The sheer abundance of recently discovered natural gas resources in the U.S. could drive down gas and electricity prices in the next few decades, yield an overall increase in energy use, and stunt the nation’s still-emerging renewable energy sector, a new report says.

Using economic modeling, researchers at the Massachusetts Institute of Technology (MIT) found that relatively cheap natural gas — much of it to be extracted from underground shale formations — could represent an increasingly large share of U.S. electricity use, particularly in the face of a weak national climate policy.

By 2050, the report says, this growth could cause national energy use to increase, possibly leading to a jump in greenhouse gas emissions of 13 percent above 2005 levels. Absent this supply of natural gas — which has become increasingly available as a result of improved drilling methods, including the emergence of hydraulic fracturing, or “fracking” — the U.S. could have expected emissions to decline 2 percent, the report says.

The natural gas boom could also retard development of carbon capture technology, the report says.

Article appearing courtesy Yale Environment 360.

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At a time when many are adopting the narrative that carbon markets are faltering, the European Union (EU) is aggressively pursuing the expansion of theirs to include aviation. One of only two mandatory greenhouse gas (GHG) cap-and-trade systems in the world, the EU Emissions Trading Scheme (ETS) plans to fold in a new sector beginning in January 2012. Our research shows reducing GHG emissions from aviation is critical if we are to mitigate the impacts of global climate change. Low-carbon fuel technology and other technologies for airplanes are advancing at a rapid clip, but we need a climate policy – either a price on carbon or something else – to get over the hump.

Although there are many opportunities to reduce aviation’s impact on global climate change available now, experts expect GHG emissions from aviation to grow by up to 300 percent by 2050 if left unchecked. Action in the areas of advanced biofuels, airplane navigation and landing systems, and engine and airframe efficiency could help considerably. However, because of market failures, many new technologies may not succeed without public policy.

The point of market-oriented regulations like the EU ETS is to help push that new technology into the market without deciding technological winners. That appears to be exactly what’s happening with aviation in Europe. Low-carbon fuel technology along with more advanced engine and aircraft designs are beginning to enter the market just as new regulations are about to take effect. For example, European airlines including KLM and Lufthansa are beginning to fuel some of their planes with advanced biofuel-petroleum blends.

The EU’s view is that equally pricing the carbon emitted from airplanes flying into and out of European airports is fair and reasonable. And to that end, countries like the United States and China could look at this as one more additional cost to doing business in Europe and support the plan. They don’t. Their concerns include the legality of the program, the fairness of European-specific action, and the economic impact on the aviation industry.

The EU deserves credit for being a first-mover on this issue.

Both countries claim the move is illegal and an act of “extraterritorial jurisdiction” or ETJ. ETJ is an arcane legal term that essentially means a country is trying to exercise authority beyond its borders. U.S. airlines filed a lawsuit in 2009 with the European Court of Justice challenging the legality of the EU plan. The airlines are also concerned that their tight profit margins will be squeezed further, which could lead to even more fees. The International Air Transport Association estimated the program would increase the annual cost to Europe’s airline industry by 1 billion Euros while their profit for 2011 is expected to be less than half that. It’s unclear how much of the additional cost could be passed on to consumers.

Though the U.S. government is not a party in the case, it also believes the program violates international treaties. The U.S. government has officially come out against including U.S. airlines in the EU plan saying the intentions are good, but the method is wrong. Since aviation is a global industry and climate change is a worldwide problem, the US argued it’s sensible to want an international agreement instead of a patchwork solution that may be unfair. The International Civil Aviation Organization (ICAO) has been working on such an agreement for many years.

Meanwhile, China is taking a retaliatory approach by putting the brakes on a major deal with Airbus, blaming the current “political environment.” Using a $4 billion deal as a bargaining chip is certainly an aggressive move by the Chinese. China also makes the claim that the EU program is illegal.

