Preface to the Paperback Edition
Continuing Catastrophe
The Next Catastrophe argues that concentrations of hazardous materials, populations, and economic power in our critical infrastructure make us more vulnerable to natural disasters, industrial/ technological disasters, and terrorist attacks. Since its publication the fearful concentrations have only increased, exposing us to more risks, including those of a catastrophic scale. Recent years have seen increased concentration in industries that utilize hazardous materials; population density has increased in risky areas such as floodplains, areas prone to earthquakes, and coastal areas subject to storms and flooding; and economic concentration has increased in electric power generation, banking, telecommunications (including increased risks of cyberwarfare), and other parts of our critical infrastructure. This was to be expected; it is the path our nation has been on since the 1970s, but now speeded up by two decades of deregulation by Congress and “free-market” Supreme Court rulings.
*Matt Lucky, at the time an undergraduate at Stanford University, was a superb research assistant on the global warming section. Faculty seminars at the Center for International Security and Cooperation, Stanford University, where I have a visiting appointment, critiqued the “meltdown” and global warming sessions fruitfully. Lee Clarke and Ezra Zuckerman gave thoughtful critiques of the manuscript. I would like to dedicate this preface to my mentor on climate change, the late Steven Schneider, of Stanford.
In this preface I will explore two catastrophic failures that were not discussed in the original edition of The Next Catastrophe: the 2008 economic meltdown and the 2010 oil spill in the Gulf of Mexico; and a third: our failure to respond to the impending threat of catastrophic global warming, as well as our continuing outstanding contribution to it. Especially in the case of the meltdown and the oil spill I will expand upon a theme introduced in The Next Catastrophe, the idea I named, for lack of a better term, “executive failure.” Now, to emphasize that more than a failure of proper executive behavior is involved, I will use the label “executive malfeasance.” It has a broader reference to illegality. In addition to support for the notion of executive malfeasance, analysis of all three areas illustrates the dominant theme of The Next Catastrophe: the dangers of concentration, particularly that of economic power.
ECONOMIC MELTDOWN, 2008
The Theories
The economic meltdown has been attributed to the complexity and tight coupling of the financial sector; to the free-market ideologies that have dominated our economy since the 1980s; to the deregulation efforts of Congress over the past twenty years; and, of course, to mounting greed by key actors. There is evidence for all of these, and combinations of them. I will explore them all briefly, and formulate the last, greed, more specifically.
Some sociologists and journalists have linked the economic meltdown to Normal Accident Theory, citing the immense complexity of the financial system and its tight coupling. Complexity and coupling played a role in the meltdown but largely because the complexity masked the malfeasance traders were able to engage in, and the coupling enabled failures caused by the malfeasance to propagate throughout much of the system. To be a normal accident as I defined it back in 1984 (Perrow 1999; Perrow 1984) would require that in a system such as a firm there were unwitting failures that interacted in a way that could not be anticipated or perceived. Since nothing is perfect, there are bound to be failures, and since we try to avoid failures, most will be unwitting. If, however, people took steps that they were warned could be damaging to the firm’s interests, the failures would not be unwitting. (The U.S. Occupational Safety and Health Administration uses the term “egregious willful violations,” which I would label as malfeasance.) If there were ample warnings but the executives dismissed them we cannot blame the failures primarily upon the complexity and coupling of the system, though complexity and coupling made the failures more likely and consequential.
A second and more dominant sociological interpretation of the crash is the influence of the reigning ideology of free markets or market fundamentalism, the norms and beliefs that sustain this ideology, and the mimicry organizations are prone to in order to catch up to industry leaders. I also challenge this “neoinstitutional” interpretation, arguing that key economic actors in firms, Congress, and government agencies created and promoted the ideologies to serve their private interests, and the interests of the organizations they represented. Once broadcast and established, the free-market ideology provided cover and justification for behavior that eventually harmed the firms, their clients, and the public in general.
Neoinstitutional theory dominates economic sociology and has helped it make the “cultural turn” that has occurred in most other parts of sociology. In this view, power and interests—self- or organizational—are downplayed, while culture, norms, and values are emphasized. The economic meltdown, in this view, was inadvertent; executives were gripped by a free-market ideology and this made them oblivious to warnings and long-term considerations. The ascendancy of shareholder value at the expense of a concern for other stakeholders, an ideology growing out of economic theory, came to dominate. In this view, executives were victims of an ideology.
I have laid out my objections to both the neoinstitutional argument and the normal accident argument in a chapter in Lounsbury and Hirsch 2010, where one may find an elaboration of my argument and supporting references. (Perrow 2010b) Three other chapters in this volume explicitly use the normal accident perspective—the complexity and tight coupling of the financial system—to explain the crisis. Several others use the neoinstitutional perspective— ideology, norms, and imitating successful firms. I summarize my argument and its divergence from both views here, and argue that deregulation was neither accidental nor normative, but a deliberate effort to enhance self-interest. Since it knowingly did harm to the organizations, their clients, and the economy, this deregulation illustrates the idea of “executive malfeasance”—a broader term than simply “greed.” The meltdown also illustrates the main theme of The Next Catastrophe: concentrations of power produce more significant targets for failures.
Creating the Ideology
In the 1980s and 1990s the United States was awash in money as a result of the “savings glut” of China, where the lack of social security forced citizens to maintain a very high savings rate. The Chinese government placed these funds in the country with the soundest currency, the United States. Deregulation of U.S. industry had started during the administration of President Carter, and was furthered when President Reagan allowed antitrust laws to go unenforced. The U.S. government, with investments from China rolling in, kept interest rates low and promoted home ownership. For the financial sector, awash in funds, deregulation took a giant leap in just ten years, from 1998 to 2007. There was an insistence upon the free movement of capital across national borders; repeal of the 1933 act separating commercial and investment banking; a congressional ban on the regulation of credit-default swaps, a profitable new device that spread widely; major increases in the leverage investment banks could use, allowing a 3,000 percent increase by firms such as Goldman Sachs; decline of regulatory enforcement in government agencies, particularly the Security and Exchange Commission (SEC); little updating by all regulatory agencies of regulations to cope with the increasing pace of financial innovations; an international agreement that allowed banks to measure their own riskiness; and allowing financial service firms to shop around for the most lax regulatory agency. The government-supported housing market was the prime beneficiary of financial deregulation.
It is important to see that these changes and innovations were not the result of the spread of an ideology of free markets; that ideology had been around for most of the century. It only spread after the 1970s, and, I argue, was promoted to justify deliberate efforts of the financial institutions to loosen regulations, many of which had been in place since the Great Depression, and thus increase profits. A key regulation was the Glass-Steagall Act of 1933, which separated commercial and investment banking. While Texas Republican Senator Phil Gramm had the proper credentials to support a free-market ideology, having been an economics professor, it is likely that the banks came to him and suggested the repeal. He had important company. A strong supporter of the bill was the otherwise liberal Democratic senator from New York, Charles Schumer, who received spectacular campaign contributions from the financial industry that was central to his state’s economy. In 2001 Schumer and Gramm, finding the SEC unresponsive to additional deregulatory efforts on their part, introduced a bill to cut the agency’s funding in half. The SEC acceded to their requests.
In many of these deregulation acts financial industry leaders actually participated in the drafting of the legislation as well as making ample campaign contributions to key congresspersons. Editorials, congressional hearings, and financial reporters trumpeted the triumph of free markets, as if it was the belated recognition of an economic law, but it was lobbying by financial institutions that “freed” the markets and created new norms, not the ideology.
