Category: Policy

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?”

The Blood-Hungry Spleen

OK, I’ve stolen another title, this time from a favorite kids’ book. This post is really about the thyroid, which is a little less catchy than the spleen.

Your hormones are exciting!
They stir your body up.
They’re made by glands (called endocrine)
and give your body pluck.

Allan Wolf & Greg Clarke, The Blood-Hungry Spleen

A friend has been diagnosed with hypothyroidism, so I did some digging on the workings of the thyroid. A few hours searching citations on PubMed, Medline and google gave me enough material to create this diagram:

Thyroid function and some associated feedbacks

(This is a LARGE image, so click through and zoom in to do it justice.)

The bottom half is the thyroid control system, as it is typically described. The top half strays into the insulin regulation system (borrowed from a classic SD model), body fat regulation, and other areas that seem related. A lot of the causal links above are speculative, and I have little hope of turning the diagram into a running model. Unfortunately, I can’t find anything in the literature that really digs into the dynamics of the system. In fact, I can’t even find the basics – how much stuff is in each stock, and how long does it stay there? There is a core of the system that I hope to get running at some point though:

Thyroid - core regulation and dose titration

(another largish image)

This is the part of the system that’s typically involved in the treatment of hypothyroidism with synthetic hormone replacements. Normally, the body runs a negative feedback loop in which thyroid hormone levels (T3/T4) govern production of TSH, which in turn controls the production of T3 and T4. The problem begins when something (perhaps an autoimmune disease, i.e. Hashimoto’s) diminishes the thyroid’s ability to produce T3 and T4 (reducing the two inflows in the big yellow box at center). Then therapy seeks to replace the natural control loop, by adjusting a dose of synthetic T4 (levothyroxine) until the measured level of TSH (left stock structure) reaches a desired target.

This is a negative feedback loop with fairly long delays, so dosage adjustments are made only at infrequent intervals, in order to allow the system to settle between changes. Otherwise, you’d have the aggressive shower taker problem: water’s to cold, crank up the hot water … ouch, too hot, turn it way down … eek, too cold …. Measurements of T3 and T4 are made, but seldom paid much heed – the TSH level is regarded as the “gold standard.”

This black box approach to control is probably effective for many patients, but it leaves me feeling uneasy about several things. The “normal” range for TSH varies by an order of magnitude; what basis is there for choosing one or the other end of the range as a target? Wouldn’t we expect variation among patients in the appropriate target level? How do we know that TSH levels are a reliable indicator, if they don’t correlate well with T3/T4 levels or symptoms? Are extremely sparse measurements of TSH really robust to variability on various time scales, or is dose titration vulnerable to noise?

One could imagine alternative approaches to control, using direct measurements of T3 and T4, or indirect measurements (symptoms). Those might have the advantage of less delay (fewer confounding states between the goal state and the measured state). But T3/T4 measurements seem to be regarded as unreliable, which might have something to do with the fact that it’s hard to find any information on the scale or dynamics of their reservoirs. Symptoms also take a back seat; one paper even demonstrates fairly convincingly that dosage changes +/- 25% have no effect on symptoms (so why are we doing this again?).

I’d like to have a more systemic understanding of both the internal dynamics of the thyroid regulation system, and its interaction with symptoms, behaviors, and other regulatory systems. Here’s hoping that one of you lurkers (I know you’re out there) can comment with some thoughts or references.

So the spleen doesn’t feel shortchanged, I’ll leave you with another favorite:

Lovely
I think that I ain’t never seen
A poem ugly as a spleen.
A poem that could make you shiver
Like 3.5 … pounds of liver.
A poem to make you lose your lunch,
Tie your intestines in a bunch.
A poem all gray, wet, and swollen,
Like a stomach or a colon.
Something like your kidney, lung,
Pancreas, bladder, even tongue.
Why you turning green, good buddy?
It’s just human body study.

John Scieszka & Lane Smith, Science Verse

OMG Did I say that out loud?

