Policy – Page 13

Reactions to Waxman Markey

My take: It’s a noble effort, but flawed. The best thing about it is the broad, upstream coverage of >85% of emissions. However, there are too many extraneous pieces operating alongside the cap. Those create possible inefficiencies, where the price of carbon is nonuniform across the economy, and create a huge design task and administrative burden for EPA. It would be better to get a carbon price in place, then fiddle with RPS, LCFS, and other standards and programs as needed later. The deep cuts in emissions reflect what it takes to change the climate trajectory, but I’m concerned that the trajectory is too rigid to cope with uncertainty, even with the compliance period, banking, borrowing, and strategic reserve provisions. So-called environmental certainty isn’t helpful if it causes price volatility that leads to the undoing of the program. As always, I’d rather see a carbon tax, but I think we could work with this framework if we have to. Allowance allocation is, of course, the big wrestling match to come.

The WSJ has a quick look

Joe Romm gives it a B+

GreenPeace says it’s a good first step

USCAP likes it (they should, a lot of it is their ideas):

USCAP hails the discussion draft released by Chairmen Waxman and Markey as a strong starting point for enacting legislation to reduce greenhouse gas emissions. The discussion draft provides a solid foundation to create a climate strategy that both protects our economy and achieves the nation’s environmental goals. It recognizes that many of these issues are tightly linked and must be dealt with simultaneously. We appreciate the thoughtful approach reflected in the draft and the priority the Chairmen are placing on this important issue.

The draft addresses most of the core issues identified by USCAP in our Blueprint for Legislative Action and reflects many of our policy recommendations. Any climate program must promote private sector investment in vital low-carbon technologies that will create new jobs and provide a foundation for economic recovery. Legislation must also protect consumers, vulnerable communities and businesses while ensuring economic sustainability and environmental effectiveness.

The API hasn’t reacted, but the IPAA has coverage on its blog

CEI hates it.

Rush Limbaugh says it’ll finish us off,

RUSH: Henry Waxman’s just about finished his global warming energy bill, 648 pages, as the Democrats prepare to finish off what’s left of the United States. Folks, we have got to drive these people out of office. We have to start now. The Republicans in Congress need to start throwing every possible tactic in front of everything the Democrats are trying to do. This is getting absurd. Listen to this. Henry Waxman and Edward Markey are putting the finishing touches on a 648-page global warming and energy bill that will certainly finish this country off. They’re circulating the bill today. The text of the bill ought to be up soon at a website called globalwarming.org. The bill contains everything you’d expect from an Algore wish list. Reading this, I don’t know how this will not raise energy prices to crippling levels and finish off the auto industry as we know it. (More here)

Time points out that the Senate could be a dealbreaker:

The effects of the already-intense lobbying around the issue were being felt across the Capitol, where the Senate the same afternoon passed by an overwhelming margin an amendment resolving that any energy legislation should not increase electricity or gas prices.

That’ll make it tough to get 60 votes.

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.

…

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.

…

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”

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?”

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:

(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:

(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:

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

Continue reading “Four Legs and a Tail”