfortable AND more convenient than any train I have ever seen. Even my wife agrees. And my car can carry her and the two kids for the same cost as me alone.

        2. That would depend on how far you have to go to get to and from the airports and how that compares to the time it would take to get to and from a train station. For some it would be faster, for some it would be slower and for some it would be a wash. And, if HSR is ever as successful as some say it would be, train stations will be surrounded by acres of parking –just like airports (except that the train stations and related parking would blight cities.

        3. The only thing rail would do to stimulate development is move it from elsewhere. There would be no net change. Transit oriented development is nothing but highway oriented development relocated from highway proximity to transit proximity.

        4. To combat obesity, it would make more sense to bring jobs to where people live, not to make it more economical to commute longer distances by supplying government subsidized high speed long distance commuting.

        5. Is HSR not expensive to maintain and expand? If you think not, you’re not following the news.

        6. If the people who love it had to pay the full, unsubsidized cost, I predict they wouldn’t like it so much.

        Where did I say I don’t support walkable cities? I moved just so I could be within walking distance of my job. If a train station was forced into my city, it would bring in an army of commuters and traffic jams twice a day, making it less walkable.

        • Nick Aster

          Honestly, I don’t have time to get too into this today. But…

          1) That’s great. HSR, again, is largely for business trips. You can work on the rails. Hard to put a price on that, and hard to compare comfort when you can walk around, get a snack, etc… First class on European trains is pretty nice. If travelling solo, including parking costs, it can absolutely be cheaper than driving – for a family trip, not so much, obviously.

          2) It won’t work well for a city like, say, Phoenix where you’d be required to drive when you go there. We never talked about where I think it’s appropriate – I’m only in favor of HSR conenting SF to LA, plus NE Cooridor and cities around Chicago.

          3) So what? More development in neglected urban areas, post-industrial areas, and so on is much better than sprawl.

          4) Assuming sprawl exacerbates obesity and other health issues (many sources agree with this) then “brining jobs to where people live” is exactly what’s caused the problem. Sprawl is a mess that can never be cured with transit. For the record, I”m not advocating we all live in Manhattan either – but pre-WWII cities (and suburbs) were build in a manner that supported choice in transportation – drive if you need to, but walking and biking were safe, and you could usually walk to a commuter train. I think that’s an ideal which we’ve sadly lost in the last 50 years. The fact that kids can’t bike to school is terrible on many levels.. but this is not really related to HSR.

          HSR is NOT about commuting. It is about mid-distance trips (~300 miles or so) that might be taken weekly for most people.

          5) Yes, it’s ridiculously expensive and it’s a tragedy in that regard. Lawsuits and special interests (even some enviros) and rampant NIMBYism are seriously screwing it up. But that’s par for the course with any development these days and the sooner we get this done the less it’ll cost going forward. Still way cheaper than widening freeways.

          6) Indeed, but same goes for gasoline. The real, unsubsidized cost of gas is probably $6-$8 a gallon, all things considered.

          Yep walkable cities are great, but bringing more people in only makes them better. Obviously there’s a point where things would get too crowded – I don’t want to live in Tokyo. But I’m not too worried about that being a problem except in very specific downtown areas which, frankly, could probably use it.

  • http://www.co2impact.com Boyd Cohen

    Interesting debate regarding the role of high speed rail in an economy. One of the main challenges to high speed rail today is that we waited almost too long to consider it. The cost to construct high speed rail today, in today’s economy, is pretty significant. Having said that, I believe that anyone arguing against high speed rail as a viable, sustainable solution has actually never trailed on a high speed train. Nick mentioned in an earlier comment the high speed rail network in Spain. When I lived in Madrid I did not need a car, for anything! Occasionally I took a taxi if I was out late but I mostly rode my bike and used the metro. When I wanted to go to the nearby mountains, I took their Cercanias trains which take people to the suburbs. When I wanted to go to Valencia, I took the high speed rail. Smart cities and smart countries create convenient rail networks whereby one can go to work or the movies by walking, biking or metro, can go to surrounding regions via some type of commuter rail, and can travel between major cities and even other countries via high speed rail. One has to not just think about today and tomorrow but building an infrastructure that can last for a century or more. Sorry to burst your bubble, but the U.S. car-dependent, McMansion lifestyle in the burbs is not only environmentally unsustainable but economically too.