All posts for the month February, 2014

Why Climate Change Mitigation Policies Will Always Fail

All climate mitigation policies will be of net harm to any country implementing them. There are three reasons for this.

First, mitigation policies will not eliminate all the projected harm of climate change. Policy replaces the unmitigated cost of climate change with a policy cost and a residual climate change cost.

Second, policy proposals are only for the rich countries to reduce emissions and emerging economies to constrain the growth. That means residual climate change costs will be greater, and the burden of cost of reductions will fall on a number of countries will a minority of, and a rapidly diminishing share of, global emissions. Even with the rich nations all succeeding in the British target of 80% reduction by 2050 will still mean global emission levels higher than currently.

Third, there is mounting evidence that actual mitigation costs per tonne of CO2 equivalent saved are considerably more than the economic models assume.

 

Introduction

The Stern Review Summary of Conclusions stated on page vi

Using the results from formal economic models, the Review estimates that if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more.

In contrast, the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change – can be limited to around 1% of global GDP each year.

The Review further stated on pages xvi-xvii

Preliminary calculations adopting the approach to valuation taken in this Review suggest that the social cost of carbon today, is of the order of $85 per tonne of CO2……. This number is well above marginal abatement costs in many sectors.

Many objections to the report look at the cost of climate change. Little discussed are the theoretical issues in implementing a successful policy. By “successful” I mean where the expected outturn of the policy is less than the projected costs of climate change.

 

The basic case

As the Stern review is saying that globally we should replace one set of costs – the projected costs of climate change – will the much lesser costs of climate. Graphically, we replace the climate change costs in blue with policy costs in orange. Costs are positive and benefits negative.

The case for policy is clear.

 

Climate change costs not completely eliminated

Peter Lilley, in his 2012 GWPF report “WHAT IS WRONG WITH STERN?” states on page 8

The benefit of preventing (climate change) entirely would, on his figures, be at least 5% of GDP – but to do so would require not just stopping all further carbon emissions but removing all those accumulated since the industrial revolution. The action he proposes to reduce the worst impacts of global warming by stabilising the atmospheric concentration of greenhouse gases at 550 ppm would, using Stern’s methodology, save some 3.1% of GDP – not 5%.

The mitigation policy seeks to stabilize total greenhouse gas levels are a level equivalent to about double the level of CO2 in 1780.


The case for policy is still clear.

 

Rich Countries Policy Burden

It is accepted that

  1. Rich countries are responsible for most of climate change.
  2. The adverse consequences of unmitigated climate change will be disproportionately endured by the less developed nations (LDNs).

Therefore the moral argument is that the rich countries should bear the cost of policy and they should compensate the LDNs for the future harm that they will endure. The compensation could then be used to offset the harm of climate change.

Rich countries have a smaller population than the LDNs. The policy costs (in orange) for them will more than double. Similarly, compensation (in burnt orange) will be much larger for the rich countries to pay out than for the LDNs who receive it in income. Finally the post-policy climate change costs (in blue) will be still larger for the LDNs.


The rich countries may or may not be better off after policy. Further the LDNs still suffer some harm.

 

Increasing Emissions amongst the emerging nations

Policy must include the emerging nations. This is why.

I have arbitrarily split the countries of the World into three groups

  1. ACEJU – The big industrialised carbon emitters – Australia, Canada, EU, Japan and USA.
  2. BICS – The large emerging nations of Brazil, India, China and South Africa.
  3. ROW – Rest of the World.

The World Bank has data on CO2 emissions by country for the period 1990 to 2010. From this, I compiled the following graph.


In the period 1990 to 2010, annual global CO2 emissions increased by 11.4 billion tonnes, or 51%. To return to 1990 emissions levels would require one group to cease emissions entirely and the other two groups to maintain emissions at 2010 levels. The future emissions growth path potentially makes the problem worse. Consider the comparative growth in population.


