MORE DISINFORMATION ON NET ZERO. COINCIDENCE OR CONSPIRACY?

Sadly we have become accustomed to the routine parade of untruths in government. But what should concern us almost as much is the peddling of ridiculous theories, misleading statistics and nonsensical arithmetic by bodies that pretend to offer some kind of independent analysis. Nowhere is this more evident than in the numerous self-styled

think-tanks and “expert” groups that set out to dispute the scientific consensus over climate science, or the relative costs of climate change versus mitigation policies.

 

One such has been the All Party Parliamentary Group on Fair Fuel, a lobby group composed of numerous climate sceptic MPs. (It should be noted that APPGs do not have an “official” parliamentary status and are very different from the Parliamentary Select Committees who do excellent work and produce well-researched reposts. They are in fact often just lobby groups for MPs pursuing particular agendas). I dealt with some of the “analysis” provided by this APPG in earlier posts.

 

THE CASE FOR ELECTRIC VEHICLES IS STRONG ENOUGH TO SURVIVE ATTACK FROM THE ICE LOBBYISTS, 

 

and

 

COSTING AN ELECTRIC VEHICLE FUTURE. IGNORE THE ALARMISTS.

 

The latter showed the lobby report had got its numbers wrong by a factor of 50, largely because of a failure to understand either elementary physical principles of energy or the units of measurement it chose to employ.

 

This level of incompetence was however surpassed by another “think-tank”, Civitas, which was sufficiently shamed to withdraw its report on account of “factual errors” after a withering assessment by Simon Evans in the Guardian. Some of the “errors” in this case were of the order of millions. 

 

How a think tank got the cost of net zero wildly wrong

 

Losing six or so zeros might merely be seen as carelessness. But as the Evans article demonstrates, it indicates a much deeper failure of understanding. It is failure to grasp the difference between power (kW) or capacity, on the one hand, and energy (kWh), on the other. This translates, unsurprisingly,  into order of magnitude errors on cost. For those not familiar with the units used for electricity, this is akin to confusing the cost of a button with the cost of the factory that produced it.

 

There seem to have been other errors in the report, such as an equally inexcusable failure to understand the difference between the total cost of investments made under a particular policy, on the one hand, and the net costs or benefits of that policy as a whole.

 

We await with interest the revised report. Civitas, on its website, claims to “… strive to benefit public debate through independent research, reasoned argument, lucid explanation and open discussion. We stand apart from party politics ….”

Odd, then, that this report should appear immediately following Sunac’s alteration of course on UK net zero. Readers will no doubt form their own view of its “independence”, as well as the competence of its authors.

THE AFFORDABILITY OF A UK ZERO CARBON TARGET

 Here are some back of the envelope calculations that demonstrate the credibility of the assertion that action to mitigate climate change, and progress to a low carbon economy, can be achieved at a containable cost. It aims to provide a simple intuitive defence of conventional estimates for the general reader, but serious students of the subject are invited to delve deeper into some of the excellent material produced under the aegis of the Committee on Climate Change[1].

One of the arguments mounted against taking effective action on climate is that the economic cost is unaffordable. The obvious response is that this has to be compared with the cost of not taking action, the costs of adaptation, and the possibility of existential climate threats on an unimaginable scale. However rather than engage with the occasionally hysterical accusations of alarmism from those in denial on the climate science, it is worth trying to get a sense of the scale of what may be involved in meeting a UK zero carbon target by 2050. Some sense of proportion should start to defuse the issue and calm any fears of national bankruptcy.[2]

This can be a confusing exercise, not least because estimates (of mitigation costs) tend to get tossed around in very different contexts. For example, it’s most common for costs to be discussed in very broad terms as a percentage of GDP. The Stern Review indicated costs of up to 2.0 % of GDP per annum, and some people have argued that this would be a very damaging and unsustainable burden in macro-economic terms.  The Committee on Climate Change currently makes a similar estimate (of 1-2 % of GDP). Others argue that Green investment can actually be used to boost economic growth and domestic employment[3]. There can be at least a partial truth in this argument, even if it can be misrepresented as arguing that the low carbon economy pays for itself. It is not an argument I intend to deploy here.

