Solving one type of knowledge problem

Have you ever found yourself wandering through midtown Manhattan, thinking “I wonder how many tons of CO2 humanity has cumulatively released into the atmosphere”? Well, you’re lucky that Deutsche Bank had you in mind when they designed their new billboard:

Now you know. And I have no doubt this counter will have as much of a lasting impact on the national conscious as the National Debt counter.

H/T: G2 Weather Intelligence

Allocation Mechanisms – The Details Really Matter

A few days ago I received an e-mail from a reader asking about allowance distribution mechanisms in Waxman-Markey.  As I wrote a response, I thought it would make more sense to make a post out of it.

As it stands in Waxman-Markey, allowances will be distributed to LDCs based on a 50/50 split of their emissions and deliveries.  This is often overlooked, but it is important as to where in the country allowance value is allocated, and ultimately how prices will change.  Below i’ve listed three allocation mechanisms, their benefits and some of the problems.  Keep in mind that a “benefit” in this discussion has to do with receiving more allowances ($) and hence has to do with more consumption/emissions (which we usually consider bad).

Consumption based – This metric benefits those who consume a lot of electricity, and are really inefficient at doing so. This is bad for states like California who have invested a lot in demand side energy efficiency.  Consumption weighting also benefits those regions that already generate a lot of electricity from low carbon sources.  If you could imagine a region that only generated electricity from zero carbon sources, they would get a whole lot of free permits, and they could turn around and sell them for pure profits.  Some might argue this is unfair, but personally I think this can almost be seen as a reward for states which have spent the money to make low carbon generation investments.

Emission based – This metric is great for those states who haven’t invested money in low carbon sources of power.  Think the Midwest and the Southeast.  Some might argue that these are the states that need the most help, and that climate policy is going to hurt them the most in percentage terms.  While I think that it is important to protect coal states, it is also important to acknowledge the expensive investments some states have made in low carbon generation.

Population based – This is not a part of Waxman-Markey, but I think it deserves a bit of discussion.  This clearly would benefit those states with a high population.  In some ways, this is the fairest system since one might assume that more energy is consumed in higher population areas.  It does, however, disadvantage low population states that emit a lot of carbon.  For example, Wyoming [remember this?] with its high emissions per capita would receive a very small amount of allowances even though it emits a ton of carbon.

At the end of the day, which system you pick depends on what you think is important.  Personally (if you can’t tell already), I think it makes sense to reward those states that have already invested in lower carbon sources of power.  These states typically face much higher electricity prices than the rest of the country.  My personal feelings aside, there is an equally valid argument that the regions with lower electricity prices (and more emissions) also tend to have a lower cost of living.  Large increases in electricity prices in these areas will constitute a larger burden as a percentage of income.

In the end, it is probably a political compromise which decided the 50/50 split, so there isn’t much we can do about it.  It is just interesting that while a lot of the debate surrounds percent allocations, much less discussion has foused on the mechanism behind the allocation.

Being for Energy Independence v. Being Against Progress

Plenty of criticism and analysis has already been directed at Alaska Governor Sarah Palin’s cap-and-trade editorial in the WaPo today (see here, here, and here). Instead of jumping on the bandwagon, I’d like to juxtapose it against an alternative analysis of the American Clean Energy and Security Act (ACES) by my former Congressman Mark Kirk (R-IL), who voted in favor of the bill. I’m not trying to pretend that Sarah Palin and Mark Kirk fall at the exact same point on the political spectrum (nor am I trying to set up some sort of artificial debate between the two of them). Indeed, Kirk represents a moderate suburban Chicago district (although one that would be hard hit by increased taxes on the wealthy), has always been fairly green, and had further political incentives for the “Yes” vote given his upcoming run for statewide office.

However, it’s worth illustrating that while both share the same overarching policy objective—“an ‘all of the above’ energy strategy”—Kirk’s reasoned, experienced, fact-based, forward-looking and still very much conservative analysis led him to a very different place than Palin. My overall message to the Republican Party: please, please listen to the Mark Kirks in Congress when designing your strategy on climate and energy legislation, and not the Sarah Palins.

