Proceedings of International Business and Social Sciences and Research Conference

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Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
Decentralization, Green Subsidies and Greenhouse Gas
Removal1
Julian Silk
This paper attempts to address points in the struggle over action against
global warming. The first is that inaction, while consistent with a belief in
high price elasticity of demand, is more convincingly explained by efforts
of the wealthy to maintain relative position. In the U.S.A., opposition is
led by the Republican party and its Tea Party wing, who are fighting to
defend not only the highest “1%” of the income distribution, but farm and
ranch owners who believe global warming will improve their production;
the coal, oil and natural gas industries, their stockholders, management
and workers, concerned that the collective solutions of carbon taxes and
cap-and-trade policies will destroy their industries, and the like.
If this first point is correct, it suggests a specific set of actions to combat
global warming. The coal industry isn’t eliminated, but incentives are
provided to control and use its emissions. Emissions have fallen
because of the worldwide recession, which has slowed electric utility
emissions overall, and the switch to natural gas facilities in this industry,
powered by the availability of cheap shale gas. Both of these conditions
may end. If there were a worldwide and highly liquid market for
greenhouse gas emissions in controlled form, not the relatively small
markets of fertilizer, or enhanced oil and gas recovery, what would this
market actually do? Clearly a positive price would be paid for the
controlled emissions, and they would be utilized and converted in some
way.
Green subsidies to existing technologies, such as algal conversion of
carbon dioxide to natural gas, partially proxy what such a market would
do. But the schemes that have been proposed are still too collective. For
example, national carbon dioxide pipeline networks would have to be
paid for by national taxes, and we are back in our original position. Is
there something simpler that could be tried on a smaller scale? Can
green subsidies, and some other tax, one more attuned to conservative
sensibilities, such as a lump-sum tax, be used to test things out on a
smaller scale?
Once both of these points are recognized, they point the way to
technologies we want, if we could get them. Two types are proposed.
The first can be called water-modulated housing, or WM. This uses the
properties of water, or some other fluid, into which carbon dioxide could
be infused (and ideally removed, in an intelligent manner) to conduct heat
transfer. A sketch, which is overly simple, shows how this would work for
a single-family detached house. Hot water that retains heat is collected.
At first glance, we might not want such hot water. But this is not the
case, especially in dry climates. If there is net removal of carbon dioxide
with the hot water, we have a new source of decentralized demand for
carbon dioxide.
______________________________________________________
Julian Silk, University of Maryland, University College (UMUC),
Email: silk30918@earthlink.net
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
WM may not be profitable at current market prices, but a lump-sum tax, green subsidy
(LSTGS) scheme may exist that puts it over the top. We can then start asking
questions: what fluids will work, how efficient is each, can you remove carbon dioxide
once you have collected it, is it efficient to do so, how much LSTGS would you need for
profitable local pipeline networks, etc.
The second technology could be called greenhouse gas flushing, or GGF. Greenhouse
gases collect in the ocean and the atmosphere. But do they collect in layers, or are
they randomly mixed? If there is random mixing in both cold and hot parts of the ocean,
it may be possible to reposition the mixing to colder regions, where new removal
technologies can be used. The same goes for the atmosphere. If there is no mixing, it
may be possible to skim the layers. Either way, at worst there are concentrated
greenhouse gases that can be shipped without pipeline networks, and that can be paid
for by an LSTGS scheme. At best, there may be controlled zones that are more
productive than the untreated zones. GGF with net removal of carbon dioxide may
make the carbon-negative sectors of GDP statistically significant.
The real question in the global warming debate is this: Is an economy in which
greenhouse gas emissions are controlled less efficient than one in which such
emissions are uncontrolled? Global warming doubters and fatalists assume that the
answer is yes, interventionists assume the answer is no. Schemes of this sort may
provide empirical data to start answering the question. If the interventionists are right,
and greenhouse gas removal becomes more feasible, then there is an answer to those
who say China and India will do nothing no matter what other countries do: you lead by
example.
I. Inaction on Climate Change by the U.S.A.
No specific legislative proposal to combat global warming has ever passed both houses
of the U.S. Congress to become American law, although specific Executive actions to
combat global warming have been put into effect. The history of specific legislative
attempts
in
the
U.S.
Congress
is
detailed
in
http://en.wikipedia.org/wiki/Climate_change_policy_of_the_United_States. The attempt
that came nearest to success is the American Clean Energy and Security Act of 2009
(also known as the Waxman-Markey Bill, in reference to its two sponsors, Henry
Waxman (D-CA) and Edward Markey (D-MA), hereafter denoted ACESA). This bill
passed the U.S. House of Representatives, but failed to receive sufficient votes in the
U.S.
Senate
(cf.
http://en.wikipedia.org/wiki/American_Clean_Energy_and_Security_Act_of_2009).
ACESA intended to impose a cap-and-trade system on greenhouse gas emissions. But
it was quite complicated, at more than 900 pages. ACESA distributed payments to a
vast number of recipients. The following is an incomplete table of who was to be paid,
the purpose of the payment, and the specific citation from ACESA.
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
Recipient
Purpose of Payment
ACESA Source Page(s)
Engineers, Academic Researchers
Develop Carbon Capture and Sequestration Technology
45-89
U.S. Automobile Manufacturers
Promote Electric Drive Vehicles and Infrastructure
93-108
U.S. Consumers
Rebates
583
U.S. Consumers
Purchase Most Energy-Efficient Appliances
313-326
U.S. States
Finance Energy-Efficient Buildings
200-266
U.S. States
Develop Smart Traffic Plans and Implementation
333-342
Community Development Organizations
Promote Energy-Efficiency and Renewable Energy
360
Less Developed Countries
Reduce Deforestation
499
Newly Industrializing Countries
Reduce Emissions
511-512
U.S. Energy-Intensive Industries
Rebates
716-719
U.S. Petroleum Refineries
Rebates
740-746
U.S. Workers Affected by Trade
Adjustment Assistance
750-754
U.S. Academic Researchers
Develop Clean Energy Innovation Centers
180-191
U.S. Academic Researchers
Study Ocean Renewable Energy and Transmission
192-199
U.S. Academic Researchers
Develop Centers to Study Health and Climate Change
856
U.S. Secretary of Health and Human Services
Climate Change Protection Fund
863-864
The provisions of ACESA were also opaque. Steven Mufson, "High-Stakes Quest for
Permission to Pollute", The Washington Post, A11, Friday, June 5, 2009, pointed out
"An item inserted at the behest of Rep. John D. Dingell (D-Mich.) would give the auto
industry $1.4 billion worth of extra allowances starting in 2012 when the cap-and-trade
system takes effect, according to an estimate by the Union of Concerned Scientists."
Subtitle B: Disposition of Allowances (pp. 536-589) attempted to characterize these
payments. An example of its language from p. 541 is worth quoting. "The
Administrator" is the Environmental Protection Agency Administrator:
1
2
3
4
"(e) TRADE-VULNERABLE INDUSTRIES.—The Administrator shall allocate emission allowances to energy
intensive, trade-exposed entities, to be distributed in accordance with part F, in the following amounts:
5
6
7
"(1) For vintage years 2012 and 2013, up to
2.0 percent of the emission allowances established
for each year under section 721(a).
8
9
10
"(2) For vintage years 2014, up to 15 percent
of the emission allowances established for that year
under section 721(a).
11
12
13
‗‗(3) For vintage years 2015 through 2025, the
maximum number of allowances that shall be distributed shall decline by the same amount that the
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
14
15
16
17
annual reduction target set forth in section 702 declines (which is 1.75 percentage points annually for
2015 through 2020, and 2.5 percentage points annually from 2021 through 2025).
[Italics and underline added]
It was never clear whether this was a typing mistake or a payoff, and ACESA died
before this could be clarified.
Granted that ACESA was complicated and cumbersome, there has been no action at all
since. In particular, the Republican Party responded with the REINS Act (for
Regulations From the Executive in Need of Scrutiny). This passed the U.S. House of
Representatives
in
August
2013
(cf.
http://thehill.com/blogs/regwatch/legislation/315241-house-votes-to-give-congresspower-over-major-regulations) though no U.S. Senate action on it has been taken or is
likely to be taken until after the November 2014 elections. This legislation was
sponsored by Rep. Todd Young (R-IN) and included a specific provision by Rep. Steve
Scalise (R-LA) to require Congressional approval before a carbon tax could be
implemented (see http://www.gop.gov/bill/113/1/hr367), and another by Rep. Rodney
Davis (R-IL) and Rep. Colin Peterson (D-MN), to shield agriculture from regulation
(ibid.).
