by Alex Evans | Jul 26, 2008 | Climate and resource scarcity, East Asia and Pacific, Economics and development, Global system
Herewith an attempt to marshal my thoughts about what’s happening on the oil price (which has fallen sharply over the last few weeks), what’s likely to happen next, and what policymakers need to do to move forward. Brief summary as follows:
– The oil price has fallen sharply over the last couple of weeks, from a peak of $147 to a 7 week low of $123 at close yesterday. So is this the start of a long decline, or just a brief pause to draw breath before a resumption of the relentless upward march of recent years?
– In a nutshell, probably more like the latter – but with the potential for a big drop in the near term for as long as the credit crunch lasts, as emerging economies slow down sharply in line with falling US demand for their exports.
– However, once we’re through the crunch, we may be back to a game of cat and mouse between oil supply and economic growth. Demand falls, oil price falls; demand picks up, oil price goes back up too – but never for long enough to give investors a clear signal to pump cash into new oil supply infrastructure.
– What we need is a game changing intervention that breaks us out of this stop-start cycle. Massive investment in new oil supply would provide it, but can’t be squared with what needs to happen on emissions reductions.
– It looks like the only way through is for policymakers to agree a global climate policy framework that’s both global in scope and sufficiently long term to provide investors with an unequivocal signal of where to put their cash: this is the only way of squaring energy security with climate change.
Full version after the jump.
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by Alex Evans | Jul 17, 2008 | Climate and resource scarcity
Although plenty of people see the Guardian’s George Monbiot as an irritating gadfly (see also Gideon Rachman’s amusing account of what it’s like to work with him), I’ve long taken him seriously on climate and scarcity issues; his book The Age of Consent, in particular, contains a really excellent attempt to think through what will happen to world trade in conditions of resource scarcity.
So it was with interest that I saw on his blog that he’s officially Changed His Mind on post-Kyoto climate policy. Like me, George has for a long time been an advocate of C&C – under which countries agree a global ceiling on greenhouse gas concentrations (e.g. 350 parts per million of CO2), figure out the level of global emissions each year that will keep us below it, and then share out the tradable permits to that ’emissions budget’ on the basis of convergence to equal per capita rights by an agreed date, like 2050. But no longer. Here he is in the Guardian on 1 July:
After reading the proofs of a book by the independent thinker Oliver Tickell, to be published this month, I have changed my view. In Kyoto2: how to manage the global greenhouse, Tickell slaughters my favourite ideas(8). He shows that there is no logical basis for dividing up the right to pollute among nation states. It gives them too much power over this commodity, and there is no guarantee that they would pass the pollution rights on to their citizens, or use the money they raised to green the economy…
Instead Tickell proposes setting a global limit for carbon pollution then selling permits to pollute to companies extracting or refining fossil fuels. This has the advantage of regulating a few thousand corporations – running oil refineries, coal washeries, gas pipelines and cement and fertiliser works for example – rather than a few billion citizens. These firms would buy their permits in a global auction, run by a coalition of the world’s central banks. There’s a reserve price, to ensure that the cost of carbon doesn’t fall too low, and a ceiling price, at which the banks promise to sell permits, to ensure that the cost doesn’t cripple the global economy. In this case companies would be borrowing permits from the future. But because the money raised would be invested in renewables, the demand for fossil fuels would fall, so fewer permits would need to be issued in later years.
Tickell calculates that if the cap were set low enough to ensure that the world became carbon neutral by 2050, the total cost of permits would be about $1 trillion a year, or roughly 1.5% of the global economy. The money would be spent on helping the poor to adapt to climate change, paying countries to protect forests and other ecosystems, developing low-carbon farming, promoting energy efficiency and building renewable power plants.
In some ways, I can see the attraction too. For one thing, Oliver Tickell’s proposed approach (which you can read more about here) retains C&C’s most important attribute: it starts from where we’re trying to get to, through a quantified, binding ceiling on GHG concentrations. None of the usual crap about “aspirational long-term goals” here, then.
