Pet emissions

Oxfam’s Duncan Green (a cat person) reports these BBC numbers tongue-in-cheek (sort of…):

Using a unit known as a ‘global hectare’ – a measure of the land area needed to support a certain ecological footprint, growing and manufacturing the 164kg of meat and 95kg of cereals a border collie or cocker spaniel eats every year takes about 0.84 gha. A bigger dog such as a German shepherd consumes even more – its carbon pawprint is more like 1.1 gha. That is more than the environmental footprint of the average Indian person, who uses just 0.8 gha of resources. If you are a multiple dog owner you are in even more trouble. Two big dogs are responsible for more carbon emissions than some British citizens.

By contrast a cat (hah!) needs 0.15 gha, a hamster 0.014 gha, and a canary 0.007 gha. The most carbon efficient pet is a goldfish. Its carbon finprint requires just 0.00034 gha. That’s over 3,000 fish per pooch.

This is the first I’ve heard of the “global hectare” used thus, but it strikes me as a very sensible metric for standardizing the environmental footprint of economies or people (or animals for that matter). .

Avatar

I just saw Avatar in 3D, which is fantastic. It was a powerful experience and in the dreamy afterglow, one thing one thinks is how maybe the solution to all of these challenges related to natural resources is to live lifestyles that use them less intensively.

Wishful thinking, perhaps? (Tyler Cowen notes that "the aliens don't seem to trade much or accumulate capital" - certainly a far cry from the modern global economy.) Higher prices might get us there on the demand side, although they’d also increase (rather than dull) the incentives for resource extraction (and inevitably some of the negative environmental and social consequences that go with it).

Oil efficiency: Now what?

This is old, but too important to let pass without mention. Morgan Downey summarizes a new paper with a disturbing punchline (summary is Downey's, emphasis is mine):

Dargay/Gately find that much of the efficiency in oil consumption in OECD countries since 1970 was due to oil being effectively phased out as an electricity generation fuel. The oil saved from electricity generation was used in transport. Transport demand for oil facilitates economic growth and is thus highly correlated with economic growth.

Now that this shift away from oil being used for electricity generation has been completed, growth in Total oil demand is going to be much more highly correlated to economic growth than it has been since 1970. Because of this, one cannot use growth in Total oil demand since 1970 as a predictor of future oil demand growth. Instead, growth in Total oil demand is likely to be higher than the 1970-today period.

Oil demand in 2009 is just over 84 million barrels per day (mbd). A major reason for the difference between the Dargay/Gately demand number by 2030 of 134 mbd and the IEA forecast of 105 mbd is due to Dargay/Gately incorporating the fact that the one off switching effect from electicity use to transport use cannot be repeated. Dargay/Gately are not stating that supply of 134 mbd or 105 mbd will be available. They are simply looking at the demand side of the equation and saying that if economic and population growth progresses as the OECD forecasts then the oil demand this implies is likely to be a lot higher than the IEA's forecast of 105 mbd.

The conclusion I take from Dargay/Gately's paper is that if supply is not available to meet this 134 mbd oil demand then economic growth cannot progress as the OECD forecasts and/or an extremely large and unprecedented change in the level of oil consumption efficiency will have to take place between now and 2030. This efficiency will likely be driven by high oil prices.

Given how hard it was for the world to reach 90 mbd even under record prices in 2008, a 50% increase in supply (to 134mbd) by 2030 seems far-fetched... so we will have to see how far innovation (in efficiency and alternate transportation energy sources) can take us.

Stavins on Copenhagen

Robert Stavins breaks down the Copenhagen Accord in some depth. Overall he seems guardedly optimistic with what emerged at the last minute, and reminds us that

The climate change policy process is best viewed as a marathon, not a sprint.

Update: Jeff Sachs, on the other hand, is not happy (and specifically unhappy with Obama). And neither are greentech businesses, as carbon prices fall in response - definitely not a good sign for the prospects of a strong international carbon market any time soon.

Via Mankiw and Environmental Capital.


Update 2: Sachs' nemesis Bill Easterly is similarly unimpressed, but thinks expectations were far from realistic.

Regarding carbon markets, prices were down ~10% - substantial, but not an unmitigated disaster. This is a highly unscientific comparison, but note that at current exchange rates these prices are around $15/ton of CO2e, compared to a proposed cap of $28/ton in the early years of Waxman-Markey, so we are still very much in the same ballpark.

Melting Chacaltaya and the water poverty of the altiplano

Via MR, a frightening but not unexpected piece on the melting of the Chacaltaya glacier that supplied water to La Paz and El Alto in Bolivia, and the incipient water poverty of the altiplano. By Alma Guillermoprieto, whose collection of essays on Latin America The Heart That Bleeds is also excellent.

