Posted by: bmeverett | June 12, 2014

President Obama’s 1% Solution


President Obama claims that he is now putting in place the first serious US policy to combat global climate change by reducing carbon dioxide emissions from US power plants by 30% by the year 2030 compared to the 2005 level. Let’s consider whether that claim has merit.

First, let’s dispense with a couple of bad arguments. Calling the President’s policy a “war on coal” or a “job killer” isn’t helpful. The President’s premise is that climate change poses an existential threat to human civilization, and therefore carbon reductions are necessary. As I have discussed often in this space, this premise is arguable, but let’s stipulate that the President is correct on this point and see if his actions will really help the cause he espouses.

According to the US Energy Information Administration (EIA), the American electric power sector emitted 2,417 million metric tonnes (mmt) of carbon dioxide in 2005. A 30% reduction would give us an allowable level of 1,692 mmt in 2030. Note once again, the careful selection of a convenient base year. By 2013, US power plant emissions had already declined to 2,053 mmt – a 15% reduction due mainly to the market substitution of natural gas for coal. The EIA projects that, without the President’s new initiative, power plant emissions will begin to rise again, reaching 2,227 mmt by 2030. The President is therefore promising a reduction of 535 mmt (2,227 minus 1,692) or 24% compared to the level expected without the President’s new policy.

How significant is this step? According to the EIA, without the new policy, total US carbon emissions from all sectors are projected to be 5,527 mmt in 2030. The anticipated reduction of 535 mmt is therefore roughly 10%. Climate change, however, is a global phenomenon. Unlike air pollution, which can often be controlled at the local level, the atmosphere does not care where the carbon is emitted. The EIA projects total global carbon dioxide emissions at 41,464 mmt in 2030. President Obama’s power plant proposal would therefore reduce global carbon emissions by just over 1%. As discussed often in this space, the real carbon problem is China, not the US. Even substantial reductions in US emissions would be insufficient to affect atmospheric carbon concentrations on a global scale.

Why would the President make such a modest proposal with such massive fanfare? After all, 1 1% reduction is nothing more than a rounding error. My guess is that the President is targeting three groups.

The first is “low information voters” who don’t pay much attention to politics. The hope is that some of these people will say, “I’ve heard that climate change is a problem, and the President seems to be doing something about it. Good for him.” Personally, I doubt that there are very many people like this, but the White House is probably counting on the fact that many people don’t have the time or interest to look into the issue enough to understand that the President’s proposal is inconsequential.

The second group is “lifestyle” environmentalists who believe that reducing their carbon footprint is an act of civic responsibility, like picking up your trash. These are people who feel a moral commitment to fighting climate change by driving a Prius, using compact fluorescent light bulbs, keeping their thermostat low, buying carbon “offsets”, installing solar panels and supporting municipal wind turbines, but don’t necessarily bother to calculate the actual impact of proposed policies on atmospheric carbon concentrations. In this sense, their actions are aesthetic rather than practical.

There is, however, a third group of more thoughtful and analytical climate activists who do understand the numbers and the likely impacts of various policy measures. Why would these people applaud the President’s 1% solution? The answer was outlined clearly by former Princeton Professor and New York Times columnist Paul Krugman in his June 5 column entitled “The Climate Domino”. Prof. Krugman sees the President’s proposal not as a solution in and of itself but as a catalyst for three-stage global action that could lead to a true solution to the climate change issue.

Stage 1 is the President’s policy. Stage 2, according to prof. Krugman, works as follows, “…it’s fairly certain that action in the U.S. would lead to corresponding action in Europe and Japan.” Stage 3 involves the US, Europe and Japan putting the screws to China. Prof. Krugman claims that “China is enormously dependent on access to advanced-country markets — a lot of the coal it burns can be attributed, directly or indirectly, to its export business — and it knows that it would put this access at risk if it refused to play any role in protecting the planet.” Hence, according to Prof. Krugman, the President’s program can leverage a real solution to the problem.

His Stage 2 and Stage 3 assertions are highly questionable. It’s difficult to argue that Europe has been waiting for American leadership on climate change. The European Union, after all, went ahead and implemented the 1997 Kyoto Protocol even after the US refused to ratify it. Kyoto was an exercise in smoke and mirrors which allowed Europe to claim complete success in meeting their treaty obligations without actually reducing carbon emissions. (For more detail on this farce, see my post “Europe’s Big Lie” of November 18, 2009). Europe then instituted a carbon trading scheme with caps so loose that carbon prices have fallen to laughably low levels. The closing price on June 11 was 5.39 Euros per metric tonne, equivalent to about 7¢ on a gallon of gasoline and hardly sufficient to induce much energy efficiency or technological innovation. German imports of US steam coal have more than quadrupled in the last four years as Germany has begun closing its low-carbon nuclear plants and has discovered that renewable energy cannot fill the gap.

