The high-powered management consulting firm McKinsey and Company
publishes an online McKinsey Quarterly. They send me automated emails on
articles that may be of interest to me. Today I received one titled “Seven ways
China might surprise us in 2009.”
Number one on their list got my attention:
China announces that by 2020, half of the cars in
the country will be electric. It invests tens of billions of dollars in R&D
toward achieving that goal.
Such a move could make China the leader in the automotive technology of the
future, with other countries struggling to keep pace. Shanghai Automotive
Industry Corporation (SAIC) or newcomer BYD Auto could become the Ford Motor of
the 21st century, propelled by a new technology—much as Ford capitalized on the
internal-combustion engine at the start of the 20th century.
McKinsey is not saying this is likely, but, as the author
puts it: “Here’s a list of some realistic possibilities for the next year. Will
all of them come to pass? I doubt it. But any one of them could, and each might
make us see China and its future in a new light.”
So what difference would it make for Oregon if China made a
big electric car push?
Lots!
It would up the importance of trying to get part of the BYD
Auto company action in Oregon. Oregon is actively courting BYD. Part of that courting,
I assume, is the Governor’s efforts to make Oregon more electric-car friendly.
Those efforts would become more important and significant.
It would indicate that China sees its own geopolitical reality
and will make the smart, strategic investments it needs. It is a large country with
little oil resources. With a small but rapidly growing, gas-based car culture, it needs get off oil before its becomes too dependent. It
should not want to face ever rising oil prices and ongoing dependency on politically
unstable regions of the world for its supply.
It might, finally, impress Oregon’s business, educational,
and political leaders that the economic and geopolitical world of the 20th
century is over. Throw all the old assumptions out. China is rising. This is not the only game changing move they might make. Oregon needs to respond. In part, that response
should be to increase the number of students studying Mandarin and studying
aboard.
And then there would be more of China's traditional coal plants to power those electric cars? We know what that means. Ever warmer here.
PS: The full article (it’s short) is here. You will probably
need to register to see the full article.
Activist and author Antonia Juhasz spoke at Powell’s Books
(10/27/08). She is the author of the recent book “Tyranny of Oil: The World’s
Most Powerful Industry – And What We Must Do To Stop It.” (here) She was
engaging, articulate and thoughtful. She spoke about the profits and political
influence of the oil companies. Both enormous and second to no other industry.
She covers all the points of the two youtubes at the end of this post. Watch
them.
What she said that interested me the most was her view that
the oil companies do not believe that the age of oil is going to end. They do
not believe in “peak oil.” In her words, “the oil companies do not intend to
become energy companies. They are not investing in renewables.” They intend to
find ever more sources of oil (off-shore, sand tars, etc) and use the US military
to secure access to oil around the world (Middle East, Africa). She has
chapters in her books laying out these future scenarios (I’ve not read them).
I am surprised by the oil companies’ failure to plan for a
future beyond oil (if it is true). Seems too foolish! I am not surprised that
they would like the age of oil to continue so that they can gain all the
profits possible. That they would manipulate our political system to do so
comes as no surprise. What I wonder
about, and what I asked Antonia about after her presentation, is what she thinks
the oil companies think the rise of China and India mean for their future.
Neither China nor India has oil reserves. Both countries are just beginning to
develop automobile cultures. Will they both go down the road of gas-consuming cars?
Or recognize it is a dead end and switch to electric cars or some renewable
based power? If they go down the
gas-consuming-car’s road, the age of oil will end much sooner and with much
more turbulence.
The following letter was emailed to all 90 Oregon legislators on 10/25/08.
Dear Senator / Representative,
Please think about the competitive advantages our next generations (today’s students) would have if more of them spoke a second, foreign language in the future world Tom Friedman describes in this op-ed column:
And therein lies the central truth of globalization today: We’re all connected and nobody is in charge.
Globalization giveth — it was this democratization of finance that helped to power the global growth that lifted so many in India, China and Brazil out of poverty in recent decades. Globalization now taketh away — it was this democratization of finance that enabled the U.S. to infect the rest of the world with its toxic mortgages. And now, we have to hope, that globalization will saveth.