Some will be more concerned with the public expenditure implications, although that issue should be seen much more in terms of more political questions of how we choose to fund transformational change. For example, much of the cost of transition to low carbon may be carried by private consumers, in their utility bills or more expensive motoring choices, or it may include publicly funded infrastructure investment and extensive grants and subsidies.

Macro-economic shocks and UK GDP numbers

2019 GDP (last year before pandemic)                                                              £ 2170 billion pa

Estimated permanent loss of GDP due to 2008 financial crisis                          £  300 billion pa
The economy is 16%, or £300 billion, smaller than it would have
been had it followed the pre-crisis trend. (IFS 2018[4])

Typical impact of an oil price shock[5] in 1970s, 1980s and 1990s.                   £ 100 billion pa
(an order of magnitude estimate, based on spikes and falls in
the oil price of $100/ bbl, UK consumption of 100 mn tonnes pa,
and scaling up to an equivalent percentage of 2019 GDP)

Assumption of a 2% of 2019 UK GDP devoted to GHG reduction                      £ 43 billion pa
and low carbon transition.

I have not included the significantly larger shifts in resources associated with different government priorities on taxation and spending. Even so, the conclusion we might draw here is that the expenditure on a low carbon economy, while substantial, is far from catastrophic and unmanageable when viewed in macro-economic terms. We have coped with much larger and less predictable economic shocks than what we now face in eliminating emissions.

Public expenditure choices

Expenditure budget 2021:                                                                          £ 908 bn.

Defence                                                                                                      £  54 bn pa

Defence in 1951 (Korean War) accounted for 
10% of GDP. Equivalent percentage of 2019 GDP                                    £ 217 bn pa

Overseas aid (0.7% of GDP target)                                                           £   15 bn pa

Overseas aid (after current cuts)                                                               £  10.85 bn pa

Reported cost of UK Track and Trace system[6]                                       £   37 bn
(spread over two years but seems to be essentially
a 12 month figure). Minimal identified benefit.

Assumption of a 2% of 2019 GDP devoted to GHG                                  £ 43 bn pa
reduction and low carbon transition. (as above)

But what can you buy for 2% of GDP?

It turns out you can do quite a lot for decarbonisation with around £ 40 billion a year. Here is one allocation of that money:

Decarbonising the power sector.                                                               £ 18 bn pa

Retrofitting UK housing stock. 28 million households                                £ 20 bn pa
Grant of £ 20,000 per household for retrofitting, at one million
households a year for 28 years

Charging infrastructure for electric vehicles (EVs)                                    £ 2.5 bn pa

Total                                                                                                           £ 40.5 bn pa

This covers the three main sources of UK emissions, and the main areas for investment to achieve net zero by 2050. Assumptions to justify the plausibility of these numbers are as follows

Power Sector

Sizewell C has an estimated capital cost of around £ 18 billion for 3.2 GW of capacity. Nuclear is currently regarded as one of the more expensive options for low carbon capacity, and Sizewell is “first of a kind” but this at least gives us an order of magnitude. The equivalent of one Sizewell a year for 25 years delivers around 80 GW of capacity and more than 600 TWh pa of energy, more than enough, even after allowing for significant growth, to effectively decarbonise a power sector which already has a significant proportion of renewable low carbon energy. [Current UK annual consumption less than 350 TWh]

Alternative renewable sources are also widely seen as likely to be much cheaper than this, although there will be other major costs associated with energy storage. However we might interpret this as at least a first approximation, or an upper limit to the capital cost for low carbon generation. A great deal of new investment would of course be required in any case, so much of this will not be a truly incremental cost.

Heating of buildings

Retro-fitting of buildings, especially residential property, for energy efficiency and low carbon heat pumps or heat network solutions, is one of the biggest problems for achieving zero carbon. The cost of air or ground source heat pump installations are currently advertised at around £ 6000-8000 and up to £ 16000 respectively, while heat networks are collective typically municipal investments which can also be quite costly. But even adding on a substantial allowance for insulation improvement, £ 20000 per household would look like an extremely generous grant to a householder, especially as there would be a continuing benefit in lower running costs.