If the EU plan is legally upheld, the U.S. and China could meet its requirements if domestic measures are taken that result in equivalent GHG emission reductions. The purchase of fuel-efficient planes like Boeing’s 787 Dreamliner could reduce emissions and save airlines money in the long run. In addition, biofuels and other alternative fuels can act as a hedge against unstable oil prices, which have seen significant volatility in the last decade. In fact, seven U.S. airlines intend to start fueling some U.S.-based flights with biofuels. Finally, the U.S. military is leading the way in establishing a market for biofuels in aviation.

There are lots of reasons to want more low-carbon fuels and fuel-efficient technologies in the aviation marketplace. Along with hedging against oil price volatility and improving national security, mitigating global climate change is an important co-benefit of efforts to move off oil. Climate policy is a necessary step to help drive technological innovation and address these problems head on. The EU deserves credit for being a first-mover on this issue.

Article by Nick Nigro, a Solutions Fellow at the Pew Center on Global Climate Change. He is responsible for research, analysis, and communication of transportation technology and policy solutions for reducing greenhouse gases.

Article appearing courtesy Txchnologist.

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Who says climate policy is dead in the U.S.? By a vote of four to one, the New Mexico Environmental Improvement Board (EIB) voted Monday to adopt a new state pollution limit requiring the state’s largest emitters to reduce their carbon dioxide emissions by 3 percent per year from 2010 levels starting in 2013.

Monday’s ruling is the culmination of a two-year petition process that took a backseat when the EIB approved participation in a regional cap-and-trade program on election night, the same night Republican Susana Martinez was elected as New Mexico’s next governor. Martinez campaigned against the proposed carbon pollution rules and even told Politico in August that she had her doubts about the human causes of global warming.

The new rule will apply to stationary sources that emit more than 25,000 metric tons of carbon dioxide—mostly electrical generating power plants, refineries, and natural gas processing and compression facilities—to reduce carbon emissions by 3 percent annually from 2010 levels.

The petition was first started and then championed through the process by New Energy Economy (NEE), a New Mexico-based nonprofit organization. NEE Senior Policy Advisor Mariel Nanasi said the rule is designed to make it as easy and inexpensive as possible to meet the carbon reduction goals, but she said what’s more important is what the rule means for New Mexico’s economy.

“This new policy makes New Mexico the nation’s leader in carbon pollution reduction while at the same time stimulating our economy and creating jobs for New Mexico families and communities,” Nanasi said. “The board understands that the same technologies that can reduce carbon pollution can also make New Mexico more competitive in the clean energy economy, which means more long-term, well-paying jobs for New Mexicans.”

New Mexico’s largest utility, PNM Resources, and the oil and gas industries sued to prevent the petition from being heard by the EIB, but the New Mexico Supreme Court in a unanimous decision overruled a lower court injunction, allowing the process to go forward.

Special provisions included to keep costs down

Recognizing opposition from PNM and other fossil fuel industry stakeholders, the EIB pushed the start date back one year to 2013 and made other concessions for the state’s largest emitters.

The rule includes provisions to keep emitters’ costs down including an annual limit on how much emitters will have to spend to comply; banking provisions which allow emitters to hold onto credits for future use; an “off ramp” if businesses can show that the rules will prove detrimental to their economic viability, and; a provision that will allow for reevaluation of the rule in 2014.

Despite posturing from electricity generators and the oil and gas industry, the architects of the rule say it will increase electricity prices by less than one percent and have an impact of a fraction of a percent for the oil and gas industry.

“[A]s a practical matter, the economic impacts are going to be trivial and pretty much unnoticeable,” said Steve Michel of Western Resource Advocates, principal architect of the rule.

The program is set to sunset in 2020, or sooner if a national or regional carbon pollution reduction program is implemented.

“Ours would not go into effect unless the regional program is not implemented,” said NEE executive director John Fogarty. “It’s really just a backup plan to keep New Mexico moving ahead.”

Article by Timothy B. Hurst, appearing courtesy ecopolitology.

