Crude Is the New Carbon

Since the world can't seem to agree on cutting carbon emissions, maybe it's time to try an easier but equally important target: oil.

Now that delegates to the U.N. climate summit are back from Copenhagen with no more than a non binding, hollow declaration of intent to reduce greenhouse-gas emissions, it is clear that the main reason "Cop" turned into a flop is the deep divide between the world's rich and poor -- between those who watch the world on plasma screens and those who are forced to sell their plasma to survive another day.

The platitudes and inspirational speeches on how we must all come together to "save ourselves from ourselves" could not mask an inescapable reality: For poor people, while often being the main casualties of an unstable climate, planetary-scale environmental concerns are a distant second to basic human needs -- access to electricity, food, and shelter. They are therefore unwilling to put their economic growth on hold until the world comes up with economically competitive alternatives to coal-fired electricity. In India alone, 150 million people have no access to basic lighting. In the face of such grinding poverty, it's no wonder that the rich countries' attempts to thwart the expansion of fossil fuels were perceived by many in the developing world as a new form of imperialism.

This pushback by the developing world begs for a unified, yet politically feasible, agenda that can be embraced by rich and poor countries alike. One area where such an agenda can emerge is oil. Whereas reaching consensus about significant cuts in the use of fossil fuels in power generation seems to be unlikely, focusing on reducing the use of oil, which powers 95 percent of the global transportation sector, is a goal that offers a real chance of global acceptance (with the exception of certain oil-exporting countries, of course).

Why should the focus be on oil?

First, unlike the electricity sector where multiple sources of energy can contribute to the grid, in transportation, oil enjoys a virtual monopoly. Almost all of the world's cars, trucks, ships, and planes can run on nothing but petroleum. With no fuel choice at the pump and with most of the world's oil owned by non-democratic regimes, the oil market is subject to perpetual volatility. This makes oil dependence an economic depressant for most oil-importing countries and developing countries in particular. When oil prices soar, as they did in 2008, recession quickly follows, trade deficits swell to dangerous levels, and millions of people in poor countries who have just begun to rise from poverty slide back into destitution. Even in the developed world, in difficult economic times public support for policies that reduce greenhouse-gas emissions falls sharply as citizens expect their governments to put a higher priority on improving the economy. The lesson: Curbing greenhouse-gas emissions is contingent on the prosperity and economic resilience of developed countries. Conversely, prosperity is difficult to achieve so long as our economies hemorrhage money to purchase expensive oil.

Second, major developing countries like China and India are now emerging as the world's biggest auto markets, and their appetite for fuel is the main driver of global growth in petroleum demand. The recent introduction of microcars like the $2,500 Tata Nano (about which Nobel Prize winner Rajendra Pachauri, head of the Intergovernmental Panel on Climate Change, said he was "having nightmares") means a 65 percent increase in the number of Indian families who will soon be able to afford a car. Scores of other countries where the micro-car market could boom, including China, whose middle class is projected to hit 700 million by 2020, would not only speed the coming of future oil shocks but also contribute to a significant spike in carbon emissions. Stopping the onslaught of gasoline-only cars in the developing world is in the interest of both developed and developing countries.

Third, the renewable alternatives to oil in the transportation sector are more competitive than the renewable alternatives to coal and natural gas in the electricity sector. In other words, oil is easier to substitute than coal. Solar and wind electricity are not at this point economically competitive with fossil fuels, but in the transportation sector most alternative fuels, such as ethanol, methanol, and biodiesel, are fully competitive with roughly $60 to $80 per barrel of oil.

A still more promising possibility is driving on electricity, which is competitive with oil at $5 to $10 a barrel. A mile driven in an electric car -- even if the electricity is made from coal -- produces less carbon dioxide on a mine-to-wheel/well-to-wheel basis than a mile driven on gasoline. And electric cars actually get cleaner as they get older. Unlike oil, which will be polluting ever more as production shifts from light conventional crudes to heavy non conventionals like tar sands and oil shale, the electric grid will no doubt become cleaner over time. This is why environmentalists are so supportive of the electrification of transportation.

