In the Green

Oh King Coal!

Energy policy is based largely on predictions of what we think will happen in the future. It has to be. We need to know how factors such as prices, technologies, geopolitics and environmental damage are likely to play out. This is the world of the educated guess, the modeler, and scenarios. Almost all energy policy publications refer to some scenario-building, and one of the common features between them is the expected future role of coal.

The formula is simple. Coal is dirty and should be phased out; but there is loads of it and it is cheaper than all other energy sources. This means that it is good for the economy and for security of supply. Hence, we should not ban it, but we should clean it up and tax it a bit to account for externalities. Plugging this formula into the models delivers the result that coal becomes the default fallback option in all scenarios that limit the amount of renewables or envisage oil price rises. The educated guess is that if we can just can just get cleaner coal (preferably with CCS) we needn't worry too much about the expense of a global renewables roll-out, the dilemma of nuclear, or peak oil. After all, you can always make oil from coal.

An initial glance at the statistics seems to support this. Picking the headline data from BP it seems there are 294 years of coal left at current consumption. BP are also consistent with the price trend story, as can be seen from this graph for which I used their figures.

As a result of this data input, the IEA World Energy Outlook reference scenario says that "coal sees the biggest increase in demand in absolute terms, jumping by 73% between 2005 and 2030". Last year's UK Energy White Paper actually revised its scenarios due to the comparitive fuel price divergence. "The price of coal" it says, "is now more favourable compared with that in the July 2006 projections. This contributes to an increase in coal capacity in the new baseline of up to 8GW by 2020". The IPCC takes a similar line: "Coal is unevenly distributed, but remains abundant. It can be converted to liquids, gases, heat and power, although more intense utilization will demand viable CCS technologies...The share of liquids will probably remain constant but with a gradual transition from conventional oil, toward coal-to-liquids, unconventional oils and modern biomass".

The assertion is clear. Coal is the big reserve and although it is finite, we don't need to treat it as such yet. We have come a long way from the panic of British economist William Stanley Jevons who foresaw the peak oil debate with a treatise on peak UK coal in 1865. In The Coal Question he observed that coal was finite, that demand seemd exponential and technology was creating a rebound effect. He was right to worry about UK coal production, which peaked in 1913, but reserves in the rest of the world are now able to balance demand. Or are they?

Last year a group of academics at the Energy Watch Group reported on global coal reserves, and in the last fortnight the National Academy of Sciences reviewed US reserves. The conclusions were that the available data is of highly dubious quality but recent downgrading of reserves indicated that peak coal could be a reailty as early as 2025. For example, in 1997 Poland downgraded its reserves by 50%, and Germany by 99% in 2004! This would mean that none of the World Energy Outlook scenarios could be met without an increase in the proportion of dirtier brown coal, and that prices of all fuels would most likely rise more rapidly.

As we've discussed on the blog before, the high prices delivered by peak fossil fuel production might put renewables and energy efficiency measures at an advantage. Renewables are even more favoured when you take into account that the global centres of power (US, China etc.) do not coincide with where the oil will be coming from in future. The worrisome thing about coal is that the big reserves lie in the powerful areas of the US, China and Russia (who may become the swing producer for coal and gas). These are countries without a great record on environmentalism and a tendency to subsidise energy in favour of growth.

Drawing conclusions from all this is tricky as always. It's possible that reduced coal reserves could ease the tension between economic growth and climate goals in the rich world, but it could be a disaster for developing countries banking on cheap solid fuels. Also, a tighter coal market would surely make it politically more difficult to sustain an articificial carbon market unless renewables were very cheaply available, especially since it could easily make CCS highly uneconomic.

Whatever the reality, it is evident that scenario-builders should incorporate better information on reserves rather than just relying on coal as a cheap fallback option. Investing in renewables and nuclear may suddenly look like an even better insurance policy than it does now. Then we just need policy makers to be honest about how expensive energy is likely to get for everyone. Easy.

