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Pack up your temperature sensors, your climate-modeling supercomputers, your tree and ice core sample equipment. Sarah Palin has spoken on climate change, and she says it’s snowing in Alaska, ergo “global warming my gluteus maximus,” Q.E.D. And you know it’s science because she used the Latin word for “ass.”

Prescient Palin only ever backs winning horses like John McCain, Bristol and Levi’s marriage, and her own gubernatorial career, so if she says climate science is a non-starter then by god, we’re just going to throw in the towel. At least until we can get Obama to take inspiration from this completely real and not made up British law:

I suppose if anyone could inspire him to criminalize this kind of idiocy, it’s La Palin.

Filed under: Climate & Energy, Politics

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The right way to understand the potential of unconventional fuels like methane hydrates and tight oil is to closely examine their production rates and their prices. If these fuels can be produced at large scales and profitable prices, they very well might influence geopolitics and economics in the ways that Charles C. Mann speculates. If they cannot, then it truly doesn’t matter how much of those resources may exist underground and in the ocean floor.

Unfortunately Mann offers precious little data on price or production rates.

If Mann’s data on methane hydrates is correct, then Japan’s experiment so far has taken 10 years and $700 million to produce 4 million cubic feet of gas, which is worth about $16,000 at today’s U.S. gas prices, or about $50,000 at today’s prices for imported LNG in Japan. At this point, it is an enormously expensive experimental pilot project, and nothing more. We do not yet know when it might be able to recover commercial volumes of gas, or at what rate, or at what price. We have no reason to believe that if commercial quantities are recoverable by 2018 as Japan hopes — which seems incredibly optimistic — that the price of that gas will be competitive with imported LNG.

At the same time, we have numerous forecasts projecting that renewables like wind and solar will be competitive with fossil-fueled grid power in most of the developed world by 2020, including much of Asia. For example, a recent report by Citigroup, and another by researchers at Stanford University, among many others. A 2011 report by WWF and Ecofys projects that by 2018, solar PV will be the cheapest way to generate power in much of Asia. If these forecasts — based on more than a decade of real-world cost data for large-scale solar and wind — are correct, then there is no reason to believe that gas from Japan’s methane hydrate experiment will be able to compete with renewable grid power, which would constitute the largest market for that gas (unless Japan rapidly deploys natural gas vehicles in the interim, which it currently has no economic reason to do).

Mann also offers no data on tight oil production and price, but here are the key facts. In 2012, according to data from the U.S. Energy Information Administration, the U.S. consumed about 18.5 million barrels a day (mb/d) of liquid fuels and produced about 11 mb/d. Only about 7 mb/d of that 11 was actual crude oil, and about 1 mb/d of that was from tight oil. The non-crude liquids the U.S. produced have less energy content than crude, and some of it cannot be made into vehicular fuel.

One cannot easily make a case for incipient U.S. “energy independence” on the basis of 1 mb/d of new tight oil production. A host of dubious assumptions and data distortions underlie the recent energy independence forecasts which I will not delve into here, but I have examined and debunked most of the reports that Mann cites, including those from the IEA (here and here), Ed Morse at Citigroup (here and here), and Leonardo Maugeri.

The progressive substitution of expensive unconventional oil for cheap conventional oil is a fundamental reason why the global price of oil has tripled over the past decade, and will continue to rise. This essential concept — along with the correct definitions of “conventional” and “unconventional” — is lost in Mann’s treatment. It’s absolutely true that we will never “run out” of oil — there will always be oil resources that are too expensive to produce that will stay in the ground — but since 2004 we have seen the indisputable evidence that affordable oil is slipping away from us, and that the rising price of oil has contributed to the stalling of the global economy. If the world could tolerate $300 a barrel, there might be no reason for concern about future oil supply. But it cannot. As the IEA’s executive director recently noted, U.S. oil and gas prices need to go higher (through exports) to “avoid [the] shale boom turning to bust.” But prices for refined products like gasoline and diesel are already near the upper limit for American consumers.

The recent achievements from combining horizontal drilling with hydraulic fracturing are indeed impressive and have brought much-needed new volumes of liquid fuels to the thirsty U.S., which has long been the world’s largest oil importer. (Shale gas is likewise an impressive accomplishment, but the U.S. was still a net gas importer in 2012, according to EIA data.) But these are not new technologies. The first horizontal well was drilled in the 1930s, and hydraulic fracturing was introduced in the 1940s. Both technologies have been thoroughly applied and refined at scale in real-world circumstances for many decades, with substantial federal support for research and development.

Methane hydrate extraction, which is still in the early stages of testing and requires techniques that have only recently been attempted for the first time, is in no way comparable to tight oil and shale gas extraction. Methane hydrates are not “being developed in much the same methodical way that shale gas was developed before it,” and skepticism on methane hydrates isn’t comparable to skepticism on shale gas. Skepticism isn’t some fungible property of everything; facts about prices and production rates are essential.

Perhaps this is the real point of Mann’s take on these new technologies: He confesses that he does not want to “miss the boat” on methane hydrates as he did on shale gas. That’s a gambler’s mentality, not a shrewd investor’s.

Perhaps that is also why Mann chooses to perceive tight oil and methane hydrates through the lens of the peak oil debate, which occupies much of Mann’s 11,000-word exposition on the history of oil and gas production. His he-said, she-said treatment of the subject, attempting to portray it as a simple matter of differing opinions between “Hubbertians” and “McKelveyans,” gave far more credence to longtime and ardent peak oil critics like Verleger and Lynch, while characterizing the views of Campbell, Laherrère, and the “anti-fossil-fuel think tank” Post Carbon Institute as “not widely shared.”

