Cap-and-trade schemes and price increases

Bike and brick wall

An exciting element of the new American administration’s climate change agenda is the promised cap-and-trade scheme for greenhouse gas emissions. During the campaign, Obama pledged that the system would auction 100% of the permits. The government would issue a set number of permits each year, which firms would need to bid for competitively. That way, the price of permits would be established through a market mechanism and whatever opportunities existed to mitigate emissions for a lesser cost would be captured. The revenues from the auctions could be used in various ways.

One big rhetorical counter-argument, employed largely by those seeking to stall the regulation of greenhouse gasses, is that this will increase consumer prices. At least when it comes to greenhouse gas intensive products, this is necessarily true in the short to medium term. The whole idea behind carbon pricing is to alter the relative cost of high-carbon and low-carbon goods: encouraging people to switch from the former to the latter, and generally minimize the consumption of high-carbon goods altogether. Prices are an important mechanism through which this information is conveyed. Also, the existence of a significant and rising cost of carbon is necessary to drive the kind of investments required to produce a low-carbon society.

There are a number of important responses to the point about raising prices. Firstly, it is important to highlight how the transition to a low-carbon economy is necessary and one-off. Putting society on a sustainable footing is a huge task, but also one of humanity’s biggest opportunities. Managed properly, our response to climate change can establish key parts of the foundation for a sustainable society. Secondly, it is key to realize that energy companies will pass along the cost of permits, even if they receive them for free (this previous post explains why). This leads to the third point, about the importance of where the funds go. In a system where permits are ‘grandfathered’ and given to power plants and industrial facilities for free, the price increases will translate into profits for those polluting firms. Cap-and-trade revenues, however, go into the public coffers. They can then be used to help individuals deal with the difficulties of economic transition, reduce taxation elsewhere, and help fund green infrastructure projects.

The 100% auction plan is certain to face stiff opposition in Congress. In spite of that, it is very much worth putting through. It is far better to get a weak but decently-designed system in place, ready to be tightened up later, than introduce something that is compromised from the start. Putting a small but real price on every tonne of emissions is thus better than entrenching a system of free emissions for favoured firms, even if non-favoured firms face higher initial carbon prices. Here’s hoping the Obama administration has the resolve and skill required to really kick off America’s urgent transition towards carbon neutrality.

Regulating dirty coal in the US

Concrete spiral staircase

The New York Times is reporting on how the Obama administration in the US is going to propose new regulations on the wastes from coal combustion, including coal ash of the kind that spilled so dramatically in Tennessee, causing $100 million in damage. The wastes contain toxins like arsenic, mercury, and lead at higher concentrations than in previous decades, partly because the scrubbers used to keep these toxins out of the plant’s air emissions lead to them ending up in the ash instead. In 2006, the National Research Council of the National Academies researched the mean concentrations of toxins in the ash: arsenic (43.4 ppm); barium (806 ppm); beryllium (5 ppm); boron (311 ppm); cadmium (3.4 ppm); chromium (136 ppm); chromium VI (90 ppm); cobalt (35.9 ppm); copper (112 ppm); fluorine (29 ppm); lead (56 ppm); manganese (250 ppm); nickel (77.6 ppm); selenium (7.7 ppm); strontium (775 ppm); thallium (9 ppm); vanadium (252 ppm); and zinc (178 ppm). In 2007, the National Academy of Sciences concluded that: “The presence of high contaminant levels in many CCR (coal combustion residue) leachates may create human health and ecological concerns.”

At present, coal ash facilities are regulated far less stringently than landfills for municipal waste, despite how they are fundamentally more hazardous. The new regulations will aim at preventing spills, as well as the leaching of toxins into the water supply.

It just goes to show that, even with effective carbon capture and storage technology, coal will probably never be a clean source of energy. By the time coal-fired power stations are required to mine, burn, and dispose of coal in a more environmentally benign manner, the cost advantages associated with coal are likely to vanish as well.

Alberta’s economic slowdown

According to The Globe and Mail, the economic situation in Alberta has recently worsened considerably. Major causes include the drop in oil prices and reduced access to credit.

While the slowdown will almost certainly reduce the pace of development in the oil sands, it may also deepen the political resolve to pursue growth at any cost. Whatever the economic future holds, a deep conflict will remain between Canada’s stated greenhouse gas mitigation goals and ambitions for Alberta to be an even larger fossil fuel producer.

The magnitude of climate change energy flows

Colourful bar image

Some statistics from Oliver Morton’s book on photosynthesis illustrate just how massive the energy flows involved in climate change already are. Anthropogenic climate change has increased the amount of solar radiation being retained by every square metre of the planet’s surface by 1.66 watts. In total, that is equivalent to 850 trillion watts (terawatts, TW) of power.

