Is stopping climate change a free lunch?

We’re again seeing the return of magical thinking in the economics profession and elsewhere.  Limiting climate change is indeed worth doing, but it is not close to a free lunch.  Eduardo Porter makes the relevant point quite nicely:

“If the Chinese and the Indians found it much more economically efficient to build out solar, nuclear and wind, why are they still building all these coal plants?” asked Ted Nordhaus, chairman of the Breakthrough Institute, a think tank focused on development and the environment.

China’s CO2 emissions increased 4.2 percent last year, according to the Global Carbon Project, helping drive a global increase of 2.3 percent. China now accounts for 28 percent of the world’s total emissions, more than the United States and the European Union combined.

“I don’t think the Chinese and the Indians are stupid,” Mr. Nordhaus told me. “They are looking at their indigenous energy resources and energy demand and making fairly reasonable decisions.”

For them, combating climate change does not look at all like a free lunch.

Note that doing something about air pollution and doing something about carbon emissions are two distinct issues.  America did a great deal to clean up its air, for instance when it comes to the dangerous Total Particulate Matter, but has done much less to lower its carbon emissions.  It is no accident that the former is a national public good, the latter is mainly a global public good.  China, India, and other developing nations may well go a similar route and simply keep emitting carbon at high and perhaps even growing rates.   If you lump everything together into a general “the benefits of getting rid of air pollution,” you will be missing that nations can and probably will make targeted clean-up attempts that leave carbon emissions largely intact.

By the way, here is yesterday’s report from India:

“India’s first task is eradication of poverty,” Mr. Javadekar said, speaking in a New York hotel suite a day after a United Nations climate summit. “Twenty percent of our population doesn’t have access to electricity, and that’s our top priority. We will grow faster, and our emissions will rise.”

India is the world’s third-largest carbon polluter, behind China and the United States, and Mr. Javadekar’s comments are a first indication of the direction of the environmental policies of the new prime minister, Narendra Modi…

In coming decades, as India works to provide access to electricity to more than 300 million people, its emissions are projected to double, surpassing those of the United States and China.

If you haven’t tried crossing the street in India, you don’t know much about how hard it is to fix the problem of carbon emissions.

Comments

I saw a much-lauded comment by Elon Musk to the same effect:

"By definition we must move to renewable energy , how can one argue against that? because to argue for it is to say we will eventually run out of energy and die, or civilization will collapse, so obviously we must find ways to produce energy in a renewable manner, the question is just how hard we should try what pace should we go at. And i think logically we should go as fast as we can, because since we know we have to get there eventually, it is better to get to a renewable future a sustainable future sooner rather than later, get there before we do the environmental damage not after, even if one can say maybe there isn't that much environmental damage, to play the devils advocate - maybe the environmental damage wont be that bad - Why take the chance?"

This stuff apparently goes over well – 1700 upvotes on Reddit – but it makes me cringe. Elon Musk is literally saying that tradeoffs don't matter and if there is any risk at all from fossil fuels we need to go immediately to renewables. It's completely nuts, but this apparently is the level of public discourse on economics.

"because to argue for it is to say we will eventually run out of energy and die, or civilization will collapse, so obviously we must find ways to produce more energy."

Fixed it. I'm all for producing as much energy as possible as cheaply as possible, but renewables aren't always renewable because they rely on unrenewable resources such as silver.

Renewables eh?

http://online.wsj.com/news/articles/SB10001424052748703421204576327410322365714

Key word from Musk's quote is "eventually". I mean, eventually, the sun will burn out. Why put our eggs in that basket?

The stone age didn't end because we ran out of stones.

Elon is fully planning on mankind being far away from the Sun when it dies.

Thanks, I'm much relieved.

I rarely post comments but I must say that I always enjoy reading yours.

rely on unrenewable resources such as silver

Care to clarrify this a bit? Unless you are feeding silver atoms into antimatter you never 'use up' silver.

No, but you can convert the state of those silver-based molecules into an economically intractable configuration.

Let's see, you are arguing that the recycling of silver which is at least around 90% with product lifecycles in excess of a decade is unsustainable in the context of fossil fuels with a life cycle for carbon as a mineral resource of less than a second and effectively zero recycling???

Seriously??

"even if one can say maybe there isn’t that much environmental damage, to play the devils advocate – maybe the environmental damage wont be that bad – Why take the chance?”

Sounds like Pascal's wager applied to a more modern deity.

+1 ... heck +100

Or overzealous application of The Precautionary Principle.

http://www.masonlec.org/site/rte_uploads/files/Precautionary-principle-Sunstein-Hahn.pdf

I know Sunstein is The Devil Incarnate but...

"Getting there" isn't (just) pushing on today's technology.

Bromides never go out of fashion.

Elon Musk says: "By definition we must move to renewable energy..."

Because coal and oil will not last forever. Period.

It's been great living in the age of oil, but, alas, it's going to end.

My friends and I are glad it's not to end during our lifetimes.

But end it will and you can start preparing now and pay whatever the costs will be or close your eyes and hope your children and grandchildren are better magicians than you.

For me the biggest argument for paying now is to end dependence on foreign sources of oil. That may not be a big issue for America this decade but it is currently for Europe and Ukraine among others. And, if you recall, one of the unnamed drivers of the infamous wars in the middle east was the presence of immense oil reserves there.

I agree with what Tyler said in an earlier post. Something like this: We are going to find out if climate warming will be disastrous or not because we can't summon the will to do anything to stop it. Humans experimenting on humans. What fun.

Re: Your point that Energy Security is a big issue for Europe and Ukraine and that's why they need to subsidize renewables. I note that Both Europe and the Ukraine have the potential for significant shale reserves. And of course both could build many more nuclear power stations than they already have. The reason they don't is due to Nimbyism driven by false fears of the dangers of these technologies, driven in part by advocates of renewable energy. So in some respects the advocates of renewable energy are creating the problem they claim to be able to solve.

So the Indians and the Chinese aren't going to jump on the carbon tax bandwagon after all?

They never were.