The real and sustained bailout from the crisis will happen when the strong companies buy the weak ones — on a global basis. It’s starting. Last week, Credit Suisse declined a Swiss government bailout and instead raised fresh capital from Qatar, the Olayan family of Saudi Arabia and Israel’s Koor Industries. Japan’s Mitsubishi bank bought a stake in Morgan Stanley, possibly rescuing it from bankruptcy and preventing an even steeper decline in the Dow. And Spain’s Banco Santander, which was spared from the worst of this credit crisis by Spain’s conservative banking regulations, is purchasing America’s Sovereign Bankcorp.
I suspect we will soon see the same happening in industry. And, once the smoke clears, I suspect we will find ourselves living in a world of globalization on steroids — a world in which key global economies are more intimately tied together than ever before.
It will be a world in which America will not be able to scratch its ear, let alone roll over in bed, without thinking about the impact on other countries and economies. And it will be a world in which multilateral diplomacy and regulation will no longer be a choice. It will be a reality and a necessity. We are all partners now.
Please consider the competitive advantage to Oregon’s future economy if many of our next generations have spent time living and studying in foreign markets. How better to equip them to develop the innovative products and services for Oregon to market to both the new global middle classes and to those living the bottom of the global income pyramid. Consider this article from the Economist:
Goldman Sachs calculates that the global middle class—which it defines as people with annual incomes ranging from $6,000 to $30,000—is growing by 70m a year and rising. By 2030, the bank predicts, another 2 billion people may have joined this group. At incomes of $6,000 the consumption of energy starts to rise, and at $8,000-9,000 purchases of higher-value consumer durables take off, so the growth in demand for these things already under way in emerging countries should continue for many years.
One of the first management gurus to note the rise of the emerging-market consumer was C.K. Prahalad in his book, “The Fortune at the Bottom of the Pyramid”. He argued that to serve these new consumers—both in the new middle classes and at the bottom of the income pyramid—companies will need new business models and products that are profitable at much lower prices than in rich countries.
Further, think about the competitive advantages our next generations would have if more of them spoke Mandarin and had lived and studied in China. Consider the following from William Foreman’s article “Wal-Mart’s New Market: Small Town China:”
Faced with saturated markets at home, these retailers are increasingly looking to emerging economies such as China to drive sales growth. Wal-Mart's attempt to gain a bigger foothold in China is anchored in smaller cities: Only three of the 30 outlets Wal-Mart Stores Inc. opened in China last year were in Shanghai, Beijing and Shenzhen. The rest were in provincial capitals or other cities.
"I think the capacity for growth in China might exceed that of the U.S., if you look at it in the long term," Terrence Cullen, Wal-Mart's vice president of development in China, said in an interview in his office in Shenzhen, the southern boomtown across the border from Hong Kong.
The global economy is rapidly changing. Oregon’s public education system needs to keep up. Simple changes are needed. Foreign language learning needs to be invigorated. The University of Oregon’s Center for Applied Second Language Studies has developed proposals in their “Oregon Roadmap to Language Excellence” that would do just that. Their costs would be minimal. And I have put forth proposals for specifically expanding Mandarin programs across Oregon. Again, the costs would be minimal. And further, for no additional cost to the state or to local school districts, my proposed “High School Study Abroad Scholarship Program” would send many more Oregon high school students abroad to study. That proposal is now in legislative counsel for drafting.
The decisions you make in the 2009 legislative session will have far reaching consequences. Act wisely, please!
Thank you for your attention.
Respectfully – Dave Porter
PS:
(1) The Tom Friedman op-ed article “The Great Iceland Meltdown” is here. (2) The Economist article titled “Globalisation: The New Champions” is here.
(3) William Foreman’s article “Wal-Mart’s New Market: Small Town China’ is here.
(4) The Center for Applied Second Language Studies’ “Oregon Roadmap to Language Excellence” is here.
(5) My Mandarin legislative proposals are here (6) My proposed “High School Study Abroad Scholarship Program” is here.
Todd Wynn has a post “Let the Free Market Decide When Oregon
Is Ready for More Wind Power” on the Oregon Catalyst (here). He argues:
The subsidies that support wind farms hurt all sectors of
the economy by redistributing money into a higher priced, less efficient and
more unreliable source of energy. The truth behind wind energy is that it costs
more than other traditional sources, does not provide reliability like
hydroelectric, nuclear or thermal power plants, and may not be as
environmentally friendly as advocates like to profess. Most estimates on cost
of wind energy without subsidies and other incentives are about 6-7 cents per
kWh. In contrast, thermal power plants can produce energy at about half of that
cost, at 2-4 cents per kWh.