Despite the BICS countries increasing its emissions by 230%, emissions per capita are still less than 40% of those of the ACEJU block. Further, the explosive growth of the BICS has not been matched by the Rest of the World. Here the emissions have grown by 45%, but population has grown by 42%. Emissions per capita are still only 35% of those of the AJEJU block.

Any policy reductions by the rich nations will be more than offset by future emissions growth in the rest of the world. There will be little reduction in climate change costs, for either the policy countries or non-policy countries. The situation becomes like this.


The non-policy countries will still see a reduction, but that might be small, even if the policy countries are successful. The disadvantage to the policy countries is inversely related to proportion of global emissions they have at the end of the policy. That in turn is influenced by the future emissions growth in the non-policy countries, as well as the proportion of global emissions in a baseline year.

 

Peer-reviewed costs of Climate Change and Actual Costs of Mitigation

The Stern review should not be taken as the only source. The UNIPCC AR4 Summary for Policymakers in 2007 stated on page 22.

Peer-reviewed estimates of the social cost of carbon in 2005 average US$12 per tonne of CO2, but the range from 100 estimates is large (-$3 to $95/tCO2).

The average social cost is just a seventh of the Stern Review, which was not a study that has been peer-reviewed.

In a previous posting, I calculated that the subsidy of offshore wind farms was equivalent to 3.8 times Stern’s social cost of carbon, and 27 times that of the $12 average of peer-reviewed studies quotes by the UNIPCC. This was a low estimate, not including transmission costs. There might be cheaper ways of abating CO2, but there are lot of failed policies as well. There is also the impact on economic growth to consider, which for emerging economies. So a more realistic situation of a “successful” mitigation policy will look like the one below. That is “successful” in achieving the emission reduction targets.

Points for further investigation

There are a number of issues that are raised in my mind that need further work.

  1. The social cost of carbon defines the expected harm from climate change per tonne of CO2. If a country has quantitative emissions reduction targets, then an absolute upper limit in annual spend can be defined when achieving that target.
  2. This would enable identification of the success of policies within a national plan, along with the overall success of that plan.
  3. The expected CO2 emissions growth in non-policy countries, along with including other greenhouse gas emissions within the analysis.

     

Conclusion

There is no combination of mitigation policies that can produce a less costly outcome than doing nothing. Any government unilaterally (or as part of group representing a minority of global emissions) pursuing such policies will be imposing net harm on its own people, no matter how large the claimed potential impacts of climate change. This conclusion can be reached even if the extreme views of the Stern Review are taken as the potential costs of climate change.

Kevin Marshall

 

Notes

The comparison of emissions growth between countries is derived from “The Climate Fix” by Roger Pielke Jnr. This enlarges on a comment made at Australian Climate Madness blog.

All first time comments are moderated. Please use the comments as a point of contact.

Update 25/02 17.30. Summary and “Points for further investigation” included, along with text changes

by manicbeancounter on 23/02/2014  •  Permalink
Posted in Climate Change Analysis, Climate Change Economics, Costs of Renewables
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Posted by manicbeancounter on 23/02/2014

https://manicbeancounter.com/2014/02/23/why-climate-change-mitigation-policies-will-always-fail/

Lewandowsky fails his own low standards

Prof Stephen Lewandowsky keeps on digging a deeper hole for himself, and anybody associated with him. At “Shaping Tomorrow’s World” he has posted his personal values statement. Ben Pile has given it a pretty good frisking. A part of these beliefs is that opinions should only be expressed and debated in the peer-reviewed literature. This is interesting given that many of Lewandowsky’s arguments are outside the peer-reviewed literature. In a comment, I gave a recent example that undermines his claims:-

A major argument of Lewandowsky, is that critics of climate change are a bunch of conspiracy theory-loving nutters. At “The Conversation”, a taxpayer-funded blog for Australian and British academics to sound off, Prof. Lewandowsky stated

While consistency is a hallmark of science, conspiracy theorists often subscribe to contradictory beliefs at the same time – for example, that MI6 killed Princess Diana, and that she also faked her own death.

