Global Greenhouse Gas Emissions Continue Increasing

Carbon dioxide (CO₂) emissions from sources all around the globe are estimated to be increasing at a renewed, distressingly rapid, rate for 2018 to date, 2.7% for the year, after having been determined to be lower, about 1.6% for the full year of 2017. This evaluation is part of a detailed accounting of all sources of CO₂ emissions and of planetary processes that remove CO₂ from the atmosphere.  The study is undertaken now an annual basis and reported in the “Global Carbon Budget 2018” (C. Le Quere and 70 coauthors, Earth Syst. Sci. Data, 10, 2141-2194, 2018).  The main sources of CO₂ emissions are use of fossil fuels (coal, oil and gas) and the manufacture of cement.  The two largest factors that remove CO₂ are absorption into the waters of the ocean, and plant and soil incorporation of CO₂.  The net balance between all emitting and absorbing factors leads to the increase in man-made atmospheric CO₂ that is the main concern when considering global warming.  The authors present the increasing trend of atmospheric CO₂ in the following graphic:

 

 

Direct measurement of atmospheric CO2 concentration from 1958 to 2018. This graphic represents the difference between man-made sources of CO2 in the atmosphere and its removal by natural earth processes. The authors’ analysis shows that humanity’s use of fossil fuels is a main contributor to increased CO2, and is a main contributor to global warming.
Source: C. Le Quere and coauthors, Earth Syst. Sci. Data, 10, 2141-2194 (2018)

 

 

Why is CO₂ emission such a problem?  This gas persists in the atmosphere for centuries, if not longer.  So the coal that was burned when the industrial revolution began produced CO₂ that is still part of the atmosphere today, and the aggregate amount of fossil fuels we consume at present produces CO₂ that will last for centuries.  The excess accumulation of CO₂ shown above cannot be removed economically on the massive scale needed with currently existing technology: the annual growth of atmospheric in 2017 was 4.6±0.2 billion metric tons measured as carbon/yr (or 16.8 billion metric tons measured as CO₂/yr).

The increased heat-trapping ability of the additional atmospheric CO₂ has alarmed scientists in the past couple of months.  They have issued two dramatic calls to action by the nations of the world (here and here) urging humanity to limit the overall rise in the long-term global average temperature to less than 1.5°C (2.7°F) by 2040 or 2050.  Voluntary national commitments were made by the members of the United Nations to reduce annual emission rates when the Paris Agreement was reached in 2015.  Even at that time, analysis of the commitments recognized that they were seriously insufficient to accomplish the limitation needed.  And in the succeeding three years, even those commitments have not been met.  This is made worse by President Trump’s intention for the U. S. to leave the Paris Agreement; the U. S. remains one of the three top annual emitters of CO₂ in the world and its emissions would increase under the president’s policy.

Global warming depends on the total accumulated greenhouse gases (GHGs), not the annual emissions rate.  The heat-trapping effect of GHGs depends on their total accumulated amount in the atmosphere.  A goal of simply reducing the annual emission rate does not replace the need to stabilize the total accumulated amount as soon as possible at as low a level as possible.  As long as the emission rate is above zero, GHGs continue accumulating in the atmosphere, thereby raising the long-term global average temperature.  Only achieving zero GHG emission rates as fast as possible stabilizes the total GHG burden at the low level needed.  

This is shown in the model image below.  It assumes that we start at a value of 100 for the atmospheric GHG level.  From year 0 to year 10 the annual emission rate, shown in blue, is 4% of the amount of the previous year (in the image the rate is multiplied by 25 to scale it to 100).  Over this period the cumulative GHG amount, shown in orange, rises by the 4% amount based on the previous year’s level, resulting in a line curving upward: 

 

 

Magically, after year 10 all net atmospheric emission rates fall to zero (blue) – including those originating from electricity generation, transportation, heating and cooling, and cement manufacture. No new GHGs are added to the atmosphere.  As a result, the total accumulated GHG burden (orange) flattens out, stabilized at the year 10 level.  It’s important to note that reducing the annual emission rate to zero cannot lead to a reduction in the total atmospheric GHG level.  This idealized model illustrates the important fact that the sooner annual emission rates approach zero, the lower the stabilized GHG level will be, with the result that the long-term global average temperature likewise will stabilize at a lower value.

 

The relationship between the accumulated GHG level and the  global average temperature.  The Fifth Assessment Report of the Intergovernmental Panel on Climate Change, issued in 2013-2014, modeled the relationship between total accumulated CO₂ in the atmosphere and modeled temperature increases (referred to the value during the early industrial revolution (1861-1880)).  The modeling included four “scenarios”, ranging from the most stringent (zero annual emission rate after 2030-2040; shown in navy blue in the image below), to a “business as usual” scenario (no meaningful policy to reduce emission rates; shown in red below).

 

Historical (black; 1870-2010) and modeled (2010-2100) temperatures (°C) projected for four “scenarios” of differing trends for man-made CO₂ concentrations with greatest to essentially no limitations on annual emission rates.  Data point dots are given every 10 years.  The most stringent (navy blue) falls to a near zero emission rate by 2030-2040; the light blue and orange lines are progressively less stringent, and the red line models the absence of meaningful constraints on emission rates.