The only reasonable explanation for European behavior is that EU governments are trying to satisfy their environmental constituents without damaging their already weak economies. In a battle between economic growth and environmental symbolism, the economy will always win. Otherwise, elected officials in Europe would find themselves looking for new jobs.

OK, but what if Prof. Krugman is right, and the Europeans rally to the cause? “Corresponding action” by Europe and Japan would presumably mean the same 10% reduction in emissions versus the level expected in 2030. The EIA estimates 2030 carbon dioxide emissions at 4,151 mmt in Europe and 1,215 mmt in Japan. A 10% reduction would therefore be 415 mmt for Europe and 122 mmt for Japan. Added to the 535 from the US, the total reduction would be 1,072 mmt or 2.6% of total global emissions. Still not much to brag about, but what about Stage 3, the full court press on China?

The idea of the US, Europe and Japan pressuring China is a little far-fetched. Vladimir Putin’s drive to dismantle Ukraine poses a serious threat to western security interests. There’s no argument about its “scientific basis” or its potential implications. Furthermore, the threat is greater for Europe than for the US. Even so, the US cannot get Europe to agree on more than weak, symbolic “sanctions” against a few Russian oligarchs. Why? Because Europe relies too heavily on Russian energy imports and is not willing to rock the boat in the face of weak economic growth. Why would we expect Europe to threaten severe economic sanctions on China, which is a larger trading partner than Russia, when the nature of the threat is not even clear? Seems most unlikely, but, again, let’s assume that Prof. Krugman is right. What happens then?

Chinese President Xi Jinping could cave to this pressure and offer to cut his emissions by the same amount as the US and Europeans – 10%. China’s projected 2030 emissions are 14,028 mmt, so their reduction would be 1,403 mmt. Total emissions reductions by the US, Europe, Japan and China in 2030 would thus be 2,475 mmt – about 6% of the global total of 41,464 mmt.

Most climate activists believe that substantial reductions in global carbon emissions are needed to forestall catastrophic climate change. The figure of 80% by 2050 is often thrown around. The year 2050 is politically useful because few if any of today’s senior politicians will still be in office then, so they can’t be held accountable for failing to meet their target. If we are to achieve an 80% reduction by 2050, however, shouldn’t we be showing at least a little progress by 2030? Prof. Krugman’s analysis suggests that global emissions will increase from roughly 32,700 today to 39,000 in 2030 – a 19% increase – rather than the 27% increase without the President’s policy. Instead of achieving an 80% reduction over 36 years (2014 to 2050), we would then have to achieve an 83% reduction over just 20 years (2030 to 2050).

Prof. Krugman claims that “The new carbon policy, then, is supposed to be the beginning, not the end, a domino that, once pushed over, should start a chain reaction that leads, finally, to global steps to limit climate change.” Really?

There’s one last issue here: cost. Some of the reduction in coal use may be achieved anyway through market forces, since natural gas is likely to be less expensive than coal for new power plants for the foreseeable future. The President’s proposed reduction, however, would rely heavily on regulatory (read expensive) actions that would raise electricity bills for consumers and businesses. The US Chamber of Commerce has estimated the cost to the US economy at $50 billion per year through 2030. With about 115 million households in the US, the total cost of the President’s program would be about $7,000 per households ($50 billion times 16 years divided by 115 million).

Prof. Krugman doesn’t dispute the Chamber’s conclusions, but says in a May 29 column entitled “Cutting back on Carbon” that “Remember, we have a $17 trillion economy right now, and it’s going to grow over time. So what the Chamber of Commerce is actually saying is that we can take dramatic steps on climate — steps that would transform international negotiations, setting the stage for global action — while reducing our incomes by only one-fifth of 1 percent. That’s cheap!”

$7,000 per household might be cheap if the result were a definitive solution to a real and well understood problem. Given the uncertainties over climate science and the heroic assumptions that Prof. Krugman has to make to make the numbers work, the President’s program looks like nothing more than an expensive Hail Mary pass.

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Responses

  1. A little math goes a long way, nice piece Dr. Everett
    I’d love to see a similar and comprehensive look – in particular at this recent report by a local 350.org chapter, would like to hear your thoughts/see your anaylsis from the other side of the tape

    http://www.betterfutureproject.org/wp-content/uploads/2014/06/A-Bridge-Too-Far-Final.compressed.pdf


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