Carbon Capture and Storage Loses another £100m but saves up to £10bn

Last week the National Audit Office published a report Carbon Capture and Storage: the second competition for government support. The main headline was

“The Department has now tried twice to kick start CCS in the UK, but there are still no examples of the technology working. There are undoubtedly challenges in getting CCS established, but the Department faced an uphill battle as a result of the way it ran the latest competition. Not being clear with HM Treasury about what the budget is from the start would hamper any project, and caused particular problems in this case where the upfront costs are likely to be high. The Department must learn lessons from this experience if it is to stand any chance of ensuring the first CCS plants are built in the near future.”

Amyas Morse, head of the National Audit Office, 20 January 2017

Key elements

  • Two Projects in the Competition.
  • When project cancelled £100m had already been spent.
  • The first competition running from 2007 to 2011.
  • Full subsidy from the Treasury (i.e. Taxpayers) would have been £1 Billion
  • Over 15 years, subsidy from consumers would have been £3.9 Billion to £8.9 Billion
  • Would have captured 1Mt to 2 Mt of CO2 a year.
  • Consumer subsidy between £105 and £172 Mwh, on top of the current wholesale price of around £45 Mwh.

The BBC carried the story, correctly citing many of the costs, as did the Express, which stated

At the time it was cancelled, the competition had two preferred bidders: the White Rose consortium in North Yorkshire which planned to build a new coal plant with the technology, and Shell’s scheme in Peterhead, Aberdeenshire, to fit CCS to an existing gas plant operated by SSE.

The NAO report said the department initially estimated it would cost consumers – who would subsidise electricity from the schemes – between £2 billion and £6 billion over 15 years, but by 2015, this estimate had risen to as much as £8.9 billion.

The report found the Treasury was concerned over the costs to consumers, and that the competition was aiming to deliver CCS before it was cost-efficient to do so.

Joanne Nova points to a July 2015 post on the subject of CCS by Anton Lang. He stated

CCS artificially raises the costs of coal fired power in two ways

First, it raises the initial construction cost for any new large scale coal fired plant by around 60%.

Second, the CCS process is hugely energy intensive — consuming up to 40% of the electricity generated by the plant. So  the plant can only sell 60% of the actual power it produces.

As a (slightly manic) beancounter, I like to put the costs in context.

  1. How much would the cost have been if the Treasury had not pulled the plug per tonne of CO2 saved?
  2. What is the value of the subsidy be if China and India adopted the plan?

In the full NAO report (a 389kb pdf) Figure 6 gives details of the two schemes shortlisted in the competition.

It is the Peterhead scheme that would incur the lower subsidy of £105 Mwh. The £3.9 billion works out at an average 290 Mw production, or 76% of capacity over 15 years. It is cheaper due to adapting old plant. The disadvantage is that there is only 30 Mt of CO2 storage capacity in the area, so the area does not have the facility to develop much more unless further infrastructure development is made to pump the CO2 offshore into old oil wells.

The White Rose scheme has higher subsidy of £172 Mwh. The £8.9 billion works out at an average 394 Mw production, or 88% of capacity over 15 years. It is new plant, but has the advantage of 520 Mt of CO2 storage capacity in the area.

If we add in the £1bn subsidy without interest, over 15 years the cost per tonne of CO2 saved is about £264 (US$330, A$435) for the Peterhead project and £300 (US$374, A$490) for the White Rose project.

The NAO report in figure 12 that the subsidy could come down to £94 Mwh with scale.

Let us see what would be the cost if India and China adopted CCS for the current coal-fired power stations, but increasing capacity by 25% to cover the efficiency losses. Assume subsidy is just $100 Mwh.

According to Greenpeace (could be unreliable), China has about 900,000 MW of capacity. Add in 25% and assume 70% capacity, gives around $700bn a year subsidy. This is about 6% of current GDP.

From Wikipedia, India had 310 000 MW of capacity in 2015.  Add in 25% and assume 70% capacity, gives around $240bn a year subsidy. This is about 12% of current GDP.

I am sure that China and India will want to follow the UK’s lead. The only slight issue is finding a hole big enough. Maybe instead they could build some big greenhouses and grow tomatoes very rapidly.

Kevin Marshall

 

Trump is wrong on China Global Warming Hoax but right on the policy consequences

Summary

  • Donald Trump’s famous tweet that Global Warming is a Chinese Hoax is false, but the policy implications are correct.

