Chip Knappenberger

A new Harvard University study (Analysis of Policies to Reduce Oil Consumption and Greenhouse-Gas Emissions from the U.S. Transportation Sector) offers a sobering assessment of what it will take to meet the emission reduction targets proposed by President Obama and the Waxman-Markey cap-and-trade bill.

Saruman’s rebuke to Gandalf — “You have elected the way of pain!” – nicely captures the key policy implication of this study (although the researchers, of course, do not put it that way).

Congressional proponents of cap-and-trade policies typically favor cost-control measures (price collars, safety values, offsets) designed to keep emission permit prices from exceeding $30/ton of CO2 in 2010 and $60/t of CO2 in 2030. Although an economy-wide permit price of $30-$60/t CO2 would significantly reduce GHG emissions from the electric power sector, it would have only a “marginal impact” on transport-sector emissions, which account for about one-third of all U.S. GHG emissions.

As a consequence, by 2020, total annual GHG emissions under Waxman-Markey would be only 7% below 2005 levels — far short of both the Waxman-Markey target (15.4% below 2005 levels) and President Obama’s somewhat less aggressive target (14% below 2005 levels).

To reduce transportation GHG emissions 14% below 2005 levels by 2025 would require gasoline prices “in the range of $7-9/gal,” the researchers estimate. They acknowledge that such prices are ”considerably higher than the American public has been historically willing to tolerate.” Yep, $7-9 a gallon would set a new record for pain at the pump!

By itself, the $30-$60/t CO2 carbon price would increase motor fuel prices by “only” $0.24-0.46/gallon. Not enough pain! To make driving hurt enough to save the planet (okay, hurt enough to produce undetectable effects on global temperatures), policymakers would also have to adopt a $0.50/gal motor fuel tax in 2010 that increases 10% a year until it reaches $3.36/gal in 2030. Even then, it won’t hurt enough unless crude oil prices increase to $124/barrel (in real dollars) by 2030. Crude oil prices as high as $198/barrel would work even better, the researchers opine.

Exactly how would “the way of pain”  produce these transport-sector emission reductions? Some of the reductions would come from consumers buying higher mpg vehicles, and some from technological innovation spurred by market demand for such vehicles. Most of it however, comes from people driving less — i.e., pain avoidance behavior!

A by-the-numbers explanation: In the base case (no carbon price, no new transportation taxes), vehicle-miles traveled (VMT) is projected to grow 39% by 2030. The economy-wide carbon price would reduce VMT by only 1% compared to the base case, and maybe not even that much due to the “rebound effect” of fuel-economy regulation (when the average vehicle gets more miles to the gallon, the average motorist travels more miles). But, add a generous serving of pain at the pump, and Voila – instead of growing 39%, VMT grows 25%. We’re saved!   

A few other tidbits from the Harvard study: 

  • Economy-wide CO2 prices must be more than twice as high (250%) as oil price increases to result in the same increase in the price of gasoline. For example, a $50/barrel increase in the price of oil is comparable to a CO2 price of $130/t.
  • Tax credits for advanced vehicles (diesels, hybrids), ranging from $3000 to $8000 per vehicle, require excessive government expenditures ($22-38 billion per year, on a par with the 2008 U.S. auto bailout).
  • Such subsidies are also counter-productive, because they blunt automakers’ incentive to increase the fuel economy of conventional vehicles, which occupy a larger share of the market.
  • If Congress is unwilling to elect the way of pain (impose transportation taxes and steeper CO2 prices), covered entities will increasingly purchase offsets rather than reduce emissions to comply with the Waxman-Markey cap. Specifically, they will purchase an estimated 730-860 tons of CO2-equivalent offsets in 2020 and more than 2 billion tons in 2027 — breaching the proposed statutory limit.
  • A $30-$60/t CO2 carbon price combined with $7-$9/gallon gasoline would reduce GDP only 1% in 2030. However, this conclusion depends on the assumption that Congress adopts a textbook perfect revenue-neutral carbon tax, in which all emission permits are auctioned, and all revenues are retured to taxpayers. 
  • The actual GDP losses would be higher: ”Given the politics surrounding the debate in Washington, D.C., revenue neutrality is likely to be an elusive goal and thus our analysis may understate the economic impacts, since only a small number of the permits are likely to be auctioned.”

The Harvard study makes even more obvious what should no longer be controversial. Congress has not yet adopted tough controls on GHG emissions not because a “well-funded denial machine” is “confusing the public,” but because Members of Congress seek above all else to get re-elected, and inflicting pain on voters is not a smart way to win their support!

In today’s New York Times, Lauren Morello of ClimateWire asks, “Is 350 [parts per million] the New 450 [ppm] When It Comes to Capping Carbon Emissions?”