It took more than congresspersons to deregulate; appointed officials also played a role. But since these officials are not subject to bribes via campaign contributions, this cannot be a motive. I argue instead that their high degree of embeddedness in the financial industry (e.g., years spent working for Goldman Sachs) overwhelmed the oath they took to serve the public interest. It is striking that the major regulatory heads so vigorously attacked those who were sounding warnings about the deregulation legislation and were calling for new tools to rein in the new, dangerous instruments. One official who opposed deregulation and feared for the health of the economy was the head of the Commodities Future Trading Commission (CFTC), Brooksley Born. Born attempted to control trading in derivatives because they lacked transparency and basic information, and this, she held, could threaten markets and the economy as a whole. In 1998 she issued a warning to the President’s Working Group on Financial Markets (which included the three key federal officials responsible for regulations, Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and SEC head Arthur Levitt). They dismissed her warning with contempt. She went public, proposing a ruling by the CFTC to control derivative trading, and Greenspan, Rubin, and Levitt, along with Deputy Treasury Secretary Lawrence Summers, not only forced her to desist, but marginalized her sufficiently that she resigned the next year. Just to make sure that there would be no increased regulation of derivative trading, they got her replacement to make a CFTC ruling to that effect. Since Brooksley Born’s warning was only one of many, it is hard to explain the behavior of these agency heads as carrying out an ideological commitment to free markets rather than carrying out the regulatory duties their agencies were expected to perform.
Repeated Warnings
Multiple warnings had been mounting since the 1990s about the dangers of nontransparent credit default swaps, derivatives and other new financial instruments, and low capital reserves. Here are a few: In 1993 a Republican congressman issued a 902-page report warning against systemic risk in the financial sector. In 1994 the risk was featured on the front pages of Fortune magazine and the Washington Monthly. Federal Reserve Chairman Greenspan said in response that the Feds and the Treasury were “ahead of the curve” on derivatives and not to worry. Two regulatory bills introduced that year by Democratic representatives went nowhere. A senior Federal Reserve official warned the Federal Reserve Bank (headed by Greenspan) and others about the astoundingly high debt-to-capital ratio of Long-Term Capital Management in September of 1998 shortly before it collapsed, the first warning shot across the industry’s bow. Prominent newspapers, surely read by regulators, congresspeople, and financial firms, spoke of a “housing bubble” 1,387 times between 2000 and 2003, and 5,535 times over the next three years. (Zuckerman 2008) Financial experts such as George Soros in 1997 and Warren Buffett in 2003 sounded warnings, the latter calling derivatives “weapons of mass destruction.”
When Republican-sponsored legislation was proposed in 2005 to rein in Freddie Mac’s mortgage practices, Freddie Mac secretly paid a public relations and lobbying firm $2 million to help kill the legislation. (Neither ideology nor the complexity of the system can explain this act.) Three years later Freddie Mac collapsed and was bailed out by taxpayers. (I will ignore the complicity of rating agencies and their conflicts of interest.) Finally, a few obscure hedge funds did due diligence, largely because of the press stories that were emerging about a bubble, and bet that there would be a crash of the housing market. They profited handsomely by examining the products that regulators were ignoring, and betting against them. It was not a case that “no one could have foreseen,” as neoinstitutional accounts argue, or that the instruments were all too complex to understand.
Profits
Most firms were profiting immensely from their risky behavior and almost none wanted to stop, even though in some cases their own officers and risk managers warned of the danger to the firm. To take just one example, in 2005 an officer of Countrywide Insurance warned that the mortgage boom was plainly over and the company should tighten its guidelines and plan for reduced volume. The chief risk officer in Countrywide warned repeatedly in 2005 and 2006 that Countrywide’s standards were being compromised by its aggressive approach. The head of the firm ignored the warnings, and the firm collapsed in January 2008.
Goldman Sachs was more strategic. Warned repeatedly of the impending meltdown by an obscure hedge fund owner, John Paulson, it continued to sell toxic mortgages to its clients but also took out insurance in case its recommended products failed. The more its clients bought, the more the clients lost, but the more Goldman Sachs made on its insurance. It has, until this writing, refused to estimate the profits this unethical maneuver produced. But it made sure that the government bailed out the insurer, AIG, and that it received all its insurance payments from the taxpayers’ bailout of AIG.
One justification of this behavior is that everyone was doing it— neoinstitutional theory credits the force of “mimetic” behavior. In this view, a firm that pulled back from the risky subprime mortgage market would see its stock go down and its top traders leave for other firms. But note that despite the warnings, key economic actors did not just go along with everyone, but actively prevented regulators from reducing the risks their firms were facing. Stronger regulations would affect all firms alike, and not affect competitive behavior. The proposed bills requiring higher liquidity, for example, would spread the short-term pain over all banks, making the competition argument inapplicable. The industry is small enough and heavily interconnected enough for a few leaders to say: “We are running high risks here; perhaps we should listen to the congressional warnings and the regulatory agencies that are saying the leverages are out of hand and derivative trading should be more transparent and regulated. We would all benefit if this reduces the chance of a crash.” The industry has powerful associations that recommend accepted practices; they could have stepped in if their members wanted them to do so.
The meltdown is neither a “normal accident” nor a product of an ideology. The free-market ideology the firms and government agents cited as justification for malfeasant behavior was deliberately selected, developed, and promoted. The growing complexity of the financial system made malfeasance easier and its tight coupling magnified its consequences, but it was agents, largely top executives, who increased the risky behavior, and did so knowing the risks. They spread the ideology through the economics profession with research grants and consultancies, and through the business schools with gifts, funding of research projects, and consultancies for faculties, and through the media, which they owned. Always one of many economic theories, the free-market ideology came to the fore only in recent decades, when business actively developed it and promoted it as a justification for deregulation and consolidation.
It is a case of “executive malfeasance,” where executives who were warned knowingly put their clients, their firms, and the economy at risk for their own private interests. I would indict government regulators and many congresspersons as well. Regulatory efforts in 2010 have been weak, and consolidation of the financial sector continues, perhaps setting the stage for further economic catastrophes.
THE GULF OF MEXICO OIL SPILL
BP: Profits over Safety
The April 20, 2010, oil spill in the Gulf of Mexico is one of the largest ecological disasters the United States has ever experienced; its extent is still unfolding. It also may be the most well-documented case of executive malfeasance by a corporation that we have seen since the tobacco-industry disclosures. While the theme of this book, concentrated vulnerabilities, plays a role here as well, it is a more ambiguous one. A fair degree of economic concentration is required for deepwater drilling, and concentrated human populations play a more remote role. But the Gulf of Mexico can be said to be a concentrated ecological system, with about fifty current vulnerabilities in the form of operating deepwater wells and thirty-three exploratory wells, which are more likely to have failures, and the health and economic opportunities of shoreline communities can be affected.
The spill story starts with John Browne, who rose to chief executive officer of BP in his forty-one years with the company. Until his resignation in 2007 he had transformed a sleepy oil company into the second-largest independent oil company in the world. In his ten years as chief executive the firm had increased in value fivefold. Its growth was largely through mergers (Standard Oil, Arco, Amoco), and Browne is credited with starting a trend toward megamergers in the industry, leading to the concentration The Next Catastrophe is so concerned about. After taking over Amoco in 1999 Browne started an ambitious cost-reduction program, ordering 25 percent cuts in refineries and pipelines that led, according to various reports, to a major accident at Texas City, Texas, in 2005 (fifteen deaths and 180 injuries) and a major spill the next year at a Prudhoe Bay, Alaska, pipeline.
The details of the Texas City refinery accident, as documented by the U.S. Chemical Safety and Hazard Investigation Board (CSB), are devastating. (Chemical Safety and Hazard Investigation Board 2007) Executives at the facility repeatedly warned top management of the risks they were running because of budget cuts, particularly in process safety. One plant meeting organized by plant management even showed a slide saying that the Texas City plant was an unsafe place to work, and documents show that for two years prior to the accident plant management warned that people were going to die because of cuts in personnel, poor maintenance, run-down equipment, and lack of process safety. Regulatory agencies were at best somnambulant. BP top management took no action and insisted upon carrying out the cuts at the refinery fully. The explosion cost the company $1.5 billion, and initial fines were $2.1 million, but third-quarter profits that year were up 34 percent, to $6.46 billion. (They climbed to $16.6 billion in 2009.)
