Category: Climate

The rebound delusion

Lately it’s become fashionable to claim that energy efficiency is useless, because the rebound effect will always eat it up. This is actually hogwash, especially in the short term. James Barrett has a nice critique of the super-rebound position at RCE. Some excerpts:

To be clear, the rebound effect is real. The theory behind it is sound: Lower the cost of anything and people will use more of it, including the cost of running energy consuming equipment. But as with many economic ideas that are sound theory (like the idea that you can raise government revenues by cutting tax rates), the trick is in knowing how far to take them in reality. (Cutting tax rates from 100% to 50% would certainly raise revenues. Cutting them from 50% to 0% would just as surely lower them.)

The problem with knowing how far to take things like this is that unlike real scientists who can run experiments in a controlled laboratory environment, economists usually have to rely on what we can observe in the real world. Unfortunately, the real world is complicated and trying to disentangle everything that’s going on is very difficult.

Owen cleverly avoids this problem by not trying to disentangle anything.

One supposed example of the Jevons paradox that he points to in the article is air conditioning. Citing a conversation with Stan Cox, author of Losing Our Cool, Owen notes that between 1993 and 2005, air conditioners in the U.S. increased in efficiency by 28%, but by 2005, homes with air conditioning increased their consumption of energy for their air conditioners by 37%.

…

Accounting only for the increased income over the timeframe and fixing Owen’s mistake of assuming that every air conditioner in service is new, a few rough calculations point to an increase in energy use for air conditioning of about 30% from 1993 to 2005, despite the gains in efficiency. Taking into account the larger size of new homes and the shift from room to central air units could easily account for the rest.

All of the increase in energy consumption for air conditioning is easily explained by factors completely unrelated to increases in energy efficiency. All of these things would have happened anyway. Without the increases in efficiency, energy consumption would have been much higher.

…

It’s easy to be sucked in by stories like the ones Owen tells. The rebound effect is real and it makes sense. Owen’s anecdotes reinforce that common sense. But it’s not enough to observe that energy use has gone up despite efficiency gains and conclude that the rebound effect makes efficiency efforts a waste of time, as Owen implies. As our per capita income increases, we’ll end up buying more of lots of things, maybe even energy. The question is how much higher would it have been otherwise.

Why is the rebound effect suddenly popular? Because an overwhelming rebound effect is needed to make sense of proposals to give up on near-term emissions prices and invest in technology, praying for a clean-energy-supply miracle in a few decades.

As Barrett points out, the notion that energy efficiency increases energy use is an exaggeration of the rebound effect. For efficiency to increase use, energy consumption has to be elastic (e<-1). I don’t remember ever seeing an economic study that came to that conclusion. In a production function, such values aren’t physically plausible, because they imply zero energy consumption at a finite energy price.

Therefore, the notion that pursuing energy efficiency makes the climate situation worse is a fabrication. Doubly so, because of an accounting sleight-of-hand. Consider two extremes:

  1. no rebound effects (elasticity ~ 0): efficiency policies work, because they reduce energy use and its associated negative social externalities.
  2. big rebound effects (elasticity < -1): efficiency policies increase energy use, but they do so because there’s a huge private benefit from the increase in mobility or illumination or whatever private purpose the energy is put to.

The super-rebound crowd pooh-poohs #1 and conveniently ignores the welfare outcome of #2, accounting only for the negative side effects.

If rebound effects are modest, as they surely are, it makes much more sense to guide R&D and deployment for both energy supply and demand with a current price signal on emissions. That way, firms make distributed decisions about where to invest, rather than the government picking winners, and appropriate tradeoffs between conservation and clean supply are possible. The price signal can be adapted to meet environmental constraints in the face of rising income. Progress starts now, rather than after decades of waiting for the discover->apply->deploy->embody pipeline.

If the public isn’t ready for it, that doesn’t mean analysts should bargain against their own good sense by recommending things that might be popular, but are unlikely to work. That’s like a doctor advising a smoker to give to cancer research, without mentioning that he really ought to quit.

Update: there’s an excellent followup at RCE.

Economists in the bathtub

Env-Econ is one of several econ sites to pick up on standupeconomist Yoram Bauman’s assessment, Grading Economics Textbooks on Climate Change.

Most point out the bad, but there’s also a lot of good. On Bauman’s curve, there are 4 As, 3 Bs, 5 Cs, 3 Ds, and one F. Still, the bad tends to be really bad. Bauman writes about one,

Overall, the book is not too bad if you ignore that it’s based on climate science that is almost 15 years out of date and that it has multiple errors that would make Wikipedia blush. The fact that this textbook has over 20 percent of the market shakes my faith in capitalism.

The interesting thing is that the worst textbooks go astray more on the science than on the economics. The worst cherry-pick outdated studies, distort the opinions of scientists, and toss in red herrings like “For Greenland, a warming climate is good economic news.”

