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Bridging climate science, citizens, and policy


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Deep Decarbonization Pathways Interim Report Released

An international group of folks put together an interim report analyzing “Deep Decarbonization Pathways”.  Decarbonization refers to the process of using less carbon within an economy.  The intent of the report was to show ways forward to keep global mean temperatures below 2C.  Readers of this blog know that I no longer think such a goal is achievable given the scope and scale of decarbonization.  We have not moved from a “business-as-usual” approach and have run out of time to reduce GHG emissions prior to relevant limits to meet this goal.  I argue the exact opposite of what the authors describe in their summary:

We do not subscribe to the view held by some that the 2°C limit is impossible to achieve and that it should be weakened or dropped altogether.

Thus the main problem with this report.  They’re using a threshold that was determined without robustly analyzing necessary actions to achieve it.  In other words, they a priori constrain themselves by adopting the 2C threshold.  Specifically, a more useful result would be to ascertain what real-world requirements exist to support different warming values in terms real people can intuitively understand.  The report is not newsworthy in that it reaches the same results that other reports reached by making similar assumptions.  Those assumptions are necessary and sufficient in order to meet the 2C threshold.  But examination unveils something few people want to recognize: they are unrealistic.  I will say that this report goes into more detail than any report I’ve read to date about the assumptions.  The detail is only slightly deeper than the assumptions themselves, but are illuminating nonetheless.

An important point here: the authors make widespread use of “catastrophe” in the report.  Good job there – it continues the bad habit of forcing the public to tune out anything the report has to say.  Why do people insist on using physical science, but not social science to advance policy?

On a related note, the report’s graphics are terrible.  They’re cool-color only, which makes copy/paste results look junky and interpretation harder than it should be.  So they put up multiple barriers to the report’s results.  I’m not sure why if the intent is to persuade policy makers toward action, but …

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N.C.’s Sea Level Rise Reaction

Many people involved in climate activism have probably heard of North Carolina’s reaction to sea level projections.  The reaction has been exaggerated by some of those same activists.  I read this article and had the following thoughts.

By the end of the century, state officials said, the ocean would be 39 inches higher.

There was no talk of salvation, no plan to hold back the tide. The 39-inch forecast was “a death sentence,” Willo Kelly said, “for ever trying to sell your house.”

Coastal residents joined forces with climate skeptics to attack the science of global warming and persuade North Carolina’s Republican-controlled legislature to deep-six the 39-inch projection, which had been advanced under the outgoing Democratic governor. Now, the state is working on a new forecast that will look only 30 years out and therefore show the seas rising by no more than eight inches.

Up to this point, readers probably have one of two reactions.  They either agree with quoted environmentalists and think N.C. tried to “legislate away sea level rise.”  Or they agree with Kelly’s reactions and the legislature’s boundaries on projection scope.

I think the reactions were entirely justified from a personal standpoint and easy to predict if anyone had stopped to think things through.  Nearly everybody would have the same reaction if your property was under threat to be considered worthless – regardless of the underlying reason.  Why?  Because you have an emotional attachment to your property that far exceeds the attachment to a 90-year sea level projection.  You’re going to react to the former more strongly than the latter.  The article identifies the underlying process:

“The main problem they have is fear,” said Michael Orbach, a marine policy professor at Duke University who has met with coastal leaders. “They realize this is going to have a huge impact on the coastal economy and coastal development interests. And, at this point, we don’t actually know what we’re going to do about it.”

This is the problem with the vast majority of climate activists’ language: they coldly announce that civilization will collapse and won’t offer actions people can take to avoid such a collapse.  Well, people will respond to that language, just not the way activists want them to.  People will fight activists and identify with climate skeptics’ arguments since they view the announcements as a threat to their way of life.

Where I differ with Kelly and others is this: she and other coastal residents had better look for viable long-term solutions before that 30-year period is over.  If they prevent long-term planning beyond 2040, inland residents of N.C. will be unfairly burdened with the cost of subsidizing Kelly and others for their lifestyle choices.