The sponsorship of the REINS Act provides hints that the opposition to collective action
against climate change is not strictly a natter of the wealthy being opposed while the
poor are in favor. Metairie is a wealthy suburb of the city of New Orleans, but much of
the rest of Rep. Scalise‘s district is highly agricultural, as is Rep. Young‘s.
The other hard core of opposition to action on climate change is the coal industry and
states that are still directly tied to it. The recent Washington Post article on changing
political views in West Virginia, ―A Blue State‘s Road to Red‖,
http://www.washingtonpost.com/sf/national/2013/10/26/a-blue-states-road-to-red/
illustrates this well. The article quotes several who insist President Obama is waging a
war on coal, but none who mention climate change, or any possible justification for the
imputed war. A proposed Environmental Protection Agency rule (EPA) requiring coalburning electric generation facilities to have carbon capture and sequestration (CCS)
(cf.
http://yosemite.epa.gov/opa/admpress.nsf/bd4379a92ceceeac8525735900400c27/da96
40577ceacd9f85257beb006cb2b6!OpenDocument) has been heavily criticized by a
U.S. House of Representatives panel, chaired by Rep. Lamar Smith (R-TX), (see
http://science.house.gov/press-release/technology-inadequate-meet-epa-s-proposedpower-plant-rule). The three statements released are by Smith himself, who represents
a major-coal burning state as well as a major oil and natural gas state, and by
Representatives from Utah and Wyoming, among the leading coal mining states.
(Wyoming is in fact the leading U.S. domestic coal producer.)
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
This distinction between opposition to climate change legislation being tied to wealth
and being tied to agricultural and coal interests was played out even more dramatically
in the recent election for Virginia governor. The election returns show Terry McAuliffe,
Democrat, with 48.0% of the vote, beating Ken Cuccinelli, Republican, with 45.5% of the
vote.
They
are
available
in
interactive
form
at
http://elections.huffingtonpost.com/2013/results. Cuccinelli made opposition to climate
change legislation one of his key issues, going so far as to repeatedly bring legal action
against a researcher at the University of Virginia, Michael Mann, who had attempted to
document
climate
change
(see
http://en.wikipedia.org/wiki/Attorney_General_of_Virginia%27s_climate_science_investi
gation). Cuccinelli did not bring any similar action against other academic researchers,
and his demands were dismissed by the Supreme Court of Virginia. Cuccinelli lost
badly in Albemarle County (in which the University of Virginia is located); in
Charlottesville, the site of the University, McAuliffe received 76.2% to Cucinelli‘s 15.5%,
one of his worst showings in the state.
Cuccinelli also badly lost in Richmond, its immediate suburb of Henrico County, and all
the counties of Northern Virginia close to Washington, DC, including Prince William
County, and in most of the Norfolk-Newport News region, all among the wealthiest
areas of the state. Prince William had been considered a tossup,
but McAuliffe
received 52.0% to Cuccinelli‘s 43.8%. Unofficial results for Middleburg, one of the
state‘s
wealthiest
locations,
at
https://docs.google.com/spreadsheet/ccc?key=0AngDot1vmw_VdDl2bnlVakNxSS1laUN
Qc0JubEM4Nnc&usp=sharing#gid=0, show McAuliffe receiving 293 votes to
Cuccinelli‘s 231.
Cuccinelli‘s strongest showings were in Campbell County, where he received 70.5% of
the vote to McAuliffe‘s 23.5%, and in the far southwest corner of the state, near
Tennessee. In Scott County, in this corner, Cuccinelli received 75.8% to McAuliffe‘s
21.9%, his strongest statewide showing. Campbell County is heavily rural (61% of the
population is rural – see http://www.city-data.com/county/Campbell_County-VA.html),
while the southwest corner of the state is a center for coal mining (see
http://www.virginiaplaces.org/geology/coal.html) and Scott County has major employers
which depend directly on natural resource extraction, including Gilbert-NS Lumber and
Joy Mining and Machinery (see http://scottcountyva.com/eda.htm).
McAuliffe‘s victory has been taken as proof that climate change denial is no longer a
winning proposition (see http://www.theguardian.com/environment/climate-consensus97-per-cent/2013/nov/06/global-warming-science-denial-losing-position), but this is a
major exaggeration. The truth is that McAuliffe, although he has improved, was a
relatively weak candidate. Cuccinelli had several things working against him besides
the climate change controversy: he was badly outspent; he was implicated in the
corruption scandal around incumbent governor Robert McDonnell; Bill Bolling, who ran
against him as a Republican, did not endorse him when he lost; there was massive
disapproval of him personally by unmarried men and especially unmarried women, who
voted against him 67% to 25% (see http://www.washingtonpost.com/wp-
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
srv/special/local/2013-elections/exit-polls/). Both candidates drew heavily unfavorable
ratings (see http://www.washingtonpost.com/local/virginia-politics/polls-open-acrossvirginia-in-hotly-contested-governors-race/2013/11/04/06c6205c-45d2-11e3-bf0ccebf37c6f484_story_1.html).
McAuliffe was projected to win by 6% (see
http://www.huffingtonpost.com/2013/11/04/virginia-governor-polls_n_4212084.html), but
barely won by 2.5%. So it is plucking amongst blazing firebrands to draw the
interpretation that a McAuliffe-style strategy to deal with climate change could work.
What it does show is what one has to work with and what has to be done: mute
opposition by agriculture and by the coal, natural gas and oil industries, and to get a
funding advantage from the wealthy, while not dropping too drastically among
constituencies that favor action against global warming.
It has to be stressed that this is political meteorology. If ACESA was the most that
could be done along the lines traditionally taken for pollution regulation at a time when
Democrats (who are willing to sponsor such measures) had control of the Presidency
and both houses of Congress, little can be expected along traditional lines in the near
future. The evidence on consumer attitudes to paying for measures to cut greenhouse
gases (GHGs, hereafter) is mixed: Soskin and Squires (2013) at
http://businessperspectives.org/journals_free/ee/2013/ee_2013_01_Soskin.pdf
is an example which suggests college-educated consumers may have a willingness to
pay that makes green power competitive in some cases; the many requirements in
terms of labeling, consumer awareness, availability of repairs, etc. that are needed are
stressed in http://www.ssireview.org/articles/entry/cultivating_the_green_consumer/.
Even if as many as 33% of customers are willing to pay to cut GHGs, the process will
be one of slow erosion as long as opponents of any mandatory action are convinced
their position has popular support. It is clear this remains the case: Cuccinelli, as
quoted in http://www.washingtonpost.com/local/virginia-politics/ken-cuccinelli-reflectson-losing-virginias-governors-race-talks-about-whats-next/2013/11/18/e5ddee64-508111e3-9fe0-fd2ca728e67c_story.html, is absolutely unrepentant about the race and is
waiting to go against Senator Mark Warner (D-VA) in 2014.
II. The American Situation: A Temporary Reprieve
It could however be argued that global warming is not a serious problem, and that the
consequences of inaction to the U.S.A. are not severe. This is partly an argument
about the costs of action vs. inaction, and partly an argument about what the situation is
now.
The most recent issue of the Jornal of Economic Literature has a Forum on the issue
―How Should We Model Climate Change?‖ Lord Nicholas Stern (2013) and Pindyck
(2013) argue in different ways that the integrated assessment models that have been
built to directly address the issue are not very helpful. Stern, however, in his Appendix,
Part 1, op. cit., 853-854, has an impressive list of catastrophes to consider in the wake
of global warming that is quite prophetic in the wake of Typhoon Haiyan in the
Philippines. Both however do argue for action now, e.g., ibid, 870.
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
Martin Weitzman, (2013) also argues for action now, but gets closer to the real issue in
the debate. What is the actual rate of interest that should be used in analyzing public
policy to measure payoffs to insurance against catastrophic risks in the future? If we
know that disaster will occur tomorrow if nothing is done, obviously insurance would be
bought immediately. So in this case, the interest rate to consider for the insurance is
zero. If disaster is very uncertain, and may not occur in the lifetime of those who are
paying for the insurance, the interest rate is very high (at least for those who believe
this), 10% or more, possibly.
