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If you look at crude oil prices, still bobbing around in the high $60's, you might think that not much happened last week. But I think we may look back 10 years from now and realize that last week the needle began to move towards dramatic changes in U.S. energy and climate policy.

First, on the foreign policy front, the U.S. was forced to recognize that it cannot enforce sanctions on Iran without China's support, and China is too wrapped up in its oily relationship with Iran to push hard. In front of our very eyes, the great constellations of power and energy have realigned. (And we're not EVEN getting into the lost Russian ship, the pirates/ecologists, and the supposed missiles that may or may not have been bound for Iran. Not that the "pirate's" story makes any sense either.) Dominating the oil market as the world's greatest consumer is no longer enough to get what we want; this means that a dramatic about-face towards creating low carbon trading blocs might be a cheaper way to consolidate power in a more multi-polar world.

On the home front, two climate sticks: the EPA is going to regulate CO2 emissions from large emitters, and Senators Kerry and Boxer released a less wimpy climate bill. Together, these two actions almost make Waxman Markey--with its big free carbon credit allocations for utilities-- look carrot-ish.

Which leads to the third plot point. Last week, utilities PG and E, Exelon, and PNM broke with the US Chamber of Commerce, which has gotten increasingly histrionic about CO2 emissions reductions to the point of calling for a  "Scopes Monkey Trial" over the scientific proof of man-made global warming before dialing it back a few days later. (Here's the Chamber's own blog on the utilities who left, kicking off with a pugnacious quote from PJ O'Rourke's Parliament of Whores.) And now, Politico reports, more than 150 business leaders from utilities, manufacturers and clean-energy companies plan to "swarm" Capitol Hill on Tuesday and Wednesday.  They're swarming, or love-bombing Congress with the message that they want clear climate change regulation, sooner rather than later, simpler rather than complex, and they intend to profit from it. Among them are all of the companies that left the Chamber of Commerce last week.

The fourth plot points can be found in the graphs at the EIA's Short Term Energy Outlook, which show that U.S. carbon emissions shrank 6 percent over the past year. In the first half of the year, U.S. petroleum consumption fell by an almost unprecedented 6.3 percent, electricity use fell by 4.4 percent--largely the result of a shrinking economy--but a huge divergence from year on year rises in the past. Interestingly, coal fired electrical generation fell by 12 percent--more than twice as fast as the electricity demand drop. Huge!  Nobody wants to shrink carbon emissions by shrinking the economy (precisely what all the fuss is about) but since we're already in the midst of a major reorganization of energy, capital, and labor, this is a logical time to lay the new ground rules, even much as the financial regulatory agencies are trying to figure out the new rules for banking.

Maybe.  

Photo Credit: Flickr User Pfala

Energy Secretary Stephen Chu and Commerce Secretary Gary Locke are both in China today, forming a new joint research program for US/China cooperation on clean vehicles and buildings with China's Minister of Science and Technology Wan Gang. (The very fact that Chu and Gang are sitting down to talk is reason for some hope: They are cut from similarly brainy optimistic technocratic cloth and before government both spent a long time at the cutting edge of private industry's research. Chu was at Bell Labs, where he won a Nobel. And Gang was at Audi's research center in Germany. Having interviewed both of them, I can easily imagine them having a beer. But if they do, there will be a leapfrog under the table, testing out its first hops.

Chu and Locke are on a unenviable chore of a mission to get China to publicly commit to reducing CO2 emissions. The Wall Street Journal's Environmental Capital Blog points out that the tensions in this mission are evident in the difference between the WSJ headline ("Chu Warns China on Emissions")  and the China Daily's: "Chu Says US Ready to Lead on Climate Change." The less public truth, as Chu knows from his stint at LBNL, which works extensively with China, is that China is very concerned about the environmental and competitive impacts of climate change and legislation and is preparing extensively and helter skelter, but not talking about it much. (Here's an article I wrote about the extent of China's energy efficiency program and its 20 year cooperation with LBNL.) Numerous bureaucrats told me that they were coming to see carbon reductions as a competitive strategy, particularly against the slower moving US, and a way of breaking out of the trap of low-cost labor as the country's competitive advantage. In the Reuters article, Locke rightly points out that China needs far more than energy efficiency. 

And that's where Wan Gang comes in. He returned to China from Germany after writing a highly influential paper saying that the only way for China to dominate the auto industry of the future is to be a pioneer in alternative fuel vehicles. Aka Leapfrogging.  (Here's an article I wrote about that mission for Wired. Substitute hybrid and electric for hydrogen and note that Wan Gang's fortunes have risen considerably.)