The Starting Point

Kirk: “For 2009, our top goal should be energy independence. I support exploring for energy off our coasts, expanding nuclear power and building a natural gas pipeline across Canada to lower heating costs in the Midwest…”

Palin: “We must move in a new direction. We are ripe for economic growth and energy independence if we responsibly tap the resources that God created right underfoot on American soil…Our 3,000-mile natural gas pipeline will transport hundreds of trillions of cubic feet of our clean natural gas to hungry markets across America. We can safely drill for U.S. oil offshore…”

Kirk and Palin seem to be agreed to the standard Republican “all of the above” energy strategy, focused on promoting domestic sources of energy and reducing America’s dependence on foreign oil.

The Experience

Kirk: “…the underlying ACES bill would still lower our dependence on foreign oil by diversifying American energy production. It is time to break the boom and bust cycle of high gas prices and the need to deploy three separate armies to the Middle East (Desert Storm, Iraqi Freedom and Enduring Freedom). As you may know, I am a veteran of the Desert Storm and Enduring Freedom missions.” “In 1998 and 1999, I served as part of the U.S. delegation to both the Kyoto and Buenos Aires UN Climate Change conferences. In those years, there was a significant debate about the amount and effect of atmospheric carbon dioxide. I was a skeptic and spent hundreds of hours on the subject of 1990s climate science. In the Congress, our job is to learn as much as possible from the latest peer-reviewed non-partisan scientists and then plot the best course for our nation.”

Palin: Governor of a large, oil producing state (surely there are no perverse incentives there). Well, until she resigned.

You can’t fault Palin for looking out for her constituents, and supporting increased domestic oil and gas production. However, Kirk has seen firsthand the impacts of U.S. dependence on foreign oil when fighting for his country, and extensively studied climate science. Whose experience is more valuable when judging U.S. climate and energy policy options?

The Analysis

Kirk: “The National Academy of Sciences reports that the earth’s average temperature already increased by 1.4°F, from 56.8°F in 1920 to 58.2°F in 2007. NOAA also reports that due to a 30% drop in winter ice covering the Great Lakes since 1972, evaporation may be the cause of Lake Michigan’s declining water level…I am a strong supporter of the non-partisan Congressional Budget Office. When they reported the Democratic health care bill cost $1.6 Trillion, we should take notice and rewrite that bill. That is why I have become one of the leading Republican authors of an alternative health care bill that will be the Congress’s least expensive bill, costing our Treasury very little. I read their report on ACES carefully too. CBO reports that peer-reviewed scientists expect the world’s average temperature to increase by 9 degrees by 2100, lowering U.S. economic output by 3% annually. In sum, they estimated the costs of the bill per household at $140 annually.”

Palin: “The Americans hit hardest will be those already struggling to make ends meet. As the president eloquently puts it, their electricity bills will ‘necessarily skyrocket.’ So much for not raising taxes on anyone making less than $250,000 a year. Even Warren Buffett, an ardent Obama supporter, admitted that under the cap-and-tax scheme, ‘poor people are going to pay a lot more for electricity.’ ”

It’s perfectly reasonable for two intelligent, reasonable people to look at the same study and draw two different conclusions, based on their judgment of the underlying assumptions or methodologies. However, this was not the case here. Here we have a careful review of available non-partisan scientific and economic data specific to this exact piece of legislation versus unsubstantiated statements and generalized quotes. Once again, whose argument is more compelling?

The Conclusion:

Kirk: “In sum, I would have preferred a bill that focused more on energy independence and less on some of the complications in this bill. Nevertheless, the 1990 Clean Air Act signed by President Bush established a cap and trade system to reduce acid rain that proved to be a great low-cost success…In the coming Senate debate, I hope we can repeat this environmental success and aggressively back a national program to defund Iran and Venezuela by reducing America’s need for foreign oil.”

Palin: “Can America produce more of its own energy through strategic investments that protect the environment, revive our economy and secure our nation? Yes, we can. Just not with Barack Obama’s energy cap-and-tax plan.”