If he had any real familiarity with their work, Mann would know that the latter group recognize the importance of fossil fuels while being deeply concerned about their future. He would also know that many other analysts and petroleum scientists have done serious and highly transparent research on the subject of peak oil, including Jeremy Leggett, a petroleum geologist and former faculty member of the Royal School of Mines in London; Olivier Rech, who was responsible for IEA’s petroleum forecasts from 2006 to 2009; dozens of independent analysts, petroleum engineers, and economists who publish at The Oil Drum; and petroleum scientists like Kjell Aleklett of Uppsala University, and Chris Skrebowski, a former long-term planner for BP and senior analyst for the Saudi Oil Ministry.

Mann’s caricature of the “Hubbertians” may make entertaining reading, but it does not refute their data, and while the assurances of people like Verleger and Lynch may be pacifying, they offer more vague assertions and rhetoric than data on production rates. The “Drill, Baby, Drill” report by petroleum geologist J. David Hughes that Mann derides (at shalebubble.org) is the most comprehensive and transparent assessment of U.S. tight oil and shale gas to date, and it offers a starkly different projection of the future of these fuels than their cheerleaders do.

Resources in the ground are one thing, but extraction is another matter entirely. And while production of fuels like methane hydrates may be technically possible, that does not mean that they will be affordable, or that their production will be scalable. Natural gas may be a “bridge” fuel, but only if we actually build a renewably powered world at the other end of that bridge. We have ample evidence that renewables are on their way to outpricing fossil fuels for grid power within a decade, while the prospects for methane hydrates and tight oil remain shrouded in speculation and wishful thinking. If there’s a boat that Mann is missing, its name is Renewables.

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It’s been a long, dark winter in Germany. In fact, there hasn’t been this little sun since people started tracking such things back in the early 1950s. A few days before Easter, the streets of Berlin were still covered in ice and snow. But spring will come, and when the snow finally melts, it will reveal the glossy black sheen of photovoltaic solar panels glinting from the North Sea to the Bavarian Alps.

Solar panels line Germany’s residential rooftops and top its low-slung barns. They sprout in orderly rows along train tracks and cover hills of coal mine tailings in what used to be East Germany. Old Soviet military bases, too polluted to use for anything else, have been turned into solar installations.

Twenty-two percent of Germany’s power is generated with renewables. Solar provides close to a quarter of that. The southern German state of Bavaria, population 12.5 million, has three photovoltaic panels per resident, which adds up to more installed solar capacity than in the entire United States.

With a long history of coal mining and heavy industry and the aforementioned winter gloom, Germany is not the country you’d naturally think of as a solar power. And yet a combination of canny regulation and widespread public support for renewables has made Germany an unlikely leader in the global green-power movement — and created a groundswell of small-scale power generation that could upend the dominance of traditional power companies.

Twenty years ago, it was clear solar power wasn’t going to get anywhere by itself. Photovoltaic panels were expensive and inefficient. Even solar systems designed to heat water, a far less technologically tricky task, were bad buys on the open market. Producing electricity from sunlight costs 10 times more than generating power using coal or nuclear energy. “The early systems might as well have been made out of gold,” says David Wedepohl, a spokesman for Germany’s Solar Industry Association.

In 1991, German politicians from across the political spectrum quietly passed the Erneuerbare Energien Gesetz (renewable energy law), or EEG. It was a little-heralded measure with long-lasting consequences.

The law guaranteed small hydroelectric power generators — mostly in Bavaria, a politically conservative area I like to think of as the Texas of Germany — a market for their electricity. The EEG required utility companies to plug all renewable power producers, down to the smallest rooftop solar panel, into the national grid and buy their power at a fixed, slightly above-market rate that guaranteed a modest return over the long term. The prices were supposed to balance out the hidden costs of conventional power, from pollution to decades of coal subsidies.

Investors began to approach solar and wind power as long-term investments, knowing there was a guaranteed future for renewable energy and a commitment to connecting it to the grid. Paperwork for renewables was streamlined — a big move in bureaucracy-loving Germany. The country invested billions in renewables research in the 1990s, and German reunification meant lots of money for energy development projects in the former East.

Now German companies lead the world in solar research and technology. The handful of companies that make inverters, the devices that reverse the flow of electricity and feed power from rooftop solar panels back into national grids, are almost all German. On a sunny day last May, Germany produced 22 gigawatts of energy from the sun — half of the world’s total and the equivalent of 20 nuclear power plants.

The “feed-in” laws and subsidies pushed innovation to the point where solar panels are cheap enough to compete on the open market in Germany and elsewhere. The price for solar panels has fallen 66 percent since 2006, and the cost of solar-generated power may be competitive with coal in a few years, according to a study by UBS. Already, solar projects are thriving in places like India and Italy despite a lack of government subsidies or support, and a recent Deutsche Bank report predicted “grid parity” in Bavaria by next year.

You might think Germany would be smug about all its solar success. But, as usual, folks here are full of doubts. Part of the reason solar panels are getting cheaper is competition from China, which is threatening to push more expensive German producers out of business. Last year, German conservatives tried to end solar subsidies entirely, arguing that plummeting prices were encouraging too many people to install solar panels. They said that the subsidies come at the expense of city dwellers without solar-ready roofs, low-income electricity consumers, and investments in other forms of renewable energy. Even environmentalists have begun to grumble about the solar boom, which sucks up half of Germany’s funding for renewables but provides just 20 percent of green power.

The proliferation of privately owned solar has large power companies in Germany worried. For two decades, they’ve been forced to facilitate and finance their competition, helping turn customers into producers. Soon, rooftop solar and other small-scale, locally owned renewables could upset the market for coal and nuclear power.

Here’s why that’s a problem: Renewable energy sources like wind and solar generate power intermittently, dependent on the sun or fickle breezes. Until researchers can find a way to store energy at a large scale, coal and nuclear plants — which can’t simply be switched on and off at will — must be kept running to guarantee a steady stream of electricity when the sun isn’t shining.

