Why We Should Build an Integral Fast Reactor Now

“In the decade from 1984 to 1994, scientists at Argonne National Laboratory developed an advanced technology that promised safe nuclear power unlimited by fuel supplies, with a waste product sharply reduced both in radioactive lifetime and amount. The program, called the IFR, was cancelled suddenly in 1994, before the technology could be perfected in every detail. Its story is not widely known, nor are its implications widely appreciated. It is a story well worth telling, and this series of articles does precisely that.”

— excerpt from Plentiful Energy and the IFR story by Charles Till,
former Associate Director, Argonne National Laboratory

“Dr. Till soon became responsible for all fast reactor work at Argonne, and continued to emerge as a leader in his field. …But his greatest contribution, to both his discipline and to the world, lies in the development of the Integral Fast Reactor, the IFR. This inspired source of electrical power has the capability to achieve incredible efficiency in fuel use, while significantly lessening problems associated with reactor safety and nuclear waste. In 1986, the IFR showed that it can protect itself from overheating and meltdown. It does so through the natural physical properties of the materials used rather than by relying on operator intervention or an engineered safety system. The IFR was also designed to burn most of its own waste, as well as that of other reactors and the material from dismantled weapons. Unfortunately, this program was canceled just 2 short years before the proof of concept. I assure my colleagues someday our Nation will regret and reverse this shortsighted decision. But complete or not, the concept and the work done to prove it remain genius and a great contribution to the world.”

–excerpt from Congressional Record: Nov. 6, 1997 (Senate)
Page S11890-S11891

Executive summary

Congress should add a provision to the climate bills to authorize $3B to have DOE work with industry to build a demonstration Integral Fast Reactor (IFR) plant in order to restart fast reactor clean energy technology.

A successful IFR demonstration has the following important benefits:

  1. The only technology we have with a realistic potential to save the planet. Eliminating carbon emissions from coal plants worldwide is required to prevent a climate catastrophe. But using carbon capture adds cost and may not be practical or viable. The IFR, on the other hand, can replace the burner in an existing coal plant while reducing operating costs. So countries will actually want to eliminate their carbon emissions because they’ll save money. This is why the IFR is one of Jim Hansen’s top five priorities for saving the planet: because the IFR is the only viable solution we know of today can eliminate CO2 emissions from coal plants without increasing energy costs.
  2. Addresses the climate change problem while helping our ecomomy with lower energy costs and increased jobs. Unlike many renewable sources, nuclear power has the potential to decrease energy costs and create new high paying jobs. You don’t have to believe in climate change to support nuclear power.
  3. Allows power companies to meet national carbon caps without raising prices. It’s critical we have the technology we need in order for power companies to meet the carbon caps that we establish for our country.  IFRs can replace the coal burners of a coal plant allowing power plant operators an economical way to meet their carbon reduction goals. IFRs provide a compelling solution on pure economics alone. The National Academies study showed clearly that nuclear is cheaper than coal with carbon capture (see Figure 2.10 on p. 58).
  4. Solves the nuclear waste problem without creating a proliferation risk and opens the door for the expansion of nuclear power in the US. Fast reactors use nuclear waste as fuel. The waste product from the IFR is minimal and short-lived. Solving the waste problem is required if we are to expand nuclear power in the US. The IFR does this. The unique reprocessing technology used in the IFR does not create a proliferation risk because it cannot be used to separate out plutonium. However, even if you still believe there is a proliferation risk and restricted the IFR to only those countries which already have nuclear power, you be hitting 93% of global carbon emissions which is more than sufficient.
  5. Creates an opportunity to become the world leader in clean energy. Obama said at MIT that he wants the US to be a world leader in clean power. Nuclear is the largest clean energy source and the IFR was determined to be the best nuclear power technology in the most extensive comparative nuclear study ever done. That means the IFR is, in the objective opinion of international energy experts, our single best clean power source. But we aren’t exploiting it. We are investing nothing in it today. One of the IFR scientists, an Argonne Distinguished Fellow, went to DOE recently and to ask for funds to at least start the IFR planning. He got nothing. Not even a dime. How do we expect to be a leader in clean energy by leaving our best technology sitting on the shelf? Nobody has been able to answer that.
  6. Creates enormous economic value. Because they use our existing nuclear waste as fuel, fast reactors turn our existing nuclear waste stockpile into an asset worth over $30 trillion dollars. That is an amazing return on investment for a one-time $3B investment to jump-start the technology. Nothing else provides such an enormous return on investment (ROI). Plus, the ROI is guaranteed: we know the technology works since we ran it for 30 years and we also know it is practical since the Russians are exporting commercial fast reactors to China.
  7. Unlimited clean power. The IFR allows us to power the entire US electricity needs for the next 1,500 years without doing any additional mining of uranium; using just the “waste” we have on-hand that nobody wants. The power is carbon free. If we mine, we can power the power needs of the entire planet forever.
  8. Required for the future of nuclear power worldwide. Nuclear is required to be part of the energy mix going forward. But we will run out of affordable fuel for existing nuclear reactors if we don’t deploy fast reactors on or before 2030 or.[1] We haven’t had a fast reactor in the US since 1994. Unless we re-start our fast reactor program now, we will have no chance of meeting this deadline, setting ourselves up for yet another energy disaster.
  9. Nuclear is of the two key technologies absolutely required for CO2 mitigation and fast reactors must be phased in by 2030 at the latest to ensure nuclear fuel availability. The National Academies’ report on America’s Energy Future said this about CCS and evolutionary nuclear:[2]

A failure to demonstrate the viability of these technologies [CCS and evolutionay nuclear] during the next decade would greatly restrict options to reduce the electricity sector’s CO2 emissions over succeeding decades. The urgency of getting started on these demonstrations to clarify future deployment options cannot be overstated.

Although the National Academies report is referring to Gen III+ when they use the term “evolutionary nuclear technologies,” by implication, Gen IV (fast nuclear) must also be restarted immediately since without fast reactors deployed starting in 2030, we’ll run out of nuclear fuel as described in the Gen IV International Forum (GIF) Technology Roadmap, p. 13. Although you can find some studies which claim we have more fuel than that, it would be a mistake to bank the future of our planet on a “best case” scenario. A recent International Nuclear Energy Academy (INEA) position paper says essentially the same thing as the GIF roadmap:

Having already a sizeable fleet of Generation IV breeders in operation by 2050 is therefore recommended to ensure a significant contribution from fission to the limitation of global warming for the rest of the century.

Environmental groups, including the Sierra Club and Environmental Defense Fund, believe that no clean energy technology should be off the table.

The Sierra Club has looked at the IFR specifically and will support the building of an IFR demo reactor.

Background

The IFR is an advanced fourth generation sodium-cooled fast nuclear reactor (SFR) combined with a reprocessing facility using pyroprocessing, typically in the same power plant. The combination of a fast reactor plus waste processing is known as the Integral Fast Reactor.

Unlike today’s nuclear power plants (all of which are second generation designs built 30 years ago), the IFR uses fast neutrons (instead of slow neutrons) and thus is known as a “fast reactor.” Fast neutrons have the advantage of “burning” the nuclear material completely so that the only waste products are fission products (elements near the middle of the periodic table).  This waste is only dangerous for a few hundred years which is much less than the 100,000-year sequestration time that many think is needed for conventional nuclear waste.

Sodium-cooled fast nuclear reactor technology was developed beginning in 1964 by a team of scientists at Argonne National Laboratories. Their test-bed reactor, known as the EBR-II,  ran flawlessly for 30 years until being permanently shut down by Congress in 1994.

Today, while other countries such as Russia, India, China, France and Japan are successfully and aggressively pursuing fast reactors,[3] the US hasn’t had an operating fast reactor since the EBR-II was shut down 15 years ago.

The need

To prevent a climate disaster, we must eliminate virtually all coal plant emissions worldwide in 25 years. The best way and, for all practical purposes, the only way to get all countries off of coal is not with coercion; it is to make them want to replace their coal burners by giving them a plug-compatible technology that is less expensive. The IFR can do this. It is plug-compatible with the burners in a coal plant (see Nuclear Power: Going Fast). No other technology can upgrade a coal plant so it is greenhouse gas free while reducing operating costs at the same time. In fact, no other technology can achieve either of these goals. The IFR can achieve both.

The bottom line is that without the IFR (or a yet-to-be-invented technology with similar ability to replace the coal burner with a cheaper alternative), it is unlikely that we’ll be able to keep CO2 under 450 ppm.

Today, the IFR is the only technology with the potential to displace the coal burner. That is why restarting the IFR is so critical and why Jim Hansen has listed it as one of the top five things we must do to avert a climate disaster.[4]

Without eliminating virtually all coal emissions by 2030, the sum total of all of our other climate mitigation efforts will be inconsequential. Hansen often refers to the near complete phase-out of carbon emissions from coal plants worldwide by 2030 as the sine qua non for climate stabilization (see for example, the top of page 6 in his August 4, 2008 trip report).

To stay under 450ppm, we would have to install about 13,000 GWe of new carbon-free power over the next 25 years. That number was calculated by Nathan Lewis of Caltech for the Atlantic, but others such as Saul Griffith have independently derived a very similar number and White House Science Advisor John Holdren used 5,600 GWe to 7,200 GWe in his presentation to the Energy Bar Association Annual Meeting on April 23, 2009. That means that if we want to save the planet, we must install more than 1 GWe per day of clean power every single day for the next 25 years. That is a very, very tough goal. It is equivalent to building one large nuclear reactor per day, or 1,500 huge wind turbines per day, or 80,000 37 foot diameter solar dishes covering 100 square miles every day, or some linear combination of these or other carbon free power generation technologies. Note that the required rate is actually higher than this because Hansen and Rajendra Pachauri, the chair of the IPCC, now both agree that 350ppm is a more realistic “not to exceed” number (and we’ve already exceeded it).

