http://www.e3network.org/papers/Economics_of_350.pdf
Here is a paper that claims:
"The most important conclusion involves what we did not find. There are no reasonable studies that say that a 350 ppm stabilization target will destroy the economy; there are no studies that claim that it is desirable to wait before taking action on climate protection. On the contrary, there is strong, widespread endorsement for policies to promote energy conservation, development of new energy technologies, and price incentives and other economic measures that will redirect the world economy onto a low-carbon path to sustainability."
Unfortunately, they do not give a recommendation for a carbon price, making it rather difficult to compare with Tol's work.
And more importantly, this means I've got little idea what they are actually recommending in the near term. "Taking action" is awfully vague.
So, would they favour a 10 Euro per tonne of C tax on coal in Europe, or should it be 50? Should steel producers get a refund of 50 Euros per tonne of steel produced to prevent leakage?
What should be done about taxes on fuel oil, petrol, diesel?
They may think that by talking down costs they are creating momentum for "strong policy action". I am not so sure.
Update:
http://www.pik-potsdam.de/research/research-domains/sustainable-solutions/research-act-intl-climate-pol/recipe-groupspace/working-papers/recipe-synthesis-report/
The above is a very detailed report, which does have carbon price projections.
On page 24 there are graphs for a range of models that give 450 ppm. In the technologically most optimistic model the carbon price starts around 10 Dollars per tonne of CO2, is at around 30 Dollars per tonne in 2030, around 100 Dollars per tonne in 2050 and stabilises out at that level.
The other two models have much higher carbon prices, one of them starts at around 100 Dollars per tonne (sometime between 2010 and 2020) and rapidly rises to around 300 Dollars per tonne (sometime in the 2020s). The other one is in the 10 to 30 Dollar per tonne range until 2030 and rises to very steep values, above a 1000 Dollars per tonne of CO2 later in the century.
---------------
Conversion of Dollars per tonne of CO2 to Dollars per tonne of C: multiply by 3.7
Thursday, December 24, 2009
Wednesday, December 23, 2009
Reliability of carbon tax estimates
How high do carbon taxes have to go to get to a particular temperature target?
Naturally, there is a lot of uncertainty there, and maybe the numbers economic models typically give for 2C are too high.
What I would say is that currently there are already taxes on fossil fuels, quite high taxes on transportation fuels most notably, several hundred Euros per tonne of petrol. These high taxes do already give a big incentive to drive less, to drive electric cars or use electric trains and to drive more efficient cars.
It is therefore difficult for me to see why a mere 10 or 30 Euros extra per tonne should be enough to make a difference there in the near term, and it seem readily credible that several hundred Euros per tonne of CO2 are needed to achieve significant reductions in the transportation sector.
For electricity this is less clear cut, because taxes, at least on the input coal and nat gas, are low. Nevertheless, it takes time to build new infrastructure and scrapping existing coal or nat gas fired power plant will not happen overnight.
So, also for electricity I see why substantial near term reductions would require a lot more than just 10 to 30 Euros per tonne.
Finally, I think that people who seriously think the 2C target is warranted based on the possible risks we take otherwise, and do not want to bet on big improvements in technology, should realise this. How can you say "We've got to take the 2C target seriously!" and "We can't bet on technolgoy saving the day!" and yet say "Don't believe in all that scaremongering about costs, 30 Euros per tonne is going to do the trick."?
Not that I have a problem with 30 Euros per tonne, fine policy as far as I am concerned, considering how much we are taxing petrol anyway.
Naturally, there is a lot of uncertainty there, and maybe the numbers economic models typically give for 2C are too high.
What I would say is that currently there are already taxes on fossil fuels, quite high taxes on transportation fuels most notably, several hundred Euros per tonne of petrol. These high taxes do already give a big incentive to drive less, to drive electric cars or use electric trains and to drive more efficient cars.
It is therefore difficult for me to see why a mere 10 or 30 Euros extra per tonne should be enough to make a difference there in the near term, and it seem readily credible that several hundred Euros per tonne of CO2 are needed to achieve significant reductions in the transportation sector.
For electricity this is less clear cut, because taxes, at least on the input coal and nat gas, are low. Nevertheless, it takes time to build new infrastructure and scrapping existing coal or nat gas fired power plant will not happen overnight.
So, also for electricity I see why substantial near term reductions would require a lot more than just 10 to 30 Euros per tonne.
Finally, I think that people who seriously think the 2C target is warranted based on the possible risks we take otherwise, and do not want to bet on big improvements in technology, should realise this. How can you say "We've got to take the 2C target seriously!" and "We can't bet on technolgoy saving the day!" and yet say "Don't believe in all that scaremongering about costs, 30 Euros per tonne is going to do the trick."?
Not that I have a problem with 30 Euros per tonne, fine policy as far as I am concerned, considering how much we are taxing petrol anyway.