 

 

Three important conclusions emerge from the modeling shown.  First, the amount of CO₂ in the atmosphere at any point along the horizontal axis does not depend on the scenario, that is, it is independent of the annual emission rate.  Second, all four scenarios follow more or less the same path along the CO₂-temperature relationship.  This dependence is nearly a linear one: the higher the CO₂ level in the atmosphere, the higher the projected temperature.  Indeed, the most stringent scenario (navy blue) shows no significant increase in CO₂ level between 2050 and 2100 (those points are all bunched together in the image) and consequently no further increase in projected temperature in those decades.  This projection mirrors the results in the model image shown further above.  Conversely, the unconstrained scenario (red) continues to emit CO₂ to 2100, leading to a drastic temperature increase of more than 4.5°C (8.1°F) by the end of the century, a truly frightening possibility.
 
Third, bringing annual emission rates to near zero does not reduce the accumulated CO₂ level after reaching a plateau, nor does this lower the projected global average temperature.  It only keeps the CO₂ level and the temperature stabilized.  

Many countries in the world are not fulfilling the pledges they made under the Paris Agreement.  The New York Times reports,  based on the most recent evaluation by the International Energy Agency, that major emitting countries around the world, including China and India, are continuing to build new coal-fired electricity plants instead of migrating to renewable energy on the scale needed. In fact, China and Japan are exporting them, building new coal plants in many developing countries.  The United States is reneging on its emissions-reducing policies put in place under former President Obama, and is opening federal lands to new fossil fuel extracting leases.  France is showing how difficult  the political scene is for pursuing policies to address global warming; rioting citizens are opposing a small, scheduled increase in taxes on vehicle fuels.

Conclusion 

This post demonstrates that continuing to emit GHGs at high annual rates inexorably adds to higher CO₂ levels in the atmosphere, which leads to higher long-term global average temperatures in a straight-line fashion.  Currently there are no technologies ready to be deployed at scale to remove CO₂ from emitting facilities or from the air, and permanently to store it away from the atmosphere.  Only reducing annual emission rates to near zero in the coming two decades, according to the two reports cited at the outset, (some advocate an even shorter schedule) will keep the world from entering a regime of unacceptably high global average temperatures.  All stakeholders need to coalesce around this objective to achieve this goal. 

© 2018 Henry Auer

 

 

Americans Support Expansion of Renewable Energy, Surveys Show

Summary.  Public opinion surveys in the U. S. show that more than two-thirds currently think there is solid evidence that the earth is warming.   The surveys find the public supports expansion of renewable energy.  A majority of Republicans among survey respondents are included in this supporting class.  One survey reports that Republicans believe their elected representatives do not “care much about” what they think about climate change. 

Policymakers should respond to poll results such as these and coalesce around efforts to expand renewable energy.  Many policy justifications exist to support this position.

 

Introduction.  Climate scientists from all around the world overwhelmingly agree that manmade greenhouse gases have contributed significantly to increased long-term global average temperatures over the last several decades.  They foresee a future by the end of this century, and beyond, having profoundly higher temperatures and consequent harmful impacts on human welfare and planetary climate conditions.  The substance of these projections of future harms has not changed since the first report from the Intergovernmental Panel on Climate Change in 1990. 

Policymakers around the world, especially those representing countries that are major emitters of greenhouse gases, have been unable to arrive at an agreement for a meaningful reduction in these emissions.  Nevertheless, in the U. S. the public has gained increased appreciation that global warming is an issue that needs to be addressed.  This post summarizes some recent public opinion surveys of attitudes toward global warming.

Pew Research Center surveys over the first months of 2013 are summarized here.  Their survey in February 2013 found that 69% of Americans think there is solid evidence that the earth’s average temperature has been increasing in recent decades.  The trend for this question since 2006, as well as for the question of whether warming arises mostly because of human activity, is shown in the graphic below, which includes survey results from March 2013.

 

Survey results over 2006-2013 showing the percent of Americans thinking that the earth is warming (top, bronze) and that the warming is due to human activity (bottom, gold). 

Source: Pew Research Center; http://www.pewresearch.org/2013/04/02/climate-change-key-data-points-from-pew-research/.

 

The graphic above shows that American public opinion bottomed in 2009-2010, both on whether the earth is warming, and on whether warming is due to human activity, and has increased significantly since then.  American belief that humans have caused global warming has consistently been at least 20% lower than agreeing that warming is occurring at all.

There is a dependence of attitudes about global warming in the U. S. on affiliation with a political party or outlook.  The Pew survey in March 2013 shows that U. S. Democrats (more liberal) are far more likely than U. S. Republicans (more conservative) to agree that global warming is occurring, and that it is due to human activity (see the table below).

 

Dependence of attitudes about global warming on political identification.  “Rep”, Republican; “Dem”, Democrats; “Ind”, politically independent or unaffiliated.