Today, we are nowhere close to that installation rate with renewables alone. For example, in 2008, the average power delivered by solar worldwide was only 2 GWe (which is to be distinguished from the peak solar capacity of 13.4GWe). That is why every renewable expert at the 2009 Aspen Institute Environment Forum agreed that nuclear must be part of the solution. Al Gore also acknowledges that nuclear must play an important role.

Nuclear has always been the world’s largest source of carbon free power. In the US, for example, even though we haven’t built a new nuclear plant in the US for 30 years, nuclear still supplies 70% of our clean power!

Nuclear can be installed very rapidly; much more rapidly than renewables. For example, about two thirds of the currently operating 440 reactors around the world came online during a 10 year period between 1980 and 1990. So our best chance of meeting the required installation of new power goal and saving the planet is with an aggressive nuclear program.

Unlike renewables, nuclear generates base load power, reliably, regardless of weather. Nuclear also uses very little land area. It does not require the installation of new power lines since it can be installed where the power is needed. However, even with a very aggressive plan involving nuclear, it will still be extremely difficult to install clean power fast enough.

Unfortunately, even in the US, we have no plan to install the clean power we need fast enough to save the planet. Even if every country were to agree tomorrow to completely eliminate their coal plant emissions by 2030, how do we think they are actually going to achieve that? There is no White House plan that explains this. There is no DOE plan. There is no plan or strategy. The deadlines will come and go and most countries will profusely apologize for not meeting their goals, just like we have with most of the signers of the Kyoto Protocol today. Apologies are nice, but they will not restore the environment.

We need a strategy that is believable, practical, and affordable for countries to adopt. The IFR offers our best hope of being a centerpiece in such a strategy because it the only technology we know of that can provide an economically compelling reason to change.

At a speech at MIT on October 23, 2009, President Obama said “And that’s why the world is now engaged in a peaceful competition to determine the technologies that will power the 21st century. … The nation that wins this competition will be the nation that leads the global economy. I am convinced of that. And I want America to be that nation, it’s that simple.”

Nuclear is our best clean power technology and the IFR is our best nuclear technology. The Gen IV International Forum (GIF) did a study in 2001-2002 of 19 different reactor designs on 15 different criteria and 24 metrics. The IFR ranked #1 overall. Over 242 experts from around the world participated in the study. It was the most comprehensive evaluation of competitive nuclear designs ever done. Top DOE nuclear management ignored the study because it didn’t endorse the design the Bush administration wanted.

The IFR has been sitting on the shelf for 15 years and the DOE currently has no plans to change that.

How does the US expect to be a leader in clean energy by ignoring our best nuclear technology? Nobody I’ve talked to has been able to answer that question.

We have the technology (it was running for 30 years before we were ordered to tear it down). And we have the money: The Recovery Act has $80 billion dollars. Why aren’t we building a demo plant?

IFRs are better than conventional nuclear in every dimension. Here are a few:

  1. Efficiency: IFRs are over 100 times more efficient than conventional nuclear. It extracts nearly 100% of the energy from nuclear material. Today’s nuclear reactors extract less than 1%. So you need only 1 ton of actinides each year to feed an IFR (we can use existing nuclear waste for this), whereas you need 100 tons of freshly mined uranium each year to extract enough material to feed a conventional nuclear plant.
  2. Unlimited power forever: IFRs can use virtually any actinide for fuel. Fast reactors with reprocessing are so efficient that even if we restrict ourselves to just our existing uranium resources, we can power the entire planet forever (the Sun will consume the Earth before we run out of material to fuel fast reactors). If we limited ourselves to using just our DU “waste” currently in storage, then using the IFR we can power the US for over 1,500 years without doing any new mining of uranium.[5]
  3. Exploits our largest energy resource: In the US, there is 10 times as much energy in the depleted uranium (DU) that is just sitting there as there is coal in the ground. This DU waste is our largest natural energy resource…but only if we have fast reactors. Otherwise, it is just waste. With fast reactors, virtually all our nuclear waste (from nuclear power plants, leftover from enrichment, and from decommissioned nuclear weapons)[6] becomes an energy asset worth about $30 trillion dollars…that’s not a typo…$30 trillion, not billion.[7] An 11 year old child was able to determine this from publicly available information in 2004.
  4. Safety: The IFR is safer than conventional nuclear because the reactors safely shut down based on the laws of physics if something goes wrong. Today’s third generation nuclear designs are very safe: 1 accident predicted every 29 million reactor years. The IFR should be even safer due to the passive safety inherent in the design. Also, IFRs are much safer than the coal plants they replace. Coal power plants are estimated to kill 24,000 Americans per year, due to lung disease as well as causing 40,000 heart attacks per year. Outside of the Soviet Union,[8] commercial nuclear has never killed even a single member of the public in its entire 50 year operating history.
  5. Proliferation resistant: The IFR is proliferation resistant on two counts.  First, the pyroprocess used to recycle the fuel does not and cannot produce plutonium with the chemical purity needed for nuclear weapon. One of the world’s top nuclear proliferation experts is strongly in favor of the IFR for this reason.   Second, if all reactors were IFRs, there would never again be need for enriched uranium. Because possession of a pyroprocessing facility could give a nation a leg up in a quest for a nuclear weapons capability, facilities for both reprocessing and uranium enrichment should be operated under strict international supervision. The need for international control is arguably the most compelling reason for the U.S. to proceed rapidly with the IFR.
  6. Consumes existing nuclear waste from nuclear reactors and weapons: Fast reactors consume our existing nuclear waste (from reactors and decommissioned weapons) and transforms it into elements that are safe after 300 years.
  7. Minimal waste: A 1 GWe IFR plant generates 1 ton of fission products each year that needs to be sequestered for 300 years until it is safe. A conventional nuclear plant of the same capacity creates about 100 tons of “waste” each year, containing isotopes that need to be sequestered for 1 million years according to the current US depository requirements. If you powered your entire life from IFRs, the amount of waste you’d generate would be smaller than 1 soda can and it would need to be stored for only 300 years.
  8. Nuclear material security: The nuclear material in the reactor or reprocessing facility would be too hot for a terrorist to handle. The nuclear material that leaves the site are the fission products which are completely useless for making a nuclear bomb.
  9. The IFR creates a huge economic opportunity for the US to be the leading clean energy supplier to the world. Nuclear is the lowest cost scalable energy technology we have and the IFR is our best nuclear technology. If we focus on the IFR and invest in ramping up the volumes and reducing the cost, the IFR will be cheapest power source that every country will want everywhere instead of coal. Our economy will benefit and our planet will too.

A brief history of the IFR

Developed in the last decades of the 20th century by a team of scientists at Argonne National Laboratory led by Charles Till. It used as a test bed a small fast reactor that first produced power in 1965 and ran for 30 years without incident.

In the 1970’s, the fast reactor  was the top energy priority of the President, Congress, and the Atomic Energy Commission. In 1971 Nixon said, “Our best hope today for meeting the Nation’s growing demand for economical clean energy lies with the fast breeder reactor.”

In his 1994 State of the Union address, President Clinton declared that the IFR was unnecessary and later that year Congress terminated the project. The scientists were ordered to dismantle the test reactor so it could never be restarted, and they came to understand that it would not be wise to criticize official policy so they stopped talking about it.

The IFR demonstrated that fast reactors can be operated for decades without incident or mishap and that the on-site reprocessing technique for removing the fission products and putting the material back into the reactor works.

Support

  1. Secretary of Energy Steven Chu[9]
  2. White House Science Advisor John Holdren[10]
  3. James Hansen, Director, NASA Goddard Institute for Space Studies
  4. Hans Bethe, Nobel laureate, Physics[11]
  5. Charles Till, Former Associate Director Argonne National Laboratory
  6. Yoon Chang, former Associate Laboratory Director, Argonne National Laboratory
  7. John Sackett, former Associate Director, Argonne National Laboratory
  8. Ray Hunter, former Deputy Director of the Office of Nuclear Energy, Science and Technology in the U.S. Department of Energy (DOE)
  9. Leonard Koch, 2004 winner of the Global Energy International Prize (equivalent to the Nobel prize for energy)
  10. California Lt. Governor John Garamendi
  11. Congressman Jerry McNerney
  12. Congresswoman Anna Eshoo
  13. Congresswoman Jackie Speier
  14. Senator Lamar Alexander
  15. Senator Jeff Bingaman[12]
  16. General Electric (who already has a plant design for the IFR ready to build)
  17. The American public, 59% of whom support nuclear power according to a March 2009 Gallup poll, despite zero PR by the nuclear industry.[13]
  18. Dean Warshawsky, Mayor of Los Altos Hills, CA

Opposition

  1. We do not know of any members of Congress who oppose restarting the IFR. Most have never heard of it.
  2. Environmental groups, in general, do not like nuclear power. For example, environmental groups in Germany got Germany to ban nuclear power. The result is that Germany is forced to build more new coal plants…the worst possible outcome for the environment and exactly the opposite of what the green groups wanted. The green case against nuclear is based largely on dogma and myth. See Mark Lynas: the green heretic persecuted for his nuclear conversion which is an eye-opening account of a noted environmentalist who took an objective look at the facts. One of the top people at NRDC (speaking on his own behalf), says his only objection to the IFR is the cost competiveness of nuclear. GE says IFRs can be built in volume for $1,500 per kW which is cheaper than coal (and slightly less than the $2,000 per kW that the Chinese paid to construct Qinshan Phase 3 which was completed 52 days ahead of schedule and under budget in 2003). The NRDC spokesperson is skeptical of GE’s cost numbers for the IFR ($1,500 per kW).
  3. The Sierra Club is in the process of determining their position on the IFR. Most other groups say that while they are sympathetic, they “do not have the expertise or inclination to take this on.”