Kelly’s view is not without merit, to be sure:

Long before that would happen, though, Kelly worries that codifying the 39-inch forecast would crush the local economy, which relies entirely on tourism and the construction, sale and rental of family beach houses. In Dare County alone, the islands’ largest jurisdiction, the state has identified more than 8,500 structures, with an assessed value of nearly $1.4 billion, that would be inundated if the tides were 39 inches higher.

That’s 8,500 structures in just one county – worth $1.4 billion – an average of $165,000 per structure.  I would absolutely fight to keep my $165,000 worth as long as I could.  Nationwide, the estimate is $700 billion; not a trivial sum is it?  The article has this choice quote:

“What is it you would ask us to do differently right now? Tell people to move away?”   “Preaching abandonment is absurd. People would go in the closet and get the guns out.”

The Coastal Resources Commission bungled their attempt to evaluate the science and establish policy.  By the time they announced results with no action plans, rumors fed by misunderstanding and bias confirmation ran rampant.  The result was Kelly’s actions to change the time horizon that planners could use.

So what are the solutions?  The Commission should establish and maintain relationships with stakeholders.  Get to know the mayors and planners and scientists and property owners.  Find out what their interests are and what motivates them to do what they do.  Identify actions they can take in the next 30 years that sets them up for success afterward.  But don’t release information without context.  Because sea level rise is likely to accelerate in the 2nd half of the 21st century.  But most people will focus on potential direct threats to themselves and their livelihoods, not global concerns.  So get into the weeds with folks.


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REMI’s Carbon Tax Report

I came across former NASA climate scientist James Hansen’s email last week supporting a carbon tax.  At the outset, I fully support this policy because it is the most economically effective way to achieve CO2 emission reductions.  An important point is this: it matters a lot how we apply the tax and what happens to the money raised because of it.  Many policy analysts think that the only way a carbon tax will ever pass is for the government to distribute the revenue via dividends to all households.  This obviously has appealing aspects, not least of which is Americans love free stuff.  That is, we love to reap the benefits of policies so long as they cost us nothing.  That attitude is obviously unsustainable – you have simply to look at the state of American infrastructure today to see the effects.

All that said, the specific carbon tax plan Hansen supported came from a Regional Economic Models, Inc. report, which the Citizens Climate Lobby commissioned.  The report found what CCL wanted it to find: deep emission cuts can result from a carbon tax.  There isn’t anything surprising with this – many other studies found the exact same result.  What matters is how we the emission cuts are achieved.  I think this study is another academic dead-end because I see little evidence how the proposed tax actually achieves the cuts.  It looks like REMI does what the IPCC does – they assume large-scale low-carbon energy technologies.  The steps of developing and deploying those technologies are not clearly demonstrated.  Does a carbon tax simply equate to low-carbon technology deployment?  I don’t think so.

First, here is an updated graphic showing REMI’s carbon emission cuts compared to other sources:

 photo EPA2014vsEIA2012vsKyotovsREMI2014_zps961bb7c7.png

The blue line with diamonds shows historical CO2 emissions.  The dark red line with squares shows EIA’s 2013 projected CO2 emissions through 2030.  EIA historically showed emissions higher than those observed.  This newest projection is much more realistic.  Next, the green triangles show the intended effect of EPA’s 2014 power plant rule.  I compare these projections against Kyoto `Low` and `High` emission cut scenarios.  An earlier post showed and discussed these comparisons.  I added the modeled result from REMI 2014 as orange dots.

Let me start by noting I have written for years now that we will not achieve even the Kyoto `Low` scenario, which called for a 20% reduction of 1990 baseline emissions.  The report did not clearly specify what baseline year they considered, so I gave them the benefit of the doubt in this analysis and chose 2015 as the baseline year.  That makes their cuts easier to achieve since 2015 emissions were 20% higher than 1990 levels.  Thus, their “33% decrease from baseline” by 2025 results in emissions between Kyoto’s `Low` and `High` scenarios.