Steve Chu says the t word in an NYT interview:

He said that while President Obama and Congressional Democratic leaders had endorsed a so-called cap-and-trade system to control global warming pollutants, there were alternatives that could emerge, including a tax on carbon emissions or a modified version of cap-and-trade.

Glad the option isn’t totally dead.

Electric Car Wisdumb

The current McKinsey Quarterly feature’s Andy Grove’s editorial, An electric plan for energy resilience. An excerpt:

We believe the United States should consider accelerating this movement by creating an industry of after-market retrofitters. What problems’”technical and economic’”would need to be solved in order to do that? With the help of a team of second-year graduate students in our Bass seminar at the Stanford Business School, we examined this question in the context of a proposed pilot program, whose aim would be to retrofit one million vehicles in three years. We felt that such a project would represent what in game theory is referred to as the ‘minimum winning game’: a significant step toward a long-term strategic objective (see sidebar, ‘Inside Andy’s real-world seminar’).

We estimate the price tag of such a pilot project to be around $10 billion, owing to the present high cost of batteries, which are around $10,000 each. One might expect such costs to drop as volume increases, but because this program is accelerated by design, we have to assume that batteries will remain expensive. Assuming an average gas price of $3 per gallon, the payback period to the owner of a retrofitted vehicle is at least ten years, not a strong economic incentive. But the benefits of this program’”testing and validating a key approach to energy resilience’”accrue to the well-being of the United States at large. As the general population is the predominant beneficiary, economic assistance flowing from everyone to vehicle owners, in the form of tax incentives, is justified.

There are different approaches to retrofitting vehicles. We favor GM’s Volt design, in which the car is directly driven by an electric motor. The vehicle’s existing gasoline engine is replaced by a smaller one, whose sole purpose is to generate electricity and recharge the battery. To simplify the retrofitting task, we would limit the scope of the program to six to ten Chevrolet, Ford, and Dodge models, selected on the basis of two criteria: low fuel efficiency and large numbers of vehicles on the road. Most of these vehicles would be SUVs, pick-ups, and vans.

There’s some wisdom in this proposal, particularly in the recognition that achieving an alt fuel vehicle transformation takes more than a few inventions; it requires changes in infrastructure, marketing, and a variety of other domains, each with bugs to be worked out:

Others wondered why we should bother retrofitting a million cars if that would deal only with a fraction of a percent of the existing cars. That’s one way to look at it. Another, which was the view our students took, is that it is important to strive to do enough conversions that we can encounter all the unknown unknowns, which in my experience characterize every new product or technology as it gets scaled into volume. Should it be 5 million? Should it only be 500,000? We picked a million as a number that is big enough to stress retrofitting capability, battery production capability, manufacturing issues and marketing issues. We described our aim as the ‘minimum winning game’ that would give us a platform from which we could scale further.

However, the retrofit idea strikes me as fundamentally flawed. Targeting low efficiency SUVs, pick-ups, and vans puts batteries exactly where they’d be least effective. If most such vehicles weren’t overweight, un-aerodynamic, saddled with lossy AWD, and bloated with power-hungry accessories, they’d already get decent fuel economy. Adding batteries to them is going to result in some combination of high cost, short range, and poor performance. That sounds like a sure way to poison the public perception of plug in electric vehicles.

RMI has been arguing for years that a coordinated set of chassis innovations could make powertrains with high cost-per-watt, like fuel cells, attractive. It’s no accident that that the only really successful hybrid vehicle (the Prius, responsible for over half of 2007 and 2008 hybrid sales) was designed from scratch. It gets its breakthrough mileage/performance combination from much more than a battery and motor. Lightweight materials, aerodynamics, low rolling resistance tires, and other innovations are also key.

I think Grove and his students are falling for a common fantasy: that technology will step up and allow us to drive exactly as we now do, fossil-free. I personally doubt that will happen. Arnold will probably be one of only a few to ever drive a hydrogen Hummer. The rest of us will have to recognize that if alt fuel vehicles are to accomplish anything really meaningful from an energy standpoint, they’ll be different, as will our land use, commuting, and travel habits.

