Written by Nathaniel Berger
During the past several years, the United States has experience numerous events of extreme weather patterns ranging from massive wildfires in Colorado to the 4th warmest winter in U.S. history. Many parts of the country experienced seventy degree days in December.
Ninety-seven percent of scientists say man-made climate change is real. However, the remaining 3% of scientists are quite loud in their efforts to deny climate change. Those who deny the occurrence of climate change take the scientific truth, and mislead, deny, and suppress it so much that little progress can be made. The media further exacerbate the problem when they give each side equal air time, insinuating whether intentionally or not, that these messages are both equally supported and valid.
However, despite the 3% of scientists’ denial, climate change is happening, and the U.S. needs to do its part to lower carbon emissions. The European Union and many other nations around the world have made pledges through the Kyoto Protocol and other initiatives to lower carbon emissions through renewable energy creation, carbon offsets, and more. Germany’s solar energy accounts for nearly a 1/3 of the nation’s energy.
Unfortunately, the U.S. has not embarked on such a serious renewable energy path, refusing to join the Kyoto Protocol or even establish a national energy policy. While many states have set forth renewable energy standards, these acts are insufficient as the U.S. is one of the top carbon emitters.
Despite the minimal efforts made in the United States to reduce carbon emissions, the U.S. experienced the lowest carbon emissions in 20 years in the first half of 2012. Many are claiming that the U.S. has finally decided to truly work to reduce carbon emissions. Sadly, I think that these people are far too optimistic. Few scientists actually think that these reductions in carbon emissions will last.
When the CO2 emissions reductions were analyzed, researchers found that 43% of the decline was a result of the mild winter that much of the U.S. experienced, 21% of the decline was attributed to coal-to-gas generation, and only a measly 6% was left for increased wind generation. In terms of weather conditions, the mild winter is not likely to be a recurring theme in coming years, and even if it is, it will likely bring with it increasingly hot summers that will require more energy consumption through increased air conditioning.
While natural gas usage has increased significantly, the switch to natural gas is only a temporary fix for carbon emissions. First, the switch to natural gas is largely a result of economic factors that have resulted in shockingly low natural gas prices. According to Michael McElroy, Professor of Environmental Studies at the Harvard School of Engineering and Applied Sciences, the impact of the decreased price of natural gas was most prevalent in the East South Central and South Atlantic regions of the U.S. because those regions have the highest level of electricity generation from coal. Few economists expect these low prices to remain long term, which may result in a small comeback of coal. However, McElroy does argue that if the United States wanted to continue to economically impact the relative price of electricity generation between coal and natural gas, a carbon tax of only $5 per ton of CO2 would make a significant difference in electricity generation. The U.S. would save 31 million tons of CO2, and the price of electricity would rise only minimally. I think this solution is perfectly reasonable especially when one considers our growing national debt. However, it is unlikely to be part of any tax reform due to the unwillingness of major political figures to put the environment and climate change on their political agendas.
Second, natural gas brings its own environmental impacts. Natural gas obtained through hydraulic fracturing is associated with water contamination and earthquakes. Many states such as, Ohio and Pennsylvania, are already noticing some of these impacts. Because of the fast-paced nature of the industry, it has been difficult for many states to develop the regulatory system fast enough to keep up with the production goals of companies interested in hydraulic fracturing. North Carolina’s Department of Environment and Natural Resources has worked to assess the potential impacts. Currently, they are recommending that with the proper guidelines and safety regulations that hydraulic fracturing can occur safely with minimal environmental impact. The only problem is that they are still unsure of what the potential impacts are, the size of those impacts, and how quickly they may impact human health.
Natural gas will not lower carbon emissions sufficiently to prevent continued climate change. It has a different set of problems from coal, but it has problems all the same. Therefore, it is only one part of the solution to climate change. It should not be seen as the end all be all. Therefore, it is vital for people to only see natural gas as a transition fuel from coal to renewable energy. People need to remember that renewable energy means that we can never run out. No one can say that about coal or even natural gas. Renewable energy is the only long-term way to reduce carbon emissions before the impacts of climate change become more extreme, and people are less able to adapt. Renewable energy is also economically crucial to the United States. Renewable energy technology is the technology of the future. If the United States wants to maintain at the forefront of the world economy, it will have to invest in renewable energy. And, if we want to maintain the world, we need to transition to renewable energy sooner rather than later.
COMMON BUT DIFFERENTIATED
In 1992 at the United Nations Rio Earth Summit, government representatives from 255 countries met to address a long list of climate and energy problems. They penned the Rio Declaration on Environment and Development, which introduced the concept of Common but Differentiated Responsibility (CBDR) stating that,
“The developed countries acknowledge the responsibility that they bear in the international pursuit of sustainable development in view of the pressures their societies place on the global environment and of the technologies and financial resources they command.”
The concept of CBDR suggests that developed countries, which in 1992 were emitting close to 80% of global CO2, have a mitigation responsibility proportional to their emissions. The logical extension of this being that developing countries are less to blame and thus essentially given a free pass to “grow dirty” as we, the United States, once did. But do these developing countries really have a right to their own Industrial Revolutions? On the one hand, it is unfair to handicap the growth of developing countries with emissions-based constraints that developed countries grew without, but on the other, it is neither logical nor moral to allow developing countries to knowingly ignore climate change simply for the sake of equality.