REMI starts with a $10 carbon tax in 2015 and increases that tax by $10/year.  In 10 years, carbon costs $100/ton.  That is an incredibly aggressive taxing scheme.  This increase would have significant economic effects.  The report describes massive economic benefits.  I will note that I am not an economist and don’t have the expertise to judge the economic model they used.  I will go on to note that as a climate scientist, all models have fundamental assumptions which affect the results they generate.  The assumptions they made likely have some effect on their results.

Why won’t we achieve these cuts?  As I stated above, technologies are critical to projecting emission cuts.  What does the REMI report show for technology?

 photo REMI2014ElectricalPowerGeneration-2scenarios_zpse41c17d9.png

The left graph shows US electrical power generation without any policy intervention (baseline case).  The right graph shows generation resulting from the $10/year carbon tax policy.  Here is their models’ results: old unscrubbed coal plants go offline in 2022 while old scrubbed coal plants go offline in 2025.  Think about this: there are about 600 coal plants in the US generating the largest single share of electricity of any power source.  The carbon tax model results assumes that other sources will replace ~30% of US electricity in 10 years.  How will that be achieved?  This is the critical missing piece of their report.

Look again at the right graph.  Carbon captured natural gas replaces natural gas generation by 2040.  Is carbon capture technology ready for national-level deployment?  No, it isn’t.  How does the report handle this?  That is, who pays for the research and development first, followed by scaled deployment?  The report is silent on this issue.  Simply put, we don’t know when carbon capture technology will be ready for scaled deployment.  Given historical performance of other technologies, it is safe to assume this development would take a couple of decades once the technology is actually ready.

Nuclear power generation also grows a little bit, as does geothermal and biopower.  This latter technology is interesting to note since it represents the majority of the percentage increase of US renewable power generation in the past 15 years (based on EIA data) – something not captured by their model.

The increase in wind generation is astounding.  It grows from a few hundred Terawatt hours to over 1500 TWh in 20 years time.  This source is the obvious beneficiary to a carbon tax.  But I eschew hard to understand units.  What does it mean to replace the majority of coal plants with wind plants?  Let’s step back from academic exercises that replace power generation wholesale and get into practical considerations.  It means deploying more than 34,000 2.5MW wind turbines operating at 30% efficiency per year every year.  (There are other metrics by which to convey the scale, but they deal with numbers few people intuitively understand.)  According to the AWEA, there were 46,100 utility-scale wind turbines installed in the US at the end of 2012.  How many years have utilities installed wind turbines?  Think of the resources required to install almost as many wind turbines in just one year as already exist in the US.  Just to point out one problem with this installation plan: where do the required rare earth metals come from?  Another: are wind turbine supply chains up to the task of manufacturing 34,000 wind turbines per year?  Another: are wind turbine manufacturing plants equipped to handle this level of work?  Another: are there enough trained workers to supply, make, transport, install, and maintain this many wind turbines?  Another: how is wind energy stored and transmitted from source to use regions (thousands of miles in many cases).

Practical questions abound.  This report is valuable as an academic exercise, but  I don’t see how wind replaces coal in 20 years time.  I want it to, but putting in a revenue-neutral carbon tax probably won’t get it done.  I don’t see carbon capture and sequestration ready for scale deployment in 10 years time.  I would love to be surprised by such a development but does a revenue-neutral carbon tax generate enough demand for low-risk seeking private industry to perform the requisite R&D?  At best, I’m unconvinced it will.

After doing a little checking, a check reminded me that British Columbia implemented a carbon tax in 2008; currently it is $40 (Canadian).  Given that, you might think it serves as a good example of what the US could do with a similar tax.  If you dig a little deeper, you find British Columbia gets 86% of its electricity from hydropower and only 6% from natural gas, making it a poor test-bed to evaluate how a carbon tax effects electricity generation in a large, modern economy.


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N.C.’s Sea Level Rise Reaction

Many people involved in climate activism have probably heard of North Carolina’s reaction to sea level projections.  The reaction has been exaggerated by some of those same activists.  I read this article and had the following thoughts.

By the end of the century, state officials said, the ocean would be 39 inches higher.