Hundreds of millions of Chinese citizens already live with a prefectural carbon price and we expect them to have a national scheme by 2020. In Australia, from the first of July this year, I believe we still technically have a carbon price but has been set to zero. I have to say that in general Americans seem amazingly unaware of this. Do you have the same internet that we do? Here people are pooping themselves over what this means for coal exports. (China's coal imports are already down about 8% in energy terms from their peak.)

If we want to stop climate change, we need to find a way to destroy the Sun. This is a paradox because in order to destroy the Sun, we need a massive amount of energy, but the Sun is our main energy source.

An alternative approach would be to tax the sun out of existence. All we need for that is the California state legislature.

"Since the beginning of time, man has yearned to destroy the sun."

"We don't know who struck first, us or them. But we do know it was us that scorched the sky. At the time, they were dependent on solar power. It was believed they would be unable to survive without an energy source as abundant as the sun."

The internet, it seems, is not without a sense of irony.

I know some people have always thought Steve Sailer had the heart of Montgomery Burns.

As well as the good looks.

Whew, what a howler of an article! For example, think about this sentence and how wrong it is: "“I don’t think the Chinese and the Indians are stupid,” Mr. Nordhaus told me."

Some points (interrelated):

1) Makes the fallacy of equating what largely state controlled economies should do, that have limited input from citizens, with what western economies should do, which are more free market oriented. Of course there's no pressure against fossil fuels in developing countries, heck, I saw coal power plants in Chinese run Tibet, which has huge hydro reserves.

2) Equates developing countries with developed countries. Naturally the former are several steps behind the production possibilities curve than the latter. Duh.

3) Fails to see that developing countries ALWAYS take the lead from developed countries in nearly everything. Even culture (sad but true). To pick a trite example: the ritual of sports managers giving mandatory interviews after a game is now practiced around the world. In started in the USA.

4) Fails to see that global warming mitigation is a problem the first world must address first, not the third world last. True, once the USA / EU adopts green energy, they should use 'green taxes' to bargain that the developed world do the same, and threats of economic sanctions, but that's a generation away.

PS--crossing the street in southeast Asia is indeed hazardous, but, with practice, it's not a big deal. What is daunting to a Westerner is how you have to time your step not to be hit by a vehicle, but, unlike in the West, the vehicles usually are not speeding too fast. By contrast, in the West many immigrants underestimate how fast US drivers are, and how strictly the rules of the road are obeyed, and often get run over more frequently than the natives (just like here, analogously). So this problem works both ways.

But it is technology not policy that is the critical component. Policy is giving us things like burning natural gas because it is transiently cheap.

The lead we should take is the same one we already took. This is where people stealing your IP is a feature rather than a bug. They are copying our dirty energy. They can copy our clean energy. Ship-based nuclear plants, for example, won't run out of cooling water and can be easily exported and positioned.

When the cost of gathering and using coal crosses the x on the price chart we need to make sure cheap and simple solar with storage is off the shelf.

@andrew' yes I agree. And you hit upon the key roadblock in solar with today's technology: storage. It's hard to store solar energy for peak use. Smart metering so people pay more for peak power is one solution, which is akin to saying you must alter your behavior with today's green technology. But we should do it IMO. The environment is too risky to play with, and I'm for global warming mitigation, though from what I've read nearly every country EXCEPT the USA will be harmed by global warming (only Florida and beach resort towns in the USA will be harmed, but largely the rest of the country will prosper from more heat).

One would think Arctic countries could also benefit immensely. Maybe Argentina and Chile as well?

This is mostly anecdotal, but, I do think people on the left (in the American political mapping) avoid thinking about the costs of their actions - a very special type of magical thinking. Pick any cause that collective action is proposed to solve and just try to find any actual discussion of the costs. I think that's the main reason the "solve global warning at ANY cost" camp hates Bjorn Lomborg so much.

My guess is that they look at all the wealth around and think, "If we could just tap into that wealth we could solve my favorite pet project!"

However, they fail to understand that many other people are coveting that same wealth for different projects and they ignore the opportunity costs of taking the wealth from its current owners.

Mother Gaia is insulted by cost benefit analyses. We must love her - authentically - from the bottom of our hearts. We must place her first in our lives.

Solid comment

"Pick any cause that collective action is proposed to solve and just try to find any actual discussion of the costs."

What's interesting is that often times the costs of a collective action on behalf of a left-wing project include compromising some other left-wing cause.

The demands of unions and environmentalists famously contend with one another. The same can be said regarding poverty-reduction and environmentalism.

In "Zero to One" Thiel observes how environmental regulations even impede the development of clean tech.

Richard Harrington that's a great summary.

"Limiting climate change is indeed worth doing,"

But don't many scientists and economists argue that moderate warming is a clear net benefit to life on the planet, at least until 2080?

Why would we want to limit this change, especially if - as many solar scientists argue - we are on the cusp of a cooling phase that brings heavy costs to agriculture and food supply.

I would use verbiage more like "development of proposals that allow implementation of scalable negative externality mitigating technologies and pareto optmimal economic policies." But 1 I don't know if that is correct and 2 it won't fit on the bumper stiçker. And might not fit on a Prius bumper.

Exactly.

Why is it assumed that a warming earth is a Bad Thing for Mama Earth?

More CO2 = more plant food and a warmer planet means less energy is wasted on heating. Etc etc etc.

Especially given that we're at the lower end of both temp and CO2 levels on a geological time frame.

It really isn't climate change that's at issue here, it's capitalism and personal freedom.

What we'd want is to be able to moderate climate if the actual damage ever showed up.

Here is how I know the answer is technology. If we took all the CO2 production and spread it equally across every human, it would do NOTHING to stop CO2 increase.

I'm much more confident about our ability to solve technology problems than human problems.

I envision a future where we've cleaned up the environment and are zipping around in hover cars, but still yammering about minimum wages and pay differentials.

Especially the ones that can be proven in a single sentence to not be solvable by the current approach.

"But don’t many scientists and economists argue that moderate warming is a clear net benefit to life on the planet, at least until 2080?"

I don't think so. I've never heard such an argument. If they do take that position, perhaps you should point that out, rather than ask it.

What do these "scientists and economists" think of ocean acidification that results from increasing CO2 levels?

Has anybody ever calculated how much cleaning up Los Angeles's smog cost the country? It's amazing how much cleaner the air is in Los Angeles today than when I was young. But I've never been able to find an estimate of how much that cost.

