The EU auction failed because bids didn’t reach a secret reserve price. “In the past five years, carbon prices on the ETS have plummeted nearly 90 percent.” The core problem with the ETS is oversupply of credits. The article points out possible solutions: backloading or long-term structural change. I’m not an expert on carbon markets, but my understanding leads me to support the long-term structural change course. The ETS tried to please too many vested interests simultaneously (too complex) and resulted in pleasing too few while not achieving its core objective of emissions reductions resulting from a market signal.
On the other hand, The Regional Greenhouse Gas Initiative had its successful 19th auction of CO2 allowances earlier this month. I wouldn’t characterize it as bad news, but the clearing price of $2.80 per ton, above the reserve price of $1.98 per ton, is too low to directly impact CO2 emissions; it is also lower than the price in Europe and California. Utilities in the region are switching to cheaper fuel sources because they’re cheaper, not because they emit fewer CO2 emissions. According to the article, a significant portion (63%) of the $105.9 million in this quarter’s revenue and the $617 million in historical revenue are earmarked for clean energy technologies like energy efficiency, renewables, and climate change adaptation across RGGI’s nine Northeast US member states. I would certainly like to read a more in-depth analysis of this claim. Where specifically have the investments gone and what are the results to date?
The RGGI realizes their reserve and clearing price are too low:
Just over a month ago, the RGGI states decided to reduce the 2014 CO2 budget (the “cap” in cap-and-trade) from 165 million to 91 million tons and retire unsold 2012 and 2013 allowances. This 45% cut is expected to boost allowance prices to $4 per ton in 2013 and up to $10 per ton in 2020, creating billions of new revenue every year. By comparison, RGGI allowance auction clearing prices have never risen higher than $3.51.
That 2020 price is still too low to have much of a direct impact on carbon emissions. The obvious benefit is the additional revenue however. The more revenue we have available to invest in innovation and deploy efficient infrastructure and technologies, the more we will decrease CO2 emissions. The investment portion of the RGGI policy is a positive feature (I have read less about what the EU does with ETS revenue; I don’t claim with certainty that the RGGI system is “better” than the ETS system). Any national-level tax-and-dividend system will be complex. But even$20 per ton today would not, absent subsidies, provide enough incentive for utilities to switch from fossil fuels to zero-carbon sources.
Energy intensity, or the amount of energy we use to create one dollar of GDP, has plummeted 58 percent between 1949 and 2011. Even more impressive is the 66 percent decrease in carbon intensity, or the amount of carbon emitted per real dollar of GDP.
The data are what the data are. This comment follows the data:
These improvements are what greens miss when they call for Americans to make painful, costly cutbacks on energy usage.
Let’s take another look at that data, now that we know the bias of the author. There are 62 years in the data cited. That means there was a 0.94% annual decrease in energy intensity. The good news is there was a decrease. We generated the same GDP dollar for less energy, as we expect in an advanced society with research and innovation. Similarly, there was a 1.06% reduction in carbon intensity. This value is important for energy and climate policy. The amount of carbon required for every GDP dollar fell over the past 62 years. Again, this is a good thing generally speaking. Technological efficiency permeated the economy over that time, which reduced the amount of carbon we emitted.
Now an important question: What caused this decrease? Was it emission reductions? No, US emissions have increased since 1950, with only a couple of periods when emission values didn’t increase every year. The US emitted just over 600 million metric tons (MMT) of carbon in 1950 and over 1500MMT in 2011. If carbon intensity is a measure of carbon per unit GDP, then the denominator increased faster than the numerator (GDP rather than carbon), in order for the ratio to decline over time. In 1950, the US real GDP was $2 trillion; in 2011, it was $13 trillion. Indeed, GDP increased faster than carbon emissions over the past 60 years.
What magnitude carbon intensity decrease is necessary to achieve carbon concentration reductions? First of all, carbon emissions have to decrease. Granted this has to occur globally, but let’s keep our focus on the US since we can actually control those emissions. Something between 3% and 4% annual decrease would do the trick. That is 3 to 4 times the historical rate! Let’s go back to the ratio: what has to change to achieve this decrease? It’s one of two things: carbon emissions or GDP. If GDP increases at the same rate it has historically, carbon emissions would have to decrease in value. If carbon emissions increased at the same rate they have historically, GDP would have to triple or quadruple in value. The former case is more likely because while we want GDP to grow as much as possible, tripling or quadrupling the rate of GDP growth won’t happen.