You won’t have any trouble finding people who will throw darts at the IFR. They will argue it’s too expensive, unreliable, unproven, increases the proliferation risk, etc. These arguments lack credibility; they all fail in the face of the facts, e.g., the EBR-II and the Russian BN-600 experiences (a commercial nuclear reactor that has operated for 30 years without incident and the precursor to Russia’s next generation fast reactors that are now being built). These two reactors are are the “inconvenient truths” for the fast reactor skeptics.

Even if you believe all the arguments of the opposition and completely discount the arguments of the Argonne scientists who best know the technology, it doesn’t matter because we do not have an option: we have to make this work now. Renewables alone can’t kill coal in the time allotted. The point is:1) virtually every credible renewable expert agrees we cannot reduce our carbon emissions enough without nuclear, 2) the IFR is our best nuclear, 3) the IFR is the only technology we have with a realistic chance of replacing coal burners in a coal plant with a lower-cost carbon-free alternative.

So objections noted, but our planet is at stake and we have got to make this work. We should be joining together and doing things that our most credible scientists tell us we have to do to save our planet, rather than arguing amongst ourselves and debating what the optimum solution is. The time for debate is over. We are so late on deploying clean energy technologies that any new technology that has a realistic potential to make a significant positive impact should be welcomed with open arms by every human being.

Urgency

“Within the next four decades, human civilisation must eliminate its use of fossil fuels and replace them with 10,000 gigawatts of reliable, sustainable power. The only realistic way that this extraordinary challenge can be met is with the rapid and large-scale deployment of nuclear power, on a worldwide basis, led by countries like the US, Russia, the EU, China and India. Generation III nuclear plants will be critical to this expansion over the short term, Generation IV technology is the astoundingly attractive long-term prospect, with the IFR being the flagship Gen IV design. The urgency in getting the IFR commercialised and deployment on an industrial scale cannot be overstated”.

–   Professor Barry Brook
Sir Hubert Wilkins Chair of Climate Change

The University of Adelaide

  1. Our top scientists tell us that evolutionary nuclear technologies are one of the two key technologies that must be done immediately. The report of the Committee on America’s Energy Future of the National Research Council of the National Academies said this about evolutionary nuclear technologies and carbon capture: “A failure to demonstrate the viability of these technologies during the next decade would greatly restrict options to reduce the electricity sector’s CO2 emissions over succeeding decades.The urgency of getting started on these demonstrations to clarify future deployment options cannot be overstated.”
  2. The climate crisis won’t wait. The sooner the IFR is perfected and deployed to eliminate emissions from coal plants, the better.
  3. We are setting yourself up for a bigger disaster if we wait. The Gen IV Internatioal Forum Technology Roadmap and a 2008 INEA position paper on uranium availability clearly show that we must deploy commercial fast reactors starting in 2030 or we’ll run out of fuel for all reactors. We are nowhere close to that goal.
  4. You can’t expand nuclear in the US without a solution to the waste problem. For example, in California, you can’t build a new nuclear power plant until there is a federal waste repository.
  5. We need to do the technology transfer while the people who know how to do it are still alive. This technology is not trivial. No other country has been able to successfully replicate the IFR. If we wait 10 years, the people who built the IFR will all be dead. This could set the project back another decade or two.
  6. Ensures energy independence for the future. If the world ramps up conventional nuclear, we will run out of cheap nuclear fuel faster than many people think. For example, the Russians published a paper showing that in Russia, if they doubled their nuclear capacity in 20 years, they would run out of cheap nuclear fuel in as little as 25 years. (see the first paragraph of BN-800 as a New Stage in the Development of Fast Sodium-Cooled Reactors). With fast reactors in place, we never run out of fuel.
  7. Solves the waste problem now. President Obama has said nuclear power will not be expanded in the US until we have a solution to the waste problem. The IFR provides that solution since today’s “waste” now becomes valuable “fuel” for our future fast reactors. The only real waste, the fission products, are small and only need be stored for about 200 years. This is a trivial challenge compared to the problem we face today. Regarding storage today, the US government could make this offer any state willing to store nuclear waste: “if you store it, you can sell it.” So if one state stores all the nuclear waste, that state would own an asset with an eventual market value of $30 trillion dollars. What state can resist that offer? Instead of rejecting nuclear waste, every state would be clamoring to get its piece of this national asset. If all the states are foolish enough to reject that offer, a number of American Indian tribes have said they are more than happy to store the nuclear waste on their land so long as they can sell that “waste” to power fast reactors, whether in the US or other parts of the world. Senator Bingaman’s bill  in fact contemplates such compensation to a State and/or Indian tribe which hosts a repository.[14] The DOE would have to supervise the storage.
  8. The genie is out of the bottle: refusing to play will not make fast reactors go away and will ultimately make us less safe. If we don’t re-start our fast reactor technology, then other countries will take the lead. France, Russia, India, Japan, and China all have fast reactor programs and all are either operating fast reactors now, or soon will be. The US shut down our last remaining fast reactor 15 years ago. Leadership is important for two reasons: 1) if we fail to lead, we will have missed taking advantage of our superior technology and missed a major economic opportunity as the premiere supplier of clean power technology and 2) the nuclear industry is in far safer hands if the US leads the way than if we abdicate. For example, if Chernobyl had been a US reactor design, that accident could never have happened.
  9. No advantage to waiting. Fast reactors are the future of nuclear power. These reactors are better in every dimension than today’s nuclear designs. The sooner we transition to them and standardize them, and focus on getting the volumes up and the costs down, the lower our energy costs, the greater our impact on climate change, and the greater our chances of capturing the economic opportunity. There is no advantage to waiting to deploy these reactors. But we cannot deploy them until we build one first. We are way behind other countries. The Russian BN-600 fast breeder reactor – Beloyarsk unit 3 – has been supplying electricity to the grid since 1980 and is said to have the best operating and production record of all Russia’s nuclear power units. China recently ordered two of the Russian BN-800 fast reactors. So while the Russians are the first country to be exporting commercial fast reactors and had no trouble getting $3.5B from the Russian government for their fast reactor program, the US hasn’t spent a dime exploiting the world’s best fast technology that we shelved in 1994 (which the Russians would love to get from us). That is not a winning strategy. It is a dumb strategy. We should either fish or cut bait on fast reactors. If we aren’t going to pursue them, then we should sell the technology to the Russians so we get at least some economic benefit from our research instead of zero. If we are going to pursue fast reactors, we need to get off our butts and build one now like our top Argonne scientists have been telling us for the last 15 years. If our objective is for Russia to lead the world on commercial advanced nuclear reactors, then we should keep doing what we are doing now, i.e., nothing.
  10. Building high dollar value nuclear reactors will help re-start our economy. Unlike with convention nuclear plants, the IFR reactors are built in a factory then shipped to the site on rail. We can re-tool idle factories, create jobs, and help reverse our trade deficit. Today, thanks to US government inaction, the Russians are the first to export commercial fast nuclear reactors. This is technology we invented and perfected.
  11. France and Japan aren’t going to wait for us. If we want to influence the fast reactor program in other countries, we need to have a program in the US. Today, we have nothing.

Why Congress must order the DOE to build an IFR demo

A member of Congress inquired about the IFR with the DOE and was told the following:

Although the IFR program per se is no longer active, research and development in sodium fast reactor and pyroprocessing technologies have continued.  In its FY 2010 budget, the Office of Nuclear Energy is requesting $153.8 million for Fuel Cycle Research and Development, a portion of which will continue research in IFR related technologies like metal fuel development and pyroprocessing.  Some additional funding is also requested in the Generation IV R&D activity to support sodium fast reactor work.  The precise distribution in FY 2010 for these activities will depend on the final appropriation.  Further research is needed to establish the scalability and economics of liquid metal and pyroprocessing technologies as well as their fuel cycle and proliferation-resistant benefits before they are ready for commercial consideration.

From this response (which doesn’t really tell the full picture), you get the impression that DOE, if left alone, will just do more research. While the Russians are building commerical fast reactors for export, DOE wants to study it more.

Think back 44 years ago. The EBR-II sodium cooled fast reactor was designed and constructed in just a few years. That’s without the aid of computers. After over 30 years of operating experience, the original scientists who worked on the IFR say we are ready to build a full-scale demo plant now. That is their expert opinion.

Today, the DOE wants to do more research and they haven’t even committed to building a small test reactor. So we were further along 44 years ago than we are today. At least back then, we actually had an operating fast reactor. Forty four years ago, we had a “can do” attitude. Today, we’ve completely lost it. We have a “do more research” attitude.  Today we have no operating fast reactor of any kind and DOE has no plans to change that.