Yes, I’m still learning about energy markets but I generally
agree with Todd. It would be nice if we could just let markets decide our
energy source. But I see the following problems.
(1)Existing
sources of energy such as coal, gas, water power, nuclear and oil already get
subsidies. I’m not yet sophisticated enough to be able to cite chapter and
verse on how they are subsidized, but I believe the subsidies are substantial.
In an ideal political economy it would be best to remove those subsidies. In
our second best, at best, political economy, we give subsidies to renewable
sources of energy to try to level the market playing field.
(2)There
are substantial externalities in the energy market whose costs need to be
brought into the market. Greenhouse gases are the most significant. I would
support an appropriate tax on carbon, or, as a second best option, a system of
cap-and-trade. Both are efforts to let the market work.
(3)I
think there is a role for government in accelerating basic research on alternative
sources of energy.
(4)There
is a substantial foreign policy public interest in shifting to non-petroleum
sources of energy. We are now funding many of our enemies abroad. It would be
smarter to subsidize non-petroleum sources of energy than to pay for the larger
military needed to take on all these petro-dollar enriched enemies.
(5)There
is the issue of China adding one traditional coal plant per week. If that
continues, the global climate will change substantially. This issue is a tough
nut to crack. I do not see a free market solution to it. China is not going to
put a carbon tax, or anything remotely like it, on it coal plants. China needs
cheap coal to continue its economic development. The Chinese Communist Party
needs economic development to stay in power. It is that simple. Yes, they would
like to improve their environment, and, in the long run, that may balance out
the drive for cheap power. But as they say “in the long run we are all dead.”
So, it is not enough in working on the issue of climate change just to worry
about programs or markets in Oregon, or the US generally. We need fresh ideas
on how to influence China to reduce its greenhouse gases.
(6)Note that
Amory Lovins support for letting energy technologies compete without subsidies
in the following youtube:
The International Studies Center at Portland’s Lincoln High
School just held its annual Study Abroad and Travel Forum. An estimated 300
students and parents attended. I’d estimated 200 interested students. Lots of
adventurous energy eager to travel and study abroad. Just what we need! Most
were Lincoln High School students, but there were a sprinkling from all over
the Portland metropolitan area.
Fifteen organizations presented their study and travel
abroad programs, first through booths in a general area, then in individual rooms
for three 25 minutes breakout sessions. Opportunities ranged from two week
study tours to a full academic year abroad living with a foreign family and
attending a foreign school. Parents and students now have to pay the program costs.
Some organizations give discounts or scholarships.
Note that some organizations have academic-year-long study
abroad programs that cost less (including tuition, room and board, and
transportation) than per pupil spending in many Oregon school districts. For
examples, Portland based Education, Travel and Culture offers academic year
abroad programs with fees ranging from to $6,950 to $9,950, not including
airfare, from countries ranging from Brazil to Sweden. China is $6,950 (plus
airfare) for an academic year. Portland based Andeo offers an academic year in
Mexico for $6,000 plus airfare. AFS has programs all over the globe for $8,900
to $10,900 per academic year.
Per pupil costs in many Oregon school districts are more
than the cost of these study abroad programs. For examples, using data from the
Oregon Department of Education’s Open Book website for a recent year,
Portland’s per pupil spending was $9,442, Salem-Keizer’s was $8,288,
Beaverton’s was $7,607 , Hillsboro’s was $7,499 , and Eugene’s was $8,440.
School district should pay for these study abroad programs. For
no additional costs, just shifting funds from in-district costs to study abroad
scholarships, Oregon could send many more high school students to study abroad.
Some school district could save money by sending students to study abroad. Such legislation will be before the 2009
legislative session. See my “High School Study Aboard Scholarship Program”
here.
Now mostly affluent families send their students abroad.
Oregon needs more students studying abroad. It’s the requirement for the world
they will live in. Oregon will need their skills and knowledge. We need to send
many more, and to send a broader mix of socio-economic backgrounds.