This was from a peer-reviewed study, that stated

In Study 1(n= 137), the more participants believed that Princess Diana faked her own death, the more they believed that she was murdered.

Steve McIntyre, with some difficulty, obtained the data. There was a reason for the author being a bit circumspect. McIntyre said

Within the Wood dataset, only two (!) respondents purported to believe that Diana faked her own death. Neither of these two respondents also purported to believe that MI6 killed Princess Diana. The subpopulation of people that believed that Diana staged her own death and that MI6 killed her was precisely zero.

The reason that the authors, the peer-reviewers and Prof. Lewandowsky failed to pick up on this is that they failed to do basic check on the data, using pivot tables. Instead, they rely on sophisticated statistical tests that Lewandowsky himself has used in his hoax paper. (The reason for the failure was succinctly expressed by Brandon Shallonberger in the comments) Ben Pile also used simple pivot tables, and eloquent language to completely demolish Lewandowsky’s 2012 hoax paper.

This example demonstrates three things

1. Lewandowsky does not stick to his own peer-reviewed rules.

2. Peer review can fail spectacularly.

3. Alternative opinions of data are possible, and the best analysis does not necessarily come from the most sophisticated techniques on the whizziest computers.

3. Lewandowsky swallowed misinformation because it accorded with his beliefs and lack of expertise in interpreting statistics. As a psychology professor studying misinformation, who is also “an award-winning teacher of statistics“, this is far less excusable than any trivial mistakes by the people he attacks.

by manicbeancounter on 22/02/2014  •  Permalink
Posted in Science & Non-science, Spin (Propaganda)
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Posted by manicbeancounter on 22/02/2014

https://manicbeancounter.com/2014/02/22/lewandowsky-fails-his-own-low-standards/

10GW of extra offshore wind turbines by 2020 – The Real Costs

Projected 10GW in offshore wind turbines by 2020 to add 5% to electricity and gas bills, and reduce UK CO2 emissions by nearly 2%. Cost to exceed benefits by 3.8 or 27 times.

 

The Telegraph has an article “Offshore wind farm scrapped due to fears over birds”

A 200MW extension to the 630MW London Array has been abandoned “over the impact on the red-throated diver, a bird classified as rare or vulnerable by the European Commission“. However,

Ministers say they want between 8GW and 15GW built by 2020, up from 3.6GW now, and suggest a total of about 10GW is most likely.

My comment on this (with references) is

Some statistics to put the 10GW of extra offshore wind power by 2020 in perspective.

Offshore wind power operates at about 35% of nameplate from DECC figures1.

So that will produce about 30,660,000 Mwh of electricity.

At present each megawatt of offshore wind gets 2 renewables obligations certificates, worth £842,8. So that will add £2575m to bills, or about 5%3 of 2012 Electricity AND Gas bills.

But this will help reduce the UKs Carbon emissions. How much?

RenewableUK reckons that each megawatt hour of renewable electricity saves 430kg of CO2 emissions4. So that equates to 13.2 mt, or 1.84% of the 716.4 mt6 1990 baseline emissions.

This has a value as well, called the “social cost of carbon”. The Stern Review reckoned $85t/CO25. The UNIPCC said the average was $126. So that is £675m or £95m towards saving the planet for future generations. Costs are either 3.8 or 27 times the benefits.

 

The costs of £2575m are not the full costs. There are also extra transmission costs, and backup capacity. A more sceptical view would put a much lower social cost of carbon than the $12 of the UNIPCC.

From note 5, the marginal abatement costs of offshore wind turbines are 3.8 times Stern’s estimate. Perhaps somebody should ask Lord Stern where the marginal abatement costs of less than $85 per tonne of CO2 are to be found. There are millions of households and businesses in this country who would love to know.