How does one apportion costs? How did they clean it up? Mostly through strict car pollutant rules wasn't it? Were substantial federal grants involved?

"How does one apportion costs?"

Well, that's why I'm hoping some scholar has done detailed work on the question of how much the War on Smog has cost. But I've been asking for a number of years and have never heard of any studies.

I suspect the Right doesn't want to think about how tremendously effective this government environmental program has been (the number of health advisory days per year in L.A. has declined from 166 in 1976 to an average of less than 1.0 per year in this decade); while the Left doesn't want to think about how much the War on Smog cost.

But it seems like a pretty interesting and relevant question.

Steve - Even Tyler observed the distinction between air pollution and carbon emissions.

Cleaning up your city's smog may have made sense in terms of cost-benefit analysis. Not so much in terms of better views but with regards to reduced mortality.

But rising CO2 levels do not compromise human health, at least not directly. It's possible the right was wrong on the EPA but right on climate change.

No, what I meant was even if some scholar tried to apportion these costs would you believe him?

It sounds like a very subjective, hand waving exercise.

As opposed to?

"No, what I meant was even if some scholar tried to apportion these costs would you believe him?"

I'd believe him more than my own back-of-an-envelope calculations.

About 600 for every car sold since 1975.

Something for the switch to unleaded gas.

Let's be generous and say 10B a year. For 40 years, about 400B. And that is nationwide.

Is $600 per car just for the equipment?

What about the worse gas mileage? This seems to have been forgotten, but back in the 1970s and perhaps in the 1980s, the EPA MPG sticker came with two numbers: in big type was the national number (e.g., 28) and in small type was the California number (e.g., 25). The extra pollution controls on cars sold in California made you spend an extra 10% or so on gasoline each year.

The government of California was always complaining that cars were filtering into California from the rest of the country and polluting more. Eventually, the whole country adopted the California smog standards; the EPA stickers no longer had two MPG ratings.

Here's what I don't know: did technological advances close the gap between MPG under California standards and the rest of the country? Or has the rest of the country just been ponying up the extra money for gasoline? U.S. consumers bought 135 billion gallons of gasoline last year, so 10% of that might be $40 billion per year. Over a quarter of a century that would be around a trillion dollars.

If the latter is true, then I want to say, "Thanks rest of the country!"

"What about the worse gas mileage?"

That's definitely a factor. And generally speaking there is quite a bit of maintenance associated with the EPA required equipment. Furthermore, many older cars that can't pass emissions inspections have a shorter usable lifespan than they would have without the mandatory inspections. And there's the cost of the yearly emissions standards themselves. Etc.

Right, we live in financial dread of our 1998 and 2001 vehicles, which run fine, not passing their next smog checks.

600 is a high estimate for a catalytic converter. That is the bulk of the reduction.

With fuel injection, I suspect the MPG disparity you are talking about is gone.

There has been a lot of other improvements since 1970, but putting in a cat converter probably was 80 pecent of reduction. Unleaded gas another 10? EGR systems, low sulfer diesel, and fuel tank fumes another small bit.

By California, you mean LA. I agree that because of the topography LA had bad vehicle smog issues. Still does. However, the rest of the country is a lot better as a result of those regulations as well.

"With fuel injection, I suspect the MPG disparity you are talking about is gone."

Thanks.

California did have a unique smog problem (especially the LA basin), but the pollutants also created problems for other basin cities, and to a lesser extent other non-basin cities. So the car regulations did help clean the LA air, but also cleaned the air in the entire country.
And most costs were still local; the Air Quality Management District was aggressive about going after all pollution sources. The Port of LA / Long Beach is a huge source of pollution, for example. The amount of toxins, esp. lead, pumped out of some of the manufacturing sites was rather remarkable (hint: don't buy property near the plume of anything related to lead batteries if you plan to raise kids).

With the attendant reduction in crime, unleaded gas had positive economic impact, I'm sure.

Steve,

I also have not found a cost estimate for Los Angeles.

Dorfman published an estimate of the magnitude and distribution of the costs of federal pollution mitigation in the American Economic Review way back in 1977.

Fouquet published an analysis of the pollution cost of coal in Victorian England in 2011. He finds a very high external cost of pollution (hence a high cost of not abating pollution) of up to 20% of GDP in 1880.

Thanks.

It would seem like one way to get some needed perspective on the whole global warming is to look at the costs and benefits of past pollution initiatives, like the hole in the ozone layer, acid rain, and the War on Smog. But the last one at least seems forgotten even though it was a massive undertaking and has been strikingly effective: I'm staring out my window at the blue sky of the San Fernando Valley, which would have been the beige sky 40 years ago.

Is it pedantic to note that global warming stopped between 16 and 26 years ago?

http://www.scirp.org/journal/PaperInformation.aspx?PaperID=49307#.VAdDzPldV8E

Something that happens by itself is a free lunch, is it not?

Because only an economist can do climate science, correct?

You're hilarious.

TMML, posting on Tyler's blog that economists should stick to economics.

In any case, that article is just about the length of the stall--- the stall's existence is not controversial. And it still needs to be explained.

Here is a discussion:
http://www.nature.com/news/climate-change-the-case-of-the-missingheat-1.14525

Well the climate scientists are hilariously bad at math so maybe the input from an economist should be welcomed.

You've made the most common category error in comments on this blog.

Climate scientists are scientists.

Economists: not.

It hasn't stopped at all!
Global warming was scared of irresponsible warming-deniers and is now just hiding in the oceans. It will come out once the righteous have smitten the climate-deniers.
And if it has actually stopped it we have to thank Al Gore!

Not pedantic, just wrong.

It hasn't stopped,

http://www.theguardian.com/environment/2013/may/17/global-warming-not-stalled-climate

And neither has the growth of CO2 or the acidification of the ocean.

http://projectgroundswell.com/2010/01/24/ocean-acidification-ocean-in-peril/

If CO2 increases in the atmosphere, it's going to get warmer because of the greenhouse properties of CO2. That's basic and irrefutable science. So if you're going to say that Global warming has stopped, you'll have to explain how that is possible in a world where the CO2 in the atmosphere continues to increase.