That means overproduction of power during daylight hours, as the country’s ample solar energy floods onto the grid along with electricity produced by power plants. Power companies traditionally charge more during the day, when offices are full and manufacturing plants are in full swing, so the glut of daytime solar power reduces their profit. The proliferation of solar panels on homes also takes high-margin residential customers off the grid at peak hours. And the energy surplus has driven prices for traditional coal and nuclear power down, even as renewables are still guaranteed more-than-competitive rates. As power companies try to pass the costs to consumers in the form of higher bills, that just encourages more people to put solar panels on their roofs.

Already, Germany’s power companies are closing power plants and scrapping plans for new ones. Germany had a national freak-out after the Fukushima disaster and decided to abolish nuclear power by 2023. Meanwhile, energy prices continue to sink, and solar installation continues to grow. By decentralizing power generation, the renewables boom could do to the power industry what the internet did to the media: put power in the hands of the little guy, and force power companies to rethink how they do business. As soon as the sun comes out, that is.

This story was produced by Slate as part of the Climate Desk collaboration.

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I was on vacation earlier this week (snowboarding in Utah, while I still can) and missed the latest round of VSP scolding about the Keystone XL campaign. There was New York Times columnist Joe Nocera, who despite being thoroughly debunked and humiliated regarding his last column, continued his jihad against climate scientist James Hansen. And there was the Washington Post editorial board, which once again lectured environmentalists that they are “fighting the wrong battles.”

To be honest, I’m tired of responding to these things; they just keep repeating the same stupid arguments with no acknowledgement of the counter-arguments. If you want a sampling of my previous responses, try:

• Caving on Keystone: Still a dumb idea
• Debunking Nature’s arguments for Keystone
• Joe Nocera knows from boneheaded
• The virtues of being unreasonable on Keystone
• Supply, demand, and activism: What should the climate movement do next?

For now, I just want to make one quick point that I don’t think I’ve made previously.

WaPo editors, Nocera, and the rest of the legion of Keystone scolds seem to think that what activists are engaged in is a policy proposal — as though they surveyed the policy options and decided that blocking this one pipeline is the most significant, impactful policy available. And that’s why they’re rallying for it.

Thus, Nocera et al. spend thousands of words arguing that, no, it’s not the optimal policy.

But that’s stupid. Comparing activism and a policy proposal using the metric of direct carbon reductions is a category error. The goal of climate policy is to reduce carbon (and build out alternatives). Activism has different goals: persuasion, organization, and a shift in political power. That a particular activist campaign would reduce carbon less than a particular policy is not so much wrong as irrelevant.

It’s not enough for Nocera et al. to say, “A carbon tax would be better than blocking this pipeline.” Of course it would! They need to explain why an activist campaign devoted to a carbon tax would be better activism than the Keystone campaign. That’s a whole different comparison.

A carbon tax has to get through Congress. The House of Representatives is filled with Republicans from narrowly drawn, far-right districts whose main fear is being primaried from the right (not being protested from the left). How exactly are left activists supposed to change that dynamic? What possible prospect of success do they have? How would it pull together a passionate constituency? What would the mechanics of a carbon tax-focused activist campaign even look like?

It’s not so much that these questions have no possible answers as Nocera and co. don’t even attempt to answer them. They don’t even acknowledge them. They are content to say, “I want a carbon tax so protestors are stupid.” It’s just a criminally shallow and irresponsible approach to a real and difficult problem.

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Green Thing encourages people to walk more, cut back on meat, buy less, turn down the thermostat, waste and fly less, and unplug vampire electronics. So every day until Earth Hour on March 23, the London-based nonprofit is publishing a poster to promote those green habits.

And some big designer names contributed to the project, including Google Creative Director Tom Uglow and London 2012 Olympics logo designer Patrick Cox. Green Thing knows “that a dig, joke, or nudge is way more effective than another weeping seal cub,” Cox said in a press release for the project. Follow the project on Green Thing.

Filed under: Article, Cities, Food, Living

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How much is it worth to us today to avoid climate disruption later this century? To understand how that question has typically been answered, you need to understand what economists call “discount rates,” key parameters in the economic models used to assess climate policy costs. Such models inform policymaking and shape conventional wisdom, but their use of discount rates has led them to lowball the threat and recommend insufficient action to meet it.

You see my problem here: You’re already bored as sh*t. And the literature on this is as voluminous as it is technical. You could be much more bored. Trust me.

But don’t give up! It really does matter. Understanding discount rates will help you understand the climate-policy landscape — not only the technical details, but the struggle over values that lurks underneath them.

So stick with me. To help counter the soporific effects of the subject, I shall endeavor to explain it in a lively, accessible fashion. Failing that, I’ll use otters.

OK! Let’s recall a vexing fact about climate change: There’s a substantial time lag between causes and effects. Greenhouse gases emitted today affect global temperatures in 50 years or so, just as we’re experiencing temperature rise caused by emissions 50 years ago. This time lag complicates efforts to do something about the problem, to say the least, as people are not generally temperamentally inclined to sacrifice now to gain benefits (or to avoid costs) 50 years down the road. We prefer instant gratification; we’re pretty myopic.

The policy challenge, then, is to pull those damages out of the future and into the present. We need to amplify that distant signal so that it is heard in everyday economic decision-making.

The preferred way to achieve this goal is to put a price on carbon, via a tax or a cap. The carbon price is meant to reflect the damages emissions will cause later, or, in dork-speak, to “internalize the externalities.”

To do this properly — to figure out the “right” price for a ton of CO2 emissions — we have to answer two questions. One, how much damage will a ton of carbon do? And two, how much is it worth to us to avoid that amount of damage?

Climate science can help answer the first question, though it can’t, and likely never will be able to, give us a precise figure. Especially at regional or more granular levels, precision is impossible given the limitations of current science and the inherent complexities of the global atmospheric system. But if we want a figure or range of figures to work with, we can choose from the center of the probability distribution and get something that’s “good enough for government work,” as they say.

The second question is trickier. The physical sciences cannot answer it. How much future climate mitigation is worth to us today — what’s called the social cost of carbon — is a matter for economics and ethics. And it’s here that discount rates enter the picture. We must prepare ourselves with an otter.