Floss your teeth, get plenty of sleep, and get the hell out of PV...

Quick post here. I wrote last year about the correlation between clean energy and oil services funds, and how the former still played as a proxy to the oil sector. Investors aren't buying clean energy based on expectations on climate policy, they're buying it on oil profitability.

With the bear market upon us, it's appropriate to turn to the stocks again to see how they are. And in addition, make note of recent commentary about the bubble that is the solar PV market. Bottom line, there are way too many PV companies around, and the demand is likely not going to be there. Something has to give. Many of these warnings were from a few months/weeks ago, and the results are starting to show:

The solar PV producers fared very well in the last year, but they are starting to crater:

I've included a selection here: REC from Norway, CSIQ from Canada, China's STP and JASO, and LDK. I'm sure there are more, but the point is made.

So why was there a boom in PV companies? Analysts, particularly Jerome Ball seem to point to a number of things:
-High oil prices bouyed the entire clean tech industry
-Solar PV has relatively lower barriers to entry than other clean techs: many chip manufacturers are simply spreading out into PV.
-PV profitability is dependent on ramping up the scale of production, which has lead to a large supply capacity

What are the risks to solar companies this year? Here are the main ones:
-Global downturn in stocks and US recession will likely ease off oil prices and reduce demand for cleantech overall.
-Oversupply: At the bottom of this post, Ball does a small comparison of this calculations of global PV demand and supply.
-Reduction in government subsidies: Ball points out that Germany and Spain are reducing their feed-in tarriff support, while the situation in the US (which has had a preference for supporting ethanol), is unclear.

So, to finish up: there's no question that clean energy will be making it big in the next decade. Long-term investors should be confident in that. But just like the tech boom of the 1990s, it's impossible to say who will make it out of it alive.

(This isn't investment advice, just observations. The title is just a joke.)

Imperial College discovers recycling

I am always astonished when I see CEP people (either staff or students) that have a - let's use a euphemism - not so green behaviour.

I don't claim that I am the greenest person ever but I think I have sensibly evolved since I entered CEP.  May I remind all of us that CEP means Centre for ENVIRONMENTAL Policy.

I strongly believe that charity begins at home. So, to me, CEP people cannot tell others that they should be (or how they can be) greener if they don't themselves endeavour to change their behaviour.
Let's start with the most visible anti-green behaviour commonly seen within our department: disposing waste without any thought, such as throwing cans or paper cups in desk bins.

As it is very difficult to challenge habits such as drinking junk drinks/soft drinks (I might make a post on this later), we are lucky at Imperial that a new recycling scheme was launched few days ago.
This means that students can now see colour-coded bins flourish in most buildings and some catering facilities. Red bin for glass, green bins for cans, tins and plastic bottles and blue bin for card and paper. This looks rather simple to understand.
Before this amazing recycling scheme came to force, all cans/plastic bottles and most paper were sent to landfill, which is kind of the worst case scenario in terms of waste management.

Surprinsingly, I still see people at CEP disposing of soft drink cans and paper in their desk bin! This makes me quesion not only the outreach of Imperial recycling scheme, but also the idea itself of recycling. Indeed, it seems to me that recycling doesn't really solve waste problems since it does not challenge people's behaviour. The only thing you're asked for recycling is to sort your waste and dispose of them in the right coloured bin (and then, you can only hope that the waste is actually recycled...). Some people will do their best to recycle, some others won't care at all. But in the end, recycling doesn't make you reduce your production of waste, i.e. it does not encourage you to consume fewer packaged items or less-packaged items. Therefore, doesn't recycling (even in the best case, when properly done) encourage people to keep on consuming the same things, without any guilt since waste disposal is shrift by the recycling scheme?

Lots of waste at Imperial comes from food. On average, people at Imperial buy every day  one individually-packed sandwich/indivually packed "make your own mix" salad and the usual 45g crisps bag accompanied with one can/bottle of cold drink (+ one or two cups of tea/coffee most of the time in paper cups with their inseparable plastic lid). How difficult would it be to implement a scheme where people could still buy their salads or other food and be rewarded when using reusable packaging (such as tupperwares) or their own mugs/bottles for their drink?