Source: Pew Research Center;  http://www.pewresearch.org/2013/04/02/climate-change-key-data-points-from-pew-research/.

 

There is also a stark division by political affiliation about whether Americans regard global warming to be a problem, according to a Pew survey from October 2012.  A majority of Democrats believe it is a very serious problem, but only one-fifth of Republicans do.  Conversely, only 1 in 6 Democrats believe global warming to be either not too serious a problem or not a problem at all, whereas more than half of Republicans fall in these two groups.

 

Gallup Poll results show that there is strong support for renewable energy in the U. S. across the political spectrum.  A survey of 1,022 subjects in all 50 states gave results having a 95% confidence level with a ±4% error.  Respondents were given a choice of placing more emphasis, less emphasis, or about the same emphasis, as currently done for supplying our energy needs from various sources.  They chose “more emphasis” by large margins for solar power (76%), wind (71%), and natural gas (65%), with much lower preferences for more emphasis for oil, nuclear energy and coal.  Breakdowns by party affiliation in this survey are shown in the following table.

Source: Gallup poll, March 2013. http://www.gallup.com/poll/161519/americans-emphasis-solar-wind-natural-gas.aspx

 

It is seen that Republicans strongly support more emphasis on solar power, wind, and natural gas, but also oil.  About half of Republicans further support more emphasis on nuclear power and coal.  Democrats, on the other hand, overwhelmingly support more emphasis on solar power and wind energy, with less than one-third supporting oil, nuclear power or coal.

 

Climate Change Communication project.  George Mason University’s Center for Climate Change Communication and Yale University’s Project on Climate Change Communication have been collaborating on the attitudes of Americans on global warming over the past several years.  They released a new report on April 2, 2013 providing results of a survey of U. S.Republicans on the subject of climate change.  938 people who had identified themselves as Republicans or Republican-leaning independents in a previous survey taken in Fall 2012 were called back in January 2013 for this survey; 77% of those agreed to participate.  Important findings are summarized here.

More than half of Republicans surveyed think that climate change is happening.  52% agreed, 26% did not agree, and 22% didn’t know.

A large majority supports expanded use of renewable energy.  These Republicans support much more (51%) or somewhat more (26%) use of renewable energy.  (In the survey, “renewable energy” consists of solar, wind and geothermal energy.)  Most of these (69%) felt measures should be started “immediately” toward this objective.

The survey also probed this issue from the converse perspective. 51% of Republicans indicated that the U. S. should use fossil fuels (i.e. coal, oil and natural gas) somewhat less (31%) or much less (21%) than today.  Only 22% favored increased use of fossil fuels, giving a ratio of about 2.5 to 1 favoring less use. 

Perceived benefits of reducing use of fossil fuels outweighed perceived “costs”.  (As seen below, “costs” does not refer to monetary costs, but to social and economic factors.)  Respondents could choose more than one from among 9 listed benefits and 6 listed costs.  The three benefits chosen most frequently, among 538 of those surveyed, were “help free us from dependence on foreign oil”, “save resources for our children & grandchildren”, and “provide a better life for our children & grandchildren”.  The benefit listed as “limit climate change” was next to last.  The two highest perceived costs chosen among 477 of respondents were “lead[ing] to more government regulation” and “caus[ing] energy prices to rise”.

After having weighed the benefits, costs, and other factors 64% of Republicans think “we SHOULD take action to reduce our fossil fuel use”, whereas 35% think “we SHOULD NOT take action” (capitalization in the survey as reported).

Perceptions of politicians’ responsiveness to people.  The Republican respondents showed an apparent skepticism or alienation concerning their ability to influence political decisions.  More than half  “do not think elected officials care much about what people like me think about climate change”, and think “people like me don’t have any say in what the government does about climate change”.  Only 8% think “elected officials pay a lot of attention to the views of people like me” on this issue.

 

Analysis

 

Surveys from three different polling organizations are summarized here.  Polling results can be partly influenced by the way that poll queries are phrased.  Yet the poll results reinforce one another quite consistently, making clear that overall they reflect the thoughts and feelings of the American public.

 

Americans favor expanding support and/or development of renewable energy sources such as wind, solar and geothermal energy.  The reasons given for this widened support cover a broad range, including achieving energy independence and expansion of a new economic sector with its attendant growth in job opportunities.

 

In the U. S. Congress, Republicans have opposed development of renewable energy.  There may be many factors contributing to the development of policy positions among legislators, including responsiveness to the wishes of constituents, sensitivity to economic interests, and development of support for retaining elected office.  In this regard it is significant that the survey results from all three polling organizations show that respondents who identify themselves as being avowedly Republican or favoring Republican positions strongly support development of renewable energy sources.

 

Among Republicans responding to the Climate Change Communication survey more than half think climate change is happening, and three-quarters of them support more or somewhat more use of renewable energy.  After weighing perceived benefits vs. perceived socioeconomic costs about two-thirds of Republicans surveyed think we should act to reduce use of fossil fuels. The Pew and Gallup surveys found comparable support among Republicans.  Anecdotally, the New York Times reports on April 9, 2013 that the Republican mayor of Lancaster, CA, a desert community with plenty of sunshine, is undertaking to install sufficient solar photovoltaic capacity to generate more electricity than his city needs.