The costs and benefits of climate change, energy poverty, and different climate change-combating plans aren't distributed evenly. That's a large part of what you're seeing here.

The overall impact of a particular climate action plan can be positive for the world, but hit particular groups or nations with high costs in excess of their benefits, or vice versa.

In particular, the benefits of energy access are log-linear. Every doubling of the kwh per year of modern energy an individual has access to produces roughly the same gain in life expectancy, happiness, HDI, and other metrics. This suggests that for low-income countries, where energy access is low, it absolutely makes sense to optimize for more energy access for their citizens. A small amount of additional energy can make a large difference in quality of life at a relatively low emissions impact. The benefit is internalized to their citizens. The cost is externalized to the rest of the world. The burden, in their minds, is placed on rich countries that have a century-long track record of high emissions. (Recall that CO2 has a roughly 100-year half-life in the atmosphere. The heating going on today is largely a result of US and European emissions, not Chinese.)

On the flip side, in high income countries, emissions reductions are relatively cheaper in terms of their actual impact on people's lives.

Finally, Nordhaus is right that coal is still cheaper than solar, wind, and nuclear in most places around the world (when considered on a 24/7 basis). But Nordhaus seems to disregard the both the price trends and market deployment trends in solar, wind, and energy storage. With prices for all three plummeting, by double digit percentages per year in the case of solar and storage, the situation is changing rapidly. On this pace, it will make very little sense to build new coal or natural gas generation across most of the world within the next ~10 years, even without added policy incentives. (See, for instance, some of the price trends here: http://rameznaam.com/2014/03/11/carbon-prices-drive-clean-energy-innovation/ )

Emissions from motor vehicles are a separate and tougher. We still lack good solutions on that front. The same is true of agriculture. And also of concrete & steel production (which account for a very high percentage of China's coal use and carbon emissions - a reason to hope that their emissions could actually peak sooner than expected).

Best,
Ramez

"The heating going on today is largely a result of US and European emissions, not Chinese"

There isn't any heating going on today, if what you mean is that the earth in its totality is getting hotter on an overall, year-around basis.

It actually is getting warmer. And CO2 levels in the atmosphere and oceans are increasing. And the ocean's are becoming more acidic. Those are the facts.

"With prices for all three plummeting, by double digit percentages per year in the case of solar and storage, the situation is changing rapidly. On this pace, it will make very little sense to build new coal or natural gas generation across most of the world within the next ~10 years, even without added policy incentives."

Good, that means all this arguing is pointless and the problem will solve itself. Yay science, global warming is solved and there's no need for any government action.

The solar system on the roof above me here in Australia cost under $2 US a watt to install and that was before subsidy. Actually, since we pay 10% tax I guess it would come to about $1.80 US a watt. And note this competes with the retail price of electricity, not the wholesale price. If anyone wants to do the maths you will see the electricity it produces is quite competitive. I'll also mention that Australia's newest wind farm cost about $1,530 US per kilowatt and operates at an average of about 42% of its total capacity. The US can of course build at a lower cost per kilowatt, being the developed world's leader in wind power. Things have changed and as these things go the change has occurred quite recently. It seems very odd to me that Porter lumps wind and solar in with nuclear as if their costs are comparable. The new Hinkley C plant in the UK apparently requires a wholesale price of about 15 US cents a kilowatt-hour to go ahead (if it goes ahead). Here in Australia there is no form of utility generation that can supply electricity to households as cheaply as rooftop solar. He also appears unaware that countries such as China and India have been rapidly expanding the rate at which they install wind and solar capacity over the past few years. But as I mentioned, this change is recent. It not surprising that some people have missed it, although I would expect people writing on such matters to pay a bit more attention to fine details such as these.

If there is any economically honest argument for wind and solar, it is that they are feasible at far lower scale than other forms of electricity generation. Setting up a coal plant to power a single small village is entirely uneconomical. You can potentially provide a small house the power it needs with one or a few solar panels.

I'll mention that in Australia rooftop solar produces electricity at a much lower cost than purchasing coal generated electricity that comes from quite large plants designed to power cities. In fact, due to the low wholesale price of electricity here and the high retail price, the cost of generating electricity from coal power stations would have to be steeply negative to compete with the rooftop solar I had installed here.

But how do you store it for night time use? How much does that cost? How much energy is lost converting the electricity to the storage mechanism and back again?

There is no good way to store solar energy, if you store it you've lost a significant amount of your production.

XVO, I don't store solar generated electricity for night time use and there is no need for me to store electricity from rooftop solar for it to be competitive with fossil fuels. Currently solar power isn't close to providing all demand during the day. Australia's electricity use during the day would probably be close to two-thirds and rooftop solar is pushing down the price of electricity and this is resulting in demand shift to the daytime as industry takes advantage of the lower electricity prices, so there is plenty of room for further rooftop capacity without the needing to curtail generation. And if some rooftop solar generation did get curtailed that's not much of a problem.

But we do have methods of storing solar power. There are two pumped storage facilities in Australia. Currently they mostly store energy from coal, but as solar capacity expands they will start storing energy from rooftop solar in the middle of the day. Pumped storage can have an efficieny of over 75%.

One thing that is interesting about Australia is our high retail energy prices and low feed-in tariffs for solar make it the most suitable country for home and business energy storage and its cost appears to be approaching the break even point now. Efficiency depends upon the battery chemistry used but charge/discharge efficiency can be over 95% for lithium-ion batteries. So in a few years stored solar energy may be used to supply a significant amount of electricity during Australia's evening peak and provide ancillary services.

Very interesting, I hadn't realized pump storage had such a high efficiency rate. Nor that the conversion from water mechanical energy to electrical energy had such a high rate of efficiency (~90%). A very cheap way to store electricity on a large scale. That's actually a very hopeful sign that renewable energy could be successful and competitive with coal. I'm still skeptical on lithium-ion storage on a large scale, the initial cost is expensive and they seem to lose storage capacity fairly quickly.

Pumped Hydro and, to a lesser extent, compressed air are the only economically viable forms of grid scale energy storage. They are geographically constrained, however. Pumped hydro is only viable in areas with large amounts of ground water and significant elevation changes. Compressed air is currently only viable in areas with large underground salt domes.

