29 Nov 2011

The big impacts of zero value carbon

This is long but it's about your future. So read it.

In July 2008, I wrote that we need to work to prevent climate change by reducing our carbon outputs (I favored a carbon tax). Later that year (three years ago!), I clarified that developed countries should concentrate on reducing carbon while developing countries concentrated on more pressing problems, i.e., water supply and sanitation.

In May 2009, I ran an experiment with experts involved in the theory and exercise of climate change negotiations. The results -- teams from "China" and "America" totally failed to agree on mitigation strategies -- gave me a strong signal that attempts to solve "the greatest collective action problem we've ever seen" would fail, as they did in Copenhagen that December. (Interestingly, the summiteers did not put much focus on water or adaptation.)

In November 2010, the Economist declared that mitigation efforts were doomed and that it was time to concentrate on adaptation. In August 2011, I said this:
It's increasingly obvious to me that no human or natural actions are going to limit climate change. The question then is what adaptation steps to take to minimize personal and social harm.
And in October, I reflected on those implications, e.g., many people -- mostly poor -- are going to die. In that post, I also said:
Mitigation-focused investments (solar, biofuels, zero-emissions stuff) are wasted if there's no "carbon reduction payback" -- this means that a lot of projects are going to turn instantly unprofitable.
This post -- after that long introduction -- is about THAT fact. Let's lay it out:
  1. The value per ton of "carbon avoided" is positive only if that carbon does not end up in the atmosphere via some other channel, i.e., carbon reductions via solar panels in Germany are worthless if Americans emit more carbon.
  2. A net reduction in global carbon emissions, therefore, depends on global limits on climate emissions, which are nowhere in sight.*
  3. Investments that included "benefits" from avoided carbon as a justification for higher costs may no longer produce those benefits. This means that the $90 billion in low-carbon FDI investments made in 2009 [pdf] may not give the return promised; many more billions in other low-carbon investments are similarly "upside down."
  4. It also means that adaptation investments that assumed a positive value of carbon (and thus a degree of mitigation and lower impacts from reduced carbon in the atmosphere) may UNDERESTIMATE the benefits from adaptation. They are not aggressive enough for a high-GHG world.
  5. Projections of $2 trillion per year investments in the "low carbon economy" are unlikely to materialize when there is no low-carbon economy.
In sum, a lot of money invested in low-carbon, renewable energy, carbon capture, carbon offsets (and so on) is going to give a lower return, result in more "stranded assets," and leave less money for more important projects -- such as preparing for the damages that will result in a world that's 5C/9F hotter (on average) and has MUCH MORE variable weather (i.e., "civilization collapses" scenario).

But what do other people think? While in Bonn,** I asked many people:
Would you invest $1 billion in adaptation or mitigation?
People working for environmental agencies and renewable energy said "mitigation -- because we MUST," but people from corporations said "adaptation, because governments have failed to do anything about reducing carbon outputs."***

And reality is not exactly matching promises, e.g., this slide showing actual carbon emissions for UK water utilities (doing what they must do) compared to their promised low-carbon targets [from this PDF]:
I reckon that this slide is a microcosm of what's happening all over the world. Even China -- the last great hope of broke governments and solar-power enthusiasts -- is putting a MUCH larger share of its money (energy, infrastructure, cars, etc.) into "dirty but cheap" investments that deliver goodies to citizens who care more about consumption than a small carbon footprint (and a government VERY interested in keeping those citizens fat and happy -- much like the US government).****

Bottom Line: Trillions of dollars invested in a "low carbon" economy have gone to waste; future investments in adaptation will need to be higher if we want to reduce the harm that climate change will inflict on human settlements, agriculture (and the environment we indirectly depend upon). Damages in poorer countries are going to be very dramatic; damages in most "rich" countries are going to be painful. Most of these impacts will be felt via the "water vector." Be prepared.

* It's quite sad to hear that global "GHG emissions are way above projections" from Europe, where governments really did take (mostly) right actions towards mitigation.***** Their actions are futile, however, without partnership from Americans, Canadians, Chinese, Indians, Japanese, et al. (let alone LDC governments that have every right to follow the lead of high carbon countries). Americans cannot say "I told you so" for failure when they took the lead in causing that failure.

** The Rio+20 pre-conference on the water-energy-food nexus conspicuously avoided an open discussion of climate change. Durban looks to be a huge failure.

*** From the Economist:
In a recent survey of Carbon Disclosure Project companies, 68% claimed to have made their global-warming strategy part of their core strategy, up from 48% last year. Given a surfeit of green PR bunkum, it is not easy to know whether they mean what they say. But if they are sincere, it is probably because they believe they must plan for a world in which water and other natural resources are increasingly scarce. Commodity prices are rising, and droughts seem increasingly common in fast-growing developing countries, including China and India. According to a recent survey by PwC, most bosses believe that resource scarcity is a bigger threat to their medium-term prospects than climate change more broadly.
**** From my book:  "Democracy is the theory that the common people know what they want and deserve to get it good and hard." -- HL Mencken.