Notes

  1. DECC stats here, spreadsheet “Renewable electricity capacity and generation (ET 6.1)”. Offshore wind was 35.2% of nameplate in 2012.
  2. https://www.ofgem.gov.uk/ofgem-publications/58136/buy-out-price-and-mututalisation-ceiling-201314.pdf.
  3. In 2012 the big six energy companies charged about £44bn to all customers. 5% rise assumes they have 85% of the market. Graph here, from this article.
  4. From http://www.renewableuk.com/en/renewable-energy/wind-energy/uk-wind-energy-database/figures-explained.cfm, last section “CO2 Reductions (p.a.) in Tonnes”.
  5. The Stern review noted on pages xvi-xvii

    Preliminary calculations adopting the approach to valuation taken in this Review suggest that the social cost of carbon today, is of the order of $85 per tonne of CO2……. This number is well above marginal abatement costs in many sectors.

  6. The UNIPCC AR4 Summary for Policymakers in 2007 stated on page 22.

    Peer-reviewed estimates of the social cost of carbon in 2005 average US$12 per tonne of CO2, but the range from 100 estimates is large (-$3 to $95/tCO2).

  7. Source World Bank data. UK data at http://data.worldbank.org/country/united-kingdom
  8. The current banding is at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/211292/ro_banding_levels_2013_17.pdf

First-time comments are moderated. Please use the comments as a point of contact, stating this is the case.

Kevin Marshall

 

 

 

 

7.

by manicbeancounter on 19/02/2014  •  Permalink
Posted in Climate Change Analysis, Climate Change Economics
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Posted by manicbeancounter on 19/02/2014

https://manicbeancounter.com/2014/02/19/10gw-of-extra-offshore-wind-turbines-by-2020-the-real-costs/

The Cassandra Effect and Insulting Climate Sceptics

There are two articles published today that are related. Bishop Hill posts about the “reverse Cassandra effect” and Jo Nova comments on Matt Ridley’s article in today’s Times on THE SCEPTICS ARE RIGHT. DON’T SCAPEGOAT THEM.

Bishop Hill refers to a Wired article on the late Julian Simon published some years ago:-

Simon always found it somewhat peculiar that neither the Science piece nor his public wager with Ehrlich nor anything else that he did, said, or wrote seemed to make much of a dent on the world at large. For some reason he could never comprehend, people were inclined to believe the very worst about anything and everything; they were immune to contrary evidence just as if they’d been medically vaccinated against the force of fact. Furthermore, there seemed to be a bizarre reverse-Cassandra effect operating in the universe: whereas the mythical Cassandra spoke the awful truth and was not believed, these days “experts” spoke awful falsehoods, and they were believed. Repeatedly being wrong actually seemed to be an advantage, conferring some sort of puzzling magic glow upon the speaker.

I believe that the Cassandra effect is still working. What is relevant is how you view awful. Take a classic example of the Cassandra effect. Ignaz Semmelweis found that doctors washing their hands between examining each patient reduced mortality rates. The implied “awful” truth that every experienced hospital doctor in 1840s Vienna had to accept was that, due to their ignorance, they had killed people when they were in the business of saving lives.

But for environmentalists the “scientific truth” that the human race is destroying the planet confirms their beliefs. Politicians whose mission is to make a real difference to the world – an honourable motive – can now take part in saving the planet from an evil menace. Maybe not as spectacularly as James Bond, or Flash Gordon, but they can still expect to receive plaudits and a place in history. Or at least a pat on the back from green activists in Bali, Copenhagen, Cancun….

For those who believe materialism is ultimately depraved; or humankind is inherently sinful; or capitalism will collapse through its inherent contradictions; or the rich got where they are through trampling over those like themselves; – all can latch onto the cause as well. For all these people the awful truth for the world is not so awful for them.

This is why the Cassandra effect is still very much with us. The awful truth is that politicians now find themselves in the same position of those doctors in 1840s Vienna. When they thought they were saving the world, they are in fact harming the futures of their constituents. As Matt Ridley points out in the Times today of climate change:-

Sceptics say it is not happening fast enough to threaten more harm than the wasteful and regressive measures intended to combat it. So far they have been right.