With that in mind, we should be focusing on creating the new stuff, not fixing the old. That might mean the Chevy Volt, but it might also mean rail or telecommuting. Rather than setting up programs to achieve narrow goals, I’d rather see broad, credible signals (e.g., prices at the pump reflecting environmental and security values) guide the evolution of the new from the bottom up.

Four Legs and a Tail

An effective climate policy needs prices, technology, institutional rules, and preferences.

I’m continuously irked by calls for R&D to save us from climate change. Yes, we need it very badly, but it’s no panacea. Without other signals, like a price on carbon, technology isn’t going to do a lot. It’s a one-legged dog. True, we might get lucky with some magic bullet, but I’m not willing to count on that. An effective climate policy needs four legs:

  1. Prices
  2. Technology (the landscape of possibilities on which we make decisions)
  3. Institutional rules and procedures
  4. Preferences, operating within social networks

Continue reading “Four Legs and a Tail”

News Flash: There Is No "Environmental Certainty"

The principal benefit cited for cap & trade is “environmental certainty,” meaning that “a cap-and-trade system, coupled with adequate enforcement, assures that environmental goals actually would be achieved by a certain date.” Environmental certainty is a bit of a misnomer. I think of environmental certainty as ensuring a reasonable chance of avoiding serious climate impacts. What people mean when they’re talking about cap & trade is really “emissions certainty.” Unfortunately, emissions certainty doesn’t provide climate certainty:

Emissions trajectories yielding 2C temperature change

Even if we could determine a “safe” level of interference in the climate system, the sensitivity of global mean temperature to increasing atmospheric CO2 is known perhaps only to a factor of three or less. Here we show how a factor of three uncertainty in climate sensitivity introduces even greater uncertainty in allowable increases in atmospheric CO2 CO2 emissions. (Caldeira, Jain & Hoffert, Science)

The uncertainty about climate sensitivity (not to mention carbon cycle feedbacks and other tipping point phenomena) makes the emissions trajectory we need highly uncertain. That trajectory is also subject to other big uncertainties – technology, growth convergence, peak oil, etc. Together, those features make it silly to expend a lot of effort on detailed plans for 2050. We don’t need a ballistic trajectory; we need a guidance system. I’d like to see us agree to a price on GHGs everywhere now, along with a decision rule for adapting that price over time until we’re on a downward emissions trajectory. Then move on to the other legs of the stool: ensuring equitable opportunities for development, changing lifestyle, tackling institutional barriers to change, and investing in technology.

Unfortunately, cap & trade seems ill-suited to adaptive control. Emissions commitments and allowance allocations are set in multi-year intervals, announced in advance, with long lead times for design. Financial markets and industry players want that certainty, but the delay limits responsiveness. Decision makers don’t set the commitment by strictly environmental standards; they also ask themselves what allocation will result in an “acceptable” price. They’re risk averse, so they choose an allocation that’s very likely to lead to an acceptable price. That means that, more often than not, the system will be overallocated. On balance, their conservatism is probably a good thing; otherwise the whole system could unravel from a negative public reaction to volatile prices. Ironically, safety valves – one policy that could make cap & trade more robust, and thus enable better mean performance – are often opposed because they reduce emissions certainty.

Cap & Trade – How Soon?

I’m a strong advocate for a price on carbon, but I have serious reservations about cap & trade. I’m thrilled that climate policy is finally getting off the dime, but I wish enthusiasm were focused on a carbon tax instead. Consider this:

Jurisdiction Instrument Started Operational Status
EU Cap & Trade 2003 2005 Phase 1 overallocated & underpriced; still wrangling over loopholes for subsequent phases
British Columbia Tax Feb 2008 July 2008 Too low to do much yet, but working
Sweden Tax 1991 1991 Running, at $150/TonCO2; emissions down
RGGI Cap & Trade 2003 2008 Overallocated
Norway Tax 1990 1991 Works; not enough to lower emissions substantially
California Cap & Trade (part of AB32) 2007 Earliest 2012 Punted
WCI Cap & Trade 2007 Earliest 2012 Draft design

The pattern that stands out to me is timing – cap & trade systems are slow to get out of the gate compared to carbon taxes. They entail huge design challenges, which often restrict sectoral coverage. Price uncertainty makes it difficult to work out the implications of allowance allocation (unless you go to pure auction, in which case you lose the benefit of transitional grandfathering as a mechanism to buy carbon-intensive industry participation). I think we’ll be lucky to see an operational cap & trade system in the US, with meaningful prices and broad coverage, by the end of the first Obama administration.