New Scientist on costs of 80% UK reduction
In the New Scientist there is an article suggesting minor costs. The underlying study can be found here:
http://www.newscientist.com/data/doc/article/mg20427373.400/ce_new_scientist_report.pdf
They have a carbon price of 210 Euros per tonne of CO2 for the non ETS of the UK in 2050 and of 410 Euros per tonne of CO2 for the ETS in 2050. The conversion to Dollars per ton of carbon is roughly: multiply by 1.5 to convert to Dollars, multiply by 44/12 or 3.7 to convert from tonnes of CO2 to tonnes of C. So, this is actually above the $1000/tC limit Richard Tol's FUND model can actually deal with.
The impact on GDP is, however, only 1.4% and on consumer prices for most products it's indeed minor, with some exceptions such as flights.
Anybody have an idea how they manage to combine sky high carbon prices with minor economic impacts?
There is this dubious section in there, of course:
"The ambitious nature of the target required further technological assumptions to be
made. In the modelling, it is implied that the government uses revenues from the
auctioning of EU ETS emissions allowances and from carbon taxes to help encourage
the following measures:
the switch from gas to electricity in the domestic sector
the increased market penetration of electric vehicles, to 90% by 2050
The rest of the revenues are assumed to be used to reduce public debt and so do not
affect consumer prices."
http://www.newscientist.com/data/doc/article/mg20427373.400/ce_new_scientist_report.pdf
They have a carbon price of 210 Euros per tonne of CO2 for the non ETS of the UK in 2050 and of 410 Euros per tonne of CO2 for the ETS in 2050. The conversion to Dollars per ton of carbon is roughly: multiply by 1.5 to convert to Dollars, multiply by 44/12 or 3.7 to convert from tonnes of CO2 to tonnes of C. So, this is actually above the $1000/tC limit Richard Tol's FUND model can actually deal with.
The impact on GDP is, however, only 1.4% and on consumer prices for most products it's indeed minor, with some exceptions such as flights.
Anybody have an idea how they manage to combine sky high carbon prices with minor economic impacts?
There is this dubious section in there, of course:
"The ambitious nature of the target required further technological assumptions to be
made. In the modelling, it is implied that the government uses revenues from the
auctioning of EU ETS emissions allowances and from carbon taxes to help encourage
the following measures:
the switch from gas to electricity in the domestic sector
the increased market penetration of electric vehicles, to 90% by 2050
The rest of the revenues are assumed to be used to reduce public debt and so do not
affect consumer prices."
Low discount rates
I see an obvious problem with low discount rates. With a high discount rate and a given pot of money today, you can compare different options of investing the money and you take the option that yields the most.
Calculating back from future costs is a bit more tricky. With a discount rate of zero, even 1% of GDP for hundreds of future generations will add up to more than the present generation produces, which is an obvious impossibility, we can't spend more than what we have.
Calculating back from future costs is a bit more tricky. With a discount rate of zero, even 1% of GDP for hundreds of future generations will add up to more than the present generation produces, which is an obvious impossibility, we can't spend more than what we have.
Another climate riddle
How can research on CO2 sequestration have any worth if an economic model says the present marginal CO2 damage cost is 0?
The answer is that the marginal damage cost runs up over time. The model can have 0 at present, 20 Euros per tonne of CO2 in 2050 and 150 Euros per tonne of CO2 in 2150.
If it is zero at present, as explained in an earlier posting, this is the sum of near term benefits from getting to an optimum temperature (say 2C) faster and the discounted costs of getting away from the optimum again in the future.
The NPV of an invention that can sequester CO2 at 30 Euros per tonne is then far from zero. It has to be discounted over many decades into the future, but also over many, many tonnes, so that you easily come to an NPV of the order of a trillion Euros.
The answer is that the marginal damage cost runs up over time. The model can have 0 at present, 20 Euros per tonne of CO2 in 2050 and 150 Euros per tonne of CO2 in 2150.
If it is zero at present, as explained in an earlier posting, this is the sum of near term benefits from getting to an optimum temperature (say 2C) faster and the discounted costs of getting away from the optimum again in the future.
The NPV of an invention that can sequester CO2 at 30 Euros per tonne is then far from zero. It has to be discounted over many decades into the future, but also over many, many tonnes, so that you easily come to an NPV of the order of a trillion Euros.
Key difference between near term CO2 emissions reduction and aerosols
CO2 reductions in the near future will get us from 5C under BAU to 4C in 2100+, near term changes in aerosols output from sea ships will impact near term temperatures and make no difference to temperature in 2100+.
If you think that 2C is optimal, depending on discount rates and how bad 5C is in comparison to 4C you can still argue that near term CO2 reductions are beneficial, but keeping aerosol emissions from sea ships high in the near term is clearly wrongheaded.
Sea salt aerosol forcing should then only be raised gradually once 2C has been passed.