Meanwhile, there is the question of what the situation is now. Do the conservatives
have some empirical basis for their beliefs? Only the empirical weather data will be
considered, but this will also offer a chance to re-examine and clarify my own work. (It
will be a minimal re-examination, as will become clear.) It will be argued that a reprieve
has come, but there are ominous warning signs that this reprieve is quite temporary.
My work addresses global warming most directly in Silk (2008), which is easily available
online. In that work, heating degree-days (HDDs), cooling degree-days (CDDs) and
precipitation were examined. Forecasting models were built for the first two, and
compared with a cyclical model: it was argued that a linear model outperformed the
cyclical model for both The data were national and were from the National Climate
Data Center (NCDC) and were for the 48 contiguous states in the U.S. Data are
available from 1895 to the present; only the latest data will be used here, with some
estimates made for 2013.
The main directory for all these files, and others as well, is
http://www1.ncdc.noaa.gov/pub/data/cirs/
The particular files to be examined in detail are
drd964x.cddst.txt and drd964x.hddst.txt.
At the bottom of each file is the composite annual data. For example, the data signifier
for national cooling degree days for 1895 is 1010041895.
Let the variable y be the current year – 1895. So y for 2008 would be equal to 113.
The linear estimated models for CDDs and HDDs whose forecasts can be examined are
thus, letting italicized variables denote the estimates, with standard errors beneath in
parentheses:
CDDs = 832.820 – 4.604*y
(129.689) (1.337)
HDDs = 5713.462 – 13.641*y
(434.603) (4.374)
R2 = 0.270
R2 = 0.265
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
No one is arguing these are inherently good models. Examining both series shows they
are extremely erratic, almost ―sawtooth‖ in appearance. It is just a question of whether
the fitted linear models were better than the fitted cyclical or cubic models. The original
article, largely based on in-sample considerations, argued that they were, and the
forecast record, while poor, does nothing to challenge that conclusion.
The forecasting results will be shown in tables and graphs. Please note that in these
forecasts, ―actual‖ values for November 2013 and December 2013 are taken to be the
2008-2012 averages: 13.8 and 7.6 for the cooling degree days, and 504.6 and 807.8
for the heating degree-days.
Estimated CDDs Actual CDDs %Error
1339.26
1411
-5.08%
1343.864
1388
-3.18%
1348.468
1379
-2.21%
1353.072
1261
7.30%
1357.676
1209
12.30%
1362.280
1427
-4.54%
1366.884
1428
-4.28%
1371.488
1464
-6.32%
1376.092
1267.4
8.58%
Estimated HDDs Actual HDDs %Error
4212.952
4246
-0.78%
4199.311
3915
7.26%
4185.67
4259
-1.72%
4172.029
4506
-7.41%
4158.388
4492
-7.43%
4144.747
4464
-7.15%
4131.106
4339
-4.79%
4117.465
3785
8.78%
4103.824
4413.4
-7.01%
CDDs
1500
1450
C 1400
D
1350
D
s 1300
CDDs
Estimated CDDs
1250
1200
2005
2007
2009
Year
2011
2013
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
HDDs
4600
4500
4400
H
D
D
s
4300
4200
HDDs
4100
Estimated HDDs
4000
3900
3800
3700
2005
2007
2009
Year
2011
2013
So what happened? What happened should give no comfort to global warming deniers.
First the recession, and later the advent of shale gas and the retirement of many coalburning facilities, had a big effect on U.S.A. CO2 output, which helps explain these
errors. The following CO2 output data are from the U.S. Energy Information
Administration, which has taken them from the U.S. Environmental Protection Agency,
but has formatted them in a more convenient manner. These are annual data by
country, and show only the years from 1980 to 2011.
They are on
http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=90&pid=44&aid=8&cid=regions
&syid=1980&eyid=2011&unit=MMTCD
and are graphed as follows for the U.S.A. and China :
Annual CO2 Emissions
M
e
t
r
i
c
M
i
l
l
i
o T
n o
n
s
6800
6300
U.S.A. CO2 Emissions
5800
U.S.A. Turning Point
5300
Chinese CO2
Emissions
4800
4300
1980
1990
2000
Year
2010
Notice that U.S. emissions fall in every recession. But the biggest fall, which surpasses
all the rest, is in the latest years, and is directly tied to shale gas. Emissions fall and
stay down, even with the lukewarm recovery since 2009. However, the Chinese
emissions shoot up like a skyrocket, and have continued to do so. The combined effect
of the CO2 emissions could have a big effect in explaining the resulting temperatures.
No linear model as simple as the one outlined can capture this.
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
These CO2 data only go up to 2011. But all evidence indicates that the trends
continued in 2012.
The World Meteorolgical Organization reports on
http://www.wmo.int/pages/mediacentre/press_releases/pr_980_en.html
that
world
concentrations of the most important GHGs increased in essentially linear fashion
between 2011 and 2012, although they do not provide country breakdowns. The U.S.
EPA
has
an
incomplete
report
for
2012,
at
http://www.wmo.int/pages/mediacentre/press_releases/pr_980_en.html, which they
estimate includes 85% - 90% of total U.S. emissions. They estimate that total reported
emissions decreased by 4.5% between 2011 and 2012.
The most exhaustive analysis of GHGs emissions is U.S. EPA (2013) Inventory of U.S.
Greenhouse Gas Emissions and Sinks. This is an annual report that documents
emissions by sector. There is no reason to believe Chinese sectors are more efficient
in any sense than the U.S. sectors, and also no reason to believe that Chinese sectoral
emissions decreased significantly in any sector between 2011 and 2012.
The patterns for both HDDs and CDDs show warming, even with the erratic shifts in
levels. The shift in inflection pattern from 2005-2007 to 2010-2012 for CDDs is the most
significant evidence of this.
In addition, it seems clear that kurtosis is increasing for both HDDs and CDDs, as was
observed for precipitation. The raw monthly averages may be hiding this. In Maryland,
near Washington, DC, leaf fall from deciduous trees used to be complete by early
November, as late as 2000. In 2013, leaf fall will probably not be complete until
December 2013, and possibly not even then. In and near Baltimore, Maryland, leaf fall
is essentially complete. Moreover, it has been very dry. If we go from one November in
which temperatures are consistently near 50° F for daytime highs, to one in which
temperatures are mostly 55°F for daytime highs, but there is one Arctic cold snap in
which daytime highs are near 40°F, the monthly averages will show little change,
because the differences cancel out on average. The latter is descriptive of current
events, and seems strongly suggestive of warming.
EPA, op. cit., 2-3 notes:
From 2010 to 2011, CO2 emissions from fossil fuel combustion decreased by 2.4
percent. This decrease is a result of multiple factors including: (1) a decrease in the
carbon intensity of fuels consumed to generate electricity due to a decrease in coal
consumption, with increased natural gas consumption and a significant increase in
hydropower used; (2) a decrease in transportation-related energy consumption due to
higher fuel costs, improvements in fuel efficiency, and a reduction in miles traveled; and
(3) relatively mild winter conditions resulting in an overall decrease in energy demand in
most sectors.
The graph below shows how oil prices and natural gas futures prices have changed
between 2009 and 18 November 2013. The prices are NYMEX (New York Mercantile
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
Exchange) West Texas Intermediate (WTI) crude oil prices and composite (Henry Hub)
natural gas prices, and are obtained using the graphing facility of The Wall Street
Journal to view commodities and futures prices in its ―Market Data‖ section. The lower
line is the natural gas prices, and the upper one is oil prices. It appears that oil prices
and natural gas prices are both declining from recent levels, but this is to overweight the
endpoints – the oil price decline has leveled out, as has the natural gas price decline.
If the endpoints are de-emphasized, what becomes apparent in viewing this graph is
that both prices, while extremely erratic, have plateaued. In particular, natural gas
prices are likely to stay in the $3.50 - $4.00 per Million BTU range for a while, having
bottomed near $2.00 per million BTU in April 2012.
Once this is over, signs are for increased natural gas prices. The recession will end, but
the U.S. will also allow increased liquefied natural gas (LNG) exports, as reported in
http://www.reuters.com/article/2013/11/15/usa-lng-freeport-idUSL2N0J01P520131115.
In addition, monthly dry shale gas production (in billion cubic feet per day) has leveled
off from all major domestic U.S. fields, as shown in the Natural Gas Weekly Update of
U.S. Energy Information Administration (EIA), for the week ending November 13, 2013.
This weekly report is online at http://www.eia.gov/naturalgas/weekly/. Of course this is
a supply response to lower market prices, but it contrasts with the increases in
production even during 2012, when prices were lower. So at least some of the major
factors keeping U.S. emissions down may be evaporating.
