Monday, April 12, 2010

It Can't Possibly Be That Easy

Over the weekend, I read Paul Krugman's big essay on climate economics, Building a Green Economy.  In it, he makes the following claim:
Just as there is a rough consensus among climate modelers about the likely trajectory of temperatures if we do not act to cut the emissions of greenhouse gases, there is a rough consensus among economic modelers about the costs of action. That general opinion may be summed up as follows: Restricting emissions would slow economic growth — but not by much. The Congressional Budget Office, relying on a survey of models, has concluded that Waxman-Markey “would reduce the projected average annual rate of growth of gross domestic product between 2010 and 2050 by 0.03 to 0.09 percentage points.” That is, it would trim average annual growth to 2.31 percent, at worst, from 2.4 percent. Over all, the Budget Office concludes, strong climate-change policy would leave the American economy between 1.1 percent and 3.4 percent smaller in 2050 than it would be otherwise.

And what about the world economy? In general, modelers tend to find that climate-change policies would lower global output by a somewhat smaller percentage than the comparable figures for the United States. The main reason is that emerging economies like China currently use energy fairly inefficiently, partly as a result of national policies that have kept the prices of fossil fuels very low, and could thus achieve large energy savings at a modest cost. One recent review of the available estimates put the costs of a very strong climate policy — substantially more aggressive than contemplated in current legislative proposals — at between 1 and 3 percent of gross world product.

Such figures typically come from a model that combines all sorts of engineering and marketplace estimates. These will include, for instance, engineers’ best calculations of how much it costs to generate electricity in various ways, from coal, gas and nuclear and solar power at given resource prices. Then estimates will be made, based on historical experience, of how much consumers would cut back their electricity consumption if its price rises. The same process is followed for other kinds of energy, like motor fuel. And the model assumes that everyone makes the best choice given the economic environment — that power generators choose the least expensive means of producing electricity, while consumers conserve energy as long as the money saved by buying less electricity exceeds the cost of using less power in the form either of other spending or loss of convenience. After all this analysis, it’s possible to predict how producers and consumers of energy will react to policies that put a price on emissions and how much those reactions will end up costing the economy as a whole.

There are, of course, a number of ways this kind of modeling could be wrong. Many of the underlying estimates are necessarily somewhat speculative; nobody really knows, for instance, what solar power will cost once it finally becomes a large-scale proposition. There is also reason to doubt the assumption that people actually make the right choices: many studies have found that consumers fail to take measures to conserve energy, like improving insulation, even when they could save money by doing so.

But while it’s unlikely that these models get everything right, it’s a good bet that they overstate rather than understate the economic costs of climate-change action. That is what the experience from the cap-and-trade program for acid rain suggests: costs came in well below initial predictions. And in general, what the models do not and cannot take into account is creativity; surely, faced with an economy in which there are big monetary payoffs for reducing greenhouse-gas emissions, the private sector will come up with ways to limit emissions that are not yet in any model.
Now, it's important to note that the goal of the Waxman Markey bill is to reduce US carbon emissions by 83% by 2050 (from 2005 levels, so even more than that from 2010 levels). So essentially, the CBO is saying, and Krugman is endorsing, that this level of emissions reduction will have so small an effect on economic growth that it's going to be indistinguishable from noise. I don't dispute that environmental economists think this, but I find it to be a completely facially implausible conclusion. I want to lay out two arguments for why these economists cannot possibly be right. The first is a common-sense argument about what actually has to happen at the level of the lives of individual citizens to bring about such a large reduction in carbon emissions. The second argument is based on looking at what was required to cause significant changes in energy efficiency in past episodes.

Let me start by saying, for any new readers that happen to stumble across this, that I believe the general thrust of the scientific consensus on climate change, and I strongly agree there is an excellent case for decisive action.  See here and here for some past relevant posts.  In general, I like to get my information on climate change from reading Science, Nature, and PNAS, rather than from partisan political sources.  However, I also believe in being realistic about what one is proposing to do, and honest about the implications.