This would help the Borough of Westminster and Chelsea to "turn the waste pyramid on its head".

Recycling is indeed only the second step after avoiding disposal. More than recycling, we ought to think of reusing, minimising waste and finally preventing waste from being produced. This could start with encouraging people to eat at Imperial's restaurant with proper plates and cutlery. Unfortunately, the choice of food is usually quite limited, food is rather expensive (and far from top quality) and the places are so noisy that you don't want to come again. Another option could be to encourage people to cook their own food (and therefore avoid all the unhealthy ingredients found in Imperial's food places). And this would at least make people know what they eat and give them a little sense of responsibility.

But this maybe goes a bit too far. It is so simple just to get for few quids a BLT sandwich, crisps, and a coke, and gulp all this all alone in front of a computer screen while checking e-mails or chatting on MSN... Doesn't this look like a miserable way of life? Unfortunately, it is what I too often see around me.

Don't blame me, I voted for Kodos

Before this post gets going, I really should mention yesterday's European Commission proposals on climate and energy policy (here's the draft Directive). However, something tells me we haven't heard the last of them. So staying true to my contrarian beliefs, here's a post on the US elections instead.

Grist, the chatty West Coast environmental website, has produced this handy guide to the candidates' positions on environmental issues. It's almost tempting to vote for Republican Ron Paul whose environmental position rests entirely on a strict adherence to property rights. In a properly functioning market, the polluter and victims reach a bargain and everybody's happy.

"When we know the air is polluted, we should prevent it because in the free market you don't have the right to pollute anybody's air", says Paul.

That's fine except, as Dilbert points out, such a bargain relies on all parties having adequate information. And Paul himself admits there's a lot we don't know about global warming.

"I've heard some stories from people who... have strong concerns about global warming, and they claim it doesn't even come from CO2, it comes from *chuckle* methane gas. That's how diverse these opinions are."

Chuckling aside, the interesting environmental story from the election so far is that John McCain stands a pretty good chance of securing the Republican nomination. The League of Conservation Voters gave McCain's voting record a score of 46% (Clinton scored 89, Obama 100). That's not terrific, but McCain does have a history of crusading and teaming up with Democrats on issues he cares about. As far back as 2003, he joined with Democrat Joe Lieberman to introduce the Climate Stewardship Bill to the Senate. That bill would have capped 2010 GHG emissions at the 2000 level in some sectors of the economy (unsurprisingly it didn't succeed). For 2008, his climate position appears to have softened to a more standard 'no action without China' stance.

The point is, while the Republican candidacy is still wide open there's a decent chance the nomination will go to a candidate who a) thinks climate change is real b) has a history of bipartisan action on key issues and c) might even be willing to do something about it. Assuming the Democratic candidate also has a reality-based position on climate and environment, voters won't even have the option of choosing a president who still entertains the notion that climate change is somewhere between a fictitious and an entirely natural phenomenon. Long live the two-party system! I don't know if that would be enough to push the US into a more ambitious climate policy. More research needed...

No ordinary behaviour

After about 10 years of not eating meat, I recently gave up vegetarianism. It wasn't an immediate breakdown, rather a slow downward spiral: I started eating fish when I moved to Norway in 2003, and started eating organic meat when I came back to London in 2006. I try to stick to free range organic (and usually succeed), but I'm not that careful anymore. As a citizen of Denmark and Canada - two countries famous for their bacon - you could say it was inevitable. And according to Pamela Anderson's Q&A in the Guardian Weekend, she'd likely not be pleased:

What makes you depressed? That people who call themselves environmentalists still eat meat.

Sorry Pam. Other priorities have taken over.