China poses two problems for us on the global warming and
renewable energy front. One, that they will do little to curb the greenhouse
gases emitted from their traditional coal plants. They are adding an estimated
one new plant per week. Those will change the global climate no matter what we
do in Oregon. And two, that they will seize the economic high ground in the
competition to develop climate friendly technologies. They may do both: heat up
the globe and get ahead in the economic race for renewal energy and sustainable
technologies. Consider three recent announcements out of China: A solar powered
car goes on sale, development of a system of recharging stations for electric
cars, and China’s first post combustion capture (PCC) coal plant.
A solar car goes on
sale: For about US$5,560 the Chinese automaker Zhejian 001 Group has a
solar car for sale. Ten have been produced so far. The car has a maximum range
of 90 miles and takes thirty hours to get fully recharged. A one hour charge
will get you five kilometers. I do not know if they are legal in the US, nor
how well they would recharge in our winter weather. But, should not the State
of Oregon or the City of Portland buy one just for show! (more here)
Development of a
system of recharging stations for electric cars: China’s State Grid
Corporation, the world’s largest electric power transmission and distribution
company, is rolling out a system of recharging stations for electric cars. “China
hopes to bring in 10,000 fuel cell, electric and hybrid cars as well as
infrastructure to power the vehicles in 10 chosen cities around the country
within two years, according to the ministry of science and technology.” And the
minister “hopes that within five years, alternative energy vehicles will
account for one in every ten of the country's car productions.” (more here)
Oregon and PGE have a few stations out and are planning
more. Israel is gearing up big time. Hopefully, staff members of Oregon’s
Department of Energy and PGE are watching these developments in China.
China’s first post
combustion capture (PCC) coal plant: The Chinese “have officially launched
a post-combustion capture (PCC) pilot plant in Beijing that strips carbon
dioxide from power station flue gases.” It represents “the first capture of
carbon dioxide in China using a PCC pilot plant.” In this effort the Chinese
are being assisted by Australia’s Commonwealth Scientific and Research
Organization (CSIRO).
“PCC is a process that uses a liquid to capture carbon
dioxide from power station flue gases and is a technology that can potentially
reduce carbon dioxide emissions from existing and future coal-fired power
stations by more than 85 per cent.” (more here)
So, China moves ahead in trying a “clean coal” technology.
For us in Oregon, we have the Boardman coal plant. PCC technology can be used
to retrofit existing plants. Would it make sense to consider it for Boardman?
The Oregon Board of Education will meet on 10/16-17. On Friday,
10/17, their agenda again includes an item “Board Work Plan.” The Board has
been considering for several meeting what their work priorities should be next
year. I have written the Board directly with my suggestions and posted here my
request that they make developing additional Mandarin programs and a high
school study abroad scholarship program priorities for next year. They have ignored me.
The new draft document (here), prepared by staff, is to me
confusing. There seems to be little relationship between the goals and the
priorities. I’ll let them figure that out. My general argument is that one cannot
tell from reading the goals/priorities that the world has changed
fundamentally. It’s not that any of the following goals and priorities are bad.
They just seem to reflect the past more than the future. Ask yourself if you
think they are sufficient for students who will face China with an economy forecast to be twice the size of the US economy in 2050:
Proposed Goals
A Common Core of Rigorous Standards
for All
An Aligned P-20 System
A Personalized Learning Experience
for Each Student
A Connected Educational Community
A System to Provide Adequate &
Appropriately Allocated Resources
Proposed Priorities:
Diploma
Implementation
Accelerations
and Transitions
Career and
Technical Education
Community
College Student Success
Equity
Teacher
Professional Development
To me all these goals and priorities seem to be an effort to
consolidate the educational system of ten or fifteen years ago. Only let’s make
it more efficient and effective - more students moving to higher levels of
education, more coordination between levels, and more a rational and
transparent funding process. And, let’s make high school students take more math
and science. Maybe that will make them globally competitive. But, to my
thinking, the economic and geo-political world is changing too rapidly to settle
for these goals. Yes, we do have to make the clockwork inside the box work
better. But, if we want our next generations to survive and thrive, we need to
think outside the box.
Let me suggest that the Board add the following goal:
Prepare students for the economic and strategic challenges
of the 21st Century.