Next, let's think briefly about some implications of the quantitative claims above about economic growth and emissions reductions.  US trend economic growth in recent decades is about 3% a year.  So between now and 2050, in a business-as-usual future that is similar to the recent past, we would expect the economy to grow by 1.0340-1 = 225%. So the economy will be about three times as large as it currently is. Some of this will come from there being more people in the US, but more of it will come from the people being wealthier, which of course they generally like to express by having bigger houses, bigger and faster cars, and more advanced technology to fill them both with.

Now, if the economy is going to be a bit more than three times larger, but we are only going to emit 17% of the current level of carbon emissions, then the carbon intensity of the economy - that is the ratio of carbon emitted per dollar of goods and services created, is going to have to be only 5% of the current value.  Next you have to figure that there are certain things in an industrial society that are very hard to do without liquid fuel - construction and agricultural machinery come to mind, along with aviation.  Relying heavily on biofuels is a very dubious prospect in a world that also needs to feed 9 billion (assumed wealthier) people from its limited agricultural land.  So you can probably figure that the residual 5% of carbon emission intensity is all going to go on these kind of specialized uses that are hard to substitute.

Therefore, these goals basically imply that the ordinary living and working of most citizens would be essentially carbon free by 2050.  That is in 40 years time.

Now, I can certainly imagine a middle class lifestyle and workstyle that is carbon free.  The technology is almost there.  For example, we could live in super-insulated passive solar houses, we could drive electric cars to work at our super insulated zero-emissions offices and factories.  The electricity to power our cars, provide for residual heating and cooling needs, and drive our industrial production would all (or almost all) have to come from some combination of renewables and nuclear, rather than the coal and natural gas that form the bulk of it today.  I think if everyone did something along those lines, we could get down to 5% of our current carbon intensity.

But it should be clear that this basically requires replacing almost everything in our society.  Since today, our houses are by and large made from R12 2 x4 stud walls, they pretty much would all need to be replaced to avoid the need for lots of heating/cooling energy.  Ditto our commercial and industrial buildings.  And of course most of current electricity generation infrastructure would need to go too.  Finally, of course, all the cars will have to be replaced.

Now, the lifetime of cars is much less than 40 years, so they will all be replaced anyway; that's not a problem (though there certainly are questions about the ultimate scalability of that many electric cars). But the median age of a house is 35 years. Here's the age of housing as of 2003 according to the US Census Bureau, American Housing Survey for the United States:

As you can see, there's a lot of houses that are more than 40 years old.  Note also that this kind of graph tends to understate the life of houses - most of the young houses are built on greenfield sites on the edge of town, and most of the older houses in town are still there.  So we are going to have to do a lot of extra replacement to get to 5% of current carbon intensity.  Instead of just building big houses on the outskirts of town, we also need to go and replace everything in town.

And of course other kinds of infrastructure tends to last even longer than houses - for example, the median age of current coal plants is 44 years.

Now, think of it this way: suppose you have a certain amount of money to spend over the next forty years that is your share of industrial society's surplus.  You could take that money and either a) tear down your house and replace it with a super-insulated carbon-neutral one of about the same size, or b) add an extra floor and a swimming pool to the house you have and continue to power it with cheap fossil fuels (coal and shale gas, let's say).

I would argue that this is, very roughly, what the choice between business as usual and an 80% reduction in carbon emissions means in personal terms.  I think at the personal level, most of us can understand that if we have to completely replace the house, we're not going to end up with the same amount of house as if we just add to the one we have.

My second argument is based on looking at past history.  In order to get to 5% of our current carbon intensity in 40 years, we need to improve carbon efficiency by an average of 7.2% per year (0.051/40 = 0.928).  That's a very large rate of change.  In particular, our main experience with society making serious improvements in energy intensity is as a result of the oil shocks of the 1970s.  I have looked extensively in the past at the effect of those shocks.  Here for example, is the year-on--year rate of change of deployed vehicle fuel economy in the US fleet (see here for methodological details):


As you can see, in the late 1970s and 1980s, we reached a level of fuel efficiency improvements of around 2-3% a year, sustained for a little over a decade.  The peak year was an improvement of 6.5%.  But what was required to kick that off?  Two massive oil-shocks, each of which led to a big recession.  The first was the Arab oil embargo in 1973-74, and the second was the effect of the Iranian revolution in 1979, and the immediately following Iran-Iraq war.  Google shows the effect on US GDP as follows:


So to get a puny 2-3% a year for a decade, just in the liquid-fuel sector, took two major recessions (or three, if you include the 1982 one).