To get our heads around discount rates, let’s first focus on how they work in individual decision-making. There are two concepts to grasp here: revealed time preferences and opportunity costs. (Hey, I just gave you an otter.)

Here’s a thought experiment. Say I gave you a choice: I’ll give you $100 today or $100 in 10 years. You’d choose today, obviously. What if the choice was $70 today or $100 in 10 years? Hm … tougher. $50 today? If you choose $50, you’re saying that dollars today are worth twice what dollars in 10 years are worth.

The degree to which you prefer present benefits (money today) over future benefits (money in the future) is known as your “revealed time preference.” It is “revealed” in that it is reflected in your savings and investment decisions, even if it is never articulated.

Now, here’s another scenario. What would you pay today to avoid $100 in damage to your car a year from now? In making this decision, you would think about what else you could do with the money in the meantime. “Hm, I could put $100 in a bank account and, at a 3 percent interest rate, in a year I’d have $103. I could pay off the repair bill and pocket $3 in profit!” In a situation of 3 percent interest rates, it’s only worth $97 to you today to avoid $100 in damage a year from now. Otherwise you could make more by investing the money differently. What if the $100 in damage was in 10 years? Then it would only be worth $67. How about 30 years? Just $41.

How much an investment pays relative to other uses of the same resources is known as its “opportunity cost.”

Revealed time preference and opportunity cost are conceptually distinct, but they both point in the same direction: You value present costs and benefits more than future costs and benefits. Think of it like compound interest, only run in reverse; to an investor today, returns lose some percentage of their “net present value” each year they recede into the future. That percentage is the discount rate. In financial transactions, the discount rate is typically set around prevailing market interest rates.

OK! We know what discount rates are and how they factor into savings and investment decisions. So far so good. Things get a little stickier and more complicated when it comes to climate change, though. So let’s take a quick otter break.

Why are discount rates a vexed subject when it comes to climate change? Mainly because climate change involves long time spans and globe-spanning geography — and therefore multiple generations and multiple societies.

Let’s focus on the time spans. Consider: If we have a discount rate of 3 percent — which is a fairly representative rate in economics — and we face $100 of climate damages in 2100 (roughly 87 years from now), it is worth about $7 to us to avoid it. Hardly anything.

To make it more vivid, imagine climate change were on track to cause $5 trillion ($5,000,000,000,000) in damages by the end of the century. That’s an unthinkably large number. (Go ahead, try to think about it.) But at a discount rate of 3 percent, it would be worth just $382 billion to us today to avoid it. For perspective, that’s a little more than half the annual U.S. military budget.

It starts to seem a little absurd. And it gets even crazier if you apply a discount rate of 5 percent, as some people suggest (5 percent is roughly the return on U.S. Treasury bills). That would mean avoiding $5 trillion in damages in 2100 is worth about $72 billion today. By comparison, that’s just over what China expects to invest in high-speed rail this year.

So you see: If we use discount rates in the 3-5 percent range, we can’t justify spending much of anything on climate policy today. And that’s what some popular modeling shows. Yale economist William Nordhaus, for instance, uses a discount rate of 3 percent, so his modeling tells us that all we need at the moment is a modest (around $5/ton) carbon tax. (Or, put another way, the social cost of carbon is $5 in today’s dollars.) [UPDATE: OK, this is slightly off. Nordhaus's optimal CO2 price was $7.40 a ton in 2005, meant to rise 2 or 3 percent a year, so it would be around $9 or $10 today. Still pretty low.]

If that doesn’t jibe with your moral intuitions, you’re not alone. U.K. economist Nicholas Stern, in his famed Stern Review, used largely the same scientific data as Nordhaus, but with a discount rate of just 0.1 percent. [UPDATE: Johnson emails to inform me that Stern used 0.1 percent for time preference but 1.4 percent for the full discount rate.] Not surprisingly, Stern’s modeling suggests that the price of a ton of CO2 is closer to $85 a ton and rising.

Again, these two, the “delayer” and the “alarmist,” do not disagree on the scientific facts, they just disagree about how much we should value economic impacts on future people. That’s the difference between apathy and panic.

What should the discount rate be in economic modeling of climate change? And how do we decide? Before we get into that heaviness, we need a little otter.

So who’s right about the discount rate, Nordhaus or Stern? Suffice to say, this is a subject of vigorous dispute. If you want to dig in, you have many long and excruciatingly boring journal articles to choose from. I will merely scratch the surface here. Long story short: There’s no “right” answer, only a judgment call.

Those who argue for a higher discount rate (in the 3-5 percent range), like Nordhaus himself [PDF], favor what they see as a descriptive rather than prescriptive approach. Ours is not to ask what the discount rate “should” be, ours is but to determine people’s actual time preferences as revealed in their everyday market behavior (i.e., look to prevailing market interest rates). It’s the only way to avoid “paternalism,” smuggling moral judgments into economics.

One of their primary assumptions is that people in the future will be richer than us, and thus better prepared to deal with climate damages. If it’s a choice between making them richer and reducing their climate damages, we should generally lean toward making them richer. Only if climate mitigation investments offer a rate of return higher than prevailing interest rates are they worthwhile. Otherwise, we’d be better off just putting the money in a bank.

For my part, I find arguments for a lower (or even zero) discount rate much more persuasive. This does not strike me as an area where “paternalism” can or should be avoided. We’re literally the parents (and grandparents) in this situation!

First, let’s discuss this notion that people’s revealed time preferences are a kind of neutral baseline discount rate, devoid of ethical judgment. I like this point from professor Paul Kelleher, who wrote a short review on “energy policy and the social discount rate” [PDF]. He’s responding here to Martin Weitzman, who argues that the social discount rate should reflect prevailing interest rates (i.e, prevailing time preferences):

Weitzman is surely correct that prevailing interest rates reveal ethically relevant information. But it is information about how individuals, acting as individuals and largely in their own interests, weight present versus future well-being. However, the social discount rate should reflect explicitly moral, other-regarding judgments about the relative importance of well-being that exists far into the future. It is by no means clear that individuals’ self-regarding behavior yields any insight whatsoever about what even those same individuals believe we owe to future generations.