By comparison, a large nuclear reactor produces about 1 gigawatt (GW) of output, 1/1000th of a TW. The total energy usage of humanity (power plants, vehicles, etc) is 13 TW. At any average moment, we are therefore experiencing about 65 times more climate change power than power intentionally employed by human beings. A comparison that may be even more startling is with the flow of heat from the Earth’s core outwards – the power that drives volcanism and continental drift. That energy flow is only 40 TW – one twentieth of the climate change we have already generated.

Of course, if we keep emitting at the present rate, we will increase the 1.66 watt per metre and 850 TW numbers considerably. It is vital to understand that these numbers arise from the amount of greenhouse gasses in the atmosphere, not the amount we emit in any particular year. As such, all increases are effectively permanent, at least from the perspective of centuries. That is something to remember whenever somebody talks about ‘stabilizing emissions.’ Doing so only stabilizes the rate at which these energy statistics are increasing.

Threats from war and climate change

Bridge undercarriage, Ottawa

Some threats to society strike people as so severe they justify employing large numbers of people, at taxpayer expense, to mitigate them. Chief among these is probably the danger that foreigners will try to kill us. Largely to combat this, Canadians pay for 65,251 active military personnel and 24,300 reservists. We also contribute a bit more than 1% of our gross domestic product.

At best, the operation of these institutions will leave us as well off as we are now. The money spent on bombs and military vehicles is primarily expended so as to minimize the risks associated with being attacked (though domestic industry and humanitarian concern are also factors).

Now consider climate change: probably the greatest threat facing humanity in the foreseeable future. I can’t tell you exactly how many taxpayer-funded agents are working on the problem, but it is certainly a very small fraction of the armed forces total. Should that number not be increased, so as to bring the allocation of resources more closely in line with the suite of threats we face? The case becomes even stronger when you recognize that climate change workers (say, people performing free building retrofits) have all the advantages of soldiers, plus additional benefits. Climate change mitigation is a humanitarian activity – the faster we bring emissions down to a sustainable level, the less suffering will occur in future generations worldwide due to the effects of climate change. Climate change mitigation and adaptation can have domestic economic benefits: not only do efficient buildings have lower year-on-year costs for heating, cooling, and lighting but they may also make those who live and work in them happier and more productive.

The idea of employing, say, 10% as many people to fight climate change as to fight foreigners is not entirely unproblematic. Providing free retrofits might undercut the businesses that perform such operations for profit now. That being said, I am sure careful policy design could minimize such problems. The biggest hurdle to overcome is the psychological block between facing the threat of climate change and employing people to combat it. Actually, rather than a block it might be more accurately referred to as the absence of a connection, between where our likely societal problems lie and where our societal resources are being directed.

Admittedly, you could achieve many of the same outcomes through market liberal climate strategies, such as carbon taxes and cap-and-trade schemes. The potential advantage of doing it through government labour is that the market liberal policies are hard to implement: firms often oppose them tooth-and-nail and convince voters that they will cause economic harm to them personally. Given the strength of entrenched interests, it would take remarkable political will to deploy the kind of market mechanism that would produce the required change at an acceptable pace.

Some outstanding questions jump to mind. Would a public climate change service be sensible or useful? What would such a service do? How could unfair competition with the private sector be addressed? Is there a politically feasible way to achieve the same outcomes with fewer problems or lower costs? All of these seem worth debating.

Note also that if you extend the 10% logic to the United States and China, you are talking about huge numbers of mitigation workers. The American armed forces comprise about 1.5 million people, with that many again in reserves. The US spends more than 4% of GDP on them. China has 2.25 million active personnel and 800,000 reservists. They spend about 1.7% of their GDP on them.

Eating the Sun: How Plants Power the Planet

Transitway station, Ottawa

Oliver Morton’s exploration of the nature and consequences of photosynthesis makes for a remarkable and informative book. It is divided into three sections: one covering the span of a human life and covering the scientific investigation of photosynthesis; one on a planetary timescale, describing the evolution of the climate, atmosphere, and life; and one on the timescale of a tree’s life, covering the changes humanity has induced in the carbon cycle, and the ways through which the climate change crisis can be overcome. The book is strongest when it comes to putting scientific information into a poignant and comprehensible form that is almost poetic. Arguably, it is weakest in terms of its analysis of what needs to be done in response to climate change.