So is it really plausible that we can price carbon high enough to improve our fossil fuel intensity across the whole economy by an average of 7% a year for 40 years, and it have no effect on growth?  That appears wildly implausible to me.

34 comments:

Michael Dawson said...

I think it's even more pie-in-the-sky than you say. You find it plausible that we'll have 4 or 5 billion automobiles in 2050.

Personally, I find that to be a rather wild assumption of its own. We're somehow going to wean ourselves completely off oil while also figuring out how to not just maintain but expand current methods of industrial production -- all with electricity and renewables only? And then, on top of that, we're also going to choose to squander a big chunk of the new power-generating arrangement on making and driving cars -- machines that sit idle 95% of their lives and devote a ton of materials to a task that, under equal conditions, could be accomplished with a 30-lb bicycle?

porsena said...

Krugman's estimate puts him in other illustrious company. In 1996, the UK Government published a review of the economic impact of controlling greenhouse gases. Lead by Sir Nicholas Stern, the report put the cost of stabilizing atmospheric CO2e to 550 ppm at around -2% to +5% of GDP annually by 2050,with the most probable value of 1%. Stern had been Chief Economist and VP of the World Bank.

Stern's review generated considerable discussion but my sense is a general acceptance of his conclusion that the economic cost would be lower if action was taken to lower emissions sooner rather than later.

porsena said...

It's also worth noting that three quarters of the US economy is propelled by the service sector, a lower carbon effort than primary industries. And, tongue-in-cheek, I note that 8%-and-growing of the US GDP is provided by the financial services sector, which we all know has no real inputs at all :)

porsena said...

And sorry, that's 2006 for the Stern review, not 1996!

Américain à Paris said...

First of all, your essay shows an American lack of vision. I didn't need a car when I lived in New York nor doing my two years in Paris or my final abode here in Budapest.

Second of all, Americans will have no choice but to wean themselves off oil. The majority of the world's giant oil fields are in decline. The world needs to discover and bring online a Saudia Arabia every three years just to offset erosion of the existing production base.

There will be no cars running on oil-based fuels in 40 years ....

Tom said...

As a building energy engineer, I think the assumption that houses must be replaced to become carbon-neutral is just wrong. I personally converted my 1940s shack to a low-energy passive solar house without replacing it. Basic requirements are additional external or internal insulation and much improved windows.
I agree with the thrust of the article that the conversion to a low-carbon economy will be much more difficult than Krugman envisions, and that we will become more poor, with either path, whether through investment and lower-consumption lifestyles or because we fail to act and suffer economic impacts of climate change.

rks said...

Very hard to understand the economy as it is. Trying to understand how it might be if it was completely changed is even harder. Still, as your clear rebuttal shows, modern economic analysis is unnecessarily hopeless. Anyway energy is the key: we'll either have very cheap electric energy from one of the nuclear research projects, or things will be very bad indeed. Since the doom market is saturated, I'm rather interested in considering how the world will develop if there is very cheap electricity. We can use it to create liquid fuels to keep our liquid oriented economy going, but maybe we can do something better?
P.S. The joy of spell checking is that all misspellings are actual words. You probably want "farcical".

Stuart Staniford said...

rks - you could probably argue that my use of facially was a bit too innovative, but I meant it in the legal sense of "obviously wrong on its face". Cf facial challenge.

Stuart Staniford said...

Tom - I'm interested in more detail on your retrofit.

DaveMart said...