III. An Ideal Private Solution
Do the Tea Party conservatives see government, which would of necessity be involved
in any public policy against global warming, as a more immediate threat than global
warming itself? Matea Gold, ―Some see McConnell‘s deal as betrayal – and opening‖,
The Washington Post, October 19, 2013, A1, captures this feeling perfectly in her
reporting of the comments of a challenger to Mitch McConnell, Matt Bevin:
―But here in the scenic countryside southeast of Louisville, conservative voters
gathered in a meeting hall at the local farm bureau to slam his deal-making as a
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
betrayal - and to consider the bid of McConnell's GOP primary challenger, Matt Bevin,
who pledged to be their voice in Washington.
‗I don't feel he represents us or that he's, frankly, even in touch with where we
are,‘ Bevin, a self-made entrepreneur and affable father of nine, told the audience. ‗I
think these last several days have helped to indicate some of that. There's a certain
amount of disdain.‘
He added, ‗There are a lot of naked emperors that are parading around in
Washington. These emperors need to be
exposed.‘
More than two hours later, the room was still packed and people had their
checkbooks out on their laps, ready to back
him.
‗I went in completely unconvinced,‘ said Taylorsville resident Chris Sullivan, a
retired naval officer. ‗And now I'm
going to go work for his campaign.‘ "
Taking views of a private solution seriously means putting aside belief in a clarifying
election, one that would give decisive victory and remove many obstructions to power
for one side or the other, and thus exploring what could be done along a knife edge in
gridlock.
What would an ideal private solution look like? Suppose it simply wasn‘t possible to
increase the output from the sources of CO2. Some sort of absolute technical limit was
imposed by nature that had nothing to do with government. Moreover, suppose that
algal conversion of CO2 to natural gas was the only possible source of new natural gas,
that the problem of keeping the algae cool enough for optimal production were cheaply
solved
(this
is
complete
fantasy
so
far
–
see
http://www.biofuelsdigest.com/bdigest/2013/09/08/seeking-delta-biofuels-algae-natgasco2-and-the-finding-of-true-value/, which seems the most down-to-earth and accessible
analysis of the problem easily available), and the price of natural gas were $1,000 per
million BTU. Private entrepreneurs would be clamoring for the building of pipeline
systems to transport CO2 to the natural gas production sites day and night, and
governments and private companies would already have responded. Cleaning systems
would be continually tested at fossil-fuel plants, to find the one that removed impurities
at lowest cost, so that pure CO2 streams would be available at minimal cost. Moreover,
similar cleaning systems would be getting installed at residential, commercial and
industrial sites.
It is at least conceivable that something similar would be done for all forms of
transportation. But once this was done, and you had the pure streams of CO 2 collected,
it would be necessary to remove it from the collection devices in a simple manner. The
work of Klaus Lackner, shown at http://www.youtube.com/watch?v=qGL21j10C8Q,
would likely to be heavily involved in such transfer from transportation vehicles. You
would have some sort of cleaning mechanism in the exhaust pipe, desiccation systems
to strip the moisture, and resins in a special compartment. For private automobiles, for
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example, drivers would fill up the resin compartment in normal driving, then take it to the
fuel stations (e.g., gasoline stations) when they needed to refuel. There would be
machines at the fueling stations that would take out the resin compartments containing
the CO2, replace them with fresh resin compartments, and provide some sort of
payment, which could be applied toward reducing the payment for fuel.
It‘s easy to see how something similar might be involved for at least residential systems.
You would have non-GHGs emitting trucks drive from house to house. The trucks
would operate machines that would collect the residential resin compartments, and
replace them with fresh ones. Payment would be issued to the homeowners, and the
payment would probably take some form of reduction in fuel payments. The setup
would be similar to that used for residential fuel oil, which used to be a much more
popular fuel than it is today. EIA‘s ―Adjusted Sales of Distillate Fuel Oil by End Use‖, at
http://www.eia.gov/dnav/pet/pet_cons_821dsta_dcu_nus_a.htm, shows that residential,
commercial, military, electric power and railroad use of fuel oil has declined significantly
in the U.S.A., while industrial and farm use has remained roughly constant, and oil
company use has more than doubled. So people no longer see the fuel trucks rumbling
through most neighborhoods, but those with long memories can remember when these
were regular experiences, and they are a model for the imagined systems.
Lackner‘s system doesn‘t solve all problems. It doesn‘t work in water itself. Liqui-Cel
membranes are one possible solution for this problem, as discussed in http://www.liquicel.com/applications/CO2.cfm. (More general discussions of this technology are in
http://www.watertechonline.com/articles/165968-snowpure-tip-effective-co2-removal
and
http://www.environmentalexpert.com/Files%5C11627%5Carticles%5C18653%5C6.pdf, still, alas, one of the
better discussions of the topic.) The technology is expensive and problematic, but
would be used if these conditions were met.
Some features stand out in this scenario. First, after the installation and construction
were over, it‘s not dramatic. There are trucks, machines, and pipelines, just as there
are in the U.S.A. at present, just more of them. No commissar is involved in the
process, and there aren‘t news reports on it every night as the lead story in the news.
There is government regulation, but it is in the background, and there are no popular
protests, or Congressional hearings. Personal behavior changes little. The political
parties aren‘t significantly involved. The nature of the American economic system is not
profoundly changed. The industries that were important before remain important, and
are not replaced wholesale by new industries or product groups – there is no reordering
of the economy.
Most important, what determines who has the systems, and who receives payments, is
money. People with large amounts of disposable income have the systems first, and
receive much of the payments. It isn‘t ―Big Government taking your money away from
you to give to undeserving minority groups on welfare‖. Individual purchasers make the
decisions, and not government bureaucrats. So it is democratic, but it is a democracy
by incomes, in which wealthy people have more ―votes‖ than do individual poor people.
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It rewards hard work, which is good, but only under what is roughly the current market
system, an attractive one to people who have done well, and who have made the
compromises to accept it, and not so attractive to others. It‘s thus conservative in a
more general sense than the political.
It becomes immediately obvious, in thinking about this private solution, that high fossil
fuel prices (without the absolute natural limit on CO2 and other greenhouse gas
emissions) possess a number of features of it. But this is the outcome that would be the
least likely to be acceptable to conservatives. Charles Krauthammer, always attuned to
conservative sensibilities, captures this perfectly with his ―Obama‘s Oil Flimflam‖, The
Washington Post, 15 March 2012, at http://www.washingtonpost.com/opinions/obamasoil-flimflam/2012/03/15/gIQA7x77ES_story.html, insisting that ―thousands of shovelready jobs‖ would be brought about by approval of the Keystone XL pipeline and also
insisting that ―High gasoline prices are a major political problem for Obama‖. Both of
these are thoroughly debatable claims (the existence of the Organization of Petroleum
Exporting Countries, or OPEC might have had something to do with high gasoline
prices, but you would never know it from the column). But if this is how a political
blocking coalition thinks, it has to be taken account of.
IV. Proxies – Lump-Sum Taxes, Green Subsidies, Carbon Tariffs and
Others
It is clearly possible to wait for fossil fuel prices to rise, and for the ideal private solution
to be brought about by market forces. This is doing nothing with public policy, and is
the preferred form of action by political conservatives.
But this approach can allow significant and possibly irreversible environmental damage
to occur before private enterprise, unaided, rides to the rescue. The current status of
efforts to bring about net reductions in greenhouse gases is surveyed in
http://news.stanford.edu/pr/2013/pr-reducing-carbon-dioxide-021513.html. Except for
agriculture, which is slow, progress in the field is limited. Olivia Ricci, of the University
of Orléans, in France, calls for a carbon tax as a necessary component, and we are
back where we started, stuck.
To see what might be done, the easiest thing is to go back to basics. The following is
the standard argument of pollution externalities. The following case is taken from
Tietenberg (2006), 82, and is typical. Some output is produced, which has a pollution
externality (an unpaid spillover that negatively affects those who aren‘t directly involved
in the transaction to purchase the product), in this case greenhouse gas emissions.
MPC is Marginal Private Cost to produce the output, MSC is Marginal Social Cost for
producing the output, and the output is sold on a competitive market at a given price.
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Efficient Output with Pollution
Damage
MSC
MPC
Price
Price (Dollars
per Unit)
tax
subsidy
Output
If the exact cause of the damage in an individual case can be localized or identified or
both, transaction costs are minimal, and the gain is enough, the usual argument is that
private negotiation will lead to installing pollution control devices, to an optimal level.
