A cost benefit analysis of CO2 emissions

Economist Richard Tol below provides breakthrough clarity by showing the private benefit of carbon dioxide -- because of the benefits of energy use -- is far greater than its social cost.  Note that not all benefits of CO2 are quantified below:  Its fertilizing effect on plants, for instance

The Private Benefit of Carbon and its Social Cost

By Richard S.J. Tol

Abstract:

The private benefit of carbon is the value, at the margin, of the energy services provided by the use of fossil fuels. It is the weighted average of the price of energy times the carbon dioxide emission coefficient, with energy used as weights. The private benefits is here estimated, for the first time, at $411/tCO2. The private benefit is lowest for coal use in industry and highest for residential electricity; it is lowest in Kazakhstan and highest in Norway. The private benefit of carbon is much higher than the social cost of carbon.

Introduction

There is a public and academic debate about the social cost of carbon (Pizer et al., 2014, Greenstone et al., 2013, Guivarch et al., 2016, Havranek et al., 2015, Hahn and Ritz, 2015, Burke et al., 2016). This focus on the damage done by emitting an additional tonne of carbon dioxide sometimes drowns out the gains from cheap and abundant energy. The risks of climate change and the need for climate policy should be discussed, but it is should not be forgotten that affordable and reliable energy is a great good – just like a stable climate is a
great good. Unfortunately, in the absence of government intervention, fossil fuels continue to be the cheapest source of energy (IEA, 2016d). I quantify the private benefit of using carbon-emitting energy and show that, in most cases, using fossil fuel adds more value than it destroys.

Methods and data

Economists have long theorized about value and how to measure it, but the debate was settled by Jevons in 1871 (Jevons, 1871). In an undistorted market, with rational and well-informed
consumers and producers, the price of a good equals its marginal value (Mankiw, 2014). We are only prepared to buy something if the welfare gain of getting it is greater than the welfare
loss of giving up part of our income and thus the opportunity to buy something else. Vice versa, we are only prepared to sell something if the price we get exceeds the loss we suffer from no longer owning it – for instance because the money gained allows us to buy something we appreciate better. The price of energy is thus a measure of the marginal value of energy – or rather of the services delivered by energy, such as warmth, cooked food,
mobility and communication. The same is true for energy used by companies. The price paid for energy equals its marginal productivity, which in turn equals the marginal value of the
products and services produced with this energy (Mankiw, 2014). The price of energy is therefore, at the margin, a measure of the worth of energy.

.................

The private benefit of carbon is large and, in most cases, much larger than the social cost of carbon. But while the social cost of carbon is tied to carbon dioxide emissions and their impact on the climate, the private benefit of carbon is not tied to fossil fuels. The private benefits of carbon are, really, the benefits of abundant and reliable energy – or rather, the benefits of the services provided by energy, such as warm homes, cooked food, travel and transport, information and communication, and so on. An increasing share of these benefits can be had without incurring carbon dioxide emissions, or by paying a falling premium to avoid such emissions.

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Dilbert cartoonist burns Yale climate scientists

They have no proof of the CAUSE of climate events

A communications group at Yale University has put out a video that seems to be a rebuttal to a Dilbert cartoon by Scott Adams poking fun at climate scientists and their misplaced confidence in models. The video is full of impressive-looking scientists talking about charts and data and whatnot. It probably cost a lot to make and certainly involved a lot of time and effort. The most amazing thing, however, is that it actually proves the points being made in the Dilbert cartoon. Rather than debunking the cartoon, the scientists acted it out in slow motion.

The Dilbert cartoon begins with a climate scientist saying “human activity is warming the earth and will lead to a global catastrophe.” When challenged to explain how he knows that, he says they start with basic physical principles plus observations about the climate, which they then feed into models, pick and choose some of the outputs, then feed those into economic models, and voila. When asked, what if I don’t trust the economic models, the scientist retreats to an accusation of denialism.

The Yale video ends in exactly the same way. After a few minutes of what I will, for the moment, call “scientific information,” we see climatologist Andrew Dessler appear at the 4:28 mark to say “It’s inarguable, although some people still argue it – heh, heh.” As in, ah those science deniers.

What exactly is “inarguable”? By selective editing we are led to believe that everything said in the video is based on multiple independent lines of evidence carrying such overwhelming force that no rational observer could dispute it. Fine, let’s go to the 2:38 mark and watch someone named Sarah Myhre tell us what this inarguable science says.

“It’s irrefutable evidence that there are major consequences that come with climate warming, and that we take these Earth systems to be very stable, we take them for granted, and they’re not stable, they’re deeply unstable when you perturb the carbon system in the atmosphere.”