The West's carbon emissions are irrelevant

This is Richard Muller in the WSJ, via Energy Outlook. His point is essentially that:

Every 10% cut in the U.S. is negated by one year of China's growth.

But the bottom line is that 80% cuts in U.S. emissions will have only a tiny benefit.

It's a case which make sense numerically, but that doesn't mean developing countries will see it that way.

First reactions to Exxon’s big play

Exxon’s $41bn deal to buy XTO energy is the big news of the day. I’m sure there will be much analysis forthcoming from every corner on this one, but here are my quick-hit thoughts from afar:

1. Great timing by Exxon. Everyone is worried about a gas glut from shale and LNG this summer, and while the price isn’t exactly distressed, this is probably about the best moment to pick up a premium large asset like XTO. I continue to admire Exxon’s countercyclical investment strategy, which they execute perhaps better than any other company on earth.


2. Great synergy between XTO’s capabilities in unconventional gas and Exxon’s global reach. Shale gas is still largely a North America story – see for example this WSJ article from tow weeks ago – and clearly has massive geological potential in many other parts of the world.


3. Related to the first two – there may be substantial balance sheet synergies, in that there are attractively priced unconventional gas opportunities out there, but with low gas prices in the near future, XTO lacks the capital and cash flow to take full advantage of them. Exxon, of course, does.


4. I think of Exxon as carrying an enormous cash hoard, so found it fascinating that they chose to do an all-stock deal. Then I looked and saw that they have burned through almost $25bn (net of income!) in the last 12 months, mostly on capex and stock buybacks. Once again… I am hard-pressed to find another company that plays the cycle better.

Update on #4: Cyrus Sanati makes the good point that Exxon did this deal with the treasury shares it bought back - much like it did for its transformative $80bn acquisition of Mobil a decade ago.

Update 2: An eagle-eyed analyst picks out an interesting condition:

Buried deeply in the 76 pages of legalese that is the Exxon Mobil-XTO $31 billion merger is a clause that basically says: If Congress regulates hydraulic fracturing, aka fracking, Exxon gets to back out of the deal.

Exxon is ever conservative, and maybe more of the value is in the U.S. than I thought in #2.

The same analyst doesn't believe this is a concern in the short term, although more for feasibility than because the underlying science is settled:

“It is our understanding that the EPA is already investigating some reports of contamination. We believe congressional leaders will wait to act until more information is available from the EPA and it is unclear when EPA would be able to complete a study,” he says.

I wonder if/how the deal gets unwound if this regulation passes a few years down the road?

Democracy might not prevent famine after all

A few weeks ago I posted about Amartya Sen's entitlement theory of the 1943-4 Bengal famine, in the context of more recent work which paints a more complex picture. Now, here's an paper that calls into question one of Sen's other famous assertions: that a famine has never occurred in a well-functioning democracy. Here's the abstract:

Amartya Sen's assertion that democratic institutions together with a free press provide effective protection from famine is one of the most cited and broadly accepted contributions in modern famine theory. Through a mix of qualitative and quantitative evidence, this article critically examines whether indeed democracies do provide protection from famine. The qualitative research builds on analyses of democratic political dynamics in famine situations (in Bihar 1966, Malawi 2002 and Niger 2005), whereas the quantitative research looks for cross-country correlations between political systems and famine incidents. The article calls into question the strength of the link between democracy and famine protection. Famines have indeed occurred in electoral democracies where the political dynamics at times were counterproductive in providing protection from famine. The article concludes that to fully grasp the complexities of famine, one should replace monocausal political explanations (such as democracy protects against famine) with general tools for context-specific political analysis.

I think the world of Sen, and these recent findings don't in my view tarnish the legacy he will leave at the intersection of economics and philosophy; rather, they are adding layers of nuance to a body of work built on his foundations (and that would be impossible without his earlier contributions).

Via Duncan Green.

Monsanto

Interesting Economist article on "whether Monsanto is a corporate sinner or saint."

I haven't yet seen Food, Inc., but this reminds me to.

Via Duncan Green, to whose blog I just subscribed.

Economics of cap-and-trade

Michael Roberts kindly sketches out the economics of cap-and-trade (and specifically its impact on energy markets and prices) through a classic supply-demand framework. I tend to believe that formalizing these sorts of things into models is a very effective way of thinking through issues and effects, so many thanks to Michael for taking this direction.

It still doesn't feel intuitively correct to me that oil and coal would benefit from cap-and-trade, even in the short term; here's my first thought on where the model might be off:

Thanks for writing this out - much more cogent than my first attempt.

The one thing I'm not sure it captures fully is the interaction with existing low-carbon energy technologies (as opposed to future innovations). The demand for total energy is inelastic in the short term, but the demand for carbon-based energy is probably more elastic because as prices climb higher, broader swathes of existing low-emission technologies (wind, solar, nuclear, etc.) become economically viable.

