Wow! Some of the comments get very long. I will keep mine short.
.
I know how to reverses Global Warming: Move the Water!
.
Well I guess that is a rather brash statement, but what I know it will have a significant effect on Global Warming if implemented in all 11 places around this earth.
You are ignoring the innovation driven by the market and the policies that created a market. The costs were driven down so fast they were difficult to forecast accurately. Your system isn't letting me paste in the graphics. See NREL https://www.nrel.gov/docs/fy13osti/56776.pdf for solar panels. Likewise the cost of batteries has been driven down by innovation 89% in the last 10 years.
Thanks for this series. I’d love to go deeper on the technical realities of sequestration, but I imagine we’re due to revisit GluLam to really set the board for what we can expect from Volts going forward.
This nber working paper from July 2019 (Heal, Schlenker: https://www.nber.org/system/files/working_papers/w26086/w26086.pdf) suggests that carbon taxes may just be shifting the consumption date rather than closing the market for consumption (burn later vs. leave it in the ground). Do we better understand this offset vs. replacement argument today? For our purposes, burning carbon today or burning carbon 10 years from now due to a modest carbon tax, or other intervention, is really beside the point. If the close-out tax level where the action is occurring is around $600, as per the suggestion in the paper, nothing on the table anywhere is really doing the proper heavy lifting that we should roll out everywhere. We’re all dancing at the margins and leaving the work un-done, an insidious false dawn.
Next, a few years ago the EU classified biofuels as renewable energy enabling Drax to pivot from Coal to Wood Pellets and increase annual emissions. There was an early report from Sandbag heralding the UK being ahead of target for their emissions goals – either because the biofuels were outright excluded or the over-seas origin of the wood pellets allowed for some boundary drawing to play the refs. It looks like last year Sandbag got more careful about how they are capturing these shenanigans, but the decision to go down this swap out road was made by the power companies in CapEx many years ago a decision that will burn on for decades – we need our regulators and policy makers to be ahead of the game here. Similar things happen in logistics, where factory to factory transportation can involve round-the-world flights to get from nearby cities because the local trade incentives and labor costs on refueling and servicing the plane make up for the ridiculously larger transit path and travel time. When we talk about radically more capable governance these are the sorts of schemes we are up against. How can we recruit and retain the kind of talent required? It should be an easy mission pitch with a leading competitor for that talent being online-engagement factories like Facebook, but the folks we need can still do math; civil service isn’t on the same playing field from a total comp perspective.
I’d love to read a deep dive into Lifecycle Analysis. We all need to get a lot more practiced at understanding which assumptions lead to unrealistic outcomes.
Great trio of blog posts! They prompted three questions:
1. What do you think of Biden's likely appointment of Californian Mary Nichols to a Presidential Cabinet Energy position?
2. What do you think of Oregon Governor Kate Brown's Executive Order 20-04 (March, 2020) as a way of circumventing walkouts by Republican Oregon State legislators who want to torpedo progressive energy legislation in the state of Oregon?
3. What kind of infrastructure would the Biden administration need to bring into being to create the level of state intervention you are proposing preside over the U.S. energy industry?
Thanks right off the top for your recognition that cap and trade and carbon tax aren't the same. The conflation of the two is a useful device for those who wish to dismiss the carbon tax policy by projecting the cap & trade inherent flaws and shortcomings onto the carbon tax approach. (Notwithstanding David's eye rolling on this point, this conflation remains an obstacle to serious policy debate, e.g., https://www.vox.com/energy-and-environment/2018/11/16/18096352/climate-change-clean-energy-policies-guide)
Not to belabor the point, but cap and trade has debilitating characteristics beyond the political economy issues you cite. And these characteristics are not found in a carbon tax: (i) cap and trade can't cope with economic swings e.g., financial crisis and pandemic (Borenstein et al); (ii) overlapping "complementary" regulatory programs actually counteract cap and trade (IEMAC and others); (iii) Cap setting will likely be inaccurate (Wara); (iv) offsets are prone to abuse and ineffectiveness (EU); (v) unpredictable technological change undermines cap and trade; (vi) this supposedly "market-based" policy evolves into substantially a government administered program. The cap has not provided environmental certainty as theory maintains.