CHINA’S RAPID RISE
With no other country is the concept of CBDR more controversial than with China. While technically still a developing nation, in the past year China has surpassed the United States not only as the country with the largest economy, but also as the number one global emitter of greenhouse gases. These two superlatives are not unrelated either; they are linked through energy intensity, a measure of energy use per GDP. China’s energy intensity is 50% greater than the United States, so even if the US and Chinese economies were growing at the same rate, China would see a 1.5 times greater increase in greenhouse gas emission than the US. But the Chinese GDP is growing approximately ten times faster than that of the United States. Due to this rapid growth in GDP, even if China is able to meet its five-year plan to reduce energy intensity by 16% before 2015, it will still experience a net increase in greenhouse gas emissions. That is the one-two punch of growth coupled with high energy intensity. The fact that China emits more greenhouse gas per unit of GDP than any other country in the world and also has the largest, fastest growing GDP in the world means that despite CBDR, China must play a leading role in mitigating climate change. Yet China is resisting pressure from the United Nations to commit to an emissions target, which they claim will cause harmful economic shocks. China has little incentive to control emissions.
While China avoids taking on greenhouse gas reduction obligations, the United States is reluctant to commit to United Nations imposed regulations unless all major emitters (not just developed countries) sign on as well. US law makers want to avoid “free riders” who benefit from US emissions reduction without contributing to the reduction themselves. In addition, if the US were to set an emissions goal without Chinese reciprocation, this would provide China with an unfair advantage in global trade. The Chinese-American political landscape is a complicated diplomacy game with plenty more facets than just the energy issue. Key to China’s recent growth is its reliance on trade with the US. China’s overall trade surplus in 2011 was $155.1 billion, but against the United States alone for the same year it was $272.3 billion, or 175.6% of the total surplus.
SOLAR AND WIND SUBSIDIES
Ironically, one of the largest growing categories of imports from China to the US are solar panels. Thus to some extent, China’s dirty growth (70% of its fuel supply comes from coal, as compared to 23% from coal in the US), actually enables clean energy infrastructure in America. In order to curb their trade deficit, last May the United States imposed an anti-dumping tariff on 31% of Chinese-made solar cells. Dumping refers to selling goods to a foreign country at a price lower than would be charged for the same goods domestically. Before the tariff, China dominated half the American market. The US hopes that the tariff will strengthen the domestic solar market, giving America a chance to compete. While beneficial to the US, the new tariff is a point of concern for China (and for other foreign countries with large solar markets such as Canada) since it will shrink trade in the global solar market and increase prices. A decrease in sales will reduce jobs as well, since about half the jobs provided by the solar sector are in installation. There is also tension regarding Sino-American competition in other renewable energy markets as well. Because the Chinese government provides large subsidies for wind turbine production, the US has trouble competing.
GOOD FOR THE EARTH GOOD FOR THE ECONOMY
The tariffs implemented by the United States on Chinese renewable infrastructure such as solar cells and wind turbines are put in place to protect the American market. China can produce and sell these goods much cheaper than can the US so imposing the tariffs allows America to compete. But rising prices also means less consumption of solar panels and wind turbines and therefore less mitigation of greenhouse gases. So what can we do to overcome this tug-of-war between the environment and the economy? Therein lies the solution to entirety of the global energy crisis. The best solution will be both economically and environmentally advantageous. At this point, it is not likely that there will be one supremely effective mitigation strategy. Instead, relief will come from a confluence of methods. A free market approach will not be enough to jump-start many renewable energy industries. One potential idea could be a reinforcing structure whereby energy technology and infrastructure can be traded. If China continues to be a supplier of solar and wind energy systems to the US, the US can purchase these in capital investments in Chinese renewable projects to be implemented in China, thereby helping China as we help ourselves.
Bradsher, Keith and Diane Cardwell. U.S. Slaps High Tariffs on Chinese Solar Panels. The New York Times. http://www.nytimes.com/2012/05/18/business/energy-environment/us-slaps-tariffs-on-chinese-solar-panels.html?pagewanted=all&_moc.semityn.www. May 17, 2012.
Bradsher, Keith. Chinese Data Mask Depth of Slowdown, Executives Say. The New York Times. http://www.nytimes.com/2012/06/23/business/global/chinese-data-said-to-be-manipulated-understating-its-slowdown.html?pagewanted=all. June 22, 2012.
Bullis, Kevin. The Chinese Solar Machine. The Technology Review. http://www.technologyreview.com/featured-story/426393/the-chinese-solar-machine/. January 2012.
Chang, Gordon G. China is 175.6% Dependent on the U.S. http://www.forbes.com/sites/gordonchang/2012/01/22/china-is-175-6-dependent-on-the-u-s/. January 22, 2011.
Leggett, Jane A. China’s Greenhouse Gas Emissions and Mitigation Policies. Congressional Research Service. http://www.fas.org/sgp/crs/row/R41919.pdf. July 18, 2011.