That being said, both are a very promising means of dealing with the intermittencies of solar and wind power in a cost effective manner.

@Ronald

Is it correct to assume that average retail electric price that people pay in Australia is ~0.13 USD/ kWhr? That gets me a payback time of ~8 years assuming 20% of installed capacity factor & a 24x7 load?

Raul, the marginal cost of grid electricity in Australia is about 26 US cents. For most Queenslanders there is no set feed-in tariff but a 5 US cent a kilowatt-hour feed-in tariff from electricity retailers is fairly common. There is a set feed in tariff in regional Queensland where I am, which is now about 5.7 US cents but I got the old rate of about 7 US cents. You were right that the system operates at about 20% of capacity, but most Australians won't do quite so well as this is a good location. Down in Brisbane in South East Queensland where most of the state's population is, a typical system might operate at 17% of capacity. A 50% self consumption rate is typical, but this will depend on the household's electricity use and the size of the system. So with a $2 US a watt install and a 17% capacity factor, a 5 US cent feed-in tariff, and 50% self consumption, unsubsidised solar will pay itself off in about 8.7 years. Note this generally can easily be improved by installing a smaller system that increases the self consumption rate. Also, some people orientate their panels is such a way it reduces the capacity factor, but increases their self consumption. There is a subsidy of about 60 US cents a watt which greatly improves the pay back period. For a $2 US a watt system it reduces it to about 5.8 years. With subsidy and without our 10% tax it drops it to about 5.2 years.

I mentioned that the marginal cost of electricity here is around 26 US cents a kilowatt-hour, but daily supply charges mean that all up I pay about 42 US cents a kilowatt-hour. With the declining cost of batteries it may soon be worthwhile for Australians to start dropping off the grid once Germany has finished building some convenient energy storage systems for us. (We mine, we farm, we style hair, but don't expect us to manufacture things.) However, I don't want to go off grid. I'd prefer my surplus solar electricity be used to help my fellow Australians by reducing pollution from fossil fuels and putting downward pressure on electricity prices.

"I pay about 42 US cents a kilowatt-hour."

Ouch! Thank you sir, may I have another.

JWatts, just to empathise our incompetence at supplying electricity at a resonable cost to end users, I'll mention that the wholesale prices of electricity in Australia are quite likely the lowest in the world. Various privatisations are not the only reason our grid electricity prices are sky high, but they certainly appear to have a lot to answer for.

The nuclear option was under consideration but doesn't seem to have been accepted as yet: http://imdiversity.com/villages/native-american/in-native-alaska-nuclear-industry-pitches-new-micro-nuke/

There's a good paper from Stefan Dercon at Oxford that makes these points nicely too - http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2458724.

The only economic policy that could be described as a free lunch is Open Borders.

'but it is not close to a free lunch'

Well, it approaches one when considering the benefits of not paying for fuel over decades.

Which just might mess up some people's business model. Not that those people are without the resouces to pay for such experts as S. Fred Singer and co. to help ensure that their business model does not die too quickly.

As noted by Thomas Edison - 'We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature's inexhaustible sources of energy — sun, wind and tide. ... I'd put my money on the sun and solar energy. What a source of power! I hope we don't have to wait until oil and coal run out before we tackle that.' But then, what did Thomas Edison know about electrical grids, right?

The obvious flaw in this analogy is that a fence has a use other than as a fuel source, whereas coal, if it isn't used as fuel....doesn't have a whole lot of other uses. You need it to make steel, I believe, but I don't think large quantities are required for this, relative to its abundance.

The other obvious point is that the sun is a giant, natural nuclear reactor. Instead of trying to soak up energy at a distance of 93 million miles from the source, wouldn't it be more efficient to create a smaller, local nuclear reactor, where you can harness a much greater fraction of the energy ouput? Why yes, it probably would.

"[W]hat did Thomas Edison know about electrical grids, right?"

The guy who advocated direct current over alternating current? Yea, I'll trust his judgment on the grid.

But we name power companies after him!!1

Homer: Then he worked on a machine to communicate with the dead. Some kind of scary telephone I guess. Or maybe he planned to just stick his head under the ground and yell.

Marge: Alright already! Everyone knows the man accomplished a lot. Maybe because he didn't spend every waking moment talking about Thomas Edison.

Homer: Oh, that's where you're wrong Marge. He was a shameless self-promoter.

I don't think he knew anything about electrical grids

Of course it's stupid to say that reducing climate change is somehow "free" - if it was, we would have done it long ago. But it may be cheaper than we currently expect. Right now most people are looking at a partial equilibrium: the present cost of fossil vs. alternatives, then multiply to get the cost of 100% renewable. But in general equilibrium, the unit cost of renewable may be much lower at 80% penetration than 20% penetration. New technologies tend to have strongly increasing returns to scale. In fact we've seen that in solar, with rapidly dropping prices and installations on an exponential path. It's like saying "a computer in every home and office? way too expensive!" in 1980. There is network effects, learning by doing, and endogenous technological development.

"China’s CO2 emissions increased 4.2 percent last year, according to the Global Carbon Project, helping drive a global increase of 2.3 percent. China now accounts for 28 percent of the world’s total emissions, more than the United States and the European Union combined."

Not 4.1% or 4.3%, but 4.2%. Not 2.1% or 2.5%, but 2.3%. Not 26% or 30% of total emissions, but 28%. Where does the "Global Carbon Project" get these numbers? Why should anyone believe this bs?

"Why should I believe your numbers? Other numbers that are close to them also exist!"

Numbers make me so angry, being all 'mathmatical' all the time. Where do they get off?

America did a great deal to clean up its air, for instance when it comes to the dangerous Total Particulate Matter, but has done much less to lower its carbon emissions. It is no accident that the former is a national public good, the latter is mainly a global public good

Which indicates that while reducing carbon is probably not entirely free you could probably get a lot of carbon reduction for free or at least for very low cost.

Well, perhaps. But see Steve Sailer's question on air pollution costs above.

You shouldn't object to a policy by saying that if it were a good idea, then it would have be adopted already.

E.g.: "If libertarianism were the best policy regime, why aren't the Chinese and Indians adopting it? I don't think the Chinese and Indians are stupid. etc. . . ." That's not a good argument against libertarianism.

