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 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)

Al Gore Armageddon

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.

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.

Endogenous Energy Technology

I just created an annotated list of links on learning/experience curves, deliberate R&D, and other forms of endogenous energy technology, including a few models and empirical estimates. See for details. Comments with more references will be greatly appreciated!

Regional Climate Initiatives – Model Roll Call – Part II


The Minnesota Next Generation Energy Act establishes a goal of reducing GHG emissions by 15% by 2015, 30% by 2025, and 80% by 2050, relative to 2005 levels.

From ScienceDaily comes news of a new research report from University of Minnesota’s Center fro Transportation Studies. The study looks at options for reducing transport emissions. Interestingly, transport represents 24% of MN emissions, vs. more than 40% in CA. The study decomposes emissions according to a variant of the IPAT identity,

Emissions = (Fuel/VehicleMile) x (Carbon/Fuel) x (VehicleMilesTraveled)

Vehicle and fuel effects are then modeled with LEAP, an energy modeling platform with a fast-growing following. The VMT portion is tackled with a spreadsheet calculator from CCAP’s Guidebook. I haven’t had much time to examine the latter, but it considers a rich set of options and looks like at least a useful repository of data. However, it’s a static framework, and land use-transportation interactions are highly dynamic. I’d expect it to be a useful way to construct alternative transport system visions, but not much help determining how to get there from here.

Minnesota’s Climate Change Advisory Group TWG on land use and transportation has a draft inventory and forecast of emissions. The Energy Supply and Residential/Commercial/Industrial TWGs developed spreadsheet analyses of a number of options. Analysis and Assumptions memos describe the results, but the spreadsheets are not online.

British Columbia

OK, it’s not a US region, but maybe we could trade it for North Dakota. BC has a revenue-neutral carbon tax, supplemented by a number of other initiatives. The tax starts at $10/TonCO2 and rises $5/year to $30 by 2012. The tax is offset by low-income tax credits and 2 to 5% reductions in lower income tax brackets; business tax reductions match personal tax reductions in roughly a 1:2 ratio.

BC’s Climate Action Plan includes a quantitative analysis of proposed policies, based on the CIMS model. CIMS is a detailed energy model coupled to a macroeconomic module that generates energy service demands. CIMS sounds a lot like DOE’s NEMS, which means that it could be useful for determining near-term effects of policies with some detail. However, it’s probably way too big to modify quickly to try out-of-the-box ideas, estimate parameters by calibration against history, or perform Monte Carlo simulations to appreciate the uncertainty around an answer.

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. The EU ETS was authorized in 2003, turned on in 2005, and still isn’t dialed in (plus it has narrower sector coverage). Why so fast? It’s simple – there’s no trading infrastructure to design, no price uncertainty to worry about, and no wrangling over allowance allocations (though the flip side of the last point is that there’s also no transient compensation for carbon-intensive industries).

Bizarrely, BC wants to mess everything up by layering cap & trade on top of the carbon tax, coordinated with the WCI (in which BC is a partner).

More Oil Price Forecasts

The history of long term energy forecasting is a rather mixed bag. Supply and demand forecasts have generally been half decent, in terms of percent error, but that’s primarily because GDP growth is steady, energy intensity is price-inelastic, and there’s a lot of momentum in energy consuming and producing capital. Energy price forecasts, on the other hand, have generally been terrible. Consider the Delphi panel forecasts conducted by the CEC:

California Energy Commission Delphi Forecasts

In 1988, John Sterman showed that energy forecasts, even those using sophisticated models, were well represented by a simple adaptive rule: Continue reading “More Oil Price Forecasts”

SRES – We've got a bigger problem now

Recently Pielke, Wigley and Green discussed the implications of autonomous energy efficiency improvements (AEEI) in IPCC scenarios, provoking many replies. Some found the hubbub around the issue surprising, because the assumptions concerned were well known, at least to modelers. I was among the surprised, but sometimes the obvious needs to be restated loud and clear. I believe that there are several bigger elephants in the room that deserve such treatment. AEEI is important, as are other hotly debated SRES choices like PPP vs. MEX, but at the end of the day, these are just parameter choices. In complex systems parameter uncertainty generally plays second fiddle to structural uncertainty. Integrated assessment models (IAMs) as a group frequently employ similar methods, e.g., dynamic general equilibrium, and leave crucial structural assumptions untested. I find it strange that the hottest debates surround biogeophysical models, which are actually much better grounded in physical principles, when socio-economic modeling is so uncertain.

Continue reading “SRES – We've got a bigger problem now”

No Gas

Every year or two the “gas out” email arrives in my inbox. This year, it’s May 15th when “all internet users are to not go to a gas station in protest of high gas prices.” Wait – am I supposed to avoid gas stations, or protesting at gas stations? I’m amazed at the durability of this internet chain letter, which now claims a ten-year history: “In April 1997, there was a “gas out” conducted nationwide in protest of gas prices. Gasoline prices dropped 30 cents a gallon overnight.” A Monty Python tune from The Meaning of Life jumps to mind:

So remember when you’re feeling very small and insecure
How amazingly unlikely is your birth
And pray that there’s intelligent life somewhere up in space
Because there’s bugger all down here on earth.

Continue reading “No Gas”

The Switch to Small Cars – Not So Fast

The NYT reports that a switch to efficient cars is underway, as evidenced by, among other things, an increase in market share for small cars from an eighth of the market at the height of SUV-mania to a fifth today, together with a sharp drop in large truck and SUV sales.

If sustained, such a shift would signal a very significant sensitivity of vehicle efficiency purchasing habits to fuel prices – perhaps much larger than the low short run price elasticity of gasoline demand. However, I think there is reason to interpret these recent events cautiously, lest they prove a little less astonishing in the long run. Continue reading “The Switch to Small Cars – Not So Fast”

It's the crude price, stupid

The NYT reports that Hillary Clinton and John McCain have lined up to suspend federal excise taxes on fuel:

Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.

Mrs. Clinton would replace that money with the new tax on oil company profits, an idea that has been kicking around Congress for several years but has not been enacted into law. Mr. McCain would divert tax revenue from other sources to make the highway trust fund whole.

On April 22, EIA data put WTI crude at $119/bbl, which is $2.83/gal before accounting for refinery losses. Spot gasoline was at $2.90 to $3.14 (depending on geography and type), which is about what you’d expect with total taxes near $0.50 and retail gasoline at $3.55/gal. With refinery yields typically at something like 85%, you’d actually expect spot gasoline to be at about $3.30, so other, more-expensive products (diesel, jet fuel, heating oil) or cheaper feedstocks must be making up the difference. The price breaks down roughly as follows:

Gasoline price breakdown
Continue reading “It's the crude price, stupid”

Unintended Consequences

Olive Heffernan has an interesting tidbit on Climate Feedback about unintended consequences of climate policy.

It’s worth noting that most of these side-effects are not consequences of climate policy per se. They are consequences of pursuing climate policy piecemeal, from the bottom up, and seeking technological fixes in the absence of market signals. If climate policy were pursued as part of a general agenda of internalizing environmental and social externalities through market signals, some of these perverse behaviors would not occur.

The side effects of the corn ethanol boom should not be laid at the door of climate policy. Apart from hopes for cellulosic, ethanol has little to offer with respect to greenhouse gas emissions, and perhaps much to answer for. Its real motivations are oil independence and largesse to the ag sector.