JP

Emissions Trading to Reduce Greenhouse Gas Emissions in the United States: The McCain-Lieberman Proposal

The Climate Stewardship Act of 2003 (S. 139) is the most detailed effort to date to design an economy-wide cap-and-trade system for US greenhouse gas emissions reductions. The Act caps sectors at their 2000 emissions in Phase I of the program, running from 2010 to 2015, and then to their 1990 emissions in Phase II starting 2016. There is a strong incentive for banking of allowances, raising the costs in Phase I to achieve savings in Phase II. Use of credits from outside the capped sectors could significantly reduce the cost of the program, even though limited to 15% and 10% of Phase I and II allowances respectively. These credits may come from CO2 sequestration in soils and forests, reductions in emissions from uncapped sectors, allowances acquired from foreign emissions trading systems, and from a special incentive program for automobile manufacturers. The 15% and 10% limits increase the incentive for banking and could prevent full use of cost-effective reductions from the uncapped sectors. Moreover, some of the potential credits might contribute little or no real climate benefit, particularly if care is not taken in defining those from forest and soil CO2 sequestration. Analysis using the MIT Emissions Prediction and Policy Analysis model shows that costs over the two Phases of the program could vary substantially, depending on normal uncertainty in economic and emissions growth, and the details of credit system implementation.

Energy Choices: Myth v. Fact

The way we power our homes and cars and factories is one of the most important choices our society faces. Perhaps it’s the push of climate change, air pollution, resource depletion, and national security. Or maybe it’s the pull of new technologies and newfound energy supplies that may be cheap and clean. Either way, most experts expect that we are heading toward a virtual revolution in the power and energy industries over the next few decades.

But whether we can revolutionize our energy infrastructure—and how, exactly, we would do it—is not simply a question of technology. Economics will play a deciding role in what unfolds. For alternative technologies to be chosen among the mix of energy sources, they must be able to compete in the energy market. The future costs of energy technologies and the ever-changing price of conventional energy sources will determine the success of alternatives over conventional, fossil fuel-powered technologies.

Energy Conservation in the United States: Understanding Its Role in Climate Policy

Efforts to reduce carbon emissions significantly will require considerable improvements in energy intensity, the ratio of energy consumption to economic activity. Improvements in energy intensity over the past thirty years suggest great possibilities for energy conservation: current annual energy consumption avoided due to declines in energy intensity since 1970 substantially exceed current annual domestic energy supply.
    While historic improvements in energy intensity suggest great scope for energy conservation in the future, I argue that estimates of avoided energy costs due to energy conservation are overly optimistic. Avoided costs are likely to be significantly higher than estimates from recent energy technology studies suggest once behavioral responses are taken into account.
    I then analyze a data set on energy intensity in the United States at the state level between 1970 and 2001 to disentangle the key elements of energy efficiency and economic activity that drive changes in energy intensity. Rising per capita income plays an important role in lower energy intensity. Higher energy prices also are important. Price and income predominantly influence intensity through changes in energy efficiency rather than through changes in economic activity.

Energy Scenarios for East Asia, 2005-2025

We describe several scenarios for economic development and energy use in East Asia based on the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy. Historic indicators for Asian economic growth, energy use, and energy intensity are discussed. In the Baseline scenario, energy use in East Asia is projected to increase from around 120 EJ in 2005 to around 220 EJ in 2025. Alternative scenarios were developed to consider: (1) How fast might energy demand grow in East Asia and how does it depend on key uncertainties? (2) Do rising prices for energy affect growth in the region? (3) Would growth in East Asia have a substantial effect on world energy markets? (4) Would development of regional gas markets have substantial effects on energy use in the region and on gas markets in other regions? Briefly, we find that with more rapid economic growth, demand in East Asia could reach 430 EJ by 2025, almost twice the level in the Baseline; rising energy prices place a drag on growth of countries in the region of 0.2 to 0.6% per year; world crude oil markets could be substantially affected by demand growth in the region, with the price effect being as much as $25 per barrel in 2025; and development of regional gas markets could expand gas use in East Asia while leading to higher gas prices in Europe.

(Document available by request)

Energy Scenarios for East Asia: 2005-2025

We describe several scenarios for economic development and energy use in East Asia based on the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy. Historic indicators for Asian economic growth, energy use, and energy intensity are discussed. In the Baseline scenario, energy use in East Asia is projected to increase from around 120 EJ in 2005 to around 220 EJ in 2025. Alternative scenarios were developed to consider: (1) How fast might energy demand grow in East Asia and how does it depend on key uncertainties? (2) Do rising prices for energy affect growth in the region? (3) Would growth in East Asia have a substantial effect on world energy markets? (4) Would development of regional gas markets have substantial effects on energy use in the region and on gas markets in other regions? Briefly, we find that with more rapid economic growth, demand in East Asia could reach 430 EJ by 2025, almost twice the level in the Baseline; rising energy prices place a drag on growth of countries in the region of 0.2 to 0.6% per year; world crude oil markets could be substantially affected by demand growth in the region, with the price effect being as much as $25 per barrel in 2025; and development of regional gas markets could expand gas use in East Asia while leading to higher gas prices in Europe.