I suspect it’s also true that it would be methodologically far easier to cap the emissions of a few thousand refineries, cement works, coal mines or power stations – the ‘upstream’ end of the production life cycle, in other words – than it would be to cap national emissions, given that totalling an entire country’s emissions involves tracking hundreds of millions of different activities (e.g. the gas I’ve just used to cook my lunch).
But while the methodological / policy end of things does look easier under Oliver’s Kyoto 2 proposal, the politics look very much more difficult. For one thing, think of the developing country equity dimensions, which China and India showed so clearly at the G8. Oliver’s proposal effectively tells Chinese steel companies that they’ll have to compete against Japanese steel companies for emission permits in an open auction – a process that in effect takes no account of their developing status, and hence does away with the principle of common but differentiated responsibilities. Good luck with securing agreement to that.
Secondly, allocating emission rights to states may indeed entail no guarantees that these states will then pass emission rights on to their citizens, it’s true. But the fact of the matter is that it’s those states that must negotiate any global deal – and those states that must enforce domestic level compliance with the global deal, even if the deal is done as Oliver wants it to be.
All in all, Oliver’s is a smart idea – especially its focus on a relatively small number of sites – but it’s hard to see it as feasible…
by David Steven | Jul 8, 2008 | Climate and resource scarcity, Europe and Central Asia, North America
Like Alex, I spoke at the United Nations University symposium on climate change and innovation on Friday – and one notable theme was the ferocious kicking that Kyoto received from some of the speakers.
Leading the onslaught were Ted Nordhaus, author of The Death of Environmentalism, and Gwyn Prins, who runs the LSE Mackinder Centre for the Study of Long Wave Events.
Nordhaus, writing with Michael Shellenberger, has called for Kyoto to be scrapped in the current issue of Democracy. “Kyoto is dead,” they write, “and that’s a good thing. In its place, we need massive global investment in new clean energy technology.”
Gwyn Prins takes a similar line, an argument he set out in a pamphlet written with Steve Rayner, and subsequent op-ed for Nature (which he says received a bigger response than anything the journal has previously published).
On Friday, both attempted to bang a few nails into Kyoto’s coffin. Gwyn, in particular, was adamant that the protocol had long been dead. Only a few diehards – emotionally incapable of accepting they are wrong – had failed to admit its passing:
We have to find a way, diplomatically, for the Europeans to join in [to a new approach to climate control] without losing face. You don’t get progress if you tell people that they must admit they made a mistake. Most of us don’t like to admit that we have made mistakes.
Prins and Nordhaus agree on a great deal. On Kyoto, they argue that:
- Its targets have had no impact on those countries that adopted them – not even slowing the rate of increase in their emissions.
- In Europe, any emissions reductions that have occurred are due to factors that precede the implementation of the Kyoto protocol.
- European emissions are rising faster than American ones (a ‘hard fact’ that embarrasses European politicians who relish looking down on ‘ugly Americans’ as Gwyn put it).
On a future climate regime, they contend that:
- Kyoto’s failure means that the Copenhagen agreement should exclude binding targets.
- Instead, a ‘bottom-up’ approach should be adopted, with investment in technology at its heart. This will reduce emissions more effectively than binding targets.
- Leadership on climate is shifting away from Europe and towards the United States.
I am going to leave future frameworks to another post. In this one – and below the jump – I look at Kyoto’s impact on Europe. There’s a lot of detail in the main post, so here are the key conclusions:
- It’s too early to say whether Kyoto has worked as advertised in Europe – but the evidence suggests that Europe as a whole will meet, or even exceed its targets.
- Later reductions in emissions seem likely to be due to policy responses to Kyoto. Governments are reacting to the pressure that a binding target applies.
- It’s likely that Europe would be emitting more if Kyoto had never been ratified – and it’s a real stretch to argue that the US is doing better than the EU on emissions.