How does she know this? From models of course. These claims are not rooted in observations but in examining the entrails of model projections. But she has to pick and choose her models because they don’t all say what she claims they say. Some models show very little sensitivity to greenhouse gases.  If we put the low-sensitivity results into economic models the results show that the economic impacts of warming are very low and possible even negative (i.e. a net benefit). And the section of the IPCC report that talks about the consequences of warming says:

For most economic sectors, the impact of climate change will be small relative to the impacts of other drivers (medium evidence, high agreement). Changes in population, age, income, technology, relative prices, lifestyle, regulation, governance, and many other aspects of socioeconomic development will have an impact on the supply and demand of economic goods and services that is large relative to the impact of climate change.

It goes on to show (Figure 10-1) that at low levels of warming the net economic effects are zero or positive. As to the climate being “deeply unstable” there’s hardly any point trying to debate that since these are not well-defined scientific words, but simple reflection on human experience will tell you that the climate system is pretty stable, at least on decadal and century time scales. The main thing to note is that she is claiming that changes to atmospheric CO2 levels have big warming effects on the climate and will cause a global catastrophe. And the only way she knows this is from looking at the outputs of models and ignoring the ones that look wrong to her. Granted she isn’t bald and doesn’t have a little beard, but otherwise she is almost verbatim the scientist in the cartoon.

Much of what she says in the video is unsubstantiated and sloppy. For instance she talks (2:14) about paleoclimatic indicators like tree rings, ice cores and sediment cores as if they are handy records of past climate conditions without acknowledging any of the known problems extracting climate information from such noisy sources.

Her most telling comment was the Freudian slip at 1:06 when she says “There is incredible agreement about the drivers of climate science.” What she meant (and quickly corrected herself to say) was “climate change.” But her comment is revealing as regards the incredible agreement—i.e. groupthink –that drives climate science, and the individuals who do the driving.  Myhre’s Freudian slip comes right after a clip in which Michael Mann emphatically declares that there are dozens of lines of evidence that all come together, “telling us the same thing,” adding “that’s how science works.” Really? The lines of evidence regarding climate do not all lead to one uniform point of view, nor is that how science works. If that’s how science worked there would be no need for research. But that’s how activists see it, and that’s the view they impose to drive climate science along in service of the activist agenda. As Dr. Myhre herself wrote in a recent op-ed:

Our job is not to objectively document the decline of Earth’s biodiversity and humanity, so what does scientific leadership look like in this hot, dangerous world? We don’t need to all agree with each other – dissent is a healthy component of the scientific community. But, we do need to summon our voices and start shouting from rooftops: “We have options”, “We don’t have to settle for cataclysm”.

Got that? The job of scientists is not objectively to gather and present evidence, but to impose an alarmist view and yell it from the rooftops. At least according to Sarah Myhre, Ph.D..

The video opens with a straw man argument: climate science is all just made up in computer models about the future, and it’s all just based on simulations. This is then refuted, rather easily, with clips of scientists listing some of the many observational data sets that exist. Whoopee. That wasn’t even the point of the Dilbert cartoon, it was just a straw man made up by the interviewer.

Then, in the process of presenting responses, the video flits back and forth between lists of observational evidence and statements that are based on the outputs of models, as if the former prove the latter. For instance, when Myhre says (2:45—2:55) that the climate systems is “deeply unstable” to perturbations in the carbon “system” (I assume she meant cycle) the video then cuts to Andrew Dessler (2:55) talking about satellite measurements, back to Myhre on paleo indicators, then to Carl Mears and Dessler (3:11) talking about sea ice trends. None of those citations support Myhre’s claims about instability, but the selective editing creates the impression that they do.

Another example is a sequence starting at 1:14 and going to about 2:06, in which various speakers lists different data sets, glossing over different spatial and time scales, measurement systems, etc. Then an assertion is slipped in at 2:07 by Ben Santer to the effect that the observed warming can’t be explained by natural causes.

Then back to Myhre listing paleoclimate indicators and Mann describing boreholes. The impression created is that all these data types prove the attribution claim made by Santer. But they do no such thing. The data sets only record changes: claims about the mechanism behind them are based on modeling work, namely when climate models can’t simulate 20th century warming without incorporating greenhouse gas forcing.

So in a sense, the video doesn’t even refute the straw man it set up. It’s not that climate science consists only of models: obviously there are observations too. But all the attribution claims about the climatic effects of greenhouse gases are based on models. If the scientists being interviewed had any evidence otherwise, they didn’t present any.

