Tag Archives: emissions

Will the real emissions target please stand up?

cop15_8_1_650

The post-Copenhagen climate negotiations seem to be diverging, at least on the question of targets. Brackets, denoting disagreement, have if anything proliferated in the draft texts. The latest from Bonn:

AD HOC WORKING GROUP ON LONG-TERM COOPERATIVE ACTION UNDER THE CONVENTION

Eleventh session Bonn, 2–6 August 2010

Item 3 of the provisional agenda Preparation of an outcome to be presented to the Conference of the Parties for adoption at its sixteenth session to enable full, effective and sustained implementation of the Convention through long-term cooperative action now, up to and beyond 2012

Text to facilitate negotiations among Parties

4. Parties should collectively reduce global emissions by [50][85][95] per cent from 1990 levels by 2050 and should ensure that global emissions continue to decline thereafter. Developed country Parties as a group should reduce their greenhouse gas emissions by [[75-85][at least 80-95][more than 95] per cent from 1990 levels by 2050] [more than 100 per cent from 1990 levels by 2040].

18. These commitments are made with a view to reducing the aggregate greenhouse gas emissions of developed country Parties by [at least] [25–40] [in the order of 30] [40] [45] [50] [X* per cent from [1990] [or 2005] levels by [2017][2020] [and by [at least] [YY] per cent by 2050 from the [1990] [ZZ] level].

Hat tip: Travis Franck.

Kerry-Lieberman “American Power Act” leaked

I think it’s a second-best policy, but perhaps the most we can hope for, and better than nothing.

Climate Progress has a first analysis and links to the leaked draft legislation outline and short summary of the Kerry-Lieberman American Power Act. [Update: there's now a

This is not much different from ACES or CLEAR, and like them it’s backwards. Emissions reductions are back-loaded. The rate of reduction (green dots) from 2030 to 2050, 6.1%/year, is hardly plausible without massive retrofit or abandonment of existing capital (or negative economic growth). Given that the easiest reductions are likely to be the first, not the last, more aggressive action should be happening up front. (Actually there are a multitude of reasons for front-loading reductions as much as reasonable price stability allows).

There’s also a price collar:

Kerry Lieberman Price

These mechanisms provide a predictable price corridor, with the expected prices of the EPA Waxman-Markey analysis (dashed green) running right up the middle. The silly strategic reserve is gone. Still, I think this arrangement is backwards, in a different sense from the target. The right way to manage the uncertainty in the long run emissions trajectory needed to stabilize climate without triggering short run economic dislocation is with a mechanism that yields stable prices over the short to medium term, while providing for adaptive adjustment of the long term price trajectory to achieve emissions stability. A cap and trade with no safety valve is essentially the opposite of that: short run volatility with long run rigidity, and therefore a poor choice. The price collar bounds the short term volatility to 2:1 (early) to 4:1 (late) price movements, but it doesn’t do anything to provide for adaptation of the emissions target or price collar if emissions reductions turn out to be unexpectedly hard, easy, important, etc. It’s likely that the target and collar will be regarded as property rights and hard to change later in the game.

I think we should expect the unexpected. My personal guess is that the EPA allowance price estimates are way too low. In that case, we’ll find ourselves stuck on the price ceiling, with targets unmet. 83% reductions in emissions at an emissions price corresponding with under $1/gallon for fuel just strike me as unlikely, unless we’re very lucky technologically. My preference would be an adaptive carbon price, starting at a substantially higher level (high enough to prevent investment in new carbon intensive capital, but not so high initially as to strand those assets – maybe $50/TonCO2). By default, the price should rise at some modest rate, with an explicit adjustment process taking place at longish intervals so that new information can be incorporated. Essentially the goal is to implement feedback control that stabilizes long term climate without short term volatility (as here or here and here).

Some other gut reactions:

Good:

  • Clean energy R&D funding.
  • Allowance distribution by auction.
  • Border adjustments (I can only find these in the summary, not the draft outline).

Bad:

  • More subsidies, guarantees and other support for nuclear power plants. Why not let the first round play out first? Is this really a good use of resources or a level playing field?
  • Subsidized CCS deployment. There are good reasons for subsidizing R&D, but deployment should be primarily motivated by the economic incentive of the emissions price.
  • Other deployment incentives. Let the price do the work!
  • Rebates through utilities. There’s good evidence that total bills are more salient to consumers than marginal costs, so this at least partially defeats the price signal. At least it’s temporary (though transient measures have a way of becoming entitlements).

