Economics

Exaggerations in the pipeline
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Exaggerations in the pipeline

There are a lot of claims about the benefits that the Kinder Morgan Trans Mountain Extension (TMX) pipeline project will supposedly have for BC, and Canada generally. Recently, I listened to Alberta Premier Rachel Notley on the CBC the other day making her pitch, emphasizing the economic benefits for BC. Some of what she said made me immediately reach out to Google to try verify the claims she made. Along the way, I looked critically at some of the other assertions the pipeline promoters have made. In the interest of fairness, I’ll briefly mention some of the exaggerations of the pipeline opponents.

At the outset, let me say that I’m generally inclined to support Premier Notley. In particular, I’m an admirer of the Alberta Climate Leadership Plan that was put together by an expert panel led by University of Alberta economist Andrew Leach. This was a major step forward by an oil-producing province traditionally governed by conservatives. To be sure, the plan is insufficient to reduce emissions to safe levels, but there are yet no such plans enacted anywhere.

Show me one. Continue reading →

The Road to Two Degrees, Part Three: Equity, inertia and fairly sharing the remaining carbon budget
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The Road to Two Degrees, Part Three: Equity, inertia and fairly sharing the remaining carbon budget

Previously published at Skeptical Science on December 9th, 2015

In the first part of this series, I examined the implications of relying on CCS and BECCS to get us to the two degree target. In the second part, I took a detailed look at Kevin Anderson’s arguments that IPCC mitigation scenarios aimed at two degrees are biased towards unproven negative-emissions technologies and that they consequently downplay the revolutionary changes to our energy systems and economy that we must make very soon. In this last part, I’m going to look at the challenges that the world faces in fairly allocating future emissions from our remaining carbon budget and raising the money needed for climate adaptation funds, taking account of the very unequal past and present.

Until now, economic growth has been driven and sustained largely by fossil fuels. Europe and North America started early with industrialization and, from 1800 up to around 1945, this growth was driven mainly by coal. After the Second World War there was a period of rapid (~4% per year) economic growth in Europe, N America and Japan, lasting about thirty years, that the French refer to as Les Trente Glorieuses, The Glorious Thirty. This expansion was accompanied by a huge rise in the consumption of oil, coal and natural gas. After this there was a thirty-year period of slower growth (~2%) in the developed economies, with consumption fluctuations caused by oil-price shocks and the collapse of the Soviet Union. During this time, oil and coal consumption continued to grow, but not as steadily as before. Then, at the end of the twentieth century, economic growth took off in China, with a huge increase in the consumption of coal.

Source of the emissions data is from the CDIAC. See the SkS post The History of Emissions and the Great Acceleration for further details.

If we are to achieve a stable climate, we will need to reverse this growth in emissions over a much shorter time period, while maintaining the economies of the developed world and, crucially, allowing the possibility of economic growth for the majority of humanity that has not yet experienced the benefits of a developed-country middle-class lifestyle.

Here are the the annual emissions sorted by country and region:

From Chancel and Piketty (2015) Continue reading →

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So long, Keystone XL

After an approval process that lasted longer than World War Two, President Obama finally said “No” to the Keystone XL pipeline.

This is undoubtedly a major victory for climate activists who had a lot staked on the outcome. Obviously, this is a defeat for the oil sands industry, but it is also something of a blow to the Serious People who are in favour of action on climate, but who consider protesting against the construction of infrastructure to be naïve at best and, at worst, a counterproductive distraction from the real action of international negotiations and policy wonkery.

If you haven’t done so already, read David Roberts who writes most of what I’m going to, but does it better.

What the Serious People say

  • One pipeline is not going to make much difference to global emissions.
  • Oil sands’ emissions have been overstated.
  • Coal.
  • What matters is reducing demand, not restricting supply.
  • There are transportation alternatives to pipelines, like railways, and they are more environmentally risky.
  • It’s a distraction.

This is all true, more or less. But it is also beside the point. Continue reading →

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The thermometer needle and the damage done

 

A recent paper published in Nature by Marshall Burke, Solomon M. Hsiang and Edward Miguel Global non-linear effect of temperature on economic production argues that increasing temperatures will cause much greater damage to the world economy than has been previously predicted. Furthermore, these losses will be distributed very unequally, with tropical countries getting hit very hard and some northern countries actually benefitting.

Let me attempt a highly simplified summary to explain what they did. I’m not an economist and their analysis is not straightforward, so beware. If I confuse you, try Dana Nuccitelli’s take or Seth Borenstein’s or Bloomberg’s.

Firstly, Burke et al. looked at factors like labour supply, labour performance and crop yields and how they relate to daily temperature exposure. Generally these show little variation up to temperatures in the high twenties Celsius, at which point they fall off quickly. Secondly, those trends were aggregated to predict the relationship between annual average temperatures and the annual impact on economic output. Thirdly, they looked at annual economic output and average annual temperatures for individual countries for the period 1960-2010. Note that they only compared the economic effects of temperature change on individual countries, they did not correlate one country with another. They were able to see how the observations compared with their predicted aggregate curve.