There was no talk of salvation, no plan to hold back the tide. The 39-inch forecast was “a death sentence,” Willo Kelly said, “for ever trying to sell your house.”

Coastal residents joined forces with climate skeptics to attack the science of global warming and persuade North Carolina’s Republican-controlled legislature to deep-six the 39-inch projection, which had been advanced under the outgoing Democratic governor. Now, the state is working on a new forecast that will look only 30 years out and therefore show the seas rising by no more than eight inches.

Up to this point, readers probably have one of two reactions.  They either agree with quoted environmentalists and think N.C. tried to “legislate away sea level rise.”  Or they agree with Kelly’s reactions and the legislature’s boundaries on projection scope.

I think the reactions were entirely justified from a personal standpoint and easy to predict if anyone had stopped to think things through.  Nearly everybody would have the same reaction if your property was under threat to be considered worthless – regardless of the underlying reason.  Why?  Because you have an emotional attachment to your property that far exceeds the attachment to a 90-year sea level projection.  You’re going to react to the former more strongly than the latter.  The article identifies the underlying process:

“The main problem they have is fear,” said Michael Orbach, a marine policy professor at Duke University who has met with coastal leaders. “They realize this is going to have a huge impact on the coastal economy and coastal development interests. And, at this point, we don’t actually know what we’re going to do about it.”

This is the problem with the vast majority of climate activists’ language: they coldly announce that civilization will collapse and won’t offer actions people can take to avoid such a collapse.  Well, people will respond to that language, just not the way activists want them to.  People will fight activists and identify with climate skeptics’ arguments since they view the announcements as a threat to their way of life.

Where I differ with Kelly and others is this: she and other coastal residents had better look for viable long-term solutions before that 30-year period is over.  If they prevent long-term planning beyond 2040, inland residents of N.C. will be unfairly burdened with the cost of subsidizing Kelly and others for their lifestyle choices.

Kelly’s view is not without merit, to be sure:

Long before that would happen, though, Kelly worries that codifying the 39-inch forecast would crush the local economy, which relies entirely on tourism and the construction, sale and rental of family beach houses. In Dare County alone, the islands’ largest jurisdiction, the state has identified more than 8,500 structures, with an assessed value of nearly $1.4 billion, that would be inundated if the tides were 39 inches higher.

That’s 8,500 structures in just one county – worth $1.4 billion – an average of $165,000 per structure.  I would absolutely fight to keep my $165,000 worth as long as I could.  Nationwide, the estimate is $700 billion; not a trivial sum is it?  The article has this choice quote:

“What is it you would ask us to do differently right now? Tell people to move away?”   “Preaching abandonment is absurd. People would go in the closet and get the guns out.”

The Coastal Resources Commission bungled their attempt to evaluate the science and establish policy.  By the time they announced results with no action plans, rumors fed by misunderstanding and bias confirmation ran rampant.  The result was Kelly’s actions to change the time horizon that planners could use.

So what are the solutions?  The Commission should establish and maintain relationships with stakeholders.  Get to know the mayors and planners and scientists and property owners.  Find out what their interests are and what motivates them to do what they do.  Identify actions they can take in the next 30 years that sets them up for success afterward.  But don’t release information without context.  Because sea level rise is likely to accelerate in the 2nd half of the 21st century.  But most people will focus on potential direct threats to themselves and their livelihoods, not global concerns.  So get into the weeds with folks.


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Newest Climate Change Consensus Document Won’t Matter…

It won’t matter unless and until physical scientists leverage expertise outside of their silos and stop executing failed strategies.  In addition to summary after summary of government sanctioned peer-reviewed scientific conclusions, scientists now think they need to report on the perceived consensus on individual bases of those conclusions in order to spur the public to action.  Regardless of their personal political leanings, scientists are very conservative job actors.  They have long-held traditions that are upheld at every turn, which reduces the urgency of their statements.  As an analogy, think of a bunch of people sitting down who think for long time periods before any action is ever taken.  First, they calmly say there is a situation that requires near-immediate action.  Then they say it a little louder.  Then a handful start yelling because you’re not responding to their carefully crafted words and they think that you just didn’t hear them or you just aren’t smart enough to understand those carefully crafted words.  Then they start screaming because they’re convinced you’re an idiot and screaming will definitely work where yelling and saying those words didn’t work before.