  • Total proposed climate policies under the Paris Agreement will not stop global emissions rising, but the policy aim is to have global emissions falling rapidly after 2020.

  • The Rio Declaration 1992 exempted developing countries from a primary obligation to constrain, let alone reduce, emissions. 

  • By 2012 the exempted countries accounted for 64% of global emissions and over 100% of the global emissions growth since 1990.

  • The exempted, countries will collectively have emissions rising for decades to come.

  • The most efficient policy is a carbon tax, applied globally. But even this is highly inefficient, only working by making fossil fuel use unaffordable to all but the very rich. That is morally unacceptable in developed countries, whilst would stop developing countries developing, likely leading to civil wars.

  • Actual climate mitigation policies are less efficient and more costly than a carbon tax.

  • Pursuing mitigation policies in just the developed countries harms the poor disproportionately and harms manufacturing. Such policies may not even reduce global emissions.

  • Even if catastrophic global warming is true, the policy reality is the same as if it were a hoax. In either case they are net harmful to the policy countries.

  • Like with utterly ineffective drugs that harm the patient, the rational response to climate mitigation policies is to ban them.

 

 

President-elect Donald Trump infamously claimed on Twitter

The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive.

I believe that statement to be totally false. The Chinese had nothing (or essentially nothing) to do with the climate alarmism that the Western intelligentsia (especially in the Anglosphere) seem to religiously accept as a series of a priori truths. But the policy implications of believing such a false position are pretty much the same for a policy-maker that (a) accepts as truth catastrophic global warming hypothesis, (b) puts their country first (but still values highly people in other countries, with an emphasis on the poor and the oppressed) (c) but understands the realities of global policy-making, along with the full economic impact of mitigation policy.

The Realities of Actual Mitigation Policy

The hypothesis is the basic form is that global human greenhouse gas emissions (mostly CO2) are resulting in rising greenhouse gas levels. This is forecast to cause large increases in global average temperatures, which in turn, many believe, will be catastrophic to the climate system. The major policy is to reduce the global greenhouse gas emissions to near zero.
The UNIPCC AR5 Synthesis Report, Summary for Policymakers 2014 tried to the maths very simple. They only looked at CO2 for the ballpark figures. Using the central assumption of a doubling of CO2 gives 3 degrees of warming, then 2 degrees comes when CO2 levels hit 450ppm. At end of 2016 it levels were about 404ppm, and rising at over 2ppm per year. Only is some warming from other greenhouse gases, so we are well beyond the 420ppm. That gives maybe 15 years tops. Somehow though figures seem to have been stretched a bit to give more time, something I will look at in a later post.
The UNFCCC – the body that brings all the countries together to cut emissions to save the planet – had an all-out bash at COP21 Paris in December 2015. In the lead-up all countries (excluding the EU countries, who let the masters in Brussels take the lead) made submissions on how they would contribute towards saving the world, or at least make a start up to 2030. Many were so vague, it was difficult to decipher the “ambition”. This was done to appear like the countries were doing something substantial, when in fact the proposals were often so insubstantial, that targets could be achieved by doing nothing at all. The UNFCCC put all the INDC submissions together on a global emissions graph.

The graph is very simple. Before the INDCs, emissions were forecast to follow the thin dark orange arrow. With the INDCs, the thick light orange forecast is still tracking upwards in 2030. The least-cost 2C scenarios is the blue arrow. This is going down by 2020, and by 2030 is substantially lower than today. The graph gives a very clear message – the whole exercise is pretty much an expensive waste of time. 40,000 people attended the meeting at Le Bourget airport North of Paris, including the vast majority of World Leaders. Rather than be honest, they went through the usual format with a breakthrough at five past midnight. Then they sent the “experts” away to think up yet more scary scenarios to get better proposals in the future.

 

Little More Policy will be Forthcoming

If they actually read the 1992 Rio Declaration, like Robin Guenier did in October 2015, they would have found out why. In particular Guenier draws attention to this statement in the declaration.