How is it that we need more research today, yet 44 years ago, we had sufficient research to design, build and operate a sodium cooled fast reactor? Did we lose all that knowledge? Did we not learn anything of value over the 30 years of operation?

Compare what is not happening in the US to what is happening in Russia today. They have been operating their BN-600 sodium-cooled fast breeder reactor without incident for the past 30 years. This is a commercial reactor, not a test reactor. And now they are building commercial fast reactors for the Chinese. So we are currently 30 years behind the Russians and even today, the DOE would rather to fund more research rather than deciding to actually build something.

We are out of time.

If the government orders DOE to have a 300 MWe IFR plant built and operating in <8 years and they make it a priority, then DOE will get it done. Short of that, nothing will happen. It’s like JFK and putting a man on the moon. Without setting high expectations, nothing gets done. It’s clear that Congress has got to request it and set high goals (just like the Chinese do) because left alone, DOE will simply research fast reactors until the cows come home and nothing will get built. If Congress requests nothing, then that’s what we will get: nothing.

The Gen IV International Forum Technology Roadmap

http://www.gen-4.org/Technology/roadmap.htm summarizes the results of extensive deliberations of the world’s top nuclear experts on generation IV reactors.

Four key points:

  1. The IFR comes in at lowest cost for viability/performance (p. 83)
  2. The IFR has the best “best case deployment date” (p. 20)
  3. The chart on p. 13 shows we will be in serious trouble if fast reactors aren’t introduced starting in 2030. A September 2008 INEA position paper confirms that we will need to have a sizable fleet of Gen IV breeder reactors in operation by 2050.

Not shown in this report were the overall scores of each system where the IFR ranked #1. See the Gen IV Evaluation Summaries presentation which discloses this.

Also, p. 41 of the Technology Roadmap basically confirms the US is not giving the IFR the attention it deserves:

SFR Design and Evaluation R&D

While there are design studies in progress in Japan on SFRs, there is little design work in the United States, even at the preconceptual level. Design work is an important performance issue, and it should accelerate given the importance of economics for the SFR. R&D activity is needed with a focus on the base technology for component development.

Next steps

“On the waste issue, GE has technology called PRISM reactors that we can employ …we can deal with nuclear waste through those reactors, but again, the decision to deploy that technology is really in the hands of the government. What China has done right though is they’ve set long-term policy with very very tall objectives. And the US has been very on and off, very short term.”

-         John Krenicki, president and CEO of GE Energy
during interview on CNBC
(Note: PRISM is GE’s commercial implementation of the IFR)

The House bill already allocates $10B for Carbon Capture and Sequestration (CCS) and $0 for fast nuclear. Bingaman’s bill allocates $6.6 billion for 10 “early mover” large-scale CCS projects and $0 for fast nuclear.

The Boxer-Kerry Climate bill should be modified to provide DOE at least $3B to construct a demonstration IFR plant.

This would be a better use of public funds than CCS, because 1) there is a greater likelihood of a successful outcome with the IFR than with CCS, and 2) the IFR solution is a superior solution to CCS because the IFR reduces the cost of operating a power plant, whereas CCS will dramatically increase it. So even if CCS worked as designed, everyone will find a reason not to adopt it. Every country would be much more likely to adopt an IFR solution (that lowers costs) than a CCS solution (that increases costs).

So why are we allocating billions to CCS and zero to the IFR? It makes no sense. You’d only do that if you were 100% confident CCS would work and would negligibly increases costs and were 100% confident the IFR would fail. But it is much more likely that the IFR will work and CCS will fail.

There is over $20 billion dollars in the Nuclear Waste Fund. Senator Lindsay Graham introduced legislation in April to have all of it rebated to consumers. That’s a dumb idea; it would not move us closer to solving the waste problem. But taking some of that $20 billion dollars and investing it in building an IFR would be a brilliant move.

For further reading

http://dl.getdropbox.com/u/390139/ifr/IFRintro.doc
Is the electronic version of this document with all the hyperlinks (if you are reading a print version)

http://bravenewclimate.com/2009/10/16/ifr-spm/
This is a more readable on-line HTML version of this document with pretty graphics done by Barry Brook.

http://www.sustainablenuclear.org/PADs/pad0509till.html
Article about the history and significance of the IFR written by the IFR inventor himself, Charles Till.

http://www.anl.gov/Media_Center/Argonne_News/news97/crtill.html
Senator Kempthorne wrote into the Congressional Record on the retirement of Charles Till a nice summary of the IFR, and that ” I assure my colleagues someday our Nation will regret and reverse this shortsighted decision.”

http://www.huffingtonpost.com/steve-kirsch/climate-bill-ignores-our_b_221796.html
My Huffington piece provides a good overview and has links to various primary sources.

http://dl.getdropbox.com/u/390139/ifr/IFRKirschCongressBriefing.ppt
A PowerPoint that gives you the gist in the first 15 slides

http://dl.getdropbox.com/u/390139/ifr/Ray%20Hunter%20email%20to%20Senator%20Reid.doc
A letter written to Senator Reid by the former #2 nuclear guy at DOE. Ray Hunter was at DOE for 30 years. Reid never saw the letter.

http://www.columbia.edu/~jeh1/mailings/2008/20081121_Obama.pdf
Jim Hansen says IFR is priority #4 of the 5 things we must do (see bottom of page 7)

http://www.timesonline.co.uk/tol/news/environment/article4836556.ece
Mark Lynas, a well known UK environmentalist, read about the IFR and he realized that the green groups had been pulling the wool over his eyes all these years. It is a great read if you have time

http://blogs.reuters.com/felix-salmon/2009/06/23/nuclear-power-going-fast/

This article talks about using the IFR to replace the burner in a coal plant. The comments on this article are also interesting reading. Some of the comments are from people who are misinformed, and some of the comments are actually very astute and accurate.

http://skirsch.com/politics/globalwarming/ifrBerkeley.htm
This is a copy of the original IFR page at UC Berkeley before it became unavailable. Lots of great details about the IFR.

http://www.youtube.com/watch?v=4uJ4NaSVLn0&feature=related%C2%A0
Video interview of Tom Blees on the IFR. This is in 3 parts. Be sure to watch part 2.

http://www.world-nuclear.org/info/default.aspx?id=540
This is the page on fast nuclear reactors on the world-nuclear.org site. This page is one of the most comprehensive I’ve seen.

http://dl.getdropbox.com/u/390139/ifr/IFRKirsch.ppt
This is my catch-all slide prezo of all IFR slides.

http://prescriptionfortheplanet.com
This is the book by Tom Blees that re-started it all when Jim Hansen read it.


[1] See Gen IV Technology Roadmap, http://www.gen-4.org/Technology/roadmap.htm, p. 13

 

[3]For example, China, in addition to completing the work on its own 65 MW experimental fast reactor at the China Institute of Atomic Energy (CIAE), just ordered two of the Russian BN-800 fast reactors.

[4] See the bottom of page 7 in Hansen’s Tell Barack Obama the Truth — The Whole Truth.

[5]The U.S. stockpile of DU amounts to about 700,000 tonnes, which is 7E5 reactor-years of power, or 7E5 x 8760 hours/yr x 1E6 kW/reactor = 6.1E15 kWhr of energy. The annual U.S electricity consumption these days is ~4E12 kWh. This works out to be 1,525 years of fuel.

[6] More than 99% of the current nuclear waste from nuclear power plants, uranium enrichment, and decommissioned nuclear weapons can be re-used to fuel fast reactors. The fission products, which comprise less than 1% by weight of our current nuclear waste, cannot be used for electric power generation, but everything else can. The DU comprises about 90% of the nuclear waste in the US today.

[7] The U.S. stockpile of DU amounts to about 700,000 tonnes, which is 7E5 reactor-years of power, or 7E5 x 8760 hours/yr x 1E6 kW/reactor = 6.1E15 kWhr of energy. At 0.5 cents per kWh, which is the current value of uranium for second generation reactors, this is $30 trillion dollars.

[8] The reactor design at Chernobyl would never have been approved in the US. If Chernobyl was a US-approved reactor design run in accordance with US standards that accident would not have happened.

[9] Chu has talked favorably about fast reactors and pyroprocessing which are the two key features of the IFR. Chu has not specifically mentioned the IFR by name, however.

[10] Holdren as not publicly announced his support of the IFR, but has spoken favorably about the IFR in private meetings.

[11] Bethe met with Till for a full day of briefings on the IFR before the project started. Bethe’s support was important for getting Congress to fund the IFR.

[12] Senator Bingaman has incorporated language into his bill (Section 313 of S.1462) which would allow DOE to lay the ground work for doing some of the planning necessary to restart the IFR. Bingaman prefers that Secretary Chu to lead on this issue rather than have it dictated by Congress.

[13] The public is uninformed about the IFR. The 59% approval is for nuclear power in general.

[14] S.1462, Section 604(d)(2) which can be found on page 329, line 16.

Cap-and-trade will Make the Climate Problem Worse, Not Better

Executive Summary

The Larson bill for regulating carbon emissions (essentially a fee-and-rebate) would be a superior alternative for everyone: generators, the public, the economy, and the environment. Conversely, the Waxman-Markey and Boxer-Kerry bills would a major step backwards, hurting the environment, economy, public, and causing unpredictable price for generators.