Right. It’s one thing for an investor to make decisions about how much future value she will sacrifice for present value. It’s another for her to make decisions about how much value future people will sacrifice for her present value. Those are decisions that affect other people, paradigmatically ethical decisions, so it is no longer her discount rate alone that’s relevant. There’s no avoiding ethical judgment here.

More arguments against high discount rates can be found in this post from NRDC chief economist Laurie Johnson (to whom we will return later). I’ll share her top-line points:

An increasingly disrupted climate may hamper economic productivity, causing economic growth rates to deviate below their historical trajectories. If worse-case climate risks materialize, climate change could even reverse economic growth. In that instance, people in the future would be poorer than people today, not wealthier.

This is the big one for me. Recent science is pointing more and more strongly to the danger of 4, 5, even 6 degree Celsius temperature rise by 2100, while at least some climate scientists are warning that “economic growth cannot be reconciled with the breadth and rate of impacts as the temperature rises towards 4°C and beyond.” Avoiding impacts that scientists characterize as dangerous and irreversible will require heroic effort.

Are we really so sure economic growth will continue as it has during our age of energy (and carbon) abundance? It’s always seemed to me that economists have near-religious faith in economic growth; models show everyone getting richer because models reflect that faith. But in an age of climate disruption, amidst “long tail” risks of truly catastrophic, even species-threatening damages, it seems insanely risky to try to dial the economic knobs to maximize returns. Surely a more precautionary approach, akin to purchasing insurance, is appropriate.

More from Johnson:

Private investors (and hence market returns) do not take into account pollution externalities resulting from production, such as the depreciation of natural capital (e.g., loss of natural habitats to development and pollution) and public health damages, or other potentially negative social impacts related to economic production, such as inequality. They therefore tend to overestimate the impact growth has on real social welfare.

Yes. Private investment decisions are made entirely within market rules, but some market rules may be maladapted to social welfare, especially future social welfare. (“You can emit carbon for free,” for instance, seems like a rather imprudent rule.) Market growth in these circumstances only exacerbates maladaption. Social and ethical decisions must encompass a broader perspective than markets can provide.

Even if income grows under a changing climate, it is unlikely that the people most harmed by climate change will be the recipients of that growth.

The more provocative way to put this point is that global economic growth is entirely consistent with the loss of the entire African continent to drought and disease. After all, Africa doesn’t contribute much to global GDP.

This gets back to climate change’s global reach. When Americans say “future generations” will benefit from our money more than our mitigation, we should be clear that we’re talking about future generations of us, the people with the wealth necessary to weather climate disruption. Future generations of the poor and vulnerable will suffer far more than they otherwise would have. We will be displacing suffering temporally and geographically. Call it the “geographical discount rate.”

And finally, there’s this old chestnut:

Money isn’t everything.

True!

Say you could ask the people of 2100 (some of whom may be your children or grandchildren), “would you rather inherit $1 trillion in cash or $1 trillion worth of avoided drought, storm, and famine?” Which do you think they would choose? They will have lost biodiversity, up to half the species on the planet, that will never return. They will have lost millions of acres of old-growth and tropical forest, most of the world’s coral reefs, and the bulk of world’s annual sea ice. Those things will never return, not in time spans relevant to our species. The natural world that has provided us sustenance since we were primates can not be restored once it’s gone.

There’s more to the biosphere than the “services” it provides humans. Some damages cannot be captured in dollar terms.

Anyway, them’s the arguments for a low-or-zero discount rate. Or at least some of the arguments. Sounds like time for an otter.

Say we’re convinced by these arguments and adopt a low discount rate, a social cost of carbon that reflects that low discount rate, and a price on carbon that reflects our new social cost of carbon. What are the consequences?

Well, for one thing, renewable power immediately becomes cheaper than fossil-fuel power, including natural gas.

That’s the sexy conclusion. Let’s run through the argument, which is in two parts.

First is a new paper out in the Journal of Environmental Studies and Sciences, by the aforementioned Laurie Johnson and her colleague Chris Hope of Cambridge. In it, they argue that the U.S. government has substantially underestimated the social cost of carbon, which threatens to distort future regulatory and legislative decisions.

“Say whaaa?” you ask. “The U.S. government has put on a price on carbon?” Why yes! Here’s the situation:

In 2010, as part of a rulemaking on efficiency standards, the U.S. government published its first estimates of the benefits of reducing CO2 emissions, referred to as the social cost of carbon (SCC). Using three climate economic models, an interagency task force concluded that regulatory impact analyses should use a central value of $21 per metric ton of CO2 for the monetized benefits of emission reductions.

The problems with the economic models the government used are twofold, say Johnson and Hope. The first, as you likely guessed, is about discount rates. The government instructed the task force to consider only three discount rates: 2.5, 3, and 5 percent. Three percent was considered the mean, or “central” value.

As we’ve seen, that might make sense for costs and benefits confined to a single generation, but across generations, a rate that high is not ethically justified. Even the government agrees: The Office of Management and Budget has official guidelines [PDF] on the use of discount rates in inter-generational cost-benefit analysis. It says they can range from 1 to 3 percent. Yet somehow 3 ended up as the task force’s “mean.”

So, Johnson and Hope modeled different (and more appropriate) discount rates: 1, 1.5, and 2 percent.

They also made another change. The task force models treat damages equally across geographic regions. They use a geographical discount rate of zero; a dollar of damage here is equal to a dollar of damage there. But fairness and decency would indicate that a dollar of damages in a poor region is worse — reduces human well-being more — than a dollar of damages in a rich region.