------------------------
Side point: The “optimum” for temperature and CO2 are linked, but if for temperature effects alone the optimum is 2C, it may be higher for CO2, because it also has an important direct effect, namely CO2 fertilisation (and disbenefit, ocean acidification).
It can therefore be argued (I know a minority opinion that I am, however, partial to) that the optimum may therefore be to keep the temperature rise to 2C with sea salt aerosols, but for CO2 concentrations to roughly triple on pre-industrial, which with other forcings held, most notably no sea salt aerosol geoengineering being used, would give something like 4 to 5C.
If you think that 2C is optimal, depending on discount rates and how bad 5C is in comparison to 4C you can still argue that near term CO2 reductions are beneficial, but keeping aerosol emissions from sea ships high in the near term is clearly wrongheaded.
Sea salt aerosol forcing should then only be raised gradually once 2C has been passed.
------------------------
Side point: The “optimum” for temperature and CO2 are linked, but if for temperature effects alone the optimum is 2C, it may be higher for CO2, because it also has an important direct effect, namely CO2 fertilisation (and disbenefit, ocean acidification).
It can therefore be argued (I know a minority opinion that I am, however, partial to) that the optimum may therefore be to keep the temperature rise to 2C with sea salt aerosols, but for CO2 concentrations to roughly triple on pre-industrial, which with other forcings held, most notably no sea salt aerosol geoengineering being used, would give something like 4 to 5C.
Low probability, high risk events and climate change
With sea level rise of 1 m per century over hundreds of years, we can just include it in the overall assessment, with some people (like me for example) happily discounting the far future away to essentially zero for this.
If it is "risks we don't know about", I do think we cannot so readily say they are lopsided, ie emissions reductions have a 0% probability of causing any "risks we don't know about" and a 100% probability of avoiding these risks.
We don't need certainty in that case, but we do need to have some case for believing that a given course of action is likely to only produce risk reduction benefits, rather than having an equal chance of causing or preventing risks.
If it is "risks we don't know about", I do think we cannot so readily say they are lopsided, ie emissions reductions have a 0% probability of causing any "risks we don't know about" and a 100% probability of avoiding these risks.
We don't need certainty in that case, but we do need to have some case for believing that a given course of action is likely to only produce risk reduction benefits, rather than having an equal chance of causing or preventing risks.
Marginal CO2 damage cost riddle
In the published literature there are studies with an ideal carbon price of 0 or less than zero. Yet, even in those studies that have a positive effect on GDP for climate change of one or two degrees Celsius, long term BAU will lead to climate change exceeding the optimum.
So, why can you still have a zero marginal cost today? After all, by emitting less today we can get from a bad 5C to a somewhat less bad 4C. And to the optimal 2C (say) we get anyway.
The answer is the timing of the optimal 2C and discounting. While emitting a marginal tonne of CO2 in these studies has negative consequences after say 2100, up to say 2050, we are getting to the optimum faster and there is a net benefit of the extra CO2 in that period. That extra benefit is in the near future and hardly discounted, the benefits of emissions reductions only come in the far future and are heavily discounted.
So, why can you still have a zero marginal cost today? After all, by emitting less today we can get from a bad 5C to a somewhat less bad 4C. And to the optimal 2C (say) we get anyway.
The answer is the timing of the optimal 2C and discounting. While emitting a marginal tonne of CO2 in these studies has negative consequences after say 2100, up to say 2050, we are getting to the optimum faster and there is a net benefit of the extra CO2 in that period. That extra benefit is in the near future and hardly discounted, the benefits of emissions reductions only come in the far future and are heavily discounted.
Richard Tol continued
http://www.esri.ie/UserFiles/publications/20090311112249/WP285.pdf
(that's a free link, figures and tables are missing, Elsevier charge for access to the full article)
The feasibility of low concentration targets: An application of FUNDEnergy Economics, Volume 31, Supplement 2, 2009, Pages S121-S130Richard S.J. Tol
There are a number of interesting figures in this paper.
1. Willingness to pay by US voters
Rather than going to elaborate cost benefit models to come up with an optimal carbon price, you can also just ask US voters what they'd support. It looks like a vast majority of US voters could be gotten on-board when there is little in transfer payments, India and China participate and the measures cost less than 1% of GDP, which should be enough for a target of 3 to 4C.
2. Results of cost benefit analyses
If everybody participates right away, the cost benefit analysis presented here indicates a better than even chance of cost effectiveness for a target of 4.5 W/m2, which translates into 3 to 4C.
This drops to less than even chances without full participation with developing nations like India and China delaying carbon taxation.
3. Results of carbon trading with full costs of carbon abatement initially born by industrialised nations
A 2C target compatible forcing target is not even evaluated. For 3.7 W/m2 transfer payments to developing countries (that is also to China) amount to 0.9% of developed country GDP in 2020 and to 3% in 2030.