The answer is yes, suggests Morello, a reporter with a keen eye for the shifting fashions of climate chic.

The older viewpoint was that if the world cuts back its CO2 emissions at least 50% by 2050, with industrial countries cutting their emissions by 80% or more, we could stabilize CO2 concentrations at 450 ppm, and that, in turn, would limit global warming to 2 degrees Celsius above pre-industrial levels.

But a 45o ppm stabilization target is increasingly regarded as too weak and unacceptably risky.  Twenty scientists, in an open letter to the President and Congress, contend that the Waxman-Markey legislation, with its emission reduction target of 83% by 2050, should be considered “only a first step.”

Then there’s the 350 or Bust campaign led by the Center for Biological Diversity. CBD and its comrades demand that U.S. environmental statutes be “fully implemented” to lower CO2 concentrations to 350 ppm. In June, CBD issued a report advising EPA to establish National Ambient Air Quality Standards (NAAQS) for CO2 set at 350 ppm.

Morello quotes Sanford University scientist Stephen Schneider on why 350 ppm is better than 450 ppm: “We’re betting the planet. There’s no such thing as a safe level [of CO2 concentrations]. There’s a level of very risky, versus mildly risky.”

This is the familiar rhetoric that we’re ”gambling with the only planet we have.” As should be obvious by now (alas, it isn’t), Schneider and other cap-and-traders propose to gamble with the only economy we have. They talk as if there are no risks of climate policy, only risks of climate change. I would paraphrase Schneider as follows: There’s economically hazardous (stabilization at 450 ppm by 2050) and there’s economically ruinous (stabilization at 350 ppm).

In “We Can’t Get There From Here” (Mar. 14, 2009), Newsweekcolumnist Sharon Begley describes what it would take to stabilize CO2 concentrations at 450 ppm by 2050:

[Cal Tech chemist Nate] Lewis’s numbers show the enormous challenge we face. The world used 14 trillion watts (14 terawatts) of power in 2006. Assuming minimal population growth (to 9 billion people), slow economic growth (1.6 percent a year, practically recession level) and—this is key—unprecedented energy efficiency (improvements of 500 percent relative to current U.S. levels, worldwide), it will use 28 terawatts in 2050. (In a business-as-usual scenario, we would need 45 terawatts.) Simple physics shows that in order to keep CO2 to 450 ppm, 26.5 of those terawatts must be zero-carbon. That’s a lot of solar, wind, hydro, biofuels and nuclear, especially since renewables kicked in a measly 0.2 terawatts in 2006 and nuclear provided 0.9 terawatts. Are you a fan of nuclear? To get 10 terawatts, less than half of what we’ll need in 2050, Lewis calculates, we’d have to build 10,000 reactors, or one every other day starting now. Do you like wind? If you use every single breeze that blows on land, you’ll get 10 or 15 terawatts. Since it’s impossible to capture all the wind, a more realistic number is 3 terawatts, or 1 million state-of-the art turbines, and even that requires storing the energy—something we don’t know how to do—for when the wind doesn’t blow. Solar? To get 10 terawatts by 2050, Lewis calculates, we’d need to cover 1 million roofs with panels every day from now until then. “It would take an army,” he says. Obama promised green jobs, but still.

The sacrifices required of developing countries would be immense, because 90% of the growth in global CO2 emissions is expected to occur in developing countries. Here’s a graph former CEQ Chairman Jim Connaughton prepared for the December 2007 major emitters conference:

co2-emissions-connaughton2

Stephen Eule of the U.S. Chamber of Commerce shows that to lower global emissions 50% below today’s levels by 2050 (the minimum reduction required to stabilize CO2 at 450 ppm), developing countries would have to reduce their emissions 62% below the baseline projection even if developed countries magically reduce their emissions to zero. They’d have cut emissions 71% below baseline if developed countries cut their emissions “only” 84% below current levels (essentially the Waxman-Markey reduction target).
eule-developing-country-emission-cuts-needed-to-cut-global-emissions-502

Absent technological miracles (which in their nature can’t be planned or predicted), lowering CO2 to 350 ppm by 2050 would probably require a global depression sustained over several decades.

Along with the push to make 350 the new 450, I detect a shift in climate alarmist rhetoric.

 If I’m not mistaken, there is a new and greater emphasis on the so-called precautionary principle. We don’t really know that limiting CO2 concentrations to 450 ppm would keep a safe lid on global warming, so we should err on the side of caution; 350 ppm is a more protective goal, argue NASA’s James Hansen and Gavin Schmidt. Again, this completely ignores the perils of the political interventions and fossil-energy restrictions required to achieve either of those targets. 