My next article will show that even the most extreme climate change believers can postulate a big enough harm from climate change than the wasteful and regressive measures intended to combat it.

Kevin Marshall

by manicbeancounter on 18/02/2014  •  Permalink
Posted in Climate Change
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Posted by manicbeancounter on 18/02/2014

https://manicbeancounter.com/2014/02/18/the-cassandra-effect-and-insulting-climate-sceptics/

Understanding the US EIAs Levilized Cost of Electric Generation figures

At Watts Up With That?, Willis Eschenbach has a post “The Levelized Cost of Electric Generation“. These are estimated figures by US Energy Information Agency (EIA) for the costs of power by fuel source, for plants with construction started now that would enter service in 2018. The full table from the EIA in $/MwH is reproduced as Table 1 below.

Willis makes the valid point that every unit of “non-dispatchable” power (i.e. renewables with no power on demand) capacity, there must be an equal amount of dispatchable power to back it up. He does not follow this up. Non-dispatchable power does not need to be fully-covered by the expensive high-efficiency fossil-fuelled power stations. The most extreme conditions of peak power demands but no wind can be met by diesel generators. These are relatively low capital cost, but with high unit costs of output. They still add to the costs of renewables, along with reducing the CO2 savings. In terms of the large scale fossil-fuelled power stations gas is clearly better than coal. Combined cycle gas has half the capital cost per unit as conventional coal so dropping the utilisation will have a much smaller impact on unit costs. Further it can be switched on or off much quicker than conventional coal. Combined the actual additional cost of renewables is lower than he implies.

As I have been looking into the subsidies that renewables receive in the UK, I would like to observations. To understand these comments in the context of Willis Eschenbach’s post please note:-

  • In the UK, all generated electricity is paid the wholesale price (approx $0.09 kwh at present).
  • In addition renewables receive renewables obligation credits or ROCs. Biomass (wood pellets usually imported from USA) and onshore wind receive 1 ROC per megawatt hour. Offshore wind receives 2 ROCs. With a ROC worth $0.07 kwh (£42.02 MwH), onshore wind and biomass receives $0.16 kwh and offshore wind $0.23 kwh.
  • Currency conversion is at £1.00 = £1.66. Willis uses kilowatt hours for his simplified summary, whereas as the EIA uses megawatt hours.

Revenue is somewhat different to the costs, but there are a few observations possible.

  1. Capacity utilisation for onshore wind is assumed at 34% and 37% for offshore. For the UK, actual average utilisation as 26% for onshore and 35% for offshore. On that basis, US costs for onshore wind would rise from $0.087 to $0.117 kwh. Here are the figures from the most recent four available years.

  2. Biomass in the UK consists of burning non-fossil fuels in existing coal-fired power stations. It is more expensive than coal because (a) fuel cost per tonne is more than coal and (b) output per tonne is slightly less than coal. I would want to know why the capital cost per kwh is 20% lower and why the variable costs are just 45% higher. On fuel costs alone the 0.2 ROCs per Mwh would be more than generous for biomass. Based on figures from April to August 2013, the full year subsidy saving of this change would be in the order of £300m or $500m per annum.
  3. The transmission investment is vastly understated. Like in the UK, the cost of transmission for a power station investor is likely in connecting the power station to the nearest point on the national grid, regardless of the capacity of the line. To obtain 34% efficiency, wind turbines need to be placed in highly exposed areas, such as hill-tops. Population centres, and established grid networks, tend to be on the plains, or in sheltered valleys. In the UK, the best locations for wind turbines are in the far North of Scotland. To effectively connect this to main grid means upgrading about 400 miles of transmission lines to enable around 5-10GW of power at peak generation. This capital cost could be as much as the wind turbines themselves. Fossil-fuelled power stations tend to be located near existing power stations. These in turn are near to the existing grid infrastructure. The upshot is that wind turbines have much higher transmission costs than fossil-fuelled power stations. The difference could be a number of cents per kilowatt hour.