A similar script played out the next year in BP’s Prudhoe Bay pipeline facilities, while the company was still under a court-ordered probation. (Alaskan oil was the major source of BP’s profits at the time.) Again there were warnings from local workers and managers that the severe cuts were endangering pipeline integrity and risking expensive and ecologically damaging spills. Injecting a corrosion inhibitor was discontinued as a cost-saving step, and investigating corrosion with a device (a “smart pig”) was not called for. Four times the leak detection alarm sounded in the week before the spill was discovered, but these were considered false alarms by management. The spill was discovered when an employee driving by smelled the oil and stepped into it when leaving the truck to investigate.
It was huge, 212,252 U.S. gallons, covering two acres. A small fine of $20 million (a little more than a day’s profit) was levied, and the local subsidiary, BP Exploration (Alaska) Inc, went on three years’ probation. Shortly after the accident it was discovered (and then only because the U.S. government ordered a smart pig inspection) that another six miles of pipe were so corroded that much of the Prudhoe oil field had to be shut down. (Wikipedia 2010) Another large spill occurred on November 29, 2009, which is still under criminal and civil investigation, and a blog by Jason Leopold notes that before the spill, worker reports and BP documents indicated that there were hundreds of miles of rotting pipe, as well as inadequate emergency facilities to deal with the next spill. The budget for the Alaska facilities has been cut each year since 2008. (Leopold 2010)
The Occupational Safety and Health Administration (OSHA) found that BP accounted for nearly half of all safety citations to the entire refining industry between mid-2007 and early 2010, and three times as many “willful” violations—executive malfeasance— as the rest of the industry combined. (Morris and Pell 2010) But forceful testimony by an OSHA official, Jordan Barab, indicts the whole refining industry. Barab finds that the petrochemical industry is repeating the same glaring mistakes despite their losses and the fines they receive. He gives several instances of ignored warnings; is concerned with worker harassment; and cites the inadequacy of measuring safety with “hard hat” requirements and workdays, noting a twenty-year-long effort by OSHA to get companies to focus on process safety rather than just individual safety. In the past decade deadly accidents have been especially pronounced. It is not a case of a few bad apples, even if BP is the worst. He finds the same violations committed by multiple refineries, and in multiple parts of a single refinery. (Barab 2010)
The Gulf of Mexico Spill
The Macondo well spill in the Gulf of Mexico on April 20, 2010, is being extensively investigated at the time of this writing (August 2010), but enough has been documented to show a continuing failure of top executives at BP to put safety at least on a par with profits. Management of the Macondo well was under pressure from above to cut costs and take risks that their own employees and the subcontractors (Transocean, Halliburton, and consultants) warned against.
The House Committee on Energy and Commerce sent a letter, signed by Representatives Henry Waxman and Bart Stupak, to the CEO of BP, Tony Hayward, on June 15, 2010. (Waxman and Stupak 2010) This letter very conveniently sums up evidence of willful, knowing risk taking in the face of credible warnings from employees and the staff of consultants and contractors. The letter states in part:
On April 15, five days before the explosion, BP’s drilling engineer called Macondo a “nightmare well.” In spite of the well’s difficulties, BP appears to have made multiple decisions for economic reasons that increased the danger of a catastrophic well failure. In several instances, these decisions appear to violate industry guidelines and were made despite warnings from BP’s own personnel and its contractors. In effect, it appears that BP repeatedly chose risky procedures in order to reduce costs and save time and made minimal efforts to contain the added risk.
At the time of the blowout, the Macondo well was significantly behind schedule. This appears to have created pressure to take shortcuts to speed finishing the well. In particular, the Committee is focusing on five crucial decisions made by BP: (1) the decision to use a well design with few barriers to gas flow; (2) the failure to use a sufficient number of “centralizers” to prevent channeling during the cement process; (3) the failure to run a cement bond log to evaluate the effectiveness of the cement job; (4) the failure to circulate potentially gas-bearing drilling mud out of the well; and (5) the failure to secure the wellhead with a lockdown sleeve before allowing pressure on the seal from below. The common feature of these five decisions is that they posed a trade-off between cost and well safety.
The committee letter goes into detail on these and other failures, noting the warnings received and ignored. For example, quoting from the House committee letter: “Despite this and other warnings, BP chose the more risky casing option, apparently because the liner option would have cost $7 to $10 million more and taken longer.” Their own Plan Review recommended against it. Halliburton, a contractor on the job, warned them of “SEVERE gas flow problems” if BP used six rather than twenty-one centralizers on the final string of casings. A BP drilling engineering team leader agreed, noting similar problems with their Atlantis project, but upper management at BP rejected the advice, an official explaining in an email that “It will take 10 hours to install them. . . . I do not like this.” Another official recognized the risks but emailed, “Who cares, it’s done, end of story, will probably be fine.” (Waxman and Stupak 2010)
They had reason to worry about costs in their operation; as noted, BP was severe on cost reduction, even though the company was immensely profitable. In 2009, because of a hurricane, they had to abandon an exploratory well that had been started two months earlier, and they resumed drilling it with the Deepwater Horizon rig. But the drilling was already forty-three days behind schedule at the time of the explosion, which is serious since the rig rents for approximately $500,000 a day, though friendly tax laws allow 70 percent of that as deductible. The House Committee letter notes the cost savings for other areas they covered; for example, a cement bond log was required by Minerals Management Services and recommended by contractors, but would have cost the company over $128,000 to complete and taken an additional nine to twelve hours. A top contractor had a crew on the rig ready to do it, but they were sent home ten hours before the explosion. An independent engineer asked by the committee to comment said it was “unheard of” to not have the cement bond log when using a single casing approach; the decision was “horribly negligent.”
Journalists have turned up other warnings and corner cutting by both BP and Transocean, the owner of the rig BP was leasing. For example, a detailed story by Ian Urbina in the New York Times notes the warning signs that started some months before the accident, increased in the five days prior to the blowout, and were physically strident with bumps, pops, and alarms the day of the accident. (Urbina 2010a) A three-part series in the Wall Street Journal provides revealing details of the drama and the conflict between BP as owner and Transocean as contractor. (Blackmon et al. 2010; Casselman and Gold 2010; Gold and Casselman 2010) (The lack of contingency plans should there be a blowout and the ineptness of the MMS are also well summarized by Urbina, but that is not our concern here. For an account of “fantasy documents” by government and oil companies that promise rapid responses to disasters, brought up to date with the Gulf spill, see Clarke 2010a. For an account of Secretary of the Interior Ken Salazar’s pro-oil stance and the failure to reform the MMS as President Obama had promised to do, see Tim Dickinson’s depressing account. (Dickinson 2010)
Transocean’s Role
Most of the workers on the rig were employed by Transocean, which is the largest offshore drilling company in the world and has fourteen rigs operating in the Gulf. Transocean was concerned enough about safety to hire Lloyd’s Register to do a safety survey of three of its deepwater rigs operating in the Gulf a few months before the disaster. This was in response to “a series of serious accidents and near-hits within the global organization.” (Urbina 2010b) Among those accidents was the near sinking of the Horizon rig in 2008 as the result of a ballast system failure that flooded the rig. Why the Horizon rig sank in the April 2010 disaster is still a mystery, but the survey turned up continuing stability problems on Horizon—for example, ballast doors that would not close automatically.
Transocean does not come out well in this disaster, especially since their own evaluations showed so many equipment and personnel problems. Workers noted that the rig had not been in dry dock for nine years despite equipment problems that BP and Transocean’s surveys had signaled. The Transocean safety study referred to at least thirty-six pieces of equipment in ill repair on the Deepwater Horizon that “may lead to loss of life, serious injury or environmental damage as a result of inadequate use and/or failure of equipment.” (Urbina 2010b) This and other surveys revealed a culture of fear (over half of the Horizon crew were fearful of reporting safety problems because of reprisals), inaccurate reports, and warnings dismissed. There was also considerable tension between personnel on the rig and the BP shore offices.