The most obvious argument against taking expensive measures against global warming is that in the last hundred thousand years Homo sapiens has expanded from tropical Africa through almost every climatic zone, extending to the high Arctic - using stone age technology.

Humans are much more adaptable than environmentalists will ever give us credit for - even at the level of Neolithic material culture, much less 21st century sophistication.

I'm going to hazard a guess that a tropically evolved hominid will do just fine if average global temperatures increase by a couple degrees C by 2100.

Well, if it was just a couple degree increase that impacted hominids, sure. But there is the entire system - primarily ice sheets and sea levels (if Miami, New Orleans, and 1000 other cities lose significant percentages of use due to flooding, and sea level rises, it is a very expensive proposition). When crops fail and there are famines, it is expensive. when the littorals are unusable, it is expensive.
Hominids obviously won't go extinct. But the four horsemen (pestilence, famine, war, death) will be riding around for some time until stasis finally returns to the system. But even after all that, I'd still expect globe that would accommodate 3-4 billion or so people, and if post-industrial development patterns are disrupted significantly (pending a final determination of rainfall patterns), I would expect a rebound.
But the point is to try and avoid going through that process...

"until stasis finally returns to the system."

Ain't no such thing as "stasis". The climate has changed continuously as long as there's been an earth. Ice a mile thick covered much of North America less than ten thousand years ago.

On the other hand since 1910, according to Jones et al, the global temperature has increased by about 1 Deg C with concurrent massive increases in population and crops. Famines have also drastically decreased. So the recent evidence would suggest global temperature rises and human welfare are positively connected rather than negatively connected. Perhaps there are non-linear effects as the temperature continues to increase, like the so called interruption in ocean currents, but most of these claims seem to have been withdrawn.

Tyler,

There ain’t no such thing as a free lunch (TANSTASFL), but in the US there is a prepaid lunch. Low cost, or even costless reforms, to reduce carbon emissions are not always magical thinking.

The strong form of the double dividend hypothesis - that shifting the tax burden from labor and capital inputs to pollution causing inputs would necessarily increase economic activity and reduce pollution – was refuted in the 1990s.

The weak form – that careful, well thought-out, tax reform can both reduce pollution and increase economic activity -has been demonstrated in the OECD. Eight OECD countries implemented environmental tax reforms in the period 1990 to 1999. These countries outperformed the United States on measures of economic, fiscal, per capita carbon usage, and social welfare over the periods 1990-1999 and 2000 – 2010.

The double dividend is contingent on the presence of pre-existing economic inefficiencies and conditions including: labour market rigidities, level of involuntary unemployment, level of pre-existing taxes on labour and capital, monopolies in the economy, consumption patterns, level of welfare benefits compared to wage levels, pre-existing regulations, deviation of current taxes from economically optimum rates, and the design of the environmental tax reform.

The US tax and fiscal system is inefficient, costly, and riddled with rent-seeking provisions. The fuel tax is less than 20% of the economically optimal level. As a result, it is relatively easy to develop environmental tax reforms that generate the double dividend have been proposed. Three such reforms have been published in the American Economic Review since 1993.

There is an incredible amount of low hanging fruit in climate mitigation: stop rent seeking activities that harm both the climate and the economy. Specific reforms that would produce costless pollution reduction in the US do not generalize to China or India.

Bob - you make a convincing point that we should not really talk about introducing new environmental taxes until we have made the existing tax and subsidy scheme more efficient. Basically anything new that would be introduced in the current political system would likely not solve the problem but just enrich some special interests.

If I really wanted to reduce carbon dioxide emissions, the first thing I would do would be to ban coal fired power stations and coal mining and coal exports. Not only would this reduce CO2 emissions, it would also have significant benefit in terms of lowering local pollution, coal fired power stations emit tons of heavy metals, including mercury, to the atmosphere and also contribute to high level smog. the radiation emissions from a coal fired plant are many times those of a nuclear powered one. Fly tips are a long term problem, and the extraction of coal also causes widespread devastation of the environment. Finally extraction of coal is one of the most dangerous and unpleasant jobs around. The US in particular, and most Western Countries, have access to more than sufficient clean burning natural gas to replace this coal (or could go nuclear). The coal mining business and communities are classic concentrated interests however so electorally this would be a non-starter. Which just illustrates your point.

Chris

GhrisA

I spent my working life trying to improve fiscal systems. There are an incredible number of specific tax provisions that reduce both equity and efficiency but enrich specific groups - pure rent seeking.

The US tax rate on diesel fuel is higher than for gasoline.
The Canadian tax rate on diesel is lower than for gasoline.
In Canada, diesel fuel used for railways is taxed at a lower than standard rate in 6 jurisdictions, at the standard rate in 1, and taxed at a higher rate in 6.
Similar examples abound in every country.
Someone, somewhere, is not optimizing.

Bob Wyman (different Bob) is correct to note that "Two sets of goals can be addressed with a single set of actions...Much of what we need to do to reduce Climate Change is actually profitable"

Left and Right may disagree about the importance of CO2 emissions, but both should agree on the wisdom of doing those things that tend to reduce CO2 emissions. Two sets of goals can be addressed with a single set of actions:
* The Left may support CO2 reductions as a way to mitigate Climate Change,
* The Right should support actions that have the side-effect of reducing CO2 emissions since they *also* reduce pollution, increase economic efficiency (save money) and increase choice in the marketplace.

Much of what we need to do to reduce Climate Change is actually profitable when lifetime costs are considered. Thus those that don't care about Climate Change should still do those things that mitigate Climate Change. For example: Electric cars and ground source heat pumps have high-up front costs, but they both have dramatically lower operating costs than do fossil fuel based systems. Over the lifetime of these assets, they are cheaper -- and, their use eliminates point-of-use burning of fossil fuels that produces CO2 emissions and other pollutants. Even if you don't believe in Climate Change, you're probably being foolish and wasting money if you use fossil fuels in your car or to heat your home.

re: India and China: At the same time that India and China are expanding fossil fueled electrical generation, both countries are investing heavily in renewables. This may be unfortunate, but it makes sense. Given that fossil fuel systems have lower up-front-costs, they are more easily deployed even though they cost more over time. Even when renewables have up-front costs comparable to fossil fuel systems, the renewable industry's deployment capacity is lower. In both India and China, there is a need for a rapid expansion of their power generation capacity, thus, it isn't surprising that they choose systems with the lowest up-front costs and which are the quickest to bring online. But, over time, their renewable deployments will catch up and eventually surpass that of the fossil fuel driven systems.