Now suppose that they are correct in their assertion that all the lines of evidence agree. All the data sets, in Mann’s words, are telling us the same thing. In that case, looking at one is as good as looking at any of the others.

Ignore for a moment the selective focus on declining Arctic sea ice data while ignoring the expansion of Antarctic sea ice. And ignore the strange quotation from Henry Pollock (3:23—3:41) about how ice doesn’t ask any questions or read the newspaper: it just melts. Overlaid on his words is a satellite video showing the summer 2016 Arctic sea ice melt. Needless to say, had the filmmaker kept the video running a few seconds more, into the fall, we’d have seen it re-freeze. Presumably the ice doesn’t read or ask questions in the fall either, it just freezes. This proves what exactly?

Anyway, back to our assumption that all the data sets agree and say the same thing. And what is it they tell us? Many key data sets indicate that climate models are wrong, and in particular that they overstate the rate of warming, (see here, here, here, here, here, here, here, here, etc.). So according to the uniformity principle so strongly enunciated in the video, all the evidence points in the same direction: the models aren’t very good. And by implication, statements made based on the models aren’t very reliable.

There’s another irony in the video’s assertions of uniformity in climate science. At the 3:55 mark Michael Mann announces that there’s a consensus because independent teams of scientists all come at the problem from different angles and come up with the same answers. He’s clearly referring to the model-based inferences about the drivers of climate change. And the models are, indeed, converging to become more and more similar. The problem is that in the process they are becoming less like the actual climate. Oops.

So how did the video do refuting Scott Adams’ cartoon? He joked that scientists warning of catastrophe invoke the authority of observational data when they are really making claims based on models. Check. He joked that they ignore on a post hoc basis the models that don’t look right to them. Check. He joked that their views presuppose the validity of models that reasonable people could doubt. Check. And he joked that to question any of this will lead to derision and the accusation of being a science denier. Check. In other words, the Yale video sought to rebut Adams’ cartoon and ended up being a documentary version of it.

SOURCE





Agency on Trump’s Chopping Block Under Investigation for Sketchy Solar Loans

A federal aid agency President Donald Trump proposed cutting is being investigated for giving out nearly $1 billion in loans to several nearly bankrupt solar companies, according to a Reuters report published Tuesday.

The Office of Inspector General for the U.S. Agency for International Development is auditing $890 million of loans approved by the Overseas Private Investment Corp., an agency that advances loans to overseas business ventures.

Critics say such business ventures should receive funding from private banks, not from federal agencies.

The USAID Office of Inspector General initially began its audit in 2016 but kept it under wraps. The probe is centered on the agency’s decision to fund five Chilean solar farms and a hydroelectric project in 2013 and 2014—many of the loans are unlikely to be repaid, according to the report.

Trump proposed cutting funding for new Overseas Private Investment Corp. projects in his 2018 budget outline released on May 23. Congress will not take up the president’s budget proposal until later this year.

The White House’s budget calls for a 31 percent cut to the Environmental Protection Agency’s 2018 budget, and slashes funding to the State Department by 29 percent, while the Department of Agriculture would see a 20 percent cut. In total, Trump’s budget proposes cutting federal spending by $3.6 trillion over the next decade, including $1.7 trillion in cuts to entitlement programs.

Three of the five solar projects are working to restructure their debt, sources familiar with the projects told reporters. They said the Overseas Private Investment Corp. would likely need to forgive 40 to 60 percent of the loans given to the solar projects. Losses on the solar deals could blow past $160 million.

Audits of the agency’s investments are rare and usually stem from considerations such as “the level of U.S. funding involved” and “reported concerns over the management or performance of a program.”

The Chile audit, the Office of Inspector General noted, will examine “the factors OPIC used to assess and approve its energy projects in Chile.” It is expected to conclude later this year.

“Development banks get the ball rolling in the industry,” Carlos St. James, an adviser for renewable energy group Wood Group, said of the investments. “Unfortunately, they bet on the wrong kind of projects.”

The Overseas Private Investment Corp. thrust through $449 million in loans to the projects despite its reliance on a makeshift financial structure that projects to inject at least half their power directly into the public grid at the going market rate, which is constantly fluctuating. Most solar providers provide power to independent agency at fixed prices.

Several commercial banks examined financing the beleaguered projects, sources told reporters, but they ultimately determined the unusual schemes are too risky. The Overseas Private Investment Corp. considered the market scheme a manageable risk, according to three internal reports from 2013 and 2014.

The solar companies, meanwhile, appeared optimistic about their ability to repay the agency’s loans.