Four key reasons why it is important that we use a fee-and-dividend approach to regulating carbon emissions:

1) Fee-and-dividend is, without any doubt, the best way to regulate carbon emissions. There is near universal agreement among experts including Al Gore, Jim Hansen, the inventors of cap-and-trade, economists, the CBO, EPA regulators, and Sierra Club that fee-and-dividend is the best way to achieve the goal of carbon emission reductions because it puts a predictable price on carbon. Conversely, the current cap-and-trade bills, even in the most optimistic scenario, would achieve virtually no reductions and in any practical, real-life scenario, would actually make the problem worse because at best it would lock in today’s emissions for decades.

2) Fee-and-dividend is popular with voters. Fee-and-dividend is politically viable. In British Columbia where the opposition party made it an election issue, they proved it was political suicide to oppose it. The opposition party now supports it. There are now carbon fee laws all over the world, including in the US.

3) Fee-and-dividend helps our economy and our environment: it is a double-dividend. Fee-and-dividend helps our economy whereas cap-and-trade would hurt our economy. So fee-and-dividend is a great idea even if you don’t believe in global warming; we pass the bill for the economic benefit and we get the environmental benefit for free. Economists call this double benefit (economy and environment) the “double dividend.” Cap-and-trade does not have a double dividend.

4) Cap-and-trade would irreparably harm our environment and hurt our economy. The current cap-and-trade bills would, even under ideal circumstances, insignificantly reduce emissions by 2020 according to the CBO analysis. Under any practical scenario, it would hurt the environment irreparably because it allows business as usual (BAU) for 17 years or more (and Stanford Professor Michael Wara’s graph of emissions under Waxman-Markey shows that under Waxman-Markey, emissions can keep increasing until 2030). This is why Jim Hansen is so against it and why key individuals within the green groups are personally opposed to the cap-and-trade part of the House and Senate bills. Cap-and-trade is a “double whammy,” hurting both our economy and environment.

Cap-and-trade must be defeated because it will do irreparable damage to our ability to mitigate climate change and hurt our economy at the same time. There is no analysis anywhere that disputes what Hansen says.

The alternative, substituting Congressman Larson’s bill for the cap-and-trade section of the Senate bill, will help both the economy and the environment. Unfortunately, nobody is paying attention to Larson’s bill because cap-and-trade is sucking all the oxygen out of the room.


The four biggest myths about fee-and-dividend

Myth #1: The cap-and-trade bill isn’t perfect, but it will get the job done and it has everyone behind it so it’s the only game in town. If you want to get something done, this is the train to get on. This is our only chance. If this is defeated, nothing will get done. This is better than nothing.

That’s what people thought when they originally supported it. The truth is that, at best, would reduce emissions by 2% by 2020 according to the CBO analysis. But the more likely scenario is that, because it allows offsets (which are impossible to regulate), it will allow actually emissions to get worse until 2030 while the same time hurt our economy through higher and unpredictable energy prices. It will also drain dollars from the US and send them overseas for a questionable environmental benefit. That is a “double whammy:” hurts the environment, hurts the economy. A fee-and-dividend provides a “double dividend”: helps the economy, helps the environment. Unfortuately, people are locked into their position and the only way they can rationalize their continued support is to ignore the facts and hope that things will turn out better than all the unbiased analyses say. This is stupid when there is a superior alternative, fee-and-dividend, that has no downsides (other than a perception myth) that virtually everyone is saying is the superior solution including the CBO, Al Gore, Jim Hansen, the creators of cap-and-trade, economists, EPA regulators, and even Exxon Mobil and the Chinese government.

Myth #2: Fee-and-dividend will never pass. It’s a tax. There is no traction for this.

This is a self-perpetuating myth that is true only as long as people contine to believe it is true. The reality is that if properly positioned (see communication tools for making a carbon tax palatable to the public), a carbon fee and rebate is not only politically viable, but it is political suicide to oppose it, as the lawmakers in British Columbia now know. Look what happened in Finland. Finland’s carbon tax has reduced emissions by 5% below the previous trend and stimulated renewable energy investment and development. Energy taxes are now a major source of government revenue, and are curbing growth in energy use and promoting efficiency while Finland’s economy expands. Finland’s climate policy has created jobs, including more jobs for women. See Carbon Tax is on the (Round) Table at the Cosmos Club.

Myth #3: Fee-and-dividend is unfair. It will result in a net transfer of wealth from states that use a lot of coal for electricity to states that have a cleaner energy mix.

States relying heavily on coal have lower power costs than states with a cleaner mix, so a fee-and-rebate would have the effect of evening out power costs across America. However, the transfer of wealth will be small in the early years when the tax is ramping up. If disparity is a problem, a portion of the fee could be used to even out regional differences, for example, taking 20% of the fee and disbursing it all back to the states to even out regional disparities.

Myth #4: It will unfairly hurt poor people because they pay a greater percentage of their income for energy prices.

Exactly the opposite is true. Percentages don’t matter. As long as rich people use more energy than poor people, poor people will always benefit from fee-and-dividend. Fee-and-dividend is the only solution that is progressive and will help the economy. Suppose we have two residents: a rich person and a poor person. The rich person makes $100K/yr and pays out $100 per year in the fee because he has a big house and a private jet. Our poor person makes $1,000/yr and pays $10 per year in the extra fee since the poor person uses less energy than the rich person. What happens is that each person gets a $55 rebate. So the poor person doesn’t pay more for energy under this plan…he actually makes money! So instead of paying out $10, the poor person  is now $45 a year richer. So the people who can least afford higher energy prices are always better off in a fee-and-dividend scheme.

Background

This is the biggest issue of our time…maybe for all time…

If we get it right, we save the planet.

If we get it wrong, we’re toast. Game over. No chance to fix it, possibly forever.

Unfortunately, we’re poised to get it wrong. Really wrong. Here’s why…

On May 4, 2009, NASA’s leading climate scientist, James Hansen, said he hoped that the Waxman-Markey bill fails because the bill would lock in dangerous emissions for decades. The Boxer-Kerry bill in the Senate is substantially the same, so his criticisms apply equally well to that bill. Hansen’s new book, Storms of My Grandchildren (available December 8) makes the case against cap-and-trade in detail in Chapter 9. He points out that fee-and-dividend, where a carbon fee is assessed at the source and 100% of those fees are paid back to the public on a per capita basis, is superior to cap-and-trade and will get the job done.

A day later, Joe Romm wrote a detailed response on his website saying Hansen is wrong. Romm argues that that fee-and-dividend won’t work.

Who should we believe? And how can we be sure they are right? This is really important. We cannot afford to get this wrong. The fate of our planet depends upon it.

What I found when I looked in detail at the evidence was that Hansen is right and Congress and Romm got it wrong. It wasn’t even close. Many others who have looked objectively at the arguments came to the same conclusion I did: see the Supporters list at the Carbon Tax Center.

So all these emails you are getting from the green groups urging you to ask your legislators to vote for the climate bill is bad advice. Doing so will make the problem worse, not better.

If you really want to save the planet, you should be urging your legislator to not support cap-and-trade and to support fee-and-dividend instead.

I’m going to summarize the reasons why cap-and-trade won’t work, why fee-and-dividend will work, and why most of the green groups got it wrong and will not change their position.

Australian climate scientist Barry Brook summed up the fundamental differences quite nicely (emphasis mine):

Carbon tax and fee and rebate are both more difficult to manipulate than a cap-and-trade, and for that reason are better. The cap-and-trade has a couple of theoretical advantages (potentially lowest costs abatement, best guarantee of actual reductions) but in practice it is distorted to hell with grandfathering, free permits etc. So KISS. The key thing is to get a price on carbon to make the alternatives much more attractive as a medium-term investment.

In short, cap-and-trade in theory works better, but in practice, especially for climate change, it probably won’t work at all, even if the bill was perfectly written. If the bill is not perfectly written, it can make things a lot worse. That’s the situation we have today with the bills in Congress.

Green groups support cap-and-trade: because in theory it gets the job done with certainty and because it appears to be politically viable. Members of Congress like it because, according to one Senator, “that’s what we did in 1992 and we’re comfortable with that.” Those groups didn’t spend enough time talking to people like Laurie Williams and Allan Zabel who are enforcement attorneys with US Environmental Protection Agency. Zabel has over 20 years of experience with cap-and-trade and offsets. They told me that even under ideal conditions, it is not possible to write an effective cap-and-trade law for climate change (more on this later). Their arguments can be found on their website at www.carbonfees.org including this excellent paper which should be read by anyone seriously interested in comparing the options:  Keeping Our Eyes on the Wrong Ball: Why Acid Rain is the Wrong Template and the 1990 CFC-Tax is Closer to the Mark and Why Cap-and-Trade Won’t Solve the Climate Crisis But Carbon Fees with 100% Rebate Can. They independently came to the same conclusion Hansen did, for a similar set of reasons.

One thing you never hear the green groups or Joe Romm talk about is that the inventors of cap-and-trade, Thomas Crocker and John Dales agree with Hansen that for climate change, an outright carbon fee is better than cap-and-trade as noted in this Wall Street Journal article “Cap-and-Trade’s Unlikely Critics: Its Creators: Economists Behind Original Concept Question the System’s Large-Scale Usefulness, and Recommend Emissions Taxes Instead.” That article also says that the economist who did the most extensive work on cap-and-trade also agrees with Hansen:

Another economist, David Montgomery, advanced their ideas in the 1970s, converting their theories into the complex mathematical formulas to demonstrate that they weren’t merely an idea but were also economically feasible. Mr. Montgomery, too, is a skeptic of cap-and-trade for greenhouse gases. He prefers an outright tax.

