May 25, 2009

Is China Ready for a Climate Deal?

There’s been a lot of theatrics over Waxman-Markey in this country. But in a sense, it’s really a sideshow: If we don’t get the major developing countries — China in particular — to commit to reducing their carbon emissions, any effort to prevent catastrophic warming of the planet will be futile. That’s why negotiations between the US and China on reducing emissions are probably the most important thing shaping our planet’s future right now.

So what, exactly, is going on? Hard to say. The good news is, it seems China and the US are in talks about what to do about climate change, and that a mutual agreement to reduce emissions before the Copenhagen conference is a possibility. The bad news is, according to the Wall Street Journal, is that we may not want to hear what Beijing has to say:
China just upped the ante in its demands of what the West should do—calling for ridiculously ambitious emissions reductions over the next decade as a pre-condition for joining the club. The Waxman-Markey bill in its original form would have fallen well short of Chinese demands; in the compromise version, near-term emissions cuts are even more modest.
Specifically, China is asking for developed countries to reduce carbon emissions by 40% below 1990 levels by 2020. To put that in perspective, the European Union has pledged to reduce their emissions by 20% in that time frame, and 30% if the rest of the developed world joins them. And Waxman-Markey? Well, according to the World Resources Institute, the cap-and-trade system would only reduce US emissions by one percent. Even if you add in the other provisions of the bill, it would bump the level of reductions up to 23 percent, at best.

So why is China making such a demand? To begin with, look at the phrasing in their press release:
A shared vision for long-term cooperative action is to enable the full, effective and sustained implementation of the UNFCCC [United Nations Framework Convention on Climate Change] to achieve its ultimate objective. Such a vision should be guided by the ultimate objective of the UNFCCC and the principle of common but differentiated responsibilities and the principle of equity. Since the UNFCCC has clearly defined the ultimate objective to address climate change, the overriding task for the international community is to implement concrete actions. The goal for long-term cooperative action should be a comprehensive one, consisting of sustainable development, mitigation, adaptation, financing and technology. In terms of mitigation, developed countries as a whole shall, as their mid-term targets, reduce their GHG emissions by at least 40% below their 1990 level by 2020.
That phrase, "common but differentiated responsibilities," is the linchpin to both the argument that the developed world should make drastic cuts in their emissions and that developing countries, including China, should not be legally bound to make any reductions at all. Basically, while all countries have a responsibility to protect the environment, developed countries — in view of their much greater wealth and that much of their wealth was gained through exploitation of developing countries’ resources — should do more to halt environmental degradation than the rest. This is especially the case with climate change, as the carbon emissions of Western countries over the last century are to blame for most of the warming that this planet has experienced to date. It is, of course, incredible to think that developing countries should place constraints on their fossil fuel consumption when developed countries won’t do the same; moreover, given that developing countries are more vulnerable to the effects of climate change, it stands to reason that developed countries should do what they can to prevent undue harm as a result. This includes not only cutting their own carbon emissions to avoid devastating levels of warming, but also financial assistance to developing countries to both develop clean sources of energy and adapt as much as possible to that climate change which is unavoidable at this point.

Now, it would be one thing for, say, Vietnam to make this argument; it’s a poor country, at risk of losing much of their farmland to global warming-induced sea level rise, and should not be denied the chance to develop their economy because of the actions of Westerners. But the argument begins to fall apart when applied to an economic behemoth like China, which, frankly, is now as much as part of the climate problem as the West. True, on a per capita basis, the Chinese are still fairly poor, on par with Albanians, but at some point it makes no sense to group all developing countries under the same rubric. Unfortunately, the international climate regime still only divides the world into developing and developed countries; creating a third category for prosperous, but still developing, countries, with a level of responsibilities in between those of the poorest and the richest countries, would bring things more into line with reality.

That said, the US needs to do more than what is proposed under Waxman-Markey; although, as mentioned above, the whole bill would result in roughly the same carbon emissions reductions as what the EU has promised. And indeed, the EU needs as much prodding on this matter as we do. By the same token, however, so do the Chinese.

#2 The Great Wall of China originally uploaded to Flickr by emms76.

May 22, 2009

Waxman-Markey: Better than Nothing

Count me on the side of Krugman, Romm, and Roberts in supporting Waxman-Markey, even in its current watered-down version (and which just recently passed out of the House Energy and Commerce Committee). Of course, it would be better, as a matter of distributive justice, if the permits in the cap-and-trade system were all auctioned off and the revenue rebated back to individuals.* And of course, it would be better if the use of carbon offsets were kept to a bare minimum. That said, the fact that W-M establishes a price on global warming pollution for the first time in American history is something to be celebrated; and the clean energy provisions that make up the majority of the bill will do a lot to move our economy away from reliance on fossil fuels.

