Month: March 2009

Draft Climate Bill Out

AP has the story. The House Committee on Energy and Commerce has the draft. From the summary:

The legislation has four titles: (1) a ‘clean energy’ title that promotes renewable sources of energy and carbon capture and sequestration technologies, low-carbon transportation fuels, clean electric vehicles, and the smart grid and electricity transmission; (2) an ‘energy efficiency’ title that increases energy efficiency across all sectors of the economy, including buildings, appliances, transportation, and industry; (3) a ‘global warming’ title that places limits on the emissions of heat-trapping pollutants; and (4) a ‘transitioning’ title that protects U.S. consumers and industry and promotes green jobs during the transition to a clean energy economy.

One key issue that the discussion draft does not address is how to allocate the tradable emission allowances that restrict the amount of global warming pollution emitted by electric utilities, oil companies, and other sources. This issue will be addressed through discussions among Committee members.

A few quick observations, drawing on the committee summary (the full text is 648 pages and I don’t have the appetite): Continue reading “Draft Climate Bill Out”

The Acid Bathtub

I noticed a few news items on the SO2 allowance market today, following up on the latest auction. Here’s the auction history:

SO2 allowance auction prices

The spot permit price has collapsed, from a high of $860/ton in the 2006 compliance stampede, to $62. That’s not surprising, given the economic situation. What is a little surprising is that the forward price (allowances for use starting in seven years) fell to $6.63 – a tenth of the previous low, spot or forward. What’s going on there? Do plants expect a seven-year recession? Are utilities hoarding cash? Do they expect the whole market to unravel, or to become irrelevant as climate policy imposes a more tightly-binding constraint?

Continue reading “The Acid Bathtub”

Carbon Confusion

Lately I’ve noticed a lot of misconceptions about how various policy instruments for GHG control actually work. Take this one, from Richard Rood in the AMS climate policy blog:

The success of a market relies on liquidity of transactions, which requires availability of choices of emission controls and abatements. The control of the amount of pollution requires that the emission controls and abatement choices represent, quantifiably and verifiably, mass of pollutant. In the sulfur market, there are technology-based choices for abatement and a number of choices of fuel that have higher and lower sulfur content. Similar choices do not exist for carbon dioxide; therefore, the fundamental elements of the carbon dioxide market do not exist.

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On the emission side, the cost of alternative sources of energy is high relative to the cost of energy provided by fossil fuels. Also sources of low-carbon dioxide energy are not adequate to replace the energy from fossil fuel combustion.

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The development of technology requires directed, sustained government investment. This is best achieved by a tax (or fee) system that generates the needed flow of money. At the same time the tax should assign valuation to carbon dioxide emissions and encourage efficiency. Increased efficiency is the best near-term strategy to reduce carbon dioxide emissions.

I think this would make an economist cringe. Liquidity has to do with the ease of finding counterparties to transactions, not the existence of an elastic aggregate supply of abatement. What’s really bizarre, though, is to argue that somehow “technology-based choices for abatement and a number of choices of fuel that have higher and lower [GHG] content” don’t exist. Ever heard of gas and coal, Prius and Hummer, CFL and incandescent, biking and driving, … ? Your cup has to be really half empty to think that the price elasticity of GHGs is zero, absent government investment in technology, or you have to be tilting at a strawman (reducing carbon allowances in the market to some infeasible level, overnight). The fact that any one alternative (say, wind power) can’t do the job is not an argument against a market; in fact it’s a good argument for a market – to let a pervasive price signal find mitigation options throughout the economy.

There is an underlying risk with carbon trading, that setting the cap too tight will lead to short-term price volatility. Given proposals so far, there’s not much risk of that happening. If there were, there’s a simple solution, that has nothing to do with technology: switch to a carbon tax, or give the market a safety valve so that it behaves like one.

Continue reading “Carbon Confusion”

Spring has (Un)Sprung

Spring has arrived here in Montana, though there’s at least two months of snow still to come. Spring critters have arrived, as if on cue. This weekend we saw our first robin, bluebird, sandhill crane, and woolly bear caterpillar. The caterpillar found a little bit too much warmth – he’s fast becoming a fossil in a pool at Mammoth Hot Springs:

Mammoth woolly bear

Typical Montana: in the time it took me to write this, then find & upload the photo, it’s snowed almost a foot and yet another bird (juncos) has arrived.

Having a Blast in Bozeman

I don’t often get to read about my adopted hometown in the national papers; it’s usually pretty obscure. When FAA analysts look for a small-time airport to poke fun at, we’re first on the list. However, today the NYT has covered the gas explosion that destroyed half a block of downtown, including some wonderful historic brick buildings. The blast was so powerful that we heard it from our house, 6 miles away with an intervening ridge. Sadly there’s no recovery for one person, but I hope the rest of downtown bounces back quickly.

FutureGen killing a mistake?

Via ClimateArk,

US government slammed over coal project

Basic accounting error led government department to miscalculate ongoing project costs

The document, which examines the restructuring of the FutureGen project in January 2008, found that a basic accounting error led the department to miscalculate ongoing project costs. This led it to drastically alter the nature of the project, delaying its operation by three years.