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by Alex Evans | May 28, 2008 | Climate and resource scarcity, Global system, Influence and networks, UK
No sooner do I finish my post this morning on high oil prices than I discover Gordon Brown in the Guardian, sharing our pain on energy prices (“…and I know that families up and down the country…” [cont. page 94]).
But his article is worth a read, for two reasons. First, while it doesn’t actually use the words “oil” and “peak”, it goes pretty close. Here’s a sample:
The cause of rising prices is clear: growing demand and too little supply to meet it both now and – perhaps of even greater significance – in the future…
Overall, by 2020, global demand for energy will rise by 50% [actually the IEA’s projection is a 50 per cent rise by 2030, not 2020, as Brown knows; but let’s not quibble]. It is the market’s belief that ever-growing demand will continue to outstrip supply that has pushed up the oil price.
And we are becoming increasingly aware of the technical, financial and political barriers to the production of more oil. Every country must find ways of being more efficient and diversifying supply. And as continuing high oil prices present us all with an immense challenge, the way we confront these issues will define our era.
Second, the article’s interesting because of the way it falls into a classic trap: confusing “oil” with “energy”. The article’s problem definition is about oil; the very first sentence says that “the global economy is facing the third great oil shock of recent decades”. So what needs to be done?
…we need to accelerate the development and deployment of alternative sources of energy, reducing global dependence on oil. Britain will increase its investment in renewables, including decentralised generation. We will build one of the world’s first commercial-scale carbon capture and storage coal plants and we have committed to a nuclear building programme to ensure that the UK’s emissions and dependence on fossil fuels do not rise as existing nuclear stations close.
So although the crisis is in oil – a liquid fuel for transport, in other words – the answer, we are told, lies with renewables, decentralised generation, carbon capture and storage and nuclear new build: with the power generation sector, in short.
This shows a pretty big lack of energy literacy. The only way these changes in the power sector will help British voters out on high oil prices would be if there was a massive roll-out of electric cars that could be recharged from the mains; or using electric power to electrolyse hydrogen on a massive scale to power cars. Not only is neither of these technologies anywhere close to commercial deployment in the UK, they’re also not even mentioned in the article.
Update: see also this post on electric cars.
by Alex Evans | May 28, 2008 | Climate and resource scarcity
The FT has a long analysis piece this morning on how the political salience of environmental issues is faring in Britain as the economy nosedives. The news ain’t good:
At a time of falling house prices and rising household costs, people are telling pollsters that they are no longer quite so interested in saving the planet. Ipsos Mori has found that environmental concerns reached a pinnacle in January 2007, when 19 per cent of people, unprompted, named the environment as one of the biggest issues facing Britain today, compared with just a few per cent several years earlier. But by January 2008, that figure had fallen to 8 per cent, while the economy was rated a top concern by one in five. One very senior member of the shadow cabinet put it more strongly: “People hate this green stuff.”
But on the other hand, CNN has this:
At a time when gas prices are at an all-time high, Americans have curtailed their driving at a historic rate. The Department of Transportation said figures from March show the steepest decrease in driving ever recorded.
Compared with March a year earlier, Americans drove an estimated 4.3 percent less — that’s 11 billion fewer miles, the DOT’s Federal Highway Administration said Monday, calling it “the sharpest yearly drop for any month in FHWA history.”
The question, then: as far as climate change is concerned, does a drop in public concern for the environment actually matter, as long as the oil price keeps on rising? Answer: yes, because there’s absolutely no law to say that pursuing enery independence is necessarily green.
Exhibit A: corn-based ethanol. Pointless as a climate mitigation measure (and seriously harmful on the food security front). As an energy security measure, unfortunately, rather effective.
Exhibit B: liquid fuels from coal. The US National Association of Mining is already out there making the arguments. Also rather effective from an energy security point of view, but not good at all for the climate.
All this adds up to a pretty good case for policymakers to focus heavy fire on unlocking electric cars, it seems to me, given how far away hydrogen still looks.