So now we have one of the world’s leading experts on climate change, Jim Hansen saying cap-and-trade would be a disaster for the climate and also the inventors of cap-and-trade and the economist who did the most work on cap-and-trade theory agreeing with Hansen. We should pay serious attention to this.

Suppose you were dying of cancer and had a year to live. The doctors tell you have only time to take one drug: Drug A or Drug B. Most of your doctors say in theory Drug A should work best (even though it has never worked on your cancer), but the world expert on your cancer says it will kill you and the company that invented the drug says Drug B will work better. For Drug B, almost everyone says it will work, it has worked in real life for people in British Columbia, but some doctors are skeptical of whether you’ll decide to actually take it.

Which Drug do you choose to save your life? Most of us would choose Drug B. But a lot of members of  Congress want to force us to take Drug A because they don’t think you’ll take Drug B. So you can see, we have a big problem here.

One of the main reasons Hansen doesn’t like cap-and-trade is precisely the same reason Brook pointed out: in any practical implementation that has the complexity of climate change, it really gets messed up. Indeed, the climate bills in both the House and Senate will both allocate permits to coal plants and allow enough emission offsets so that the owners of the coal plants will not have to do reduce their emissions for decades. So it locks in a bad result for a time that is long enough to permanently eliminate any hope of controlling climate change. I’ve not seen any analysis with a credible argument as to why Hansen’s most-likely-case-scenario won’t happen.

Critics say fee-and-dividend isn’t politically possible. But is that really true? The critics (including Romm) seem unaware of what happened when British Columbia passed a fee-and-dividend law for climate change. First, the law was put in operation in only 4 months whereas cap-and-trade would take many years to implement.  Second it became an election issue with the opposition party campaigning hard against this “tax” — but the public liked it as the money was returned via a reduction in payroll taxes.  When the opposition lost the election, they changed their tune — now both parties support it. So much for the “not politically viable” argument. BC proved just the opposite is true: that it is not politically viable to oppose fee-and-dividend! For more on the British Columbia experience, see these 3 links: http://www.carbontax.org/progress/where-carbon-is-taxed/, http://www.carbontax.org/blogarchives/2009/05/13/bc-voters-stand-by-carbon-tax/, and

http://www2.macleans.ca/2009/05/26/a-new-coalition-a-different-politics/.

So now let’s sum up the key reasons cap-and-trade is bad and fee-and-dividend is good.

Here are a few reasons why cap-and-trade is the wrong answer for controlling carbon emissions:

  1. Experts say both the Senate and House bills will lock-in high emissions for decades. This is the most significant argument against these bills. It’s not just that cap-and-trade won’t work. It’s that it will make things worse. See G-8 Failure Reflects U.S. Failure on Climate Change and Hansen hopes lawmakers’ cap-and-trade approach to climate will fail for details. Also, Rainforest Action Network and International Rives released an analysis of Waxman-Markey which pointed out “In reality, emissions from the major sources of greenhouse gas pollution in the US would be allowed to increase until 2025 and the 20% reduction supposed to happen by 2020 would not actually be required to occur until 2036.” If the full amount of offsets allowed by the Waxman-Markey draft legislation were utilized by polluters, the report concludes that any actual emissions reductions in capped sectors of the U.S. economy would be delayed until 2026, allowing a full seventeen years of continued business as usual. Yikes. That’s a fatal blow.
  2. Even the most optimistic projections only show minimal reductions under cap-and-trade. The analysis of Waxman-Markey by the non-partisan Congressional Budget Office (CBO) show that it would reduce cumulative emissions by just 2% between 2012 and 2020 in the sectors of the U.S. economy regulated under the bill’s cap and trade program. That’s better than nothing, but still not good enough. If it were only really this bad, it wouldn’t be such a big problem. But this is the optimistic scenario because it assumed that everything was on the level (no gaming or fraud). While we can hope for this to be exceeded, it is much more likely that we’ll have business as usual for the next 17 years.
  3. It drains money from consumers which hurts our economy without reducing carbon emissions. Cap-and-trade will take money out of your pocket (in higher energy prices). But instead of going to building new clean energy, that money is more likely to go into the pockets of Wall Street investors who set up the cheapest offsets and to foreign countries that implement them. This will be a net drain on our economy. Furthermore, basic economic principles dictate that all those funds will go to the cheapest offsets. Those inexpensive offsets will either be shams or be very ineffective. In short, there will be a net transfer of money out of the US for virtually no benefit to the consumer. Consumers lose, Wall Street wins, foreign countries win. That’s really bad for us. That’s not what we need to help our economy. Offsets allow funds to be diverted into shams instead of building a clean energy economy.
  4. It will not create any incentives to exceed the cap. Cap-and-trade basically sets a floor. Once your emissions are below the cap, there is no incentive to do better than that. This is particularly bad because the floor contemplated in the bills in Congress are actually above the current emissions for nearly 20 years. Take a look at the graph at Is Waxman-Markey’s “Cap” and Trade System Full of Hot Air? So a high floor and no incentive to do better than the floor is bad news for the environment.
  5. Cap-and-trade cannot deal with unanticipated fluctuations in demand. Cap-and-trade amounts to rationing. If the economy needs more fuel beyond the “cap” you had set for the year, the alternative may be to turn off the lights.  Assuming this is unacceptable, there would be an huge incentive to suspend the program as occurred with the RECLAIM cap-and-trade program in Los Angeles.  Or alternatively, you get price volatility, because as you bump up against the cap, and there is demand greater than the cap at the prevailing price, you get scarcity and price spikes.
  6. The creators of cap-and-trade and the economist who knows it the best are dubious it will work for climate change. They all believe that fee-and-dividend is the superior approach. See this Wall Street Journal article “Cap-and-Trade’s Unlikely Critics: Its Creators: Economists Behind Original Concept Question the System’s Large-Scale Usefulness, and Recommend Emissions Taxes Instead
  7. It has not worked in practice when applied to climate change. There are no success examples; it hasn’t worked anywhere where it’s been used to regulate carbon emissions. In Europe, it produced harmful price volatility, few legitimate green house gas reductions, higher energy prices for cosumers, and billions in windfall profits for utilities. Uh oh. Big red flag. The proponents of cap-and-trade never like to talk about this; they say we’ll get it right even though our system isn’t that different from those that have been tried before
  8. It will create unpredictable prices. Cap-and-trade, in theory, locks the emissions and allows prices to fluctuate, sometime quite violently as it did in the EU. It is just the opposite of fee-and-dividend which creates a stable price, but an uncertain emission reduction at any point in time.
  9. It is not affordable. Where are consumers going to get the money to pay for this? It would be one thing if it were effective. But these bills increase costs for no benefit. There is no rebate to consumers to help them pay for the increased costs.
  10. A lot of very smart people say cap-and-trade will not work. See the Supporters list at the Carbon Tax Center. A lot of people are afraid to speak out or just not aware of the fee-and-dividend alternative.
  11. It will delay investments in the clean energy economy that the Obama administration wants. The money you pay won’t flow into building clean energy in the US. See this analysis.
  12. The proponents of cap-and-trade for carbon emissions fail to distinguish why cap-and-trade worked for acid rain, but why it won’t work for carbon emissions. Cap-and-trade works for some things and not others. The proponents of cap-and-trade in general fail to appreciate this; they think that since it worked for acid rain, it will work for reducing carbon emissions. In fact, they use this argument when arguing for cap-and-trade. But that argument is flawed. Williams and Zabel call this this argument “the big lie” in their video. Cap-and-trade cannot be applied successfully to all situations. And the acid rate program did not include offsets, a key feature of both the House and Senate versions of cap-and-trade that destroys its integrity. For details on this, see Keeping Our Eyes on the Wrong Ball: Why Acid Rain is the Wrong Template and the 1990 CFC-Tax is Closer to the Mark and Why Cap-and-Trade Won’t Solve the Climate Crisis But Carbon Fees with 100% Rebate Can.
  13. Carbon offsets don’t work. Carbon offsets destroy the integrity of the cap-and-trade program. Williams and Zabel call this “the big rip-off.” See this video.
  14. Cap-and-trade with offsets provides too many opportunities to game the system. A very senior Senate staff person acknowledged that cap-and-trade isn’t the most efficient way to achieve carbon reductions, but politicians like it because it is “an easier tool for politicians to use as a revenue grab for purposes other than addressing climate change.”
  15. There are too many uncertainties. Even if you had cap-and-trade without any offsets, that would be better, but there are still problems. Suppose you are PG&E. You can’t predict next year’s power demand since it depends on climate and economy. So what do you do? Overbuy the permits? Or under buy and risk having to buy later on the open market? What happens if the economy goes wild and demand goes up. You’re screwed. The price on any permits remaining goes sky high. What incentive I have to cut my emissions once I have my permits. Do I reduce so I can sell my permits? But how do I know there will be a market after I do that? Could be that everyone else is doing the same thing. There is no certainty so I can’t plan effectively.

