Tuesday, February 24, 2009

Solutions to Climate Change

Joe Romm has started a series of posts (1, 2, and #3 coming soon), where he shares his ideas about what should replace dirty coal once strict CO2 regulation is introduced in the US, and trust me; it will be quite soon.

As the solutions, Joe suggests energy efficiency, wind power, concentrated solar power, and biomass co-firing. Joe's ideas are smart, as always. I just want to comment on efficiency and the use of biomass. Efficiency is on the top of Joe's list, and he points out to California's success in increasing efficiency dramatically. Efficiency is THE key solution to slowing down the growth of world's energy consumption, but I think it's fallacious and dangerous to view it as an energy source. The history teaches that, while most applications of energy consumption have become more efficient over the years, the saved energy has been simply used for other applications. Below, I've made two graphs of California. The first graph shows the trend for per capita energy consumption in California compared to the rest of the US from 1960 to 2007. The second graph shows a similar comparison of CO2 emissions indexed to 1980. I wish EIA had this data starting from 1960, as well, but they don't.

As the first graph shows, California was already using much less energy per capita in 1960 compared to the rest of the US (in other words, before the efficiency programs). The growth in consumption has been much more modest in California, but I'd like to see the composition of industrial activity, and the share of energy intensive industries before making a conclusion of the main driver behind the trend. The second graph shows that the growth in CO2 emissions has been somewhat slower in California than in the rest of the country. However, whether efficiency programs or other factors, such as the availability or price of cleaner energy sources has been driving the trend, remains a question. In addition, California has imported coal powered electricity from the states around it, thereby avoiding the emissions within in the state. In other words, the efficiency programs in California have probably not led to notably lower CO2 emissions. In addition, I'd argue that the estimates of California's energy savings during the past three decades, as Joe Romm presents them, are largely guesses, since nobody knows the counter factual; that is, what the growth in demand would've been, had the alternative option to cheap efficiency been new generation capacity costing several times more. Although efficiency is important, we shouldn't delude ourselves into thinking energy efficiency cleans up our our energy infrastructure - it doesn't. We still need to focus on decarbonizing our energy system.

Biomass co-firing is, in my opinion, another fallacy as a solution to combat climate change. First of all, burning biomass is not necessarily more environmentally friendly than coal, and it may even emit more CO2 per megawatthour. For example, in Finland a standard form of biomass is peat, which emits around 380 kg of CO2/MWh, whereas coal emits "only" about 300 kilos of CO2 per MWh. (In fact, Finland recently had a feed-in tariff for peat based power generation). Burning waste from saw mills is another example; it emits around 500 kg of CO2/MWh (also quite common in Finland). The standard argument for burning of biomass is that it would otherwise decay in nature, and thereby release methane into the atmosphere. That is a fairly weak argument, since there are often many useful applications for biomass other than burning it or leaving it to decay. However, by far the weakest argument is that it's renewable. If you release the CO2 in biomass into the atmosphere by burning it; you've released the CO2 into the atmosphere.

What if the US followed Jim Hansen's advice, and instead of using coal plants for biomass co-firing, as Joe Romm suggests, bulldozed the plants to the ground? (Btw. see this link for March 2. demonstration at Capitol Power Plant with Jim Hansen). Now, the US government is not going to demolish any utility's coal plants. However, given a sufficiently high price of CO2, no free allowances or grandfathering of plants, and/or a competitive and responsive electricity market; the utilities themselves may have an incentive to bulldoze their coal plants. Following IEA:s reference scenario with 0.9 % p.a. growth in coal generation to 2030 (and in the following calculation, until 2039); a back-of-the-envelope calculation suggests that the opportunity cost of CO2 emissions from burning coal in the US could be around $ 3.8 trillion in the next 30 years at a CO2 price of $ 85/tonne (the social cost of CO2 in the Stern Review), using a discount rate of 2 % p.a.. The cost would be around $ 3.3 trillion even without any growth in coal based power generation. Coal retains its 49-50 % share of total generation in 2030 in the IEA reference scenario. That share of power generation is not replaced over night, but the calculation just shows how expensive coal based power generation is in reality.

Saturday, February 21, 2009

Silence on the DRC

How is it still possible? Bob Herbert's op-ed should make us all ask that question:

Women and girls of all ages, from old women to very young children, have been gang-raped, and in many cases their sexual organs have been mutilated. The victims number in the hundreds of thousands. But the world, for the most part, has remained indifferent to their suffering.

"These women are raped in front of their husbands, in front of their children, in front of their parents, in front of their neighbors," said Dr. Denis Mukwege, a gynecologist who runs a hospital in Bukavu that treats only the women who have sustained the most severe injuries.

In some cases, the rapists have violated their victims with loaded guns and pulled the triggers. Other women have had their organs deliberately destroyed by knives or other weapons. Sons have been forced at gunpoint to rape their mothers. Many women and girls have been abducted and sexually enslaved.

I'm appalled by our indifference.

Friday, February 20, 2009

EU Bonds and the European Energy Infrastructure

On Wednesday, George Soros joined the chorus of calling for EU bonds. Indeed, EU bonds would be a great financing mechanism for co-ordinated counter-cyclical fiscal policies. The mechanism would benefit new and weaker members countries most clearly, however properly designed; it would divide the fiscal burden more equally also among the stronger member countries. A new mechanism for EU bonds could also help solve disputes on who pays for the investments in cross-border energy networks, both electricity and gas. The bonds could be used for new grant and loan facilities created by the European Investment Bank and EBRD to guarantee cost recovery for investments in energy networks together with other necessary regulatory codes and measures. Moreover, the bonds could be used for co-ordinated efforts to mitigate climate change.

Wednesday, February 18, 2009

Fear the N-Word No More: Part 2

In an interview yesterday, Alan Greenspan told the Financial Times that some banks may have to be temporarily nationalized to fix the financial system. If Alan is not afraid to use the N-word, then neither should Tim Geithner, Larry Summers, or Barack Obama. Yes, some McCarthyists may label you anti-American, but it's still, as Alan says, the least bad option. It's not "in your culture", but neither is lemon socialism.

Monday, February 16, 2009

Jim Hansen's Op-Ed

One of our best climate scientists, Jim Hansen submitted this op-ed to the Observer yesterday. Once again, he's calling for a moratorium for new coal plants, this time pleading to the UK government. There's one thing I especially agree with in the letter; although, I'm not sure whether he means it the way I understand it:

The dirtiest trick that governments play on their citizens is the pretense that they are working on “clean coal” or that they will build power plants that are “capture ready” in case technology is ever developed to capture all pollutants.

Pretense indeed. I don't think Jim Hansen expects a country like China ever to bulldoze its coal plants. The country generates over 80 % of it's electricity from coal. It's therefore important that affluent Western countries commit themselves to the development of carbon capture and sequestration technologies that can then be transferred to developing countries. So far, there's no sign of any serious commitment.

Btw. If you haven't read this 2007 MIT study, The Future of Coal, you should.

Renewable Energy 401(k) Tax Credit

I'm not quite sure of the arithmetic behind this plan; especially small companies receiving a tax credit 10 times higher than large companies. (are their pension dollars worth 10 times more?) Nevertheless, I think the Renewable Energy Task Force of South Denver Chamber of Commerce is after something good. Who knows, if the proposal had been better designed, it could've actually made the stimulus package.

Friday, February 6, 2009

The Political Reality of Climate Change Mitigation

I feel ashamed for not posting anything in four days. This week has been really busy with work. In addition, following the global economy's downhill takes a lot of time. One thing worth looking into now is how countries, in the case of either uncoordinated or coordinated fiscal stimulus (unlikely to happen), could get the most bang for the buck in terms of decarbonizing the global energy system. That could take more than a few blog postings, but it's worth the try.

First, let's talk about the reality of climate change mitigation with reference to energy. Varun Rai and David Victor recently made a very good point about how dirty coal, thanks to the economic crisis and ironically, environmental groups, may now emerge as the main option for new power generation (for the next decade, perhaps?). The fact, which too few people seem to understand, is that a country such as China is not going stop using coal any time soon. "Clean coal" (yes, the term is an oxymoron) technologies could potentially make the use of coal much more environmentally friendly, although admittedly, not quite so. The development of such technologies will depend on affluent Western countries, especially the U.S. However, U.S. environmental groups are now campaigning against clean coal, thereby possibly ensuring that all of the coming coal plants in developing countries will be plain old dirty coal plants.

Now, let's turn to nuclear power. There's been, once again, a lot of scoffing at the Finnish nuclear project, Olkiluoto 3. The project has been a complete disaster, and it's now 38 months late from schedule, and at least € 1.5 billion over budget. The sponsor of the project, TVO is now sueing the EPC contractors Areva and Siemens for damages worth € 2.4 billion (lost electricity production, lost emissions allowances, etc.). Nuclear power is now being quickly demonized in many places. It's certainly no silver bullet for the mitigation of climate change, but it's one of the solutions. Even Joseph Romm knows this. I'm in favor of all other options (solar, wind, ocean, etc.), but we have to face the reality, take what's offered and plausible, and run with it. If you lobby against all new nuclear and clean coal projects, the chances are, the environment will be the one losing out.

Btw. here's a great recent paper on CCS, also by Rai and Victor.

Monday, February 2, 2009

The Founding Conference of IRENA

If you missed the founding conference of the International Renewable Energy Agency last Monday; you're not the only one; so did I. It amazes me that the event went below the radar of all major news sources. I had to double check whether any major newspaper or news agency had ran even a small article - and nothing.

Anyways, so far I'm happy that the organization came into being. The IEA has focused mostly on the issues of its OECD member countries, and there has been a growing need for an organization that pulls together a vision and the policy expertise for a sustainable global energy infrastructure. The IEA has produced great overviews and statistics (though often outdated) of the global energy market, in particular oil, gas and coal. The organization has also published well prepared policy papers of its member countries. However, its main value has been in informing us on how things are, period. Furthermore, the IEA has only recently started to show the kind of attention towards renewables they deserve. Just compare the growth estimates for renewables in WEO 2008 to those in 2007.

There were 75 signatories to IRENA last Monday, and most notably the UK and the US were not among them. The US's part could be explained through the Bush legacy of climate change denial, but I don't get the humpty dumpty politics behind the UK's absence. This document explains in more detail what the role of IRENA will be in context to other orgnaizations.

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