Falling behind

Great column on energy efficiency in other parts of the world today, courtesy Thomas Friedman.

Here is the key quote:

Unlike America, Denmark, which was so badly hammered by the 1973 Arab oil embargo that it banned all Sunday driving for a while, responded to that crisis in such a sustained, focused and systematic way that today it is energy independent. (And it didn’t happen by Danish politicians making their people stupid by telling them the solution was simply more offshore drilling.)

What was the trick? To be sure, Denmark is much smaller than us and was lucky to discover some oil in the North Sea. But despite that, Danes imposed on themselves a set of gasoline taxes, CO2 taxes and building-and-appliance efficiency standards that allowed them to grow their economy — while barely growing their energy consumption — and gave birth to a Danish clean-power industry that is one of the most competitive in the world today. Denmark today gets nearly 20 percent of its electricity from wind. America? About 1 percent.

And did Danes suffer from their government shaping the market with energy taxes to stimulate innovations in clean power? In one word, said Connie Hedegaard, Denmark’s minister of climate and energy: “No.” It just forced them to innovate more — like the way Danes recycle waste heat from their coal-fired power plants and use it for home heating and hot water, or the way they incinerate their trash in central stations to provide home heating. (There are virtually no landfills here.)

There is little whining here about Denmark having $10-a-gallon gasoline because of high energy taxes. The shaping of the market with high energy standards and taxes on fossil fuels by the Danish government has actually had “a positive impact on job creation,” added Hedegaard. “For example, the wind industry — it was nothing in the 1970s. Today, one-third of all terrestrial wind turbines in the world come from Denmark.” In the last 10 years, Denmark’s exports of energy efficiency products have tripled. Energy technology exports rose 8 percent in 2007 to more than $10.5 billion in 2006, compared with a 2 percent rise in 2007 for Danish exports as a whole.

“It is one of our fastest-growing export areas,” said Hedegaard. It is one reason that unemployment in Denmark today is 1.6 percent. In 1973, said Hedegaard, “we got 99 percent of our energy from the Middle East. Today it is zero.”

Frankly, when you compare how America has responded to the 1973 oil shock and how Denmark has responded, we look pathetic.

Friedman makes an excellent point: Americans are addicted to cheap energy, and the reason we can’t live without it is that cheap energy is the very foundation of our daily life. Houston is the perfect example of this… everything is deliberately spread super thin, low-density development dominates the landscape. Why? Because surface parking controls all.

So instead of perpetually increasing the value of our land, we wastefully spread development around like grease on a pan. We could cluster development and infrastructure in a spatially efficient way while STILL promoting property ownership and privacy, there is no reason those priorities should be compromised.

The problem is how to shock people out of their previous routine for long enough that they have to rationally evaluate their behavior. That is the only time that most people will truly consider making a lifestyle change. Market shocks like the recent spike in gas prices are helpful in this regard, but how to do make it last?

“I have observed that in all other countries, including in America, people are complaining about how prices of [gasoline] are going up,” Denmark’s prime minister, Anders Fogh Rasmussen, told me. “The cure is not to reduce the price, but, on the contrary, to raise it even higher to break our addiction to oil. We are going to introduce a new tax reform in the direction of even higher taxation on energy and the revenue generated on that will be used to cut taxes on personal income — so we will improve incentives to work and improve incentives to save energy and develop renewable energy.”

Sounds a lot like talk of a price-floor on oil, which you can read more about here. But why does this matter in the long run? For one, the US economy is being horribly drained by our excessive dependence on foreign energy, but of greater concern is our status as world laggard which is becoming more and more ingrained…

Because it was smart taxes and incentives that spurred Danish energy companies to innovate, Ditlev Engel, the president of Vestas — Denmark’s and the world’s biggest wind turbine company — told me that he simply can’t understand how the U.S. Congress could have just failed to extend the production tax credits for wind development in America.

Why should you care?

“We’ve had 35 new competitors coming out of China in the last 18 months,” said Engel, “and not one out of the U.S.”

If these kinds of trends continue for another generation, we’re setting outselves up to follow in the path of the UK. In 1900 they were the world’s greatest nation, but by 2000 the UK was no longer an international power. Likewise, our place atop the world’s great nations has seemed unshakeable since the dramatic rise of the United States since World War II, and especially since the collapse of the USSR. But steadily, steadily, China is replacing us… and right now most Americans are too fat and happy to care. Sounds like what we need is a big enough shock to help us evaluate our own behavior.