Another rhetorical shift is a subtle revision in the concept of climate sensitivity. Climate sensitivity used to mean how much global warming you get from a given increase in CO2 concentrations. However, since 2001, although CO2 concentrations have increased at an accelerating rate, global temperatures have been stagnant or even declined slightly. To my knowledge, no scientist in the late 1990s predicted a roughly 10-year period of no warming at the start of the 21st Century. This suggests that the climate is less sensitive (less reactive to CO2 emissions) than the alleged “scientific consensus” has been telling us.

That’s inconvenient if the only way to sell energy rationing to a reluctant populace is to claim, over and over again, that climate change is “even worse than scientists previously predicted.”

So the new rhetoric emphasizes the alleged damages of global warming — melting Arctic sea ice, drought in Australia, species migration. And we’re told that these impacts are occurring faster than climate models have predicted.  Dr. Brenda Ekwurzel of the Union of Concerned Scientists argued along those lines at a Ways and Means Committee hearing earlier this year on “Scientific Objectives in Climate Change Legislation.” 

Climate sensitivity is thus redefined to mean climate impacts per a given increment of warming rather temperature change per a given increment of CO2. In short, we’re supposed to believe that less warming than the IPCC predicts leads to worse impacts than the IPCC predicts. Hence the need to make 350 ppm the new 450 ppm.

All of which is obviously question-begging, because if the world isn’t warming, how do we know that, say, drought in Southern California is due to CO2 emissions rather than to ocean cycles or some other factor not related to the greenhouse effect? Indeed, if a change in weather or climatic conditions occurs faster than greenhouse climate models project, that is prima facie evidence that the change is not due to greenhouse gas emissions. 

The older view of climate sensitivity – that X amount of CO2 produces Y amount of warming — is the correct one, because it alone allows scientists to frame testable hypotheses. Scientists can measure CO2 concentrations, and they can measure global temperatures, and they can test whether a given increment in CO2 concentrations does or does not yield a hypothetical increase in global temperature.  

As discussed in a previous post, a recent observational study by Richard Lindzen and Yong-Sang Choi of MIT indicates that the actual climate is about six times less sensitive to CO2 emissions than the IPCC’s “best estimate.”

Last week, on the free-market energy blog MasterResource.Org, I posted a two-part column on climate change and national security. In a nutshell, I argued that global warming is likely not an important geopolitical or military “threat multiplier,” and that the national security risks of climate change policies likely outweigh those of climate change itself.

One of the great things about “publishing” on the Internet is that readers can quickly and easily share other insights and information the author had not considered.

Climate scientist and fellow blogger Chip Knappenberger called my attention to a remarkable essay in Nature magazine by Wendy Barnaby, editor of People & Science, the journal of the British Science Association — and to Chip’s review of Barnaby’s essay on WorldClimateReport.Com.

One of the principal ways climate change supposedly acts as a “threat multiplier” is to intensify drought and water shortages, leading to crop failure, famine, and armed conflict within and among nations. Barnaby had written a book about biological warfare, and the publishers suggested she write a book about the coming century of “water wars.” 

At the outset, she assumed that water scarcity is a signifcant source of armed conflict in the world – a pervasive problem just waiting to be ‘threat multiplied’ by climate change. The book was to include a history of water wars, but, as she dug into her topic, she found there wasn’t much history to write about. ”Cooperation, in fact, is the dominant response to shared water resources,” she discovered. The data are overwhelming:

Between 1948 and 1999, cooperation over water, including the signing of treaties, far outweighed conflict over water and violent conflict in particular. Of 1,831 instances of interactions over international fresh water resources tallied over that time period (including everything from unofficial verbal exchanges to economic agreements or military action), 67% were cooperative, only 28% were conflictive, and the remaining 5% neutral or insignificant. In those five decades, there were no formal declarations of war over water (emphasis added).

It is true that many nations are water-stressed, but this has not meant that their people must either perish or go to war to seize another country’s water supplies. Usually, it means that countries cooperate and import “virtual water” in the form of agricultural produce. It takes lots more water to grow crops than it does to supply households with drinking water. So where water is scarce, people tend to substitute grain imports for home-grown produce. Israel, Jordan, and Egypt are a case in point:

Israel ran out of water in the 1950s: it has not since then produced enough water to meet all of its needs, including food production. Jordan had been in the same situation since the 1960s; Egypt since the 1970s.  Although it’s true that these countries have fought wars with each other, they have not fought over water. Instead, they all import grain. As [U.K. social scientist Tony] Allan points out, more ‘virtual’ water flows into the Middle East each year embedded in grain than flows down the Nile to Egyptian farmers.

Climate change-related drought would pose challenges to resource managers but should not lead to armed conflict where nations are free to cooperate and trade. (As noted in my MasterResource column, cap-and-trade treaties require carbon tariffs for enforcement — a recipe for conflict and trade war rather than cooperation and trade.)