FutureGen, which was meant to begin operation in 2012, combined integrated gasification combined cycle (IGCC) with carbon capture and sequestration (CCS).

The initiative was designed to be an experimental one for emerging clean coal research, but construction prices had been escalating as material and labour costs increased. The DoE decided to withdraw support for the industry alliance that was partially funding the programme in January last year.

“Contrary to best practices, DoE did not base its decision to restructure FutureGen on a comprehensive analysis of factors, such as the associated costs, benefits, and risks,” says the report.

“DoE made its decision based, in large part, on its conclusion that construction and material costs for the original programme would continue escalating substantially in the definite future and that lifecycle costs were likely to double.”

However, the DoE’s own Energy Information Administration has pointed out that significant cost escalation for building power plants does not continue in the long run.

The department also made a fundamental mistake in assessing ongoing project costs. It said that costs had doubled from original estimates, using that as the key justification for withdrawing funds from the alliance.

But when it compared its original 2004 estimate of the project’s cost with the alliance’s 2006 estimate to reach that conclusion, it did not take into account that the first estimate was in constant 2004 dollars, whereas the latter was in inflated dollars. Had it acknowledged this difference, the project cost would only have increased by 39 per cent ($370m), according to the GAO.

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Another good reason to make sure your units balance. I find this explanation of the cancellation barely credible. There must be more to this than meets the eye.

Friendly Climate Science & Policy Models

Beth Sawin just presented our C-ROADS work in Copenhagen. The model will soon be available online and in other forms, for decision support and educational purposes. It helps people to understand the basic dynamics of the carbon cycle and climate, and to add up diverse regional proposals for emissions reductions, to see what they imply for the globe. It’s a small model, yet there are those who love it. No model can do everything, so I thought I’d point out a few other tools that are available online, fairly easy to use, and serve similar purposes.

FAIR

From MNP, Netherlands. Like C-ROADS, runs interactively. The downloadable demo version is quite sophisticated, but emphasizes discovery of emissions trajectories that meet goals and constraints, rather than characterization of proposals on the table. The full research version, with sector/fuel detail and marginal abatement costs, is available on a case-by-case basis. Backed up by some excellent publications.

JCM

Ben Matthews’ Java Climate Model. Another interactive tool. Generates visually stunning output in realtime, which is remarkable given the scale and sophistication of the underlying model. Very rich; it helps to know what you’re after when you start to get into the deeper levels.

MAGICC

The tool used in AR4 to summarize the behavior of 19 GCMs, facilitating more rapid scenario experimentation and sensitivity analysis. Its companion SCENGEN does nice regional maps, which I haven’t really explored. MAGICC takes a few seconds to run, and while it has a GUI, detailed input and output is buried in text files, so I’m stretching the term “friendly” here.

I think these are the premier accessible tools out there, but I’m sure I’ve forgotten a few, so I’ll violate my normal editing rules and update this post as needed.

Biofuels, dost thou protest too much?

Future ethanol?

Following up on yesterday’s LCFS item, a group of biofuel researchers have written an open letter to the gubernator, protesting the inclusion of indirect land use emissions in biofuel assessments for the LCFS. The letter is followed by 12 pages of names and affiliations – mostly biologists, chemical engineers, and ag economists. They ask for a 24-month moratorium on regulation of indirect land use effects, during which all indirect or market-mediated effects of petroleum and alternative fuels would be studied.

I have mixed feelings about this. On one hand, I don’t think it’s always practical to burden a local regulation with features that attempt to control its nonlocal effects. Better to have a simple regulation that gets imitated widely, so that nonlocal effects come under control in their own jurisdictions. On the other hand, I don’t see how you can do regional GHG policy without some kind of accounting for at least the largest boundary effects. Otherwise leakage of emissions to unregulated jurisdictions just puts the regions who are trying to do the right thing at a competitive disadvantage.

Continue reading “Biofuels, dost thou protest too much?”

Ethanol Odd Couple & the California LCFS

I started sharing items from my feed reader, here. Top of the list is currently a pair of articles from Science Daily:

Corn-for-ethanol’s Carbon Footprint Critiqued

To avoid creating greenhouse gases, it makes more sense using today’s technology to leave land unfarmed in conservation reserves than to plow it up for corn to make biofuel, according to a comprehensive Duke University-led study.

“Converting set-asides to corn-ethanol production is an inefficient and expensive greenhouse gas mitigation policy that should not be encouraged until ethanol-production technologies improve,” the study’s authors reported in the March edition of the research journal Ecological Applications.

Corn Rises After Government Boosts Estimate for Ethanol Demand

Corn rose for a fourth straight session, the longest rally this year, after the U.S. government unexpectedly increased its estimate of the amount of grain that will be used to make ethanol.

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House Speaker Nancy Pelosi, a California Democrat, and Senator Amy Klobuchar, a Minnesota Democrat, both said March 9 they support higher amounts of ethanol blended into gasoline. On March 6, Growth Energy, an ethanol-industry trade group, asked the Environmental Protection Agency to raise the U.S. ratio of ethanol in gasoline to 15 percent from 10 percent.