United States Senate Committee on Environment and Public Works. The Real Story Behind China’s Energy Policy and What America Can Learn From It. http://epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=f29ee5f7-c9f5-46ca-9500-0f10b27f41ed. December 8, 2010
written by Joshua De Santiago
When the Caribbean and Gulf skies cleared after Hurricane Isaac, fishermen set out to reap a harvest from the reefs with the blessing of ocean biologists and seafood chefs. The fishermen are actually doing a much-needed service to the tropical reefs by whittling at the prolific and venomous lionfish, an invasive species that poses a serious risk to the fragile ecosystem, and restaurants are serving up lionfish with gusto. As a native Floridian, I endorse this unusual method of environmental stewardship – as long as the fishing is kept in check to protect the other reef wildlife. But how did this peculiar way of species control appear?
The lionfish (Pterois volitans and Pterois miles) arrived in the American East Coast sometime in the early 1990’s, speculated to have been released by well-meaning aquarium owners no longer willing to deal with the fish’s poisonous and painful spiky fin rays. A native of the South Pacific and Indian Ocean, the lionfish has few natural predators in the Atlantic and its voracious appetite has made it a grave threat to tropical reefs in the Gulf of Mexico, the Caribbean, and the East Coast. The worst case scenario according to a study from Oregon State University’s Department of Zoology and the NOAA’s National Centers for Coastal Ocean Science is that the lionfish outcompetes the ecologically and environmentally important snapper and grouper populations and eats the coral reef ecosystem into demise. The lionfish’s population could prove to be too great of a stressor on reefs that are already subject to overfishing.
In 2010, the Florida Keys National Marine Sanctuary opened up its waters to fishermen with a license to catch as many lionfish as they can in a day in an attempt to reel in the lionfish’s growth. These “lionfish derbys” are now sponsored by the Reef Environmental Education Foundation (REEF) and occur several times a year. Cash prizes are awarded to boats with the biggest hauls and scientists take samples of the captured fish in order to learn more about them. Meanwhile, the majority of the fish are sold to restaurants and chefs on shore who cook them in a variety of ways for the crowds that gathered for the fun activities that form part of the lionfish derby. I can tell you from experience that these derbys bring in a huge haul – the biggest usually tally around 1000 lionfish – and each and every one is delicious. Though even a light prick from the spines can produce an intense pain, it is usually not fatal to humans. The venom denatures when cooked and the flesh has no venom concentrations.
Lad Akins of REEF confirms that diving fishermen are effective at keeping down the population of lionfish at the sites they frequent, though there are still upwards of 300,000 fishin the Florida Keys alone. The Oregon State Zoologists suggest that the most effective method of management is actually limiting fishing of and providing marine reserves to the few species that can feed on the lionfish. I believe a combination of both of these methods would protect the reefs best. The presiding Floridian fishing authorities should work with the REEF and NCCOS centers to create permits that allow for a greater number of fishermen to bring in lionfish. Additionally, restrictions should be developed on fishing species that predate upon the lionfish and the fish that compete with lionfish for food. Though humans may be as voracious as the lionfish, we will need to develop new policies to keep their population in control and protect our reefs.
This post was written by Dani Replogle
Last March I learned (to my slight disappointment) that I would be spending the majority of my summer in Houston, Texas. Now, the point of this post is not to bash Houston, but there was one thing about that city that would prevent me from living there in the long term: the heat. The overwhelming heat index prevents outdoor activity from being even remotely attractive between the hours of 9am and 8pm. The frightening outbreak of West Nile virus has done nothing to make an evening jog more appealing. Perhaps that’s part of the reason that Texas is ranked by the CDC as of the most obese states in the U.S. Although Texas summers have never been a picnic, there are those who speculate that the weather and health risks are worsening due to our old nemesis, climate change.
The toughest part about this for me was driving down to my aunt’s beach house in Galveston, passing by oil rig after oil rig, and thinking to myself that these problems all lead back to this. Houston boasts an unemployment rate that is consistently lower than the national average, leading people to flock to Texas for jobs that are frequently in the lucrative oil industry. The emissions from this oil are part of the climate change problem that is plaguing not only our planet, but also our health and the health of our families.
Mitt Romney wants to focus on making the U.S. energy independent. I don’t wholeheartedly disagree with him, but his focus on increasing oil and coal production while reducing subsidies for cleaner energy technology is alarmingly shortsighted. If we want the U.S. to remain a leader in the international realm, both politically and economically, it is imperative that we be on the forefront of clean energy development. This means continued subsidies for solar, wind and bio-fuel development. The source of these subsidies should be obvious. It’s widely known that until last year the federal government provided huge subsidies to the agricultural sector to feed the corn industry. This policy is disastrous for the environment. A large part of this funding should be redirected toward clean energy development.
In the interim between lowering coal (still the largest source of electric energy production in the U.S.) and oil production and lowering costs for solar and wind infrastructure, the U.S. should focus on the already growing natural gas industry to pick up the slack. “Fracking” is still a controversial topic, but as a short term solution there’s no arguing that natural gas is the lesser of two evils when compared to coal. Supporting fracking also provides a way to quiet the roar that the farm lobbyists are justifiably making by incentivising farmers to grow guar beans, a crop used in fracking fluid that natural gas companies are scrambling to buy.