Here is Bill Gates with his ideas on how to solve the problem:
http://www.ted.com/talks/bill_gates.html

He argues that it is no good trying to deploy immature technologies which will slightly reduce the problem, and that feed-in tariffs and so on are hugely expensive and it would be better to spend some tens of billions on developing really revolutionary technology in wind, solar, and nuclear.
He is backing the Traveling wave reactor. I am keen on the Liquid fluoride thorium reactor - more here:
http://thoriumenergy.blogspot.com/2009/12/wired-thorium-article-available-online.html

Solar is tough to do even as far north as the US, but say between 20 degrees north and south it is a different matter, and most people live there.

So you spend more on R & D, and when you have an economic solution build it fast.

In my view nuclear comes into that category now, and any supposed risks surely pale in comparison with the risks from climate change.

Therefore I's suggest a build out of conventional nuclear now, followed by more advanced nuclear, solar and perhaps high altitude wind

crisismaven said...

Very cogent arguments. Problem is politicians cannot think and the CBO is not an independent think tank nor is human mind meant to discuss exponential curves or reductions. And Krugman anyway is one of the greatest "linearist" simplifiers of all. No wonder, Nobel didn't dedicate a mathematics prize - he knew the committee wouldn't be up o it or they wouldn't have awarded the IPCC with its faulty calculators and its projections with error greater than forecast. However that may be, there was another refutation of these mealy-mouthed projections over at the Mises Institute: "Correcting Krugman on Climate" and "The Costs of Carbon Legislation".

KLR said...

Even Colin Campbell is talking peak demand now. I have my doubts; depending on which stream you're talking about the US hit trough fairly quickly from the late 70s peaks, which I documented in the article I submitted to TOD. We can do a lot with CAFE etc but the fleet itself is larger now, thus new vehicles have less of an impact than they did then. Also ethanol takes away some of those gains in the first place.

Other big conservation measure employed then was phasing out of residual fuel oil, from 15.88% of US consumption in 1977 down to 8.78% in 1984. Unfortunately China has already played this card, being down to 8.95% in 2008. This is the only major stream in US demand that went down for good; others eventually hit trough and rebounded - see that TOD article if interested. The Oil Drum | Petroleum Demand Lessons from the Late 1970s

Whether we absolutely positively have to have more and more ethylene every year to grow the economy is open to question, of course. Shopping bags, pfffah! Just put RFID chips in all the products and shoppers can just push their carts past readers and tally up their purchases in a split second - and have their AmeroCards deduct the total from their savings account. Checkers freshly unemployed can go, uh, into flipping real estate or making iPod skins...

I want to examine how economies that have gone to hell and back had their petroleum demand affected - Japan, FSU, Argentina, Indonesia. Probably some lessons to be drawn in there.

Datamunger said...

Great post, Stuart. Though, if the neocons can serve up endless fudge to get the nation to go to war, maybe ol' Kruggers is to be forgiven.

This issue has legs. Glad you raised it.

Robert said...

I agree that this carbon reduction will be difficult, and often argue with my climate economist friends about the somewhat rosy assumptions behind their calculations. Effectively, their models are based on a Panglossian, best-of-all-possible worlds, in the sense that one focuses on a climate target as the end point and then lets the model calculations find an optimized path to get there. In other words, their is an all-knowing, central-planner (in a beneficial way) who guides the economy toward the low-carbon goal. Not likely, but at least a glimmer of hope to evaluate in more detail.

As to the issue of housing modifications, some fairly simple calculations based on typical houses for the midwestern US show that 30-50% of energy use can be saved by simple, cost-effective measures such as sealing leaks, additional insulation, behavior changes (temperature setbacks and water management), etc. With those as starting points, and some creative ways to do financing of costs, renewable sources of energy supply become more viable, thus further reducing the carbon footprint.

I'm not much of an optimist, but I think there are still paths available to us, for a short time at least.

Engineer-Poet said...

(4096 char limit?  Whiskey Tango Foxtrot?!  Okay, splitting this up.)

Stuart, you know I'm a big fan of your work, but I'll go ahead and play advocatus diaboli:  maybe it can be that easy.  I won't say it will be for sure, but I'll try to make a case for it.