“The extent to which developing country Parties will effectively implement their commitments under the Convention … will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.” [My emphasis]

These non-Annex 1 developing countries have had phenomenal economic growth, with driven by rapid development of cheap energy from fossil fuels. Guenier quotes some CO2 emissions figures. Instead, I have used the broader estimates of greenhouse gas emissions from the European Commissions’ EDGAR database, grouping the figures into the Annex I countries (the rich OECD countries, like the USA, Japan, European Union, Canada, Australia etc.); the Annex I Transitional economies (basically the ex-Soviet bloc in Europe); International air and shipping; and the Non-Annex, rest of the world.


The figures are quite clear. The growth in emissions in 22 years was greater in the Non-Annex developing countries than the world as a whole. But this is just the developing countries starting to catch up. The breakdown of the Non-Annex developing county emissions is below.

This “developing” part of the world now has 84% of the global population, but in 2012 was just 64% of the greenhouse gas emissions. India and China each have more than 4 times the population of the USA, Africa 3.5 times and S&E Asia 3 times. Whilst in China emissions growth will peak soon, in India emissions growth is only recently taken off.  In S&E Asia and Africa emissions growth has yet to really take off. No matter what the USA and a few other developed countries do, it will not make a big difference to the long-term outlook for GHG emissions. Now compare the global emissions to the UNFCCC graph of INDCs of the target emissions reductions for 2030. The UNFCCC scale is in billions of tonnes, whilst the scale I use is in millions. The least cost 2C scenario is lower in 2040 that the total non-Annex countries in 2012. Even without emissions growth in the non-Annex countries, the Annex countries could cut emissions by 100% and still the 2C limit will be breached by the 84% who live in countries with no obligation to cut their emissions.
But maybe the USA should cut emissions anyway? After all it will not cost much, so these developing nations will be brought into line. I only recently realized how wrong this view was. Economics Prof Richard Tol it one of the World’s leading climate economists, who (unlike me) happens to believe in the moral case for cutting greenhouse gas emissions. In a recent paper, “The Structure of the Climate Debate”, Tol explained how a global carbon tax was theoretically the most efficient means to reduce global greenhouse gas emissions. Use regulation, or rationing, or subsidies of renewables, and it will be more expensive – less bang for your bucks. However, I objected. He seemed to be saying that the carbon tax necessary to cut global emissions worked out at less than the taxation on gasoline in Britain. At over $3 (a level that is similar in much of Europe) there are still quite high levels of fuel usage. I can still remember my high school economics teacher, in teaching about elasticity of demand, said that a good example of inelastic demand were the “sin” taxes on booze, alcohol, tobacco and petrol (gasoline). You could have quite high taxes without impacting on demand. Well, after a few exchanges at cliscep blog turns out Tol (in the more technical Tol 2013 paper) was recommending a $210 tCO2 tax to be imposed in 2020 globally, plus an escalator of 5.5% a year forever. It would eventually make fossil-fuelled energy use unaffordable to all but the Hollywood A-listers. I showed British readers in GBP would that would mean, but for the US readers $210tCO2 is about $1.83 per gallon of gasoline. There would be uproar if it was introduced, and people might get more fuel efficient cars. With the escalator that would rise to over $3 a gallon in 2030, $9 2050, $35 in 2075 and$132 a gallon in 2100. There would also be similar hikes in electricity from coal and gas. This might not be fast enough to achieve the reductions required by the UNFCCC, but would not be sustainable in a country with democratic elections every few years.

But actual climate mitigation policies, are far less effective that the carbon tax. This includes subsidies or loan guarantees to speculative and unsustainable businesses, or flash renewable technologies that fail to deliver,

The carbon tax might be harmful to the poor and middle classes in America, but think of what it would do to the living standards of the poorest half of the world. Countries where parents are hoping that their children might enjoy cheap energy for cooking, lighting or heating, would see those hopes dashed. For billions of people their children or grandchildren would never have a family car, or be able to travel by plane. If the Governments of India, China or Indonesia tried to impose such high and escalating taxes there could be economic collapse similar to that of Greece, and likely civil wars.

Should the Rich countries still do something?