Then the Board should take fifteen minutes at each Board
meeting next year to hear from different experts outside of education on what
those experts think will be the economic and strategic challenges our next
generations will face in the 21st century. The Board should start with
a presentation on China. We have a variety of China experts in Oregon.
Let me also suggest again that the Board make “foreign
languages and study abroad” one of their work plan priorities. They should then
consider:
Proposals
put forward by the University of Oregon’s (CASLS) “Oregon Roadmap to
Language Excellence” Project. See here .
My
proposals for the 2009 legislative session relating to expanding Mandarin
and high school study abroad programs. See here and here.
Finding
a way for the Oregon community college system to offer a study abroad
immersion program (live with family, study Mandarin) for an academic year
in China for less than $10,000 (tuition, transportation, room and board)
with full credit transferable to the four year public universities. And,
perhaps, the state of Oregon should kick in $3,000 - $5,000 per student to
make it even more affordable.
Melinda has a post “Clean Coal” (here) on the Bonneville Environmental Foundation blog. About coal she writes “It is and always will be a dirty fossil fuel and will never be a clean or renewable source of energy. The phrase everyone should be using is ‘coal with carbon capture and storage’, or CCS.” And, as facts, she notes that CCS is expensive, that numerous questions about the storage and leakage of CO2 remain, and that “a large scale plant with CCS does not exist.” She sees some roles for CCS, but does not want CCS “to become an excuse to not invest in clean, renewable technologies like wind and solar, which are the real, long-term solutions to climate change.”
I generally agree with her about CCS, given my current limited knowledge of coal technologies and economics. But, while she recognizes the significance of China “putting up new coal plants each week,” she does not seem to give that fact enough emphasis. If we cannot get China to shift either to CCS coal plants or cleaner renewable energy the globe will heat up. What we do in Oregon matters only slightly at the margin. So, any discussion about coal technologies and global warming must move on to a discussion about how to persuade China to change its behavior. We need new ideas on how to do this, on how to engage China on global warming. And given such engagement, CCS may rise or fall in its relevance to combating global warming.
At its basics, the drive to stop global warming is about
getting to where the costs of renewable energy (RE) are less than the costs of
coal generated electricity (C) - that is of getting to RE<C. As Stanford’s David
Victor (here) says in the following youtube (one hour long): “In all the
world’s major economies, coal is the dominant generator of electricity. In this
country, 51% of the electricity we generate comes from coal. In China and
India, the percentage is even higher.” Coal is the major producer of greenhouse
gases.
Globally, the key is China, and, to a lesser extent, India. Victor
says “China and India are expected to be 80% of the rise in coal generation out
to the year 2030.” I argue that we in Oregon need to be more creative and
innovative in our approach to China (and India). We need to find ways to
persuade them to switch to renewable energy or clean up their coal plants. And
we cannot leave this effort to our national government. If China continues to
build one new, traditional coal plant per week, nothing we do to reduce
greenhouse gases in Oregon will make any difference. We will have
inconvenienced ourselves and paid extra to reduce global warming while China
and India (who produce far fewer per capita greenhouse gases) heat up the
planet.
In Oregon, we have one coal plant. It is PGE’s 600 megawatt
Boardman plant that supplies about one-fifth of PGE’s electric power. It has a
planned $420 million, 10 year retrofit that would reduce haze producing but not
carbon emissions. Coal for the plant comes by train from Wyoming and Montana’s Powder
River Basin. (See here, here, and here.)
This youtube lecture by David Victor is a good introduction
to the global uses of coal to generate electricity. It makes many points. I
note the following:
(1)Coal and natural gases are substitutes in generating
electricity. So, as the price of natural gas goes up, more coal is used. Natural
gases prices are often contractually linked to oil prices, so, as the price of
oil goes up (so does the price of natural gas), more coal is used (and its
price goes up). Coal emits twice the greenhouses gases as natural gas.
(2)Coal plants are increasing in the US. Many have been
delayed because of local opposition to siting, but they are in the development
pipeline.
(3)For a cap-and-trade system to work to reduce coal usage,
the price of carbon needs to be much, much higher.
(4)Clean coal plants, here called CCS (for Carbon Capture
and Storage): (a) cost about twice as much to build; (b) could require a
pipeline system as large as the natural gas pipeline system to move greenhouse
gases to wells; and (c) are not being built.