Here are a few reasons why Hansen, economists, regulators, and even Exxon Mobil, like fee-and-dividend:

  1. Most experts who have looked at both systems admit that fee-and-dividend will work better than cap-and-trade for carbon emissions. Among experts who really understand both systems, there is pretty much universal agreement that fee-and-rebate is the superior solution for regulating carbon emissions. The regulators, in particular, love it. One EPA economist when asked about Williams and Zabel’s fee-and-rebate proposal for climate change said, “Anyone who knows anything knows they are right.” Climate Change: Caps vs. Taxes , a report from the conservative American Enterprise Institute (AEI) says the same things the experts have been saying: ” A cap-and-trade approach to controlling GHG emissions would be highly problematic. A program of carbon-centered tax reform, by contrast, lacks most of the negative attributes of cap-and-trade, and could convey significant benefits unrelated to GHG reductions or avoidance of potential climate harms, making this a no-regrets policy.” The report goes into detail about the impossibility of enforcement of cap-and-trade, and the incentives for cheating would be high.
  2. The Congressional Budget Office agrees that fee-and-dividend is the superior approach. Here’s what Peter Orszag, Director of the Congressional Budget Office, told Congress on April 24, 2008:

“Within the relatively efficient category of approaches that rely on the power of markets, a tax on emissions is generally more efficient than a cap-and-trade system. The reason is that although both a tax and a cap-and-trade system encourage firms to find the lowest-cost reductions at a particular point in time, a tax provides greater flexibility over time, allowing firms to achieve reductions when they are least expensive. In particular, a tax encourages firms to make greater reductions in emissions at times when the cost of doing so is low and allows them leeway to lessen their efforts when the cost is high.”

  1. Unlike for cap-and-trade, fee-and-dividend can be totally justified on pure economic grounds alone. Fee-and-dividend is just good economic policy on its own. It has a fringe benefit in controlling climate change, but if the dividend paired with a reduction in taxes, it can be totally justified on economic reasons alone (known as the “double dividend”). Cap-and-trade removes money from the wallets of consumers and transfers it to wealthy investors and foreign countries. Fee-and-dividend does the opposite: it keeps all money within the US and has the effect of redistributing it from wealthy people (who tend to emit more carbon) into the hands of poorer people (who tend to emit less carbon), i.e., it’s progressive. Since the marginal propensity to spend is way higher for poor people than rich people, the economy is stimulated because you are now transferring money into the hands of people who are more likely to spend it. That is why fee-and-dividend is a positive benefit to our economy and it can be justified on that basis alone. See, for example, this New York Times OpEd: “An Emissions Plan Conservatives Could Warm To” which was co-authored by a Republican and an economist. The AEI report Climate Change: Caps vs. Taxes says the same thing: fee-and-dividend: ” … a carbon tax can be paired with a reduction in other taxes in a manner that improves the overall efficiency of the economy. Where such a double dividend is available, a carbon tax swap would be desirable, even if the environmental benefit of reduced carbon emissions failed to be realized.”
  2. It is politically viable; arguably more than cap-and-trade seems to be. Look what happened in British Columbia which passed a fee-and-rebate law: the opposition party made it the key issue for the next election. When the opposition lost the election, they changed their tune and now support it. The public loves it. So when you hear the argument that “fee-and-dividend” isn’t politically viable, ask them to explain why we would be any different here than in British Columbia, Boulder, Colorado, and many other places all over the world that have successfully implemented carbon taxes. British Columbia proved that it was not politically viable to oppose fee-and-dividend. Also, cap-and-trade doesn’t seem to be a political slam dunk since it increases fees to consumers and doesn’t give them the money to pay for it. It appears the only way to get cap-and-trade to pass is to water it down even more. The big myth in this debate is that fee-and-dividend isn’t politically viable. The British Columbia experience showed conclusively that it wasn’t politically viable to oppose fee-and-dividend. But it’s truly amazing how many people still cling to the big myth, mostly because they don’t know the facts.
  3. It works in real life when applied to carbon emissions. It’s been used in British Columbia to reduce carbon emissions. It was implemented in record time (about 4 months). The public loves it. It didn’t destroy the economy. Politicians who campaigned against it lost (and changed their position to support it). It works in the US too. Boulder, Colorado implemented the first tax on carbon emissions in the US on April 1, 2007. It costs the average household $1.33 a month, but households that use renewable energy get an offsetting discount. The Carbon Tax Center has a long list of places where carbon taxes are in place and working, proving without a doubt it is politically feasible all over the world. That page references materials are essential reading for any carbon tax advocate seeking to master not only the details of carbon taxing but communication tools for making a carbon tax palatable to the public.
  4. It gives predictable prices. Unlike cap-and-trade, prices are very predictable. There is never a rationing situation. Industries can emit as much carbon as they want. By steadily and predictably increasing the fee on a regular basis, results are guaranteed.
  5. It creates a stable climate for the massive investment in clean energy that we need. Cap-and-trade will not create confidence by investors that clean energy will become profitable because it creates an unpredictable price on carbon. Fee-and-dividend, on the other hand, guarantees that clean sources will steadily become more attractive than fossil fuel sources by setting a gradually increasing and predictable price on carbon. See this video.
  6. Everyone is incentivized to find alternative solutions at their own pace. Unlike cap-and-trade, industries determine for themselves the rate of compliance. Fee-and-dividend rewards them for doing it sooner and more completely. But the rate is up to them.
  7. Everyone is incentivized to continue to reduce their carbon emissions to zero. Unlike cap-and-trade which sets a floor on the incentives to reduce carbon emissions, there is no floor in fee-and-rebate. Industries are rewarded for (but not forced to) reducing carbon emissions to zero as fast as they can. That’s exactly the type of incentive we want.
  8. It cannot be gamed with offsets of dubious effectiveness. Gaming in a fee-and-rebate system is nearly eliminated. Gaming in a cap-and-trade system would be rampant.
  9. It’s affordable. Because 100% of the fees are rebated to the public, it’s very affordable. In essence, it amounts to a net transfer of wealth from people who emit lots of carbon to people who emit less carbon. In other words, the money goes from people who can most afford it to people who can least afford it. Most importantly, unlike cap-and-trade, none of your money goes to Wall Street investors and none of your money flows out of the country. In fee-and-dividend, the money flows from US consumer to US consumer. That’s why it was so popular in British Columbia and the reasons for its popularity there should be exactly the same here.
  10. NRDC likes it. NRDC economists like but but they just doesn’t think it will pass Congress. That’s odd considering the British Columbia experience. Most Americans would actually come out ahead in a fee-and-rebate system. So why would it be not politically possible to do this?
  11. Nobody says it will make things worse than the status quo. This is perhaps the most important argument. If you have one solution where a lot of experts say it will make things worse, and another solution where nobody says it will make things worse, why would you ever opt for the first solution, especially on an issue where if you get it wrong, you will most likely irreparably damage the environment? Fee-and-dividend is the safe solution and the only logical choice where you cannot prove beyond a reasonable doubt which expert is correct about cap-and-trade.
  12. Al Gore agrees that fee-and-dividend is the best way to reduce carbon emissions. Al Gore originally insisted that a carbon tax was the only way to go. Although he later came out in support of cap-and-trade, he is still of the opinion that fee-and-dividend is the best way to go.
  13. It can be easily adjusted for regional differences. One critic of fee-and-rebate claimed it was unacceptable because it would be a net transfer of money from states with high emissions to the cleanest states (like California). However, the system could be easily written to keep the cash flows within each state or within groups of states who start out with similar emissions.
  14. Exxon Mobil likes it. So it has support from all of the players.

There is also an excellent 10-minute video entitled “The Huge Mistake” which summarizes the case for fee-and-rebate. I highly recommend this video.

Hansen points out:

Regarding “cap” versus “fee” versus “tax”: none of these approaches will work (slow down emissions fast) unless they increase the price of carbon emissions.  “Cap” is dishonest, as they pretend that it will not increase fuel cost.  “Tax” is unnecessarily self-flagellating, making it practically impossible to be accepted.  “Fee” seems to be an appropriate middle ground.  Of course the big question is: what happens to the money collected.  Cap-and-trade pulls another big swindle — Congress wants to decide what happens to the money, so it can hand out favors to the usual suspects, who will hand some back to them.  The public needs to insist on a 100 percent dividend.

So why, if fee-and-dividend is so good, don’t all the green groups align behind it? I think there are three reasons:

  1. They honestly think cap-and-trade will work…eventually. They believe if it fails to achieve the goals, that Congress will tweak it so it will work. However, others are skeptical that that will happen in time to make a difference. For example, in RECLAIM, despite the presence of accurate monitors and sophisticated regulators, the initial cap was inflated (set too high, also called “over-allocation”), which delayed most emission reductions for approximately seven years (see Why Acid Rain is the Wrong Template and the 1990 CFC-Tax is Closer to the Mark and Why Cap-and-Trade Won’t Solve the Climate Crisis But Carbon Fees with 100% Rebate Can). We don’t have seven years to waste.
  2. They think that cap-and-trade has the political momentum to pass Congress now and that fee-and-dividend can’t get enough votes to pass. So they’d rather have something than nothing. Virtually all the political momentum is behind cap-and-trade.
  3. They are now so publicly committed to supporting cap-and-trade it is difficult to impossible to change their position. To change their position now would hurt their credibility, even if they now realize they made a mistake. The leader of one of the largest green groups told me, “I am very sympathetic to this critique.  It has been almost impossible to turn the greens from cap and trade.”

Is it possible for Congress to create an ideal law that would make cap-and-trade work for climate change? When I asked Williams and Zabel if they could write a cap-and-trade bill that would work for climate change, here’s what they said:

As Steven Stoft has said, in general, cap-and-trade provides an incentive to pollute up to the cap, to the extent that you are relying on the cap as a limit.  So even if there was a perfect cap-and-trade system, with no offsets, then you would be less likely to get reductions below the cap.  This doesn’t occur with an appropriate fee, because there is always an incentive to avoid the fee.