So our goal should be to decrease carbon emissions. If we can simultaneously increase GDP along the way, so much the better. We obviously should not look at “solutions” that decrease GDP. Walter Russell is unfortunately partially correct when he says that some greens miss part of reality. They place too much focus on decreasing emissions regardless of the consequences. In the real world, people still have to eat and pay for the mortgage. Walter does miss his own share of reality however. These graphs do not indicate a wildly efficient economy. We should not break out into celebration because of the graphs. We should instead examine them soberly and then determine what our goals should be. Do we want to decrease emissions and concentrations and if so to what level? Those goals will help us establish the requisite policies to achieve them. I for one do not think we are decarbonizing nearly fast enough and I think we can decarbonize faster via some common sense policies.
The White House strategy on the sequester was built around a familiar miscalculation about Republicans. It assumed that, in the end, they would be reasonable and negotiate a realistic alternative to indiscriminate cuts. Because the reductions hurt defense programs long held sacrosanct by Republicans, the White House thought it had leverage that would reduce the damage to the domestic programs favored by Democrats.
Obama chose excellent election staffs throughout his political career.
He did not choose competent political strategists. He himself is not a competent political strategist. His team spent 18 months on health insurance legislation, during which he gave away concession after concession without getting anything of value in return. Why? Because he wanted a Grand Bargain as part of his political legacy. One result of this shortsightedness was the Republican wave election of 2010, when state legislatures and governorships flipped from Democratic to Republican control. The Democratic base didn’t think Obama had done much for them for 2 years, so they didn’t show up to vote. The biggest problem with this: your average Republican wasn’t elected; the far right-wing fringe of the Republican Party was: enter the Teabaggers to the US Congress, governorships, and state legislatures.
Obama’s team made multiple deals on financial items: the debt ceiling (Republicans don’t want to pay for the bills they charged up), the Bush tax cuts (expired after 1 extension), and the 2011 deal to initiate blind spending cuts because the Republican-led House of Representatives can’t execute their Constitutional duty to pass an annual budget on time. Hence the leading NYT paragraph.
Time after time after time, the Teabagging Republicans have refused to negotiate or work with President Obama or Democrats. How many times will it take before Democrats take the Teabaggers at their word: despite the trillions of debt run up by their party in the 2000s, they won’t allow Obama to run up any more debt, regardless of the cost to the US economy or its citizens. Well, it will take at least one more time, apparently.
The President this morning had important statements on what the group to be led by Vice President Biden will do in the wake of the Newtown terrorist attack. After his announcement, the press asked many questions regarding the fiscal curb negotiations. Here is a gem of a response from President Obama (emphasis mine):
I have gone at least halfway in meeting some of the Republican concerns.
Did Americans vote for President Obama to go more than halfway in meeting Republican concerns? They did, even if they didn’t consciously think about it beforehand.
This is a frightening admission. The start of fiscal curb impacts won’t start for another two weeks and Obama has already given up more than half the field to his opposition. How many football games would you win if you let the other team start at your 45-yard line? In the last four years, Obama’s defense hasn’t kept Republicans out of the end zone when he should have been scoring his own points. How far will Obama yield just to satisfy his own intense desire to make a deal with anybody, no matter how ridiculous they are? The American people are on the record rejecting Republican fiscal proposals, yet Obama continues to add them to his own proposal. If the stakes weren’t so high, it might be entertaining to watch how this unfolds.
We heard plenty of rhetoric from Obama super-supporters leading up to the November election: how we had to vote for Obama because crazy ol’ Mitt Romney would destroy the country. It turns out Democrats are just as eager to scare-monger as Republicans are when it comes to protecting those in power from accountability. Largely left unsaid was what Obama would do if re-elected. I argued with many friends about this topic. I saw what the first-term was all about: taking progressive policies off the table prior to negotiation, negotiating for too long, yielding concession after concession while not getting anything of equal value in return from Republicans who only wanted to see him lose the 2012 election.
Now that Obama has been reelected, a political “crisis” that Obama and Congress purposefully created for themselves needs our attention. The fiscal curb is approaching. For a couple of weeks, Obama made a good show of touring the country and showing voters how smart they were to vote for him, because he wasn’t going to capitulate and concede on tax cuts for the obscenely rich or the Big 3: Medicare, Medicaid, and Social Security. Social Security doesn’t add to the deficit because it has a guaranteed revenue stream. Medicare and Medicaid could be made solvent for decades with minor adjustments that have nothing to do with things Republicans think they do.