***** Ministers made a spirited defense of their disastrous biofuels policies. Many EU governments have failed to adequately implement low-carbon policies.


RM said...

Read this:


Price on Carbon Failing to Reduce Greenhouse-Gas Emissions

Alberta's carbon offsets are supposed to be real, measurable and provable, but may not be, a report says

Eric said...

OK, you and others claim that the sky is falling. You may be right. Most of the claimers then state that the only solution is a world government with them in charge. Since neither a world government nor them in charge will ever happen, what is the backup plan and if there is no backup plan, why should people listen to endless repetitions of 'The sky is falling.'?

David Zetland said...

@Eric -- there is no backup plan as far as mitigation is concerned. Given that the sky will thus fall, your plan should be "prepare for +5C," i.e. adaptation...

Eric said...

That is not a plan either. If you had power to change things, what would you do? Would the other seven billion beings on the planet revolt against your plan? If they would, what would you do next?

As you can see from the sentences above, with respect to climate change or water, I would like people who propose that humanity should change to spell out that change in details with milestones, costs, and social and political viability. I have never seen such a plan or met anyone who would claim that they have such a plan. They just want things, magically, to be 'different.'

benjaminpink said...


David Zetland said...

@Eric -- you're missing the difference between collective action (which requires a Core) and dictatorship, which requires both power and wisdom. You're scenario isn't on the table, so stick with options that are. A "group solution" that reduced CO2e would have made us ALL better off, but there was no will among short term gainers (and those who have no foresight to see how this is gonna bite them in the ass).

Alexander Jablokov said...

The sky is falling. We can spend all of our available wealth to build scaffolding to hold up some tiny bit of sky, and hope our sterling example inspires others. Or we can save our scaffolding dollars, build up our army, and try to force others to build scaffolding instead.
Or we can save our scaffolding dollars and build a falling-sky-resistant roof instead. Right now, the only practical choice. Yours is the clearest statement I've seen of the choices. Thanks.

Eric said...

I am not missing the difference, as far as I know.
I don't recommend a dictatorship, but I have gotten tired of
'Collective action is hard. Let's not do it. Then let's call all those who will not do collective action idiots.'

Collective action IS hard. In the case of water economy, the goal of collective action is critical to reach.

So my question is 'Who is going to do the work to reach this goal and what are the spelled out milestones that ensure that the goal is reached?'

I would like a detailed, non-dictatorial plan that will work. Saying that collective action is hard so just adapt strikes me as the wrong answer.

Does this make sense?

Eric said...

@Alexander and David,

Of the seven billion people on Earth, how many of them will this falling sky resistant roof protect? How many of the rest will be left to die? What do you expect the rest to do in an attempt to avoid dying?

I have not seen serious discussions on this. The closest that I got was with a Native American who said that he expected 6.9 billion to die and that as long has he and his friends survived it was fine with him if the rest died.

Alex Trembath said...


Some potential good news WRT climate forcing effects of carbon accumulation:



Your argument assumes that the production of low carbon energy is motivated solely by climate-related benefits, and that no other benefits accrue to either society or investors. Putting aside energy security, manufacturing support, and induced innovation benefits that you and I will likely disagree on, isn't there an inherent benefit to diversifying and upgrading an aging energy infrastructure?

I will, however, certainly concede the inefficiency of current investments/subsidies, which do not demand or reward systems-scale innovations and therefore do not drive clean energy towards subsidy full commercial viability. The real "waste" that I see is from activists who desire building a 100% zero-carbon economy with today's technology, which remains overly expensive and lacks performance characteristics needed for full-scale deployment.

Eric said...

Thanks for the link.

Also, I agree with your thought that current technology does not scale and is not up to the job.

That's why we are trying to invent better technologies.

David Zetland said...

@Alex -- I agree. ALL energy sources (and systems) need to survive on their own merits, not ideology or subsidies (and yes, I know fossil/nuclear have HUGE subsidies).

freude bud said...

How does this demonstrate that the price of carbon is zero? It seems to me that it demonstrates that the price is quite high ... but that you want the cost to be met by adaption instead of mitigation.

David Zetland said...

@freude -- the REAL (actionable) price that producers *face* is zero, but the shadow (impact) price to society is high. That's how you square that circle.

freude bud said...

But it's clear that in Europe, which has a cap and trade scheme, that the actionable price is not zero, but rather somewhere around $5/metric ton. Everywhere else it is zero, but how is that an interesting/helpful observation?

David Zetland said...

@freude -- because the value of projects that last for years (decades!) depends on the cost of carbon for ALL that time. The EU price of $5/ton would be fine if it was set for 20+ years, but it's not.

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