An oil-first strategy can position the United States as a leader in the global effort to cut greenhouse-gas emissions. With a stroke of the pen, the U.S. Congress, now struggling to pass comprehensive energy and climate legislation, can introduce an Open Fuel Standard requiring that new cars sold in the United States are flex-fuel vehicles. Such technology, which costs automakers barely $100 per new vehicle, can protect economies from high and volatile oil prices and from the threats caused by global instability by providing an immediate pathway to fuel competition -- at least until the 2030s, when most automakers will have mass-produced plug-in hybrid and electric vehicles. During the 2008 oil shock, in Brazil, where most cars have flex-fuel engines, gasoline became an alternative fuel as motorists shifted to sugar cane ethanol, which, with oil at over $100 a barrel, was quite a bargain. As a result, Brazil was one of the economies least affected by the run-up in oil prices.

With renewed economic growth and fears of inflation, few would dismiss the possibility of oil rising once again to $100, or even $200, per barrel. But without vehicle platforms that can accommodate petroleum alternatives and hence permit fuel competition, both the world's poor and rich will sooner or later be forced to buy three-digit oil instead of much cheaper alternatives. And if we leave vehicle platforms gasoline-only, we will be stuck with oil forever.

An Open Fuel Standard could have a profound impact on world development. Since no automaker can afford to give up on the U.S. market, such a standard would essentially become an international one. Flex-fuel technology would allow poor countries, most of them with strong agricultural sectors, to grow their fuel rather than import it. Microcars with flex-fuel engines fed by domestically grown fuel would reduce poor countries' trade deficits, strengthen their energy security, create agricultural jobs, and reduce emissions.

Many climate advocates are understandably concerned that flex-fuel vehicles would open the gate to increased use of alternative liquid fuels that are either more carbon intensive than gasoline or are grown in an environmentally unsustainable manner. But such concerns are shortsighted. Alcohol fuels made from sugar cane, non food biomass, sewage sludge, and municipal solid waste offer considerable reduction in CO2 emissions. New approaches to producing methanol (a type of alcohol that can run in flex-fuel vehicles), from recycling CO2 to producing biofuels from CO2-guzzling algae, offer a more cost-effective way of dealing with CO2 than the economically prohibitive yet much-touted approach of carbon sequestration (essentially burying carbon dioxide in the ground or the oceans). But none of these alternatives will ever become prevalent unless we allow our cars to run on something other than petroleum.

In the coming months, major emitting countries will have to agree on priorities for next year's climate meeting in Mexico City. Failure to learn the lessons of Copenhagen will guarantee another debilitating face-off with the developing world. But focusing on oil dependence, the one issue on which the interests of rich and poor are fully aligned, could restore the trust necessary to move the climate process forward.



Time to Take Away Sudan's Credit Card

Sudanese officials are heading to Washington in search of a bailout. But the Obama administration should condition its support on an improvement in the country's dismal human rights record.

Omar al-Bashir's brutal Sudanese regime certainly has nerve. On Dec. 14, as Bashir's National Congress Party (NCP) thugs violently suppressed the second peaceful demonstration by opposition groups in seven days, the Sudanese minister of finance met with the U.S. Special Envoy to Sudan Scott Gration and urged the United States to lift sanctions on Khartoum and cancel Sudan's foreign debt -- in other words, bailing out the government that brought you such atrocities as Darfur and the decades-long civil war with South Sudan that now ominously threatens to reignite.

While no Western country is rushing to hand out money to Bashir, the international community has disagreed over how to persuade Sudan to end its genocidal ways, and the United States is still the only country to impose sanctions. One unlooked-for upside of the global financial crisis may be that it offers new economic leverage with Khartoum. Following the crash, Sudan now holds roughly $36 billion in external sovereign debt that it is struggling to repay. This debt gives the rest of the world a new opportunity to finally affect the course of Sudanese political reform and even end the conflicts in Darfur and South Sudan, if Western countries are willing to act boldly.