2015-10-28_11-43-09

From Burke et al. (2015).

This work showed that the GDP of countries with an annual average temperature of 13°C were the least sensitive to temperature changes. Colder countries on the left side of the hump would benefit from an increase in temperature, whereas warmer countries would see their output suffer as temperature increases. Note that the figure does not show that a certain temperature predetermines the level of wealth of a country (China, despite recent rapid growth is poorer than the US and Japan even though average annual temperatures are similar). Rather, it illustrates how susceptible countries are to increases or decreases in productivity relative to their annual average temperature.

There is some evidence that rich countries are slightly less affected by changes in temperature (the curve is a little flatter for them). There are few hot and wealthy countries examined in the study, so any general conclusions about them cannot be certain, but the evidence still points to them being more prone to damage from rising temperature than rich, cooler countries. No matter how rich you are, extra heat hurts the warm lands more than it does the temperate and the cool. You can’t buy your way out of the effects of global warming, except by moving away from the Equator or up into the highlands. Continue reading →

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Have we turned the corner on emissions?

One of these days, the world will get its act together and halt the growth in CO2 emissions. This week, the International Energy Agency reported that the rise in emissions did indeed stall in 2014. According to the announcement, this was the first time in forty years that IEA emissions did not increase, except in years of economic weakness.

When we start to turn the emissions corner for good, this is what it will look like. Although halting emissions growth does not yet put us on the path to meeting the 2°C target, it does at least mean that we might not be destined to follow the business-as-usual path to disaster along the worst-case RCP8.5 pathway. At least we are not going as fast along that road.

Chris Mooney, Climate Nexus and Joe Romm have articles on this, all worth reading.

The IEA announcement was a teaser: we are going to have to wait until June 15, 2015 to see the details of the analysis. In the meantime, I thought it would worthwhile looking at some data to see how confident we can be that this really is a positive signal that we can discern out of the noise and uncertainty.

First, let’s plot year-to-year growth in CO2 emissions, along with global GDP growth, against time:

IEA1

Continue reading →

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Keystone XL: Oil Markets and Emissions

Originally posted at Skeptical Science on September 1st, 2014

  • Estimates of the incremental emission effects of individual oil sands projects like the Keystone XL (KXL) pipeline are sensitive to assumptions about the response of world markets and alternative transportation options.
  • A recent Nature Climate Change paper by Erickson and Lazarus concludes that KXL may produce incremental emissions of 0-110 million tonnes of CO2per year, but the article has provoked some controversy.
  • Comments by industry leaders and the recent shelving of a new bitumen mining project suggest that the expansion of the oil sands may be more transportation constrained and more exposed to cost increases than is sometimes assumed.
  • Looking at the longer-term commitment effects of new infrastructure on cumulative emissions supports the higher-end incremental estimates.

President Obama (BBC) has made it clear that the impact of the Keystone XL (KXL) pipeline on the climate will be critical in his administration’s decision on whether the pipeline will go ahead or not.  However, different estimates of the extra carbon emissions that the pipeline will cause vary wildly. For example, the consultants commissioned by the US State Department estimated that the incremental emissions would be 1.3 to 27.4 million tonnes of CO2 (MtCO2) annually. In contrast, John Abraham, writing in the Guardian (and again more recently), estimated that the emissions would be as much as 190 MtCO2 annually, about seven times the State Department’s high estimate (calculation details here).

The variation in the estimates arises from the assumptions made. The State Department consultants assumed that the extra oil transported by the pipeline would displace oil produced elsewhere, so that we should only count the difference between the life-cycle emissions from the shut-in light oil and those of the more carbon-intensive bitumen. In addition, they estimated that not building KXL would mean that bitumen would instead be transported by rail, at slightly higher transportation costs. Abraham simply totted up all of the production, refining and consumption emissions of the 830,000 barrels per day (bpd) pipeline capacity and did not consider any effect of the extra product on world oil markets.

Neither set of assumptions is likely to be correct. Increasing the supply of any product will have an effect on a market, lowering prices and stimulating demand (consumption) growth. Lower prices will reduce supply somewhere.  The question is: by how much?

An interesting new paper in Nature Climate Change (paywalled, but there is an open copy of an earlier version available here) by Peter Erickson and Michael Lazaruares ,attempts to answer this question. The authors are based in the Seattle office of the Stockholm Environment Institute (SEI).
Continue reading →

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The Carbon Bubble – Unburnable Fossil Fuels – Seminar and Discussion

Originally published at Skeptical Science on March 26th, 2014

The British Columbia Sustainable Energy Association (BCSEA) organizes a series of free seminars on climate change and sustainability issues. BCSEA was founded by Guy Dauncey. On February 11th, 2014 BCSEA held a webinar on the recent work done by the Carbon Tracker Initative. Guy has written a detailed summary of their recent work on the BCSEA webpage.