I use this little gem of hypocrisy to highlight the obvious - that when it comes to the environment, people act (including me) in strange ways. Humans are creatures of both habit and impulse, which is what makes environmental economics and policy such an interesting field.

Much of this behaviour is hypocritical: they fly across the world to join an "eco community" in Fiji, they don't put their money in ethical investments in spite of expressions of intent, they consume energy and goods without thought, and they eat meat. The list is endless. The complete reverse is the case when people idealize our low-carbon futures: the shiny and utopian trumps all. This is reflected in the dream of hydrogen networks, and fuel cell cars, installing mini-turbines on private houses, discussing every other kind of alternative energy as some kind of silver bullet, and setting carbon targets in 2050. And yet people in their own homes still fail to take the most obvious (and often negative cost) steps to reduce energy use: cavity wall insulation, better boilers, washing clothes at low temp, and low-energy bulbs.

Now, none of this is new, and it is rather predictable. The "option space" (i.e. the array of possible choices and steps available) in which individuals (and firms) analyze and make their choices is incredibly complex and busy with opportunities that can satisfy other (typically fiscal) priorities. A little of dose of "I can't make a difference" only helps the hypocrisy and procrastination. It's easier to dream big goals than to actually do anything.

Yet all of this shouldn't make us abandon our hopes for achieving carbon goals and using economic measures to do so. Those who argue that economics cannot be used to solve the problem (because capitalism was the source of the problem) have missed the point. Particularly those who root for a recession and its associated fall in energy use. Long-term zero economic growth is impossible in this day and age, even if population was to stay steady. The system we live in inquisitive and inventive, always seeking new things to do and better ways to do them.

What we should be concerned with is the option space in which this economic growth occurs, and use the natural dynamic of the market economy to reach solutions. Policies should be designed with an understanding of the option space in which individual firms and consumers make their choices and how they develop expectations for the future. Changing the shape of this option space to a more environmentally friendly growth is not limited to increasing the price of carbon - although this is an important step. It also includes designing policy with an understanding of the psychology of how choices are made; for example with information or marketing campaigns. We see from companies like Starbucks that a high price associated with what is ultimately an average good can be sustained if the psychology is right. The acceptance of policies can be improved with the guarantee of revenue neutrality, co-benefits, and improved alternatives (such as public transport).

No certification, no biofuels!

Today, a group of MPs asked for a moratorium on biofuels targets, since there is still no robust certification for biofuels.  These targets were set by the European Commission, which requires biofuel incorporation in fossil fuels for transport of 5.75% (by energy content) by 2010 and 10% by 2020.

The group of MPs released a paper called "Are biofuels sustainable?" acknowledging that not all biofuels provide sustainable greenhouse gas emission reductions, but that on top of that, some biofuels lead to rainforest destruction, soil degradation, water pollution, adverse impacts on biodiversity and participate in food price increase. No wonder so many NGOs keep calling for a biofuel certification to be rapidly put in place.

Last Monday was also quite a big day for people interested in biofuel certification (which is, incidentally, the topic of my PhD).

First of all, Stavros Dimas, EU Commissioner for the Environment, acknowledged that "the environmental problems caused by biofuels and also the social problems are bigger than what [he] thought they were".

The same day, the Royal Society issued a report saying that the UK government had to rethink its biofuel policy, since it does not ensure that biofuel use will reduce GHG emissions.

Quite respected and usually non-controversial people challenging the whole biofuels strategy, this is a rather new trend (the OECD also recently issued a pretty anti-biofuel report entitled "Biofuels: is the cure worse than the disease").

The EU Commission is about to issue by the end of the month a final proposal for the forthcoming "Directive on the promotion of renewable energy sources". While the EU Council asks for sustainable biofuels, the EU Commission is challenged by NGOs such as Friend of the Earth  that say its current proposal will not ensure biofuels are truly sustainable  (cf. this webpage and its related links).

The only hope now is that the EU Commission will provide the basis for a truly stringent and ambitious biofuel certification. Without such certification, the free market will without any doubt go for cheap destructive biofuels.