So maybe the United States, and other rich countries, should still adopt policies regardless. After all, they should pay for the (alleged) harms that are leading to disaster. But if the proposers had any understanding of the real world, they would know that just as economic growth has been propelled by abundant supplies of cheap, available and reliable energy. In international trade what is “cheap” is a relative concept. In the nineteenth century steam power was very expensive compared to electricity today. But at this point in time, when developing countries are make power more available and driving their unit energy costs down. Steam power was much cheaper, and more available than water power, which in turn was cheaper than human or animal power. Yet implementing emissions reduction policies, the rich countries are driving those unit energy costs up just as developing countries have been driving unit energy costs down and making power more available. The USA and EU countries are generating a comparative disadvantage. But, as the developed nations tend to be more energy efficient, the net effect on global emissions may be to increase them, despite the policy countries decreasing theirs. That net effect is unlikely to be as large as any actual savings in the policy countries. What is more, the costs of policy will fall on the poor, and those areas of employment with high energy usage and that compete internationally.

An argument for climate mitigation is that it is to make small sacrifices now to save future generations from the much larger costs of future catastrophic climate change. That is only true if global emissions are cut significantly, at a cost lower than the actual harmful impacts that would have occurred without policy. As policy to cut emissions will makes very little difference to global emissions, then the sacrifices could be of a small benefit in non-policy countries, but be to the net disadvantage of future generations in the policy countries. The biggest burden of the costs of policy will fall on the poorer sections of society and manufacturing in the policy countries.

The Moral Case Against Climate Mitigatiom

If the medical profession insisted on patients taking drugs that did not work and had harmful side effects, then in litigious America they would be sued for all they had, and likely jailed. But when the climate alarmists, back by the liberal establishment, insist on policy that cannot work and causes substantial harms they are not held to account. Indeed, so pervasive are the beliefs in climate alarmism, it is an act of heresy to even question this false policy. Now the tables are turned.

The first thing that should be done with harmful drugs that cannot work is to ban them from sale. For an incoming President, the first thing to do with harmful and useless policies is to rescind them.

Kevin Marshall

 

Friends of the Earth still perverting the evidence for fracking harms

Yesterday, the Advertising Standards Authority at long last managed to informally resolve the complaints about a misleading leaflet by Friends of the Earth Trust and Friends of the Earth Ltd. This is no fault of the ASA. Rather FoE tried to defend the indefensible, drawing out the process much like they try to draw out planning inquiries. From the Guardian

“After many attempts by Friends of the Earth to delay this decision, the charity’s admission that all of the claims it made, that we complained about, were false should hopefully put a stop to it misleading the UK public on fracking,” said Francis Egan, chief executive of Cuadrilla. …..

According to the BBC

Friends of the Earth (FOE) must not repeat misleading claims it made in an anti-fracking leaflet, the advertising watchdog has said.

The fundraising flyer claimed fracking chemicals could pollute drinking water and cause cancer and implied the process increases rates of asthma.

The charity “agreed not to repeat the claims,” the Advertising Standards Authority (ASA) said.

All pretty clear. As the BBC reports that the eco-worriers are not to be told that they are misleading the public.

Donna Hume, a campaigner for the environmental charity, said it would “continue to campaign against fracking” because it was “inherently risky for the environment”.

……..

Ms Hume said Cuadrilla “started this process to distract from the real issues about fracking” and was trying to “shut down opposition”.

“It hasn’t worked though. What’s happened instead is that the ASA has dropped the case without ruling,” she said.

“We continue to campaign against fracking, alongside local people, because the process of exploring for and extracting shale gas is inherently risky for the environment, this is why fracking is banned or put on hold in so many countries.”

Donna Hume was just acting as mouthpiece to the FoE, who issued a misleading statement about the case. They stated

Last year fracking company Cuadrilla complained to the Advertising Standards Authority about one of our anti fracking leaflets.

But after more than a year, the complaint has been closed without a ruling.

The scientific evidence that fracking can cause harm to people and the environment keeps stacking up. Friends of the Earth is not alone in pointing out the risks of fracking, to the climate, to public health, of water contamination, and to the natural environment.

ASA Chief Executive Guy Parker, took the unusual step of setting the record straight.

But amidst the reports, the public comments by the parties involved and the social media chatter, there’s a risk that the facts become obscured.

So let me be clear. We told Friends of the Earth that based on the evidence we’d seen, claims it made in its anti-fracking leaflet or claims with the same meaning cannot be repeated, and asked for an assurance that they wouldn’t be. Friends of the Earth gave us an assurance to that effect. Unless the evidence changes, that means it mustn’t repeat in ads claims about the effects of fracking on the health of local populations, drinking water or property prices.