Indifferent:

  • Preemption of state cap & trade schemes. Sorry, RGGI, AB32, and WCI. This probably has to happen.
  • Green jobs claims. In the long run, employment is controlled by a bunch of negative feedback loops, so it’s not likely to change a lot. The current effects of the housing bust/financial crisis and eventual effects of big twin deficits are likely to overwhelm any climate policy signal. The real issue is how to create wealth without borrowing it from the future (e.g., by filling up the atmospheric bathtub with GHGs) and sustaining vulnerability to oil shocks, and on that score this is a good move.
  • State preemption of offshore oil leasing within 75 miles of its shoreline. Is this anything more than an illusion of protection?
  • Banking, borrowing and offsets allowed.

Unclear:

  • Performance standards for coal plants.
  • Transportation efficiency measures.
  • Industry rebates to prevent leakage (does this defeat the price signal?).

Stop talking, start studying?

Roger Pielke Jr. poses a carbon price paradox:

The carbon price paradox is that any politically conceivable price on carbon can do little more than have a marginal effect on the modern energy economy. A price that would be high enough to induce transformational change is just not in the cards. Thus, carbon pricing alone cannot lead to a transformation of the energy economy.

Put another way:

Advocates for a response to climate change based on increasing the costs of carbon-based energy skate around the fact that people react very negatively to higher prices by promising that action won’t really cost that much. … If action on climate change is indeed “not costly” then it would logically follow the only reasons for anyone to question a strategy based on increasing the costs of energy are complete ignorance and/or a crass willingness to destroy the planet for private gain. … There is another view. Specifically that the current ranges of actions at the forefront of the climate debate focused on putting a price on carbon in order to motivate action are misguided and cannot succeed. This argument goes as follows: In order for action to occur costs must be significant enough to change incentives and thus behavior. Without the sugarcoating, pricing carbon (whether via cap-and-trade or a direct tax) is designed to be costly. In this basic principle lies the seed of failure. Policy makers will do (and have done) everything they can to avoid imposing higher costs of energy on their constituents via dodgy offsets, overly generous allowances, safety valves, hot air, and whatever other gimmick they can come up with.

His prescription (and that of the Breakthrough Institute)  is low carbon taxes, reinvested in R&D:

We believe that soon-to-be-president Obama’s proposal to spend $150 billion over the next 10 years on developing carbon-free energy technologies and infrastructure is the right first step. … a $5 charge on each ton of carbon dioxide produced in the use of fossil fuel energy would raise $30 billion a year. This is more than enough to finance the Obama plan twice over.

… We would like to create the conditions for a virtuous cycle, whereby a small, politically acceptable charge for the use of carbon emitting energy, is used to invest immediately in the development and subsequent deployment of technologies that will accelerate the decarbonization of the U.S. economy.

Stop talking, start solving

As the nation begins to rely less and less on fossil fuels, the political atmosphere will be more favorable to gradually raising the charge on carbon, as it will have less of an impact on businesses and consumers, this in turn will ensure that there is a steady, perhaps even growing source of funds to support a process of continuous technological innovation.

This approach reminds me of an old joke:

Lenin, Stalin, Khrushchev and Brezhnev are travelling together on a train. Unexpectedly the train stops. Lenin suggests: “Perhaps, we should call a subbotnik, so that workers and peasants fix the problem.” Kruschev suggests rehabilitating the engineers, and leaves for a while, but nothing happens. Stalin, fed up, steps out to intervene. Rifle shots are heard, but when he returns there is still no motion. Brezhnev reaches over, pulls the curtain, and says, “Comrades, let’s pretend we’re moving.”

I translate the structure of Pielke’s argument like this:

Pielke Loops

Implementation of a high emissions price now would be undone politically (B1). A low emissions price triggers a virtuous cycle (R), as revenue reinvested in technology lowers the cost of future mitigation, minimizing public outcry and enabling the emissions price to go up. Note that this structure implies two other balancing loops (B2 & B3) that serve to weaken the R&D effect, because revenues fall as emissions fall.