Transocean has been cited twice in recent years by authorities in Britain for failing to properly maintain a blowout preventer and related testing equipment on an offshore drill site there, with officials saying in November 2006 that the device “failed in service, exposing persons to risks that endangered their safety.” (Lipton 2010)
Public Officials
Executive malfeasance appears to be widespread in the oil industry. It is possibly aided by the interests of the judiciary and members of Congress. The federal judge that blocked President Obama’s moratorium on exploratory deepwater drilling had large personal investments in the oil industry, and specifically with the corporations funding the Horizon operation. As William Freudenburg and Robert Gramling note in their important history and diagnosis of the accident, Blowout, “Thirty-seven of the 64 active or senior judges in key Gulf Coast districts in Louisiana, Texas, Alabama, Mississippi and Florida have links to oil, gas and related energy industries, including some who own stocks or bonds in BP PLC, Halliburton or Transocean—and others who regularly list receiving royalties from oil and gas production wells.” (Freudenburg and Gramling, forthcoming) The Congressional committees charged with keeping watch over the oil and gas firms had nearly thirty members with at least $9 million in investments in the firms they were overseeing. (Anderson and Kunzelman 2010)
Is BP an Exception?
Normal Accident Theory (NAT) argued that if we had systems with catastrophic potential that might fail because of their sheer complexity and tight coupling, even if everyone played as safe as is humanly possible, these systems should be abandoned. Catastrophes would be rare, but if inevitable, we should not run the risk. Redesigning such systems to reduce complexity and coupling to tolerable levels is one alternative, generally by using modular rather than integrated design, as argued in chapter 8 of this book and particularly in my discussion of global firms. (Perrow 2009) This hardly seems possible with deepwater wells. Another way to reduce our vulnerability is to limit the concentrations of hazardous substances, so accidents will be less severe, as I argue for many systems with catastrophic potential in this book. Again, this will not work with shallow or deepwater drilling; maximizing the amount of crude flowing is the whole point, and the hazardous substances are bound to affect the ecology and nearby communities, with some effects lasting for decades. Though this suggests that the complex and tightly coupled practice of deepwater drilling should be abandoned because of the catastrophic potential of an accident, there are other arguments to consider.
Perhaps BP is the exception, and other drilling firms take the obvious safety steps it failed to take. A cryptic statement in July 2010 by Attorney General Eric Holder, however, is not reassuring. When asked if BP was doing anything different from others in the industry, Holder said he observed a “certain commonality of the way oil companies had been operating” in the Gulf. Because the investigation was ongoing, he couldn’t go into specifics. (Raju 2010) This possibility, that other firms are just as profit-oriented at the expense of safety as was BP, should be seriously considered. If BP is an outlier, it is not likely that the newly reformed Minerals Management Service (now renamed the Bureau of Ocean Energy Management, Regulation and Enforcement) is likely to discover that. The MMS inspected twenty-nine of the thirty-three deepwater exploratory wells after the BP explosion. (Exploratory wells are the most dangerous; production wells even survive hurricanes without having spills. Exploratory wells may be reopened as production wells, but generally new wells are drilled close by for production.) Their inspection found no serious violations. One may be skeptical of their finding. For example, MMS only recommended, but did not require, a backup blowout preventer (the preventer failed in the Horizon explosion and spill). It did not set or enforce specifications for pipes, allowing BP to use a less safe design in its rig. It did not know that many key alarms were routinely disabled. It often approved dangerous practices, such as having few centering rings. Furthermore, many unsafe practices in the Horizon rig occurred when the rig ran into trouble; inspection would not catch such risky practices. We cannot be reassured that BP is an outlier and the other twenty-nine drilling operations would operate safely.
But the slim data on our experience with two decades of deepwater drilling make it hard to judge the degree of danger. A Transocean rig in the North Sea had an emergency that resembled the Horizon one in 2009, but a Halliburton adviser working on the Horizon rig was not even aware of it. (Brown 2010) There have not been many major blowouts in the Gulf, though there are still residues on the coast of Mexico thirty years after the Ixtoc disaster in 1979. Blowout preventers are supposed to be the last line of defense, but one study of wells in North America and the North Sea found that in eleven cases of their being used, they were successful in only five. (Barstow et al. 2010) In June 2007 there was a blowout at the Cote de Mer field in Louisiana; a surge of gas blew through the blowout preventer, 22,261 feet down. It cost $75 million to bring it under control. (Carroll, Polson, and Klimasinska 2010) News accounts are few and do not estimate the amount of oil spilled. There may have been other Gulf blowouts that have not made it onto Google.
Is Exxon the Model?
Journalists have suggested that BP was the risk-taking outlier and point to Exxon Mobil’s safety record, supposedly the gold standard for safety as a result of the Exxon Valdez accident in 1989. One explanation for Exxon’s unwillingness to take risks, if that is true, is that it is a highly structured organization with extensive training for everyone. A magazine story reports that in joint operations, which are common in the industry, Exxon personnel always stood out as the most knowledgeable and highly trained, and they often took charge even though they nominally should not have. (LeVine 2009) Exxon Mobil CEO Rex Tillerson told a House Committee, regarding BP’s Macondo well, “We do not proceed with operations if we cannot do so safely. We would not have drilled the well the way they did.” (Bea et al. 2010)
This would fit with the notion of High Reliability Organizations (Weick and Sutcliffe 2006), a theory that emphasizes the necessity and effectiveness of safety cultures, something that virtually all government and NGO reports say that BP lacked. Another explanation is that BP is more like a bank than an engineering company. In contrast to Exxon Mobil, which owns and runs almost all of its own equipment, BP relies upon outside contractors. Still another explanation is not inconsistent with these, but quite different: Exxon is so big and so rich (the richest corporation in the world for some years running) that it does not need to take chances. Smaller and poorer companies have to take chances. If this is true, it does not fare well for future drilling; concentrated as the industry is, offshore drilling still has many small and hungry firms.
An account by Jad Mouawad tells a dramatic story of Exxon’s concern with safety, and gives us a bit of a picture of all that is involved in this complex industry. (Mouawad 2010) In September 2006 Exxon, after five hundred days (!) of drilling an exploration well called Blackbeard in the Gulf, set a record: a depth of 30,067 feet. (This was not a deepwater well, but an “ultra-deep” well started in seventy feet of water off the Louisiana coast. The risks and complexity of drilling increase with the ocean depth, of course, but the major problems are the extremely high temperatures and pressures—enough to crush a large truck—5.7 miles beyond the ocean bottom. Ultra-deep wells have the disaster potential of deepwater wells; indeed, since they can be very close to populations, the potential is even greater.) Exxon estimated that they were within two thousand feet of a field with around a billion barrels of oil and gas, an “elephant,” a record for the Gulf. But they experienced a “kick”—a gush of natural gas such as BP experienced with its Macondo well. The higher-than-expected pressure could not be relieved with drilling mud. Engineers said it was too dangerous; the geoscientists wanted to keep going. The chairman and chief executive officer of Exxon sided with the engineers and the project was abandoned, written off as a dry well, at a cost of $200 million. (Mouawad 2010)
Does this make the case for the possibility of safe deep-well drilling, and for huge companies that can afford not to take great risks?
In 2007 a small company, McMoRan Exploration, bought the rights to the Blackbeard property and commenced drilling. James Moffett, the cochairman of MMR and a geologist, said that high pressures at thirty thousand feet would drop with more drilling because of a quirk of deep geology. In 2008, after seven months of drilling, they had gone 2,900 feet beyond Exxon. They boasted of a great find of between a half billion and several billion barrels of oil; it could be the biggest find in the Gulf (but also, so close to the shore, the biggest threat if there were a blowout). They ordered the equipment to make the well productive—which can take two years, and much additional capital. An Exxon spokesman said, “We’ll see.” There have been no updates as of the time of this writing. (Mouawad 2010)
Does this make the case for small and moderate-sized organizations that are willing to take big risks in the Gulf? The database is too small for confident predictions.