Electric vehicles

“The UK by 2040 needs 1-2.5 million new charging points. An average public charging point costs 25-30,000 euros so it would need to invest 33-87bn euros from now until 2040,” said Wood Mackenzie’s Wetzel. Interpreting this as two million over twenty years and assuming a cost per installation of £ 25000, this implies an annual investment of £ 2.5 billion.

The price of EVs is likely to fall dramatically with increasing scale, so we should not need to worry unduly about the capital costs of fleet replacement, which will be borne by motorists as they retire their existing vehicles.

Conclusions

Current estimates of expenditure required for a zero-carbon economy are plausible. In no sense can they be considered unattainable or damaging in macro-economic terms, as the sums are smaller and more predictable than the much bigger economic shocks we have endured in recent decades from other sources. Viewed as public expenditure choices the sums are commensurate with other choices we make and have made, such as the unfortunate “test and trace” scheme. An it is quite easy to hypothesise major elements in the composition of that expenditure.

Caveat. Sharp-eyed readers will have noticed that I have omitted some of the notoriously difficult, but smaller, sectors, such as aviation and shipping. But I believe the biggest additional issue will be the funds that high income countries will need to find in order to support low carbon strategies in the developing world.  That is a different story, and one that I have addressed in earlier posts this year.

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[1] Advisory-Group-on-Costs-and-Benefits-of-Net-Zero.pdf (theccc.org.uk) for example

[2] This post concentrates on UK statistics but the same arguments, and similar orders of magnitude, will apply to most developed economies.

[3] Retrofitting the UK housing stock, and many other infrastructure investments, will be labour intensive.

[4] 10 years on - have we recovered from the financial crisis? - Institute For Fiscal Studies - IFS. Paul Johnson and Jonathan Cribb. 2018

[5] The UK became a net oil exporter during this period, so the macro-economic consequences for the UK relate both to price shocks and significant changes in production.

[6] “Chancellor Rishi Sunak’s Budget last week included an additional £15bn for test and trace, taking the total bill to more than £37bn over two years.” [Independent. 10 March 2021]

 

SAVING THE PLANET DOES NOT NECESSARILY COST THE EARTH

Beware Fake News  on the economic and other choices we have to make.

There are longstanding debates about the economic costs of moving the world away from its addiction to the fossil fuels that are the prime source of the greenhouse gases causing temperature and climate change. There will be renewed attention to the challenges as the world slowly emerges from the covid-19 pandemic.

There are many elements to this discussion, from estimates of aggregate cost to macro-economic issues of reviving economies through Green investment. Some are discussed in a forthcoming article in the Oxford Review of Economic Policy.[1]   Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?

However, the propaganda battle has also begun, and so have the invented stories. On 7^th May the Financial Times commissioned an exchange of views between Christina Figueres, a former leader of the UN climate secretariat, and Benjamin Zycher of the American Enterprise Institute. Can we tackle both climate change and Covid-19 recovery?

Taxes at $30 for a gallon of petrol? Really?

Zycher, after a fairly conventional if disputable assertion of essential connections between economic growth and energy consumption, claimed that the Intergovernmental Panel on Climate Change (IPCC) advocates carbon taxes for 2030 with a midrange equivalent to $30 per gallon of petrol.

I have always been a natural enthusiast for Twyman’s principle, also attributed to the distinguished statistician, the late Andrew Ehrenburg. The “principle” is that any “interesting” statistic is probably wrong. In other words, if a number looks wrong, then quite likely it is wrong. This one was specially “interesting”; my own familiarity with energy statistics, and energy costs and prices, indicated an order of magnitude error.

If it looks wrong, there’s a good chance it is wrong!

Quite apart from the numbers, the attribution of this statement to the IPCC was intrinsically improbable, as the IPCC does not take policy positions. Its function is to report and summarise the literature of thousands of scientific and other publications, including economic modelling. It tells policymakers what we know and don’t know about the risks related to climate change (a bit like the role of the UK’s SAGE in the current pandemic). Its processes are carefully controlled by national governments, and it emphatically does not “do” policy recommendations, or advocacy.