I look forward to reading your book. Based on your discussions here, I note, there seems to be excessive dependence upon the California experience for your conclusions. With regard to the Potemkin Village, it was clear in the planning process for the climate program that cap and trade would account for 23% of emissions reductions and the remaining 78% by the 10+ or so regulatory programs. You are right to call out the misleading narrative on the California approach which Jerry Brown, Arnold Schwarzenegger, Mary Nichols, EDF and many others have disseminated. For too long we have heard "Emissions have fallen, the economy has grown and cap and trade (or AB32) works."
Causality Isn't Established: However, your conclusion that regulations/standards/subsidies did all the work is questionable. I have yet to see a credible establishment of significant causality between either the cap and trade or the 10+ regulatory programs in California on emissions. You may recall the common complaint about the California Air Resources Board (CARB) resistance to independent evaluation of the programs which had to be mandated by law. Serious independent evaluation is needed.
Your conclusion that the regs have been doing all the work seems unsubstantiated. The most significant impact on California emissions has been the economy--the 2009 financial crash where you see the shift in the emissions curve. In addition, California exported its pollution as industry moved to neighboring states, Mexico, China etc. Finally, the on-going shift in economic structure from energy intensive industries (gypsum, etc.) to tech, media and services has reduced energy intensity.
With regard to the Regional Greenhouse Gas Initiative (RGGI), causality for emissions reductions can't be found in RGGI due to large surplus of allowances, low prices and a "cap gap" between the cap and actual emissions that has no impact. ("The bad news is that RGGI isn’t succeeding in the one way that counts most: reducing carbon." David Roberts, VOX, 2-28-17). The recognized cause of emissions reductions was primarily falling natural gas prices (Stavins) and not regulations.
I recall CARB indicating about a year ago that cap and trade would have to do more from the mid 2020s to 2030 because the regulatory/standards/subsidy programs would have less and less impact. Why then are your recommending this approach for the country (and beyond) if California thinks the regulatory approach is running out of room?
I appreciate your discussion of the significant administrative capacity that is needed. That strikes me as the Achilles heel for your recommended policy approach of large government expansion. In addition, the high cost of the California regulatory programs themselves ($50-$200/ton/CO2) and the $478/ton/CO2 cost for the projects funded with the cap and trade revenues argue against your policy recommendation.
What has been absent from the three discussions has been whether or not your recommendations are appropriate for developing countries (where I worked a good bit of my life). That's where the major emissions are. Many countries will draw from the U.S. approach. So, what the U.S. does matters beyond its borders.
Putting aside questions about the effectiveness of a regulatory/industrial policy approach, your policy approach seems as inappropriate as cap and trade for developing countries where two major factors prevail: weak institutions and serious corruption (see World Bank and Transparency International indices). This is where the simplicity, transparency and equity of the revenue neutral carbon fee and dividend has its strongest advantage (as the IMF recommends). Other primary approaches are much more vulnerable to corruption, elite capture and inequitable outcomes.
I note that there are (at least) four characteristics not found widely that make California and Germany inappropriate examples for developing countries: (1) wealth; (2) low corruption; (3) strong administrative capacity; and (4) public acceptance for high cost environmental programs.
So, what is the path forward? First, the central policy should be the revenue neutral carbon fee and dividend which provides a workable, equitable, effective and efficient policy that can address this global problem by establishing a Border Carbon Adjustment with the EU, UK, Canada and a few others to start a Carbon Club. Others are incentivized to join the Club.
Second, a set of truly complementary policies are justified and needed where:
(i) the fee doesn't impact emissions e.g., forest and agriculture sequestration;
(ii) where the fee doesn't have adequate impact e.g., rental housing where landlord-tenant incentives aren't aligned and building codes and energy efficiency programs are justified; possibly additional auto incentives; and government R&D to accompany the anticipated incentivization of private RD&D.
To consider a carbon fee as a secondary patchwork policy filling regulatory gaps is likely to lead to another lost decade.
Final note: pursuing an all-in policy of trying to make all clean energy options cheaper than fossil fuels seems like betting against the house. This approach leaves the biggest market failure in history in place--the subsidizing of fossil fuels as they continue to avoid paying for the cost of their CO2 emissions.
I would like to know David and Danny’s opinion of RGGI, the Regional Greenhouse Gas Initiative. Maryland, where I live, has been getting RGGI proceeds, and I’ve read that it’s successfully reducing emissions, though I haven’t been able to follow it as closely as I would like.
“One is that to do better does require a lot of government. “
True, but that’s not as bad as it sounds. This is more an issue of framing. We need to stop thinking of “the government” as the Other, something imposed from above as the GOP does, and instead start thinking of it as the Referee, setting and enforcing the rules on our behalf, but not directly playing in the game.