4. Feasibility of 2C target, economic impacts
2.6 W/m2 is somewhat compatible with a 2C target. Four cases are calculated, and for 3 of these the carbon price is above $1000/tC starting immediatately and rising further. GDP losses aren't calculated for these 3, because the model cannot deal with prices above $1000/tC.
With full participation (or developed countries paying the full costs) the model gives an immediately necessary carbon price of over 800 Dollars per ton of carbon. GDP losses are 2% of GDP in developed nations in 2020, and around 14% for the rest of the world. Transfer payments required are not calculated, but given that the rest of the world is 50% of world GDP at the moment, it ought to be 10%+ of developed country GDP.
For 2100 GDP losses are calculated of 20-50%.
The conclusion one can take from this paper is that a 2C target is neither politically feasible nor vaguely justifiable on the basis of cost benefit analysis.
To get away from these conclusions we'd need:
1. Carbon negative energy options
2. Include at least some aerosol type geoengineering
3. Cheap options to deal with other greenhouse gases (methane, N2O)
4. Reduced costs for renewable energy
----------------
My own take on the best climate policy:
Targets are all very interesting, but really what matters is policy. We already tax fossil fuels. That's fine and there are good reasons to increase these taxes and decrease subsidies over time. That has in fact been happening and will continue.
Otherwise, we need more research and development, and I include a lot more in this category than Bjorn Lomborg would.
(that's a free link, figures and tables are missing, Elsevier charge for access to the full article)
The feasibility of low concentration targets: An application of FUNDEnergy Economics, Volume 31, Supplement 2, 2009, Pages S121-S130Richard S.J. Tol
There are a number of interesting figures in this paper.
1. Willingness to pay by US voters
Rather than going to elaborate cost benefit models to come up with an optimal carbon price, you can also just ask US voters what they'd support. It looks like a vast majority of US voters could be gotten on-board when there is little in transfer payments, India and China participate and the measures cost less than 1% of GDP, which should be enough for a target of 3 to 4C.
2. Results of cost benefit analyses
If everybody participates right away, the cost benefit analysis presented here indicates a better than even chance of cost effectiveness for a target of 4.5 W/m2, which translates into 3 to 4C.
This drops to less than even chances without full participation with developing nations like India and China delaying carbon taxation.
3. Results of carbon trading with full costs of carbon abatement initially born by industrialised nations
A 2C target compatible forcing target is not even evaluated. For 3.7 W/m2 transfer payments to developing countries (that is also to China) amount to 0.9% of developed country GDP in 2020 and to 3% in 2030.
4. Feasibility of 2C target, economic impacts
2.6 W/m2 is somewhat compatible with a 2C target. Four cases are calculated, and for 3 of these the carbon price is above $1000/tC starting immediatately and rising further. GDP losses aren't calculated for these 3, because the model cannot deal with prices above $1000/tC.
With full participation (or developed countries paying the full costs) the model gives an immediately necessary carbon price of over 800 Dollars per ton of carbon. GDP losses are 2% of GDP in developed nations in 2020, and around 14% for the rest of the world. Transfer payments required are not calculated, but given that the rest of the world is 50% of world GDP at the moment, it ought to be 10%+ of developed country GDP.
For 2100 GDP losses are calculated of 20-50%.
The conclusion one can take from this paper is that a 2C target is neither politically feasible nor vaguely justifiable on the basis of cost benefit analysis.
To get away from these conclusions we'd need:
1. Carbon negative energy options
2. Include at least some aerosol type geoengineering
3. Cheap options to deal with other greenhouse gases (methane, N2O)
4. Reduced costs for renewable energy
----------------
My own take on the best climate policy:
Targets are all very interesting, but really what matters is policy. We already tax fossil fuels. That's fine and there are good reasons to increase these taxes and decrease subsidies over time. That has in fact been happening and will continue.
Otherwise, we need more research and development, and I include a lot more in this category than Bjorn Lomborg would.
Tuesday, December 22, 2009
Monday, December 21, 2009
Richard Tol on emission reduction
"The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties"
Energy PolicyVolume 33, Issue 16, November 2005, Pages 2064-2074
"One hundred and three estimates of the marginal damage costs of carbon dioxide emissions were gathered from 28 published studies and combined to form a probability density function. The uncertainty is strongly right-skewed. If all studies are combined, the mode is $2/tC, the median $14/tC, the mean $93/tC, and the 95 percentile $350/tC. Studies with a lower discount rate have higher estimates and much greater uncertainties. Similarly, studies that use equity weighing, have higher estimates and larger uncertainties. Interestingly, studies that are peer-reviewed have lower estimates and smaller uncertainties. Using standard assumptions about discounting and aggregation, the marginal damage costs of carbon dioxide emissions are unlikely to exceed $50/tC, and probably much smaller."
http://www.esri.ie/UserFiles/publications/20090326110224/WP285.pdf
"This can be kept below 2.0ºC (in the 21st century), but only for a carbon tax of $1000/tC, starting in 2013 and rising with the rate of discount, and applied to all greenhouse gas emissions in all countries. "
I like the basic idea of looking at a given carbon tax path and estimating what it'll do in principle. But, $1000/tC is not outrageous for taxing transportation fuels. It is, however, rather high compared to estimated costs for CO2 mineralisation or other CO2 negative options (say CO2 capture and storage from ethanol plants). I suspect these have been excluded from the analysis and this limits the possibilities for keeping below 2C at a more realistic cost.