I decided to do a quick check.  Much of the polemic was based on the supposed extremism, and implied naivety or hostility to humanity, of environmental campaigners, exemplified by “$30 per gallon”. It seemed quite important to understand how the author had come to this number. If the alleged advocacy was not correct, it seemed to be a particularly egregious example of dishonest reporting and misinformation.

First this meant chasing up the citation[2], given as Chapter 2 of the IPCC Special Report: Global Warming of 1.5 ºC. That report also has a Summary for Policymakers. Inspection of that summary did not reveal any mention of carbon taxes or carbon prices. If IPCC were really engaging in advocacy, it is in a summary for policymakers that one would expect to find it. It was not there.

I turned to Chapter 2, which appeared to be where Zycher had extracted his dubious statistic. The chapter consists largely of a technical summary of modelling methods, and hundreds of modelling outputs, all heavily qualified as to assumptions, meaning and interpretation. It does discuss the theoretical impact of carbon prices, but the relevant section, around page 78 of Chapter 2 emphasises the “real world distinction … between implementable and notional [model] carbon prices …” and that any “price … estimated in modelling studies needs to be compared with what is feasible”.

Turning to climate policy discussions, some proposals for more aggressive carbon pricing do indeed favour CO2 prices (or taxes) higher than today’s, typically of $100-200 per tonne. The same section of the IPPC report does identify evidence in support.  “Literature has identified a range of factors … that support [social cost] SCC values above $100.”  But for petrol that would be around 90 cents per gallon, an amount almost lost in the noise, not Zycher’s hysteria-inducing 30 dollars. Focusing on petrol prices in an electric future seems inappropriate but is presumably intended to link back to an everyday price with which most people are familiar.

If anything, environmental campaigners might be concerned that carbon taxes, even at the quite aggressive level suggested above, have so little impact on pump prices to consumers. An amount of 90 cents (or pence) a gallon is less than European governments already levy in tax, and within the range of the normal fluctuations in fuel prices in recent years. It is widely assumed among energy economists that taxing petrol is not a particularly effective instrument for promoting low carbon transport, and that more of the solution lies with electric (or hydrogen) vehicles. A more common financial concern is that governments will be reluctant to face the loss of the fuel tax revenues that stem from petrol and diesel.

Setting up straw men is, I am afraid, a standard tactic for this camp in the climate debate and the wider culture wars. This was a prime example.

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[1] Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change? Cameron Hepburn, Brian O’Callaghan, Nicholas Stern, Joseph Stiglitz and Dimitri Zenghelis. Forthcoming in the Oxford Review of Economic Policy 36(S1).

[2] Chapter 2: Mitigation pathways compatible with 1.5°C in the context of sustainable development. https://report.ipcc.ch/sr15/pdf/sr15_chapter2.pdf .

GREENS WANT A HUNDRED BILLION A YEAR OF PUBLIC SPEND TO DECARBONISE. THE COMMITMENT IS WELCOME, BUT HOW MUCH IS NECESSARY?

The UK’s Green Party rightly treats climate change as the defining issue of our time, but what is the financial and policy credibility of its proposals?  We must be prepared to spend what it takes, but money is not necessarily the biggest obstacle. Focus needs to be on the practicalities.

The Green Party manifesto promises an annual budget of £ 100 billion to realise the decarbonisation of the UK economy. Some people may fear that this makes policies to “save the planet” unaffordable, but the spending and borrowing to achieve that  should not necessarily be seen as the main question.

If high levels of spending on decarbonisation are effective, they can be justified.  

The issue of climate change is rapidly becoming a major priority among the public. There is an increasing recognition by climate scientists that the world will, collectively, have to attain “net zero” carbon emissions in the not too distant future. The likely overshoot, together with any failure to fully decarbonise sectors such as agriculture and aviation, or policy failures in some countries, mean that the global economy will have to find the funds for direct extraction of CO2 from the atmosphere. Even the most optimistic views of the still undeveloped sequestration technologies for direct extraction find it hard to come up with future estimates that are realistically much below $200 per tonne[1].