So Johnson and Hope added “equity weights” to regional damages, based on relative income levels.

[UPDATE: To clarify: Johnson and Hope ran the models with low discount rates, then they ran a few with equity weights separately, for illustrative purposes. The two tweaks were not combined in any model runs; if they had been, the estimates of SCC would have been even higher.]

With those changes (effectively reflecting Stern’s assumptions rather than Nordhaus’s), the authors found a social cost of carbon “2.6 to over 12 times larger” than the $21 central estimate of conventional models, which indicates that “regulatory impact analyses that use the government’s limited range of SCC estimates will significantly understate potential benefits of climate mitigation.” That matters a lot, especially at a time when EPA carbon emissions are subject to such intense political scrutiny.

The second half of the argument … comes after an otter.

In a supplemental piece, Johnson compares the levelized costs of different forms of power in light of her new social cost of carbon.

Overall, the analysis shows that if the well-being of future generations is properly taken into consideration, the benefits of cleaner electricity sources are greater than their upfront costs, both for new generation, and for replacing our dirtiest plants. In contrast, using the government’s estimate of CO2 damage costs tends to favor dirtier energy sources, and an ever riskier climate. [my emphasis]

So if you take equity into account and use a low discount rate — that is, if you choose to treat future generations and vulnerable peoples with moral regard — clean energy is already cheaper than dirty energy.

That’s something I wish I could get people to understand: The “cost” of a form of energy is not an objective property of the universe, measured by a market cost-o-meter. It’s a social construct, the result of assumptions built into the way we calculate value. Those assumptions are not holy writ. They can be contested.

Along those lines, check out this response to Johnson’s work from one of the modelers involved in the government commission:

Michael Greenstone, a former chief economist for the president’s Council of Economic Advisers who helped create the $21 price tag back in 2010, said he stands by the 2010 analysis.

“I’m not overwhelmed by the opinions of two people, experts as they may be, about what the proper assumptions are, not compared to the collective effort of a dozen federal agencies and leading experts from the wide variety of disciplines that have insight into the climate change problem,” Dr. Greenstone said. “Calculating the social cost of carbon requires many, many assumptions.”

“What the authors of this study are highlighting is that as you change those assumptions, you can make the number go up or down,” he said. “There are other people that believe the discount rate should be even higher, which would lead to a substantially smaller social cost of carbon.” he said.

It’s true that there are many assumptions involved in determining a social cost of carbon. What’s also true is that many of those assumptions are based, in part, on moral judgments.

As cultures, as polities, how should we make those kind of judgments? Frank Partnoy, a professor of law and finance at the University of San Diego, makes the right point:

“Ultimately, we can’t rely on only numbers — we have to make really hard value judgments,” Dr. Partnoy said. “We should stop pretending this is a science and admit it is an art and talk about this in terms of ethics and fairness, not what we can observe in the markets.”

That, to me, is the key take-home message about discount rates: They are social and ethical disputes being waged under cover of math, as though they are nothing but technical matters to be determined by “experts.” But social and ethical judgments should be made in an open, transparent way, not buried in models as inscrutable parameters.

I mean, we’re talking about how much we value our children and grandchildren. Surely that’s a matter for democratic discussion and debate!

Now you know what discount rates are and you can participate in those debates. You deserve an otter.

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By Claire Thompson

In the 12 years since the debut of LEED certification, the green-building stamp of approval has become the holy grail for every earth-loving contractor and home-builder. But while brand-new, Dwell magazine-worthy eco-structures are a flashy way to highlight new construction practices, the greenest buildings, it turns out, are almost always old ones. By fixing up an old building, you’re saving the planet all the costs of growing, manufacturing, and shipping new building materials all over creation, putting yourself decades ahead of a new building in terms of mitigating climate impacts.

LEED has a special set of awards (silver, gold, platinum) for existing buildings that have energy efficiency retrofits and other upgrades, but these rising energy-saving superstars haven’t seen much limelight — until now. Next month, the first annual EBie Awards will recognize impressive environmental performance improvements in existing buildings (existing buildings – E.B. – get it?).

“There’s not been enough recognition of the talent and skills that go into making effective change through existing buildings,” says Russell Unger, executive director of the Urban Green Council, which created the awards. “By bringing these incredible case studies to light, we’re hopefully encouraging duplication. People will start asking themselves, ‘Why can’t I do that, too?’”

The shift in focus from new green building to retrofitting existing buildings is already underway, spurred by a lack of capital for new construction and a realization of the huge benefits of rehabbing older buildings. Unger says that last year alone, New York City had 22 LEED-certified existing building projects, compared with 24 over the previous four years.

One of the main reasons these projects haven’t gotten more attention is their total lack of sex appeal. The 18 EBie finalists include an elementary school, a hospital, an art museum, and an affordable housing complex. If these buildings have one thing in common, it’ that they look more or less the same as they did before.

Hollie Brown is a project developer for Schneider Electric, which did a retrofit for the Dallas Museum of Art, one of the finalists. She doubts much of the Dallas public is even aware of the impressive changes their museum underwent — a testament to the skill of the construction team, but also an example of how under-the-radar green retrofits remain, in part because they achieve such significant savings through practically invisible changes. The retrofit involved implementing strict humidity controls, important for the art’s physical preservation, and had to take place without disturbing the exhibits.

“None of the retrofits [we made] were terribly exotic,” says Marc Zuluaga, director of multifamily energy services for Steven Winter Associates, which oversaw the rehab of a Brooklyn affordable housing complex, another finalist. The apartment building got new windows and a more balanced, functional ventilation system, both of which subtly improve comfort and quality of life for residents in addition to lowering the owner’s energy bill. But “it’s not necessarily something that tenants feel or see on a day-to-day basis,” Zuluaga says.

Just because these retrofits are not immediately visible doesn’t mean the savings they achieve are minor, however. Unger says that when the judges decided on a scoring scale, they assumed the highest energy savings they’d see would be 40 percent. But multiple projects showed savings of more than 50 percent.