 

The Climate Change Communication project found that of the Republicans surveyed more than half felt alienated or ignored by their elected representatives.  If this is a valid representation of attitudes held by the officials, it suggests they pay more attention to other considerations than to taking the opinions of their constituents into account.

 

Conclusion.  Polling shows that the fraction of Americans that thinks global warming is occurring, and that human activity is a cause, is growing in recent years.  The majority of Americans think growth of renewable energy sources should be supported.  More than half of Republicans, and in certain surveys many more, are included among those supporters.  Many reasons, most having to do with national security and economic factors, are identified for this support.  Explicit identification of global warming or similar environmental concerns is low on this list.  Elected officials who are our policymakers at the national level should pay heed to survey results such as these.  They should support expansion of renewable energy sources for all the reasons mentioned in the Climate Change Communication survey.

 

 © 2013 Henry Auer

Choose a Carbon Fee, Not a Cap and Trade Regime

Summary.   Burning fossil fuels generates carbon dioxide as waste whose socioeconomic costs to humanity are not accounted for in the price of the fuel.   Reducing our dependence on fossil fuel use and mitigation of emission of greenhouse gases have led to valuing carbon either by a fee or use of a cap and trade mechanism; the additional value would limit consumption.  A carbon fee is easy to implement legislatively or administratively, and has been effective in reducing demand for fossil fuels.  Cap and trade regimes are in place in many jurisdictions around the world.  They are administratively complex and bureaucratically onerous, and can be unsuccessful in curbing fossil fuel use.  This post expands on these factors, and concludes that lowering the use of fossil fuels is best accomplished by imposing a fee on carbon.

 

Introduction. 

Human activity generates waste.  Significantly, as we burn more and more fossil fuels to produce the energy that powers modern life, we emit more and more carbon dioxide into the atmosphere.  This substance, an important greenhouse gas, is being released as the waste product of our energy economy.

 

It is imperative to treat manmade carbon dioxide as a cost-bearing waste product because of the harmful effects of the global warming that it produces.  These harms carry enormous costs with them.  Properly accounting for these costs would make it more acceptable to make the investments needed to reduce greenhouse gas emissions.
 

Policy directed toward reducing dependence on fossil fuels and mitigating greenhouse gas (GHG) emissions has long grappled with the alternative policies of imposing a carbon fee on fossil fuels and creating a cap and trade regime.  These may be viewed as policies that affect, respectively, the demand for, and the supply of, fossil fuels.  A carbon fee levies an added cost on fossil fuels directly.  The fee is passed through directly to the consumer, affecting demand. Cap and trade mechanisms, on the other hand, place upper limits on the emission of carbon dioxide (CO₂). 

This post reviews examples of both mitigation mechanisms.  Upon consideration we support the use of a carbon fee in preference to a cap and trade mechanism for mitigation.

A carbon fee is imposed on fossil fuels directly in accordance with the amount of CO₂ produced when burned.  The fee is imposed and collected at, or close to, the source of the fuel.  The value of the fee is then passed along as the fuel is transformed (petroleum to gasoline, for example), and/or transported (all fuels), and is ultimately paid by the consumer.  The level of the fee is set by policymakers, and typically is envisioned to start low and rise periodically until it reaches an intended level.  It is seen that a carbon fee is conceptually and operationally easy to implement.  Clearly the fee operates to constrain demand.

Under cap-and-trade major emitting facilities are allotted allowances each of which licenses the release of a fixed amount, say 1 ton, of CO₂ and other GHGs.  An administrative agency determines the total number of allowances (the cap) and the allotments for each period.  The cap is reduced year by year, thus constraining fuel consumption.  Ideally the emitters would pay for the allowances, frequently through an auction, but at the outset in many regimes they are distributed at no charge.  In any case, as the program matures markets are ultimately set up to auction annual allowances, and for trading them, thereby establishing a price for emissions.  The market price on carbon established in this market deters fossil fuel use. 

There are many problems with a cap-and-trade regime that make it difficult to succeed.  For example, if the supply of allowances is too high or the market demand is too low, their price will fall and the objective of reducing the rate of emissions of CO₂ will be discouraged.  For these and other reasons discussed below, operation of a cap and trade regime is complex, if not cumbersome.  A cap and trade regime may be intricate and top-heavy to administer.

Both cap and trade and a carbon fee assign a monetary value to the waste stream that emissions of CO₂ and other greenhouse gases represent.  This has not been done historically; CO₂ has not been considered to be a waste product of our energy economy whose disposal had to be priced into the cost of the fossil fuels.
 

Examples of using a carbon tax.