I had no doubt we would see the following. Obama made the following proposal yesterday: in exchange for extending middle-class tax cuts, raising the debt limit, extending unemployment benefits, and new spending on infrastructure, he would continue Bush’s high-income tax cuts for income up to $400,000 and would cut Social Security benefits. That’s $1.3 trillion in revenue for $850 billion in spending cuts. Obama has already given up on raising taxes for incomes over $250,000. And he threw Social Security under the bus. For nothing in return.
Mark my words: the Big 3 will take massive hits. And unlike in 2005 when the country resisted a Republican President doing it, a Democratic President will do it in 2012. Republicans will successfully get even more spending cuts in programs that need only slight tweaks while raising the income limit that gets subjected to a return to tax rates under Clinton than is present in this offer. How do I know? Speaker Boehner quickly rejected the President’s offer. Why? Because it ensures that Obama will continue to foolishly engage with the Speaker in closed-door meetings instead of speaking in front of the American people. If he did the latter, as was his initial strategy, Boehner would have to agree to the President’s proposal. Because Republican plans consist of everything Americans don’t want to see: slashing unemployment insurance, tax hikes on the middle class while the rich walk away untouched, cuts to the Big 3, etc.
And here is why that will happen: Barack Obama wants his legacy to be defined by his ability to make deals with Republicans. The specific details don’t matter that much to him. He wants to be perceived as someone who gets things done, regardless of who came up with the idea in the first place. Health care? Let’s try the Republican plan Mitt Romney got through in Massachusetts. Climate Change? Let’s try the Republican plan from the 1990s. Budget balancing? Let’s try what Republicans have wanted for decades: no social programs and lots of defense spending.
The best part? We’ll all do it together! Yay! Be happy, Democrats! You prevented the world-ending Mitt Romney from being elected and now your party’s President will dismantle the most successful programs that kept millions of Americans out of poverty in the 20th century. Because we all had to vote for the lesser of two evils. Phew, disaster was narrowly avoided, wasn’t it?
Various interested parties have written about the efficacy (or lack thereof) with regard to carbon-related market schemes of all sizes and types. Probably one of the more visible programs is the global emissions offset scheme enacted in the wake of the Kyoto Protocol. This is the case for good reason: Kyoto represented the largest effort to date to deal with carbon emissions and related activities at the international level. The short story can be summarized by two competing viewpoints. On the one hand are people who think the Kyoto-scheme was real progress because it did something for the first time. On the other hand, critics claim that the scheme is a failure for any number of reasons, most not actually dealing with real-world facts.
Who’s right? Well, as usual, there are valid points made on both sides. It is true that a global market was created where none before it existed. In and of itself, that is probably a good thing. It allows us to monitor how such a program works and make modifications with time if something needs to be tweaked or overhauled. To that point, the critics make a good argument. The scheme very likely isn’t working. But critics will leave it at that without examining it in further detail.
I’m going to look at one part of the scheme in a little more detail and explain why the scheme isn’t working as efficiently as it should.
Quickly: there are too many credits in the market. In economic terms, there is a drastic oversupply of offset credits. By definition, the market will operate inefficiently. How inefficient is the market? After all, if we are talking about just a little oversupply, we are also talking about small inefficiency. How does 1,000X oversupply grab you? Yes, that number is correct and it is wildly inefficient. This scheme is laughable (or would be if part of a comedy routine). Unfortunately, it is what passes for real-world policy today.
Nature Climate Change‘s most recent issue included a paper by Kevin Anderson and Alice Bows entitled, “A new paradigm for climate change” [subs. req'd]. Kevin works at the Tyndall Centre for Climate Change Research, School of Mechanical Civil and Aerospace Engineering and Alice works at the Sustainable Consumption Institute, School of Mechanical Civil and Aerospace Engineering, University of Manchester. The discussion and arguments in the paper aren’t exactly novel if you’ve paid attention to the policy side of the climate change topic but bears examination as much as other works on the climate-policy interface, in which I am very interested.
I think the paper has some serious flaws in its assumptions, which detracts from the policy prescriptions offered. Prime among the flaws is this:
We urgently need to acknowledge that the development needs of many countries leave the rich western nations with little choice but to immediately and severely curb their greenhouse gas emissions
The latter part of this statement simply will not happen, barring additional severe economic distress. The first part represents progress from the scientific community: developing nations want and deserve higher living standards, of which energy is a primary input. But developed nations cannot and will not “immediately and severely curb their greenhouse gas emissions”. There is a choice that these nations make every day: their own economies will grow and they will do so with the cheapest energy possible.