The only real question is who makes the payment, not what will happen. This is the
celebrated Coase (1960) theorem. Wikipedia has a good overview of the theorem at
http://en.wikipedia.org/wiki/Coase_theorem.
This isn‘t possible here, since none of the conditions are fulfilled. The usual response
would be to install a Pigouvian tax on output, to make producing output more expensive,
and to internalize the unpaid costs, and so bring marginal private cost into line with
marginal social cost. This follows the reasoning of Pigou (1920), and is represented
here by the vertical sequence of ―x‘s‖ for tax. Wikipedia also has a good overview on
these: see http://en.wikipedia.org/wiki/Pigovian_tax.
A Pigouvian tax simply isn‘t politically feasible in the U.S.A. Instead, the problem can
be attacked the other way around. We see the polluter with the pollution-controlling
technology, and we subsidize the producer once it is installed, so that the marginal
social cost becomes the marginal private cost once again. We have to get the money
from somewhere, and we get the money through a lump-sum tax. This proposal is in
fact quite similar to the one made in Carlton and Loury (1980), but can be made more
specific.
This brings us to the idea of fuel cells. Those interested in natural gas will recall the
work
of
Bergens,
Gorman,
Palmore
and
Whitesides
(1994),
at
http://gmwgroup.harvard.edu/pubs/pdf/411.pdf. This is one of the set of publications of
the Whitesides Research Group, online at http://gmwgroup.harvard.edu/. But the
natural gas fuel cell does not seem to have been significantly further developed by this
group. The group has done work on other fuels as sources for fuel cells, of which coal
seems to have been the last fuel directly tested, in Weibel, Boulatov, Lee, Ferrigno and
Whitesides (2005), online at http://gmwgroup.harvard.edu/pubs/pdf/923.pdf. It has done
a considerable amount of basic research, of which Tran, Cohen, Murray, Rampi and
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Whitesides (2009), online at http://gmwgroup.harvard.edu/pubs/pdf/1043.pdf, may
ultimately be the most important in the long-term development of fuel cells (it is difficult
for a non-specialist to be clear about this).
But the group does not seem to have
been directly involved in utility or other commercial applications.
Those familiar with fuel cells at all will be familiar with the work done by Ballard Power
Systems. This work is described on the company web site at http://ballard.com/. The
most relevant product for utility applications appears to be the ClearGenTM Multi-MW
Systems,
described
in
http://ballard.com/fuel-cell-products/cleargen-multi-mwsystems.aspx. This product comes in a 1 MW (megawatt) standard size for distributed
generation, and is scalable in 500 KW (kilowatt) increments. Although similar items are
being produced in Canada and Tijuana, Mexico, and China has signed up to use test
these products on buses, (as described on the web site), I, personally, have always
been skeptical about hydrogen fuel cells, produced by Ballard and other competing
companies, despite their vaunted environmental qualities. Of the companies directly
involved, Hydrogenics, (cf. http://www.hydrogenics.com/), located in Mississauga,
Canada, seems to be the most successful. Kirt Hill points this out in his Motley Fool
column, online at http://www.fool.com/investing/general/2013/11/18/hydrogenics-and-ahydrogen-economy.aspx. But the infrastructure obstacles and the costs seem to be
insurmountable for wide-scale adoption in the near future, although these companies
may be good bets for the very long term.
Instead, the most promising application for the near-term application appears to be a
natural gas fuel cell – engine configuration by GE described by Martin LaMonica in his
IEEE Spectrum article on 24 September 2013, ―GE to Muscle into Fuel Cells with Hybrid
System‖, at http://spectrum.ieee.org/energywise/energy/fossil-fuels/ge-to-muscle-intofuel-cells-with-hybrid-system.
The GE system promises 70% efficiency in fuel
conversion, according to Mark Little, director of GE Global Research.
The most direct way to quickly get changes in GHGs emissions would be to put
integrated gasification combined cycle (IGCC) coal plants into operation with such GE
fuel cells.
Wikipedia has a good web site on these plants at
http://en.wikipedia.org/wiki/Integrated_gasification_combined_cycle. It‘s necessary to
make a distinction between a development strategy and a GHGs-reduction strategy. If
one wants to design a development strategy that interferes as little with laissez-faire,
one hopes for the gradual displacement of coal facilities by natural gas facilities, and
does nothing otherwise. But this ignores the warnings of the end of the reprieve, and
does nothing to entice the coal supporters.
The
two
serious
IGCC
possibilities
are
the
Kemper
IGCC
(see
http://en.wikipedia.org/wiki/Kemper_Project) to be built in Mississippi, and the
Edwardsport IGCC (see http://en.wikipedia.org/wiki/Edwardsport_Power_Station) to be
built in Indiana. Both have suffered start-up problems and significant cost overruns (see
http://www.reuters.com/article/2013/06/10/utilities-operations-duke-edwardsportidUSL3N0EM2G720130610). A part of the cost overruns has come from environmental
protests. But part has come from the technical complexity of the projects.
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A very optimistic example might be to add $10 to all the electricity bills in Mississippi in
order to subsidize and pay for the testing of one of the GE fuel cells on one of the
gasifiers of the Kemper IGCC. This would provide the first solid experimental data on
what fuel cell costs really are, and what they can do, at the utility-scale level.
Such lump-sum taxes are not going to be popular. Margaret Thatcher‘s experiment with
lump-sum
taxes
is
described
in
http://www.palgrave.com/economics/tresch/example/pdfs/Example4.1.pdf; it led to riots
in the streets and led directly to her resignation as Prime Minister. But we go back to
ACESA and the problem with conservative resistance; we are taking a small part of the
ACESA plan above – the payments to energy-intensive industries – and funding it in the
way which is least likely to offend conservative sensibilities. Their sensibilities will still
be upset, since government is involved with the collection of the payments, but it may
be possible for the payments to be large enough to overcome this resistance.
Moreover, Bob Matyi of Platt‘s Coal Trader, reports on 13 November 2013 that the
Indiana Utility Regulatory Commission just approved a plan to install $258 million of
pollution controls at the 2,600 MW coal facility of Indiana Michigan Power at Rockport,
Indiana. So by working with Mississippi, one is not lumping costs on top of costs
immediately. Moreover, such a demonstration might attract funding from outside the
state.
There might be positive multiplier effects of the spending in the usual Keynesian terms,
but such effects can‘t be assumed, and certainly can‘t be argued to the conservatives,
who are the least likely to believe their existence.
The ugly necessity of doing something like this if any serious action is to be taken can
be seen by considering an alternative procedure to pay for the subsidies: carbon tariffs.
We will consider China as the country that would pay the tariffs. Any method the U.S.A.
attempts to use carbon tariffs will invite retaliation which could easily wind up costing
more than the revenue which is gained from China, or which could involve very high
costs to generate a net gain. (Moreover, other countries, like Mexico, which try such
tariffs, will be in even worse shape if they intend to promote exports to the paying
country like China, which Mexico is apparently planning to do, see
http://in.reuters.com/article/2013/08/09/mexico-oil-idINDEE97809B20130809.)
We need the standard economic tool of isoquants for the example. Isoquants are
alternative combinations of inputs which yield the same output. See, for example,
Hackman (2008), 19-20, which considers the issues in much more depth than usual, or
http://en.wikipedia.org/wiki/Isoquant
or
http://www.youtube.com/watch?v=RMLJ9AClSfQ.
Some isoquants for a typical American agricultural field are displayed below.
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U.S.A. Agricultural Isoquants
Lowest Q
2nd Lowest Q
Middle Q
L
a
b
o
r
Higher Q
Highest Q
A
B
Chinese CO2 Effect
Capital
We consider just China and the U.S.A. For simplicity, suppose China just produces
steel, with inefficient coal-based generation facilities, and we are only worried about
American agricultural production. Suppose it is the case that this typical American field
produces corn. Suppose that if it were the case that no Chinese GHGs reached
America, we would be on the top isoquant, at point A. Suppose that because Chinese
GHGs do reach the typical field, we are moved down to point B. In this case, it would
seem that there would be some grounds for acceptance of a carbon tariff against
Chinese steel, even by the Chinese, since reductions in GHGs would mean more corn,
which would mean more food available to be traded to China, which would mean lower
prices for Chinese consumers.