This left me wondering where California’s assessments of low carbon fuels now stand. Last March, I attended a collaborative workshop on life cycle analysis of low carbon fuels, part of a series (mostly facilitated by Ventana, but not this one) on GHG policy. The elephant in the room was indirect land use emissions from biofuels. At the time, some of the academics present argued that, while there’s a lot of uncertainty, zero is the one value that we know to be wrong. That left me wondering what plan B is for biofuels, if current variants turn out to have high land use emissions (rendering them worse than fossil alternatives) and advanced variants remain elusive.

It turns out to be an opportune moment to wonder about this again, because California ARB has just released its LCFS staff report and a bunch of related documents on fuel GHG intensities and land use emissions. The staff report burdens corn ethanol with an indirect land use emission factor of 30 gCO2eq/MJ, on top of direct emissions of 47 to 75 gCO2eq/MJ. That renders 4 of the 11 options tested worse than gasoline (CA RFG at 96 gCO2eq/MJ). Brazilian sugarcane ethanol goes from 27 gCO2eq/MJ direct to 73 gCO2eq/MJ total, due to a higher burden of 46 gCO2eq/MJ for land use (presumably due to tropical forest proximity).

These numbers are a lot bigger than the zero, but also a lot smaller than Michael O’Hare’s 2008 back-of-the-envelope exercise. For example, for corn ethanol grown on converted CRP land, he put total emissions at 228 gCO2eq/MJ (more than twice as high as gasoline), of which 140 gCO2eq/MJ is land use. Maybe the new results (from the GTAP model) are a lot better, but I’m a little wary of the fact that the Staff Report sensitivity ranges on land use (32-57 gCO2eq/MJ for sugarcane, for example) have such a low variance, when uncertainty was previously regarded as rather profound.

But hey, 7 of 11 corn ethanol variants are still better than gasoline, right? Not so fast. A low carbon fuel standard sets the constraint:

(1-x)*G = (1-s)*G + s*A

where x is the standard (emissions intensity cut vs. gasoline), s is the market share of the low-carbon alternative, G is the intensity of gasoline, and A is the intensity of the alternative. Rearranging,

s = x / (1-A/G)

In words, the market share of the alternative fuel needed is proportional to the size of the cut, x, and inversely proportional to the alternative’s improvement over gasoline, (1-A/G), which I’ll call i. As a result, the required share of an alternative fuel increases steeply as it’s performance approaches the limit required by the standard, as shown schematically below:

Intensity-share schematic

Clearly, if a fuel’s i is less than x, s=x/i would have to exceed 1, which is impossible, so you couldn’t meet the constraint with that fuel alone (though you could still use it, supplemented by something better).

Thus land use emissions are quite debilitating for conventional ethanol fuels’ role in the LCFS. For example, ignoring land use emissions, California dry process ethanol has intensity ~=59, or i=0.39. To make a 10% cut, x=0.1, you’d need s=0.26 – 26% market share is hard, but doable. But add 30 gCO2eq/MJ for land use, and i=0.07, which means you can’t meet the standard with that fuel alone. Even the best ethanol option, Brazilian sugarcane at i=0.24, would have 42% market share to meet the standard. This means that the alternative to gasoline in the LCFS would have to be either an advanced ethanol (cellulosic, not yet evaluated), electricity (i=0.6) or hydrogen. As it turns out, that’s exactly what the new Staff Report shows. In the new gasoline compliance scenarios in table ES-10, conventional ethanol contributes at most 5% of the 2020 intensity reduction.

Chapter VI of the Staff Report describes compliance scenarios in more detail. Of the four scenarios in the gasoline stovepipe, each blends 15 to 20% ethanol into gasoline. That ethanol is in turn about 10% conventional (Midwest corn or an improved CA variant with lower intensity) and up to 10% sugarcane. The other 80 to 90% of ethanol is either cellulosic or “advanced renewable” (from forest waste).

That makes the current scenarios a rather different beast from those explored in the original UC Davis LCFS technical study that provides the analytical foundation for the LCFS. I dusted off my copy of VISION-CA (the model used, and a topic for another post some day) and ran the 10% cut scenarios. Some look rather like the vision in the current staff report, with high penetration of low-intensity fuels. But the most technically diverse (and, I think, the most plausible) scenario is H10, with multiple fuels and vehicles. The H10 scenario’s ethanol is still 70% conventional Midwest corn in 2020. It also includes substantial “dieselization” of the fleet (which helps due to diesel’s higher tank-to-wheel efficiency). I suspect that H10-like scenarios are now unavailable, due to land use emissions (which greatly diminish the value of corn ethanol) and the choice of separate compliance pathways for gasoline and diesel.

The new beast isn’t necessarily worse than the old, but it strikes me as higher risk, because it relies on the substantial penetration of fuels that aren’t on the market today. If that’s going to happen by 2020, it’s going to be a busy decade.