There may be other tools from the Econ 101 toolkit that can include price-based substitution into the standard supply-demand framework (besides embedding in the demand curve) - if anyone has any ideas, I'm all ears.

Does W-M promote energy efficiency?

My comment in response to Michael Roberts' concern that Waxman-Markey doesn't pass on higher electricity prices that would spur energy efficiency:

I like your "increasing marginal price" mechanism. Alternately, Waxman-Markey attempts to preserve the price signal by encouraging local distribution companies to rebate consumers through lump sums rather than lower prices. I'm not an authority on how it turned out - Stavins seemed to think it was going to be fine, whereas this Climate Progress post parses how "airtight" the language is (the answer seems to be "indicative, but not totally airtight.")

Update: Michael agrees in the comments. For those interested, here's the relevant passage in its entirety from Kerry-Boxer (passed by a friend - apparently it's on p664-665, but I don't have a link):

In general, an electricity local distribution company shall not use the value of emission allowances distributed under this subsection to provide to any ratepayer a rebate that is based solely on the quantity of electricity delivered to such ratepayer. To the extent an electricity local distribution company uses the value of emission allowances distributed under this subsection to provide rebates, it shall, to the maximum extent practicable, provide such rebates with regard to the fixed portion of ratepayers’ bills or as a fixed credit or rebate on electricity bills.

"Solely" and "to the maximum extent practicable" leave some wiggle room, but overall this looks pretty good.

Good blogs

Great list of the 100 Best Blogs for Socially Minded MBAs, with ample natural resources and environmental representation, via #20 (and one of my favorites), Greed, Green and Grains.

Good news on the Brazilian Amazon

A new study has two pieces of great news about deforestation in the Brazilian Amazon (in bold):

Brazil has lowered deforestation rates 64 percent since 2005. This remarkable achievement was possible through a government crack-down on illegal activities in the region. It was helped by a retraction of the cattle and soybean industries, and a growing effort to exclude deforesters from the beef and soy markets. The article describes how Brazil could build upon this progress to end forest clearing by the year 2020, and the additional funding that will be required to reach this goal.

The study estimates that $6.5 to $18 billion will be needed from 2010 to 2020 to achieve the end of deforestation, resulting in a 2 to 5 percent reduction in global carbon dioxide emissions. The steps include the support of low-deforestation livelihoods for forest peoples and smallholders; identifying and rewarding responsible cattle ranchers and farmers; improved enforcement of environmental laws; and investments in protected area management. This estimate utilizes a sophisticated economic model of the Amazon region that estimates and maps the value of forgone profits from ranching and soy farming that are associated with forest conservation.

The former is quite impressive; the latter is fantastic (if true) because in the grand scheme of climate change and the resources that could be dedicated toward mitigating it, $7-18 billion is really not that much money.

Via Climate Progress.

China and Iranian refining, cont.

Remember Iran’s shortage of refining capacity? At least one rumored and unsurprising agreement of mutual benefit appears to have been struck.

The Sinopec Group has signed an agreement with the National Iranian Oil Refining & Distribution Company (NIORDC) to provide 6.5 billion US dollars in capital to the latter for building and upgrading refineries in Iran, reported the semi-official Iranian media MEHR.

Market-watchers believe that it will develop into another loan-for-oil deal in which Iran would export crude oil to China in exchange for loans.

Well short of the rumored $40 billion, but still no doubt most welcome for the Iranian government.

Timeline of water conflict

It has some centuries-long gaps without anything, so one thinks it could be filled out with further research, but nevertheless fascinating. Via Environmental Capital.

The limits of green energy

I heartily agree with Geoff Styles:

In the last year or so the rationale for renewable energy has evolved from emphasizing mainly energy security and climate change to focusing on the creation of "green jobs" and the development of an industry that many perceive as the "next big thing": a new global growth wave along the lines of information technology and telecoms. Unfortunately, neither of these newer justifications withstands serious scrutiny.

Read here for why. Here are my posts on green jobs.

Growing the ethanol market

U.S. ethanol is not cost-competitive abroad, where it competes on an even playing field with Brazilian sugarcane ethanol, so to grow (and reach the RFS mandates) it needs to grow the domestic market:

"Without increasing the blend of ethanol to E15, it will be impossible to achieve the targets set in the Renewable Fuel Standard and there will be no market for cellulosic ethanol," said Jeff Broin, POET chief executive officer. "POET is spending tens of millions of dollars to commercialize the production of ethanol from harvest leftovers but needs E15 to be certain there will be a market for the product."

The clever (but erroneous) framing is that not meeting the ethanol RFS would be the end of the world.