The natural food movement already has a growing number of followers that could only be increased by federal propaganda. Instead, federal government regulations openly state that they make small-scale, organic farming very difficult. By growing guar organically, we would not only offset some of the negative consequences of burning natural gas, but also support the displacement of industrialized farming with greener, healthier organic farms. Struggling organic farms could use revenue from their guar crop to further promote themselves, eventually making economically unsustainable government subsidies unnecessary. For Republicans, this plan offers less dependence on Middle Eastern countries that are currently the primary guar exporters. Best of all, guar is a resistant crop that can withstand arid conditions. If this summer’s trend continues arid conditions are what farmers, and the rest of America, will be up against in the coming years.
The new Farm Bill is the perfect opportunity to finally attack agriculture’s contribution to climate change, but nothing will ever be done if our government continues to be bullied by industrial farm lobbyists and impeded by a system that discourages revisiting bills. Fracking isn’t a forever solution by any means, but I believe that it can play an important role in a long term plan that will build cleaner farms, promote energy independence and encourage green technological development. These issues are all connected, and the Farm Bill provides a way to deal with them comprehensively- if our leaders have the guts to stand up to both big business and hardcore environmentalists and do what is necessary. Environmental ethics aside, it is absolutely necessary that our policy adapts to combat climate change for the sake of all American interests.
Post Written by Lauren Martin
Americans anxiously anticipated the arrival of Hurricane Isaac, a Category 1 storm that killed 7 people, flooded regions of Louisiana, and dumped more than 20 inches of rain in some areas this past week. Every time there is a hurricane, CNN, MSNBC, and FOX show 24-7 coverage of what Jon Steward calls “Hurricane Porn.” Hurricane Isaac intrinsically roused memories of recent disasters in the Gulf Coast, including Hurricane Katrina and the BP Oil Spill, accentuating the media flurry that enveloped the nightly news. Natural disaster activity in the Gulf Coast over the past decade has become increasingly politically charged and particular attention to presidential nominees in this campaign season dictated a lot of what is reported on in the media. The real question at hand is if this is just voyeuristic ‘disaster porn’ or is there a substantive policy reason or set of reasons to be focused on gulf hurricanes?
So, how does Hurricane Isaac relate to Mitt Romney and President Obama’s campaign anyway? The media and general public have routinely scrutinized Presidents for their response to natural disasters. Whether it be applauding Herbert Hoover in the Mississippi Flood of 1927 or questioning why President Bush flew over the damages of Hurricane Katrina in 2005 instead of touching down, the public eye looks upon the leaders of our country with heightened awareness in times of need.
Governor Mitt Romney visited Louisiana August 31, while President Obama visited on New Orleans the following Monday. While both candidates deviated from their campaign trails to evidence their empathy for those suffering Americans in need of assistance, it gave them yet another seemingly “apolitical” topic that already attracted enough media attention that a public brawl must ensue.
Official press direct from the White House Press Secretary Jay Carney examined Isaac’s damages with barely any mention of the Hurricane with his statements: “It is worth noting that last year there was an effort to underfund the money that’s used to provide relief to Americans when they’ve been hit by disasters..and that effort was led by Congressman Paul Ryan”. The media soaked this up but Carney couldn’t revel in his condescendence of Ryan too long before representatives of the Ryan-Romney campaign refuted these claims by describing their disaster relief platform as “a critical obligation and should be treated as a high priority within a fiscally responsible budget”.
Hurricane Isaac allows candidates to temporarily elevate natural disasters as an aspect of each respective candidates’ campaign agenda. Although it can highlight the divergence between their policies, it has no lasting fortitude when people step into their offices on Monday and Hurricane Isaac crawls form front-page news to an afterthought by Friday for many Americans.
I agree that leading up to the Presidential Election, how could Hurricane Isaac not become politically charged? But, as the hurricane porn subsides, I’ll tell you what you missed. Hurricane Isaac encapsulates important economic and environmental components that should mean more to Americans that ending up in the back pages of the Wall Street Journal.
Everyone loves to talk about “risk management” in our economy. Well guess what, the environment poses incredible risks to our economy. Every natural disaster impedes the intrinsic workflow of local activity. Hurricanes have economic implications that stretch far greater than their geographical regions. Paradoxically, not all of these implications negatively affect our economy, as rebuilding after the hurricane can actually be a boon for economic growth particularly in the construction industries.
However, in the short-term, analysts predict that there are damages in gas prices and economic growth. The halt of oil and natural gas production is forecasted to cause more than a $750 billion loss, which is 0.1 percent of annualized real GDP growth. The G7 called for a lift in oil production to negate this lack of supply, which bolstered up crude oil prices for a brief period.
There are several environmental implications of hurricanes in the gulf. One concern is that recent perceived increases in hurricane activity are a sign of global climate change. The United States Global Change Research Fund found that “hurricane intensity and associated storm surge will be among the most serious consequences of climate change”. (www.globalclimatechange.gov/usimpacts) These findings forecast that lower topographical regions where sea level is rising will be more frequently and intensely affected, especially on account of greater loss of land-mass, which serves as a buffer for coastal areas.
In contrast, however, some were hopeful that Hurricane Isaac could help alleviate the present nation-wide drought, affecting roughly 63% of the continental US, although it failed to sufficiently do so.