Enforcing Compliance: The Allocation of Liability in International GHG Emissions Trading and the Clean Development Mechanism

About the book: In concise, informative chapters, Climate Economics and Policy considers the key issues involved in one of the most important policy debates of our time. Beginning with an overview and policy history, it explores the potential impact of climate change on a variety of domains, including water resources, agriculture, and forests. The contributors then provide assessments of policies that will affect greenhouse gas emissions, including electricity restructuring, carbon sequestration in forests, and early reduction programs. In considering both domestic and international policy options, the authors examine command and control strategies, energy efficiency opportunities, taxes, emissions trading, subsidy reform, and inducements for technological progress.

Environmental Factors Affecting Tropical Cyclone Power Dissipation

Revised estimates of kinetic energy production by tropical cyclones in the Atlantic and western North Pacific are presented. These show considerable variability on interannual-to-multidecadal time scales. In the Atlantic, variability on time scales of a few years and more is strongly correlated with tropical Atlantic sea surface temperature, while in the western North Pacific, this correlation, while still present, is considerably weaker. Using a combination of basic theory and empirical statistical analysis, it is shown that much of the variability in both ocean basins can be explained by variations in potential intensity, low-level vorticity, and vertical wind shear. Potential intensity variations are in turn factored into components related to variations in net surface radiation, thermodynamic efficiency, and average surface wind speed.

In the Atlantic, potential intensity, low-level vorticity, and vertical wind shear strongly covary and are also highly correlated with sea surface temperature, at least during the period in which reanalysis products are considered reliable. In the Pacific, the three factors are not strongly correlated. The relative contributions of the three factors are quantified, and implications for future trends and variability of tropical cyclone activity are discussed.

© 2007 American Meteorological Society

Environmental levies and distortionary taxation: Pigou, taxation, and pollution

I note an important distinction between the optimal price of environmental quality in a second-best world and the optimal level of environmental quality. Using an analytical general equilibrium model, I show that for reasonable parameter values, an increase in tax distortions (arising from an increase in required tax revenues) leads to a fall in the optimal Pigouvian tax rate even while environmental quality improves. In general, knowledge of the direction of changes in optimal environmental tax rates due to changes in the economy is not sufficient for understanding the impact on environmental quality.

Copyright © 2003 Elsevier Science B.V.

Estimated PDFs of Climate System Properties Including Natural and Anthropogenic Forcings

We present revised probability density functions (PDF) for climate system properties (climate sensitivity, rate of deep-ocean heat uptake, and the net aerosol forcing strength) that include the effect on 20th century temperature changes of natural as well as anthropogenic forcings. The additional natural forcings, primarily the cooling by volcanic eruptions, affect the PDF by requiring a higher climate sensitivity and a lower rate of deep-ocean heat uptake to reproduce the observed temperature changes. The estimated 90% range of climate sensitivity is 2.4 to 9.2 K. The net aerosol forcing strength for the 1980s decade shifted towards positive values to compensate for the now included volcanic forcing with 90% bounds of -0.7 to -0.16 W/m2. The rate of deep-ocean heat uptake is also reduced with the effective diffusivity, Kv, ranging from 0.25 to 7.3 cm2/s. This upper bound implies that many coupled atmosphere-ocean GCMs mix heat into the deep ocean (below the mixed layer) too efficiently.

Copyright 2006 by the American Geophysical Union

Estimated PDFs of Climate System Properties Including Natural and Anthropogenic Forcings

We present revised probability density functions (PDF) for climate system properties (climate sensitivity, rate of deep-ocean heat uptake, and the net aerosol forcing strength) that include the effect on 20th century temperature changes of natural as well as anthropogenic forcings. The additional natural forcings, primarily the cooling by volcanic eruptions, affect the PDF by requiring a higher climate sensitivity and a lower rate of deep-ocean heat uptake to reproduce the observed temperature changes. The estimated 90% range of climate sensitivity is 2.4 to 9.2 K. The net aerosol forcing strength for the 1980s decade shifted towards positive values to compensate for the now included volcanic forcing with 90% bounds of -0.7 to -0.16 W/m2. The rate of deep-ocean heat uptake is also reduced with the effective diffusivity, Kv, ranging from 0.25 to 7.3 cm2/s. This upper bound implies that many coupled atmosphere-ocean GCMs mix heat into the deep ocean (below the mixed layer) too efficiently.

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