If you elaborate on the diagram a bit, you can see why the technology-led strategy is unlikely to work:

PielkeLoopsSF

First, there’s a huge delay between R&D investment and emergence of deployable technology (green stock-flow chain). R&D funded now by an emissions price could take decades to emerge. Second, there’s another huge delay from the slow turnover of the existing capital stock (purple) – even if we had cars that ran on water tomorrow, it would take 15 years or more to turn over the fleet. Buildings and infrastructure last much longer. Together, those delays greatly weaken the near-term effect of R&D on emissions, and therefore also prevent the virtuous cycle of reduced public outcry due to greater opportunities from getting going. As long as emissions prices remain low, the accumulation of commitments to high-emissions capital grows, increasing public resistance to a later change in direction. Continue reading

Another look at inadequate Copenhagen pledges

Joeri Rogelj and others argue that Copenhagen Accord pledges are paltry in a Nature Opinion,

Current national emissions targets can’t limit global warming to 2 °C, calculate Joeri Rogelj, Malte Meinshausen and colleagues — they might even lock the world into exceeding 3 °C warming.

  • Nations will probably meet only the lower ends of their emissions pledges in the absence of a binding international agreement
  • Nations can bank an estimated 12 gigatonnes of Co2 equivalents surplus allowances for use after 2012
  • Land-use rules are likely to result in further allowance increases of 0.5 GtCO2-eq per year
  • Global emissions in 2020 could thus be up to 20% higher than today
  • Current pledges mean a greater than 50% chance that warming will exceed 3°C by 2100
  • If nations agree to halve emissions by 2050, there is still a 50% chance that warming will exceed 2°C and will almost certainly exceed 1.5°C

Via Nature’s Climate Feedback, Copenhagen Accord – missing the mark.

The lure of border carbon adjustments

Are border carbon adjustments (BCAs) the wave of the future? Consider these two figures:

Carbon flows embodied in trade goods

Leakage

The first shows the scale of carbon embodied in trade. The second, even if it overstates true intentions, demonstrates the threat of carbon outsourcing. Both are compelling arguments for border adjustments (i.e. tariffs) on GHG emissions.

I think things could easily go this route: it’s essentially a noncooperative route to a harmonized global carbon price. Unlike global emissions trading, it’s not driven by any principle of fair allocation of property rights in the atmosphere; instead it serves the more vulgar notion that everyone (or at least every nation) keeps their own money.

Consider the pros and cons:

Advocates of BCAs claim that the measures are intended to address three factors. First, competitiveness concerns where some industries in developed countries consider that a BCA will protect their global competitiveness vis-a-vis industries in countries that do not apply the same requirements. The second argument for BCAs is ‘carbon leakage’ – the notion that emissions might move to countries where rules are less stringent. A third argument, of the highest political relevance, has to do with ‘leveraging’ the participation of developing countries in binding mitigation schemes or to adopt comparable measures to offset emissions by their own industries.

from a developing country perspective, at least three arguments run counter to that idea: 1) that the use of BCAs is a prima facie violation of the spirit and letter of multilateral trade principles and norms that require equal treatment among equal goods; 2) that BCAs are a disguised form of protectionism; and 3) that BCAs undermine in practice the principle of common but differentiated responsibilities.

In other words: the advocates are a strong domestic constituency with material arguments in places where BCAs might arise. The opponents are somewhere else and don’t get to vote, and armed with legalistic principles more than fear and greed.

LCFS in Equilibrium II

My last post introduced some observations from simulation of an equilibrium fuel portfolio standard model:

  • knife-edge behavior of market volume of alternative fuels as you approach compliance limits (discussed last year): as the required portfolio performance approaches the performance of the best component options, demand for those approaches 100% of volume rapidly.
  • differences in the competitive landscape for technology providers, when compared to alternatives like a carbon tax.
  • differences in behavior under uncertainty.
  • perverse behavior when the elasticity of substitution among fuels is low

Here are some of the details. First, the model:

structure

Notice that this is not a normal SD model – there are loops but no stocks. That’s because this is a system of simultaneous equations solved in equilibrium. The Vensim FIND ZERO function is used to find a vector of prices (one for each fuel, plus the shadow price of emissions intensity) that matches supply and demand, subject to the intensity constraint.