How it can be that easy isn't a big mystery.  We've been conducting our affairs without regard to GHG emissions since the Industrial Revolution, roughly 150 years ago.  We've done this because until recently it hasn't cost us in any way we cared to count, or even knew how to.  We have counted other things, like SOx and fly-ash emissions, and done a pretty good job of slashing them (where interest groups haven't put a thumb on the scales to e.g. maintain a market for high-sulfur coal despite the results).

We would have seen action a lot sooner if "environmental" interest groups hadn't insisted on placing their own thumb on the scales, such as insisting on a "climate levy" against nuclear power plants (and more recently using the fraudulent Storm & Smith report to claim that mining uranium is GHG-intensive).  This resistance imposed non-economic costs on low-GHG power, but it is in the process of evaporating (it should surprise no one that many anti-nuclear groups were financed by coal companies).

Other things are coming along.  Wind power is far cheaper than oil, and islands like Aruba are going for it in a very big way despite the financial crisis.  It's expanding rapidly in the US, with net generation up 20% in 2009 despite bad financials and apparent bad weather.  The time horizon for long-distance transmission lines is much longer than for wind farms, but they're moving too.  Using HVDC to squeeze more power over the same corridors is not going to be un-noticed, either.

The price of low-carbon energy gets more competitive all the time.  Nuclear is expensive, but it appears to cost about as much as state-of-the-art coal plants; it's only old, fully amortized, scrubber-less polluting coal that's cheap.  The cost of wind keeps falling; it's already very competitive with $8/mmBTU natural gas, and only today's unrealistic pricing of shale gas lets anyone think it isn't a winner.  Solar is 20 years behind wind, but in 2030 it should be about where wind is today and that's only halfway to the 2050 date.

The impending retirement of those old, polluting, amortized coal plants is significant.  Electricity is going to cost more, and with it, inefficiency.

That's the electric supply end.  On the electric demand end, heat pumps can replace fossil-fired furnaces.  EVs and plug-in hybrids can substitute electricity for liquid fuel, and dynamic charging can make more of that electricity GHG-free.  Most existing buildings will have been re-roofed and remodeled at least once in the next 40 years, if they still exist; that's the time to update the insulation to modern standards.  If we get some reasonable building codes soon, whatever's put up in the mean time will not waste energy like today's current stock.  The outdoor hot tub and massive array of incandescent Christmas lights might become a Japanese soaker in the master bath (fed by a tank off the solar DHW heater) and gaudy-but-thrifty strings of LEDs; similar luxury for a lot less energy.

Engineer-Poet said...

The inefficient use of electricity followed from historical low prices, but high efficiency is quite feasible with modern technologies.  When prices create pressures to adopt them, they will become universal.  Just as today's crappy building codes are The Way Things Are Done until suddenly they aren't, the same will be true of the best practices possible with what we've got.  What's coming will be even better.

I know I'm hand-waving here, but there are existence proofs for everything I've claimed here.  Texas got 19% of its electricity from wind one recent morning, and the total could have been a lot higher if e.g. AC Propulsion's V2G system had been available for stabilizing the grid.  Building energy retrofits have done everything Tom claimed (I've seen multiple case studies from around the USA).  Nuclear has been working quietly and cleanly for the last 40 years, and only seems to get better.  The storage of mass quantities of energy as compressed air is in the pilot stages.

Yes, people will be wastrels if juice costs 5¢/kWh.  They're far less likely to go the McMansion route if it's 15¢/kWh and gas is $1.20/therm; they'll install a ground-source heat pump instead of putting in an addition because, really, don't Americans have enough space already?  But juice at 15¢/kWh is a lot cheaper than $4.00/gallon gasoline, so the Volts and Leafs and plug-in Priuses and Fusions will flourish as the SUV segment dies a second, final death.  All of this will be accompanied by huge reductions in the amount of carbon emitted.

It's not a certain future, but it's quite feasible and a few policy initiatives can make it likely.  More than that, I can't say.

Greg said...