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Experts from both sides of the U.S. climate debate are urging more federal investment in clean energy innovation — and the scrapping of cap-and-trade proposals — in the aftermath of the U.S. Senate’s failure to pass a climate bill. In a joint report, the American Enterprise Institute, a conservative think tank; the more left-leaning Brookings Institution; and the Breakthrough Institute call for a “post-partisan” climate policy that reduces the nation’s reliance on fossil fuels, invests as much as $25 billion annually in clean energy research and development, and overhauls the federal incentives system to reward innovation that reduces the costs of clean energy.

The groups suggest that lawmakers drop the controversial cap-and-trade option, which would place a steadily-rising cap and price on CO2 emissions. “The entire climate and energy agenda that we’ve been talking about for several years now has hit a dead end, so it’s time to hit the reset button,” said Steven Hayward of the American Enterprise Institute and a co-author of the report.

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(Reuters) – The U.N. climate change chief urged governments on Monday to make real steps toward a new treaty to fight global warming or risk throwing negotiations into doubt.

Negotiators are meeting in the northern Chinese port city of Tianjin to try reach agreement on what should follow the current phase of the Kyoto Protocol, the key treaty on climate change, which expires in 2012.

The fraught U.N. talks have been hobbled by lack of trust between rich and poor nations over climate funds, demand for more transparency over emissions cut pledges and anger over the size of cuts offered by rich nations.

Delaying agreement would leave less time for the world to figure out how to rein in greenhouse gas emissions and would add to uncertainties weighing on companies unsure where climate policy and carbon markets are headed after 2012.

“Now is the time to accelerate the search for common ground,” Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change, told hundreds of delegates from some 177 countries at the opening session of the Tianjin talks, which last until Saturday.

“A concrete outcome in Cancun is crucially needed to restore the faith and ability of parties to take the process forward, to prevent multilateralism from being perceived as a never-ending road,” she said in an opening speech at the meeting.

The talks are the last major round before the year’s main climate meeting in the Mexican resort of Cancun from November 29.

Negotiators from nearly 200 governments failed to agree last year on a new legally binding climate pact. A meeting in Copenhagen in late 2009 ended in bitter sniping between rich and developing countries, and produced a non-binding accord that left many key issues unsettled.

Governments are struggling to overcome lingering distrust and turn sprawling draft treaties dotted with caveats into a binding agreement, possibly by late 2011.

“This week is to some extent going to be an indicator of how far forward we can go,” the U.S. negotiator at the Tianjin talks, Jonathan Pershing, told Reuters.

“It now looks like the differences are quite large, but there’s some hope of achieving consensus on some issues,” the chief Chinese climate negotiator, Xie Zhenhua, told reporters.

DROUGHTS AND FLOODS

Recent devastating floods in Pakistan and severe drought in Russia are the kind of severe weather that rising temperatures are likely to magnify if countries fail to make dramatic cuts to greenhouse gas emissions, said Wendel Trio, the climate policy coordinator for Greenpeace.

Figueres told Reuters in a separate interview that she hoped the Tianjin talks could agree on important specifics of a future pact, including how to manage adaptation funds and green technology to help poorer countries, and a program to support carbon-absorbing forests in Brazil, Indonesia and elsewhere.

“I think there’s a pretty good chance that the governments will agree on the creation of the (climate) fund,” she said.

Governments have said the fund could disperse up to $100 billion a year by 2020 to help poor countries cope with global warming. But negotiators have been wrestling over how to manage the money and the fund’s design.

Developing countries want a more direct say, while the United States and other countries that would provide the funding want more vetting.

“When you’re thinking about that scale of finance…we want to think about people who have expertise,” said Pershing, the U.S. negotiator. “There’s clearly a need to bring in guidance.”

He said that could come from ensuring countries’ finance ministries and other economic agencies help oversee spending.

Even if the negotiations make progress, the current pledges of governments to curb greenhouse gas emissions will not be enough to avoid pushing the world into dangerous global warming, roughly defined as a rise of 2 degrees Celsius (3.6 F) above average pre-industrial temperatures, said Figueres.

Governments should nonetheless focus on securing formal pledges of the emissions cuts already made, “fully realizing it is a first, necessary but insufficient step,” she said.