However, what is logical for India and China isn't logical for us here in the US, Europe and many other places. Our energy demand is growing much more slowly than theirs and thus for us the wise option would be to focus our energy investments the cheaper renewables (cheaper over their lifetimes). Of course, in so doing, we'll be gaining an economic advantage over the Indians and Chinese since in our future, our energy will be generated at very low operational costs while they will be stuck with proportionally more generation from high-cost fuels.

Bob - if the renewables are really cheaper over their lifetimes in Western countries then people will invest in them anyway. The real issue here is how to value the external cost of the technology versus the internal cost. If the internal cost of renewables is really lower than non-renewables then abating climate change really is a free lunch, as per Tyler's original post. But most people doubt that at the current stage of development of renewables this is the case. So the question is should the Government introduce taxes, if so, by how much to make non-renewables pay their external costs? If there are taxes then there is a cost to abating global warming as taxes increase costs and so reduce demand to less than it would be otherwise.

ChrisA, Yes, in the long run, people will eventually invest in renewables since they are both cheaper and cleaner. But, as Keynes said: "In the long run, we're all dead." The challenge is not just to figure out what will eventually be obvious to everyone, but to get them to see it sooner rather than later.

Today, there are market failures and government policies that discourage people from "doing the right thing." One of the biggest problems is that the "cleaner, cheaper" alternatives typically have higher up-front costs than do dirtier, more expensive fossil fueled alternatives. Those with limited funds or poor credit, can't "afford to save money" by using cheaper, cleaner solar pv, ground source heat pumps or electric vehicles. Oddly, "cheap energy" is something that only the wealthy can afford. Also, the federal government and many states give substantial tax credits and subsidies to support solar and wind installations on the limited number of sites or homes that can exploit these technologies. However, even though ground source heat pumps can be used by many more buildings than those that can install solar on their roofs, GSHP receives much less government support. The result has been a large market for solar and wind tax-equity that has fueled an explosion in installations for those technologies while virtually no money is invested in the GSHP market.

Yes, in the long run, we can be sure that people will do to the right thing. But, it would make a great deal of sense for us to try to remove the barriers that prevent them from doing the right thing sooner.

Tyler - what about Africa?I don't know where Africa's development stands compared to China and India, but surely its 1.1b population also will drive some emission increases....

Joss, I imagine that African nations will use the lowest cost generating capacity and currently this is solar for off grid use. In Australia electricity distributors are planning to roll up the electricity grid in remote regions and replace it with solar power and energy storage to save money, so the future of rural electrification definitely appears to be distributed. For grid generation the lowest cost may be some combination of wind, solar, and run of the river hydroelectricity, depending on local conditions. Parts of Africa also have excellent geothermal resources. As an example, Kenya has secured funding for a 300 megawatt wind farm, has a large number of (small) off grid solar systems and is expanding its on grid solar capacity. The country also has a significant amount of hydroelectric and geothermal capacity. Currently Kenya generates roughly a third of its electricity from fossil fuels, but that portion is set to decrease.

Ronald - the reality is that as population become more and more urbanized, as will happen in Africa, and demand for energy increases with economic growth, there is no way distributed solar energy will work. When population densities are in the tens of thousands of people per square KM, the finite solar irradiance per area is too small when divided into this number of people to make it a viable source of energy. So you have to have a centralized generation system with power generation elsewhere other than the population center. Perhaps large scale solar farms could work, but I have my doubts, its just too diffuse. Kenya looks like it might have some useful oil and gas resources in the rift valley. My guess is that will be the source of their energy growth going forward.

Blink... blink... ChrisA, you know that a square meter of PV can generate a kilowatt-hour of electricity a day in Kenya? Get a Kenyan to spread his arms and legs wide. That's about how much area is required per person to generate electricity equal to one quarter of Italy's per capita electricity consumption. Do you really think Kenyans are going to have less roofspace than this? Ten thousand people per square kilometer is still 100 square meters per person. Twenty thousand people per square kilometer is still 50 square meters per person.

Here's an article from the Sydney Morning Herald that shows why Australian coal exporters are having kittens over what is happening in China:

http://www.smh.com.au/business/carbon-economy/china-slashes-spending-on-new-fossilfuel-power-plants-20140501-37ior.html

While absolute coal use is up, 75% of investment in the power sector went to non-fossil fuel sources. And China apparently hopes to bring down coal as portion of total energy consumption to under 65% this year, which is two years ahead of schedule. The price of Australian export coal is down to $69 a tonne which is about one third of its peak and in real terms is around the lowest its been for decades.

Stopping climate change is not a free lunch if you place a high value on

1. high unemployment - burning natural capital is done to kill jobs that would otherwise need to be created to produce energy harvesting assets and operate the energy harvesting system. In the pre-coal age, iron and other metals were produced in a highly evolved charcoal manufacturing system. Pollard and Coppice groves produced the wood ideal for turning into charcoal, but the labor required was higher than coal mining. In England, the coal produced very inferior iron compared to the iron produced with charcoal, but the lower labor cost meant more inferior iron could be used to replace the higher quality high labor cost iron. At the time of the industrial revolution, England was suffering a labor shortage.

Today we have far superior methods of producing the energy needed to refine metals, like harvesting the wind and sun to produce electricity for electric arc smelters.

Milton Friedman attacked the depletion tax credit which had dentists and radiologists investing in drilling a hundred thousand oil and gas wells per year - the US has about 1.9 million more oil and gas wells than the rest of the world thanks to government drill baby drill policy up to circa 1970 when tax rates were cut and tax dodges were closed pretty much killing that energy production method, and the jobs that went with it. Many people do not remember or were born after the massive oil industry jobs as the government policies shifted away from promoting US oil drilling, production, and consumption. Milton Friedman argued we should not spend so much producing oil when it was cheaper in the Persian Gulf, and the US should keep its oil in the ground until the global shortage of oil as fields outside the US played out. Of course, he was writing that when unemployment was very low and wages were rising rapidly.