I find the most egregious misrepresentation in Schiller’s The Economy Today (D+):

The earth’s climate is driven by solar radiation. The energy the sun absorbs must be balanced by outgoing radiation from the earth and the atmosphere. Scientists fear that a flow imbalance is developing. Of particular concern is a buildup of carbon dioxide (CO2) that might trap heat in the earth’s atmosphere, warming the planet. The natural release of CO2 dwarfs the emissions from human activities. But there’s a concern that the steady increase in man-made CO2 emissions—principally from burning fossil fuels like gasoline and coal—is tipping the balance….

First, there’s no “might” about the fact that CO2 traps heat (infrared radiation); the only question is how much, when feedback effects come into play.  But the bigger issue is Schiller’s implication about the cause of atmospheric CO2 buildup. Here’s a picture of Schiller’s words, with arrow width scaled roughly to actual fluxes:

CO2flows1

Apparently, nature is at fault for increasing atmospheric CO2. This is like worrying that the world will run out of air, because people are inhaling it all (Schiller may be inhaling something else). The reality is that the natural flux, while large, is a two way flow:

CO2flows2

What goes into the ocean and biosphere generally comes out again. For the last hundred centuries, those flows were nearly equal (i.e. zero net flow). But now that humans are emitting a lot of carbon, the net flow is actually from the atmosphere into natural systems, like this:

CO2flows3

That’s quite a different situation. If an author can’t paint an accurate verbal picture of a simple stock-flow system like this, how can a text help students learn to manage resources, money or other stocks?

Now cap & trade is REALLY dead

From the WaPo:

[Obama] also virtually abandoned his legislation – hopelessly stalled in the Senate – featuring economic incentives to reduce carbon emissions from power plants, vehicles and other sources.

“I’m going to be looking for other means of addressing this problem,” he said. “Cap and trade was just one way of skinning the cat,” he said, strongly implying there will be others.

In the campaign, Republicans slammed the bill as a “national energy tax” and jobs killer, and numerous Democrats sought to emphasize their opposition to the measure during their own re-election races.

Brookings reflects, Toles nails it.

Climate CoLab Contest

The Climate CoLab is an interesting experiment that combines three features,

  • Collaborative simulation modeling (including several integrated assessment models and C-LEARN)
  • On-line debates
  • Collective decision-making

Together these create an infrastructure for collective intelligence that gets beyond the unreal rhetoric that pervades many policy debates.

The CoLab is launching its 2010 round of policy proposal contests:

To members of the Climate CoLab community,

We are pleased to announce the launch of a new Climate CoLab contest, as well as a major upgrade of our software platform.

The contest will address the question: What international climate agreements should the world community make?

The first round runs through October 31 and the final round through November 26.

In early December, the United Nations and U.S. Congress will be briefed on the winning entries.

We are raising funds in the hope of being able to pay travel expenses for one representative from each winning team to attend one or both of these briefings.

We invite you to form teams and enter the contest–learn more at http://climatecolab.org.

We also encourage you to fill out your profiles and add a picture, so that members of the community can get to know each other.

And please inform anyone you believe might be interested about the contest.

Best,

Rob Laubacher

The contest leads to real briefings on the hill, and there are prizes for winners. See details.

Technology first?

The idea of a technology-led solution to climate is gaining ground, most recently with a joint AEI-Brookings proposal. Kristen Sheeran has a nice commentary at RCE on the prospects. Go read it.

I’m definitely bearish on the technology-first idea. I agree that technology investment is a winner, with or without environmental externalities. But for high tech to solve the climate problem by itself, absent any emissions pricing, may require technical discontinuities that are less than likely. That makes technology-first the Hail-Mary pass of climate policy: something you do when you’re out of options.

The world isn’t out of options in a physical sense; it’s just that the public has convinced itself otherwise. That’s a pity.

The BC carbon tax – good idea, bad implementation

Via PEF:

BC’s carbon tax was supposed to be “revenue neutral”, meaning all carbon tax revenue would be “recycled” to British Columbians through personal income tax cuts, corporate income tax cuts and a low-income credit. When the 2008 budget launched the carbon tax, we were provided with a forecast that had revenues precisely match recycling through tax cuts and credits, with about one-third of revenues going to each of PIT cuts, CIT cuts and the low-income credit.

But recent budgets have shown a carbon tax deficit: tax cuts have completely swamped carbon tax revenues. While some were concerned that the carbon tax would be a “tax grab”, instead we are a carbon tax is that is revenue negative not revenue neutral.

…

Corporate tax cuts are now absorbing the lion’s share of carbon tax revenues. In 2010/11, they will be equivalent to 57% of carbon tax revenues, compared to one-third in 2008/09. Cutting corporate taxes is the worst possible way of using carbon tax revenues. This is because of the intense concentration of ownership of capital at the top of the income distribution (when you hear corporate tax cuts think upper-income tax cuts), and also because shareholders outside BC, who pay no carbon tax, benefit from corporate tax cuts.

…

When sea level chartjunk attacks

SeaLevelAttack

This informationisbeautiful graphic is pretty, but I don’t find it informative. The y scale is nonlinear, and I don’t know if the x scale conveys anything. It’s hard to work out the timing of inundation, which is really the key. The focus on the low points of big cities in developed countries is misleading, because those will be defended for a long time. Ho Chi Minh city should be on there, as well as the US gulf coast. USA Today would love this.