Despite all that, there’s no denying that W-M has been watered down, to the detriment of trying to keep the planet from warming to dangerous levels. And given that W-M, as written, would have rather meager effects on planetary warming (Jim Manzi, for one, claims it would only reduce global average temperatures by 0.1ยบ C by 2100), what is the virtue of enacting it? The answer, I think, is twofold: the US would have a stronger position going into negotiations with China and the other major developing countries at the Copenhagen conference in December; and by putting in place the basic mechanisms for reducing carbon emissions now, they can more easily be strengthened, tweaked, etc., down the road. Of course, it’s impossible to say if W-M will actually help accomplish these goals — Suppose the Chinese balk in agreeing to reduce their emissions? Suppose the Republicans regain power while still committed to denialism about climate change? — but it seems to me that progress will not be made by waiting around for a perfect bill. Indeed, I think that once the US commits to reducing carbon emissions, the scare stories that dominate much of the climate change debate in this country will lose much of their force, and making stronger reductions won’t seem so impossible to many. Now if only W-M survives in its current form though the other House committees, a floor vote, and the Senate…

* Though see this report which argues that the allocation scheme of W-M will prevent utilities from reaping windfall profits, as they did in Europe during the first phase of its cap-and-trade system.

May 16, 2009

Unemployment Blogging: Or, The Double Dip Recession

So my job at EPC, which I feared at the time I was hired would not be permanent, was in fact not permanent. On top of that, I threw my back out last Friday and have spent much of the last week on a sofa with an icepack. (I was getting better until today, when I had a rather severe relapse; I'm writing this from a guest bed in my parents' house.) In short, I'm not having a very good time right now.

I'm not quite as scared as I was during my last spell of unemployment, when I had been applying to jobs for about a year, getting nowhere, and then having even the meager cashier job I had taken away from me. On the other hand, as my last job was a contract position, I have no recourse to unemployment benefits this time. So I will have to use what savings I have amassed very wisely. I sincerely hope that I will be able to stand on my own two feet soon -- both figuratively and literally.

May 7, 2009

UNCLOS vs. The Senate

Via Scott Paul, some encouraging news on the Law of the Sea Convention (or UNCLOS):
Senate Foreign Relations Chairman John Kerry (D-Mass.) is crafting a strategy to ratify the long-stalled Law of the Sea Treaty this year -- a move that ocean and foreign policy experts say is increasingly important as climate change reshapes the Arctic.

Kerry said this week that he is working to find time for a hearing and votes on the treaty, which governs navigation, fishing, economic development and environmental standards on the open seas.
UNCLOS has been in Senatorial limbo for about 15 years, so it's encouraging to hear that Sen. Kerry is leading a charge to finally ratify it. On the other hand, it seemed like the treaty had a good shot back in 2007, and in 2004 -- my understanding is that it had the votes for ratification even back then. And yet, nothing has happened. I could understand why the Republicans sat on the issue when they had the majority, given their captivity to the far right and its hatred of multilateralism. But why, with the Democrats in charge, there's been no movement whatever on the treaty, is a mystery.

On the other hand, it may not be such a mystery, given how the Senate works. Norm Ornstein recently wrote about how the abuse of the Senate's rules has made even overwhelmingly popular legislation nearly impossible to pass. I don't know if this has been the case, but I suspect that fear of someone like James Inhofe bringing Senate business to a halt has been a major factor in the lack of action on UNCLOS. The Greenwire article mentions that finding time on the Senate calendar is a big question for moving ratification forward; but it seems to me that the Senate leadership could find the time if they wanted to have a vote. In other words, I fear that ratification opponents care a lot more about stopping it than supporters do about passing it. Again, this is speculation on my part -- one other factor could be that the Republican Senators who have said they support ratification might cave under right-wing pressure. Fortunately, this time around ratification requires only eight GOP votes, at least.

The Hundred Dollar Bill on the Sidewalk

David Roberts writes about energy efficiency:
When smart energy advocates claim that shifts in policy can produce large dividends, they’re inevitably dismissed as promising "something for nothing." Dig into that phrase a little and at its root you find faith: the faith that if "something" were available, rational market actors would already have acted to obtain it. The claim that government can make (or induce) investments that offer substantial returns simply doesn’t compute.