“So, let’s say we abandon the dream of a single comprehensive carbon pricing system and instead turn to sector-by-sector industrial policy. What’s the right way to do that to produce followership? “
One principle that needs to be baked in from the beginning is to appeal directly to those who will experience change. For example, we need to understand that it’s probably going to be necessary, and indeed vital, to hire armies of oil-field workers to cap frack wells and eliminate fugitive emissions, also to build offshore wind. It’s also going to be necessary to train “non-deal” middle-age workers nationwide to be solar designers and installers. Solar works just fine in Erie PA, for example, especially when you compare solar resource maps of the US and Germany. The Germans installed solar in areas with the resource of Maine.
I was getting kind of depressed with parts one and two of this series, but part three seems to be more hopeful. I kept thinking, “If not this, then what?”. Does your book have a happy ending?
RGGI is great at what it does, which is put a modest ($2-8/tCO2) price on electricity sector emissions, raise some modest funds for state clean energy programs (and a few rebate programs), and provide a transparent, turnkey operation that high-ambition states and low-ambition states alike can join. But it's not having a big impact on emissions. That's fine! It's very helpful, and also not the star of the show. Arguably RGGI has the most politically sophisticated and realistic policy design, which in part reflects its modest aims — a single sector, with massive technological change, aggressive state policies driving emissions down, and a modest carbon price goal that's explicitly set. Big thumbs up on clear goals and politically sustainable policy design.
To be clear, we don't think government is bad — quite the opposite, we think effective government is the key to climate progress and effective markets (for carbon and everything else). Public service isn't just critical, but often way more fun than anything else in my experience!
The happy ending we offer is that getting serious about politics creates realistic paths forward. I'm genuinely optimistic about our potential to move faster when we treat politics like we do engineering and physical constraints. Writing a book like this is also an act of optimism, the hope that we've learned something useful and can pass it along to save others the time and stress of spending years in the trenches. (And for those in the same trenches, some potentially useful strategic reflections along with a high-five.)
Wow! Some of the comments get very long. I will keep mine short.
.
I know how to reverses Global Warming: Move the Water!
.
Well I guess that is a rather brash statement, but what I know it will have a significant effect on Global Warming if implemented in all 11 places around this earth.
.
YouTube Videos:
https://youtu.be/vRJyCVXApAk
https://youtu.be/bjHxkxRWAs0
You are ignoring the innovation driven by the market and the policies that created a market. The costs were driven down so fast they were difficult to forecast accurately. Your system isn't letting me paste in the graphics. See NREL https://www.nrel.gov/docs/fy13osti/56776.pdf for solar panels. Likewise the cost of batteries has been driven down by innovation 89% in the last 10 years.
Thanks for this series. I’d love to go deeper on the technical realities of sequestration, but I imagine we’re due to revisit GluLam to really set the board for what we can expect from Volts going forward.
This nber working paper from July 2019 (Heal, Schlenker: https://www.nber.org/system/files/working_papers/w26086/w26086.pdf) suggests that carbon taxes may just be shifting the consumption date rather than closing the market for consumption (burn later vs. leave it in the ground). Do we better understand this offset vs. replacement argument today? For our purposes, burning carbon today or burning carbon 10 years from now due to a modest carbon tax, or other intervention, is really beside the point. If the close-out tax level where the action is occurring is around $600, as per the suggestion in the paper, nothing on the table anywhere is really doing the proper heavy lifting that we should roll out everywhere. We’re all dancing at the margins and leaving the work un-done, an insidious false dawn.
Next, a few years ago the EU classified biofuels as renewable energy enabling Drax to pivot from Coal to Wood Pellets and increase annual emissions. There was an early report from Sandbag heralding the UK being ahead of target for their emissions goals – either because the biofuels were outright excluded or the over-seas origin of the wood pellets allowed for some boundary drawing to play the refs. It looks like last year Sandbag got more careful about how they are capturing these shenanigans, but the decision to go down this swap out road was made by the power companies in CapEx many years ago a decision that will burn on for decades – we need our regulators and policy makers to be ahead of the game here. Similar things happen in logistics, where factory to factory transportation can involve round-the-world flights to get from nearby cities because the local trade incentives and labor costs on refueling and servicing the plane make up for the ridiculously larger transit path and travel time. When we talk about radically more capable governance these are the sorts of schemes we are up against. How can we recruit and retain the kind of talent required? It should be an easy mission pitch with a leading competitor for that talent being online-engagement factories like Facebook, but the folks we need can still do math; civil service isn’t on the same playing field from a total comp perspective.