Continue reading

The AWG-LCA draft agreement

Like the AOSIS draft, the LTCA draft is a bit coy about developing country actions, and there are a number of unsettled language variations, indicated by brackets. It sets a global goal of 1.5C to 2C, and emissions cuts of 50 to 95 percent from 1990 levels by 2050. Developed countries commit to between 75 and more than 95 percent by 2050, with interim targets of 25 to 45 percent below 1990 by 2020. The developing countries are not explicitly subject to targets, but the combination of supported and autonomous NAMAs is “aimed at achieving a substantial deviation in emissions [in the order of 15-30 percent by 2020] relative to those emissions that would occur in the absence of enhanced mitigation.” The BAU trajectory against which that might be judged is unspecified.

The bracketed options in the text create many possible permutations of the agreement. One is particularly illuminating: the least stringent global target (peak in 2020, 50% below 1990 in 2050) combined with the most stringent developed target (peak in 2011, 45% below 1990 in 2020, 95% below 1990 in 2050). That yields maximum possible emissions in the developing world, given the global and developed budgets.

In that scenario, developing emissions could look like the following:

AWG-LCA developing emissions

Emissions in the developing countries still must peak before 2030. Note that, as in my AOSIS experiment, the potential emissions budget for developing countries exceeds business-as-usual; if BAU emissions don’t actually rise faster than anticipated, those emissions might be reallocated to delay the peak in emissions a bit, but not more than a few years.

Interestingly, this scenario results in hyper-convergence, with developed emissions per capita falling well below developing emissions per capita.AWGLCApercap

It’s unlikely that this is a physically or politically realizable situation, given that developed countries would have to reduce emissions far faster than the natural rate of capital turnover. The rapid decline would not benefit developing countries either, because buildings and infrastructure cannot be moved elsewhere. If developed countries make less aggressive cuts, to about -30% in 2020 and -85% in 2050, per capita emissions converge between 2030 and 2040. However, in that case, developing country emissions have to peak earlier and fall faster.

The only way to delay the peak in developing country emissions significantly is to delay the global peak. However, meeting the same global 2050 target with a later start requires faster declines in emissions, which quickly become impractical unless you assume some kind of technical miracle (not a robust strategy). Therefore, the only way for developing countries to avoid a peak in emissions in the next decade or two is to abandon any pretense of preserving a reasonable probability of meeting 2C or similar targets. That seems to be what some of the big emerging emitters are implicitly arguing for, but is it what they really want, or in their best interest?

Afterthought: The big challenge is that the global and developed country targets are explicit, while the developing country trajectory those necessitate is not. The draft recognizes means for reducing developing country emissions (supported and autonomous NAMAs), but there’s no coordinating mechanism that ensures the outcome adds up to the global goal.

Danish text – emissions trajectories

Surfing a bit, it looks like the furor over the leaked Danish text actually has at least four major components:

  1. Lack of per capita convergence in 2050.
  2. Requirement that the upper tier of developing countries set targets.
  3. Institutional arrangements that determine control of funds and activity.
  4. The global peak in 2020 and decline to 2050.

These are evident in coverage in Politico and COP15.dk, for example.

I’ve already tackled #1, which is an illusion based on flawed analysis. I also commented on #2 – whether you set formal targets or not, absolute emissions need to fall in every major region if atmospheric GHG concentrations and radiative imbalance are to stabilize or decline. I don’t have an opinion on #3. #4 is what I’d like to talk about here.

There seem to be two responses to #4: dissatisfaction with the very idea of peaking and declining on anything like that schedule, and dissatisfaction with the burden sharing at the peak.

First, the global trajectory. There are a variety of possible emissions paths that satisfy the criteria in the Danish text. Here’s one (again relying on C-ROADS data and projections, close to A1FI in the future):

Global maximum emissions trajectory

Here, emissions grow along Business-As-Usual (BAU), peak in 2020, then decline at 3.75%/year to hit the 2050 target. This is, of course, a silly trajectory, because its basically impossible to turn the economy on a dime like this, transitioning overnight from growth to decline. More plausible trajectories have to be smooth, like this:

Global practical trajectory

One consequence of the smoothness constraint is that emissions reductions have to be faster later, to make up for the growth that occurs during a gradual transition from growing to declining emissions. Here, they approach -5%/year, vs. -3.5% in the “pointy” trajectory. A similar constraint arises from the need to maintain the area under the emissions curve if you want to achieve similar climate outcomes.