Since the 80s, job killing policies have been the priority, Job safety in mines and in refineries has fallen because that kills jobs. It cuts into profits to hire workers to maintain mine safety equipment and properly ventilate coal mines - killing jobs and killing mine workers cuts energy prices to consumers. Blowing the tops off mountains to get to the coal kills jobs, and then leaving it as a wasteland kills jobs, and not protecting springs kills jobs, and not making sure the waste does not pollute waterways after rains kills jobs.

The reason the coal industry needs the job killing ability to pollute is to compete with wind power which has used technology and economies of scale to increased the power generated over the lifetime of labor built capital assets to harvest wind. Solar capital assets are driven by labor efficiency from technologies and economies of scale to bring them down to the long term costs of "clean coal" which is coal that does not cause acid rain, but otherwise depends on coal mining killing jobs by polluting in the mining.

For coal to have the low environmental impact of the next thousand years as wind, the labor costs of coal need to increase substantially to reclaim the land that has been reduced to wasteland by coal mining and burning.

The coal industry wants the free lunch of not being responsible for all the harm it causes workers and bystanders and future generations because it needs to kill jobs to compete with sustainability.

2. promoting authoritarian police states and dictatorships. Most of the global oil industry depends on governments taking the property of the people and turning them over to the global corporations which then bring in foreign workers to pillage and plunder the land, paying what amount to bribes to the dictators for making it possible to take the property of the people by force. The oil industries never benefit the people by providing them with job opportunities. In the best cases, the government can bribe the citizens with enough money they can be free of the government and the need to work. In the next case, the government can hire enough people in high level government jobs, but that merely led to large Saudi families and now there are too many people to hire them all.

3. war. Wars for oil and other fossil fuels have been the norm for a century. The technology of war has made it possible for a small number of people to wage war over oil. War for control over regions with oil. Civil wars for control over the bribes paid to pillage and plunder for oil.

The US taxpayers are responsible for trillions spent on war with oil being a big reason for much of the scope of the wars. The terrorism that threatens is driven by fights over the benefits and harms of oil.

So, if you value unemployment, lack of civil liberties around the world, and ongoing war, then switching from fossil fuels to wind and solar harvesting which will require huge investments of labor into the harvesting capital assets, huge investments in labor into energy storage capital assets, and huge investments in replacing fossil fuel burning with electric powered solution, like ground source heat pumps.

I say "drill baby drill" a million boreholes per year to become the heat source and sink for HVAC systems that heat and cool. It will take a century to convert all buildings at that rate. Presumably the scale of that activity will cut the labor costs and increase productivity so several million per year are done for the same cost.

These boreholes will be productive for a century on average, and the HVAC equipment will be replaced only twice given a three decade lifecycle for that hardware.

Solar PV can be installed on millions of buildings per year, which means new installations will still being down when the 30-40 year life cycle of the PV panels requires recycling and replacement.

That means fossil fuel jobs are more than replaced by the jobs building, installing, and maintaining sustainable energy systems.

And given polluting and liberty violating jobs are replaced by more capitalist jobs, this transition is economically neutral or positive. Given economists have no problems with factories in Iowa being closed and replaced by factories in China with the handwave that the 500 50 year old factory workers easily become Apple App developers making more by delivering 500 new apps that users will pay to use.

We should view emissions in per capita terms rather than focusing on increases or decreases.

I know there are really sensible things, like how people are concerned with relative situations and are more sensitive to losing something that they already have than getting something that they don't. And also, when concerned with the direction of change, then the size of change really, really matters.

But when looking at the justice of the matter (why we should do anything when emissions will rise elsewhere), I think per capita emissions is the relevant figure, not the aggregate change across nations of diverse sizes.

Yes, I know, that's not highly conducive to argumentation that allows us to emit to the nth degree while coming down on them for any amount of increase.

And here's another link to an article on how hard up the coal export industry is in Australia in case anyone is interested:

http://reneweconomy.com.au/2014/massive-australia-coal-project-dumped-in-face-of-china-energy-revolution-73096

I notice the big mining companies, BHP, Rio Tinto, no longer seem intersted in coal expansion in Australia. Those who do seem interested appear to be smaller companies trying to get together enough cheap foreign finance and government provided rail and other subsidies to open a new basin and gamble on the downturn in coal prices being cyclical rather than structural. While the government support is there the foreign financing always seems to fall apart. Not many people are willing to take a chance on new coal. Australia will continue to export large quanties of coal for some time, at unfortunately a low cost, as the basins currently being exploited are high quality and less polluting than the majority of coal in the world, but the writing is on the wall and nobody is going to want our vast reserves of low quality more polluting coal. We won't even want it ourselves for that long as we now have cheaper alternatives than building new coal power stations.

Lots of comments but none making the obvious point that this is a strawman. I am not aware of any person who thinks that stopping climate change is a free lunch. Proponents *do* believe that stopping it is cheaper than the alternative.

As one commenter alludes to above, an authoritarian developing economy is hardly a strong proxy for the desirability of a policy. Particularly when those economies have shown strongly mixed judgment on environmental questions... the stories of horrific pollution in China are legion at this point.

"If the Chinese and the Indians found it much more economically efficient to build out solar, nuclear and wind, why are they still building all these coal plants?”"

Tragedy of the Commons.

"Note that doing something about air pollution and doing something about carbon emissions are two distinct issues."

I'm sorry, but I won't note that, because the two are hopelessly interlocked. Reducing carbon emissions will make our air much cleaner. There is simply no way to do the former without the latter.

There is no free lunch anywhere, I'll agree to that. In fact we already ate our lunch, and now we're looking at the bill. The options are deal with the carbonization of the Earth - which is causing increased temperatures and increased acidification of our oceans, or prevent it from getting much worse. It is likely that we will have to do both and both of these are extremely costly propositions. So there is nothing free about any of this. But, all the things we'll do to deal with CO2 emissions will also help make our air cleaner and bring with it health benefits that might exceed the costs of CO2 reduction without considering any of the benefits from preventing global warming and ocean acidification.

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