Etrion Chief Executive Officer Marco Northland did not respond to questions from reporters about the audit, but suggested he expects the market to turnaround.

Javier Contreras, the CEO of Ameris Capital, also declined to comment on the audit, but said the company would pay the loans back in full. First Solar declined to comment.

The other agency projects being audited in Chile are the Maria Elena solar park, constructed by now-bankrupt SunEdison, and the Amanecer solar park owned by TerraForm Power, neither of which replied to reporters’ request for comment.

SOURCE





Draining the EPA Swamp

June 5 being World Environment Day, it’s an appropriate time to reflect on the abuses committed in the name of Nature by the U.S. Environmental Protection Agency, the enforcer of some of the most important laws enacted over the past 50 years. Originating earlier under a different name, the Clean Water Act of 1972 is one of the most far-reaching pieces of legislation in environmental history. At first it applied only to “navigable waters.” In 2006, the U.S. Supreme Court ruled (in Rapanos v. United States) that the law also covered wetlands adjacent to navigable rivers. But even seemingly minor wetlands fall under its protection, as Northern California farmer John Duarte learned the hard way.

Under the Obama administration, explains Independent Institute Policy Fellow K. Lloyd Billingsley, the EPA fined Duarte $2.8 million because when he plowed a field to plant wheat crops, it became a wetland subject the agency’s strict regulatory protection. The farmer is hoping that new EPA chief Scott Pruitt will rescind the fine. If that happens, it will be welcome news. But don’t expect the government to compensate Duarte for the five years of anxiety and expenses he incurred while the agency persecuted him.

The Trump administration could go further than giving Duarte a reprieve. It could champion major reform of the Clean Water Act. One way is to rid the law of its financially and legally corrosive elements. As Independent Institute Research Fellow Ryan M. Yonk has written, “Merely instructing federal bureaucracies to reintroduce sanity to their definition of ‘navigable waterways’ would restrict [the Clean Water Act] to projects for which it has a possibility of doing some good.” This, we hope, would be only one step in a larger effort to drain the swamp of environmental bureaucracy.

SOURCE




Australian politicians urged to provide energy certainty

There is a poll result referred to below which should be taken with a grain of salt.  The most pro-Warmist statement was read out first to respondents, with more skeptical statements  being read later.  That tends to generate a primacy effect, with subsequent responses tailored to the initial one.  Good survey practice would have been to present the three statements in random order but there is no mention of them doing that in their methodology section.  It's another example of how to lie with statistics -- a Greenie artform

Australia's treasurer has urged MPs to put aside ideological differences and embrace an energy policy in the interests of giving investors certainty.

Scott Morrison, who earlier in the year waved a lump of coal around during question time, said on Wednesday for far too long parliament has not come together to resolve energy issues.

Policy uncertainty had turned into a big risk for investors.

"There's a very big national interest here and it's for all parliamentarians I think to focus on that regardless of which party they're in or what ideological perspective they have on this issue," Mr Morrison told reporters in Canberra.

"Until we can get to that certain place on energy policy, then we really are putting a lot at risk."

Renewables attracted record levels of investment in 2016 but that came off the back of several sluggish years while the Abbott government reviewed and cut the renewable energy target.

Chief Scientist Alan Finkel will brief the prime minister and state leaders on his review of the national energy sector at a meeting in Hobart on Friday.

He's widely expected to recommend a low emissions target - similar to the existing renewable energy target but taking a technology-neutral approach by mandating a percentage of power each year be generated from sources below a certain emissions level.

The approach is firming as the new focus of federal climate policy with the Nationals flagging support and Labor not ruling it out.

Energy experts say the LET would be a "third-best solution".

"This mechanism is well behind an emissions intensity scheme and an economy-wide price on carbon, and won't discriminate against really dirty coal over more efficient coal," ANU Energy Change Institute director Ken Baldwin said.

However, his colleague Paul Burke said it was a smart alternative given the government had already ruled out any mechanisms that price carbon pollution.

"Solar and wind power are increasingly cheap, and an LET would help to ensure that the required investment takes place to replace retiring fossil-fuel generators," he said.

Greens energy spokesman Adam Bandt said reports Dr Finkel could recommend rule changes to mandate new renewable projects have storage attached were troubling and could lock storage companies out of participating in the market in their own right.

It would be better to create a new energy storage target or have other non-market incentives to integrate storage, he said.

A Lowy Institute poll, released on Wednesday, found four in five Australians thought the government should focus on renewables, even if they needed more investment to make the system more reliable.

Nearly three in five ranked climate change as a "critical threat" to Australia over the next decade.

SOURCE

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