Kevin Marshall

by manicbeancounter on 17/02/2014  •  Permalink
Posted in Climate Change Analysis, Climate Change Economics
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Posted by manicbeancounter on 17/02/2014

https://manicbeancounter.com/2014/02/17/understanding-the-us-eias-levilized-cost-of-electric-generation-figures/

The Nub of the Climate Change Policy Problem

Over at the Conversation, Climate Scientist Mike Hulme has a short article “Science can’t settle what should be done about climate change“. He argues the politics, not science, must take centre stage. He makes four points.

  • How do we value future public goods and natural assets relative to their value today?
  • Is “commodifying” nature appropriate?
  • The morality of technologies for mitigation or adaptation. For instance, fracking and GM crops.
  • The role of national governments against multilateral treaties or international governing bodies. Also the consequent impacts on democracy.

Christopher Wright (Professor of Organisation Studies at University of Sydney) commented

The one problem I have with the above analysis is that the focus on climate science has been a quite deliberate strategy by those seeking to deny or cast doubt on the urgency of the problem. This has meant the debate has continually stalled around issues of whether climate change is a problem or not. The science highlights that it is a very big problem indeed. However, while the science continues to be questioned, we will be unable to have the serious policy conversation about what we need to do to avoid catastrophic changes to our ecosystem.

My reply (with references) is

Science might point to a very big problem, but it cannot translate that into coherent policy terms. Nor can it weigh that against the effectiveness of policies, nor the harms policies can cause. Economics is central to asking those questions. The key figure that encapsulates the predicted harm of climate change is the social cost of carbon SCC, expressed in tonnes of CO2 equivalent. In 2006 Stern measured this as $85/tCO21. A year later the AR4 SPM2 stated a range of -$3 to $95/tCO2 from peer reviewed studies, with an average of $12/tCO2.

The key figure for the effectiveness to policy is the marginal abatement cost. Basically this refers to the marginal cost of preventing a tonne of CO2 equivalent entering the atmosphere. For policy to be of net benefit, MAC needs to be less than SCC.

$85 is about £52, and $12 about £7.50. In the UK onshore wind turbines receive a direct subsidy equivalent to £98/tCO23 saved, and offshore £195/tCO2. Then there are the extra costs of transmission lines, and other costs which could double those figures.

Then you need to recognize that a global problem will not be solved by unilateralist policies by a country with producing less than 2% of global emissions. So the UK is impoverished now by harmful, ineffectual, policies, and still future generations suffer >90% of the consequences of unmitigated climate change. Mike Hulme’s four points above are in addition to this, weighing further against mitigation policy.

Notes

  1. The Stern review noted on pages xvi-xvii

    Preliminary calculations adopting the approach to valuation taken in this Review suggest that the social cost of carbon today, is of the order of $85 per tonne of CO2……. This number is well above marginal abatement costs in many sectors.

  2. The UNIPCC AR4 Summary for Policymakers in 2007 stated on page 22.

    Peer-reviewed estimates of the social cost of carbon in 2005 average US$12 per tonne of CO2, but the range from 100 estimates is large (-$3 to $95/tCO2).

  3. The renewables obligation credit (ROC) buy-out price is currently £42.02 per megawatt hour, as determined by OFGEM. The British renewable industry lobby group renewableUK, uses DECC’s carbon saving figure of 430g/kWh, as stated in an appendix to the Energy Efficiency Innovation Review in 2005. £42.02/.430 = £97.67. Onshore wind turbines get one ROC per MWh generated, offshore wind turbines 2 ROCs.

Kevin Marshall

Jo Nova discusses Mike Hulme’s four points here.

by manicbeancounter on 04/02/2014  •  Permalink
Posted in Climate Change Analysis, Climate Change Economics, Costs of Renewables
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Posted by manicbeancounter on 04/02/2014

https://manicbeancounter.com/2014/02/04/the-nub-of-the-climate-change-policy-problem/