(5) Costs are increasing for the construction of coal
plants, of carbon capture and storage systems, of pipelines and of transmission
lines.
The following email letter was sent to all 90 Oregon legislators on
9/29/08
Dear Senator / Representative
The success of our economy in Oregon will depend upon how
innovative our future citizens can be. Oregon will get more innovations from
its next generations if they learn foreign languages and spend time studying
abroad. I urge you, as an Oregon legislator, to give more Oregon students
opportunities to learn foreign languages and to spend time studying abroad. It
is also important that Oregon continue its tradition of innovative public
programs. As a legislator, you, too, need to innovate and to model the innovative
spirit for others in the public and private sectors. Our economic future
depends upon the actions you take.
In the 2009 legislative session you will have an opportunity
to create an innovative high school study abroad scholarship program for Oregon’s
public school system. It would cost no
additional dollars.
The concept is simple: permit local school districts to use
state and local funds to pay for students studying abroad. Call the payments
scholarships.
There are existing private, academic-year-long study abroad
programs that cost less (including tuition, room and board, and transportation)
than per pupil spending in many Oregon school districts. For examples, Portland
based Education, Travel and Culture (here) offers academic year abroad programs with
fees ranging from to $6,950 to $9,950, not including airfare, from countries
ranging from Brazil to Sweden. China is $6,950 (plus airfare) for an academic
year. Portland based Andeo (here) offers an academic year in Mexico for $6,000 plus
airfare. AFS (here) has programs all over the globe for $8,900 to $10,900 per academic
year. There are many other private study abroad programs currently existing and
others could be created specifically to use this funding. There is even a
national organization, the Council for Standards on International Educational
Travel (CSIET) that “identifies reputable international youth exchange
programs.”
Per pupil costs in many Oregon school districts are more
than the cost of these study abroad programs. For examples, using data from the
Oregon Department of Education’s Open Book website for a recent year,
Portland’s per pupil spending was $9,442, Salem-Keizer’s was $8,288,
Beaverton’s was $7,607 , Hillsboro’s was $7,499 , and Eugene’s was $8,440.
So for no additional costs, just shifting funds from
in-district costs to study abroad scholarships, Oregon could send many more
high school students to study abroad. Some school district could save money by
sending students to study abroad.
There are, of course, lots of administrative details that
need to be worked out. I have proposed some. But, if the legislature, governor
and school districts want to send more high school students to study abroad and
to strengthen Oregon’s innovation culture, those details will be worked out. It
will not need any additional funding, just the political will to innovate and
make changes. (see here for more)
So, how important is innovation? Tom Friedman in his recent
column (9/7/08) “Georgia on My Mind” could just as well be thinking of us in
Oregon in writing:
What I found missing in both conventions was a
sense of priorities. Both Barack Obama and John McCain offered a list of good
things they plan to do as president, but, since you can’t do everything,
where’s the focus going to be?
That focus needs to be on strengthening our capacity
for innovation — our most important competitive advantage. If we can’t remain
the most innovative country in the world, we are not going to have $1 billion
to toss at either the country Georgia or the state of Georgia.
While we still have enormous innovative energy
bubbling up from the American people, it is not being supported and nurtured as
needed in today’s supercompetitive world. Right now, we feel like a country in
a very slow decline — in infrastructure, basic research and education — just slow
enough to lull us into thinking that we have all the time and money to play
around in Tbilisi, Georgia, more than Atlanta, Georgia.
As Chuck Vest, the former president of M.I.T.,
said to me: “Both candidates have spoken a lot about ‘change,’ but in most
areas of need, innovation is the only mechanism that can actually change things
in substantive ways. Innovation is where creative thinking and practical
know-how meet to do new things in new ways, and old things in new ways.
Judy Estrin, author of the book “Closing the Innovation Gap:
Reigniting the Spark of Creativity in a Global Economy,” has an online excerpt
in which “she describes how international collaboration is the key to staying
innovative in a globalized world.” (see here and here)A key to being able to collaborate
internationally is fluency in multiple languages. So, let us build on our
innovative economy in Oregon by giving our high school students opportunities
to learn foreign languages and cultures through studying abroad.