Finally, years hurricane can reduce hypoxia (low oxygen) conditions in the Gulf. The hypoxic zone, or dead zone, in the Gulf is a seasonal phenomenon that results from nutrient runoff from Midwestern agriculture, hot summer temperatures, and lack of mixing among strata in the water column. Hypoxia has potential impacts on shrimp and oyster harvest in the U.S. Hurricanes cause mixing among strata in the water column which can temporarily increase oxygen levels and reduce the size of the dead zone.
So, there you have it. The real affects of Isaac in the midst of the captivating and enthralling hurricane porn you have been watching on CNN, MSNBC, and FOX
First blog post of the new semester is by our newest environmental economics faculty member, Professor William Pizer of the Sanford School of Public Policy and the Nicholas Institute for Environmental Policy Solutions.
Last week I gave a talk to the Orange/Chatham County Sierra Club on this topic. Since the disaster at the Fukushima Daiichi Nuclear Power Plant last spring, there appears to be a global retreat from nuclear power. Countries planning to expand nuclear power are reconsidering and countries that were already uncomfortable with nuclear power – namely Germany – have made plans to phase it out. What does that mean for climate change? Can we successfully address the threat of climate change without leaning on nuclear power?
To address this question, I first looked at a number of stabilization scenarios produced by various modeling teams over the last few years to see what they said about the potential role of nuclear power and then tried to understand what their analyses implied about both costs and other consequences. Here, stabilization scenarios represent views by various experts about how we might limit atmospheric concentrations of greenhouse gases to certain levels, thereby limiting the impacts of climate change. There are a wide range of views about the appropriate or achievable stabilization level, but they can be loosely grouped in terms of whether they target 450, 550, or 650 ppm (parts per million) of carbon dioxide equivalent concentrations. Carbon dioxide “equivalent” (or CO2e) references the inclusion of other greenhouse gases, expressed in terms that can be added to concentrations of carbon dioxide (CO2). Again, roughly speaking, this amounts to best guess warming of 1.5, 2.5, and 3 °C of average global warming (see discussion here).
Before talking about the specific implications for nuclear power, it is useful to first note that these stabilization scenarios have fairly dramatic implications for fossil fuel use generally. 450 ppm CO2e scenarios imply that global emissions CO2 emissions, which are otherwise forecast to perhaps double by 2050 (see slide 8), need to fall by 50% or even more. 550 ppm CO2e scenarios imply 2050 concentrations that are roughly the same as today, and 650 implies maybe a 50% increase (see slide 6). Because emissions are roughly proportional to fossil fuel use, this implies dramatic consequences for energy use around the world.
What kind of consequences? Generally, four. (1) Less energy use overall; (2) More renewables; (3) More nuclear; and (4) Carbon capture and storage (CCS), where fossil fuels are burned and the CO2 is captured and pumped deep underground. The first two consequences are important, but limited. Energy conservation can help countries that use too much energy per capita, but cannot address the needs of growing countries with large development needs. Currently, 39% of the world’s population does not have access to basic energy services (see slide 9).
Non-biomass, non-hydro renewables – solar and wind – are an important piece of the puzzle, but are limited because of their intermittency. This implies higher costs, because backup power needs to be available, but also penetration limits because of stability issues. Large scale hydroelectric power allows storage, but frequently has adverse environmental impacts (e.g., this report). New developments in biofuels are promising, but raise issues with a potential food-fuel trade-off (see, for example, these essays) as well as land-use and lifecycle emission issues. This leaves two large potential sources of low-carbon emissions: nuclear and fossil with CCS.
We see exactly these two technologies, along with non-biomass renewables, dominating power generation in the scenarios produced by a recent analysis under the U.S. Climate Change Science Program (slide 15). This 550 ppm CO2e global analysis was carried out by 3 of the top modeling teams in the United States. What is interesting is that the two technologies play different roles in the three studies. The MIT team, for example, assumed that nuclear power was constrained to current levels by political and/or proliferation concerns. Meanwhile, the Stanford and Maryland models assumed nuclear power more than doubles by 2050.
A more recent study by the International Energy Agency (IEA), in its World Energy Outlook 2011, had nuclear more than doubling by 2035 in a 450 scenario (slide 10). But their study, which came out after Fukushima, also considered a “low nuclear 450 scenario” where nuclear power actually falls by 50% in 2035 (slide 13).
Finally, in a 2009 analysis of H.R. 2454, the domestic climate change bill passed by the U.S. House of Representatives, the U.S. Energy Information Administration considered a “limited technology” scenario where both capture and storage and nuclear technologies were assumed to be 50% more expensive. While the base case for H.R. 2454 showed nuclear power in the United States doubling by 2030, the “limited technology” case had nuclear power staying at current levels (slide 16).
So at this point, I think it is fair to make two observations. First, stabilization of greenhouse gases at the more ambitious levels envisioned by most scientists will require significant limits if not absolute reductions in carbon dioxide emissions over the next half-century even as energy use rises to meet development needs in emerging economies. Second, significant reductions will lean, to a large extent on nuclear power or capture and storage technologies, along with non-biomass renewables – but the exact amount remains an open question. Generally, less nuclear means more CCS, and vice-versa. Solar and wind are important, but become problematic at high penetration levels due to intermittency.