Well, the screaming isn’t helping, is it?  You’re not an idiot.  The volume of words isn’t the issue.  The issue is you are motivated by things outside of the climate realm – things like having a job; a job that pays a living wage so you can pay for your mortgage and car payment and keep your children educated and happy.  An existence in an affluent world that allows you the time and energy to think of complex problems beyond your perceived immediate needs.  If those needs aren’t met – if you have insecure affluence – you place climate change and the environment far down on a list of priorities – just like a majority of other Americans.

But the newly released “American Association for the Advancement of Science, the world’s largest general scientific society with a membership of 121,200 scientists and “science supporters” globally” report won’t change this dynamic.  While it is important that the AAAS engages scientists and the society it serves, this report is unfortunately just the latest effort by a group of physical scientists that ignores science results outside of their discipline to try to convince Americans that immediate and drastic action is necessary.  Like previous efforts, this one will not spur people to action, mostly because the actions listed are about limits, stopping, restricting, reversing, preventing, and regulating.  The conceptual model from which these words arise works in direct contrast to the fundamentals of American culture.  We are a people who are imaginative, who innovate, who invest.

As I have written before, there is no way we will achieve greenhouse gas emissions reductions without substantial investment into innovation of new technologies that we research, develop, and deploy at scale.  There is nothing limiting or restrictive about this framework.  It it the opposite of those things.  This framework recognizes and sets out to achieve opportunities; it allows for personal and cultural growth; it is in sync with the underlying cultural fabric of this country.  It directly addresses people’s perception of the security of their affluence in the same way that developing countries’ economic growth allows people to move beyond basic material needs to higher order needs.

The reality of insecure affluence among many Americans today might be an indirect outcome of the 1%’s efforts to increase wealth disparity, but it is real.  We have to address that disparity first in order to address the real, valid perceptions of insecure affluence.  Only after Americans feel their personal wealth is secure will they have the resources to devote to higher order needs such as global climate change.  That can happen with concerted focus on investing and innovating a post-carbon economy.  But you won’t see that at the top of any policy prescription from the majority of climate scientists.


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Carbon Price Already Part of Doing Business

A report issued yesterday by the Carbon Disclosure Project generated a number of news articles today, including in the New York Times.  The report identified 29 major US corporations’ inclusion of future carbon prices in their financial planning.  This is a significant and logical development.  It is financially responsible for companies with billions of annual revenue dollars to consider upcoming costs in their planning.  These companies aren’t partisan, they’re interested only in making money.  If they think there is a way to make more money with carbon pricing than without, they’ll plan and act accordingly.

The NYT article notes that many Republicans might not like this development.  That’s due to the hyper-partisan characteristic of today’s leading Republicans.  Their worldview demands that they yell loudly at developments like carbon prices.  And despite their to-date very successful campaign to prevent policymakers from establishing a national carbon tax (which economists agree is the most economically efficient method) or a cap-and-trade system, they can’t and don’t control global policymakers.  A larger economic body than the US established a carbon price: the European Union.  China has begun limited implementation of carbon pricing.  Regional cap-and-trade systems encompassing US states and Canadian provinces with large economies exist and will only expand in the future.  What this means is US corporations doing business in the EU and China (and soon high population US states) have to take their carbon pricing into account.

The NYT and Huffington Post articles’ authors seem more surprised that companies like ExxonMobil are among those who are planning for carbon pricing than anything.  As I stated above, this is really the only logical development left for Exxon and other companies.  They can either perform their fiduciary duties and protect their shareholders’ interests or they can lose market share or fail.