By helping spread the word about these potential savings, the EBies could help convince banks and other lenders that retrofits are solid investments. Brown’s company, Schneider Electric, retrofitted the Dallas Art Museum as part of an energy conservation performance contract, which guarantees the project will pay for itself within 10 years by taking a huge bite out of the museum’s utility bills. Zuluaga’s company, Steven Winter Associates, did a study for Deutsche Bank Americas Foundation and Living Cities to analyze the energy savings achieved by over 200 multifamily housing units, and found the buildings reduced their fuel consumption by an average of 19 percent.

“Almost all buildings are going to have opportunities to improve efficiency that will save money and be a far better investment than the stock market,” Unger says.

With the EBies highlighting the upper end of what’s possible, we should see support for existing building retrofits grow. For this year, though, EBie finalists will mostly enjoy basking in some long-deserved glory. Those who can make it to New York for the awards ceremony on June 28 will enjoy a “VIP day” with a fancy lunch, a tour of the World Trade Center site, and a walk down the “green carpet.” And then they’ll return home to — hopefully — toil in a little less obscurity.

Just don’t hold your breath for the TMZ post-show commentary.

Filed under: Cities

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by Greg Hanscom.

I once
worked for a New Yorker who loved to wisecrack that the only difference between
Denver and yogurt was that “yogurt’s got culture.”

Looking
at the Mile High City’s endless sprawl of lookalike Anywhere, U.S.A. subdivisions,
it’s easy to understand where he was coming from. But in a former warehouse
district just off of downtown, an innovative experiment in neighborhood-level
sustainability is underway that could show New York and the rest of the country
what really rocks the house when it comes to eco-centric living.

The
project, and others like it around the country, started with a simple
observation: While cities have been leaders in the effort to combat climate
change, much of the action within cities occurs at the neighborhood level. “The
neighborhood is a geography, a scale that resonates with people,” says Rob
Bennett, executive director of the nonprofit Portland Sustainability Institute.
“Neighborhoods have always been a powerful and important part of how we view city-building,
and how we view ourselves as citizens.”

Bennett is
among a group of urban thinkers who envision neighborhoods powered by their own
micro-solar or geothermal power grids. They imagine city blocks operate as
single, interconnected systems, saving gobs of energy and resources in the
process, and small manufacturing districts where companies make use of each
other’s waste streams. Planning geeks call them “eco-districts,” and say they’ll
be the next big (or not-so-big) thing in sustainability.

The
project in Denver is the brainchild of Living City Block, a nonprofit that
adopted two square blocks in Lower Downtown (known by locals as LoDo).
Architect Paul Todd says that 20 years ago, the place was a wasteland of
boarded up, Victorian-era warehouses. He and his wife (and architectural
partner), Kirstin Todd, bought a building in 1991
that was slated for demolition. “We removed the entire second floor and most of
the roof,” he says. “We completely rebuilt it from the ground up.”

At about the same time, the city poured money
into the area, tearing out a viaduct that once arched over a nearby rail yard
and putting in walking malls, trees, and bike racks. Today, the area is the
nightlife epicenter for the entire metro area, drawing crowds of shoppers,
revelers, and diners even on weeknights. (Eat it, Yoplait.)

Living City Block president Llewellyn Wells says
government agencies have put a lot of resources into retrofitting and
weatherizing homes in recent years, and an entire industry has sprouted up to
“green up” corporate and college campuses—but little attention has been paid
to retrofitting smaller commercial space, he says. If Living City Block can
figure out a way to retrofit LoDo, it could pave the way for other projects,
tying in everything from energy generation and efficiency to storm water and
waste water management.

“There
are tens of thousands of other neighborhoods like this around the country,”
Wells says.

After an initial round of community meetings and
design charrettes, a vision of the block emerged that would include rooftop
gardens, solar panels, and energy-efficient retrofits. Two buildings—the
Todds’ and one owned by the Alliance for Sustainable Colorado, an environmental
nonprofit—will be tricked out to generate all, or close to all of their own
electricity. By the end of next year, Living City Block expects to cut the
block’s energy use in half. By the time the project is finished, block-wide
savings should be between 75 and 80 percent.

But
turning ideas like these into street-level reality has proven to be harder than
anyone expected. Last year, the Department of Energy awarded Living City Block $600,000
in energy analysis and modeling work. Workers are now outfitting the buildings
with fancy new meters so that the block can monitor its energy savings over
time. But the project still faces some formidable obstacles: To fund the actual
retrofit work, Living City Block and the owners of the LoDo buildings need to
convince a bank to lend them money—a tall order when you consider that the
loan will be leveraged against future energy savings, not business profits.
“Easier said than done,” Wells says.

The
second challenge is equally daunting: holding a group of property owners
together long enough to make something like this work. The extensive legal
issues that come with this kind of communal investment require some kind of
formal governing body, akin to a homeowner’s association—currently, there
isn’t one. And then there are simple questions of leadership and attention span.

“They started out strong, with a lot of enthusiasm,” says Paul Todd.
“But getting everybody together and trying to think about the block
holistically without scaring people about giving up property or development
rights—that has been a big challenge. It’s been tough to get people to show
up to information meetings.”

While Living City Block has a second initiative
underway in Brooklyn, it stepped away from a similar project in Washington,
D.C., this year. Wells will only say that local funding was an issue.

But
Living City Block’s trials and errors offer lessons for other efforts to green
neighborhoods. “We’re pioneers—we’re out there taking the hits.” Wells says.
“We’ve learned that there has to be an involved community on the ground for
this to work. What we care about in the end are better communities, not just
better buildings.”

Stay
tuned for more stories about neighborhood-scale sustainability efforts, from
Portland to Washington, D.C.

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by Arne Jungjohann.