Other Arguments
Another argument for continued drilling is that we have learned from our mistakes, and will be safer in the future. But as Lee Clarke notes in a blog post (Clarke 2010a), the biggest lesson that BP may have learned from the ExxonValdez disaster is that although the initial punitive damages awarded by a federal jury were $5 billion, the Supreme court reduced this to $500 million. Although promises were made after Valdez to upgrade spill recovery technology and preparations, the BP spill revealed that the industry had made almost no changes since Valdez. Sometimes firms may learn something we wish they hadn’t: that courts will reduce large fines.
One argument against a ban on deepwater drilling is that the expensive rigs able to do this would simply move to other locations that have no ban. (A recent news story indicates that BP is selling its land-based drilling properties and plans to focus on ocean drilling, having signed a large contract with Egypt to drill in the ecologically sensitive Mediterranean.) This is similar to the argument against intensive policing in high-crime areas—the criminals merely move to new areas that have seen their police forces decline, so intensive policing in the Gulf does little. But since it would not diminish the policing resources of other nations, it is still a net gain. In addition, were they to move to Norway or Brazil, where much drilling takes place, they would have to have stronger safety standards—including, e.g., a backup blowout preventer—than those required in the Gulf. They might move their rigs to other nations throughout the world (especially Southeast Asia and Africa) where safety standards are presumably below those of the Gulf of Mexico, and where there may be ecosystems as vulnerable as those of the Gulf. True enough, but something is still gained by protecting the Gulf ecosystem from further assaults. It is even possible that banning deepwater drilling in the Gulf would highlight the risks elsewhere and lead to safer systems.
A further argument has been put forth by the oil industry and state governments bordering the Gulf: the economic impact upon the area would be severe in terms of jobs lost and business activity associated with pumping, transporting, and selling the oil, and tax revenues would decline. The effect upon jobs is not likely to be as severe as the effect upon non-oil activities. Oil is capital-intensive, with few workers per unit of capital; non-oil activities such as fishing and tourism are labor-intensive. More jobs are at stake in these industries, and we are not talking about banning all drilling, just deepwater drilling, which, while growing, is not the major source of oil from the Gulf. But tax revenues for social services in Gulf states would be reduced. The answer to this is to match other nations that receive 70 to over 80 percent of company royalties, compared to the 40 percent the United States receives for deepwater drilling. (Freudenburg and Gramling, forthcoming)
Perhaps continued drilling can be justified because the output is so vital. This was the justification of the immense risks the nuclear weapons program was running during the Cold War (but is still running without the risks of a war with Russia). We are mostly lucky with our nuclear power plants and our nuclear defense system, two cases where I have argued that the risks of normal accidents exceed the benefits (see chapter 5 in this book and chapter 2 in Normal Accidents). In both cases we regularly—yearly, in the case of nuclear power—come close to disasters, and as I have pointed out it takes just the right, though rare, combination of failures and environmental conditions to have a true disaster; close calls are thousands of times more prevalent. The potential for Bhopal-like chemical-plant failures spreading toxic fumes existed for perhaps forty years in hundreds of plants before we had a Bhopal, though we had many close calls. Our luck ran out with the Deepwater Horizon well, and perhaps will soon run out with one of the fifty or so other deepwater wells.
Since there are substitute energy sources for many of the uses oil is put to, it does not have the character of being an output so vital as to allow the extracting industry to operate with weak safety incentives and small penalties. Were oil priced to reflect the costs of catastrophes such as the Gulf spill, and far more important, the industry’s contribution to greenhouse gas emissions, we would quickly have a surge in carbon-free energy sources and a sharp rise in conservation (fewer unnecessary auto trips, for example) and efficiency (e.g., in auto engines, to match European and Chinese standards). This argument involves our national energy policy, and is best addressed in the next section, where it will be argued that the price of oil should increase to reflect its “externalities”—the costs to the environment that are not reflected in its current low price.
The high degree of concentration in the industry gives its major players excessive political power. Deep-sea drilling or ultra-deep drilling on land requires huge organizations by most standards, and there are not likely to be one hundred rig owners such as Transocean to ensure competition, or dozens of Halliburtons experienced with drilling muds and seals. (The concentration extends down to the facility level; Shell has a single platform that can receive oil and gas from thirty-four wells in the area!) But though they are expected to be big, the size of the majors, such as Exxon, BP, and Shell, vastly exceeds what is required for economies of scale in this technology. The industry could be broken up. Reportedly, the Obama administration finds BP too big to be pushed into bankruptcy because it would not be liable for claims by those hurt by it; the first claim on its assets in the case of bankruptcy would be those to whom it owes money and next, the stockholders. (BP has threatened that its ability to pay damage costs will be impeded if it is prevented from further deepwater drilling.) This is another reason to consider downsizing firms in areas where there is catastrophic loss potential; they should not be too big to fail.
THE LAST CATASTROPHE
When we turned managed capitalism into free-market capitalism, beginning with the Reagan/Thatcher era, we increased the magnitude of an existing market failure in the economies of the developed world: many outputs of capitalism are not included in the price of goods and services, they are “free.” The major addition to market failures due to unpriced outputs was the rapidly rising, unpriced production of pollutants, some of which would stay in the atmosphere for centuries. They warmed the earth by keeping the heat of the sun on the earth instead of allowing it to radiate back into space at night. The free market in externalities was producing global warming at an increasing rate.
This section will examine the role of the United States in global warming, which will be our Last Catastrophe. The catastrophic consequences of rising emissions of greenhouse gases (GHGs) are widely predicted by the scientific community, though we cannot predict the precise years, or even decades, when several key tipping points are reached. Recent work on the oceans strongly suggests that some of the important tipping points have already occurred, and even if we stopped emitting GHGs worldwide entirely, the effects of long-lasting emissions, principally carbon dioxide (CO2), will continue for hundreds of years. (Hoegh-Guldberg and Bruno 2010) We may have seen irreversible damage to coral reefs (the source of food for most of the fish we consume); sea levels will continue to rise, regardless of our efforts, because of melting ice and the expanding volume of warmed water; permafrost will continue to melt, releasing the powerful GHG methane; and so on. Tipping points for other disastrous effects are necessarily unpredictable because we have no historical experience with the major changes that warming is forcing, but estimates of the dates of irreversible harm range from 2030 to 2050. In these scenarios, we have two to four decades, a generation or two, to curb our emissions. And even if we did at least stabilize them, the negative impacts upon our planet will continue far beyond those generations.
Currently the United States is the second-largest contributor to greenhouse gases that are raising the earth’s temperature to alarming and very possibly catastrophic levels. Except for a few very small nations, it is far and away the biggest per capita polluter. China recently overtook us on a national, rather than per capita, basis and shows no signs of substantial reduction. It is said to be both the greenest and the blackest nation on earth. It leads the world in some areas of renewable energy but continues to build coal plants at the alarming rate of about two a week. The rising expectations of its increasingly urban population make the demand for energy politically powerful. Though China has a strong central government in many respects, and has passed some draconian laws regarding pollution, automobile expansion alone will continue to increase its emissions. A strenuous effort by the government to merely stabilize, rather than reduce, current emissions would probably lead to unacceptable political unrest and the fall of the government, with nothing promising to replace it.
The best hope for reducing China’s emissions is for the United States to take strenuous efforts to reduce its own emissions, thus setting an example that world opinion might force China, and then India, the third-largest producer of GHGs, to follow, and hope that their efforts to inform the public of the dangers will forestall severe political unrest. The United States could increase its informal pressures by freely licensing the new technologies necessary for carbon reduction and renewable energies. It does not necessarily follow that raising the standard of living requires more pollution. Technological innovations, along with efficiency, could produce “sustainable development” even in China, many argue.
I will examine why the United States is unlikely to take strenuous efforts. In its simplest form the argument is that the federal structure of the United States allows powerful interest groups to thwart national leaders, including the president, and their power extends to influencing public opinion, Congress, regulatory agencies, and the composition of the Supreme Court. The result is much less concern with any action to reduce global warming than is found in European nations.