Hmmm…somehow there seems to still be a disagreement between Kirk and Palin about the merits of ACES and the direction of America’s climate and energy policy. Based on their experience, evidence and analysis, I wonder whom to believe?

So, the G8 meeting WAS interesting

Photographic evidence that agreeing to limit warming of global temperatures to 2 degree C was not the only notable thing at the G-8 meeting this week:

This may be evidence that B-Rock is indeed human. I also appreciate how amused Sarkozy appears. Before jumping to conclusions though, you should note this picture may have been taken out of context. Who has come forth to defend the President’s honor? Greta Van Susteren of Fox News, obviously. Just because a picture speaks 1000 words doesn’t mean those are the right words…

H/T: J-Ladd

Senate Debate vs. House Debate

The beauty of writing for two blogs is you get to post the same thing twice and you get double the credit for it, or something like that. This post originally appeared on Weathervane, RFF’s fancy and informative climate blog:

How will the Senate Climate Debate Differ from the House Debate?

By Daniel F. Morris

The climate debate kicked off in the Senate this week with the Obama administration encouraging senators to pass legislation comparable to H.R. 2454, the mammoth bill that passed by a vote of 219-212 last month. In testimony given to the Environment and Public Works Committee, Energy Secretary Steven Chu, Agriculture Secretary Tom Vilsack, Interior Secretary Ken Salazar, and EPA Administrator Lisa Jackson all urged the Senate not to slow the momentum behind the passage of the House bill.

The formation of the Senate bill and the debate surrounding it will be significantly different from the experience in the House. First, a huge component of the Senate strategy will involve wrangling 60 votes to block a potential filibuster, which will probably require more compromises to accommodate Midwestern Democrats who currently feel compelled to oppose the bill. Concessions may involve the stringency of the cap in the early years of a cap-and-trade market (14% reduction of 2005 emissions by 2020 instead of 17%), allowance allocations given away to energy-sensitive industries, especially coal, oil, and manufacturing, and the role of nuclear power in the nation’s future energy portfolio.

Second, the bill will receive much more scrutiny at the committee level than the House bill received. H.R. 2454 was fully marked up only by the Energy and Commerce Committee. Input from other committees, like Ways and Means and Agriculture, were included in a manager’s amendment inserted during floor debate. In contrast, the lead for drawing up the Senate bill will be Sen. Barbara Boxer (D-CA) in the Environment and Public Works Committee, but the legislation will ultimately include pieces constructed by at least five other committees, including, Agriculture, Commerce, Energy and Natural Resources, Finance, and Foreign Relations. Senate Majority Leader Harry Reid (D-NV) has tentatively slated a deadline for the bill to clear the committees of Sept. 28, so September will be a hectic month. Boxer is indicating she wants to wait until after the August recess to take up any climate bill.

Aside from dynamics distinct to the Senate, there are a number of specific issues that may develop disparately from the House debate. Some of the prominent topics are:

• Price collar: H.R. 2454 established a minimum carbon price (or price floor) of $10, but did not include a matching maximum price. The strategic reserve auction mechanism (Sec. 726) protects much more against extreme price volatility than consistently high allowance prices. In the interest of protecting regulated industries and reducing overall costs of the entire program, the Senate will likely take a much closer look at employing a price collar that sets both a minimum and maximum price for emissions allowances. Previous studies conducted by RFF scholars, one by Dallas Burtraw and Karen Palmer and another by Harrison Fell and Richard Morgenstern show that use of a price collar can reduce the total costs of implementing a cap-and-trade system.
• Competitiveness: President Obama expressed some dismay about the last-minute addition of protectionist language (Sec. 3) included in H.R. 2454 targeting imports from emerging economies that do not take on similar emissions reductions. Language in the bill explicitly names China and India as countries that deserve scrutiny. Those concerned that such language will lead to conflict in future climate negotiations with the two countries see the Senate as the place to scrub the inflammatory verbiage. Foreign Relations Chairman John Kerry (D-MA) has already stated that he and others in the committee intend to make changes in the hopes of avoiding retaliatory measures from India and China. Midwest Senators Carl Levin (D-MI) and Sherrod Brown (D-OH), however, have expressed support for the provisions and disagree with the President’s assessment. The matter will no doubt receive considerable attention from both the Foreign Relations and Finance committees.
• Market Regulation: Both chambers want to see stringent regulations for the potentially huge carbon trading markets to come out of cap-and-trade measures. H.R. 2454 split responsibility for oversight between the Commodity Future Trading Commission and the Federal Energy Regulatory Commission. Sen. Dianne Feinstein’s (D-CA) experience with FERC during California’s deregulation woes of the early part of the decade have led to her strong distrust of the agency, and she has introduced a bill giving CFTC full authority for regulating carbon markets. This debate may continue to evolve as the Senate bill begins to take shape.
• Agriculture: In the House debate, powerful agriculture concerns found voice in Rep. Collin Peterson (D-MN), who had a major influence over the final version of the bill, including a provision that give authority to the Dept. of Agriculture to determine what constitutes domestic forestry and agriculture offsets. Many farm groups lined up against the House bill after its passage and their influence could spell doom for Senate passage. Agriculture Committee Chairman Tom Harkin (D-IA) has already expressed his dissatisfaction with the House bill and intends to protect agriculture and farmers. Expect agriculture to play an even bigger role in the Senate debate.

Undoubtedly, other issues will surface over the summer as committees begin drafting separate pieces. The Senate has somewhat of a head start in that a major energy provision has already been shepherded through committee by Energy and Natural Resources Chairman Jeff Bingaman (D-NM).

The path to President Obama signing climate and energy legislation is far from clear, however. The Senate bill must navigate skeptical and apprehensive Midwest Senators, substantial efforts from environmental groups to strengthen it, and ardent opposition from many in the Republican minority. Even though the Fourth of July was last weekend, it appears that we can look forward to plenty of fireworks for the rest of the summer.

Desalination and Climate Change

I don’t pretend to know much about water, but being from California and living through droughts certainly has kept it on my mind.  While everyone knows that water will continue to increase in importance, it definitely has not reached a national level of prominence like climate change. Most people acknowledge that climate change will continue to affect water availability going forward, but it seems that water shortages are already contributing to climate change.

A recent article in the Washington Post  discusses the opening of a desalinization plant that is going to open next year in Carlsbad, CA.  Of particular note to climate change was that

Government agencies have opposed desalination because of the process’s energy consumption. The desalination plant would use nearly twice as much energy as a wastewater-treatment plant available in Orange County.

I realize that we are already using energy to treat water, but turning to large scale desalinization is a significant step.  Plants in other parts of California are also expected to be built, and many of these will require the construction of new power plants.   These new emissions will in turn contribute to climate change related water shortages.

One new power plant is a drop in the bucket compared to global emissions, but it illustrates that water needs to be a part of our national climate agenda moving forward.  If we ignore it, it will just find a way to come back and bite us.

Another fallen giant

The volume of celebrity deaths in the past few weeks is becoming a bit disturbing. While the world is mourning the king of pop, another king has passed quietly and sadly. John Bachar was a veritible god in the world of rock climbing. For the past 30-some years, he has been dominating walls and routes that others thought were unclimbable, and doing it all without ropes. He died Sunday while free soloing in Mammoth Lakes, CA, doing what he loved, which is as much as any of us can hope for. Grist has posted a touching (though slightly overwrought) eulogy here. Below are a couple videos that, while cheesy, show the ridiculous skills this man possessed.

I realize this post doesn’t have anything to do with economics, and is tangentially related to the environment. The reason I included it is the following: we all have our motivations for engaging in this work. Mine are numerous, but a lifetime spent in nature pushing my body and mind through skiing, climbing, mountain biking, etc., drove me to environmental work and it’s what keeps me going. It’s been a tough year for luminaries in these sports, and this is my small way of remembering their achievements. Rest in peace, John.