But energy efficiency refutes that view. Studies show -- at this point beyond reasonable doubt -- that there is money lying on the ground that nobody’s picking up. Lots and lots of money. This isn’t some marginal phenomenon. We’re talking about "cost-negative" investments that can in the next few decades increase the aggregate efficiency of the economy by 20, 30, 50 percent. That’s enormous. That’s a central fact of our economic life, not a peculiar marginal phenomenon. People are behaving irrationally on a massive, massive scale.
This point is largely correct, but it needs to be said just how it is correct. To begin with, an energy efficiency investment is "cost-negative" so long as you take into account the lower operating costs over some specified payback period, or even over the entire operating life of the investment. Based purely on the sticker price, though, it's rarely the case that the more energy-efficient item costs less than the less energy-efficient one. To be sure, if you go to buy, say, an air conditioner, as I did recently, you'll see attached a yellow slip of paper from the Federal Trade Commission that says what the average yearly cost of operation is, and how it compares to other items in its class. That's helpful, but it doesn't go nearly far enough to overcome the average person's tendency to think primarily of the upfront expense and leave the cost-benefit analysis for later. If we want to encourage more intelligence in our energy consumption, we need to be much more aggressive in prodding consumers into making more energy conscious decisions. (And in case you were wondering, I got a small 5,200 BTU unit; it isn't Energy Star rated, but that was only because there were no such units available in that class when I went to shop -- which, in a way, proves my point.)

At the same time, while changing individual behavior is undoubtedly important (see, e.g., Felix Salmon on Google's new PowerMeter software or my own post on the subject), inducing large-scale increases in energy efficiency will require attacking the problem at, well, a larger scale. This is the rationale behind the push for revenue decoupling for electric utilities in the US, as well as other schemes like energy efficiency portfolio standards and "white certificate" trading programs. (See this Economist article for an overview of the issues involved.) I would also add that, pace Roberts' assertions about the failures of standard economics with respect to energy efficiency, a stronger price signal would go a long way toward making our energy regime more intelligent. The oil price boom certainly convinced many that gas guzzlers are a thing of the past, even after the dramatic dropoff last fall and winter. And while electricity prices have increased significantly over the past decade, that has to be set against the much longer decade-on-decade decline:

Granted, it's also true that energy intensity, both in the US and worldwide, has been declining over the past 30 years or so; but I see no reason why an increase in coal prices, via a carbon cap, couldn't help that process along more quickly.

NB: Post title refers to the old joke about economists:
Two economists are walking down the street. One sees a hundred dollar bill lying on the sidewalk, and says so.

"Obviously not," says the other. "If there were, someone would have picked it up!"

May 1, 2009

Simple Answers to Simple Questions

Dwyer Gunn over at Freakonomics:
Are Carbon Offsets Too Good to Be True?

OK, perhaps that's being too glib. I certainly believe that carbon offsets can play some role in reducing carbon emissions. But as they are currently designed, I would not want them to play a very big role in abating climate change. The several fiascos surrounding offsets are fairly well-known, and tend to revolve around the same problem: The requirement of additionality (that an offset project would not occur absent money from offsets) is difficult, if not impossible to prove, and easy to game. One simple way to address this problem, I think, would be to require that credits be issued only for projects that have not yet been started; it's amazing how many offset projects in the Clean Development Mechanism, say, were approved retroactively, on the theory that the project was built with the anticipation of getting offset funds and would not be "viable" without them.

But even if you enacted that or other reforms aimed at making offsets a more trustworthy proposition, the question then becomes, are offset programs thus more effective? That is, is there a tradeoff between the quality of offsets issued and the speed with which they can be certified and sold? Gunn points to a recent paper (PDF) by Michael Wara and David Victor, who have each written extensively on carbon offsets, that addresses this question specifically. Let me quote from the executive summary:
The demand for [CDM] credits in emission trading systems is likely to be out of phase with the CDM supply. Also, the rate at which CDM credits are being issued today—at a time when demand for such offsets from the European ETS is extremely high—is only one-twentieth to one-fortieth the rate needed just for the current CDM system to keep pace with the projects it has already registered. If the CDM system is reformed so that it does a much better job of ensuring that emission credits represent genuine reductions then its ability to dampen reliably the price of emission permits will be even further diminished.
In other words, a junk-free offset program couldn't issue nearly enough credits to allow developed countries to cheaply meet their emissions reductions requirements. And remember, the CDM is one of the more responsibly run offset programs out there.

I'm trying not to be so negative about carbon offsets, but it's rather hard to avoid these conclusions. My experience in grad school, for example, of exploring the possibility of using offsets to finance putting out coal fires in developing countries was one of trying to finesse the conceptual difficulties in order to come up with a workable outline of how it could be done.* But if Wara and Victor are right, then it seems that even when those conceptual difficulties are solved, the logistics of using offsets are too big to overcome.

* Asking whether an emissions reduction project is additional is a bit like asking whether, if your parents had married other people, you would be a different person. It's not something you can really prove one way or another, but you have to make some sort of assumption in order to proceed. The question is, do you want to make decisions about the future of this planet on such assumptions?