Friends of the Earth has said we “dropped the case”. That’s not an accurate reflection of what’s happened. We thoroughly investigated the complaints we received and closed the case on receipt of the above assurance. Because of that, we decided against publishing a formal ruling, but plainly that’s not the same thing as “dropping the case”. Crucially, the claims under the microscope mustn’t reappear in ads, unless the evidence changes. Dropped cases don’t have that outcome.

The ASA, which tries to be impartial and objective, had to take the unusual statement to combat FoE deliberate misinformation. So what is the scientific evidence that FoE claim? This from the false statement that ASA was forced to rebut.

The risks of fracking

In April 2016, a major peer-reviewed study by research institute PSE Healthy Energy was published in academic journal PLOS ONE, which assessed 685 pieces of peer-reviewed scientific literature from around the world over 2009-2015 and found:

  • “84% of public health studies contain findings that indicate public health hazards, elevated risks, or adverse health outcomes”

  • “69% of water quality studies contain findings that indicate potential, positive association, or actual incidence of water contamination”

  • “87% of air quality studies contain findings that indicate elevated air pollutant emissions and/or atmospheric concentrations”

I suggest readers actually read what is said. Hundreds of studies cannot identify, beyond reasonable doubt, that there is a significant large risk to human health. If any single study did establish this it would be world news. It is just hearsay, that would be dismissed by a criminal court in the UK. A suggestion is from what the  PLOS-ONE Journal does not include in the submission criteria, that is normal in traditional journals – that submissions should have something novel to say about the subject area. As an online journal it does not have to pay its way by subscriptions, as authors usually have to pay a fee of $1495 prior to publication.

But this still leaves the biggest piece of misinformation that FoE harps on about, but was not included in the ruling. Below is the BBC’s two pictures of the leaflet.

foe-false-fracking-leaflet-bbc

foe-false-fracking-leaflet-bbc2

It is the the issue of climate change that goes unchallenged. Yet it is the most pernicious and misleading claim of the lot. If fracking goes ahead in the UK it will make not a jot of difference. According to the EU EDGAR data the UK emitted just 1.1% of global GHG emissions in 2012. That proportion is falling principally because emissions are rising in other countries. It will continue to fall as emissions in developing countries rise, as those countries develop. That is China, India, the rest of South East Asia and 50+ African nations. These developing countries, which are exempt from any obligation to constrain emissions under the 1992 Rio Declaration, have 80% of the global population and accounted for over 100% of emissions growth between 1990 and 2012. I have summarized the EDGAR data below.

ghg-ems-annnon

So who does the FoE speak for when they say “We could trigger catastrophic global temperature increases if we burn shale in addition to other fossil fuels“?

They do not speak for the USA, where shale gas has replaced coal, and where total emissions have reduced as a result, with real pollutants falling. There the bonus has been hundreds of thousands of extra jobs. They do not speak for China where half of the global increase (well 53%) in GHG emissions between 1990 and 2012 occurred. They cannot speak for Britain, as if it triggers massive falls in energy costs like in the USA (and geologically the North of England Bowland shale deposits look to be much deeper than the US deposits, so potentially cheaper to extract) then industry could be attracted back to the UK from countries like China with much higher emissions per unit of output.

Even worse, F0E do not speak for the British people. In promoting renewables, they are encouraging higher energy prices, which have lead to increasing fuel poverty and increased winter deaths among the elderly. On the other hand the claims of climate catastrophism from human emissions look to be far fetched when this century global average temperature rises have stalled, when according to theory they should have increased at an accelerated rate.

Kevin Marshall

Update 7th Jan 11am

Ron Clutz has posted a good summary of the initial ruling, along with pointing to a blog run by retired minister Rev. Michael Roberts, who was one of the two private individuals (along with gas exploration company Cuadrilla) who made the complaint to ASA.

The Rev Roberts has a very detailed post on the 4th January giving extensive background history of FoE’s misinformation campaign against shale gas exploration in the Fylde. There is one link I think they should amend. The post finishes with what I believe to be a true statement.