The United States vs. Europe in Conservation and Clean Energy
The contrast with Europe is striking, according to Steven Hill in his Europe’s Promise and recent blogs. (Hill 2010a; Hill 2010b) Poll data show much more concern and greater willingness to pay higher prices for clean energy in Europe than in the United States. More important, strong national governments and the (sometimes) strong European Union have used taxing authority (tax breaks as well as higher indirect and hidden taxes) and central planning to foster renewable energy, efficiency, and conservation. Nearly everyone agrees that the quickest and cheapest way to reduce GHG emissions is through increasing energy efficiency and conservation with existing technologies. A safer planet is easily within our reach in this view! A McKinsey study argues that industrialized nations, the United States in particular, already have the technology to stabilize and then reduce GHG emissions with only a tiny reduction in our high standard of living. (Hill 2010b, 461)
“Cogeneration” is an example of conservation. It utilizes the 65 percent of energy lost to heat in electric power stations by recycling it to heat homes and buildings. Recycled energy from cogeneration amounts to 50 percent of the energy used in Denmark; along with other efficiencies the Danish use half as much electricity per year as Americans. It is a small, compact country, but efficiency opportunities in the United States are many and large. For example: “Improving energy efficiency in buildings would translate to a 25 percent reduction in America’s carbon emissions,” according to sources Hill examines. With great effort the Obama administration set higher fuel standards for autos to 35.5 miles per gallon by 2016; Europe’s is set at 50 mpg by 2012, four years earlier; China has already reached our 2016 target. “If the United States were to match the fuel economy achievements of Europe, US demand for oil would be cut by 1.5 billion barrels of oil per year, nearly 20 percent of consumption, a huge amount given that the US consumes about a quarter of the world’s total.” (Hill 2010a) Then there are the renewables, such as solar, wind, geothermal, and hydro, which is the biggest of them all. They constitute about 7 percent of our electricity generation; in 2007 the figure was 14 percent for Germany and 40 percent for Sweden.
Big Organizations in Europe
Even in the more regulated European nations there is a dark underside: large for-profit organizations. Emissions from EU nations dropped 11 percent in 2009, but most, perhaps all, of this was because of the recession, rather than efficiency and renewables. The EU cap-and-trade system means that selling permits to pollute elsewhere offsets emission reductions from renewables; the result is that, unless there is a recession, emissions increase with the population. Here is how it works.
The EU-wide emissions trading system determines the total amount of CO2 that can be emitted by power companies and industries. If a firm emits more than its emissions allowance, it must purchase a certificate to emit those extra tons of carbon. The government sets the number of certificates, but the cost of the certificate is a market price—it can go up or down, as more or fewer certificates are needed. Letting the market decide how much the externalities of pollution are worth is an article of faith, whereas an outright tax on carbon emissions is shunned. As wind and solar come onstream they drive down the costs of the certificates to pollute. The cost of emitting a ton of carbon drops and in 2010 is nearly zero in the EU trading system, but the amount of emissions allowed does not change.
German generating companies have generous allowances (free certificates) that they successfully insisted upon as the price of their support for the Renewable Energy Law. Thus, they have even less incentive to reduce their emissions. Even if some countries such as Germany do reduce emissions through efficiency measures or simply because wind power means less of their energy is needed, the polluting industries can profit handsomely by selling their unused certificates to other EU countries, such as Poland or Slovakia, who are less efficient and have very little invested in renewables. The inefficient generators in these countries can continue to pollute, and the EU’s level of emissions remains the same. (Perrow 2010c; Walderman 2009)
The solution would be to reduce the number of certificates that could be traded every time a new wind turbine or other renewable source comes online. The price of certificates to pollute would then rise, the search for efficiency and renewables would intensify, and emissions would be reduced. This is not likely to happen soon, if ever, because the German state and most EU states are not powerful enough to force the big corporations to accept such a scheme. (Cronin 2008)
Shiufai Wong gives an example of this power in his article on wind energy in Germany and the UK. (Wong 2010) The German government passed an electricity “feed-in” law in 1991, which requires the electric utilities to pay a higher rate for electricity generated from nonutility sources such as wind and solar. It is a hidden subsidy for renewables, via the utilities, and is currently four times the price of coal-generated electricity and five times the price of solar. The utilities refused to pay a high price for energy they did not even produce, but the government successfully sued them. The utilities protested and took the matter to the European Court of Justice, citing a law dating back to the Third Reich legitimating feed-in tariffs only for large generation plants. It all took some years, but the court finally ruled in favor of the German government. But by then, Wong observes, industry had “. . . become sufficiently consolidated and powerful, after mergers and acquisitions under European liberalization policies, to resist the federal government’s pressure to develop or purchase expensive wind energy.” (Wong 2010, 373) The companies proved stronger than either Germany or the European Court of Justice.
In response, the German government, committed to developing wind energy, sponsored small, local initiatives, small enough that the old law did not cover them. Initially, these initiatives also did not threaten the coal and electric power industry. The government’s technical assistance and subsidies soon made Germany the world leader in wind energy by 2007, all with “backyard” plants of 50 megawatts or less of generated power.
But Germany began to run out of backyards. The wind blows stronger and more dependably a few miles out in the ocean, and offshore wind farms became the favored technology. Since Germany’s big industries blocked the growth of big onshore wind farms, the government made an end run around them and turned to offshore sites that the restrictive law did not cover. Entrepreneurs were free to develop large, very efficient offshore wind farms. But the small, dispersed German onshore wind farms lacked the capital and the technical skills for offshore farms. The coal and oil companies and the generating companies refused to invest in offshore farms. Consequently, Germany has lagged in this area, and only in the past few years has foreign capital come in to exploit the offshore opportunities. This is an instructive example of how large organizational interests can shape the renewable field. A strong central government was not strong enough in this case.
The UK took a different tack, as Wong carefully describes. With deregulation and weak government the ruling idea since the Thatcher years, local communities were able to prevent wind farms from being established, although the government offered support. The government tried to encourage onshore wind farms but was unable to overrule local objections. (This occasionally occurs in the Thatcherized United States as well.) But the government had legal control over most of the country’s seashores. Therefore, the government turned to large enterprises (including Shell, which did not see a threat in contrast to big oil in Germany) to build offshore wind farms. With subsidies and feed-in tariffs, the UK rapidly advanced in wind generation, almost all of it offshore, and now surpasses Germany in total production.
Other large industries have weakened emission reduction attempts in the EU. To take just one example, the EU proposed taxing carmakers for every gram above a set limit of CO2 released by their vehicles, starting at 20 euros in 2012. But the car industry, along with sympathetic governments with large car manufacturing firms such as Italy, got the basic fine slashed to 5 euros, a fairly trivial amount that the industry could easily ignore. (Cronin 2008)
Thus, while Europe is aggressively doing much more with efficiency, conservation, and renewables than the United States, large private organizations are still able to undercut the net result; emission reduction, except during recessions, is substantial for a few of the nations, but not for the EU as a whole. Additionally, selling European pollution rights to countries in the developing world, such as China and India, and the underdeveloped world under the Kyoto treaty does not appear to have much, if any, beneficial effect. The Kyoto treaty has been widely criticized as counterproductive for a number of reasons. (Perrow 2010c)
The United States
Turning to the biggest per capita and second biggest national polluter, the United States, the case for the Last Catastrophe is even grimmer. Recall that with existing technology alone, applied to conservation and efficiency, we could quickly and cheaply reduce our pollution levels and be the example the rest of the world would gradually follow. (Even if they didn’t, it would substantially delay the Last Catastrophe for, making a wild guess, perhaps a generation.) Why don’t we do as least as well as Europe? Because there is very little legislation requiring conservation and efficiency. Why? Because with federal subsidies energy is so cheap for consumers in the United States that there is no incentive for the private sector to bring existing technologies to the fore.