And, I think at least "mild" geoengineering (sea salt spraying say to replace current anthropogenic aerosols from sea shipping and use of high sulphur heavy fuel oil) at a modest level should be part of the analysis. It's one thing to use aerosols as the whole strategy and to compensate quadrupled CO2 plus lots of methane and other greenhouse gases that would give 10C plus in the absence of aerosols with continuous injection of large amounts of sulphur based aerosols, and quite another to maintain (at least a portion of) the current aerosol related cooling forcing of 1.2 W/m2 (equivalent to about 1C for a best guess climate sensitivity).
I should also add, that while I see some reasons why people have worries about 10C from greenhouses gases being compensated by 10C of aerosol cooling; I don't quite swallow these arguments just like that. I don't like the handwavey, "how can you consider something so obviously bound to have terrible consequences" approach to rejecting it without seeing any need to consider it further.
Energy PolicyVolume 33, Issue 16, November 2005, Pages 2064-2074
"One hundred and three estimates of the marginal damage costs of carbon dioxide emissions were gathered from 28 published studies and combined to form a probability density function. The uncertainty is strongly right-skewed. If all studies are combined, the mode is $2/tC, the median $14/tC, the mean $93/tC, and the 95 percentile $350/tC. Studies with a lower discount rate have higher estimates and much greater uncertainties. Similarly, studies that use equity weighing, have higher estimates and larger uncertainties. Interestingly, studies that are peer-reviewed have lower estimates and smaller uncertainties. Using standard assumptions about discounting and aggregation, the marginal damage costs of carbon dioxide emissions are unlikely to exceed $50/tC, and probably much smaller."
http://www.esri.ie/UserFiles/publications/20090326110224/WP285.pdf
"This can be kept below 2.0ºC (in the 21st century), but only for a carbon tax of $1000/tC, starting in 2013 and rising with the rate of discount, and applied to all greenhouse gas emissions in all countries. "
I like the basic idea of looking at a given carbon tax path and estimating what it'll do in principle. But, $1000/tC is not outrageous for taxing transportation fuels. It is, however, rather high compared to estimated costs for CO2 mineralisation or other CO2 negative options (say CO2 capture and storage from ethanol plants). I suspect these have been excluded from the analysis and this limits the possibilities for keeping below 2C at a more realistic cost.
And, I think at least "mild" geoengineering (sea salt spraying say to replace current anthropogenic aerosols from sea shipping and use of high sulphur heavy fuel oil) at a modest level should be part of the analysis. It's one thing to use aerosols as the whole strategy and to compensate quadrupled CO2 plus lots of methane and other greenhouse gases that would give 10C plus in the absence of aerosols with continuous injection of large amounts of sulphur based aerosols, and quite another to maintain (at least a portion of) the current aerosol related cooling forcing of 1.2 W/m2 (equivalent to about 1C for a best guess climate sensitivity).
I should also add, that while I see some reasons why people have worries about 10C from greenhouses gases being compensated by 10C of aerosol cooling; I don't quite swallow these arguments just like that. I don't like the handwavey, "how can you consider something so obviously bound to have terrible consequences" approach to rejecting it without seeing any need to consider it further.
Wednesday, December 16, 2009
Positive externalities
Over on the global change discussion group I've put this up for discussion:
I'd like to put these up for discussion in two contexts:
1. The "guilt" question - How solid is the case for "climate debt" for past emissions? Should this debt be repaid to innocent developing countries suffering from "our" past and present emissions sins?
2. Clean technology development financing
It is often argued that developing countries will suffer most and have contributed little to past emissions. We have benefited from past emissions, they will suffer, so we should reimburse them.
This is quite a sensible argument. However, I think the positive externalities are all too easily forgotten. If Europe and the US had never burnt any coal, there would be less CO2 in the atmosphere, but there would also be no vaccines, no mobile phones, no photovoltaics, no modern wind turbines, no batteries.
The availability of these technologies is, has been and will continue to be a huge boon to the development of poorer nations, all of which have higher living standards today than a 100 years ago.
I would argue that huge transfers to developing countries are the right thing to do, because so much more good can be done there than in Europe or the US; not because of a need to atone for past sins.
---------------------------
Technology development can lead to huge external benefits. Sometimes, via patents or through first mover advantages, the developer can be fairly rewarded with the right incentives provided.
But, when it's hard to capture a reasonable share of the benefits, private investors will not cough up any cash.