Leaflet omits main reason for opposition is Climate change

https://www.foe.co.uk/page/no-fracking-lancashire

The link is just to a series of posts on fracking in Lancashire. It is one of them is

Lancashire fracking inquiry: 3 reasons fracking must be stopped

The first reason is climate change. But rather than relate emissions to catastrophic global warming, they point to the how allowing development of fossil fuels appears in relation to Government commitments made in the Climate Change Act 2008 and the Paris Agreement. FoE presents their unbalanced case in much fuller detail in the mis-named Fracking Facts.

Update 2 7th Jan 2pm

I have rechecked the post Cuadrilla’s leaflet complaint is closed without a ruling, while evidence of fracking risks grows, where Friends of the Earth activist Tony Bosworth makes the grossly misleading statement that ASA closed the case without a ruling. The claim is still there, but no acknowledgement of the undertaking that F0E made to ASA. F0E mislead the public in order to gain donations, and now tries to hide the information from its supporters by misinformation. Below, is a screenshot of the beginning of the article.

Ivanpah Solar Project Still Failing to Achieve Potential

Paul Homewood yesterday referred to a Marketwatch report titled “High-tech solar projects fail to deliver.” This was reposted at Tallbloke.

Marketwatch looks at the Ivanpah solar project. They comment

The $2.2 billion Ivanpah solar power project in California’s Mojave Desert is supposed to be generating more than a million megawatt-hours of electricity each year. But 15 months after starting up, the plant is producing just 40% of that, according to data from the U.S. Energy Department.

I looked at the Ivanpah solar project last fall, when the investors applied for a $539million federal grant to help pay off a $1.5 billion federal loan. One of the largest investors was Google, who at the end of 2013 had Cash, Cash Equivalents & Marketable Securities of $58,717million, $10,000million than the year before.

Technologically the Ivanpah plant seems impressive. It is worth taking a look at the website.

That might have been the problem. The original projections were for 1065,000 MWh annually from a 392 MW nameplate implying a planned output of 31% of capacity. When I look at the costings on Which? for solar panels on the roof of a house, they assume just under 10% of capacity. Another site, Wind and Sun UK, say

1 kWp of well sited PV array in the UK will produce 700-800 kWh of electricity per year.

That is around 8-9.5% of capacity. Even considering the technological superiority of the project and the climatic differences, three times is a bit steep, although 12.5% (40% of 31%) is very low. From Marketwatch some of the difference is can be explained by

  • Complex equipment constantly breaking down
  • Optimization of complex new technologies
  • Steam pipes leaking due to vibrations
  • Generating the initial steam takes longer than expected
  • It is cloudier than expected

However, even all of this cannot account for the output only being at 40% of expected. With the strong sun of the desert I would expect daily output to never exceed 40% of theoretical, as it is only daylight for 50% of the time, and just after sunrise and before sunset the sun is less strong than at midday. As well as the teething problems with complex technology, it appears that the engineers were over optimistic. A lack of due diligence in appraising the scheme – a factor common to many large scale Government backed initiatives – will have let the engineers have the finance for a fully scaled-up version of what should have been a small-scale project to prove the technology.

 

Have 250.000 Spanish jobs been sacrificed for the folly of saving the planet?

Spain is one of the leading countries in Europe for Renewables. In 2013 output broke new records, with renewables accounting for 21.1% of Spanish electricity demand, with wind and hydroelectric power production increasing by 12% and 16%, respectively on 2012.

This is to the detriment of the Spanish economy for three financial reasons.

First is the huge amount now likely being spent on wind power subsidies. In 2013 output from wind farms was about 54GWh, or 12% higher than the 48.5GWh produced in 2012. Assuming an average subsidy of €54MWh (the rate for onshore wind turbines in the UK) that would be €2.9billion in subsidies.

Second, there is the huge amount now likely being spent on solar power. Spain is home to the massive Anadasol Solar Power Station. The three sections are expected to produce 495GWh per year, which at 38% of capacity seems a tad high. This will have a guaranteed price of €270 per megawatt. In the UK, the wholesale price is about £45 or €60 a megawatt. The excess cost (or subsidy) is therefore €210MWh, or €100million a year. At this rate, the total 8.2GWh produced by photovoltaics would have attracted a subsidy of €1.7bn in subsidies.

The combined estimated subsidy is worth €4.6bn is equivalent to 0.3% of GDP. Total subsidies are likely to be much more.

