Chu began by reviewing the world's use of energy over time. By 2025, he predicted, the world will use three times the energy it did in1970. Given that we chiefly depend upon fossil fuels, this implies greater carbon dioxide in the atmosphere. Carbon dioxide lasts a long time; even if we stopped adding to it, the world would continue warming. At twice the carbon dioxide levels of pre-industrial times, the world climate would shift by several degrees, growing hotter in the Northern Hemisphere, colder in the Southern Hemisphere.
Chu cautioned the audience to not underestimate a few degrees: for example, he said, 8 degrees Celsius separates today's average temperatures from that of the last ice age. As the temperature rises, glaciers melt, reflecting less heat back into space and speeding the warming. Although the warmer weather should encourage more plant life, which would remove more carbon dioxide, even the most generous models do not predict much relief. Our agriculture in the Northern Hemisphere would be threatened by this climate change; already California farmers can no longer depend upon water from the Sierra Nevada Mountains.
Chu discussed the possibility of storing carbon dioxide underground, out of the atmosphere. Oil drillers are already using carbon dioxide to push out more oil. South Dakota actually exports carbon dioxide to Canada for this purpose. Unfortunately, if carbon dioxide leaks out, it can be deadly, and oil companies have been reluctant to monitor study how this leakage happens.
This growth in carbon dioxide as an asset is fueled by a dwindling resource: oil. The United States is the wealthiest country in the world and consumes the most energy per capita. Until 1970, the United States was a net exporter of oil; now it imports 60 percent of its oil. China seems poised to follow in the same path; it is now importing 50 percent of its oil and will have to increase to 75 percent soon. Although no one knows with certainty, predictions of a peak of oil production have been continually made. Chu said he doubts whether the world will run out of oil in the foreseeable future; current drilling methods only recover 30 percent to 40 percent of the oil available.
Chu said he believes we have two parallel paths for our energy needs: conservation and the development of new, cleaner energy. Although he said that the free market is the most nimble way to accomplish technology gains, he acknowledged that there are certain limitations, such as externalities (prices do not capture damage from pollution), and that free markets only promote local optimization in time or geography (a shortage of fish fuels more fishing). He used the example of refrigerators to show how government regulation can help the free market. Refrigerators have steadily gone up in size but have used continually less energy since the mid-1970s, when the federal government started requiring stricter energy guidelines. The real price for refrigerators has gone down, as well. This is an important example, since 40 percent of all energy is used to heat or cool, he said.
On the "supply side," Chu considered new fuel sources, such as coal, fusion, fission, wind, photocells and biomass. There seems to be at least 200 (perhaps a 1,000) years left of coal, he noted. Unfortunately, coal puts out even more emissions than oil. Chu dismissed fusion as not being a major player for the rest of this century, at least. Fission is marred by the waste and nuclear proliferation issues. Even if Yucca Mountain finally opens for nuclear waste, he said, it would be filled by 2010. Recycling the fuel reduces waste by a factor of 10, but involves plutonium, which can be "weaponized," creating a security risk. Wind is also a strong possibility as a new energy source; its cost is within 20 percent of commercial viability.
Chu seemed to feel that using biomass as an alternative fuel source was perhaps the strongest possibility. He noted that the recent history of agriculture has allowed us to feed more people on less land. In fact, he said, the federal government pays many farmers to not grow crops. New trade agreements will make it less likely that the United States can sell the heavily subsidized crops on the world market, making it ideal for biomass energy, such as conversion to ethanol.
Sandor discussed his reactions as an economist, saying that he found Chu's words sound. He said the question on pricing externalities was very interesting. For example, the United States passed a cap on sulfur emissions in response to the problem of acid rain. His organization, the Chicago Climate Exchange, manages the trading of the permits that allow the sulfur polluting. This, he said, set up price signals that encouraged scrubbers in smokestacks, the switch to low-sulfur coal and the switch to gas.
Both Chu and Sandor agreed there were large gains to be made in non-fossil fuel energy sources, particularly biomass. Sandor quoted a member of OPEC who said, "The Stone Age didn't end because they ran out of stones." Similarly, both men said they were optimistic that the world would shift to other energy sources well before our oil runs out.