Barnaby’s conclusion is worth reproducing in full:

Book or no book, it is still important that the popular myth of water wars somehow be dispelled once and for all. This will not only stop unsettling and incorrect predictions of international conflict over water. It will also discourage a certain public resignation that climate change will bring war, and focus attention on what politicians can do to avoid it: most importantly, improve the conditions of trade for developing countries to strengthen their economies. And it would help to convince water engineers and managers, who still tend to see water shortages in terms of local supply and demand, that the solutions to water scarcity and security lie outside the water sector in the water/food/trade/economic development sector. It would be great if we could unclog our stream of thought about misleading notions of ‘water wars.’

Waxman-Markey would increase U.S. dependence on petroleum product imports

As discussed in my column on MasterResource.Org, U.S. dependence on oil, including oil imports, is not a “crisis.” Nonetheless, many eco-warriers and defense hawks claim that it is. They also claim that Waxman-Markey would enhance U.S. energy security by inaugurating the transition to a “beyond petroleum” economy.

Well, another colleague sent me a report showing that Waxman-Markey would make us more dependent on petroleum product imports.

The report, prepared by EnSys Energy for the American Petroleum Institute, finds that by 2030, Waxman-Markey would:

  • Significantly increase U.S. refining costs;
  • Reduce U.S. refining volume by up to 4.4 million barrels per day (mbd);
  • Reduce annual U.S. refining investments by up to $89.7 billion (up to an 88% decline in investment);
  • Reduce refinery utilization rates from 83.3% to as low as 63.4%;
  • Create competitive advantage for non-U.S. refineries; and, hence
  • Increase U.S. reliance on petroleum product imports.

EnSys analyzed three scenarios: a “Base Case” (EIA’s reference case projection of future liquid fuels supply and demand without climate legislation); a “Basic Case” (EIA’s analysis of Waxman-Markey assuming timely development of key low-emission technologies and no severe policy constraints on the use of both domestic and international offsets); and a No International/Limited Case (EIA’s analysis of Waxman-Markey assuming limited access to international offsets, and no deployment of key technologies beyond EIA’s reference case).

Okay, now that we understand the terminology, let’s look at some graphs from the EnSys report. First, the impact of Waxman-Markey on U.S. refinery output:

ensys-throughput

Next, the impact on U.S. refining investments:

ensys-investment

Next, the impact on petroleum product imports by volume:

ensys-product-import-volumes

Next, the impact on petroleum product imports by percent:

ensys-import-volume-by-percent2

Finally, the impact of Waxman-Markey on U.S. refining global market share:

ensys-regional-impacts1

Bottom line for “energy security” mavens: Waxman-Markey grows foreign refining output at the expense of U.S. output, and increases U.S. dependence on petroleum product imports.

The EnSys report very likely understates the impact of Waxman-Markey on U.S. refining. A modeling study can only estimate how carbon constraints will affect refining via their impact on fuel prices. Models cannot estimate how carbon-constraints might affect refining via their impact on investor psychology.    

Investors can get spooked when government declares regulatory warfare on an industry, and the Waxman-Markey bill does just that. Consider the gross disparity between the refining industry’s share of covered emissions (43%) under Waxman-Markey and its share of emission allowances (2.5%).

ensys-allocations-vs-emissions  

Investors cannot be blamed if they view Waxman-Markey as the proverbial “writing on the wall” for the U.S. refining industry. From this I conclude that Waxman-Markey’s adverse impacts on U.S. refining – and thus on the volume and percent of petroleum product imports – could be substantially greater than those EnSys projects.

Conclusion

Waxman-Markey will not take us “beyond petroleum.” Instead, it will make gasoline more costly to consumers while making America more dependent on imported petroleum products.

The Waxman-Markey cap-and-trade (energy tax) bill aims to reduce U.S. greenhouse gas emissions 20% below 2005 levels by 2020, 42% below by 2030, and 83% below by 2050. The cumulative cost in reduced GDP would likely total trillions of dollars. How much bang would we get for the buck?

Today, on Masterresource.org, climate scientist Chip Knappenberger shows by the numbers that the Waxman-Markey bill “will have virtually no impact on the future course of the earth’s climate.”

To calculate the climatic effects of the bill, Chip uses the MAGICC* climate model developed by the National Center for Climate Research, and assumes a climate sensitivity of 3°C (in other words, a doubling of atmospheric greenhouse gas concentrations above pre-industrial levels is assumed to produce 3°C of warming).

MAGICC reveals that an 83% reduction in U.S. emissions “will only produce a global temperature ‘savings’ during the next 50 years of about 0.05ºC.”  Translating a bit, the temperature reduction is nine hundredths of one degree Fahrenheit, or two years of avoided warming.

* Model for the Assessment of Greenhouse-gas Induced Climate Change