If the carbon tariff were put into place, and if this argument were correct, so that there
would be more food, more food would be available for American consumers, too. This
possible trade is what has to be sold to the American liberals, who would otherwise
oppose the lump-sum tax, and have faith in the sort of clarifying election it is being
argued simply won‘t happen.
It must be stressed that this argument goes directly against what is probably the most
famous article in the literature on the economics of climate change, Deschênes and
Greenstone, (2007). The conclusion of their study is that global warming will increase
agricultural productivity in the U.S.A. However, they measure productivity in terms of
agricultural profits, not agricultural output. There are some amazing results in their
study, such as statistically significant estimated results of directly opposite sign for the
effect of GHGs for North Carolina and South Carolina. If corn prices go up enough, and
farms that are losing money sell out to real estate development, while profitable farms
stay in business, profits could increase even if productivity goes down. Fisher,
Haneman, Roberts and Shlenker (2012), challenge the Deschênes and Greenstone
results directly, and Walthall et. al. (2012), state that ―Increases in temperature coupled
with more variable precipitation will reduce productivity of crops, and these effects will
outweigh the benefits of increasing carbon dioxide‖, 1. Malcolm et. al. (July 2012) note
that how bad the effects are depends on a host of variables, but do not dismiss the
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effects as zero or positive. Analysis via isoquants is what has to be done to get a direct
measure of negative results.
Suppose that the argument that Chinese GHGs emissions constitute damages to U.S.
agriculture is accepted. Can they survive WTO rules, assuming neither the U.S.A. nor
China will leave the WTO (World Trade Organization)? This is the key question which
must be answered before they would be put into effect. Based on Zhu, Lee and Kim
(2011),
at
http://www.ipedr.com/vol10/41-S00042.pdf
and
http://www.carbontax.org/issues/border-adjustments/ and the references therein (see
especially Pauwelyn (2012)), the only way such carbon tariffs could survive is as a
border tax adjustment. So if Chinese steel GHGs emissions damage Chinese corn
production to a limited degree, but damage American corn production more, only a tariff
corresponding to the difference is acceptable, not a tariff corresponding to the absolute
amount of the damages to American production. The only way to get full payment is to
prove there is zero damage to Chinese corn production because of GHGs emissions,
which would be impossible.
It may be possible to get some benefit out of such carbon tariffs. But the Chinese are
likely to retaliate against the U.S.A., even though they ultimately benefit from the tariffs
that force them to improve their facilities, because the immediate costs and benefits of
the change are not equalized between China and the U.S.A. with this action. The
simplest way for them to retaliate would be to argue that GHGs emissions anywhere in
the world, once produced, have the same effect on all countries, and that damages
should be based on discriminatory effects of production plus transportation. So yes,
burning coal in China makes a difference to agriculture in the U.S.A. vs. agriculture in
China, but the real cause it does is because so much GHGs are released in shipping
the coal to China! This argument, if accepted, would allow the Chinese to impose
discriminatory tariffs against U.S. coal shipments vs. shipments of coal from Ha Long
Bay in Vietnam, based on the greater distance travelled, unless it could be proved that
the shipping released no or minimal GHGs.
My own personal preference would be to accept this argument and go out and make big
investments in port facilities, shipping vessels, train transport, etc., to fit them with fuel
cells so that the minimal GHGs argument could be met directly. But this is likely to be
ridiculously expensive. Andrew Moore, in his 15 November 2013 article, ―Railroads
study LNG locomotives, but shippers‘ savings are unclear‖, for Platt‘s Coal Trader,
notes the caution railroads would show in even converting to LNG (liquefied natural
gas), which would be a much easier proposition than to convert to fuel cells. The
following are 2 quotes from the article (MMBTU = 1 million BTU – a standard energy
unit):
―Given that it takes roughly 7.19 gallons of diesel to equal the equivalent energy
of 1 MMBtu, Friday‘s
diesel price equals $21.12/MMBtu, a little more than twice
the LNG cost of $10.16/MMBtu. Conversely, $10.16/MMBtu would roughly equal
$1.41/diesel gallon equivalent, a little more than half of the ultra low
sulfur diesel
price.‖
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―Steven Ditmeyer, former associate administrator for research and development
at the Federal Railroad
Administration and now an adjunct professor with Michigan
State University‘s Railway Management Program, said it costs roughly $500,000 to
convert a diesel-fueled locomotive to run on LNG and $1
million for an LNG tender.
Those costs could add up quickly. BNSF, for example, owned more than 4,500
locomotives at the end of 2012, according to its annual STB filing. But Ditmeyer said it‘s
unlikely the railroads would convert their entire locomotive fleets to LNG. Instead, he
believes they would work best on unit train routes, where the larger scale is more
economical, and most likely on coal routes. ‗Any long haul trains from point to point,
where there is sufficient density of traffic, it just might make sense,‘ Ditmeyer said.‖
So even though in principle, LNG would provide a significant fuel saving, there are
significant infrastructure or capital costs, and these capital costs can chip away the
savings. In the article, Koby Knight, an assistant for Clean Energy Fuels, an LNG
supplier, argues that the 50% savings would only fall to 40%, once these capital costs
were taken into account. But we have no reason to believe him. Moreover, as is also
mentioned in the article, given the way railroad pricing is structured, the fuel savings
might not be passed on to consumers. Another quote from the article points this out:
―Bob Szabo, who is the executive director of Consumers United for Rail Equity, a
Washington, DC-based
advocacy group for captive shippers, said that while LNG
might lead to cheaper fuel costs, he doesn‘t think
it likely those savings will reach
shippers. ‗That‘s not the way railroads price their services,‘ Szabo said.
‗They‘ve been running ads about how efficient railroads are at moving a ton of
freight, but rail rates since 2003 have gone up two and half times trucking rates, so are
the railroads passing on this fuel efficiency to customers in the form of reduced rates?
No, they are in a position to charge whatever they want to charge.‘
Another prominent railroad consultant who works with shippers and railroads but
wished to remain anonymous, said that despite whatever fuel savings that might be
realized, ‗railroads are not very good
about giving reductions below their base rates.‘
‗Their argument would be to say they have all this [new] capital expense,‘ the
consultant said. ...
The consultant said that if the railroads adopted LNG-fueled locomotives for
revenue service, they would
likely ‗have to throw fuel surcharges out the window,
but I don‘t know how it would be done … they would have to come up with a new plan,
a capital expense surcharge ... it would be just a whole different
paradigm. ‘ ‖
So going whole hog for low GHGs emissions would mean new regulatory rules for the
railroads, and likely for the shipping vessels as well. This regulatory cost of conversion
may well be worth accepting eventually, in addition to the capital cost. But to try to add
this on now in order to get partial payments for the coal-based fuel cells from carbon
tariffs is likely to be more expensive than accepting the whole capital cost as a domestic
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problem. It makes the argument to the liberals more difficult: one has to argue that
here‘s what costs are vs. what they would be otherwise, even though prices would still
go up. But this makes the argument to the conservatives so much easier that it would
be worth accepting.
It may be worth going through a small numerical exercise to see why the Chinese would
be so unyielding.
Suppose we take U.S.A. corn crop production from
http://cornandsoybeandigest.com/blog/usda-increases-expected-crop-production
at
160.4 bushels/acre. We take Chinese corn production per acre at 86 bushels/acre from
http://www.peoriamagazines.com/ibi/2011/nov/chinese-corn-production.
Chinese CO2 emissions in 2009 are reported to be 1.1 billion tons per 567.8 million tons
steel produced in
http://www.iaia.org/conferences/iaia12/uploadpapers/Final%20papers%20review%20pr
ocess/Meng,%20Wang.%20%20THE%20CONTROL%20METHODS%20OF%20CO2%
20EMISSION.pdf?AspxAutoDetectCookieSupport=1
U.S.A. CO2 emissions per ton steel produced are reported for 2007 as 1.14 tons
CO2/ton steel produced in http://www.reliableplant.com/Read/15419/steel-industryreaches-energy-efficiency-milestone.
Accepting these ratios as current leaves a 0.8 difference in tons CO 2 output for every
ton of steel that isn‘t produced in China and is in the U.S.A.
Suppose we moved all steel production to the U.S.A. from China and ignore
transportation emissions. Suppose for simplicity that U.S.A. corn production would be
166 bushels/acre in this case, while Chinese corn production would be 88 bushels per
acre. The loss for the U.S.A. would be (166-160.4)/0.8 = 7.02 bushels/acre, while the
Chinese loss is (88-86)/0.8 = 2.51 bushels/acre.