That's of course the reason for feed-in tariffs of 40 cents per kWh for PV. It's also why no private investor will sink money into CO2 mineralisation technology. Or why it's so hard to get private money for fighting malaria or improving African crop yields.
Now I like the CDM as conceived. It can be much cheaper to reduce emissions in developing countries, and why not do that for 1 Euro per tonne, and then not reduce in developed countries for 10 Euros per tonne. It's development aid combined with cost reduction. In theory at least.
I am wondering whether we should in a similar manner reward clean technology development spending. Already with CDM there are questions about additionality (would the country do it anyway? or worse would it otherwise have speeded up regulatory action?) and measurement against base line.
Of necessity, this is even harder for technology spending. Say, if Germany or Spain choose to spend 10 billion Euros on feed-in tariffs, how much is that going to reduce emissions over the long term in the rest of the world?
I would propose to deal with this through a cost cap. Beyond a certain level, say 25 Euros per tonne (reviewed every year), governments can sell unlimited emissions allowances and use the proceeds for clean technology funding. Alternatively, if there are no emissions allowance markets and just hard caps for individual countries, the country could be allowed to meet some of its target by counting clean development spending at 25 Euros per tonne.
I'd like to put these up for discussion in two contexts:
1. The "guilt" question - How solid is the case for "climate debt" for past emissions? Should this debt be repaid to innocent developing countries suffering from "our" past and present emissions sins?
2. Clean technology development financing
It is often argued that developing countries will suffer most and have contributed little to past emissions. We have benefited from past emissions, they will suffer, so we should reimburse them.
This is quite a sensible argument. However, I think the positive externalities are all too easily forgotten. If Europe and the US had never burnt any coal, there would be less CO2 in the atmosphere, but there would also be no vaccines, no mobile phones, no photovoltaics, no modern wind turbines, no batteries.
The availability of these technologies is, has been and will continue to be a huge boon to the development of poorer nations, all of which have higher living standards today than a 100 years ago.
I would argue that huge transfers to developing countries are the right thing to do, because so much more good can be done there than in Europe or the US; not because of a need to atone for past sins.
---------------------------
Technology development can lead to huge external benefits. Sometimes, via patents or through first mover advantages, the developer can be fairly rewarded with the right incentives provided.
But, when it's hard to capture a reasonable share of the benefits, private investors will not cough up any cash.
That's of course the reason for feed-in tariffs of 40 cents per kWh for PV. It's also why no private investor will sink money into CO2 mineralisation technology. Or why it's so hard to get private money for fighting malaria or improving African crop yields.
Now I like the CDM as conceived. It can be much cheaper to reduce emissions in developing countries, and why not do that for 1 Euro per tonne, and then not reduce in developed countries for 10 Euros per tonne. It's development aid combined with cost reduction. In theory at least.
I am wondering whether we should in a similar manner reward clean technology development spending. Already with CDM there are questions about additionality (would the country do it anyway? or worse would it otherwise have speeded up regulatory action?) and measurement against base line.
Of necessity, this is even harder for technology spending. Say, if Germany or Spain choose to spend 10 billion Euros on feed-in tariffs, how much is that going to reduce emissions over the long term in the rest of the world?
I would propose to deal with this through a cost cap. Beyond a certain level, say 25 Euros per tonne (reviewed every year), governments can sell unlimited emissions allowances and use the proceeds for clean technology funding. Alternatively, if there are no emissions allowance markets and just hard caps for individual countries, the country could be allowed to meet some of its target by counting clean development spending at 25 Euros per tonne.
Saturday, December 12, 2009
Old post on aerosols on Global change
http://groups.google.com/group/globalchange/browse_thread/thread/cbe22ce1dae48e27/eddf69ceb8773abd?lnk=gst&q=gerhaush#eddf69ceb8773abd
... you get 2.14C as the equilibrium response to present GHG forcing.
But, total GHG forcing is currently offset by aerosols to a poorly known degree.
If you stick in total forcing compared to pre-industrial, namely 1.6 W/ m2, things look considerably better. 1.6 W/m2 is less than half of 3.7 W/m2, and gives you an equilibrium response of 1.3C. Due to thermal lag, only about 0.7C are already realised and another 0.6C are in the pipe-line.
One of my pet themes is aerosols. What you'll notice from these figures is the consequences of reducing sulfate emissions towards zero, while say reducing CO2 emissions just enough to keep concentrations constant. As about half the CO2 is sunk at the moment, that's also roughly the reduction required to keep concentration constant.
If we do that instantaneously, and simultaneously eliminate aerosols, we've got a slightly better than 50% chance of missing a 2C target.
If we keep all forcings constant, however, I get that the climate sensitivity would have to be above 3 times 2/1.3 or more than 4.5 C, which means I think that a 2C target could be met with greater than 95% probability.
The critical importance of aerosols is something that is completely lost in the public debate.
But it is the loss of aerosol cooling from emissions reductions that means we likely need huge cuts in GHG emissions to avoid 2C with greater than 90% probability.