Today's answer from Andris Pielbag, EU Energy Commissioner, is not very reassuring. To him, the UK House of Commons report is wrong in saying that the current biofuel policy is negative.

Luckily, the UK is today extremely far from reaching the European targets.

To be continued...

Meet me in the lobby

A rather snappy one for a deadline-filled Friday: have you heard about the Worst EU Lobbying Awards, won jointly in 2007 by BMW, Daimler and Porsche? The former two being - from my observation of events in the last three years - the strongest backing to the EU's policy on hydrogen and fuel cells for transport. Not a very reassuring thought.

This initiative, organised by Friends of the Earth and other major non-profits, has appeared in parallel to the European Transparency Initiative (ETI), and the pressures for a compulsory registry of lobbyists and their funding sources.

Also, a bit of film reviews for the weekend: I watched a documentary, Manufactured Landscapes, by Edward Burtynsky, who apparently is a very famous photographer. Now, I am no art critic, but I loved that this film takes a very visual/pictures-better-than-words view on environmental damage and its consequences for people and the landscape in China (and Bangladesh).  No Michael Moore making conclusions for you or Al Gore alternating boring (at least that's what I thought) slides with sentimentalist snippets - just striking images to mark our beauty-craving minds. 

How is the world doing, doctor?

Every year the Worldwatch Institute, a globally-focused environmental research organization based in Washington, publishes “The State of the World”; this is an annual report which makes an annual assessment of urgent global environmental problems and the innovative ideas proposed and applied across the globe to address them.

This year’s report is less pessimistic than usual as the authors argue that the world economy is about to enter a new, almost revolutionary, era. Because of the threat of climate change, governments and businesses have already started changing their behaviours. In its foreword Daniel Esty, professor of Environmental Policy at Yale, says: “State of the World 2008 makes it clear that our planet and every individual on it face substantial environmental challenges. From the build-up of greenhouse gas emissions in the atmosphere to significant water shortages and a wide range of pollution and natural resource management issues, the road to a sustainable economy is full of potholes. But there are signs of hope…., the pace and scale of environmental innovation is extraordinary”. Indeed this report shows that

• In 2006, an estimated $52 billion was invested in wind power, biofuels, and other renewable energy sources, up 33 percent from 2005. Preliminary estimates indicate that the figure soared as high as $66 billion in 2007.
• In 2006 venture capital has invested 2.6 billion dollar in clean technologies, making the green business the third most funded sector, after digital and biotechnologies.
• Carbon trading is growing even more explosively, reaching an estimated $30 billion in 2006, nearly triple the amount traded in 2005.
• Innovative companies are revolutionizing industrial production while also saving money: e.g. chemical giant DuPont cut its greenhouse gas emissions 72 percent below 1991 levels by 2007, saving $3 billion in the process.

Chris Flavin, the president of the institute argues that continued human progress now depends on an economic transformation that is more profound than any seen in the last century. He is also realistic though when he says that the transition from a traditional economic paradigm to a sustainable one will require years of deep changes.

Besides the human, financial and technological capital, we now need to consider also the natural one, which means that we need new economic indices (e.g. environmental accounting). The old GDP indicator seems increasingly “unfit for purpose”.  Interestingly enough the report suggests that, contrary to what previously believed, economic growth doesn’t necessarily go hand in hand with development: between 1990 and 2000 GDP per person has increased fivefold and yet this has coincided with the biggest environmental decline in history and mass poverty.

Furthermore this study challenges another paradigm of traditional Economics, i.e. economic efficiency: markets do very little to ensure a fair allocation of goods; rich people take increasingly more while 40% (think about it….40%!!!) of the world population live in the most extreme poverty.

The bad news is that the weaknesses of a traditional economy are growing in numbers and size.  The good news is that the opportunities to create a new sustainable economy appear stronger than ever (e.g. Citigroup has recently announced its intention to invest 50 billion dollar in the climate change business for the next ten years).