China can't bet its future on leapfrogging anymore than the US can bet its competitiveness on preventing the worldwide adoption of emissions standards. Will Chu and Gang figure out a collaboration that satisfies the competitive urges of both?

Making fun of clean coal has become a cottage industry for American enviro-media types. (For a classic example, check out this snarky ad by the Coen brothers.) But while we have been snickering, China is building a clean coal plant that will go online next year, and has two more in the works. Last year alone China built 90 gigawatts of coal-fired power plants, which means that if China decides to use its massive domestic market for carbon sequestration to develop cheap technology and processes (provided that's possible) they could capture an enormous world market for the equipment in a few decades.

In the US, clean coal has longer political legs more than economic ones, in part because of the way we play the politics of energy and greenhouse gases. America's Clean Coal experiment is FutureGen, a much talked-about coal plant which was supposed to sequester its carbon emissions. FutureGen, though, has always been a political creature, designed to delay limits on greenhouse gas emissions by coal fired power plants by promising a far off clean coal utopia. Here's an interesting quote from  Kenneth Green at the American Enterprise Institute on Carbon Capture and Sequestration (CCS): "It's the universal fig leaf. For people who want to say they're not against coal when they really are, they hold up CCS. If CCS works, then coal is fine," Green said. "If you are a coal supporter, it lets you say to your coal people, 'I know you're going to get hit by cap and trade, but we're going to give you CCS. It's going to protect you, more or less.'"

 Even the Bush administration had a hard time keeping a straight face, and so they stopped signing the checks for FutureGen. Recently, the Obama administration rescued FutureGen, and with a group of power companies the $1.6 billion project is now on track, sort of, to have some kind of plan-like thing ready by 2010.

When energy and technology projects are driven by short-term political considerations rather than more substantial economic or strategic ones, tax payers waste money (and market opportunities) with this on again off again pattern of support. By comparison, a number of long standing oil carbon capture and sequestration projects have been going profitably in the US for years. A few years ago the oil company BP talked about building about a for-profit project at its Carson refinery that reportedly was almost twice the size of FutureGen. (That project is now re-structuring.)

And in the meantime, China has become a frontrunner, skillfully leveraging domestic and foreign expertise, funds, (and worry!) to get three plants started. The plant near Tianjin is already partly built, and the first of its three phases of construction will be complete this year. International capital clearly sniffs where the action is and  BP has opened a CCS collaboration center in Shanghai. The IEA, meanwhile, is congratulating China as a leader in the field.

In the US, it's time for everyone to leave behind the snarky politics of clean coal and get to work.

Uganda is a landlocked country of 32 million that's a bit smaller than Oregon. GDP: $1100. And, according to this report of a meeting with a representative of the US Department of Energy, may have reserves that "rival" those of Saudi Arabia.

(For reference: Saudi Arabia produces well over 10 million barrels of oil a day and has reserves estimated at 267 billion barrels.)

The DOE expert says Uganda could produce 3.5 million barrels a day, and possibly much more, and then offers US help with environmental and governance issues.

I have no way of knowing how accurate the prediction of Uganda's oil reserves is, but even if there is a lot of oil there, there's no doubt that the place and oil source we call Saudi Arabia was the product of a particular moment in world history, and a particular relationship between the US as the emerging post-colonial world power and the kingdom of Saudi Arabia, which needed protection as the Cold War heated up. In other words: More than oil made Saudi Arabia what it is today.

By contrast, this moment in history is a dramatically different petri dish. As this article shows, Uganda is actually considering NOT exporting its oil, which would mean that the reserves, no matter how large they are, would not realize their full value. Furthermore, Uganda is seriously looking at doing deals with both Iran and China--both in their own ways emerging powers without the baggage that the US has.

And the US has neither the diplomatic suasion nor the air of military invincibility that it had 50 years ago, or even 10 years ago. The US military, through AFRICOM, has a complex relationship with the government of  Uganda and rival groups in nearby Democratic Republic of the Congo. Earlier this year, AFRICOM helped plan a horrifically botched raid on rebels who turned around and killed 900 civilians.

It's probably fair to say that regardless of how much oil is found, there will never be another Saudi Arabia, willing to invest so much of its income in creating spare capacity to keep America's vision of the world afloat with cheapish oil. For the US, chasing  Saudi Arabias  and oil reserves around the world has been part of our 20th century version of manifest destiny. But with incredible speed, the whole venture --both the good and the bad--is changing.