... you get 2.14C as the equilibrium response to present GHG forcing.
But, total GHG forcing is currently offset by aerosols to a poorly known degree.
If you stick in total forcing compared to pre-industrial, namely 1.6 W/ m2, things look considerably better. 1.6 W/m2 is less than half of 3.7 W/m2, and gives you an equilibrium response of 1.3C. Due to thermal lag, only about 0.7C are already realised and another 0.6C are in the pipe-line.
One of my pet themes is aerosols. What you'll notice from these figures is the consequences of reducing sulfate emissions towards zero, while say reducing CO2 emissions just enough to keep concentrations constant. As about half the CO2 is sunk at the moment, that's also roughly the reduction required to keep concentration constant.
If we do that instantaneously, and simultaneously eliminate aerosols, we've got a slightly better than 50% chance of missing a 2C target.
If we keep all forcings constant, however, I get that the climate sensitivity would have to be above 3 times 2/1.3 or more than 4.5 C, which means I think that a 2C target could be met with greater than 95% probability.
The critical importance of aerosols is something that is completely lost in the public debate.
But it is the loss of aerosol cooling from emissions reductions that means we likely need huge cuts in GHG emissions to avoid 2C with greater than 90% probability.
Another very good global change thread
http://groups.google.com/group/globalchange/browse_thread/thread/de041f09df3d3873/9eebfe21d6da38d7?lnk=gst&q=extropic#9eebfe21d6da38d7
Virtually everything in this thread is worth reading.
It starts with James Annan writing the following:
Even if one assumes the premise that we are "optimally adapted" to the present climate (which I think would be difficult to rationally defend), it does not follow that changes to the climate would result in net costs.
...
Virtually everything in this thread is worth reading.
It starts with James Annan writing the following:
Even if one assumes the premise that we are "optimally adapted" to the present climate (which I think would be difficult to rationally defend), it does not follow that changes to the climate would result in net costs.
...
Looking through posts on the global change list
> However, I believe if you calculate the net present value of some > catastrophe that lies even 100 or 200 years in the future, using the > usuual discounting method employed by business economists and > government planners, you do end up with a net present value for the > disaster that makes it virtually irrelevant to people living in > present. I think the only reasonable way to determine that value is by asking people what deprivations they are willing to suffer today for the sake of avoiding a catastrophe 200 years hence.
But, I also think that when there are real investment returns, interest rates are useful.
Say I might want to do something for people 200 years hence, then I could buy some stainless steel, bury it in my garden and leave it there for 200 years to be used by my descendants then.
Or I could buy the steel, make a wind turbine from it, generate electricity with it, make more steel with the electricity and then after 200 years leave my descendants not 1 tonne of steel but 1000 tonnes of steel in the form of wind turbines.
Putting these two ways of approaching interest back into climate change terms. I think it makes no sense to discount the value of species loss or of a 10% probability of the end of humanity, but I don't want to pay 100 Dollar today, so that descendants of mine in 2300 making a million Dollar a year, can spend 110 Dollar less in dike maintenance; especially so, when assuming only slowly declining real investment returns over the long term, I could invest those 100 Dollars and turn them into a million Dollars over those 300 years paying for 10000 such dike improvements.
Nor do I want to spend 90% of my income today to prevent a catastrophe in 2300, when much richer people in 2100 could do the same with 10% of their income.
I accept Michael's point, which I think basically is (Michael may chime in, if I get him wrong), that the sum total of what we do must allow substantial real positive returns, otherwise people in 2300 will be fewer in number and poorer than we are today living on a poisoned planet, and indeed be helped more by burying something for them to use then, than they would be by us misinvesting the oil or steel today.
From a "how much deprivation today is the well being of people in 2300 worth to us" perspective, a 0% real investment return may be more than enough to justify the expenditure (not buying a big car so that some poor fellow in 2300 has enough to eat may seem like a good deal to many people), or far too little (not buying anything to eat today, so that poor fellows in 2300, 2400, 2500 ... 10450 have enough to eat may not seem like a very good idea at all to rather many people).
I've got a big logical problem with using discount rates to work out how much should be spent today to save future generations some costly damage, as I've alluded to in my previous post. A discount rate above 0 discounts far future generations to nothing, but a discount rate of 0 means a small annual damage incurred by a huge number of future generations would justify spending all our resources today, leaving our own generation nothing to live on.
Surely how much deprivation the spending means today has to figure somehow?
Put differently, I am happy to put money I don't need into an account that pays 0% interest. But even 100% interest isn't going to interest me, if I am asked to deposit the money I need to buy food to survive.
------------------------
Climate change economics boils down in practise to considerations like "I'll buy a smaller car and I'll have done my bit to save those cute polar bears."