My final question is what does this mean for costs. The IEA study indicated that their low nuclear 450 scenario only raised costs by 10 percent compared to the ordinary 450 scenario. The EIA study, where both CCS and nuclear were limited, raised allowance prices by almost 100 percent holding other policy variables equal (e.g., comparing the “limited technology/limited international offset” case to the “limited international offset case” in slide 20). While these are just two data points, the lesson is this: limiting nuclear power is not impossible and perhaps not even that much more expensive – but it puts a lot more pressure on other technologies, notably CCS. Without nuclear and CCS, it becomes a lot harder if not impossible to achieve greenhouse gas stabilization.
Ultimately, each of these choices involves troubling risks that are difficult to quantify. Climate change, nuclear power, and CCS – pumping billions of tons of carbon dioxide deep underground – all pose risks that we would prefer to avoid. But we cannot avoid all of them, and putting an absolute premium on avoiding one risk only exacerbates the other risks. While the choice is not really “nuclear power or climate change,” thanks to CCS and other options, prudent policymaking will require a careful balancing of multiple risks.
Last Thursday, I had the pleasure of listening to Hunt Alcott, Assistant Professor of Economics at NYU, present some new work on the impact of taxation when consumers are inattentive to certain types of price signals.
Earlier in this course we learned about different types of taxes: corrective taxes that “correct” a market failure and increase social welfare and distortionary taxes that raise revenue, but decrease social welfare. Dr. Alcott and co-authors’ provocative hypothesis is that when consumers make mistakes in thinking about different types of prices, you can construct taxes that are not corrective, but nonetheless increase social welfare. Literally, you are taxing people to make them better off. This is “We’re from the government and we’re here to help” taken up a notch.
To understand this hypothesis we need to define the particular type of mistake that consumers are making. This mistake is what the authors call “inattention.” Drawing on the literature, they argue that people are often more price responsive to purchase prices than to other implicit prices or ancillary costs. For example, people are more responsive to purchase price than shipping and handling costs or sales tax rates. They argue that the long run fuel costs associated with operating a vehicle are similar ancillary costs and consumers may be inattentive to these costs when making their car purchase decision.
Under these circumstances, taxing gas-inefficient vehicles, or implicitly taxing them through a CAFE standard, can actually make inattentive people better off. The tax increases the relative purchase price of the gas-guzzler and decreases the relative purchase price of the fuel-efficient car. The tax distorts relative prices in a way that makes consumers recognize the long-term costs of operating the vehicle (which they would otherwise be inattentive to) by embedding them in the upfront purchase cost. The increase in social welfare from this type of “internality” tax holds even if there are no externalities (carbon emissions etc.) from the burning of the additional gasoline.
To say that taxing people to make them better off is politically infeasible (and undesirable) is an understatement. But the idea that people make mistakes in trading off current costs and longer terms costs is well-established in the literature. It is worth thinking of less paternalistic ways to help people make tradeoffs that ex post, they would agree made them better off. The authors offer four broad categories of such policies all of which try to target the policy to customers most likely to be inattentive. While any of these may work theoretically it is often quite difficult to target customers who are inattentive. How do you tell if a customer is inattentive to gas prices or really just likes trucks?
Full paper: Allcott,Hunt, Sendhil Mullainathan, and Dmitry Taubinsky “Externalizing the Internality“
I grew up in Wyoming and my interest in environmental economics stems from three distinct tensions between the environment and the economy of Wyoming. The first was that many people in my town made their living from extracting coal. The second was controversy over the “let it burn” policy during the severe wildfire in Yellowstone in 1988. And the third was the controversy over reintroduction of the gray wolf into Yellowstone which is the focus of this week’s blog.
Reintroduction of the gray wolf began in 1995, but the original proposals date from the mid-1980s (when I was in high school and many of you weren’t born—yes, I’m that old). 66 gray wolves were reintroduced in 1995.[i] The Fish and Wildlife Service originally set a goal of 150 wolves with 15 breeding pairs.[ii] By 2007 the wolf population in the greater Yellowstone area had reached 1,513.[iii] The Fish and Wildlife service recommended that the wolf be delisted from the set of species protected under the Endangered Species Act (ESA) in Idaho and Montana, but retain federal protection in Wyoming. Conservationist balked and took to the courts, where Judge Donald Malloy (U.S. District Court, Missoula, MT) held that the species had to be listed under the ESA in all states or in none.[iv] In the end, Congress added a rider to a budget bill that delisted the wolf in Idaho and Montana and Judge Malloy upheld that congressional action.[v] Game-Set-Match.
A similar struggle is currently underway with respect to delisting the grizzly bear. Fish and Wildlife recommended the bear be delisted, and it was actually delisted from 2007-2009.[vi] But conservation groups again headed to court and won a partial victory. Judge Malloy (same judge) determined that Fish and Wildlife hadn’t adequately studied the potential effects of a decrease in white pine bark on the grizzly bear or established a sufficient recovery plan if the bear population should decline rapidly.[vii] On November 22, 2011, the appeals court upheld Judge Malloy’s ruling.[viii] So the grizzly bear is back on the endangered species list awaiting further review by Fish and Wildlife or further congressional shenanigans.