Consumer prices are artificially low because of billions of taxpayer dollars that the government gives to nuclear, oil, gas, and coal companies. The government estimates that subsidies to oil alone amount to $4 billion per year. (Kocieniewski 2006) In addition, our energy prices are lower than in other industrialized countries because we do not tax them as much. Europe recovers more of the cost of externalities through higher taxes upon the sources. Not only are the subsidies making our energy cheap, but the full costs of the externalities are not included in the price. These costs include the warming effects of GHG emissions, the health effects of these and other forms of damaging pollution, and ecological assaults on the environment. If these costs were included, we would be utilizing our existing technologies in the conservation and efficiency area and inventing new ones.
Why are such large externalities tolerated if they are documented by science and so easily reduced? To take the most obvious cases, the coal, oil, and auto industries reap the bulk of the profits generated by not paying for the externalities. Why is the government so ineffective in stopping this abuse? Because the legislative arm of the government, which would have to pass the necessary laws, including those that fund and direct agencies such as the Environmental Protection Agency, is made up of elected representatives. These (1) have to be responsive to local, short-term interests such as jobs for coal miners, or keeping offshore oil revenues flowing to a Gulf state. Our federal system of government has difficulty imposing regulations that favor national, long-term interests as opposed to local, short-term interests that are bad for the nation in the long run. (2) Industries that benefit from pollution have invested billions in campaigns to deny the problem of global warming, thus preventing widespread demands by the electorate for pollution controls. (3) Enough elected representatives depend upon campaign finance funds from polluting industries to block the legislation that occasionally is proposed.
Since a federal system of government will find it hard to impose policies that reflect a long-term common good, even when the financial burden to taxpayers is very small, influencing and energizing public attitudes is crucial. The global warming issue is especially vulnerable to conditions that make public concern about warming difficult. The warming is gradual, usually imperceptible, and when it has dramatic effects they are likely to be in distant places experienced by marginalized people. Abetting it is disruptive to present U.S. lifestyles and will primarily benefit unborn generations. It is not like the threat of a nuclear radiation accident that would render half of Pennsylvania uninhabitable for generations, or a hurricane that would suddenly kill people in a specific U.S. community. Our recent economic downturn has cut the concern with global warming by about 20 percent in most polls. Water shortages in Northern China, disappearing islands in equatorial nations, and record-breaking floods and monsoons in India and Pakistan affect our attitudes far less.
In this attitudinal environment it is easy to mobilize enough citizens—25 percent of the voting population will do—to resist efforts to curb emissions. This minority is concentrated in those legislative areas that elect conservative candidates that can weaken climate bills in the House of Representatives and block even weakened bills entirely in the Senate. Because of the unrepresentative nature of the Senate, senators representing less than 20 percent of the nation’s population can block legislation. The major polluting industries have successfully influenced a minority of the voters to oppose legislation, particularly since the mid-1990s, when the predictions of the Intergovernmental Panel on Climate Change (IPCC) began to raise public concern. A well-financed consortium of polluters, primarily big oil, coal, and auto companies, was successful.
In 1997 the difference between self-identified Democrat and Republican respondents to a Gallup poll asking whether global warming was happening was only four percentage points: 52 percent of Democrats and 48 percent of Republicans thought it was happening. By 2008 the four-point difference had increased to 34 percent. Concern with global warming among Republicans has actually declined over the past decade, and their belief that it was being exaggerated rose from 37 percent to 59 percent. This was a key message of the conservative think tanks, in part funded by oil and coal interests, their efforts widely represented in the mass media. The role of corporations in shaping public opinion and the influence of conservative think tanks funded by them has been well studied (Jacques, Dunlap, and Freeman 2008; McCright and Dunlap 2003). The consortium awarded grants to conservative think tanks that in turn made sure that “both sides” were heard in congressional hearings and in the media, even though one side was a tiny minority of “experts” with fuzzy credentials. The American Enterprise Institute offered a bounty of $10,000 for scholarly articles that would dispute the alarming findings of the Intergovernmental Panel on Climate Change. (Sample 2007)
It is possible that Congress would be pressured to act if public opinion in the United States could swing sufficiently in favor of drastic measures such as cap-and-trade or even an outright carbon tax (the option favored by most experts). But it would probably take a decade or more of dramatic domestic evidence of the effects of warming to do this. Some examples:
• massive wildfires in the West, already occurring in California;
• the erosion of beaches and the saltwater invasion of agricultural areas as a result of rising ocean levels (although that would be gradual, and while beaches and marine life are currently disappearing from the Chesapeake Bay, this has yet to incite significant political action);
• the sudden flooding and salination of California’s major source of drinking water and agriculture in the Sacramento Delta (many towns are below sea level and below the level of the rivers and canals);
• sudden increases in hurricane intensity hitting Miami, New York City, and other East Coast cities;
• and prolonged droughts in the Southwest with a modern Dust Bowl evacuation.
Catastrophes in other parts of the world are not likely to have enough effect upon U.S. public attitudes to influence a sufficient number of legislators in Congress, but catastrophes at home eventually would. (The public and congressional sentiments would also have to be strong enough to influence the Supreme Court, whose current conservative majority is likely to block any strong legislation; the Court is quite resistant to influence from the public and Congress.)
What Could Be Done?
What could be done now, rather than wait for near-term catastrophes, to avoid the long-term and perhaps final one where irreversible changes make it impossible for humanity to survive? Clearly, conservation and efficiency are the quickest and cheapest ways to reduce emissions, but without a carbon tax, there is insufficient economic incentive to achieve more than the incremental changes that are taking place. Energy is still cheap. Shareholder value, rather than stakeholder value, dominates U.S. capitalism, and with rapid trading opportunities, investments in efficiency that will not show a payoff for five or ten years are not feasible.
How about renewables, such as wind, solar, and geothermal (we have exhausted our hydro potentials)? At present they constitute less than 4 percent of our electric energy supply. There is no renewable “industry” strong enough to mount a serious lobbying campaign to increase the small subsidies and tax breaks we have at present. Renewable energy is a fragmented field, dispersed geographically and economically, and internally competitive rather than collaborative. Even if it doubled or tripled in the next decade, it would still relieve only a small part of our emissions burden. (Conservation and efficiency, however, could have a big impact.) All three, wind, solar, and geothermal, produce electricity far from the areas that consume it, and our grid is both geographically and technically ill-constructed to accommodate large amounts of these renewables.
Wind and solar have the additional problem of intermittency. Much of Texas electrical power generation narrowly missed a large blackout when the wind failed for just ten minutes; England has had periods of four days without significant wind. Although the storage problem is being seriously addressed, it is far from solved. It has to accommodate an unusual but hardly unprecedented period of four days with no wind. At best we are experimenting with twelve-hour battery storage. The areas with near-constant sun and the space for solar are mostly unpopulated with acute transmission problems, and they still have nights. Most of our electricity comes from coal-fired plants because they are much cheaper than gas or oil-fired plants. These plants represent huge capital investments that would be idle during the day in the case of backing up solar, and would have to sit idle for weeks or months waiting for the cloudy or windless days when they are needed to fill in or replace renewable sources. Indeed, it takes too long for a coal-fired plant to start up to make this feasible. Oil and especially gas-fired plants can start up within minutes, but it would be economically unwise (and deadly for their shareholders) for them to sit idle most of the time, coming into action only when needed. The capital investment is simply too large. (The intermittency problem in Europe is mounting, and is gloomily discussed by Steve Esaui. [Esaui 2010])
Numerous other inventive renewables are in the development stage—for example, underwater windmills to capture tidal flows, and “sea snakes” that capture wave motion—but installations at an appropriate scale that would make a dent of more than a few percentage points in our rising demand for electricity in the United States and Europe are decades away. Only a few European countries have seen 20 or 30 percent of their electrical energy production come from carbon-free sources, and there is little hope for the rest of the world. (For dire predictions about the developing world, see my review of a recent book. [Perrow 2010a])
Nuclear energy is being touted by some as an essential part of reducing emissions. As my chapter in this book indicates, I think we have just been lucky with our nuclear plants: we have had numerous close calls and have weak regulation, but so far never just the right combination of failures to cause a serious accident. I think that new models may well be safer than the ones running now, even safe enough to risk building many new plants. But the obstacles are numerous: New plants are likely to be built in nations that are vulnerable to terrorists that can acquire materials for dirty bombs or nuclear bombs. When the whole life cycle of nuclear energy is considered, there are many GHGs and other forms of pollution involved. There is a shortage of trained personnel worldwide, raising the risk of using inexperienced and poorly trained personnel at all organizational levels. The spent fuel disposal problem still has no long-term solution. Finally, the cost, even with state subsidies, has risen rapidly. (Clarke 2010b; Schneider et al. 2009) China appears to be building plants quite quickly, but France, the leading Western nation in the field, is three years behind schedule, with 75 percent cost overruns in the Finland plant it is building; a plant in its own country is two years behind, and they have difficulty pouring cement and putting steel reinforcements in the right place (as the United States did in its building spree decades ago). (Perrow 1999, chapter 2) China may build plants in only five or six years, but the West requires ten or more years, it seems. There are safer alternatives, as we shall see.