This is one of the reasons I’ve supported regional carbon pricing following the continued failure to price carbon at the national and international levels.  If the price exists in a large enough portion of the larger economy, companies have to respond.  They can more easily lobby national politicians than local people who are very supportive of carbon pricing and who can run for local offices.  This is an example of my larger point that we need to implement climate mitigation and adaptation policies at the local level first.  Efforts to do this at the international level have failed time and time again.  But if thousands of communities implement their own strategies nationally and internationally, then higher levels of government have examples with which to work and grow.  More importantly, thousands of communities’ influence establishes political and social inertia that lobbying can only blunt.  This is the fastest way toward widespread policy implementation.


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Government Crisis Viewed Through D.C. Media Bubble

In the postmortem of Republican’s surrender from their extremist hostage taking and ransom demands, people everywhere are analyzing what they think happened.  One article contained glaring ideological framing.  I agree with the foundational analysis of “Short-term debt deal won’t mask big barriers ahead” by Charles Babington of the Associated Press: yesterday’s deal didn’t address the underlying problems in D.C.  But I do disagree with important parts that Charles uses as supporting evidence for his argument.

First:

Republicans still adamantly oppose tax increases. Powerful interest groups and many Democrats still fiercely oppose cuts in Social Security and Medicare benefits.

The first sentence is mostly true.  Republicans oppose tax increases on the rich (witness the 2011 deal to lock in lower tax rates for people making $400,000 or more per year), but are more than happy to shift taxation onto the lower and middle class.  But the second sentence is even more painful to read for its vapidity.  What the heck are “powerful interest groups”?  Does Charles know who opposes Social Security and Medicare benefit cuts the most?  People that receive them!  Want to “fix” Social Security?  Lift the taxable income cap and Social Security is solvent for centuries.  But that means “raising taxes” to pay for a social good.  Does Charles seriously believe there are no “powerful interest groups” that oppose tax increases?  No, but he and the AP sure expects readers to.  And Republican supporters demonstrate that effort works.  It’s hip to trash Social Security and Medicare in the D.C. cocktail circuit, but remains wickedly unpopular in the rest of the country.

In fact, most of the “powerful interest groups” on the right – the same ones that pushed for the partial government shutdown and threatened the US’s role as the safest investment on earth -

Also, as usual, there is no mention of the national deficit’s growth under Republican President George W. Bush, George H. W. Bush, or Ronald Reagan.  But this fact is an obvious part of the Teabagger’s outrage at establishment Republicans.  It also serves another purpose: if Republicans can generate enough outrage over national debt (that they themselves accumulated), they can demand Social Security and Medicare cuts while the obscenely wealthy get their taxes cut, even though Social Security doesn’t contribute one penny to the national debt they’re supposedly so concerned about.

Second:

The Simpson-Bowles plan remains widely praised nationwide, and largely ignored in Congress.

What?!  Most of the nation doesn’t even know what the S-B plan is or what it would do.  S-B remains widely praised in the same D.C. circles where it’s cool to want to take insurance programs away from the disadvantaged, and that’s it.  Does Charles write that it’s Congress’ job to plan for and pass a budget every year?  Because they haven’t done that on time since 1996 – a time when Republicans dominated the legislature.  Instead, folks in D.C. turned to gangs as the answer – gangs of legislators trying to do the work the rest of their colleagues can’t be bothered to do.

Left out of this article, as usual, are the long list of concessions Democrats yielded all to willingly to Republicans in previous “negotiations” without acquiring Republican concessions.  This latest “reset” is no different: sequestration cuts to the budget (which nobody likes but too many voted and signed for) remain in place.  Those cuts reduce our national economic activity: reduced GDP of about 1%.  At a time of historically low interest rates, the government could rebuild our decaying infrastructure for nearly at-cost, while putting millions of people back to work who want to work.  We are squandering an immense opportunity that will not repeat itself.  That infrastructure will be rebuilt, but today’s politicians want to make sure we pay more than we have to.

Charles and the AP mention none of this.  Instead, it is “powerful interest groups” and crackpot plans.  The framing by the D.C. crowd belittles the American people.  It’s no wonder the media and Congress aren’t liked or trusted by a majority of Americans.