Ever since Germany shut down eight of its nuclear power plants in the wake of the Fukushima disaster, nuclear proponents have raged against the decision. Their claim: This cannot possibly be good for the German economy,  its energy security, or the climate.

The latest example of this rage is a piece in The New Republic: “How Germany Phased Out Nuclear Power, Only to Get Mugged by Reality.” Before digging deeper into the arguments, let’s figure out just what reality we’re talking about.

As I’ve written before, Germany, Europe’s biggest economy, is aggressively pursuing a transition away from both nuclear power and conventional fossil fuels. It will likely encounter the challenges—and reap the benefits—of this strategy before other countries. Some analysts have hypothesized that Germany’s 20-year support for renewable energy would place a drag on the economy. However, Germany has rebounded from the financial crisis faster than many other countries around the world and is currently enjoying its strongest economic growth (and lowest unemployment) since its reunification 20 years ago. Renewable energy currently employs 370,000, compared to 50,000 in the coal industry (from mine to power plant). And Germany forecasts that its exports of clean energy technologies and expertise will continue to expand in the future. If the investment that Germany is making in renewable energy pays off,  it is likely that Germany will remain the economic engine of Europe for decades to come.

Now let’s do a reality check on the grim “reality” that mugged the New Republic.

First, the author claims that “electricity prices have risen for consumers, and it could cost the country’s four operators of nuclear plants more than $40 billion simply to shut the nuclear reactors down.” Exactly. Each kilowatt hour of nuclear power is much more expensive than stated on customers’ utility bills. Shutting down reactors is only a small part of the lifetime costs for nuclear power, but still: It costs at least $1.4 billion to dismantle one reactor unit in Germany. Nuclear’s burden is even greater in the case of an accident, when taxpayers are stuck with the bill. Tepco, the operator of the Fukushima Dai-Ichi plant, just sought about $13 billion in public funds to deal with compensation claims.

Over the last 40 years, the German nuclear industry has been pampered with more than $230 billion in direct subsidies. Over the same period,  renewable energy technologies have received just $56 billion [PDF] in incentives. Subsidies kept the price for electricity generated from nuclear energy artificially low. The argument of cheap nuclear power turns into a boomerang once the hidden costs of nuclear become visible. For economic reasons, nuclear should never have been regarded a viable option in the first place.

Second, the author wants us to believe that “Germany became a net importer of electricity almost overnight” after shutting down the eight nuclear power plants in March 2011. This is false. Germany is a long-time net exporter of electricity and continues to be one—even after Fukushima. In the first half of 2011,  Germany exported 27.9 terawatt-hours (TWh) while it imported only 23.9 TWh, according to the Federal Statistical Office.

The explanation is simple: Germany has installed much more power-generating capacity than it needs for domestic consumption. Power demand ranges from 40,000 to 80,000 megawatts (MW), depending on time of day and year. Coal, gas, and renewables provide a capacity of 81,000 MW, even without nuclear power.

Since Europe has a common market, countries import and export electricity. Power is imported not because of a lack of supply, but as an economic decision to shop where prices are lowest. Thanks to this common market, the nuclear phaseout does not threaten German energy security. To the contrary: the shift to renewable energy and efficiency will increase energy security in Germany. After all, its nuclear fuel is imported from other countries.

Third, the article quotes an expert who claims Germany’s nuclear phase-out has already “caused a 25-million-ton annual increase in carbon dioxide emissions” by replacing nuclear with coal-fired power plants. The attentive reader will note that this claim undermines the previous one, but that is beside the point. The nuclear phaseout does not jeopardize Germany’s ambitious climate targets: reducing greenhouse gas emissions   40 percent by 2020 and at least 80 percent by 2050. If emissions were to rise due to the nuclear phase-out, the government would have to come up with compensating measures to reach these targets.

However, it is unlikely that emissions will rise. By the rules of the E.U. cap-and-trade system, emissions from the energy sector are capped. Even if coal were to replace nuclear capacity in Germany, emissions in the sector overall will still have to be reduced, either by shifting to more natural gas or by replacing old coal plants with more efficient ones. That’s the genius of a cap-and-trade system. Believe it or not, with that system in place, Germany’s nuclear phaseout will even cause emissions in other European countries to fall.

The decision of the Merkel government to shut down all nuclear power plants in Germany by 2022 may have caught some international observers by surprise. But it was no surprise if you followed Germany’s political discourse over the last decade. What Chancellor Merkel did after Fukushima—with the overwhelming support of voters—was go back to the timeline of the 2002 Nuclear Exit Law implemented by the Social Democrats and Green Party in agreement with Germany’s nuclear energy industry. By making it sound like Germany has suddenly gone off track,  the author paints it as irrational, random, and thoughtless. Nothing could be further from reality.

Phasing out nuclear power is the right thing to do. The future of nuclear power was yesterday. Germany has entered the race to the age of renewables. If the Germans can power their highly competitive economy with wind, solar, hydro, and biomass power, than everyone else should be able to do it too. This is exactly what status-quo interests are afraid of. They better be.

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by Brad Johnson.

Cross-posted from ThinkProgress Green. This post was coauthored by Tanya Somanader.

In an interview with Glenn Beck,
Republican presidential candidate Rick Santorum claimed global warming
is a hoax. Beck grinned as Santorum called for a “drill everywhere”
policy and claimed that there is “no such thing as global warming”:

Beck: Oil?

Santorum: Drill. Drill everywhere.

Beck: Coal?

Santorum: Absolutely. Natural gas. We have huge stores. 263 years of
oil at the current rate, almost 200 years of gas, and 300 years of coal.

Beck: What about global warming?

Santorum: There is no such thing as global warming.
It is, in my opinion, there are hundreds of factors that cause the Earth
to warm and cool, and the trace gas—of which human participation in
this trace gas—is …

Beck: This could seal the deal for me. Whatever, I got enough.

Watch it:

Earlier this month, Santorum told the other enforcer of conservative thought, Rush Limbaugh, that global warming is “junk science.”

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