Cap & trade is dead. Long live cap & trade?

Democrats have pulled the plug on a sweeping energy bill this year. There is no heir apparent. This is not cause for panic. In climate, as in education, there are no emergencies.

However, the underlying reasons may be cause for panic. It seems that voters are unwilling to accept any policy that will significantly raise the price of emissions. Given that price is a predominant information carrier in our economy, other polices are unlikely to work efficiently, absent a price signal. That leaves us in a bit of a pickle. What to do?

If you don’t want to buck public opinion, advise the people to invest in (then pray for) a technological miracle. Ask yourself, “Do I feel lucky?” It might even work.

Alternatively, you might conclude that the public hasn’t quite grasped the nature of the problem – that wait and see is not a good policy in systems with long delays. But then you’d be accused of scientism, for the equivalent of challenging the efficient market hypothesis or the notion that the customer is always right. That’s rather puzzling, given that there’s direct evidence that people don’t intuitively appreciate the dynamics of accumulation, and that snowstorms in the East cause half of Americans to question the reality of climate change.

The anti-scientism, pro-technology crowd takes opposition to meaningful mitigation policy as a sure sign that the public is on to something. The wisdom of crowds is powerful when there’s diverse information and rapid feedback, as in price discovery through a market. But it has a pretty disastrous history in the runup to bubbles and other catastrophes, as we’ve recently seen. Surely there are some legitimate worries about current climate proposals (I’ve expressed a number here), but it doesn’t follow that pricing emissions is a bad decision.

So, what’s a modeler to do? Opening up political debates is a good idea, though not quite in the way that I think proponents intend. We already have plenty of political debates. The problem is that they tend to lack ready access to scientific or other information that can be agreed upon or at least presented in a way that permits testing of hypotheses against data or evaluation of decisions against contingencies. That means that questions of values and distribution of benefits (which politics is rightfully about) get mixed up with muddled thinking about science, economics, and social system dynamics.

The solution typically proposed is to open up science and models to more public scrutiny. That’s a good idea for a variety of reasons, but by itself it’s a losing proposition for scientists- they get all the criticism, and the public process doesn’t assimilate much of their insights. What’s needed is a fair exchange, where everyone shows their hands. Scientists make their stuff accessible, and in return participants in policy debates actually use it, and additionally submit to formalization of their arguments to facilitate shared understanding and testing.

Coming back to cap & trade, I don’t see that the major political players are willing to do that. Following a successful round of multi-stakeholder workshops that brought a systems perspective to conversations about climate policy, funded by the petro industry in California, we spent a fair amount of time marketing the idea of a model-assisted deliberation process targeted at shared design of federal climate policy. Lobbyists at some of the big stakeholders told us very forthrightly that they were unwilling to engage in any process with an outcome that they couldn’t predict and control.

In an environment where everyone’s happy with their own entrenched position, their isn’t much hope for a good solution to emerge. The only solution I see is to make an end run around the big players, and go straight to the public with better information, in order to expand the set of things they’ll accept. I hope there’s time for that to work.

Leaders for a New Climate: Systems Thinking and the C-ROADS Simulation workshop

Oct 19-21, 2010 — Boston Mass USA

Climate Interactive and SEED Systems are offering a powerful three-day workshop for innovative climate, energy, and sustainability leaders from business, non-profit, government, and university sectors, led by Drew Jones and Sara Schley.

Attend to develop your capacities in:

• Systems thinking: Causal loop and stock-flow diagramming.

• Leadership: Vision, reflective conversation, consensus building.

• Computer simulation: Using and leading policy-testing with the C-ROADS/C-Learn simulation.

• Policy development: Attendees will play the World Climate exercise.

• Climate, energy, and sustainability strategy: Reflections and insights from international experts.

• Business success stories: What’s working in the new low carbon economy and implications for you.

• Building your network of people sharing aspirations for climate progress.

We will stay connected and collaborate to accelerate progress.

For more information and to register please visit http://climateinteractive.org/events

The emerging climate technology delusion

What do you do when feasible policies aren’t popular, and popular policies aren’t feasible?

Let’s start with a joke:

Lenin, Stalin, Khrushchev and Brezhnev are travelling together on a train. Unexpectedly the train stops. Lenin suggests: “Perhaps, we should call a subbotnik, so that workers and peasants fix the problem.” Kruschev suggests rehabilitating the engineers, and leaves for a while, but nothing happens. Stalin, fed up, steps out to intervene. Rifle shots are heard, but when he returns there is still no motion. Brezhnev reaches over, pulls the curtain, and says, “Comrades, let’s pretend we’re moving.” (Apologies to regulars for the repeat.)

The Soviet approach would be funny, if it weren’t the hottest new trend in climate policy. The latest installment is a Breakthrough article, The emerging climate technology consensus. An excerpt: Continue reading “The emerging climate technology delusion”