The Chinese are willing to accept this loss domestically. So what the Chinese are not
willing to accept domestically and impose on the U.S.A is the difference of 7.02 - 2.51 =
4.52 bushels/acre. (Note that this rounding off to 2 digits after the decimal point.) The
tariff that would be imposed if this argument were accepted would be the price of corn
times this difference. At a price of $4.20 per bushel, this is $4.20*4.52 = $18.96, a very
hefty tariff per ton of steel indeed.
Our situation is summed up in the following table:
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
Chinese CO2
1,100,000,000.00
U.S.A. bu/ac.
160.4
Chinese bu./ac.
Chinese steel
86
567,800,000.00
U.S.A. would be
166
Chinese CO2/ton USA Co2/ton China would be
1.94
1.14
88
CO2 Dif.
0.80 USA ratio/CCO2
7.02
China ratio/CCO2
2.51
Ratio Dif.
4.52
Price/bu
$4.20
Tariff
$18.96
V. Water Modulation (WM)
Carbon Capture and Sequestration (CCS) has been proposed as the answer to keep
GHGs emissions from contributing to global warming2. There are a variety of CCS
methods that have been proposed. The two most prominent and familiar are saline
cavern burial, and use in enhanced oil and gas recovery. Other proposals are use in
concrete (cf. http://www.netl.doe.gov/publications/factsheets/project/FE0004285.pdf)
and use in steel slag (cf. http://environmentalresearchweb.org/cws/article/news/36966
and http://www.ncbi.nlm.nih.gov/pubmed/23913597). All these are good and should be
tried.
The problem with CCS, except for the only and gas recovery, and to some extent even
there, is that it is a 0-1 proposition. You do it for a while, and then you stop. The CO 2
that was being emitted is trapped, but the production process that was emitting it
doesn‘t change, except that now the producers face an additional cost. The cost would
be brought about by carbon taxes, or cap-and-trade penalties, both of which seem
impossible, or by loss of good will, which is ineffective.
To reduce GHGs emissions, either less has to be produced, or the circumstances have
to be set up so that there is a convergent sequence: for CO 2, a certain amount gets
produced, then is utilized to produce something that has economic value with renewable
energy or some other means that does not produce CO2, then the thing with economic
value gets utilized, but the CO2 yield is lower, and the process repeats until
convergence. What one wants is for such convergent sequences to use ambient CO 2 in
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
the atmosphere, and for the processes to become so widespread that eventually not
only are they not adding CO2 on net, but that they become a carbon sink in and of
themselves. Algae production, at least in principle, has promise of becoming such a
sequence, and this will be to
-------2
From here on in, most of our attention will be devoted to CO 2. Andrew Revkin is one of
many who have cited the latest findings on methane emissions, in
http://dotearth.blogs.nytimes.com/2013/11/25/new-study-finds-u-s-has-underestimatedmethane-levels-in-the-atmosphere/. My position is unchanged from Silk (2012).
Professor Howarth deserves great credit for raising the issue. But until and unless this
level of emissions can be shown to be consistent with rational insurance behavior for
insurers who insure hydraulic fracturing, this level, if validated, is not due to hydraulic
fracturing. If proposition A implies proposition B, and B is an economic proposition, and
we don‘t observe B, we may doubt A. Economics has that much validity. But there is
justification for an immediate steep tariff on laptops from China, Taiwan and Japan until
they change their production processes to destroy nitrogen triflouride (NF3) before it is
released into the atmosphere. See http://oceans.mit.edu/featured-stories/5-questionsmits-ron-prinn-400-ppm-threshold.
some extent a paradigm for the processes considered.
What does CO2 do? If we step back from all the fears about global warming, with all its
disastrous
outcomes,
including
fewer
fish,
e.g.,
http://www.washingtonpost.com/national/health-science/study-links-warmer-watertemperatures-to-greater-levels-of-mercury-in-fish/2013/10/13/c86d43c6-3113-11e39c68-1cf643210300_story.html, etc., CO2 is an insulator. Heat comes via infrared rays
of the sun, and gets trapped by the increased CO 2 concentrations, and stays, so
temperatures rise. If we ignore the possibility of geoengineering, such as described in
http://www.geoengineering.ox.ac.uk/what-is-geoengineering/what-is-geoengineering/?,
basically what we want is to either reduce the amount of insulator that gets out there, or
design some sort of economic mechanism that makes people collect the insulator so
that it isn‘t just considered to be trash, and disposed as a public nuisance. The real
hatred that prevents action against CO2 isn‘t some profound scientific knowledge.
When
Sarah
Palin
talks
about
global
warming
(e.g.,
http://en.wikipedia.org/wiki/Political_positions_of_Sarah_Palin), she‘s not about to sit in
the sessions at the next atmospheric science proceedings and criticize regression
models for unexplained autocorrelation in the residual terms.
She‘s expressing a
feeling that the vastly over-persecuted taxpayers should not have additional pain
inflicted upon them in the form of higher taxes or additional responsibilities to gather this
insulator through some collective means. It‘s an emotional response, not a detached
weighing of costs and benefits of particular actions, and the vent she gives to emotions
is far from the worst.
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
Can we change the rules of the game, so that these persecuted taxpayers have an
incentive to collect CO2 not as a group, but individually, to make some money from it? If
the rules can be changed so that you, our pillars of the community, have an individual
incentive to collect the CO2, and you, not the minorities, not the evil liberals, not the
wicked President Obama, not other salivating parasites, but you, get some money out of
it, the resistance to doing something about CO2 can change. This is decentralization,
and it is one strand in the concept of water modulation.
The second source for water modulation is a description of an early hydrogen bomb,
Mike, in Rhodes (1995). The speaker quoted is Jacob Wechsler, one of the engineers
who worked on the Mike bomb:
―A thermal-radiation shield floating in a vacuum can significantly reduce radiantheat transport from a
warm exterior to a cold interior. Without it, Wechsler
observes, ‗you‘re talking a cold surface and a warm surface, and the temperature
difference is a couple hundred degrees Kelvin. I don‘t care if you‘ve got a vacuum
between them, the heat leak into the cold surface is serious. But there‘s a neat little
trick. If you can put in a surface with an intermediate temperature and float it – isolate
it thermally – then the outside
sees the intermediate, and the inside sees the other
side of the intermediate, and that cuts the loss way
down.‘ ‖, op. cit., 491.
The third source for the idea is noting that rain on a house, in summer, has a major
effect in cooling the house off, and reducing electricity demand. Clouds cover the sun,
yes, but rain itself cools off the roof. (Specifics can be found from ECoology, a similar
idea, at http://ecoology.com/Roof_Cooling_Techn_3.htm.) Cooling off the roof helps
during the day, but what happens afterward? That‘s what water modulation is trying to
answer.
With that, water modulation becomes a reasonably transparent idea, if a difficult one to
implement. The following diagram is a simple illustration of the general concept. (Da
Vinci is in no danger of being supplanted.) We have a detached single-family house
and a garage, which for the sake of argument is detached from the house. On the
garage, there are solar photovoltaic (PV) panels. Beneath the house, on the ground,
there are pumps, powered by the PV cells during the day and other means (possibly
wind or batteries) at night. Beneath the ground, there is a large storage container,
which holds separate chambers for water and CO2, which will play the role of the
thermal shield. Aside from the house, there are CO2 collectors, possibly of the Lackner
type, that collect CO2 from the ambient air.
The house is enclosed in a nonpermeable but thin container, which is transparent, and
allows for infrared ray penetration and heat penetration through the lower side when
desired. But the containing chassis does not allow water evaporation, though this might
be added. Another refinement would be to have the roof sprayed or inlaid with some
sort of material that would reflect sun rays during the day but allow them at night, in the
manner of the reflective placards people put in automobile windows during the day to
minimize heat gain.
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
The sun shines on the PV cells that pump the water up through the chimney onto the
roof. The water flows down the roof, taking some of the heat with it. It then flows
through the chassis and is collected once again in the storage chamber. It is unclear
whether it would make sense to have a cold water chamber in the storage container as
well as a hot water container – this can be examined. But during the pumping process,
we are collecting hot water off the roof. So far, there is no difference between this
process and E-Coology. But what do we do with the hot water that has been collected?
This is where the CO2 and its collection come in. We keep the water hot, and the CO 2
which we collect from the atmosphere is our insulating mechanism. We keep the hot
water hot during the day in the storage container.