The striking similarity in these two cases suggests the debate is not over the science of endangerment; over whether the decrease in the white pine bark will really endanger the grizzly bear. This is a battle over control. As long as the gray wolf or the grizzly bear are listed under the ESA, their management is under federal control. If they are delisted, management returns to the states. And these are RED states. Conservationists feel as though state management plans will not reflect their values and will lean to heavily toward ranchers’ preferences. Indeed, since delisting the wolf, Montana and Idaho have introduced hunting licenses for wolves, which sold out quickly.[ix]
Economics can help here because it presents an alternative mechanism for the conservationists and the ranchers to reach mutually beneficial agreements. Ranchers have always been compensated for cattle whose death can be linked to wolves. Some ranchers argue that the value of the lost cattle doesn’t capture the full cost of the wolves on cattle populations.[x] But a market-based solution to this problem could go much further than compensation for cattle losses.
Imagine you give hunting permits for wolves to ranchers as a function of the historical number of cattle lost to wolves. Then ranchers can sell or buy additional “kill licenses,” they can even sell them to (gasp) conservationists. The rancher places some value on that kill license, based on the expected damages from one wolf. Conservationists place a value on the license too which is based on the value they have for one additional wolf surviving. Let the market sort out who values the wolf more. Could it be any worse than Congress?
[i] Kaufman, Leslie November 4, 2011.“After Years of Conflict, a New Dynamic in Wolf Country,” New York Times. Available at: http://nyti.ms/tYsGWW. Last accessed November 29, 2011.
[v] Remillard, Ashley J. August 5. 2011. “Federal Judge Upholds Legislation Delisting the Gray Wolf.” Endangered Species Law and Policy. Available at: http://bit.ly/sQYLmo. Last Accessed: November 28, 2011.
[viii] Huang, Audrey. November 22, 2011. “Ninth Circuit Affirms Lower Court Decision for Strike Rule Delisting Grizzly Bears” Endangered Species Law and Policy. Available at: http://bit.ly/utNmAO. Last accessed: November 28, 2011.
Imagine you are in the market for a new light truck. Let’s say it’s a new Ford Explorer. You go to your favorite Ford dealer and the helpful salesperson tells you that she has two 2011 Explorers with identical performance and features. One of these cars costs $2000 more and gets 49.6 mpg, the other gets 27.5 mpg. You are the type of driver who buys a new car with cash every 10-12 years and drives it into the ground. So you do some quick calculations using a 7% discount rate and figure that you will save nearly $5,200 in gasoline over the life of the car. That’s a net gain of $3,200 over the life of the car. Moreover, you will recoup your additional expenses in the first four years of ownership. Your friend who is shopping with you, finances all of his vehicles. But you run the calculations for him and discover that even if he finances the car over 60 months, he will save $12 per month during the loan period.
If this deal sounds good to you, you are in luck. This is exactly the deal that the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) claim to be offering in their newly proposed regulation for increased fuel efficiency standards, laboriously titled “2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards” [FactSheet, Full Notice of Proposed Rulemaking (800+ pages)].
The goal of the proposed NHTSA rule is to increase the average industry fleet-wide fuel economy for cars and light trucks to 40.1 mpg by 2021 and to 49.6 mpg by 2025. The simultaneous rule by EPA, which is based off the fuel economy standards proposed by NHTSA, limits greenhouse gas emissions from vehicles to 163 grams per mile (g/m) by 2025. The claim is that these standards can be met and in so doing, consumers will actually save an average of $3,200 per vehicle over the life of a new car. We are from the government and we are here to help!
There is a lot of flexibility built into this rule. There are options to earn credits for over-compliance, which can both be carried forward (banking) and carried back (borrowing). There are allowances for credit transfer between cars and light trucks and even credit trading across manufacturers. There is also plenty of flexibility built into the GHG standards allowing for credits for air-conditioning improvements, off-cycle improvements, an electric vehicle multiplier, and credits for hybridization of full size trucks. All of these sources of regulatory flexibility should lower the costs of attaining the standard and allow each manufacturer to attain the standard in a cost-effective way given its fleet.
Still, the presentation of benefits and costs suggests a free lunch. Actually, a lunch that you are paid $3,200 to eat. Even with all of these cost-lowering flexibility measures, this seems hard to swallow. And it should be, because it is wrong.
To see why the costs are much higher than the analysis suggest, image you are back at the Ford dealer. The salesperson presents a new 2011 Explorer, which gets 27.5 mpg and tells you that this car retails for $22,000. Then she shows you a 1997 model-year Ford Explorer that has never been driven or owned (the odometer reads 0), but this 1997 Explorer has been tweaked to get 49.6 mpg. She’ll sell you this modified 1997 model Explorer for $24,000. What do you choose? Many of you will get the 2011 model with the worse gas mileage. Some of you might buy the 1997 model car with the better gas mileage, but clearly your cost is not just $2000. It’s the monetary costs ($2,000) plus the difference in performance/features between the 1997 and the 2011 model.
What the benefit-cost analysis conducted by NHTSA and EPA says is that by 2025 the car manufactures can produce a car that has the same performance as 2011 cars on the market today, but gets double the gas mileage. This car will cost $2,000 more than cars sold today. But nobody expects that absent this regulation 2025 models will perform like 2011 models. We expect innovation in performance, features, safety, etc. The real cost of the regulation is how much of this we will give up between now and 2025 in order to get a doubling of the fuel economy of vehicles.