Natural gas is considered by some to be the most promising “bridge” between high-emission energy and carbon-free energy. By utilizing natural gas trapped in shale deposits throughout the United States we could have many decades of energy that emits only half as much CO2 as coal-fired plants. But the environmental impact of current gas removal from our most abundant source, shale, is proving to be alarming. There is evidence of serious water-table pollution and above-ground air pollution from emissions from the removal process. Local communities are going to courts to stop the extraction process, which involves injecting millions of gallons of water with dangerous chemicals into the earth with such force as to break open the shale and free the gas trapped in it. Gas companies plan over fifty thousand sites in Pennsylvania alone, but communities are having second thoughts and trying to stop the extraction. Homes have exploded in Colorado and Ohio; a town in Wyoming is advised to run electric fans when showering to avoid explosions; flammable gas bubbles up in streams; gas mixed with well water will burn at the kitchen faucet; all kinds of ailments show up, including irreversible brain damage.
A high-powered hydraulic fracturing job, or “fracking,” as it is called, returns fifty to one hundred thousand barrels of fluid to the surface, which would require safe disposal to avoid contamination. Getting that safe disposal has been difficult. Vice President Dick Cheney’s 2005 energy legislation exempted gas (and oil) companies from the provisions of the Safe Drinking Water Act and the Clean Water Act, so national regulation has been blocked. New York’s State Senate passed a ban on fracking in August 2010, but its Assembly has yet to act. The technology resembles that of deepwater oil drilling in that the amount of cement used around the well pipe is critical. As one industry representative put it, “At the same time if you try to put in too much cement you can risk collapsing the well. So it’s drawing a balance between protecting the groundwater” and “protecting the well that you are constructing.” The groundwater occasionally loses. (The HBO documentary “Gasland” is devastating. See also Lustgarten 2009 and Zeller 2010.)
But many call for this as a bridge to renewables, notably an MIT report and respected scientists at Stanford University’s energy labs. (Tollefson 2010) However, even if its extraction and transport impact could be reduced—say, to the high level of impact we have with coal extraction and transport—natural gas only buys us a few decades before supplies run out, and is only half clean.
The most promising bridge to renewables is Carbon Capture and Storage (CCS), but it too has its costs and its enemies.
The coal that is used to generate electricity is our largest single pollutant. It could be made nearly carbon-free with a process called Carbon Capture and Storage. CCS is technologically feasible. The U.S. Geological Survey says there is plenty of underground and ocean-bed storage space; CO2 injection technology has been used for decades to increase oil recovery with no dangers. The technology for stripping carbon from coal is available, with three different technologies being tested. Demonstration plants exist in Europe and are being built in China, and one (FutureGen) is going up in Illinois with government subsidies. There is one small test-unit plant, the Mountaineer plant, attached to a large generating station in West Virginia, owned by the largest generating utility in the United States, American Electric Power, with government and industry funding. The Mountaineer plant currently stores 90 percent of its CO2, but only from a 20-megawatt facility; it hopes to store that much from a 240-megawatt facility by 2013. (The whole plant has a 1,300-megawatt capacity.) (Sullivan 2010)
The political advantage of CCS is that the powerful coal companies and electric generation companies will support CCS if there are huge subsidies; an estimated $500 billion over ten years is needed. Were we ever to pass a carbon tax, or cap-and-trade tax, coal and generating companies would not lose money because with CCS their emissions would be very low. At present there is little incentive for generating companies to do it on their own, and coal companies are investing only 2 percent of their profits in CCS. A substantial part of the public investment could come from redirecting the billions in subsidies that now go to coal, oil, and nuclear, but since these subsidies are spent over most of our states and congressional districts, this is not likely to happen.
Would the American public put up with a $500 billion subsidy for CCS? It has quietly allowed our national debt to increase much more than that with our wars and our economic meltdown. The war costs have been accepted because they have been incremental and tied to the notion of national security. The expense of the downturn has been more visible and more protested, but it has been justified as preventing an economic calamity. Unfortunately, a subsidy for CCS will be quite visible and sudden, and the human calamity it prevents is seen as decades away and in remote places. The recent recession has doubled the percentage of “deniers” and cut the highly alarmed by almost half, so selling Americans on a huge subsidy will be hard, even though five out of six of the Americans polled favor regulation of carbon dioxide as a pollutant. (Leiserowitz 2009) A few catastrophes that could be associated with climate change in North America could increase the pressure for a quick reduction of emissions. The coal and oil lobbies would support a crash program for CCS, but not for renewables. It may be our only politically feasible alternative to continued polluting.
The CCS process has many disadvantages, however. Estimates of the increased cost of electricity at the household bus bar go from 1.5 percent (MIT study) to just under 50 percent (DOE); either way it would still be cheaper than electricity from gas-fired power plants, and much cheaper than that from oil-fired ones. From 20 percent to 25 percent more coal must be used because of the capture process, although that could decline sharply with experience and innovations. (Storage is comparatively cheap.) (Morse, Rai, and He 2009; Victor and Morse 2009) This raises the already large human and ecological costs of mining coal and transporting it. Even the “cleaned” coal still has other toxic agents in its plume. And the already enormous political and economic power of coal companies and energy companies will be increased. Critics also fear that CCS will mean fewer investments in renewables such as solar and wind. But if you believe we are two to three decades away from irreversible damage to humans and our ecosystem, it will be well worth these disadvantages and risks. By the time—say, twenty years from now—CCS is in place at a majority of our large coal-emission sources, with the usual learning curve that reduces costs and improves efficiency, the public could be convinced that we need the legislation necessary to concentrate on renewables and efficiency and phase out coal.
There is support for CCS in the energy community. Both Al Gore and climatologist James Hansen say no new coal plants should be built without CCS. Lord Stern, of the influential Stern Report on climate change, calls for it. MIT and Harvard researchers say it is the key to lowering emissions while still meeting energy demands. A special section of Science magazine lauds it. (Haszeldine 2009) President Obama wants at least five demonstration plants operating by 2016 (but will not get them). CCS plants are planned, under way, or already well developed in Germany, France, the Netherlands, China, and a few U.S. states, although Europe will miss its 2015 CCS goals. Among NGOs, some (Greenpeace, Friends of the Earth) denounce the idea as slowing renewables and not addressing our lifestyle problems, and some are neutral, but some big ones favor it, such as the Natural Resource Defense Council and the World Wildlife Fund.
It is not enough for the United States to cap its emissions at present levels, of course. But as the largest per capita polluter and second-largest national polluter after China, America’s demonstration, along with licensing the intellectual property freely to other countries, would put immense pressure on China, India, and Europe to do the same.
I have argued that given the understandably short-run perspective of the American voter we need more than calls for renewable energy to mitigate pollution. We need to subsidize—one might say “bribe”—the powerful coal and electric power industries in order to reduce our major polluting sources. This, and an aggressive public opinion campaign, could make a carbon tax politically feasible. That would spur efficiency, conservation, and investments in renewables. Once again, as will be clear in this book, large organizations and concentrations of power are at the heart of reducing disasters, in this case, the danger of the Final One.
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