I’d love to read a deep dive into Lifecycle Analysis. We all need to get a lot more practiced at understanding which assumptions lead to unrealistic outcomes.
Great trio of blog posts! They prompted three questions:
1. What do you think of Biden's likely appointment of Californian Mary Nichols to a Presidential Cabinet Energy position?
2. What do you think of Oregon Governor Kate Brown's Executive Order 20-04 (March, 2020) as a way of circumventing walkouts by Republican Oregon State legislators who want to torpedo progressive energy legislation in the state of Oregon?
3. What kind of infrastructure would the Biden administration need to bring into being to create the level of state intervention you are proposing preside over the U.S. energy industry?
I made the argument last year that a carbon tax and a Green New Deal could be complementrary strategies:
https://www.carbontax.org/blog/2019/03/14/carbon-tax-advocates-should-embrace-a-green-new-deal/
https://www.carbontax.org/blog/2019/04/10/green-new-dealers-should-embrace-a-carbon-tax/
Thanks right off the top for your recognition that cap and trade and carbon tax aren't the same. The conflation of the two is a useful device for those who wish to dismiss the carbon tax policy by projecting the cap & trade inherent flaws and shortcomings onto the carbon tax approach. (Notwithstanding David's eye rolling on this point, this conflation remains an obstacle to serious policy debate, e.g., https://www.vox.com/energy-and-environment/2018/11/16/18096352/climate-change-clean-energy-policies-guide)
Not to belabor the point, but cap and trade has debilitating characteristics beyond the political economy issues you cite. And these characteristics are not found in a carbon tax: (i) cap and trade can't cope with economic swings e.g., financial crisis and pandemic (Borenstein et al); (ii) overlapping "complementary" regulatory programs actually counteract cap and trade (IEMAC and others); (iii) Cap setting will likely be inaccurate (Wara); (iv) offsets are prone to abuse and ineffectiveness (EU); (v) unpredictable technological change undermines cap and trade; (vi) this supposedly "market-based" policy evolves into substantially a government administered program. The cap has not provided environmental certainty as theory maintains.
I look forward to reading your book. Based on your discussions here, I note, there seems to be excessive dependence upon the California experience for your conclusions. With regard to the Potemkin Village, it was clear in the planning process for the climate program that cap and trade would account for 23% of emissions reductions and the remaining 78% by the 10+ or so regulatory programs. You are right to call out the misleading narrative on the California approach which Jerry Brown, Arnold Schwarzenegger, Mary Nichols, EDF and many others have disseminated. For too long we have heard "Emissions have fallen, the economy has grown and cap and trade (or AB32) works."
Causality Isn't Established: However, your conclusion that regulations/standards/subsidies did all the work is questionable. I have yet to see a credible establishment of significant causality between either the cap and trade or the 10+ regulatory programs in California on emissions. You may recall the common complaint about the California Air Resources Board (CARB) resistance to independent evaluation of the programs which had to be mandated by law. Serious independent evaluation is needed.
Your conclusion that the regs have been doing all the work seems unsubstantiated. The most significant impact on California emissions has been the economy--the 2009 financial crash where you see the shift in the emissions curve. In addition, California exported its pollution as industry moved to neighboring states, Mexico, China etc. Finally, the on-going shift in economic structure from energy intensive industries (gypsum, etc.) to tech, media and services has reduced energy intensity.
With regard to the Regional Greenhouse Gas Initiative (RGGI), causality for emissions reductions can't be found in RGGI due to large surplus of allowances, low prices and a "cap gap" between the cap and actual emissions that has no impact. ("The bad news is that RGGI isn’t succeeding in the one way that counts most: reducing carbon." David Roberts, VOX, 2-28-17). The recognized cause of emissions reductions was primarily falling natural gas prices (Stavins) and not regulations.
I recall CARB indicating about a year ago that cap and trade would have to do more from the mid 2020s to 2030 because the regulatory/standards/subsidy programs would have less and less impact. Why then are your recommending this approach for the country (and beyond) if California thinks the regulatory approach is running out of room?
I appreciate your discussion of the significant administrative capacity that is needed. That strikes me as the Achilles heel for your recommended policy approach of large government expansion. In addition, the high cost of the California regulatory programs themselves ($50-$200/ton/CO2) and the $478/ton/CO2 cost for the projects funded with the cap and trade revenues argue against your policy recommendation.