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Australia Giving Up On Relatively Successful Carbon Market

Australia voted last week to scrap their carbon tax and replace it with a much less economically efficient cap-and-trade scheme.  The pro-business Reuters article acknowledges the only “positive” that results from this decision: businesses will save money.  Well, hallelujah.  I’m sure today’s children will be immensely grateful when they’re adults with all the resultant climate change effects that Australian businesses were able to avoid paying for their actions and saved a few billion dollars in the 2010s.  That’s one way to look at this news.  Let’s flesh the landscape out before throwing Australia under the bus too quickly.

To be fair, Australia simply moved up the date when they joined … the European carbon “market”.  You remember, that’s the market that severely over-supplied carbon credits at its outset and refused earlier this year to remove some of those excess credits for a mere two years.  In essence, the European carbon market doesn’t work.  How can you tell?  Carbon costs €4.2/tCO2 today.  When the European market started, the cost was €31/tCO2.  At one-tenth the original price, the market signal is clear: there are far too many allowances in the European market.  Have greenhouse gas emissions (note: CO2 isn’t the only GHG!) fallen in the EU since the market’s inception?  Yes, but this is a result of the continued economic malaise the Europeans inflict on themselves, as described by the European Environment Agency’s most recent report.

The temporary benefit to the earlier Australian move to the EU’s ETS is this: the flow of carbon credits is one way: from Europe to Australia.  Australia can’t export credits until July 2018.  So in the short-term, Australia could help relieve the over-supply of EU carbon credits.  This might help in raising the carbon price back to more realistic levels, but this won’t happen until 2016 at the earliest because of lower emissions and demand for permits in Australia.

There are two big negative effects of moving from a fixed tax to a floating market.  The first is that carbon will become much cheaper in Australia: from A$25.40 per tonne to A$6 per tonne.  Is carbon really only worth A$6?  In an over-supplied market, perhaps it is.  The fact that not all industries are involved in the carbon market means that we manipulate the true carbon price.  Of course, as much as folks like to talk about “free markets”, most markets are heavily manipulated by vested interests.  The second negative effect remains local: the move removes A$3.8 billion from the Australian federal budget over four years.  Australia’s Prime Minister Kevin Rudd proposed to make up this budget shortfall by “removing a tax concession on the personal use of salary-sacrificed or employer-provided cars.”  Good luck with that, Mr. Rudd.  Everybody is loath to give up a financial benefit once they receive it.  Look – more market manipulation!

Australian coal companies were more than happy to propagate misinformation to Australian energy consumers: electricity price increases were due exclusively to the carbon tax!  This highlights a common problem with any carbon-pricing scheme: special interests can more easily spread misinformation and disinformation (and are often happy to do so!) than market proponents can spread true information.  The reason is often quite simple: the truth is complex and consumers don’t want to invest the time to understand why they pay the prices they pay.  How many consumers demanded energy utilities stop raising prices before carbon market inception?  Then who was responsible for price increases?  “Market forces” is the lame excuse dished out to the masses.  How about the relentless, unquenchable hunger for ever-rising profits?  Somehow, that’s alright, but accurately pricing a commodity is heresy.

An additional piece of context: Australia suffered from record heat waves, droughts, and floods in the past ten years.  The Australian public’s acceptance of climate change related to these disasters is widespread, as is their desire to “take action”.  Well, the government took action and that same public cried uncle with slightly higher utility bills.  This proves the common refrain: people support climate policies … so long as they are absolutely free.  That smacks into reality awfully quick.  It also demonstrates that there is no such thing as a “Climate Pearl Harbor” that leads to unequivocal support for a given climate policy.  The slow-acting nature of climate works strongly against widespread, effective climate policy.


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Recent Carbon Market News

A couple of carbon market-related news items caught my eye recently.  While not an exhaustive list, these items are important to discuss:
EU Cancels Carbon Auction, Prices Drop
RGGI Nets $106 Million For Clean Energy, May Hit $2 Billion By 2020

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.


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US Carbon Intensity

I saw this article today – “US Getting More Economic Bang for Its Energy Buck” and wanted to make some observations about it.  The article contains the following assertion:

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.

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