For much of the last decade, Bashir and the NCP, who were sitting on Sudan's rich oil reserves, could afford to ignore their mounting debt. A flood of foreign direct investment and new loans contracted with China, the Gulf Arab states, and India financed a booming resource economy and made Sudan careless about payments to the International Monetary Fund (IMF), Paris Club members, and other debtors. The existence of such a steady stream of income has also enabled Sudan's hubris toward the international community on issues like Darfur.

But the global recession has rocked Sudan's fragile economy, and the good times are over. The large drop in oil prices over the last year has sharply lowered government revenues. The Sudanese government compounded the problem by defending the exchange rate of the Sudanese pound in order to prevent a rise in domestic food and import prices. This unsound policy quickly became unsustainable as the Sudanese government began to run out of foreign reserves and found foreign capital more difficult to acquire, because all of its creditors were also affected by the crisis.

The crash subsequently led the Sudanese government to return to the international community with an urgent appeal for debt relief. This summer, it asked the IMF to push forward a debt-relief package provided to other countries in similar financial circumstances and even convinced Japan to write off a small portion of its debt. Securing a debt relief package was at the top of the Sudanese delegation's agenda at the recent IMF/World Bank annual meetings in Turkey, and now -- for the first time publicly -- it has raised the issue with Obama's envoy to Sudan. The Sudanese newspaper Al-Sahafa reported last Tuesday that Sudanese Finance Minister Awad al-Jaz will travel to Washington in January to speak again with Gration.

Sudan's aggressive international lobbying must be put in its appropriate context. Its debt -- the second most in Africa -- has subsidized the government's war and genocide against its own people. Between 2001 and 2008, some of the bloodiest years in Sudan, the regime contracted more than $3.4 billion in new loans from international lenders. Although Khartoum claimed to use these loans to build up the oil sector and public infrastructure, it is impossible -- given the scant public information on the government's budget -- to disconnect this financing with the revenues available for war-making. Even from the government's limited reporting, we know that Sudan imported weapons worth $76.3 million between 2004 and 2006. In addition, it has purchased in the last five years 20 advanced fighter aircraft and 26 attack helicopters, which most experts conservatively estimate carry a price tag of hundreds of millions of dollars. 

Because of these violent campaigns and the general repression since the regime took power in 1989, the estimated $23 billion accumulated by Bashir and the NCP should be classified as "odious debt." This term, advanced by debt-relief advocates and recognized as an international legal principle, submits that the people of a country cannot be expected to repay debts contracted without their consent and spent against their own best interests by repressive regimes. This legal argument, however, is usually made to defend new governments facing unmanageable debt conditions created by the malfeasance of past dictatorial regimes. But what -- other than attempting to block additional financing -- should the international community do with the burgeoning debt load of an odious regime that continues to terrorize its people?

In the case of Sudan, the United States and other countries should seize Khartoum's request as a potentially effective and multilateral tool, at a time when few other options present themselves. Given Sudan's earnest desire for debt relief, U.S. insistence on regular debt payments should be regarded as a stick that -- with changed behavior from the Sudanese government -- could become a carrot.

With Sudan at a dangerous crossroads in 2010, the Obama administration and the global community should not stop there. As the Save Darfur Coalition, an NGO that aims to raise public awareness about human rights abuses throughout Sudan and mobilize a unified international response, has argued, Obama should present Khartoum with a choice between earned incentives or serious consequences, making debt relief a key part of the equation. The Obama administration should lead an international coalition of Sudan's creditors to condition any consideration of debt relief on concrete and lasting progress toward peace in Darfur; the full implementation of the 2005 Comprehensive Peace Agreement, which brought an end to the 22-year-long civil war between North and South Sudan; credible elections in April 2010; and significant political and judicial reforms that fundamentally change the repressive systems in Sudan.

Gration should start by making it clear to NCP officials that free and fair elections next April are one important benchmark to gain U.S. backing of a debt-relief package. That means Finance Minister al-Jaz should cancel his scheduled trip to Washington in January to further discuss debt relief unless his regime immediately begins opening the political space necessary for a credible election process. For a more prosperous future in Sudan, the international community must rid the Sudanese people of this burdensome and "odious" debt created by the regime in Khartoum. However, Sudan's leaders should know that the first step must finally be to commit themselves to extinguishing the smoldering embers of decades of war.