Stuart,

It won't be easy, but it may not be as hard as you imply. But then again, it may be harder.

First, growth probably makes the job easier, not harder. If the economy didn't grow at all, the required rate of reduction is still 4.3%. Your chart of vehicle improvements shows that level being reached only twice after WWII demob. So in one sense, 4.3% is in the same category as 7.2%: dauntingly difficult. But consider this: when the economy is growing, and people feel positive, they buy new stuff to replace the old. When it's not growing, they make do with the old. So a (relatively) high rate of GDP growth may speed the replacement of vehicles. The outcome depends on policies and incentives.

Second, as you point out, vehicle emissions are not the total. Coal and gas fired power stations emit a comparable amount. And these emissions are much easier to manage and eventually eliminate, simply because there are so few points of emission (relatively speaking). The 44-year median age of coal plants is also a good thing. It means that existing plants are mostly amortized. There would have to be a spate of power plant construction soon, whatever happens.

The picture is more mixed for industrial and residential emissions.

Overall, it seems to me that given well-distributed income growth, and good emission-reduction policies and methods, the target looks - just - achievable. But (leaving aside the risks to incomes, some of which you have covered), we're setting ourselves up for failure due to our choice of method.

Currently only two methods are being considered for emissions reduction: cap-and-trade, and a carbon tax. Yes, the EPA has threatened to regulate, but regulation is well out of fashion in political circles, so I can't see EPA regulation lasting forty years. Cap-and-trade or a tax are the long-run choices, and it looks like cap-and-trade has been chosen. Either or both could fail halfway through the job, because they contain perverse incentives.

A carbon tax is a revenue stream for the government. It would be a strong-willed government that does not start using that revenue for its ordinary business. Once a government comes to depend on the revenue from a carbon tax, it has incentives to maximise that revenue, and to maintain its existence for as long as possible. The level of emissions corresponding to maximum revenue is unlikely to be what the science says we need.

Similar reasoning applies to cap and trade, which involves the government auctioning emissions permits. The government has an incentive to maximise, or at least maintain, its revenue from the auctions.

The US government has already succumbed to the incentive to use carbon revenue. The Wikipedia article on emissions trading has this: "The 2010 United States federal budget proposes to support clean energy development with a 10-year investment of US $15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits. Under the proposed cap-and-trade program, all GHG emissions credits would be auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019." So the US govt. is already counting on $63 billion p.a. going into general revenues.

In a market system such as cap-and-trade, arbitrageurs, too, have incentives to keep the market large, and so incentives to influence the government to slow the sinking of the cap. The "influencing" is generally carried out discreetly, though, so we won't see it in Wikipedia.

Even if there is initial success in reducing carbon emissions via market methods, the rate of emissions reduction will slow drastically in a decade or so, and it may well stop entirely, well above the target level, purely through the operation of incentives -- these among others.

Anastasia said...

Where is all the energy going to come from to support this concept, which really constitutes a far higher percentage reduction for already developed nations since it, I guess, presumes the developing world will be allowed to play catch up? What about all the other resources required as well? Isn't it safe to say, with oil peaking at some point over the decade 2005-2015 that the world economy will absolutely contract too, no matter how much funny money is printed?

As usual more guys just mentally whacking off on supply side solutions this and techno-fixes that, with no regard for reality. Simple stuff like, how much C02 would be expended building the infrastructure to lift the developing world to some level of comfort, all 7 or 8 billion of them, if UN population projections are to be believed, and what additional burden would all that business place on the environment?

KLR said...

In re: guzzlers: GM Arlington workers toil overtime to maintain SUV supplies | News for Dallas, Texas | Dallas Morning News | Dallas Business News Maybe if we see sustained prices this time - in 1979-1981 the crude price peaked and took a long time to come down from that height, unlike the late 2008 crash through the floor and attendant move to higher mileage standards.

In re: Texas wind, ERCOT had that embarrassing incident cutting supplies to interruptibile customers due to wind coming up short. Maybe just an isolated incident or part of the learning curve?