Update: I learn a few things from a comment exchange with Geoff Styles.

R: I recently read Turning Oil Into Salt (which has a lot to like and a lot to dislike - I wrote a rambling review for anyone interested), which would have you believe that the incremental cost of making a car flex-fuel is minimal (in the low hundreds of dollars range above a normal car). If this is true (and I would be interested to hear informed views on whether it is), it would be worth at least looking at the cost/benefit of mandating or incentivizing flex-fuel vehicles, particularly if the alternative to satisfy the ethanol lobby is an E15 ruling that doesn't make economic and/or environmental sense.

Geoff: The Big 3 have already committed to making half their new cars flex-fuel, and with GM and Chrysler beholden to the govt. a 100% target won't be far behind. But even if 100% of all new cars were FFVs starting this year, there would still be many millions of cars vulnerable to damage from higher ethanol blends for many years to come. The problem isn't the FFVs, of which there are already enough to boost E85 sales dramatically. It's making the entire E85 proposition, with its high costs for service station owners and consumers alike more attractive. Does 75% of the energy of gasoline for 86% of its cost sound like a good deal to you?

R: Agree that E15 could be bad for legacy vehicles (I was thinking of FFVs as an alternative demand sink to raising the blending limit to 15%). I think raising the limit would be a bad idea.

And agree that expanding E85 infrastructure will take investment, but the economics of ethanol itself could become attractive enough to justify that investment (and the energy-adjusted price ratio with gasoline has and will continue to fluctuate based on ag supply-demand, crude prices and refining economics).

I don't really like corn ethanol, but if it's a choice between E15 or more FFVs to satisfy the ethanol lobby, the latter sounds more attractive to me.

Geoff: R,
When you put it that way, I agree, though the old saw about horses and water comes to mind. There are sufficient FFVs on the road already to absorb 10x the E85 currently sold. Understanding why they're not buying more of it could be key to figuring out how to make it work on a mass-market level. Is it a critical mass issue on either infrastructure or vehicles, or do consumers just not like the value proposition and attributes?

R: I hadn't realized there were already so many FFVs in the U.S. - sounds like that can't be a constraint now. Do you have any idea how much ethanol E85-equipped stations sell? That might shed some light on whether the issue is midstream infrastructure vs. poor value proposition.

Update 2: ... in which my poor reading skills and attention to detail are exposed:

Geoff: R,
The figure is cited and linked in the posting.

R: So it is :) Good stuff.

Intellectual honesty is important

George Monbiot is right on with his concerned appraisal of ClimateGate.

I have seldom felt so alone. Confronted with crisis, most of the environmentalists I know have gone into denial. The emails hacked from the Climatic Research Unit (CRU) at the University of East Anglia, they say, are a storm in a tea cup, no big deal, exaggerated out of all recognition. It is true that climate change deniers have made wild claims which the material can't possibly support (the end of global warming, the death of climate science). But it is also true that the emails are very damaging.

The response of the greens and most of the scientists I know is profoundly ironic, as we spend so much of our time confronting other people's denial. Pretending that this isn't a real crisis isn't going to make it go away. Nor is an attempt to justify the emails with technicalities. We'll be able to get past this only by grasping reality, apologising where appropriate and demonstrating that it cannot happen again.

I am a stickler for intellectual honesty, so I agree wholeheartedly here:

Some people say that I am romanticising science, that it is never as open and honest as the Popperian ideal. Perhaps. But I know that opaqueness and secrecy are the enemies of science. There is a word for the apparent repeated attempts to prevent disclosure revealed in these emails: unscientific.

As one commenter says, “Science is about intellectual honesty or it's nothing at all.”

P.S. Tyler Cowen offers substantive rationalist consolation.

350 ppm

I was aware of 350.org. I was not aware until today that we passed 350 ppm in 1988.

Thanks to Geoff Styles, who makes a good “the great is the enemy of the good” point:

As it is, President Obama is taking a considerable risk in offering emission cuts that have not been approved by Congress, which might not be inclined to stick out its neck quite so far going into a tough mid-term election that will hinge on the economy and employment. While China's offer represents a serious first step, a similar focus on "carbon intensity" by the previous US administration was met with derision by environmentalists. The problem is that the level of emissions this would yield if China's economy continues to grow at 8% per year or more is incompatible with scenarios for limiting peak CO2 concentrations in the atmosphere to 450 parts per million and eventually restoring them to pre-industrial levels. If we can't avoid blowing past the 450 ppm limit that was the basis of the Bali framework, then growing efforts to shift the official goalpost back to 350 ppm--a level we passed in 1988--look like King Canute ordering the tide not to rise. Expect a great deal of attention to be focused on these numbers in the next couple of weeks.