Burning off the Fat

In stretching the Happy New Year greetings out to the 18th day of Christmas I sit, pondering upon what my true love would choose to send me at these Oort-cloud like extremes of the festive season. A carbon-credit offset gift voucher! - how topical that would be. However, with 25% of gift-vouchers never used, would this represent pocketed profits for the off-setters of this world or would they apply the revenue to it's intended means? A rhetorical question. The point being my personal distrust and moral rejection of the 'pay-off my impact' option.

  My back was proverbially 'upped' by a link in Nathan's post suggesting that the Toyota Prius achieved only 48mpg urban and 45mpg on the open road. This maybe true for an average enviro-tourist but I noticed upon my Father's dash that he achieves an average 55mpg since purchase. A sacrifice has been made, with music now a rare treat in the car, as the key to unlocking the true value of the Prius lies not in the purchase alone, but in a focused effort to drive more economically utilising engine braking, vehicle momentum and an appreciation of optimal speed/efficiency to coax out those precious mpg's .

This protracted intro brings me closer to my point. Energy efficient light-bulbs and increased motor-fuel efficiency can be brought over the counter some serious gains can still be made through small, directed shifts on daily behaviors. Replacing an entire household (4-bed) with 18W energy saving light-bulbs or save the equivalent kWhe as reducing the use of Tumble Dryers or Washing Machines by a third (wear those jeans for one more day!). The key being that little shifts in daily behavior can make it all the more green.

The cringe-worthy point (and upon retorspective assessment, one made by a number of other blogs about): Have you made any new years resolutions to tackle your impact for the new year? Much like the 'more gym' and 'less beer' efforts of yesteryear, can the 'more green' of 2008 last much beyond the protracted hangover of a 2007 big on enviro-stimulus. Looking back now, the year past was pretty phenomenal with regards the publicity of climate change issues in the public eye and long may it continue (a review - anyone?). It may not yet have reached the guilt-trip of a mince-pie mountain and a magnum of Merlot, but it seeps slowly into the subconscious - The trip just keeps getting bigger!

Topical links

So, the Government has done some talking about nuclear again. And this time its words are more serious than last time, but not so serious that any actual action has been proposed. As I'm sure you're aware, the main stumbling block to new nuclear (apart from the fact that much of the public is inconveniently opposed) is cost. The government is committed to not interfering in the electricity market by promising long-term contracts for generation, but private capital won't flow to nuclear unless there is some kind of certainty about future prices.

In the FT yesterday, and on the EU Energy Policy Blog, David Newberry suggests bridging this stalemate with a clever finanical instrument that could raise capital and hedge against future low prices. I'd be interested in comments on his 'kWh bond' and will comment on it myself when I've got my head around it.

My other topical link is to a chemicals industry blog entry that gives us the news that China is freezing energy costs in teh wake of $100 oil. This kind of move is bound up in all kinds of equity issues, much as India's cheap car announcement is, but if it prompted similar action around the globe it could prevent some of the much needed bite from high oil prices. I think it could be worth watching the extent to which governments are prepared to subsidise oil in other growing economies, as it could undermine scenarios that suggest high global energy prices will prompt fuel-switching and behavioural change amongst consumers. Incidentally, the post also tells us that China will beat most of the developed world to a ban on plastic bags - though it's hard to believe that this is just to prioritise oil use as the author suggests.

Indoctrinating Sustainable Cynicism

Here's a peculiar article, mentioned on Greg Mankiw's blog, about the teaching of history and economics in France and Germany. "Millions of children are being raised on prejudice and disinformation" apparently. The article goes on to claim that leftist, anti-capitalist attitudes are rife in Europe and the result of misinformation transmitted in the classroom from an early age. As proof, the article is peppered with quotations from French and German school textbooks such as this one:

“Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer,”

The article is apparently based on serious academic research, so perhaps shouldn't be dismissed too quickly. However, in its current state, the tone is so hysterical that its conclusion seems scarcely believable. It appears to claim that any text that mentions cultural globalisation or a Tobin Tax, or fails to praise the entrepreneur, or that refers to the welfare state or workers' collective bargaining rights in anything but derogatory terms provides proof of anti-capitalist brainwashing in European schools. But who knows if these quotations are taken in their proper context, or if the texts themselves are truly representative of the school curriculum?