I have blogged before about my frustration that the right insists that all regulation is job-killing. But I’m equally frustrated when the left insists that regulations are costless. Maybe doubling fuel economy is a good idea. Maybe the benefits to us of reduced carbon emissions, reduced oil consumption, increased national security, are worth trading off more horsepower, torque, or other features. Maybe not. But that is what a benefit-cost analysis should be helping us decide. We want jobs, economic growth, clean air, clean water, good schools, etc. The challenge is how to balance out those competing desires with our limited resources. It may not be a great sound bite, but it is the truth.
This week, I’m featuring a guest blog by my colleague, Dr. Jeffrey Vincent, the Clarence F. Korstian Professor of Forest Economics and Management at the Nicholas School of the Environment at Duke University.
Most people would agree that it’s a good thing to improve governance: to make governments more accountable, bureaucracies more efficient, corruption less common, and property rights and the rule of law stronger. Most people probably wouldn’t think about the effect of improved governance on the environment, but people in the environmental policy community do, and they think it’s good, too. The forest sector has been the focus of most of this attention. Over the last decade, a raft of international organizations have launched initiatives to improve law enforcement and combat corruption related to forest resources. If you haven’t heard of these initiatives, it might be because many are under the banner of one of the worst acronyms ever written: FLEGT.
There’s empirical support for the idea that improved governance can reduce deforestation. In 2000, UC Santa Barbara economists Henning Bohn and Bob Deacon published a paper in the American Economic Review that investigated the relationship between deforestation and ownership risk in 62 developing countries. They found significant evidence that countries where ownership risk was higher lost forests more rapidly between 1980 and 1985 than countries where this risk was lower.
One of my hobbyhorses is the belief that deforestation is caused by logging. This seems logical—if you cut down trees, then there’s no forest left, right?—but it forgets the fact that a forest is a renewable resource that has the ability to recover from disturbance. Although logging can sometimes lead to the permanent loss of forest cover, in most cases deforestation results not from demand by loggers for trees, but rather from demand by farmers for the land the trees grow on. When I heard Bob Deacon present a draft version of the AER paper at a seminar at Harvard in the late 1990s, I immediately began wondering whether the results applied to logging. Does improved governance reduce timber harvests, and not just deforestation?
An even earlier (1985) paper by another University of California economist, Hossein Farzin at UC Davis, in the Journal of Political Economy contained results that suggested the answer might not be yes. One of the two most important ideas in resource economics is Hotelling’s Rule, which implies that a higher discount rate causes resource users to shift extraction toward the present—to accelerate resource depletion. (You’ll need to guess the other idea. Hint: think “Tragedy of the Commons.”) Farzin pointed out that while this was true for a user who had already made the investment required for extraction, the opposite could be true for a potential user still deciding whether to invest. In the latter case, a higher discount rate would reduce the present value of profits from resource extraction, and this could reduce investment. With less investment, there would be less extraction. So, a higher discount rate has opposing effects on resource extraction, and the net effect can be either positive (extraction increases, if the Hotelling effect is stronger) or negative (extraction decreases, if the investment effect is stronger).
What does this have to do with governance? Improved governance reduces risk, and reduced risk reduces the discount rate. So, we can expect improved governance to mirror the effect of a reduced discount rate and to have opposing effects on timber harvests. In 2010, a decade after the Bohn and Deacon paper (research takes time!), my former PhD student Susana Ferreira (now at the University of Georgia) and I tested this hypothesis in a paper, “Governance and Timber Harvests,” published in Environmental and Resource Economics. We compiled annual data on timber harvests, governance, and other variables during 1984-2006 for 67 developing countries. The panel structure of the data enabled us to control for unobserved differences across countries that could potentially confound the effects of governance. If you take Prof. Bennear’s course, ENV 350, “Program Evaluation,” you’ll learn how to do this.
Consistent with Farzin’s paper, we found that improved governance sometimes reduces timber harvests but other times raises them. Interestingly, it tends to raise them in countries with the worst governance. In those countries, where corruption is the most pervasive and law enforcement the weakest, investment in the equipment, roads, and mills or port facilities required for logging is evidently so depressed that it outweighs the Hotelling effect, with the net effect being to reduce timber harvests. Improving governance reverses this and causes harvests to rise.
This is a disconcerting finding for organizations that are promoting improved governance in the forest sector. It suggests that their efforts could wind up raising timber harvests in the very countries they are most concerned about. Now, higher timber harvests provide some important economic benefits, such as increased employment, government revenue, and foreign exchange earnings. These organizations believe, however, that timber harvests are already excessively high and are causing undue environmental harm. Our results suggest that cleaning up governments could make these problems worse.
This is not to say that improving governance is a bad thing. Improved governance provides other benefits, and our results imply that it can indeed be expected to reduce timber harvests in countries with relatively stronger governance. The important lesson is that policy interventions can have unintended consequences. If this is known in advance, then it might be possible to modify the interventions to manage those consequences. In the case of timber, such modifications could include more careful monitoring of logging investments and logging activity. Just improving governance is not enough.