In Australia, Prime Minister Julia Gillard’s government enacted a carbon fee program in 2011.  Initially the carbon fee is US$23.15 per ton of carbon; much of the revenue is to be applied as compensation to businesses and consumers (“cap and rebate”).  After six months of operation, the electricity generation segment of Australia’s energy economy reduced its carbon emissions rate by 8.6%.  Emissions were 7.5 million tonnes lower in the second half of 2012 than for the same period in 2011.  This arose from a decrease in demand and an increase in residential rooftop solar panel use and increased energy-efficiency.   Some coal-burning facilities ceased operating, while more power came from increased hydroelectric generation.  The long-term goal is to reduce emissions by 33 million tonnes per year by 2020.

Gasoline fees are very effective in affecting drivers’ travel habits.  The graphic below, characterizing how per capita fuel use reflects the size of the gasoline fee,

 

Sources: New York Times presenting data from the U. S. Department of Energy and the World Bank; http://www.nytimes.com/interactive/2012/09/11/business/Fuel-Taxes-and-Consumption.html?ref=business  

shows that per capita use of fuel for driving in developed countries decreases as the amount of the gas fee increases.  The U. S. has the lowest gas fee, which is correlated with the highest amount of fuel used per capita (horizontal scale). As the gas fee increases (vertical scale), it is seen that most of the benefit appears to be attained by a fee level of about US$2.20 per U. S. gallon.  In Great Britain, where the gas fee is even higher, Ford, the American car maker, sells a model of its compact Focus whose efficiency is 72 miles per U. S. gallon.  In contrast, a Focus model sold in the U. S. gets only 33 miles per U. S. gallon.  Clearly, automakers already have the technology and capability to mass produce highly fuel efficient cars.  This shows that the current state of technology is sufficient to garner significant improvements today.

Gasoline prices affect consumption.   In the U. S. the price of gasoline has fluctuated considerably in recent years for reasons that do not include imposition of a carbon fee.  The Washington Post reported on April 17, 2012 that higher gas prices had led to reduced consumption, and to a move toward the purchase of more fuel-efficient vehicles.

A review of various studies of the interrelationship between price and consumption concluded that “we can be reasonably assured that a rise in gas fees, all else being equal, will cause consumption to decrease”. 

Examples of using cap and trade.

In the U. S. the Regional Greenhouse Gas Initiative (RGGI) encompasses nine northeastern states.  RGGI controls only for emissions from fossil fuel plants that generate electricity, and affects only larger power plants.  RGGI created a CO₂ cap and trade program, with the goal first of stabilizing and subsequently reducing the overall emissions from these plants.  Each state’s base emission amount was established at the outset, and is remaining fixed at that level from 2009 through 2014.  Starting in 2015, the allowances for each state are to be reduced by 2.5% per year, so that by 2018 the emissions will be 10% below the starting level.  Auctions for emission allowances occur quarterly.  RGGI estimates that the auction price increases the cost of electricity to the consumer by only 0.4% to 1%.

In its 19th auction, almost 38 million CO₂ allowances were sold, garnering about US$106 million, or US$2.80 per allowance.  The cumulative amount from all auctions is about US$1.2 billion.  The proceeds are used to rebate portions of electricity bills to consumers, invest in the region’s renewable energy economy, including job training for environmental jobs, and similar objectives.  RGGI has already invested in improvements that will produce significant reductions of CO₂ emissions and save the need for generating major amounts of electricity, as well as the thermal energy needed to drive the generators.

European Union (EU). Even before the entry into force of the Kyoto Protocol in 2005, the European Commission established its greenhouse gas emissions trading scheme (ETS) using a cap and trade market mechanism. As an accord intended to govern the operations of 27 sovereign nations, each country had to enact laws codifying the applicability of the ETS structure within its borders.

It covers at least 11,000 individual emission sources across the EU. The ETS is being implemented in three phases.

Phase 1, operating from 2005 to 2007, was characterized as a learning phase, and included such features as

• The level of the emissions cap was determined largely by each nation independently;
• It included only power plants with a capacity greater than 20 MW, and other industrial facilities; these represented 42% of emissions; and
• Allocations of emission allowances relied primarily on recent historical records; they were offered at no cost.

In Phase 2 (2008-2012), features that expanded on those of Phase 1 included:

• The level of the emissions cap conformed to the limits of the Kyoto Protocol; and
• Limits on emissions from air travel were to begin in 2012.

Phase 3 (2013-2020) departs from the earlier phases in important ways:

• National emissions caps were to be replaced by a single EU-wide cap; they decrease by 1.74% per year starting in 2010 with the objective of delivering 21% reduction referenced to 2005 by 2020;
• 90% of the allowances will be sold by auction rather than being distributed free of cost.

The performance of the ETS is shown below in the graphic.  Emissions allowances in a cap-and-trade regime were already in use in the EU prior to 2005. In Phase 1 it turns out that for a variety of reasons the auction market in these initial years established early prices as high as almost EUR30 (about US$39.20 at that time) per tonne of CO₂ equivalents (blue and lavender lines; tonne, a metric ton), which then fell to EUR0/tonne toward the end of Phase 1 (orange line; see the graphic).