So, anyone who argues for a later peak is in effect arguing for (a) faster reductions later, or (b) weaker ambitions for the climate outcome. I don’t see how either of these is in the best interest of developing countries (or developed, for that matter). (A) means spending at most an extra decade building carbon-intensive capital, only to abandon it at a rapid rate a decade or two later. That’s not development. (B) means more climate damages and other negative externalities, for which growth is unlikely to compensate, and to which the developing countries are probably most vulnerable.

If, for sake of argument, we take my smooth version of the Danish text target as a given, there’s still the question of how emissions between now and 2050 are partitioned. If the developed world shoots for 20% below 1990 by 2020, the trajectory might look like this:

Developed -20% below 1990 in 2020

That’s a target that most would consider to be modest, yet to hit it, emissions have to peak by 2012, and decline at up to 8% per year through 2020. It would be easier to achieve in some regions, like the EU, that are already not far from Kyoto levels, but tough for the developed world as a whole. The natural turnover of buildings, infrastructure and power plants is 2 to 4%/year, so emissions declining at 8% per year means some combination of massive retrofits, where possible, and abandonment of carbon-emitting assets. If that were happening in the developed world, in tandem with free trade, rapid growth and no targets in the developing world, it would surely mean massive job dislocations. I expect that would cause the emission control regime in the developed world to crumble.

The -20% in 2020 trajectory creates surprisingly little headroom for growth in the developing world. Emissions can grow only until 2025 (vs. 2020 globally, and 2012 in the developing countries). Thereafter they have to fall at roughly the global rate.

Developing with global and developed targets

What if the developed world manages to go even faster, achieving -40% from 1990 by 2020, and -90% by 2050? Surprisingly, that buys the developing countries almost nothing. Emissions can rise a little higher, but must peak around the same time, and decline at the same rate. Some of the rise is potentially inaccessible, because it exceeds BAU, and no one really knows how to control economic growth.

Developing with developed -20% vs -40%

The reason for this behavior is fairly simple: as soon as developed countries make substantial cuts of any size, they become bit players in the global emissions game. Further reductions, acting on a small basis, are very tiny compared to the large basis of developing country emissions. Thus the past is a story of high developed country cumulative emissions, but the future is really about the developing countries’ path. If developing countries want to push the emissions envelope, they have to accept that they are taking a riskier climate future, no matter what the developed world does. In addition, deeper cuts on the part of the developed world become very expensive, because marginal costs grow with the depth of the cut. On the whole everyone would be better off if the developing countries asked for more money rather than deeper emissions cuts in the developed world.


There’s a deeper reason to think that calls for deeper cuts in the developed world, to provide headroom for greater emissions growth in developing countries, are counterproductive. I think the mental model behind such calls is a mixture of the following:

  1. carbon fuels GDP, and GDP equals happiness
  2. developing countries have an urgent need to build certain critical infrastructure, after which they can reduce emissions
  3. slow growth fuels discontent, leading to revolution
  4. growth pays for pollution reductions (the Kuznets curve)

Certainly each of these ideas contains some truth, and each has played a role in the phenomenal growth of the developed world. However, each is also fallacious in important ways. The elements in (1) are certainly correlated, but the relationship between carbon and happiness is mediated by all kinds of institutional and social factors. The key question for  (2) is, what kind of infrastructure? Cheap carbon invites building exactly the kind of infrastructure that the developed world is now locked into, and struggling to dismantle. (3) might be true, but I suspect that it has as more to do with inequitable distribution of wealth and power than it does with absolute wealth. Rapid growth can easily increase inequity. The empirical basis of the Kuznets curve in (4) is rather shaky. Attempts to grow out of the negative side effects of growth are essentially a pyramid scheme. Moreover, to the extent that growth is successful, preferences shift to nonmarket amenities like health and clean air, so the cost of the negatives of growth grows.

Rather than following the developed countries down a blind alley, the developing countries could take this opportunity to bypass our unsustainable development path. By implementing emissions controls now, they could start building a low-carbon-friendly infrastructure, and get locked into sustainable technologies, that won’t have to be dismantled or abandoned in a few decades. This would mean developing institutions that internalize environmental externalities and allocate property rights sensibly. As a byproduct, that would help the poorest within their countries avoid the consequences of the new wealth of their elites. Preferences would evolve toward low-carbon lifestyles, rather than shopping, driving, and conspicuous consumption. Now, if we could just figure out how to implement the same insights here in the developed world …