Link to 2007 American Housing Survey here: Census: U.S. Housing Stock Now Numbers 128 Million Units - Demographics, Single Family - Builder Magazine Hmm, 78.3% are solo driving commuters, bit higher than other refs I've seen. They conduct the survey every 2 years.

Chris Vernon said...

I don't understand where the +225% growth over the next 40 years come from... to hang the post off "in a business-as-usual future that is similar to the recent past" seems strange to say the least.

I'd say a 80% reduction in emissions over that time frame is more likely that a further 225% growth. Remember the Soviet collapse scrubbed off over 30% of their CO2 emissions over just the five year period from '91.

I don't see how Americans can be richer with bigger houses more cars etc. 40 years from now. More likely in my opinion they (Europeans too) will be poorer, living is colder/hotter houses, and travelling significantly less.

I see no reason to suspect the future to be similar to the recent past.

Fmagyar said...

"So between now and 2050, in a business-as-usual future that is similar to the recent past, we would expect the economy to grow by 1.0340-1 = 225%. So the economy will be about three times as large as it currently is. Some of this will come from there being more people in the US, but more of it will come from the people being wealthier, which of course they generally like to express by having bigger houses, bigger and faster cars, and more advanced technology to fill them both with."

ROFLMAO!! I guess the tooth fairy will make all that possible, right?

Ever hear of limits to growth? Of course you have, you just refuse to accept it as reality. Go study the exponential function, it describes "Growth" Then wrap your mind around the consequences.

Try This. Take a chessboard and put a grain of rice in the square at the upper left hand corner. Next put two grains in the square to its right. keep doubling until you reach the 64th square a the bottom right of the board. Now tell me how much rice you have.

We are not going to continue growing the economy because it is physically impossible, we are at the beginning of a global economic contraction. We need a completely new paradigm... BAU is kaput!

Good luck to all, cheers!

jewishfarmer said...

To me the most critical observation raised by your post, which mirrors some things I've written about in the past is this -will the build-out required in order to accomplish this push us into a high emissions scenario in and of itself - maintaining the economy and building out on that scale is likely to be an enormously emissions intensive project.

Stuart Staniford said...

Chris:

The reason I looked at those assumptions are because that's what Krugman, and the CBO summarizing the work of environmental economists, are claiming: they are saying that Waxman-Markey will have a negligible impact on economic growth, but nonetheless produce an 83% reduction in emissions by 2050, and I just don't see how that can possibly be the case. (So my post effectively has a reductio-ad-absurdum structure to the argument).

Stuart Staniford said...

EP:

I wasn't trying to claim that the emissions reductions couldn't be achieved - I agree that with a sufficiently determined effort, they probably could be. Rather, I wanted to question the idea that they couldn't be achieved without any impact on growth. When you say "they'll install a ground-source heat pump instead of putting in an addition because, really, don't Americans have enough space already", that's exactly the kind of choice I'm talking about. Replacing the heating system and having a bigger house are *alternatives* for our limited resources - the latter is growth, whereas the former isn't. While you and I might agree that (most) Americans have enough space, most of them don't agree, and would move to a bigger house if they could.

Datamunger said...

Krugman responds.

kjmclark said...

I would say to remember that growth in an economic sense is not the same as growth in a social sense. To have economic growth, you just need to have the value of goods and services increase. I don't think anyone even said that it has to be real, non-inflationary growth. A bigger, more expensive house is one form of growth. A smaller, more expensive house is also growth. Economically, it's the "more expensive" part that's growth.

Further, there's nothing requiring that the GDP growth trickle down to the majority. It works just as well from an economic perspective for an increasingly wealthy 10% to have high-performance electric cars while the rest of us are riding bikes or taking electric transit powered by overhead catenaries.

And there's nothing wrong with GDP growth increasing in some areas while others shrink. If people spend 5% less per year on cars and 10% more each year on electronics, GDP will continue to grow.

Tom said...