If we were designing a cap-and-trade, there would be no offsets; all allowances would be sold at the floor price, set to insure that fossil fuel energy became more expensive than clean energy within a known time frame.  To avoid the enforcement nightmare associated with tracking emissions, we would have an upstream cap, applied to fossil fuels as they entered the economy.  We would essentially get rid of the trade, because the cap would just be the maximum amount of fossil fuels that could enter the economy.  Trading would occur after the initial purchase of fossil fuels, where the cap/fee would be applied.  This would essentially be cap-and-dividend as proposed by Peter Barnes, but would be more explicit about the price (i.e., getting the price above the currently available price of clean energy at the start of the program within a known time frame)

Another reason that a cap system is inferior to a fee system is that it amounts to rationing.  If the economy needs more fuel beyond the “cap” you had set for the year, the alternative may be to turn off the lights.  Assuming this is unacceptable, there would be an huge incentive to suspend the program as occurred with the RECLAIM cap-and-trade program in Los Angeles.  Or alternatively, you get price volatility, because as you bump up against the cap, and there is demand greater than the cap at the prevailing price, you get scarcity and price spikes.

A steadily declining cap assumes that there are technical/infrastructure improvements in clean energy that will match the required carbon decreases.  Economic activity and innovation are not that predictable in a real economy.  Rather these things are unpredictable.  So a fee (rather than a cap) is more economically flexible and rational.  It provides clear incentives, but doesn’t create price spikes from specifically imposed limits/caps.  What pulls innovation and investment in clean energy forward is the price structure making clean energy competitive with fossil fuels within a known time frame.  Planning is then possible.

There is a great report on why cap-and-trade will lead to price volatility and delays in clean energy investment by the Brattle Group. see http://www.brattle.com/_documents/UploadLibrary/Upload737.pdf

One final comment. Williams and Zabel have been two of the most outspoken critics of cap-and-trade for carbon emissions for some time. They are also in a position to know exactly what they are talking about because they have been involved in enforcement of California’s cap-and-trade law. I asked them whether anyone from Congress including any staff member has ever talked to them to seek their advice or ask them to testify in front of any Congressional committee. The answer is no, not one person has contacted them. So if you thought Congress seriously and carefully weighed the arguments against cap-and-trade, think again.

Collectively over the years, Hansen and the Carbon Tax Center have discussed cap-and-trade and fee-and-dividend with several dozen members, mostly on the House side, with varying degrees of receptivity.

A better solution: Larson’s bill

On the House side, Congressmen Larson (D-CT) and Stark (D-CA) are the strongest advocates of this approach– they introduced a bill that has carbon pricing with corresponding reductions in payroll taxes on wages. Unfortunately, they are being ignored by the Democratic leadership and the White House. However, the Chinese government noticed the wisdom of this bill and is apparently going to take this approach. For a quick synopsis of Larson’s bill, see: http://www.carbontax.org/progress/carbon-tax-bills/.

From the graph below (from Carbon Tax is on the (Round) Table at the Cosmos Club), you can see how Larson’s bill is vastly superior to W-M and it will help the economy to boot.

Congressman Dingell has championed a carbon tax at times. Congressmen McDermott (D-WA) and Doggett (D-TX) both introduced proposals to “manage (carbon) price” which work more or less like a carbon fee but with some of the (alleged) advantages of a cap. On the Republican side, Bob Inglis (R-SC) has tirelessly pressed the case for a carbon tax; he’s very assertive about saying it must be revenue-neutral– no expansion of government.  He’s a big supporter of wind electricity generation, and understands that a carbon price is essential to making the shift.

In the Senate, Dorgan (D-ND) has often asked why get Wall Street into the carbon market and why not a direct fee instead. Senator Corker often asks similar questions.

Senator Cantwell (D-WA) has been working on a Cap/Dividend proposal that would be a huge improvement, for example eliminating offsets. Like other bills, Cantwell allows a coal-burning company that sequesters CO2 to get a refund of the fee if the CO2 is sequestered. This is because the power company is paying the fee when the buy the coal, so by “refunding” that same fee if they later capture the carbon that they already paid a fee on, it becomes revenue neutral to the power company which is perfectly fair since they aren’t emitting any carbon. And if the CCS cost is lower than the carbon fee, the utility makes money on the deal giving them a huge economic incentive to do the right thing. Without this credit, a power company would have no incentive to sequester their emission since they had to pay for the emissions when they bought the coal. Although her carbon price starts out low, it increases over time, though arguably not enough and . Cantwell returns 75% of the auction revenue as per capita dividends and allows 25% to be used for transition assistance and green public investments.  Using 25% of the revenue for other things, such as evening out the regional impacts caused by higher carbon prices, is a reasonable approach. Such regional impacts are a big political issue, esp. among Democratic Senators from carbon-intensive states. Cantwell also has a provision whereby the President can adjust the cap downward in the event that changing climate science ‘demands’ such a revision. Cantwell just about eliminates ‘the stupid markets and traders.’  No offsets; permits can only be acquired (at auction) by actual first sellers of fossil fuels; and the permits expire quickly.  So it’s ‘use ‘em or lose ‘em,’ with extremely limited trading and speculation.

Peter Barnes pointed out the following:

Fee and Dividend is effectively the same as Cap and Dividend, where the cap is upstream (at the fuel source, the exact same place the fee would be), 100% of permits under the cap are auctioned (in effect, the permit price = the fee), per capita dividends are then paid, and there is ZERO trading of offsets for permits. Sen. Maria Cantwell has a bill to this effect.  It is ‘fee and dividend’ in all but name

Senator Murkowski (R-Alaska) said positive things about the cap/dividend idea at a recent Energy and National Resources Committee hearing.

At this point, it’s fair to say that cap-and-trade has “sucked so much of the oxygen out of the room” that it’s near-impossible to get real focus on Capitol Hill on alternatives such as fee-and-dividend. There seems to be great reluctance to break with the “party line(s)” on cap-and-trade.  The Democratic party line: cap/trade “guarantees” emissions reductions and is the best we can do; the Republican party line: it’s too expensive and will disadvantage US firms because no other country will follow.

James Handley, a former enforcement attorney with the US EPA and volunteer with the Carbon Tax Center explained his personal views on this: “Both are wrong, of course, but frankly, the Republicans have a point about other countries not following cap/trade because it’s just too complex  and linking caps especially with offsets would be a nightmare.”

A defeat of cap-and-trade, however, may allow Congress to seriously discuss the better alternative, a revenue-neutral alternative that doesn’t increase the size of government that should garner bi-partisan support if it is seriously considered. It seems like lots of Hill staff and members understand fee-and-dividend, but they’re not free (yet) to embrace or even talk about it.  And they won’t be until the current proposals fade and they hear from constituents and the President in support of something better.

How the bills stack up

James Handley rates the laws in order of preference:

Larson > British Columbia > Cantwell >> Kerry-Boxer/Waxman-Markey.

Larson’s rate would go high enough to actually get substantial reductions.   British Columbia’s bill is strong because it’s rev-neutral.  Cantwell avoids markets but doesn’t have a signficant price and is mostly a subsidy (for CCS) bill.  All of these bills are much better (hence the >>) than Kerry-Boxer/Waxman-Markey which will mostly fund offsets without driving reductions here.

Summary

So there it is. Now you know the arguments. It’s time to cast your votes: cap-and-trade or fee-and-rebate?

The online version of this document is at: http://dl.getdropbox.com/u/390139/ifr/cap%20and%20trade.doc


Appendix 1: A short argument for fee-and-dividend

This is the biggest issue of our time…maybe for all time… If we get it right, we save the planet. If we get it wrong, we’re toast. Game over. No chance to fix it, possibly forever.

Unfortunately, we’re poised to get it wrong. Really wrong.

A lot of people came on board cap and trade early on, when they thought it would work. Later, when it became clear that in any possible real life situation, cap and trade would actually hurt the environment and our economy, it was too late to change their position. So they are still locked in as supporters because they want to believe they were right and that somehow, magically, the bill will do what it claims to do and because they think it is the only game in town. This myth feeds upon itself.

This is amazing that this is happening but it is high time for someone to point out that the emperor has no clothes.

The belief of environmental benefit is fantasy. Let’s look at the objective facts. The CBO analysis was realistic, but in a sense very optimistic since there no gaming and fraud and everything works as planned. It showed you got virtually no reduction by 2020. The reality of course will be much worse. Supporters of course then discredit the truthtellers since it makes them look bad.

The fact is this: Al Gore, Jim Hansen, the inventors of cap and trade, leading economists (including conservative economists), and epa regulators …and even Exxon Mobil, say fee and dividend is superior in every respect.

Fee-and-dividend is also the only solution to this problem that is progressive and will help the economy. The environmental benefits are significant and a nice plus. This is the “double dividend” that the economists talk about for fee-and-rebate.

The “politically impossible” is a self-perpetuating myth as the British Columbia experience showed.

Someone needs to stand up and pull the plug on the myth and go with the better solution.

Congressman Larson has taken the first step in doing that. His bill is an excellent framework. Nothing is more important that putting a predictable price on carbon and helping the economy. His bill does both.

The more you check into this, the more convinced you will become that fee and rebate is the way to go.

Steve Kirsch, stk@propel.com, 650-279-1008

Cap and trade vs. fee and dividend poll

Read my post on Cap and Trade and express your opinion: