externalities
Editorial
Carbon capture in Iowa: A lifeline or a pipe dream?
In absence of smarter rules to limit the environmental impacts of farming, Iowans should be wary of new lifelines for the ethanol industry.
Legendary VC John Doerr has a plan for solving climate change
John Doerr’s new book, 'Speed and Scale: An Action Plan for Solving Our Climate Crisis Now,' is a checklist for global action.
www.theatlantic.com
A climate-focused index fund will fight skeptical CEOs
The hedge fund that staged a revolt at Exxon last month is now recruiting an army of mom-and-pop investors for future battles.
medium.com
Opinion: Externalities are our existential threat
It’s the “ex’s” we need to worry about the most. Externalities that create an existential threat. The ultimate threat: Our extinction.
Three things Christine Lagarde can do to cement her legacy on climate.
Managing Director Lagarde has positioned the IMF as an important and credible voice in the debate about climate change. Now it’s time for the Fund to expand and institutionalize this new role, helping poor and vulnerable countries understand and confront the macroeconomic and financial risks of climate change.
WASHINGTON DC, Oct 11 2017 (IPS) - The International Monetary Fund (IMF) and climate change do not often appear in the same headline together. Indeed, environmental issues have been, at most, peripheral to the Fund’s core functions. But now economists inside and outside the IMF are beginning to understand that climate change has significant implications for national and regional economies, and so it’s worth reconsidering the Fund’s role in addressing the climate challenge.
To her credit, Managing Director Christine Lagarde has boldly injected the IMF’s voice into the global debate on policy responses to climate change and has identified a number of roles the Fund can play.
The Fund has conducted valuable work on how carbon emissions can be reduced through market prices that reflect the negative externalities of those emissions. In particular, the Fund has become a leading voice for quantifying and streamlining or eliminating fossil fuel subsidies, as well as for introducing carbon-pricing mechanisms.
What is still missing, however, is a bigger role for the IMF in enabling countries to prepare and manage the potential impacts of climate change. There are three things the Fund could do, building on its current efforts, that would make a big difference:
1. Deepen Research on Macroeconomic and Financial Impacts of Climate Change
In a climate change debate that has become heavily politicized, the Fund’s technical and nonpartisan voice is uniquely valuable. Few questions are as important as understanding the possible effects of a changing climate on the world’s economies, especially the most vulnerable ones.
The Fund has recently started to make important contributions in this area. In a paper published last year, the IMF started to look into the implications of climate change on so-called “small states”. And last week, the Fund devoted for the first time a whole chapter of its flagship World Economic Outlook to the impacts of weather shocks on economic activity.
Building on these foundations, the Fund should focus its research capabilities on a key question, namely whether climate change is having have a “level effect” or a “growth effect” on per capita income. If the former, then climate change will only destroy a given amount of income over time (think of damaged bridges and buildings) but not affect the capacity of the economy itself to grow. If the latter, then climate change is also harming the drivers of growth themselves, such as the productivity and availability of workers, the productivity of agriculture, and the flow of investment. The economy’s growth rate will slow as a result, and losses will compound year after year, leaving an economy significantly worse off than if only level effects applied.
Getting better answers to this question is essential for policymakers making decisions about how much to spend today to avoid damage tomorrow.
2. Formally Incorporate Climate Change Into Policy Dialogue
One of the Fund’s core functions is macroeconomic surveillance. This function brings Fund staff into regular policy dialogues (called Article IV consultations) with financial authorities in virtually every country in the world.
Financial authorities have a key role to play in preparing for climate change, as they are charged with budget planning and managing fiscal and financial risks. The Fund should bring climate risk into the dialogue as a formal part of its consultations, not just with small states, but with a much larger set of vulnerable countries as well, including systemically-significant ones.
This year, in collaboration with the World Bank, the Fund launched the first Climate Change Policy Assessment (CCPA) during the Article IV consultations for the Seychelles. The assessment focused on policy options to reduce vulnerability to climate change; the Seychelle authorities found it to be very useful. More CCPAs are planned – a small handful per year – but this is simply not fast enough given the urgency and gravity of the challenge.
The Fund should formalize CCPAs as a routine part of Article IV consultations for a broad swathe of vulnerable, low-income countries. This will require investing in staff capacity and training, including in the Fund’s Monetary and Capital Markets Department, which can help countries identify how climate risks and opportunities could affect their financial systems. Maximizing synergies with the World Bank on the CCPAs will also be necessary.
3. Treat Expenditures on Climate Resilience as Investments
Countries facing a balance-of-payments crisis often draw on IMF resources and enter into a program relationship with the IMF. One of the trickiest elements when negotiating such a program is how to treat different categories of spending and where to cut to restore fiscal balance. How should the Fund treat expenditures designed to provide financial protection against extreme weather events? These include, for example, deposits into a national reserve fund, premium payments on sovereign insurance against natural disasters, or the costs of issuing catastrophe (“cat”) bonds.
Protecting some of these expenditures from program-mandated cuts is fully appropriate, as they are designed to provide a measure of fiscal protection to the government in the aftermath of an extreme weather event. For instance, the Fund might treat cat bond issuance costs and insurance premiums as investments with potential upside, rather than as expenditures, thereby exempting them from cuts.
Managing Director Lagarde has positioned the IMF as an important and credible voice in the debate about climate change. Now it’s time for the Fund to expand and institutionalize this new role, helping poor and vulnerable countries understand and confront the macroeconomic and financial risks of climate change.
“This article was originally posted at World Resources Institute’s Insights blog”
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Whitehouse's floor soliloquies chug on. Is anyone listening?
For the 180th time, Sheldon Whitehouse took to the Senate floor this month to warn of the perils of climate change, blasting the fossil fuel industry, corporate greed and the failure of market capitalism to address global warming.
For the 180th time, Sheldon Whitehouse took to the Senate floor this month to warn of the perils of climate change, blasting the fossil fuel industry, corporate greed and the failure of market capitalism to address global warming.
Each week for years, largely without fail, the junior senator from Rhode Island waxes philosphical about ocean acidification, atmospheric temperature rise, devastated coastal communities, increases in storms, fires and floods. And every week, he urges Congress and the American people to act before it is too late.
But is anyone listening?
"I don't know," the Democrat recently told E&E; News during a sit-down in his office. "After all that effort, I certainly hope and pray it had an impact."
Whitehouse has gained a reputation as a lefty progressive with anti-capitalist undertones who rages against greedy corporate interests and the Koch brothers.
But he said he sees market capitalism as the most effective way to address global warming, much more so than increased regulation, a common Democratic battle cry. And the climate hawk is working to find common ground with those who once appeared to be his enemies.
In the wake of unprecedented extreme weather events such as Hurricanes Harvey, Irma, Jose and Maria, the subject of climate change is back in the spotlight. And the administration's move to kill the Clean Power Plan gives lawmakers more room to act.
In a change from years past, more Republicans are joining Whitehouse and beginning to call for action. Sen. Lindsey Graham (R-S.C.) said last month he would work with Whitehouse on a bipartisan carbon fee bill.
"I'm a Republican. I believe that the greenhouse gas effect is real, that CO2 emissions generated by man is creating our greenhouse gas effect that traps heat and the planet is warming," Graham said during a press conference (Greenwire, Sept. 20).
Even though many activists on the left want caps on emissions, Whitehouse says a carbon fee is much more efficient. "You get much more climate bang for your effort buck," he said.
And while he is not shy to criticize the GOP for what he considers inaction on the global warming issue, he is equally willing to call out fellow Democrats, as well.
"Remember Will Rogers? The 1930s-era comedian who said, 'I'm not a member of any organized political party, I'm a Democrat,'" he said. "No, we've done an absolutely crap job of fighting this fight. We allowed it to become polar bears versus jobs, which is ridiculous on both sides."
There are more jobs in green energy and renewables now than in the fossil fuel industry, he said. "And it's not polar bears that are suffering, it's beaches and fishermen and farmers right here in the United States."
'Capitalism is the solution'
At issue, Whitehouse said, is not capitalism as an economic system, but rather what he sees as a perversion of that system.
"I think market capitalism is the solution to the problem," he said. "The difficulty here is that market capitalism has been twisted by the fossil fuel industry, and they have completely polluted and captured our politics so that the natural course of things has been interfered with."
The "natural course" refers to an inevitable market collapse that often accompanies innovation. Whitehouse said when the economy shifts, for example, from horses to internal combustion engines, there is a "quite precipitous and quite painful" fallout, but it is usually contained within the affected industries.
"In this case, we spin this out too far; while we're waiting for that natural eventual precipitous market collapse [of the fossil fuel industry] to take place, we're also doing all this other damage that will then come back to haunt us, and for which there will be considerable blame," he said.
Sen. Sheldon Whitehouse (D-R.I.) on the Senate floor. C-SPAN
Critics believe the very nature of capitalism works against environmental protection. In her award-winning book "This Changes Everything: Capitalism vs. the Climate," author Naomi Klein argues capitalism necessitates ongoing economic growth.
The ever-growing consumption model requires never-ending resource extraction, she says, thereby exacerbating global warming through continued carbon emissions. Klein, and others on the left, are pushing for a new economic model.
This idea runs counter to Whitehouse's position. He argues market capitalism is not inherently problematic, but rather has been "torqued and polluted and ruined" by the fossil fuel industry.
More specifically, the industry "enjoys" an annual subsidy in the United States of more than a half-trillion dollars a year, according to the International Monetary Fund, he said.
"In theory, under market capitalism, those negative externalities in the amount of $700 billion a year ought to be baked into the price of the product," he said.
In economic theory, a negative externality is the cost that is suffered by a third party as the result of a market transaction.
"The markets work, but when you have negative externalities not in the price, that's an economic failure, an economic dislocation," Whitehouse said. "But because it's so to the benefit of the fossil fuel industry, they've stepped over into the political side and have just beat the hell out of everybody in order to protect that massive subsidy."
Whitehouse said that usually, on the political side, lawmakers would recognize the $700 billion as a negative externality, but Republicans — he thinks — have become indebted to industry donors.
"You can't smoke in airplanes any longer because now we know what secondhand smoke does to children sitting next to you in the airplane," he said. "They won't let us do the equivalent of that for climate change because they make too much money off of the status quo."
For Whitehouse, the fight for climate action is not only a fight for the preservation of the planet, but also for what he sees as core American values.
'Baked into me'
The child of a prominent diplomatic family, Whitehouse said he spent time in places such as Laos and Turkey growing up, and watching his kin make sacrifices for high ideals had an effect.
"I spent my life as the son and grandson of Foreign Service officers, and we were not on the champagne and cocktails diplomatic circuit," he said. "We were in poverty-ridden countries, and we were in countries at war, and what I grew up around were Americans who put themselves and their families in harm's way because they believed in something."
It was evident to him from an early age that something about America was important enough for family and friends to subject their loved ones to malaria, dirty drinking water or poor living conditions.
"They do it because something matters. So that got baked into me pretty hard," he said.
"And if we have let this temple of democracy that men and women fought and bled and died to create and preserve get corrupted by one special interest in a way that will harm the lives of people all around the world and bring the democracy that we cherish into disrepute, shame on us."
Whitehouse first became passionate about climate change through his wife, a marine biologist who shared her findings concerning sea-level rise and ocean acidification in their home-state Narragansett Bay.
"The bay in which my wife did her research on winter flounder has risen nearly 4 degrees medium underwater temperature, and the flounder that she used to study are virtually gone," he said.
'Boom'
When Whitehouse arrived on the Hill in 2007, lawmakers were taking climate change seriously and working to draft a solution, he said. From 2007 to 2009, there were "bipartisan bills coming out of all sorts of places," he said. In 2008, Sen. John McCain (R-Ariz.) ran for president on a climate change platform Whitehouse considered "great."
"And I thought, OK, this is a scientific problem, but government is working on this, we're doing our job," he said. "Then comes 2010, Citizens United decision. Requested and forecasted by the fossil fuel industry from the five Republicans on the Supreme Court and boom, like sprinters at the starting gun, they were off."
Citizens United v. Federal Election Commission is the 2010 landmark Supreme Court case, which lifted restrictions on how much money large corporations can invest in political campaigns.
Since 2010, there has not been a Republican co-sponsor, with Graham as a potential exception, of serious carbon emissions reduction legislation, Whitehouse said.
"The fossil fuel industry took that huge political weaponry that they were given by the five Republicans on the Supreme Court in Citizens United and they turned it on the Republican Party and they crushed dissent, and they made [climate] look like a partisan issue, which it is not," he said.
'Science got me scared'
When a carbon cap-and-trade bill passed the House in 2009 but failed to gain traction in the Democrat-controlled Senate, Whitehouse was furious and began taking on the Senate floor to vent his frustrations with Congress' lack of action.
"The science got me scared, watching the corruption of the government that I love happen in front of my eyes got me mad," he said.
"So at that point, I thought, well, somebody has got to say something, just to let people know that the lights have not gone out here. The only way to do that around here with people as busy as they are is to put yourself on a schedule and tell your office every week, no excuses, no exceptions, I'm going to the floor."
And despite the yearslong quest, Whitehouse is convinced the climate change fight can be won. "I wouldn't rule out a carbon fee," he said. A confluence of action has given him hope.
In addition to Graham's announcement, large oil and gas players have said they support a carbon fee.
"Although they're lying, Exxon, Shell, Chevron, all the big oil companies, pretend to support carbon fee," he said. "So there's significance in their pretense, if they know they've got to at least pretend."
There is building support for a carbon fee in the business community, he said. In fact, more than 1,200 business across the globe, including U.S. companies like General Motors Co., are voluntarily assigning a dollar value to carbon dioxide to reduce greenhouse gas emissions (Greenwire, Sept. 12).
And lastly, Whitehouse cited President Trump himself, who in 2009 signed onto a full-page ad in The New York Times saying climate change science is irrefutable and the consequences will be catastrophic and irreversible (E&E; News PM, Oct. 2).
"So is it a long shot? Yes, but those are all pretty interesting pieces that could come together as this thing develops," Whitehouse said.
"Ultimately, we win. We just hope that we don't win too late."
Twitter: @AriannaSkibell Email: askibell@eenews.net
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The most effective clean energy policy gets the least love.
In defense of renewable energy mandates.
by David Roberts@drvox
Back in the 1990s and 2000s, when Democrats had more power in state governments, 29 states (and DC) passed some form of renewable portfolio standard (RPS), a policy that requires a state’s utilities to get a certain percentage of their power from renewable sources by a certain year.
Standards range from California’s wildly ambitious 50-percent-by-2030 to Ohio’s modest 12.5-percent-by-2026, and everywhere in between.
Though they aren’t as sexy as perpetually-discussed-but-rarely-passed carbon taxes, and they are flawed and insufficient in a number of ways, RPSs have been the quiet workhorses of renewable energy deployment in the US. According to one Lawrence Berkeley Lab report, fully 62 percent of the growth in US non-hydro renewables since 2000 has been undertaken to satisfy RPS requirements.
Consequently, there’s been a great deal of research done about their various costs, benefits, and impacts. One thing that’s been missing, however, is a comprehensive prospective analysis, projecting the total costs and benefits of RPSs going forward.
Happily, such an analysis was just published in the journal Environmental Research Letters.
If you’ve followed previous research literature on RPSs (and who hasn’t?), the top-line results probably won’t surprise you. Spoiler: The benefits of these policies will substantially outweigh the costs, even under conservative assumptions.
Aside from the basic finding, I do think the results can shed light on two important points — one important to the future of the US grid, one important to politics and policymaking in general. And y’all know how I love to make points.
First, though, a quick summary of the results.
RPS benefits will outweigh costs under almost any assumptions
The researchers used various datasets and methods to evaluate RPSs out through 2050, assessing them along three key metrics:
(a) national electric system costs and national and regional retail electricity prices; (b) environmental and health benefits associated with reduced greenhouse gas (GHG) and air pollution emissions and reduced water use; and (c) other impacts related to gross effects on employment and reductions in natural gas prices.
They modeled three scenarios, one with no RPS, one which took into account existing RPS commitments, and a high RE scenario in which RPSs were strengthened.
Under the high RE scenario, renewables are 35 percent of US power by 2030 and 49 percent by 2050.
So how do the costs and benefits balance out? Let’s skip to the end:
In the existing RPS scenario, electricity system costs range from -0.7 percent to 0.8 percent of no RPS system costs (which roughly amounts to plus-or-minus $31 billion).
In other words, depending on assumptions about the price of renewables and natural gas in the future, the direct costs to consumers could range from mild (roughly 1 cent per kwh in the most affected regions) to negative, i.e., a net savings for consumers. RPSs could very well pay for themselves even before externalities are taken into account.
Whereas the upper-bound estimate of existing RPS costs is $31 billion, the lower-bound estimate of air-quality benefits is $48 billion and the lower-bound estimate of climate mitigation benefits is $37 billion.
So: If existing RPSs are maintained through 2050, they will impose, at the very most, $31 billion in costs, and produce, at the very least, $85 billion in benefits. Seems like a pretty good deal.
The high RE scenario, which involves cranking up RPSs even in states that currently don’t have them, entails more pronounced costs (upper bound: $194 billion) but also more pronounced benefits (lower bound: $303 billion in air quality, $132 billion in climate). Still a screaming deal.
There are interesting caveats and methodological details in the paper — it’s always worth remembering how much results like this depend on the assumptions fed into the model about natural gas costs, electricity demand, the future cost of wind and solar, etc. — but let’s get on to my two points.
Point one: anything is better than coal
The bulk of the air-quality benefits in both RPS scenarios — and a substantial portion of total benefits — comes from “reduced SO2 and subsequently reduced particulate sulfate concentrations. Particularly important is the avoided premature mortality primarily associated with reduced chronic exposure to ambient PM2.5.”
Basically, reducing smog and other particulates in the air (by reducing SO2 emissions) produces enormous health benefits.
Guess where most of that SO2 comes from. Yup: coal plants. Most of the SO2 reductions in both RPS scenarios come from coal plants shutting down in the Central and Eastern US.
What this demonstrates, more or less, is that coal is so poisonous that virtually any alternative pencils out, once health effects are internalized. Coal is public health target number one.
It also demonstrates that the regions of the country with the weakest (or no) RPSs stand to benefit most from strengthening them.
And finally, it demonstrates that coal really is a convenient bogey man for renewables. Once coal has been driven from the grid and natural gas is the primary competitor, RE’s advantage on externalities will shrink. It won’t disappear, by any means, but natural gas’s air quality and climate impacts are marginally less ludicrous than coal’s. That will put RE in a somewhat tighter race.
Point two: real policies are better than imaginary policies
The authors make a point of saying that, although RPSs are clearly cost-effective — they generate benefits well in excess of costs — “we do not claim that RPS programs represent the most cost-effective path towards achieving these air quality and climate benefits.”
The standard economist objection is that the most cost-effective way to reduce an externality is to put a price on it. From that perspective, an RPS is just an indirect, inefficient way of putting a price on (some) pollutants.
This critique is irritating and wrong in many ways, but for the purposes of my point here, let’s grant it. Let’s say that pollution taxes have an efficiency advantage over clean energy mandates.
What clean energy mandates lack in efficiency, they make up for with another key quality that pollution taxes lack: They are real.
RPSs might not be the most cost-effective way to improve air quality, reduce carbon emissions, or stimulate the growth of clean-energy industries and jobs ... but they are real, working, doing all three of those things, right now, cost-effectively.
Democratic policies often seem caught between two sets of policy purists — on one side, wonks and economists, preoccupied with theoretical, more cost-effective alternatives; on the other side, activists, preoccupied with theoretical, stronger alternatives. (Yes, I’m still reliving the 2009 Waxman-Markey fight.)
There seems to be, on the left, less of that implacable pushing everywhere at once that you find on the right, less appreciation of half-a-loaf solutions that can be ratcheted up over time with steady effort.
RPSs are the perfect case in point. Everyone I know in energy-nerd world has their own bespoke objection to RPSs: They are too strong, or too weak, they should include this or that other technology, they don’t solve systemic externality issues, they are just a bargaining chip for carbon taxes.
But they exist. They are popular. They are working. Maybe economists could tear their eyes from carbon taxes and activists could tear their eyes from pipelines long enough to give them a few cheers.
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