The seminar starts at 8:30 minutes and a very good Q&A session begins at 39 minutes. The slides that accompany the seminar can be downloaded here.

The presenter is Mark Campanale, the founder and executive director of the Carbon Tracker Initiative. Continue reading →

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The effect of cross-border shopping on BC fuel consumption estimates

  • Since the introduction of the carbon tax in 2008, BC has achieved reductions in fuel use of 17.4% per capita and even greater reductions (18.8%) relative to the rest of Canada.
  • During this period there has been a large increase in the number of Canadian vehicles crossing the BC border into the United States , especially for day trips. It is likely that the main purpose of many of these trips was shopping.
  • The current rate of Canadians visiting the US is not unprecedented. Larger numbers of Canadians crossed the border in the 1990s.
  • Although high gasoline prices are a factor in motivating the border crossings, there were many other incentives, for example, the strong Canadian dollar, as well as cheaper dairy products, clothing and electronic goods.
  • On average, a Canadian vehicle crossed the border an additional 1.3 times per year in 2012 compared to the rate  before the introduction of the carbon tax.
  • It is estimated that 1-2% of the refined petroleum product fuel consumed in BC was purchased in the United States as a consequence of the additional cross-border travel. This amount of fuel does not therefore show up in Canadian fuel sales figures, which requires us to make small adjustments to the provincial fuel-use estimates. Nevertheless, the adjusted reduction in BC fuel use over the past four years still exceeds 15% per person per year.
  • The BC carbon tax is an effective policy that has likely substantially reduced emissions, but has not harmed the economy. It is increasingly politically popular within the province.

Continue reading →

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Update on BC’s Effective and Popular Carbon Tax

Originally posted at Skeptical Science on July 25th, 2013

Stewart Elgie and Jessica McClay of the University of Ottawa have a peer-reviewed article in press in a special issue of the journal Canadian Public Policy. The article is summarized in the report BC’s Carbon Tax shift after five years: Results. An environmental (and economic) success story. The report can be downloaded here and is summarized here.
The results are similar to a previous report that I wrote about in the article BC’s revenue-neutral carbon tax experiment, four years on: It’s working, but updated, with one more year of data.  The new data show that the carbon tax is working even better than reported previously.
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A Miss by Myles: Why Professor Allen is wrong to think carbon capture and storage will solve the climate crisis

Originally posted at Skeptical Science on 11 June 2013, written by Andy Skuce and rustneversleeps

A recent opinion piece in the British newspaper Mail on Sunday by University of Oxford climatescientist Myles Allen argues that the best way to combat climate change is to pass laws requiring fossil fuel producers to capture and sequester a rising proportion of the carbon dioxide emissions that the fuels produce. We argue here that such a policy, with its emphasis on carbonsequestration, would not be successful in achieving the carbon emission reductions that Allen himself advocates—for a variety of political, economic, technological and logistical reasons. A more recent article by Allen in The Guardian covers the same ground.

Nevertheless, Allen’s prescription does succeed in focussing the mind on the scale of the problem that we face in mitigating climate change.

Summary/Index

This is a very long post, so here is a clickable summary.

A good starting framework, then… Allen’s diagnosis is clear and his framing of targets in terms of cumulative emissions is unabiguous. But his prescription is flawed.

Politics There is no reason to assume a fixed emissions cap schedule would be easier to sell to the public than a carbon tax. Caps would produce greater certainty of longer-term emission reductions at the cost of uncertain economic consequences.

Economics (i): Efficiency Imposing emissions caps without allowing trading through brokers would be very inefficient. It is not clear whether Allen supports or opposes trading.

Economics (ii) Innovation by fiat? Prescribing one form of technology as the principle solution is risky. Nobody can predict how technology will evolve and what problems may emerge in future.

Economics (iii): The information conveyed by prices The cost of one technology should not be used as a basis for carbon pricing. There is a wide range of mitigation options, with highly variable prices, all with variable and uncertain potential to contribute to solutions. Experience in British Columbia shows that even a modest carbon tax can reduce emissions significantly without harming the economy.

Scaling it up to climate relevance Even promoters of aggressive deployment of carbon capture and storage (CCS) do not envision it as more than a partial contribution to mitigating climate change by 2050.

Timing and feasibility The mass of the CO2 to be sequestered is about double the mass of the fossil fuels themselves. To develop a new industry, from scratch, to capture, transport and dispose of these quantities will involve vast amounts of capital and many decades, even if it were technically possible.

Hazards The magnitude of the CO2 to be sequestered in the subsurface is such that environmental risks from leakage, aquifer contamination and induced earthquakes are likely to be much larger than those from the already contentious shale gas industry. Getting  public licence for CCS projects in inhabited areas is likely to be very difficult and time consuming.

Summing up The climate crisis is so vast that we need to throw everything we have at it. Claiming that any single technology will solve the problem can lead to complacency that the fix is simple. It isn’t.

Continue reading →