Eating the Sun contains many sections that are highly technical: descriptions of the biochemistry of photosynthesis, the geological and climatological processes that have taken place over billions of years, the scientific methods through which both have been explored, and more. It can also be quirky, philosophical, and personal. For instance, there are asides in which the author explains his aesthetic preference for one or another scientific theory, such as how photosystems I and II in plants came to be integrated. The combination is not unlike that found in Michael Pollan’s work, where an educated non-expert with a talent for writing adopts the task of explaining technical issues and making their significance clearly felt.

The book features a great deal of discussion of the Earth as an integrated chemical and energy system, including consideration for many different forms of ‘Gaia hypotheses’ – most of them far less teleological than James Lovelock’s earliest work, which (probably wrongly) attributed a kind of agency to the planet as a whole. Of particular interest, among the non-telelogical variants, is combination of the anthropic principle with the idea of systems that self-regulate. It may well be that there are planets where physical and chemical processes do not remain constrained between life-compatible bounds over the long term. Of course, there are no living and intelligent observers on these planets to make note of them.

On climate change, Morton fails to appreciate the rapidity with which mitigation must occur. He contemplates what would be necessary to stabilize greenhouse gas emissions by 2050, whereas we will actually need to make great strides towards stabilizing concentrations by then. Rather than the seven Pacala-Socolow wedges required to produce a flat emissions profile, many more will be needed to begin the decline towards zero net emissions. His calm descriptions of global concentrations of carbon dioxide passing 500 parts per million (ppm), with associated temperature increases of up to four degrees Celsius, fails to portray what a catastrophic outcome this would be. These days, those committed to avoiding change of more than two degrees are advocating concentration targets around 350 ppm.

Morton’s discussion of mitigation technologies also offers scope for criticism; in particular, his discussion of nuclear fusion, fission, and hydrogen fuel cells is fairly superficial and fails to take into consideration some of the major limitations associated with each technology. In particular, he fails to consider the practical and economic issues associated with hydrogen as a fuel. That being said, he strongly makes the point that, in the long run, it will be necessary to move from an economy powered by the built-up solar reserves in fossil fuels to one largely powered by the current energy available in sunlight: whether that energy is directed towards the production of electricity, biomass, or fuels.

At times, the level of detail in Eating the Sun can be overwhelming. In particular, I found that some of the passages about biosphere-atmosphere interaction or long-term geological trends required close and repeated reading to be understood. For the non-practitioners at whom this book is aimed, such knowledge is not likely to be long-lasting. At the same time, by providing such clear and vivid detail, Morton grants a worthwhile understanding of the history and nature of the scientific processes through which we have uncovered so much about the world. As with the very best scientific writing, this book makes you feel both awed about the complexity and power of the world and impressed with the ingenuity that has gone into better understanding it. The book is highly recommended to anyone with an interest in the history of the planet, the nature of the carbon cycle, or science generally.

The irony of laissez faire climate policy

Half-built skyscraper

There are those who have adopted what amounts to a business-as-usual climate change policy – hoping that free markets and technological development will stabilize greenhouse gas concentrations at a safe level and deal with the consequences of the climate change that is already on the way, due to past emissions. While a lot of people take this position for self-interested reasons, I think there are at least some who adopt it in good faith. They look back at previous challenges, and situations where some people said a massive societal effort was required, and they see that the problems were less severe than advertised and that a muddled government response was adequate.

The great irony of taking this approach is that it is virtually certain to produce the opposite outcome from what its proponents are seeking. Right now, we have the chance to establish powerful incentives for critical voluntary actions: things like energy efficiency, stopping the construction of coal plants, and developing renewable sources of energy. Mechanisms like a carbon tax, feed-in tariffs for renewables, incentive programs, and the like are ways to encourage both private actors and firms to take these steps. If we fail to put those policies in place and we allow emissions to keep on rising for another decade or more, avoiding catastrophic climate change will only be possible through rigid controls: rationing, strict mandates, and major interventions in business and the lives of individuals. If we fail to take advantage of the time available for a smoothed transition to a low carbon economy, the transition will necessarily be a more abrupt and painful one.

The heuristic that says “we dealt with past problems, therefore we need not sacrifice economic liberty to fight climate change” leads, in all probability, to a situation where curtailing those liberties is the only road forward.

Rebuild the Orbiting Carbon Observatory

Morty and a blue wine glass

A week ago, NASA’s carbon dioxide (CO2) tracking satellite was destroyed en route to space by a faulty booster. The Orbiting Carbon Observatory (OCO) was intended to produce large numbers of measurements of the concentration of carbon dioxide in different parts of the atmosphere. In so doing, it would have helped to identify major CO2 sources and sinks – deepening our understanding of the carbon cycle under human influence. Given the destruction of the original instrument, I think the only sensible course of action is to rebuild it as quickly as can be managed and place it into orbit.