Article by Chris Buckley, edited by David Fogarty, appearing courtesy Reuters.

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Amid a growing call for reducing atmospheric concentrations of CO2 to 350 parts per million, a group of economists maintains that striving to meet that target is a smart investment — and the best insurance policy humanity could buy.

The climate change news from Washington is cautiously encouraging. No one in power is listening to the climate skeptics any more; the economic stimulus package included real money for clean energy; a bill capping U.S. carbon emissions emerged, battered but still standing, from the House of Representatives, and might even survive the Senate. This, along with stricter emission standards in Europe and a big push for clean energy and efficiency standards in China, provides grounds for hope for genuine progress on emissions reduction.

But while climate policy is finally moving forward, climate science is moving faster. One discovery after another suggests the world is warming faster, and climate damages are appearing sooner, than anyone had expected. Much of the policy discussion so far has been aimed at keeping the atmospheric concentration of CO2 below 450 parts per million (ppm) — which was until recently thought to be low enough to prevent dangerous levels of warming. But last year, James Hansen, NASA’s top climate scientist, argued that paleoclimatic evidence shows 450 ppm is the threshold for transition to an ice-free earth. This would imply a catastrophic rise in sea levels, eventually flooding all coastal cities and regions.

To avoid reaching such a crisis stage, Hansen and a growing number of others now call for stabilizing CO2 concentrations at 350 ppm. The world is now around 390 ppm and rising; since CO2 persists in the atmosphere for a long time, it is difficult to reduce concentrations quickly. In Hansen’s scenario, a phaseout of coal use, massive reforestation, and widespread use of carbon capture and storage could allow the world to achieve negative net carbon emissions by mid-century and reach 350 ppm by 2100.

Can we afford to reduce atmospheric concentrations of CO2 to 350 ppm by the end of this century? To address this question, Economists for Equity and Environment (www.E3Network.org) — a group dedicated to applying and developing economic principles to protect human health and the environment — conducted a study of “The Economics of 350.”

Why the wide range of cost estimates?

At first glance, there is a bewildering range of estimates of the costs of climate protection. Look more closely, however, and there are just a few projections of economic disaster, out in right field by themselves. Other estimates range from modest costs to small net economic gains.

The outliers are the handful of private consultant studies funded by partisan lobbying groups such as the U.S. Chamber of Commerce and the National Association of Manufacturers. Using proprietary models (or their own adaptations of standard models), and pessimistic economic assumptions, these studies forecast that even mild U.S. proposals, such as last year’s Lieberman-Warner bill, would cost many thousands of dollars per household and would cause widespread unemployment and economic dislocation. An analysis by journalist Eric Pooley documents the excessive, often uncritical attention given to these studies by the media.

These projections of economic ruin have not been reproduced by any major academic or non-profit research group. Many economic models find that the modest steps called for in recent U.S. proposals would have very small costs and virtually undetectable effects on total employment — as documented in a report by Nathaniel Keohane and Peter Goldmark for the Environmental Defense Fund.

But to reach 350 ppm, we will have to go far beyond the emission reductions considered in recent U.S. proposals. How much will it cost to reach this more ambitious target? Until recently, most economic research focused on higher targets such as 450 ppm or more. There are, however, four major climate economics modeling groups — all at European universities — that have analyzed the costs of reaching 350 ppm.

One group starts from the (realistic) assumption of high unemployment, and finds that long-run employment and economic growth would be

Needed emissions reductions will cost 1 to 3 percent of world economic output, some studies find.

increased by a program of public investment in green technology and emissions reduction that leads to 350 ppm. The other three groups adopt the common assumption that short-run unemployment can be ignored in long-run models. They generally find that the needed emissions reductions will cost an average of 1 to 3 percent of world economic output, for some years to come.

Other studies have reached more optimistic conclusions about costs. McKinsey & Company, an international consulting firm, has carried out detailed studies of the costs of hundreds of emission-reducing technologies. They find that some emissions can be eliminated for no cost or even an economic savings; more than half of worldwide business-as-usual emissions in 2030 could be eliminated at very small total cost. The net costs of reducing carbon emissions (i.e. investment costs, minus the value of energy saved) go down when the price of oil goes up, and vice versa. McKinsey’s entire package of reductions, eliminating more than half of world emissions, would have zero total cost if the price of oil were $90 per barrel.