Third is the disastrous foray in solar panels lead to huge amounts of investments in solar schemes. In 2008 there were an estimated 30,000 jobs supported in the boom years. These jobs disappeared with the bust. With this sudden boom, caused by extremely generous subsidies, the quality of the panels was poor and overpriced. Many investors would not have got their money back even if the subsidies had remained. Now they will be saddled in debt, with no income. These borrowing were often state-backed. According to Bloomberg this fund was €24bn at the end of 2011. If some of this has to be written off, then there could be a material impact on deficit reduction plans, and thus the levels of unemployment. Government backing loss-making projects costs jobs.

This claim can be cross-checked. In the same Bloomberg article the Renewable Energy Producers Association (Asociación de productores de energías renovables or APPA) was quoted as saying that the renewables industry sustains about 110,000 Spanish jobs. In 2011 Verso Economics, a Kirkcaldy-based outfit, wrote a report about the effect of renewables jobs in Scotland and the impact on the wider UK. Whilst the report found that the jobs in renewables were largely neutral with Scotland – one job lost in the wider economy for each gained in renewables – in the wider UK economy for each job gained in Scottish renewables 3.7 jobs were lost in the wider UK economy. (report here, and reported at Caledonian Mercury, BBC and Scottish Sceptic) If this were replicated in Spain, the net impact of 110,000 jobs in renewables would be 400,000 jobs less jobs in the wider Spanish economy. Without renewables more than 250,000 people could be in work, or over 1% of the labor force.

Why I call Spain’s attempt to save the planet a folly, are the same reasons for calling Britain’s attempts a folly. Any emissions reductions in Europe will be more than offset by many times over from the emerging economies elsewhere. In reducing emissions, Spain will increase unemployment and reduce growth. But future generations will still bear over 80% of any consequences of warming than if no rich country did anything. In the current situation, I believe that a lot of Spanish people might object to their country being called “rich” anyway.

Update 20/11/14 – minor editing.

Spending Money on Foreign Aid instead of Renewables

On the Discussion at BishopHill, commentator Raff asked people whether the $1.7 trillion spent so far on renewables should have been spent on foreign aid instead. This is an extended version of my reply.

The money spent on renewables has been net harmful by any measure. It has not only failed to even dent global emissions growth, it will also fail even if the elusive global agreement is reached as the country targets do not stack up. So the people of the emissions-reducing countries will bear both the cost of those policies and practically all the costs of the unabated warming as well. The costs of those policies have been well above anything justified in the likes of the Stern Review. There are plenty of British examples at Bishop Hill of costs being higher than expected and (often) solutions being much less effective than planned from Wind, solar, CCS, power transmission, domestic energy saving etc. Consequences have been to create a new category of poverty and make our energy supplies less secure. In Spain the squandering of money has been proportionately greater and likely made a significant impact of the severity of the economic depression.1

The initial justification for foreign aid came out of the Harrod and Domar growth models. Lack of economic growth was due to lack of investment, and poor countries cannot get finance for that necessary investment. Foreign Aid, by bridging the “financing gap“, would create the desired rate of economic growth. William Easterly looked at 40 years of data in his 2002 book “The Elusive Quest for Growth“. Out of over 80 countries, he could find just one – Tunisia – where foreign aid conformed to the theory. That is where increased aid was followed by increased investment which was followed by increased growth. There were plenty examples of where countries received huge amounts of aid relative to GDP over decades and their economies shrank. Easterly graphically confirmed what the late Peter Bauer said over thirty years ago – “Official aid is more likely to retard development than to promote it.

In both constraining CO2 emissions and Foreign Aid the evidence shows that the pursuit of these policies is not just useless, but possibly net harmful. An analogy could be made with a doctor who continues to pursue courses of treatment when the evidence shows that the treatment not only does not work, but has known and harmful side effects. In medicine it is accepted that new treatments should be rigorously tested, and results challenged, before being applied. But a challenge to that doctor’s opinion would be a challenge to his expert authority and moral integrity. In constraining CO2 emissions and promoting foreign aid it is even more so.

Notes

  1. The rationale behind this claim is explored in a separate posting.

Kevin Marshall

Ivanpah 392MW Solar Plant a green energy failure even at the planning stage

The Hockey Schtick blog specializes in summarizing scientific papers that have a sceptical leaning. A couple of days ago it posted about the World’s largest solar energy plant applying for a $539million federal grant to help pay off a $1.5 billion federal loan. The Ivanpah solar electric generating plant is owned by Google and renewable energy giant NRG. Google can certainly afford to bear these loses. At the end of 2013 its accounts state that it had Cash, Cash Equivalents & Marketable Securities of $58,717million, $10,000million than the year before.