 

CO₂ price evolution in the EU from 2003 to 2009.  Each period’s price performance is color coded as shown.  The pale aqua line represents futures trading for (the lower number of) allowances to be granted beginning at the start of Phase 2.  The EU-wide number of allowances for Phase 2 was 11.8% lower than for Phase 1.  Once Phase 2 began in 2008, the actual allowance price and the futures trading for 2009 allowances followed essentially identical paths.

Source: Estimations of carbon price in Europe, Nicole Dellero (2008)  http://ec.europa.eu/energy/nuclear/forum/opportunities/doc/competitiveness/2008-10-24/areva--co2prices.pdf.

 

The fall of the allowance price to EUR0/tonne in 2007 has been attributed both to a glut of allowances and to the impending economic slowdown preceding the world financial crisis of the coming years.  Of course, with allowances having no penalty value, emission sources were free to continue “business-as-usual”, rather than to curtail them.  On the other hand, when allowances had a significant price, businesses were able to pass along corresponding price increases to customers, which resulted in windfall profits.

The ETS had to cancel its most recent auction in March 2013 because bids received were “significantly” below the actual market rate.  In 2013, the start of Phase 3, about 40% of newly issued carbon emission allowances are being sold at auction for the first time.  The rest are still distributed at no charge.  The price had fallen by 5.6% to EUR3.73 (US$4.86) a metric ton, and reached a low on Jan. 31, 2013 of EUR3.42. 

Longer term the ETS price for emission allowances has fallen drastically, by 90%, in the last five years as demand for energy has fallen because of recessionary conditions among EU countries.  This has led to an oversupply of unused allowances.  The ETS is reevaluating its allocation of allowances, in an attempt to rebalance the trading system and maintain a price on emissions.

The state of California enacted its Global Warming Solutions Act in 2006, establishing mitigation goals through 2020.  The governor at the time, Arnold Schwarzenegger, extended the Act by executive order declaring further stringent mitigation objectives through 2050.  These actions are significant, because California constitutes about 1/6 of the U. S. economy in view of its large size and population.  The Act is also significant because in the U. S. it is the only economy-wide mitigation plan.  Inititally it covers most fixed point sources of emission, including electric generation plants and industrial facilities, beginning now (2012-3).  It will extend to refining and sale of transportation fuels (i.e., distributed sources) in 2015.  The mechanisms for undertaking its mitigation goals include a cap and trade system as well as continuing and expanding California’s historic, successful energy efficiency programs.  State officials and advisors are undertaking to learn lessons from the experience of the European Union’s ETS, seeking to avoid its mistakes.

The state established a rigorous survey of emissions from every potential covered installation in order to allocate emission allowances.  In its first auctions California sold 23.1 million allowances at US$10.09 each, in Nov. 2012, and another 12.9 million allowances at US$13.62 each at the second auction in Feb. 2013.  This works out to revenue from the first two auctions of US$409 million.

 

Analysis

Two major mechanisms have been devised to abate the emission of CO₂, a major greenhouse gas, (aside from the important contribution of increasing the efficiency of energy usage).  One, a cap and trade regime, operates primarily by capping the supply of energy.  (Of course the auction price imposed on allowances has the effect of raising the price of the energy purchased by the consumer, so cap and trade may also have elements of lowering energy demand as well.)  The second, a carbon fee applied in proportion to the amount of CO₂ emitted when the fossil fuel is burned, directly limits demand by raising the price paid for energy.

A cap and trade regime has many disadvantages in comparison to a carbon fee.  Some of these are apparent when considering the case of the European Union.  The factors, many of which are interrelated, include a) a need to account accurately for baseline emissions from each identified source prior to placing the regime in operation; b) a continued need for monitoring emissions from each source as the regime operates; c) a need for a  mechanism to allot allowances both at the outset and in subsequent periods of operation; d) a mechanism or rule for distributing allowances, including determining whether to grant or sell them; e) monitoring use of energy offsets by those installations unable to comply with emissions limits; and f) creating and maintaining the new administrative and bureaucratic offices needed to operate the regime.  It is seen from this incomplete list that a cap and trade regime presents many challenges, requires an extensive bureaucratic structure, and includes many opportunities for mistakes to be made that defeat the objective of constraining emissions.

In contrast, a carbon fee is extraordinarily simple in its operating features and is easy to implement.  A tax rate is established at the outset, covering most or all sources of CO₂ emissions.  In order to achieve its objectives, it would be optimal to start with an insignificant tax rate, and then have the rate increase annually to a level at which it would have a meaningful effect in reducing energy demand.  The example cited in the gasoline fee graphic above provides ample evidence that a carbon fee is easy to apply, has a broad if not universal reach, and achieves its objective according to its magnitude.  It is clear that the simplicity and effectiveness of a carbon fee offers major advantages over use of a cap and trade regime.

Many commentators have urged use of a carbon fee to mitigate emissions.  One of the most consistent over time has been Tom Friedman, columnist for the New York Times, most recently in this article.   His writing and that of others have considered the many uses to which the revenues from pricing carbon could be applied.  This post will not address that discussion; most alternatives are worthy ones.

