Category Archives: Europe

The OECD’s strange idea of sustainability

I admit I’m a bit confused about the OECD study the AP is reporting here. Supposedly, the Organisation for Economic Cooperation and Development finds, if we do nothing about climate change…

world gross domestic product will grow 99 per cent between 2005 and 2030, with severe environmental consequences, the report said. With measures, growth would be nearly the same, 97 per cent, but with a much healthier environment.

You have to pay a fairly astounding $117 U.S. for the thing, so I’m just going by the executive summary, but those “severe environmental consequences” include

  • Mass extinctions
  • Grievous shortage of drinking water
  • Quadrupling of deaths caused by ground-level ozone and doubling of deaths caused by particulates in the air

But doing something about these things would be harder on the economy? Admittedly this helps explain why the OECD only seriously contemplates doing enough to limit carbon-dioxide emissions increases to 12 per cent between now and midcentury, versus the 40-or-so-per-cent cut that climate-change wonks generally consider the minimum necessary action to keep all hell from breaking loose.

The OECD describes this as “addressing some of these key environmental challenges.” If they’re really key, I’d think we should probably kind of address all of them, hey?

No scarcity = no market

After screwing up its internal carbon-permit trading system by issuing permits so willynilly that they became almost worthless, the EU is carrying on with phase two of the operation. This time, they’re going to impose some actual emissions restrictions, reports The Times:

The key difference in the second phase is a reduction of between 5 per cent and 10 per cent in the emissions permits granted. Mr Marcu said that he expected the tougher regime to “start delivering some substantive reductions” in carbon emissions.

City analysts believe that it will lead to a big increase in the market price of carbon. Deutsche Bank expects forward prices to rise from the present level of about €23 a tonne to €35. UBS has predicted a rise to €30 a tonne.

Michael Grubb, chief economist at the Carbon Trust, said that the changes represented a “fairly severe” cutback from the previous, regime. “In the old system, the allowances became pretty worthless,” he said.

The purpose of carbon-emissions permits is twofold:

  1. Create a mechanism for rewarding polluters that stop polluting;
  2. Create incentives to move pollution toward the most economically productive activity.

In other words, create a market for greenhouse gases. Markets only work if there’s scarcity. Maybe, maybe, the EU’s figured that out.

Solar power, done coolly

Seville power stationWow. This Spanish solar-power station generates electricity by using mirrors to focus the sun’s rays on water, which boils to make steam, which runs up a big concrete tower and drives turbines. It’s 40 storeys tall and is supposed to eventually generate enough power to run Seville (pop. 600,000) at about three times the price of conventional power. That’s not bad, considering that the planned solar farm in Sarnia, Ontario, is getting a contract from the provincial government paying 42 cents a kilowatt-hour, roughly eight times the price of conventional electricity.

But the real story is how the thing looks. If it works as promised, all the hip cities will want one. If it were anybody but the BBC, I probably wouldn’t believe it. I republish their picture here with all due credit.

(Via Boing Boing.)

Bjorn Lomborg and the challenges of mitigation

The Danish political scientist and statistician Bjorn Lomborg is a hugely controversial figure in the climate-change discussion and I hesitate even to bring him up. But what the hell.

If you’re not familiar with him, the 30-second summary is that Lomborg describes himself as an environmentalist and says he believes climate change is happening and that human beings are significantly responsible for it, but he’s used several lines of argument over the years to propose that responding to the situation by cutting greenhouse-gas emissions is the wrong move. He wrote a book called The Skeptical Environmentalist that has been quite popular in certain quarters, though many, many professional earth-scientists (as opposed to political scientists) in the relevant fields have challenged both its premises and its conclusions.

His argument, articulated at length in an interview on PBS’s NewsHour, is that we’d end up better off if we accept that climate change is inevitable no matter what we do, take the money we’d spend cutting greenhouse-gas emissions (which he estimates at about $180 billion per year globally in today’s dollars) and apply it to mitigating the effects of climate change and a host of other problems such as malaria and poor nutrition and to research on easier ways of cutting emissions so that countries like China will want to and be able to afford to get on board.

Well, basically, Ray [host Ray Suarez], the point is to say, we don’t care particularly about climate change, per se. We care about, what are its impacts? We care about the people who are going to get more risk in flooding, the people who are going to get more exposed to malaria, the people who are going to die more because of heat waves. And those are the people we actually want to help.

So the question is: Can we do better? And my argument is simply, if you look, for instance, at the Kyoto Protocol, even if everybody did the Kyoto Protocol, including the U.S., it would have very little impact. It would basically postpone global warming by about five years at the end of the century, at a cost, as you mentioned, of about $180 billion a year.

Now, if you look at some of the other things, you could do great good in the world. You could actually do amazing amounts of good to many of the people who are going to get hardest hit by climate change through focusing on HIV-AIDS, malaria, malnutrition, free trade, agricultural research.