The day is over. Now we can pump the hot water back on the roof. The hot water
simulates falling rain again, only this time, the simulated rain is warm. The warmth
penetrates through the roof, and cuts any heating demand during the night. As the
water loses heat, it gets cool, and becomes fresh as a collector for the following day. (It
would probably need some oxygenation, along the lines of water in aquariums, too.)
This is likely to be a fairly robust system, and would be even better, although much
more expensive, if we could allow some of the hot water to evaporate inside the house
and provide a humidifying effect, since the water would have to be replaced. Our
system is likely to have best effects during the spring and fall, and acts to reduce
demand.
If we just use a given amount of CO2 as an insulator, and it is never collected, we are
back to CCS. But if we collect the CO2 and slowly transport it to algae processing
centers, treated as toxic waste, using delivery vehicles that rely on technology that does
not emit GHGs, we have the possibility of creating a carbon sink. It is unclear whether it
would be better to have the algae processing done on the grounds of the house proper
or at a central location.
We simulate thus simulate cool rain during the day, collect and store the heat, and
simulate hot rain during the night. We pump during peak periods, and we use PV
technology and others that do not release GHGs. We have slow CO 2 replacement and
possibly slow water replacement as well. We use lump-sum taxes to collect revenues,
and pay for the creation of carbon sinks, measuring the CO2 the house generates during
normal operation, and paying for the difference between that and what the house
removes with WM in effect. It would make sense along the same principles to pay for
afforestation, but WM is quicker and more likely to be easily measurable.
This has a bias, once again. The wealthy receive the immediate benefits and the poor
get the shaft, since they are more likely to be living in multi-family houses or mobile
homes that can‘t afford such a system. But the poor get the benefits in terms of lower
food prices, even if they are only lower than what they would otherwise be, and it‘s the
same dilemma again: it‘s either this or something like this, or nothing.
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
VI. Skimming and Bioluminescence
This section will be fairly short, since it is by far the most speculative. It turns out, in
looking at the atmosphere, that CO2 concentrations are neither all at the lowest level of
the atmosphere, nor uniformly distributed across all altitudes. Foucher, Chédin,
Armante, Boone, Crevoisier and Bernath (2011), present information that the
distribution is like a very flat inverted χ2, almost trianglular, (cf. Fig.7, ibid, 2462), if I am
reading this correctly, but with seasonal and geographical variation. See also
http://ara.abct.lmd.polytechnique.fr/index.php?page=carboncycle#uploads/i/photos/ch4/ch4_iasi_lmd_v3.1_0801.jpg. Water vapor has increased in
the upper atmosphere, where it is also, alas, a GHG, in agreement with the models for
global warming, but not obviously a helpful complement to transport of the GHGs, see
http://cires.colorado.edu/news/press/2013/watervapor.html.
See
however,
http://www.sciencedaily.com/releases/2013/05/130522131158.htm. So it may be that
the oceans are a better platform to work with.
Studies of the CO2 distribution by depth in the oceans are much less numerous than
studies of the distribution by height in the atmosphere. Much of the work has been
done in the Pacific Ocean (see Sabine et. al. (2002)), although this is obviously dated.
Roy et. al. (2011) seems the latest comprehensive study for all oceans. They find, if
this is being read correctly, that the greatest increase in CO 2 uptake were in the Arctic
and Antarctic waters as well as the equatorial regions, op. cit., 2304, with a roughly
linear pattern that appears common over oceans and varies inversely with depth, ibid,
2311, Figure 9. The reduced sea ice in these waters fits naturally with these
conclusions, see http://www.sciencedaily.com/releases/2013/02/130218092540.htm. Of
course, there are a large number of factors that allow for variation around this common
pattern, such as solubility, etc., but the pattern seems stably linear, although they note
factors they are not accounting for which could cause nonlinearity.
It is possible that a skimming mechanism could be developed, powered by PV cells, and
lowered at the appropriate depths to flush out CO2 from the water. To my knowledge,
the performance of CO2 removal processes is not well understood at low temperatures3.
However, the life inside the ocean acts as a suction pump, drawing material (& CO 2)
from
the
surface
to
lower
depths;
see
http://earthguide.ucsd.edu/virtualmuseum/climatechange1/06_2.shtml. So a 100%
requirement for manmade energy in such a process may not be necessary.
Once the CO2 is collected, in either cold or warm seawater, what can be done with it?
One possible use is to develop organisms which produce bioluminescence. One such
case,
the
Vargula
species,
is
described
in
http://en.wikipedia.org/wiki/Vargula_hilgendorfii.
The bioluminescent reaction is
described
more
generally,
for
other
species,
in
http://www.mbari.org/education/internship/99interns/99internpapers/TrevorRivers.pdf.
The latter group learned that what caused the bioluminescence in Vargula was
consumption of other organisms, and that the luciferin coelenterazine was responsible
for the phenomenon. See http://en.wikipedia.org/wiki/Coelenterazine. The presence of
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
bioluminescence is now understood fairly well. See http://biolum.eemb.ucsb.edu/ and
especially Haddock, Moline and Case (2010).
The chemistry and biology of bioluminescence, which appears less understood, are
discussed
as
of
2006
in
http://www.bio.davidson.edu/people/midorcas/animalphysiology/websites/2006/caherme
s/reaction.htm. Chemistry for a variety of species is discussed by Edward A. Meighen
in http://www.chemistryexplained.com/Ar-Bo/Bioluminescence.html. Of the species
involved, dinoflagellates and bacteria seem the most promising as possibilities to be
worked with to develop carbon sinks, as they do not appear to release CO 2 during their
reactions, as do fireflies (compare, in particular, Figures 2 and 4 with Figure 1). It may
be the lack of a similar mechanism that is causing the large-scale devastation of
starfish, noted in http://www.washingtonpost.com/national/health-science/a-mysteriousillness-is-turning-sea-stars-to-goo/2013/11/22/dd7ceb66-4c9f-11e3-be6bd3d28122e6d4_gallery.html#photo=1.
Work on the phenomenon is already being done by the American military, see
http://www.marinecorpstimes.com/article/20100911/NEWS/9110310/Military-increasesinterest-in-bioluminescence.
If bioluminescence can be used for lighting, even on as small a scale as naval bases, or
for communication, the causes of global warming can be divided, and the problem
reduced, even if only a little bit, to form a small carbon sink. There are an abundance of
sources
for
coelenterazine,
see
http://www.nanolight.com/index.php
and
http://www.registech.com/portfolio-products/coelenterazine, for just two among many
suppliers.
VII. Conclusion
This work has tried to argue that the political bases for the standard remedies
prescribed in economic analysis for pollution do not exist in the U.S.A. (and possibly for
other countries with similar politics, such as Australia) for global warming. It has
identified an alternative, a lump sum tax, subsidy scheme, and tried to identify how it
would work for fuel cells for use in coal facilities, and to develop carbon sinks with home
space heating and with bioluminescence. If enough carbon sinks can be developed,
removal of GHGs becomes a realistic prospect, and global warming can be halted and
reversed.
It has been argued that carbon tariffs, generally, will not significantly speed this process,
though they may have merit in specific cases. What is then to persuade China and
India and other major emitters of GHGs in the developing world to follow similar
courses? Even if we ignore the health of their own citizens, which must eventually
become an overriding factor in their calculations, these countries are still faced with
competitive pressures in what is now a world market. If we look at the fixed capital
costs of technologies to develop carbon sinks in perspective, they are impediments, and
not impermeable ones, to developing carbon sinks. Government will be used for
Proceedings of International Business and Social Sciences and Research Conference
16 - 17 December 2013, Hotel Mariiott Casamagna, Cancun, Mexico, ISBN: 978-1-922069-38-2
something, even if it is just to provide the maximum possible security for the value of
financial
3
With some diffidence, it may be possible to conclude that the argument of Stephanie
Burt, Andrew Baxter and Larry Baxter, ―Cryogenic CO2
Capture to Control Climate Change Emissions‖, at
http://sustainablees.com/documents/Clearwater.pdf has merit, but it has not received
overwhelming confirmation.
assets in currency or in financial institutions, as in laissez-faire doctrine. So much
value can be produced for so many people, especially young people, by using
government to end global warming, that no country will resist its use forever. Once it is
so used, successfully, the lower operating costs of economies that do not emit GHGs on
the scale that has become commonplace will undercut the pricing of all other systems in
all other countries, and force them to change. The only question is what the losses will
be to get there.
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