 
The time to begin abating humanity’s emissions of CO₂, a major greenhouse gas, is now.  The longer we wait, the more firmly we cement our dependence on fossil fuels, and the more CO₂ accumulates in the atmosphere, exacerbating global warming and its damaging effects on human life and welfare.  The simplest, most direct, and highly effective mechanism for reducing dependence on fossil fuels and mitigate emissions of GHGs is to apply a carbon fee.
 

© 2013 Henry Auer

Fossil Fuels and Global Warming: Video

I've created a video entitled “Does Burning Fossil Fuels Cause Global Warming?”. It’s a pictorial examination of the relationship between fossil fuel use, carbon dioxide increase, and increased long-term global average temperature. It presents experimental data showing that a) the long-term global average temperature is increasing, b) the atmospheric CO₂ level is increasing, c) the increased CO₂ originates from burning fossil fuels, and d) burning fossil fuels is a major factor directly contributing to global warming.

Please have a look!
　
This video is the third in a series that also includes
           Our Invisible Energy and
           Light and Heat - The Greenhouse Effect.
　
© 2012 Henry Auer

Production Tax Credit for Wind Energy in the U. S.

Summary.  One way of reducing the rate of emission of carbon dioxide is to generate electric power from renewable sources, including wind energy.  In the U. S. renewable energy has been aided by a production tax credit since 1992, that Congress, in fits and starts, has repeatedly granted and taken away.  It is scheduled to expire again on Dec. 31, 2012.  In contrast, conventional fossil fuel energy sources have been steadily subsidized since the early 1900’s. 

Renewable energy, including wind energy, benefits the U. S. by relieving dependence on foreign energy sources, expanding economic activity, and lowering the annual rate of emission of carbon dioxide, the most prevalent greenhouse gas.  For these reasons the production tax credit should be renewed for an extended duration, in order to convey stability and predictability to the renewable energy industry.

 

Introduction.  The United States burns large amounts of fossil fuels in order to drive its economy, resulting in correspondingly large annual rates of emission of greenhouse gases such as carbon dioxide, CO₂.  CO₂ accumulates in the atmosphere because more is emitted than can be absorbed around the planet.  As a result long-term average global temperatures have been rising inexorably.  Increased temperatures are held responsible

for extreme weather events around the world, which lead to significant harms to our economic and societal wellbeing.

One way of reducing the rate of emission of CO₂ is to generate electric power from renewable sources.  Wind generation has been growing rapidly around the world, including the U. S., yet its share of energy production is still relatively small.  The U. S. enacted a Production Tax Credit (PTC) as part of the Energy Policy Act of 1992 in order to promote wind energy.  It subsidizes the sale of electricity produced by wind power.

The PTC has been allowed to expire and been reinstated repeatedly in recent years.  The current legislation granting the PTC expires Dec. 31, 2012.  However, Congress has not passed any new appropriations bills covering the current fiscal year that began Oct. 1, including the PTC.  Other significant fiscal difficulties arise in the U. S. by law on Jan. 1, 2013, so considering an extension of the PTC is greatly complicated by these additional crises.

The PTC subsidizes wind power generation by US$0.022 per kWh.  This adds up to about US$1 billion per year at the current level of wind generation (see below).  According to Vice Admiral (Ret.) Denny McGinn, the President and CEO of the American Council on Renewable Energy, the PTC has been a major factor in creating and expanding the wind energy industry in the U. S. since its inception.  Currently its extension is a topic of great controversy, mostly along party lines, in the Congress.  Those opposed generally are against promoting renewable energy and to expanding tax credits as a form of increased government spending.   Those supporting extension favor the PTC as a way of fostering expansion of the renewable energy industry.

Over the past decade the PTC has been allowed to expire, and then been reinstated, in repeated cycles, leading to an “off-again-on-again” pattern of funding.  This has led to insecurity and unpredictability facing investors and energy industrialists seeking to develop new wind energy facilities.  It should be noted that these entrepreneurs are part of the private market economy.  They need stability in their understanding of the financial environment surrounding their plans; it is difficult to plan for investment and construction of new wind facilities when the PTC is given and taken away in fits and starts. 

The correlation between breaks in appropriations for the PTC and the annual newly installed wind generation capacity is shown in the graphic below.

Annual installation of new wind generation capacity correlated with breaks in appropriation for the PTC.  The total affected wind generation capacity can be obtained by adding the heights of each bar.  The generation capacity for 2012 and 2013 are estimates based on the present status of the PTC.

Sources: American Wind Energy Association; U. S. Department of Energy, Energy Information Administration, as presented in The Guardian Oct. 17, 2012; http://www.guardian.co.uk/environment/blog/2012/oct/17/us-wind-power-mitt-romney-subsidy?newsfeed=true

 

The PTC lapsed in the years 2000, 2002 and 2004.  The effect of the lost support is evident in this graphic.  In each of those years the installation of new wind energy facilities fell by 73% or more (light green bars).  When reinstated, the PTC was implemented only for one- or two-year periods, rather than permanently or at least for an extended time.  In addition, the graphic shows a projected drop to no new wind capacity to be constructed in 2013, although it is likely that vestigial new construction will persist into 2013.  Adm. McGinn believes the wind industry would need a 3-5 year horizon for planning, and understands that PTC subsidies will not be, and indeed should not be, a permanent fixture in their industry.