This means that current CO2 emissions themselves represent a particularly insidious form of borrowing. It is borrowing that requires a future repayment in kind (ie carbon sequestration to deal with past carbon emissions). If, globally, we are already on track to be at or above sustainable targets compatible with avoiding catastrophic change, then the future burden will include the cost of removing much or even all of current emissions. In the end we will, collectively, be forced to pay what it takes to deal with the problems, or to face the even more expensive consequences.

With current annual GHG emissions in the UK running at close to 500 million tonnes of CO2 equivalent (465 in 2017), our current activity is, each year, potentially imposing a future "climate debt" of perhaps $100 billion on future citizens of somewhere who will have to pay for the clean-up. The disturbing nature of this debt is of course concealed by the fact that it remains unmonetized, and also that it simply forms part of a global pool, responsibility for which cannot easily be re-allocated to individual agents or countries.

On this basis the Green Party propositions for these extremely high levels of public spending, and the associated borrowing, are not intrinsically unreasonable or outrageous. Long term borrowing, in a non-monetised form, is what we are doing now. But that in itself does not prove the need for quite such a large public spend as the best policy now.

We shall not be forgiven.  (Charcoal drawing, Nina)

But is this a realistic or even a necessary proposition for public spending?

The first qualification to make is that the estimate of what can be usefully spent is higher than most previous estimates. The Stern Review, hugely influential in promoting the low carbon agenda, suggested that perhaps between one and two percent of global GDP needed to be devoted to decarbonisation and other measures to reduce GHG. That would be consistent with an annual spend in the £20-40 billion range. Stern argued, correctly, that this represented no more than a six to twelve month delay in reaching a given level of income by 2050.

A second qualification is that this does not necessarily equate to this level of public spending. At least part of this spend will, eventually, take the form of spending by households and businesses as they adapt to the future. That may for example include personal investment in electric vehicles or in adaptation of domestic heating systems to conform to new low carbon standards.

A third qualification is that it may simply not be possible for us to spend, usefully and quickly, the amount of money suggested by the Green’s budget. Electric vehicles, heat networks, and heat pumps are all a long slog and it is unlikely that we have the labour or the skills to do all those things at the speed the Green Party programme implies.

Where Greens are right of course is that we and others need to be doing more, and faster. In particular we should be putting in place the institutions that will in due course facilitate the investments we need. Elsewhere I have proposed the idea of a National Heat Authority to promote and coordinate plans for carbon-free heat, and to initiate local proposals for (up to) city-scale heat networks which may in due course be managed and financed through local authorities. A very effective use of the money, too, if the political will can be found and successful project implementation assured, may well be to support some of the initiatives to promote climate compatible growth in the developing world.

There are plenty of feasible options available which are essential to accelerating our current downward trend in emissions, and may help postpone reliance on actual carbon sequestration. We certainly need to spend significantly more, but not necessarily, yet, in UK located investments, on the scale that the Green Party has proposed.

As a global community we should be taking action, to the practical limits, to mitigate climate change. And in its level of ambition the Green Party deserves our wholehearted support. Greta Thunberg is right. We shall not be forgiven if we fail. 

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[1] One major issue for costs is that not only does the CO₂ have to separated, it then has to be safely stored, either by a further process of combining with other elements to a solid state, or by the energy intensive process of pumping into deep oceans.

NEGATIVE NET CARBON. DIRECT EXTRACTION OF CO2. IS IT A GAME CHANGER?

DIRECT EXTRACTION OF CO2 FROM THE ATMOSPHERE.  IS THIS REALISTIC? IF SO IT COULD BE A GAME CHANGER?

A Swiss company has told the Carbon Brief website that there is a real prospect of reducing the costs of the direct extraction of carbon dioxide from the atmosphere to a point where it will be possible to consider large scale operations that could substantially offset current emissions and even feature in attempts to reduce concentration levels, in the so-called “zero carbon” or “net negative CO₂” policies that many people consider are implied in the Paris agreements. If their promises are realistic, then this would be a truly revolutionary development, with profound implications for our approach to climate policy. But there will be a lot of questions to answer on the way.

