Friday, August 05, 2011

The complexity of climate change policy

Buried in a couple recent news stories, which themselves were buried by the news of the debt standoff in the U.S.,  were a couple fascinating nuggets that reveal a lot about how climate change mitigation policy does, and does not happen.

One is an agreement to raise fuel efficiency standards in the U.S., which will presumably also become the rule in Canada. The... greement to that vehicles sold will average 54.5 mpg by 2025, although with loopholes related to measurement of efficiency, the actual average will be more like 43 mpg.

Why did it happen? (NY Times):

It is an extraordinary shift in the relationship between the companies and Washington. But a lot has happened in the last four years, notably the $80 billion federal bailout of General Motors, Chrysler and scores of their suppliers, which removed any itch for a politically charged battle from the carmakers...

The new mind-set in Detroit has been helped by some give and take on the government’s side. G.M., Ford and Chrysler pressed for less onerous mileage goals for their profitable pickup trucks and got them. And the administration agreed to revisit the new requirements halfway through their course, with the possibility of adjusting them. In the end, though, Detroit was faced with an undeniable political reality: there was no graceful way to say no to an administration that just two years ago came to its aid financially.

The auto bailout as climate policy: investing in the companies provided some leverage in the battle to reduce emissions from passenger vehicles. Was the Obama administration prescient here, knowing that there were little odds of carbon tax on fuel? More likely, the U.S. government was merely taking advantage of an opportunity to use some leverage to push an emissions reduction effort. Of course, the idea of "nationalizing" companies in hopes of enforcing a climate change policy would cause the "Tea Party" to self-combust.

The other example is the Alberta government's approval of a carbon capture and storage project (Globe and Mail):

Calgary-based Swan Hills Synfuels LP aims to use an unproven method, coal gasification, to reach 1.4-kilometre-deep coal deposits in central Alberta, convert them to gas underground, capture the emissions before they ever see daylight and use the gaseous coal to run a power plant. The new plant would serve a whopping 300,000 homes while producing one-third the emissions of a similarly sized regular coal plant – or about the same carbon output as a natural-gas plant. Because the project will divert 1.3 million tonnes of carbon dioxide a year – providing the cost certainty of coal and environmental performance of natural gas – Alberta coughed up $285-million for the $1.5-billion development.

Now, investment in a CCS project in Alberta is not a huge surprise, especially considering the particular plant can aide in oil recovery. But then there't this nugget:

Industry members, politicians and academics said provincial funding is necessary because there’s little incentive to reduce emissions. CCS is “viable, but it comes at a cost,” said Don Lawton, a University of Calgary geophysicist who studies CCS. “But until there’s a price on carbon, it’s an expense that has to be borne by somebody.” Mr. Lambert said the project would die without provincial money. “I don’t think I could deliver the returns investors would need to put their money up,” he said.

So the CCS projects go ahead, but solwly, and at great expense to the province of Alberta because of the lack of a federal carbon price, which was strongly opposed by politicans from Alberta. Unlike the automobile case above, pricing carbon is critical to making CCS work.


John Mashey said...

Minor omission:orroe to do with this than many realize:

Recall the unique legal rule that lets California normally set tougher standards on emissions, that other states can copy if they wish. Automakers cannot ignore the CA market, but generally prefer to have uniform standards.

If you want to hear a passionate promoter of lower oil use an increased use of electric and vehicles and PHEVs, it's George Schultz, still active at 90!.

Simon Donner said...

The lesson in all this might be the need for more innovation in climate policy. We've clung to old ideas for too long.