On the subject of bias, the article above could be seen as part of a continued condescending attitude towards the economies of France and Germany.  As if the Anglo-Saxon reader already knows that those primative français have a laughably poor conception of the economy and only needs to read the above article to discover its roots. From that point of view, one could even argue that France has given up on capitalism, citing Nicolas Sarkozy's recent decision to launch a commission, featuring the renowned duo of Joseph Stiglitz and Amartya Sen, charged with finding a measure of wellbeing superior to GDP.

Speaking of which... if we take a look at UNDP's Human Development Index (HDI), France is ranked the 10th most developed country in the world (the UK is 16th). But looking more closely (see diagram), we see that the UK is ahead on GDP per capita but France overtakes once other aspects of the index are taken into account. In other words, according to HDI, France is more efficient at converting GDP into economic wellbeing while the UK is the economic dinosaur, squandering GDP with less welfare output to show for it.

An alternative alternative to GDP is provided by NEF's Happy Planet Index (HPI), a combination of  life satisfaction and life expectancy (good) with ecological footprint (bad). On this score, the UK ranks 108th in the world while France is lower at 129th. France's higher life expectancy is balanced out by higher ecological footprint and lower life satisfaction. The best 2 countries, according to HPI are Vanatu and Colombia - i.e. they're the most efficient users of natural resources, producing the most per capita  'happy life-years' per unit of ecological footprint. The NEF site also allows users to calculate their own HPI - apparently this author has a below UK average ecological footprint of 1.8, and is below world average happiness but likely to live a very long time. Terrific: looks like it's time to move to France.

There are many other alternative welfare indices, one of the most famous being Gross National Happiness (GNH), a Buddhist-based welfare concept developed by the Kingdom of Bhutan (an absolute monarchy). If you think the HPI seems too clunky and formulaic, perhaps you should join the more outside-the-box community of GNH researchers. Here are the papers from their latest conference.

 

Tiny car by Tata motors

Today, India's Tata Motors announced with great fanfare their new Tata Nano, now the cheapest car in the world at $2500. In the second most populous country in the world. And with that, the hearts of millions of environmentalists around the world cried a milllion little green tears.

Ok, I'm being a bit sarcastic. I'm not trying to belittle the environmental concerns regarding this car; my first reaction to this car is just to shrug - but it was bound to happen anyway, right? The market gives what the market wants.

The car has a small engine, and apparently an impressive fuel efficiency of 54 MPG - better than the Toyota Prius! We should welcome its use in the US and EU. It apparently satisfies Euro 4 emissions standards (although Euro 5 is required in 2008), but my first guess is that it wouldn't pass western safety standards - though I'm ready to stand corrected.

The environmental concerns relate primarily to the increased uptake of cars in the developing world, by making it substantially more affordable. But we need to be careful not to make judgement (if only indirectly) about whether people in developing countries should be "allowed" to drive cars, in spite of their fast-growing emissions. In the eyes of the developing world, this smacks of parentalism and doesn't get us anywhere. They are not stupid, and want to have the same luxuries that have been afforded to us for so long.

Of course this car makes own transport more affordable, and will be very popular. But personal car use has skyrocketed in the last decade, and the catalyst has been increasing wealth - not cheap cars. In the end, this car should not affect our view on building clean transport both in the developed and developing world: fuel taxes, congestion charging, efficiency standards, new technologies, better public transport, and zoning.