The original mission cost about US$280 million and took about nine years to reach a launch attempt. That being said, it stands to reason that building a second unit would cost less, given that the design and concept testing has already been done. We might also hope that a second unit could be assembled, tested, and launched more quickly. Even if a replacement would cost as much as the original, it would be less than $1 per American, far less per human being, and some tiny fraction of the cost of wars and bank bailouts.

As IPCC Chairman Rajendra Pachauri has said: “If there’s no action before 2012, that’s too late. What we do in the next two to three years will determine our future. This is the defining moment.” Satellite images of the ozone hole helped to propel international action to restrict the emission of CFCs. There is reason to hope that similar data on greenhouse gasses might generate an equivalent political push. Even if it doesn’t, and the data from the OCO remains under the exclusive scrutiny of geeks, it should give us a deeper understanding of how the basic chemical, physical, and biological systems of the planet function – and how human beings are researching them. That is information worth $280 million.

One could do as some have and point to the US$$400 million that NASA was granted in the American stimulus package, specifically for climate change research. One could also point to the fundamental wastefulness and irrelevance of manned spaceflight, given our current problems. Either way, the United States should scrape together the cash for a new satellite, and put it on a more reliable rocket this time.

Morton on the end of the carbon cycle

Golden sunset

Among many other things, Oliver Morton’s Eating the Sun discusses the carbon cycle across extremely long timespans. It highlights the existence of positive and negative feedbacks, which have historically constrained atmospheric concentrations of carbon dioxide to a particular range: with a high point established though increased emissions from volcanoes, and a low point established through the absorption of atmospheric carbon dioxide through the weathering of rocks.

The book predicts that, on the basis of astronomical and geological factors, this see-saw will eventually come to rest about a billion years from now: with the victory of erosion, and the permanent elimination of carbon dioxide from the atmosphere. As a consequence, photosynthesis will cease – for lack of building material – and the energy system that supports all complex life will collapse. Morton dubs this ‘the end of plants’ and the explanation of why it is to occur is difficult to compress into a blog post. It’s one of many reasons for which the book is worthwhile reading.

It’s a sobering perspective: akin to the knowledge that our sun will eventually fail, or that the Second Law of Thermodynamics and a universe expanding without end would combine to produce ‘heat death’ and an end to all chemical reactions everywhere.

That being said, it is essentially impossible for our minds to appreciate the meaning of a billion years, or anticipate how life (and humanity) would change across that span. Long, long before this final descent in the carbon cycle could be approached, we would have ceased to resemble our present forms; indeed, our current forms and future forms might not even be able to comprehend one another. After all, the Cambrian explosion, in which complex life forms like molluscs and crustaceans emerged, happened ‘only’ 530 million years ago.

Of course, even starting to approach that post-human future requires surviving the all-too-human threats we have created for ourselves, with climate change foremost among them. The billion-year carbon bust offers no prospect of avoiding the warming we are creating at the level of years and centuries. What Morton’s long-term perspective does offer, however, is a fairly strong assurance that life can adapt to most any set of climatic circumstances we might be able to create. Of course, ‘life’ writ large is far more adaptable and resilient than our present form of civilization, which may be quite impossible to propagate in a world where temperatures are more than 5˚C higher, on average, glaciers and icecaps are gone, the oceans are acid, and precipitation patterns have changed dramatically.

It is both startling and entirely possible that human civilization, for all its accomplishments, will prove less adept at responding to large-scale changes in climate than ancient sharks or turtles have done.

Climate change on the Globe and Mail wiki

The Globe and Mail has an initiative called Policy Wiki, in which they are trying to foster web discussions on public policy issues of interest to Canadians. The third topic they have selected is climate change. The site includes a briefing note by Mark Jaccard, of the Pembina Institute, and an analysis and proposal by David Suzuki.

Some of the sub-questions to be discussed include:

  1. How closely should Canada’s policies be linked to the US?
  2. Should our focus be bilateral or multilateral?
  3. What position should Canada adopt at the Copenhagen conference?
  4. How does the economic crisis impact actions on climate change?
  5. How will this impact Canadian industry?
  6. How many green jobs can Canada create?
  7. What added responsibility does Canada have as an energy superpower?

Most frequent commenters on this site are quite concerned with Canadian climate policy. As such, this might be an opportunity to discuss the issue with a broader audience. I personally plan to contribute, and would be pleased to see readers doing so as well.