The point is that most of the impact that’s going to come throughout the 21st century will come from emissions from third world countries like China and India. And the idea is to say, as long as it costs $30 to cut a ton of carbon dioxide, rich countries may do a little, but poor countries, like China and India, are not going to do anything. What we need to do is to cut the cost of cutting carbon emissions from $30 down to $3. If it costs $3, then maybe they would.

So this is about a long-term strategy. Instead of these, “Let’s cut a lot now,” that makes us feel good, but end up doing very little good, it’s about making sure that we end up making much better technologies available to everyone in the world so that we can cut carbon emissions cheaply.

That’s about investing in research and development, and that’s why I’m suggesting spend perhaps $25 billion a year on research and development in low-carbon emitting energy technologies. That will likely do much more good than the Kyoto Protocol at a much lower cost.

Put aside all the other stuff Lomborg has said about climate change in the past. This is, on its own merits, an interesting economic and utilitarian argument.

The premise of cutting greenhouse-gas emissions is that we will be able to make a difference globally — that the total worldwide emissions will be able to be cut drastically and permanently, and that that will slow down and ultimately halt climate change before it makes things too uncomfortable for too many people. The premise assumes that although the United States, China, India, Brazil and other emerging economic powers that pollute a lot are not now doing very much to reduce their emissions, they will be persuaded to do so in the future.

A further premise is that two forces will act on these laggards if most of the world’s other countries do cut their emissions. The first is moral suasion, which can only come from leading by example. The second is economic opportunity, if it can be shown that cutting emissions ultimately leads to greater prosperity through more efficient industry.

This second point is the basket into which I put my rhetorical eggs — that this stuff is good for an economy completely independent of climate change, and the sooner we start, the better. I’m irked that Lomborg looks at costs and not benefits for the people doing the spending.

I’m also not convinced that China or the United States is a hopeless cause. China is reaching an environmental turning point where the health costs of its coal plants are practically exceeding the benefits of the electricity derived from them. A Democrat president and a Democrat-controlled Congress could make sharp reductions in gas emissions a matter of national policy in the United States. And if we can avoid the problem (and its potentially manifold unexpected consequences and ramifications that could be much worse than anybody’s predicting), that’s a better solution than learning to live with it.

So that’s my answer to Lomborg’s latest ideas. If you believe that climate change is a real problem, you probably ought to have one, too.

Europe needs a carbon tax: Financial Times

The U.K.’s Financial Times has an excellent package today outlining the many, many, many practical flaws with Europe’s credit-trading system for reducing carbon dioxide emissions. In short, people are paying a lot of money and it’s not doing very much good so far.

The question is whether these flaws are growing pains or endemic to a system that has a semi-imaginary thing (an absence of gases going up a smokestack) at its core rather than a concrete thing (like a bushel of wheat) or something that depends purely on long-established mutual trust (like a promise to pay interest on a specified date).

The FT thinks the flaws are endemic, or at least so difficult to repair that a carbon tax is a preferable way of reducing greenhouse-gas emissions. That’s a declaration that has my attention.

Carbon trading, done poorly

The Washington Post reports with its usual diligence on how a carbon-trading market might be set up badly. Give out too many credits, allow participating jurisdictions exemptions for all their private special cases, and include industries whose operations are very easily moved offshore. But that’s Europe for you.

[B]ecause of lobbying by well-connected companies, the E.U.’s limits on emissions ended up being higher than the actual emissions. As a result, fewer companies than expected had to buy emissions this year, and the price of carbon allowances, which had topped $30 per ton of carbon about a year ago, crashed to about $1 a ton. That eased some of the pressure on electricity rates, but prices for next year, after tighter E.U. limits take effect, are still about $20 a ton.

The E.U. is drawing up new rules for a second phase of its program, due to run from 2008 to 2012, but those, too, have sparked controversy.

Fights have erupted as countries seek to guard their interests. Eastern European nations have lobbied for more generous allocations because of their communist legacies and lower living standards. Germany, the continent’s largest wind-energy producer, wants an E.U. mandate that each country get 20 percent of its energy from renewable resources by 2020; Poland, which uses no renewable resources, is resisting.

Germany boasts that it has cut emissions to 18.4 percent below 1990 levels, the benchmark used in the Kyoto Protocol and in Europe. But nearly half the reduction was because of sagging industrial output in the former East Germany after reunification. For the 2008-2012 period, E.U. officials sliced 5 percent off Germany’s emissions proposal.

Of course there will be rocky beginnings, since they’re trying something entirely new. And pain, for operations that can’t or won’t become more efficient. But it’s definitely important to learn from the EU’s experience and its mistakes, to try to create trading systems that offer incentives and rewards to people for doing the right things.