Technologically the Ivanpah plant sounds impressive. Problem is that in it’s first year of operation it produced one quarter of the projected electricity. As a minor consequence, it was projected to scorch 1,000 birds a year. Instead it is 28,000 in the first year. A three minute summary is at Fox News.

But even at the planning stage there was either no proper business plan presented, or at least no proper scrutiny like a bank would do when making a loan. 1065,000 MWh annually from a 392 MW nameplate is a planned output of 31% of capacity. Even accepting that figure, a $2bn investment with a 20 year payback (zero discount rate) is still nearly $100 MWh. A 10 year payback is much more reasonable. Add maintenance and operating costs easily gets to $200 MWh. A small utility company in Wisconsin buys in extra electricity for $30 MWh. So the planned cost was 6-7 times the wholesale price of electricity.

Maybe this was justified in saving the planet?

The AR4 synthesis report of 2007* said that peer-reviewed estimates of the social costs of carbon from averaged on 2005 $12 per tonne of CO2, but the range from 100 estimates is large (-$3 to $95/tCO2). If we take the bold assumption that the theoretic output of this plant would entirely replace the electricity from a typical coal-fired power station producing 900kg of CO2 per MWh, then the saving is $190t/CO2, or double the very top-end 2005 estimate, or 15 times the average estimate. For some reason, the Social Cost of Carbon is missing from the

Suppose the US was “really serious” about doing its bit to save the planet and tried to cut its CO2 emissions by 80%. In round figures, in 2013 that was 5 billion tonnes of CO2 equivalent (source CDIAC). Using similar schemes, it would cost $760bn a year or 5% of 2013 GDP of $16.8trn. Remember, that is if similar schemes are successful. The Ivanpah solar plant does not look like a success.

 

* For some reason, the Social Cost of Carbon is missing from the AR5 Synthesis Report published on November 1st. I would guess the reason that it has fallen out of favour is that the marginal abatement costs are much larger than the highest estimates, and the cost of doing nothing per tonne of CO2 are about zero.

Kevin Marshall

Connecting German Policy to the Global Climate Change Issue

Notrickszone, posts that Professor Fritz Vahrenholt calls the green jobs machine a “labeling fraud“. The claimed level of German green jobs is many times the actual figures. This is in response to a couple of comments by “Buddy”.

Buddy,

It is not enough to point out that there is a potential problem. Effective mitigation policy requires

1. Assessing the scale of the potential problem.

2. Assessing the scale of the solution required.

3. Devising policies that will meet that solution.

4. Getting enacted the policies to meet that solution.

5. Effectively enacting those policies.

I welcome your comments, as they illustrate the failure to think the problem through by the so-called “experts”. Exaggerated claims of green jobs does nothing the tackle the alleged problems of rising emissions. Further German policy is one of failure to deliver virtually any promised reductions, but has wasted money on bogus schemes. See for instance

http://notrickszone.com/2014/03/07/economics-expert-slams-german-feed-in-act-calling-it-an-abuse-of-state-power-belongs-in-the-dustbin/

Germany is not alone with policy failures. Globally, renewables have failed to deliver the low-cost, reliable, on demand power of fossil fuels, hence the exaggerated claims for jobs and investment. Given the policy failures, any other country would be mad to sign up to similar policies, even if they believed that without effective carbons reductions future generations will face a climate catastrophe. Politicians will duck the issue, by signing vague agreements to tackle the problem in the future. Yet without the emerging economies successfully combatting carbon emissions, the policy countries will incur all the policy costs now, and leave future generations with practically all the projected catastrophic consequences of global warming. I discussed further here.

The issue of smog is interesting. The worst smogs are in China and India, caused by coal fired power stations. The UNIPCC reckons that the aerosols that make up the smog have a net cooling effect (AR5 and AR4). So tackling air pollution from the dirtiest coal-fired power stations may actually increase warming. Yet in Britain the Clean Air Act had a huge difference on air quality. According to a Centre for Policy Studies Report, globally the policy could save millions of lives.

Kevin Marshall

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

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.