The U.S. recently achieved something through price signals that scientists and environmentalists have failed to achieve via policy for a generation: a significant reduction in overall CO2 emissions: 7.7% since 2006, the largest reduction of all countries or regions. This is after Congress failed to get a climate-energy bill passed in 2010. Why did the decrease occur? Because old coal-fired plants (the most polluting type) grew much more uneconomical to operate in the past few years compared to natural gas-fired plants. There is a problem moving forward and that is there is nothing substantially cheaper than natural gas on the scale necessary to further reduce U.S. emissions. Effectively, there is a new baseline from which the U.S. will operate for the next generation. But natural gas, as most readers are familiar, still pollutes far more than renewable energy sources. So U.S. emissions will continue to be quite high and more CO2 will accumulate in the atmosphere.
Despite the early flawed assumption, the papers’ authors quite correctly state the following:
[...]any contextual interpretation of the science demonstrates that the threshold of 2°C [increase in average global temperatures] is no longer viable, at least within orthodox political and economic constraints. Against this backdrop, unsubstantiated hope leaves such constraints unquestioned, while at the same time legitimizing a focus on increasingly improbable low-carbon futures and underplaying high-emission scenarios.
I have written many times on the false hope that low- and moderate-emission pathways represent (given the unfortunate reality that our actual emissions are on a substantially different orientation) and lamented that even climate scientists misdirected their energies by rarely analyzing high-emission scenarios, thereby depriving policymakers with the required scope of potential futures from which we choose.
The authors do present this somewhat accurate portrayal:
At the same time as climate change analyses are being subverted to reconcile them with the orthodoxy of economic growth, neoclassical economics has evidently failed to keep even its own house in order. This failure is not peripheral. It is prolonged, deep-rooted and disregards national boundaries, raising profound issues about the structures, values and framing of contemporary society.
Rather than demonizing neoclassical economics, the authors should look for opportunities within such a framework that would actually result in emissions reductions. But the authors’ do identify issues that really do lie at the heart of climate policy: the values of contemporary society. If those values were more robustly analyzed and respected for what they were as a foundation to climate policy, we would have made meaningful progress on the issue.
The lack of such effort is evident in one of the authors’ concluding paragraphs:
It is in this rapidly evolving context that the science underpinning climate change is being conducted and its findings communicated. This is an opportunity that should and must be grasped. Liberate the science from the economics, finance and astrology, stand by the conclusions however uncomfortable. But this is still not enough. In an increasingly interconnected world where the whole — the system — is often far removed from the sum of its parts, we need to be less afraid of making academic judgements. Not unsubstantiated opinions and prejudice, but applying a mix of academic rigour, courage and humility to bring new and interdisciplinary insights into the emerging era. Leave the market economists to fight among themselves over the right price of carbon — let them relive their groundhog day if they wish. The world is moving on and we need to have the audacity to think differently and conceive of alternative futures.
This thrown gauntlet is full of high-minded rhetoric but short on grasping the realities of the world. I don’t know of any climate scientist who is afraid of making academic judgements. But it is folly to accuse skeptics of unsubstantiated opinions and prejudice when advocates for climate activism also display their own set of opinions and prejudice – those opinion and prejudices arise through psychological lenses which themselves are rooted in biological constructs. Insulting one another has done and will continue to not to anything to solve this problem. Nobody has the “truth” market cornered. The “new” paradigm championed by the authors bears remarkable resemblance to other recommendations from legions of climate activists before them. What has such a stance accomplished? Emissions continue to grow, concentrations continue to accumulate, temperatures continue to rise, etc.
Many of the same people who rail against unsubstantiated opinions and prejudice also vehemently dismiss new articulated paradigms. I see nothing in this paper, or many others like it, that advocate for the rapid growth of developing economies based on 21st century technologies and innovations, even though such an effort is clearly needed while developed nations work at finding ways to decarbonize their own economies. Quite simply, this is the least expensive path forward – it leverages opportunity within the economic framework in which we operate. It strikes me as senseless to continue the same fight that has not achieved meaningful decarbonization in the last two generations.
I have argued for some time now with fellow Democrats and liberals about what I perceive as the lack of choice in candidates between the two major US political parties, especially for “higher” offices – President and Senator especially. Yesterday’s news that President Obama restarted an effort begun under the Bush presidency to establish a free trade pact with eight Asian nations, despite clear and unambiguous 2008 campaign promises not to, is the latest evidence supporting my theory.