And that's the way it should be I suppose, we compare in simple terms what we give up for our climate change investment and what we get back, and then judge whether the sacrifice is worth it. It's just that when I look at climate change economics, I do it with some awe for the real power of compound interest, and with a belief that there are many real investment opportunities with huge returns today.
Do you see what I am driving at? Just because some people use discount rates in silly ways doesn't mean we should throw the baby out with the bath water and deny that there are real investment opportunities with returns well above zero and powerful compounding opportunities, and that this needs to figure in our decision making.
CRU continued
Does the information from the Cru that has found its way into the public domain change my views about what should be done about climate change?
No.
I've given the below comment on the issue elsewhere:
It's pretty hard to communicate accurately to the public what "the science" says. I think it would help to refrain from loud, but unspecific calls for action, combined with a claim that this is precisely what "the science" says.
I think what the science says, if one has to abbreviate it into a one sentence type sound bite, is that the price of carbon given by models is from somewhere around 0 to thousands of Euros per tonne, depending primarily on assumptions about the fragility of ecosystems, equity, what drives wealth and how to account for the more uncertain risks.
If you don't claim (quite wrongly in my opinion) that the climate science is the key battle ground and that everything hangs on whether climate sensitivity is 1C or possibly 5C+ (a la Lindzen), or whether today's temperatures are warmer than the MWP (lots of Hockey stick debaters) or not, climate scientists can nicely stay above the fray and bask proudly in the glory provided by their widely acknowledged independence and objectivity.
Plus, it's much easier to have sensible discussions about say what we really know about the world average temperature between the years 1000 and 1500.
No.
I've given the below comment on the issue elsewhere:
It's pretty hard to communicate accurately to the public what "the science" says. I think it would help to refrain from loud, but unspecific calls for action, combined with a claim that this is precisely what "the science" says.
I think what the science says, if one has to abbreviate it into a one sentence type sound bite, is that the price of carbon given by models is from somewhere around 0 to thousands of Euros per tonne, depending primarily on assumptions about the fragility of ecosystems, equity, what drives wealth and how to account for the more uncertain risks.
If you don't claim (quite wrongly in my opinion) that the climate science is the key battle ground and that everything hangs on whether climate sensitivity is 1C or possibly 5C+ (a la Lindzen), or whether today's temperatures are warmer than the MWP (lots of Hockey stick debaters) or not, climate scientists can nicely stay above the fray and bask proudly in the glory provided by their widely acknowledged independence and objectivity.
Plus, it's much easier to have sensible discussions about say what we really know about the world average temperature between the years 1000 and 1500.
Friday, December 11, 2009
Paper by Ted Nordhaus
http://thebreakthrough.org/blog/scrap%20kyoto.pdf
The above is quite an interesting paper. The basic argument is that energy price increases sufficient to provide the right incentives to develop clean energy are politically infeasible, and therefore, there must be much more focus on research and development.
I would say that the arguments of Ted Nordhaus apply even more to research, where absent climate benefits, there is no potential whatsoever for monetisation, and where it may be even harder for research funders to directly monetise the benefits. One example is air capture with minerals. The theoretical potential is huge, there is more than enough silicates to capture all past emissions and all conceivable future emissions. The potential for cost reductions is also very large. The chemical reaction between CO2 and olivine is exothermic, so it's not that we'd have to put large amount of energy into the capture. The reaction is slow, because the minerals have little contact with the CO2 in the air. Over geologic timescales, CO2 being mopped up by minerals is also the natural way that excess CO2 in the atmosphere is regulated away by nature.
But, what incentive is there for private industry to invest into research?
And even for governments it's not that attractive. A feed-in tariff on off-shore wind energy can be sold by the Dutch government as a way to develop technology Dutch companies can sell at a big profit to the rest of the world. But research on how to speed up rock weathering rates in Oman or the Alps? How do you sell that as a profit spinner?
The above is quite an interesting paper. The basic argument is that energy price increases sufficient to provide the right incentives to develop clean energy are politically infeasible, and therefore, there must be much more focus on research and development.
I would say that the arguments of Ted Nordhaus apply even more to research, where absent climate benefits, there is no potential whatsoever for monetisation, and where it may be even harder for research funders to directly monetise the benefits. One example is air capture with minerals. The theoretical potential is huge, there is more than enough silicates to capture all past emissions and all conceivable future emissions. The potential for cost reductions is also very large. The chemical reaction between CO2 and olivine is exothermic, so it's not that we'd have to put large amount of energy into the capture. The reaction is slow, because the minerals have little contact with the CO2 in the air. Over geologic timescales, CO2 being mopped up by minerals is also the natural way that excess CO2 in the atmosphere is regulated away by nature.
But, what incentive is there for private industry to invest into research?
And even for governments it's not that attractive. A feed-in tariff on off-shore wind energy can be sold by the Dutch government as a way to develop technology Dutch companies can sell at a big profit to the rest of the world. But research on how to speed up rock weathering rates in Oman or the Alps? How do you sell that as a profit spinner?
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