Next Generation Climate Policy Models

Today I’m presenting a talk at an ECF workshop, Towards the next generation of climate policy models. The workshop’s in Berlin, but I’m staying in Montana, so my carbon footprint is minimal for this one (just wait until next month …). My slides are here: Towards Next Generation Climate Policy Models.

I created a set of links to supporting materials on del.icio.us.

Update Workshop materials are now on a web site here.

California Punting on Cap & Trade

Bloomberg reports that California’s cap and trade program may still be some way off:

[CARB chair] Nichols told venture capitalists and clean-energy executives last week in Mountain View, California, that she was “thinking of punting,” saying the specifics of the emissions-trading program may not be ready for 1-2 more years.

“I think the cap-and-trade system needs to be thought through and I don’t think that has been done yet,” said Jerry Hill, a member of the Air Resources Board. “It would be a good idea to take our time to be sure what we do create is successful.”

Greentech VCs aren’t thrilled, but I think this is wise, and applaud CARB for recognizing the scale of the design task rather than launching a half-baked program. Still, delay is costly, and design complexity contributes to delay. California has a lot of balls in the air, with a hybrid design involving a dozen or so sectoral initiatives, a low-carbon fuel standard, and cap & trade. As I said a while ago,

My fear is that the analysis of GHG initiatives will ultimately prove overconstrained and underpowered, and that as a result implementation will ultimately crumble when called upon to make real changes (like California’s ambitious executive order targeting 2050 emissions 80% below 1990 levels). California’s electric power market restructuring debacle jumps to mind. I think underpowered analysis is partly a function of history. Other programs, like emissions markets for SOx, energy efficiency programs, and local regulation of criteria air pollutants have all worked OK in the past. However, these activities have all been marginal, in the sense that they affect only a small fraction of energy costs and a tinier fraction of GDP. Thus they had limited potential to create noticeable unwanted side effects that might lead to damaging economic ripple effects or the undoing of the policy. Given that, it was feasible to proceed by cautious experimentation. Greenhouse gas regulation, if it is to meet ambitious goals, will not be marginal; it will be pervasive and obvious. Analysis budgets of a few million dollars (much less in most regions) seem out of proportion with the multibillion $/year scale of the problem.

One result of the omission of a true top-down design process is that there has been no serious comparison of proposed emissions trading schemes with carbon taxes, though there are many strong substantive arguments in favor of the latter. In California, for example, the CPUC Interim Opinion on Greenhouse Gas Regulatory Strategies states, ‘We did not seriously consider the carbon tax option in the course of this proceeding, due to the fact that, if such a policy were implemented, it would most likely be imposed on the economy as a whole by ARB.’ It’s hard for CARB to consider a tax, because legislation does not authorize it. It’s hard for legislators to enable a tax, because a supermajority is required and it’s generally considered poor form to say the word ‘tax’ out loud. Thus, for better or for worse, a major option is foreclosed at the outset.

At the risk of repeating myself,

The BC tax demonstrates a huge advantage of a carbon tax over cap & trade: it can be implemented quickly. The tax was introduced in the Feb. 19 budget, and switched on July 1st. By contrast, the WCI and California cap & trade systems have been underway much longer, and still are no where near going live.

My preferred approach to GHG regulation would be, in a nutshell: (a) get a price on emissions ASAP, in as simple and stable a way as possible; if you can’t have a tax, design cap & trade to look like a tax (b) get other regions to harmonize (c) then do all that other stuff: removing institutional barriers to change, R&D, efficiency and renewable incentives, in roughly that order (c) dispense with portfolio standards and other mandates unless (a) through (c) aren’t doing the job.