My theory is the lede: you still get something evil when you vote for the lesser of two evils. This goes out to all the so-called Democratic activists who claim that voting for a “Democrat” is always the only choice. No, it’s not. It’s a terrible long-term plan because right-wingers purposefully grow more extreme, which pulls Democratic candidates and their policies further and further to the right. I only vote for candidates that I think will stop this trajectory. I didn’t think then-Sen. Obama would do that in 2008 and most of his actions since then have convinced me of that opinion.
Compare this:
The newly leaked document is one of the most controversial of the Trans-Pacific Partnership trade pact. It addresses a broad sweep of regulations governing international investment and reveals the Obama administration’s advocacy for policies that environmental activists, financial reform advocates and labor unions have long rejected for eroding key protections currently in domestic laws.
with the 2008 campaign promise:
“We will not negotiate bilateral trade agreements that stop the government from protecting the environment, food safety, or the health of its citizens; give greater rights to foreign investors than to U.S. investors; require the privatization of our vital public services; or prevent developing country governments from adopting humanitarian licensing policies to improve access to life-saving medications,” reads the campaign document.
The administration and its sycophants can spin this free trade effort any way they want – the end result will be the ultimate determination of what President Obama and his backers really want. Read again what I wrote in the first paragraph: Obama restarted the Bush effort. Obama stopped it once he gained office, with a grand public show trying to prove how change-gy and hope-y he was. Then he restarted it without public acclaim. His administration has been negotiating for over 2 years in secret. It’s all bipartisanship-y, which is exactly what the corrupt media inside the D.C. Beltway wants to see, but it’s not what average Americans want to see. Has Obama been campaigning on this effort? No, he hasn’t brought it up once. Nor has he campaigned on the other free trade agreements he’s signed. Our economy falters, which we’re told causes Obama to worry, but the free trade express keeps chugging right along without public debate.
So keep voting for the lesser of two evils. Just don’t expect me to consider a slower march to an evil state a success. A march away from that state would be a success. That’s what I’ll be voting for in November.
The fine folks at JP Morgan Chase continued to make unchecked bets (the same kind that A.I.G. made and got burned) and lost big: $2 Billion in the last 6 weeks. A few of those folks have since lost their jobs. But not the man who lobbied the hardest against regulations that would prevent Chase from making those bets – no, he still has his job. The shareholders are doing what they’re supposed to be doing: asking tough questions. Will Dimon keep his job? Sure – crony capitalism rewards failures at the top.
What I want to know is where are the massive rallies by the Tea Party calling for Dimon to be fired and regulations to be imposed on gamblers masquerading as bankers?
The answer is easy: there aren’t any and there won’t be any. The Tea Party was co-opted by the same folks who perpetrated the worst activities that led up to the Great Recession and our continued economic malaise. No substantive changes were made in the way Chase or other banks do business – save the tens of Trillions of dollars they got for free from the Federal Reserve.
The co-opting included distracting the populists in the Tea Party with the supposedly scarier threat of a Black Man in the White House.
Meanwhile, speculators were allowed to run up the cost of oil and gasoline, which acts as a choke collar on the American economy, and other right-wing economic theories were imposed across Europe, which has led to what is likely to be another recession:
The combination of high oil/gas prices, US corporations sitting on Trillions of dollars in cash (not hiring), and European economic weakness will not help the US economy. Will our “recovery” be over soon; will we follow Europe into weaker and weaker economic conditions? Don’t ask the Tea Party, they don’t truly care.
Yet oil prices increased this week by over $4 to $103.24 per barrel and gas prices at the pump rose $0.04 to $3.52 (national average).
Let ‘s state this clearly: it’s not American demand driving those prices up. We can attribute part of the increase to other growing economies. But as more people are figuring out all the time, a not inconsequential part of it is commodity speculators. Then there’s tension over Iran that the Republican Teabaggers are trying to inflame – they just love them all the war and conflict they can gin up (as long as their family members aren’t required to actually serve, dont’cha know). Finally, don’t discount the role of the giant fossil fuel industry here – do you think they’re taking the Keystone pipeline decision in peace?
As the folks at Bonddad Blog state, oil and gas prices this high helped act like a choke collar on the U.S. economy last year. Given the relative growing health of the economy since, and the similarly growing prospects for Obama’s reelection largely as a result, that collar might be forcefully reapplied (or no action taken by some to remove it) in order to dim his electoral chances.