A Swiss company has opened what is believed to be the world’s first ‘commercial’ plant that sucks carbon dioxide from the atmosphere, a process that could help reduce global warming, it is claimed. The firm, Climeworks, expressed confidence they could bring down the cost from $600 per tonne of the greenhouse gas to $200 in three to five years with a longer term target of $100. This is almost an order of magnitude lower than previous estimates of the cost of direct carbon extraction, widely assumed to be around $1000 per tonne.

This is also one of the two most important candidates for a game changing technology breakthrough that I identified in my 2016 submission to the House of Lords Inquiry, which can be viewed as a separate page on this site. If it proves to be feasible then it may represent a considerable advance on what has hitherto been considered the only feasible route to net negative carbon, the so-called bio-energy with carbon capture and storage (BECCS) approach. Shortcomings of the latter include the limited supply of bio-energy, not least due to land availability constraints, and controversy over whether this really represents a sustainable approach[1]. So direct sequestration, if feasible, is very attractive.

There are clearly still a large number of outstanding questions before we get too excited by this prospect.

Is $200 or $100 per tonne really achievable? And if so is the technology scaleable? And to what scale[2]? If it is scaleable, it seems likely the world could be seeking an expansion of the process well beyond the 1% of current emissions suggested as an ambitious target by Climeworks.

The other big question is how to dispose of the CO₂ after its capture. This is a big issue, and a very substantial part of the cost for all carbon capture technologies, including those based on removing the CO₂ from fossil fuel combustion. This cost needs to be factored in and is bound to be a fairly substantial element in the total. It does not appear to be included in the Climeworks figures. Moreover the disposal issue, at scale, will raise its own environmental and risk issues.

But if these questions can be answered this could be a very significant technology advance. It is certainly not the magic bullet that solves all problems, but it could have some important consequences for the way we look at climate policies. Why?

First, one of the most terrifying features of the climate change threat is the apparent irreversibility of the processes involved. CO₂ emissions are cumulative. If they cannot be removed on any scale, then there is a real risk of a future where the climate science starts to tell us there is no return.  At this point priorities would take a dangerous turn towards survival rather than the global idealism, or at least hope, that underpins global agreements. But it is not just that dealing with a very expensive problem is psychologically more attractive than coping with the prospect of unavoidable catastrophe. Ability, in principle at least, to partially reverse out of the worst consequences, puts a finite bound on the costs of making the wrong policy choices. Inter alia it ought to increase the available policy options.

Second, and more importantly, direct sequestration has the potential to change the basis of policy in relation to carbon pricing. I have previously commented on the weakness of traditional cost benefit analysis (CBA) in this context. CBA fails to provide a basis for a carbon price, and the failure is in large measure due to an impossible number of uncertainties (in climate, geographical and economic impact) to which probabilities cannot be assigned from any established base of knowledge. But if we have a clear way of putting a cost on CO₂ removal, then we have at least a first approximation to a “true” cost of CO₂ emissions. This might inter alia provide a better justification for effective carbon pricing, and even for global adoption of a “common” rate of carbon tax. It could be a much more hard-edged approach than complex negotiations over carbon trading schemes, which, as with the EU Emissions Trading Scheme, have so far failed to deliver adequate carbon prices.

These are obviously early days for direct extraction technologies, and we should avoid premature optimism, but this could be an important part of the geo-engineering landscape to watch.

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[1] One of the reasons BECCS is controversial is that its justification requires careful analysis of the entire chain of processes involved, starting with the cultivation of the bio-crop and including any ecological or carbon related side effects, as well as consideration of the alternative land uses for food production or other purposes.

[2] Limits to scale might be imposed, for example, by the availability of other input chemicals to the extraction process. But the more serious limitations are likely to be on disposal of the CO₂ gas. A preferred route of extraction might be capture of the carbon in a solid and inert form, such as calcium carbonate, if this were possible.