In the Green gets a blogroll

I've been meaning to add one for a while, but we now have a list of "Blogs We Like" on the left-hand bar. Looking at it now, it's a bit of a miserly and mixed list. But I think it offers a nice set of related sites for readers to branch off to. The list will get added to over time - and feel free to recommend any sites for inclusion.

Climate policy and avoided pollution control

I'm currently finishing up a draft of a paper titled European climate policy to 2030 and avoided costs of air pollution control. The background of the paper is that climate policy will reduce air pollutant emissions, and consequently reduce the need for end of pipe (EOP) pollution control measures. EOP measures have been the mainstay of pollution control in the last few decades, and include particulate filters, catalytic converters, and flue gas desulphurisation.

Air quality targets will be set in future, regardless of climate policy; but with CO2 abatement they will be "cheaper" to meet. The goal of this paper, then, is to quantify the avoided costs of EOP measures arising from climate policy, and compare them with the costs of climate policy. Why is this interesting? If the savings from avoided air quality policy are non-trivial compared to climate policy, it could increase the political feasibility of climate policy.

The paper uses a top-down computable general equilibrium (CGE) model. (And yes, I know, CGE is terrible.) CGE studies in the co-benefits field have largely presented results in terms of reduced air pollutants or monetized health benefits from climate policy. This is because CGE models are generally very aggregated with respect to sector inputs and outputs, and lack specific technological detail. To do the avoided cost analysis, I've had to make some novel modifications in order to introduce EOP technologies into the model. At the moment, I've only included PM2.5, NOx, and SO2 emissions from stationary sources - those which use EOP technologies.

So what are the preliminary results?

Assuming the Kyoto Protocol is achieved in 2010 (with all reductions undertaken at home) and the NEC Directive goals are also achieved, the avoided costs of EOP expenditure is 15% of the CO2 abatement cost in 2010. (All costs annualized.) This is in a similar range to work by Syri et al. [Energy Policy 29 (11), 871-884.], who put the number at 20% - albeit with additional pollutants and a different model.

The uncertainties of future climate and air quality targets beyond 2010 mean that I have used two alternative climate and air quality policy scenarios to undertake the analysis. For 2020, with climate policy at either Kyoto Protocol levels or a 20% reduction, and pollutants kept at NEC levels or reduced by 10-20%, the "saving" works out between 4-10%. In 2030, the saving falls to 2-4%.

These numbers are still up for adjustment as I do more model runs for the draft. I'm presenting the savings in terms of total costs, because it is not possible to undertake marginal analysis when you have two separate abatement activities going on (someone correct me if I'm wrong). But a patterns emerges: the size of the avoided expenditures falls as both climate and air quality targets become more stringent. This is in part because the marginal abatement cost of CO2 abatement is rising faster than that of air pollution abatement.

So what do the results mean for air quality and climate policy in future? Firstly, it is evident that air quality targets need to be set in the context of this kind of analysis. Climate policy can make more stringent air quality targets cheaper and technically feasible. Secondly, and highlighting that we shouldn't start double counting these benefits, climate policy can become more politically feasible if it is understood that CO2 abatement is causing savings in other environmental policy domains. This co-benefit is largest in the early years (next decade or so) - conveniently when political inertia to get climate policy going is at its highest. Thirdly, just because savings are being made in the aggregate economy, it doesn't mean that some portions of the economy aren't still losing out. This raises political issues that will still need to be sorted out.

In the Green returns on Monday...

I hope all of you have enjoyed your winter break, and want to promise that the blog will wake up out of hibernation over the weekend. Although I shouldn't have to apologize for the lack of posts over Christmas and New Year, I must say that I had intentions of writing - they simply gave way to PhD and family priorities.

So with the news that 2007 was the second warmest year on record in the UK, we hope to offer you another year of environment- and energy-related policy news and analysis. Thank you to all of you who visited/read the blog (all 100-200 per day of you!), and commented on the posts. And of course, many thanks to those who contributed.

The current plan for my first post over the weekend will be sharing some results from my first PhD paper, a draft of which I finished up the weekend before Christmas.