 

Economic potential of the wind energy industry.  The expansion of the wind energy industry as a component of renewable energy has led to a work force estimated to have reached 85,000 jobs nationwide in 2008-9, according to the American Wind Energy Association (AWEA) as reported in the New York Times.   It has since fallen by 10,000 because of competition from China, and the growth of inexpensive natural gas.  In July, for example, the U. S. Commerce Department imposed tariffs on turbine towers originating in China, responding to a finding that the towers were priced in the U. S. at less than the cost of production in China.  In recent months, facing the unresolved expiration of the PTC, it is estimated that 1,700 layoffs have already occurred.  The American wind industry is composed of several hundred manufacturers, from multinational companies to small firms making specialty items needed in wind turbine installations.

 

According to AWEA 2.9% of the U. S. electricity demand was provided by wind energy in 2011. In Iowa and South Dakota, which have high potenetial wind energy resources, around 20% of the electricity demand is provided by wind. Nationally, the U.S. could provide 20%  of its electricity from wind power by 2030; this achievement is expected to provide 500,000 jobs to American workers.  In addition, currently 65% of the components in wind turbines are manufactured in the U. S., compared with only 25% before 2005; there are almost 500 companies distributed across 44 states engaged in manufacturing for the wind energy industry.  These data show that wind energy can make a significant impact on the American economy. 

 

Historical role of subsidies in the U. S. energy economy.  One group opposing extension of the PTC is the American Energy Alliance .  Its president, Thomas Pyle, concurred in calling the PTC a “boondoggle”, which it has been receiving for 20 years.  This opinion, however, is in flagrant disregard of the findings of recent studies of energy subsidies.  In the U. S., sources of energy have been recipients of federal subsidies since the 1800’s.  This includes the coal industry, the oil industry, and nuclear power.  Timelines for incentives from the federal government for energy sources over the past century are shown in the graphic below.  



Duration of U. S. government incentive support for fossil fuels, nuclear energy and renewable energy (includes wind, solar, hydropower, geothermal and biomass) from 1900.

Source: American Wind Energy Association using data from the U. S. Energy Information Agency, 2008.  http://awea.org/learnabout/publications/upload/Subsidies-Factsheet-May-2011.pdf

 

These subsidies have been especially instrumental during the early years in the development of each industry; yet after a century of growth in the oil and gas industry, it is still receiving federal subsidies (second gray bar; see the graphic above), and it benefits from a depletion tax credit as well (top gray bar).  The coal industry likewise has benefited from favorable tax treatment since about 1950 (third gray bar).  It is hard to argue that industries that are among the largest and most profitable in the American economy still require subsidies for their survival and growth.  Subsidies to the oil and gas industry are as much as 5 times larger than those for the entire renewable energy sector.  In 2007 the fossil fuel sector received US$ 5.450 billion in subsidies, whereas all renewable energy sources received only US$ 1.147 billion.

 

Analysis

 

Conventional energy sources, namely the various fossil fuels, continue to receive significant subsidies from the federal government, in spite of the fact that they are clearly mature industries.  The companies in question are massively large, and garner extremely large profits from their operations.  It is difficult to justify continuation of any subsidy or support in their favor.  The nuclear industry likewise continues to receive significant subsidy support after several decades of operation.  In this case, operations are usually regulated at the level of the states that the various nuclear-powered electric utilities serve.

 

Development of renewable energy is viewed as having several favorable effects on the American economy.  First, it would contribute to increasing the independence of the U. S. from relying on foreign sources of energy, and from having to use dollar resources to buy fossil fuels from abroad.  Second, it would relieve dependence on fossil fuels overall.  Third, development of all forms of renewable energy would contribute to the U. S. economy by providing new job opportunities in various skilled vocations, thus expanding our economic activity.  Fourth, expansion of renewable energy leads to economies of scale that would make electricity from these sources be fully competitive with conventional, fossil fuel-powered, electricity.  This effect is in fact already operating; wind energy generation is considered to be comparable in cost to conventional electricity.  Finally, widespread adoption of renewable energy would contribute to reducing the annual rate of emission of greenhouse gases.

 

For all these reasons it is important that the renewable energy production tax credit be reinstated for an extended period.  The historical persistence of subsidy support for the conventional fossil fuel industries provides an excellent precedent for the PTC.  Since fossil fuels have long been profoundly successful industries, their subsidies are no longer needed.  The PTC could readily be funded by reducing or eliminating these historical subsidies.  The availability of the PTC would promote expansion of renewable energy, with all its advantages.  Implementing the PTC for a multi-year interval would convey stability and predictability to entrepreneurs and industrialists who seek to develop renewable energy resources.  

 

© 2012 Henry Auer