Studies from major environmental groups, including Greenpeace and the Union of Concerned Scientists (UCS), have reached even more optimistic conclusions than McKinsey. Both Greenpeace and UCS project substantial economic savings from emission reduction, with fuel savings much larger than the costs of investment. Both assume high oil prices — up to $140 per barrel for Greenpeace — along with rapid change in emissions-reduction technologies.

Deciding whether it’s worth the price

The range of cost estimates for reaching 350 ppm, combined with uncertainties about oil prices and future technologies, make it difficult to choose a single estimate of the total economic cost. Suppose that, for the sake of argument, 2.5 percent of world output must be spent on climate stabilization for years to come. Is that an unacceptably large number?

Imagine an economy growing at 2.5 percent every year (a little slower than the recent U.S. average). Suppose it skips one year’s growth — all too easy to imagine in 2009 — and then resumes growing. That makes GDP 2.5 percent smaller than it would have been, forever. So the “skip year” has the same effect as spending 2.5 percent of output on climate protection every year. Household incomes would take 29 years to double, instead of 28.

Alternatively, we know we can afford to devote 2.5 percent of income to protection against a remote but disastrous threat — because we already do,

We can afford to protect the climate, and leave a livable world to future generations.

year after year. In 68 countries, military spending exceeds 2.5 percent of GDP. In the United States and China, the top greenhouse gas emitters, military spending absorbs more than 4 percent of GDP. Both countries would be safer, not more vulnerable, if they diverted half of their defense spending to defense against climate crisis.

The most important conclusion of our research involves what we did not find. There are no reasonable studies saying that a 350 ppm stabilization target will destroy the economy. This is not surprising. The ominous recent research on potential climate damages does not examine the cost of doing something; instead, it looks at the cost of doing nothing about emissions.

If the worst happens, our grandchildren will inherit a degraded Earth that does not support anything like the life that we have enjoyed. On the other hand, if we prepare for the worst but it does not quite happen, we will have invested more than was absolutely necessary — in perfect hindsight — in clean energy, conservation, and carbon-free technologies. Which extreme presents the greater danger?

Climate risk and insurance

Think about climate risk as an insurance problem. You don’t buy fire insurance because you’re sure your house will burn down; rather, you are not, and cannot be, sure enough that it will not burn down. Likewise, projections by Hansen and others of dangerous climate risk from staying above 350ppm CO2 are not certainties; they are necessarily uncertain (although becoming more likely as temperatures rise).

The analogy to insurance is important but inexact; there is no climate insurance company to which the world can hand 2.5 percent of output, if that is what it costs. There is, however, a need for large-scale investment, both in proven emissions-reducing technologies and in research and development.

The role of government in climate policy is not only to set appropriate price signals through a carbon tax or cap-and-trade system; the public sector must also guide research on clean energy technologies. Despite free-market mythology to the contrary, this has worked well in the past. Wind power is profitable today as a result of decades of government investment in the United States and Europe. In another arena, the U.S. government essentially invented microelectronics in the 1950s and 1960s: At first, almost all transistors, integrated circuits, and the like were bought by agencies such as the Pentagon and NASA, because no one else could afford them. Just a few decades of massive government purchases of these items turned microelectronics into the premier private-sector success story of the late-20th century, transforming everyone’s life in countless unexpected ways.

The climate crisis challenges us to do it again, to invent the new technologies and industries that will transform life in the mid-21st century and beyond. We know it’s possible: We can afford to protect the climate, and leave a livable world to future generations.

Author Frank Ackerman is senior economist with the Stockholm Environment Institute at Tufts University. He is also a co-founder of Economists for Equity and Environment (E3), and the lead author of E3’s “Economics of 350” study.

Article appearing courtesy of Yale Environment 360

[photo credit: pfala]

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