What has been absent from the three discussions has been whether or not your recommendations are appropriate for developing countries (where I worked a good bit of my life). That's where the major emissions are. Many countries will draw from the U.S. approach. So, what the U.S. does matters beyond its borders.
Putting aside questions about the effectiveness of a regulatory/industrial policy approach, your policy approach seems as inappropriate as cap and trade for developing countries where two major factors prevail: weak institutions and serious corruption (see World Bank and Transparency International indices). This is where the simplicity, transparency and equity of the revenue neutral carbon fee and dividend has its strongest advantage (as the IMF recommends). Other primary approaches are much more vulnerable to corruption, elite capture and inequitable outcomes.
I note that there are (at least) four characteristics not found widely that make California and Germany inappropriate examples for developing countries: (1) wealth; (2) low corruption; (3) strong administrative capacity; and (4) public acceptance for high cost environmental programs.
So, what is the path forward? First, the central policy should be the revenue neutral carbon fee and dividend which provides a workable, equitable, effective and efficient policy that can address this global problem by establishing a Border Carbon Adjustment with the EU, UK, Canada and a few others to start a Carbon Club. Others are incentivized to join the Club.
Second, a set of truly complementary policies are justified and needed where:
(i) the fee doesn't impact emissions e.g., forest and agriculture sequestration;
(ii) where the fee doesn't have adequate impact e.g., rental housing where landlord-tenant incentives aren't aligned and building codes and energy efficiency programs are justified; possibly additional auto incentives; and government R&D to accompany the anticipated incentivization of private RD&D.
To consider a carbon fee as a secondary patchwork policy filling regulatory gaps is likely to lead to another lost decade.
Final note: pursuing an all-in policy of trying to make all clean energy options cheaper than fossil fuels seems like betting against the house. This approach leaves the biggest market failure in history in place--the subsidizing of fossil fuels as they continue to avoid paying for the cost of their CO2 emissions.
I would like to know David and Danny’s opinion of RGGI, the Regional Greenhouse Gas Initiative. Maryland, where I live, has been getting RGGI proceeds, and I’ve read that it’s successfully reducing emissions, though I haven’t been able to follow it as closely as I would like.
“One is that to do better does require a lot of government. “
True, but that’s not as bad as it sounds. This is more an issue of framing. We need to stop thinking of “the government” as the Other, something imposed from above as the GOP does, and instead start thinking of it as the Referee, setting and enforcing the rules on our behalf, but not directly playing in the game.
“So, let’s say we abandon the dream of a single comprehensive carbon pricing system and instead turn to sector-by-sector industrial policy. What’s the right way to do that to produce followership? “
One principle that needs to be baked in from the beginning is to appeal directly to those who will experience change. For example, we need to understand that it’s probably going to be necessary, and indeed vital, to hire armies of oil-field workers to cap frack wells and eliminate fugitive emissions, also to build offshore wind. It’s also going to be necessary to train “non-deal” middle-age workers nationwide to be solar designers and installers. Solar works just fine in Erie PA, for example, especially when you compare solar resource maps of the US and Germany. The Germans installed solar in areas with the resource of Maine.
I was getting kind of depressed with parts one and two of this series, but part three seems to be more hopeful. I kept thinking, “If not this, then what?”. Does your book have a happy ending?
RGGI is great at what it does, which is put a modest ($2-8/tCO2) price on electricity sector emissions, raise some modest funds for state clean energy programs (and a few rebate programs), and provide a transparent, turnkey operation that high-ambition states and low-ambition states alike can join. But it's not having a big impact on emissions. That's fine! It's very helpful, and also not the star of the show. Arguably RGGI has the most politically sophisticated and realistic policy design, which in part reflects its modest aims — a single sector, with massive technological change, aggressive state policies driving emissions down, and a modest carbon price goal that's explicitly set. Big thumbs up on clear goals and politically sustainable policy design.
To be clear, we don't think government is bad — quite the opposite, we think effective government is the key to climate progress and effective markets (for carbon and everything else). Public service isn't just critical, but often way more fun than anything else in my experience!
The happy ending we offer is that getting serious about politics creates realistic paths forward. I'm genuinely optimistic about our potential to move faster when we treat politics like we do engineering and physical constraints. Writing a book like this is also an act of optimism, the hope that we've learned something useful and can pass it along to save others the time and stress of spending years in the trenches. (And for those in the same trenches, some potentially useful strategic reflections along with a high-five.)