Stuart,
You wanted details on our retrofit. We added 2 inches of additional rigid insulation outside the frame walls with the dryvit stucco system (better than the apparent R-14 increase because no studs are penetrating the exterior insulation), plus high-end Anderson windows (triple-glazed, argon), added south glazing and window coverings, all done in 1990, been reaping the benefits ever since.
EcoFutures in Boulder is a contractor specializing in zero-energy homes and they have good info on retrofit technologies on their website, like the following example.(http://www.ecofuturesbuilding.com/2009/10/1247-scrub-oak/)

Building technologies are evolving and I think energy retrofits will get even more cost-effective, but windows/siding need replacement every ~30 years and I think the life-cycle cost is already lowest if window/furnace/envelope updates are done to high energy performance standards (just as another market failure, due to lack of information, split incentives,etc.).

Stuart Staniford said...

Tom:

I beat you to that link :-). Thanks for the update on what you did.

Tom said...

I wondered if you arrived at that link independently. Ecofutures remodeled the house across the alley from me which I am looking at right now, to an energy-efficient but not net-zero standard.

Stuart Staniford said...

Tom:

That's a pretty funny co-incidence. I was just googling "zero energy retrofit" around 6:30am this morning and came across it.

sofistek said...

This is more like it. Common sense weaved in with some quantitative analysis.

Dave Cohen wrote something similar last year. It's long but worth a read.

Yes, with the economy imagined to be over 3 times the current economy, just what do those economic modelers think that economy will consist of? People spending most of their time just talking to each other? No, it's going to consist of, roughly, 3 times the amount of resource consumption including a similar rise in energy consumption. Economists assume an infinite world, with infinite human ability to solve problems.

gu said...

interesting article, Stuart, and comments.

I myself was thinking along those lines for quite some time, and, well,
did not come to a conclusion.

Concerning the 'reductio ad absurdum' effort, I agree.

What bothers me, that even an intelligent person like Krugman cannot
think without 'growth'.

The 'qualitative' growth replacing 'quantitative' growth arguments
are to my opinion mainly illusions.

Ofcourse ist is at first a matter of definition, what we understand
by 'growth'.

After satisfying basic needs there is the wide-open area of well-being,
where we 'invest' our efforts (metaphorically:energy)

Just imagine an imaginary Buddhist economy, where after the basic needs are satisfied,
everything would be 'invested' into the inner side: The education/perfection of the subject and its relations.
Think Bhutan.

But this is not how the western (capitalist) system works.
Everything has to be monetized.
Maybe we can become all artists and sell our works to 'consumers' who buy our works
with huge amounts of money. (Van Goghs, Picassos etc)

A nearly zero-energy-Nirvana above the basic needs.

Actually a lot of stable 'primitive societies' seem to work that way.

Krugman wrote an interesting piece about the economy in 2100, I think in 2000.
Looking back, he argued similarly:
The information work was mostly devalued in his retrospect, and celebity-status was
the 'value'.

Our current value-system is inherently energy-based, i.e. material whealth, including vacationing in far-away places and so on.

I am surprised that Krugman never elaborated on this fundamental issue.

To make this not too long, I stop here and hopefully write a second comment tomorrow.

(One evident contradiction in conventional economic thinking is in the 'discounting the future', which collapses, if we change our value-structure.)

gu said...

second part.

My main point is, that a longterm-contracting economy is incompatible with conventional economics.

Actually it is not much different from a 'reductio ad absurdum'.

To stay alive, it has to phantasize phantom growth in western terms.

I realized that after the Stern-report 2006/7, who discounted the future with 1%, whereas American economists use something like 3%.
Which means, that the Americans are far more optimistic than even the British.

Common to both is that the future is, on average, brighter than the past.

So the comparison of cost of doing something NOW compared to doing the same thing some 10-100 years
LATER would be discounted by the respective compounded amounts.

This way of argueing is deeply embedded in conventional economic thinking.

It relies on the assumption, that the future is -GNP-wise- better than the past: i.e. GROWING.

So we again land on the question what 'growth' is?

In conventional economics it is everything which ADDS to GNP.

If we dematerialize, this concept has the difficulty to integrate this dematerialization in its
measurement.

But: To dematerialize we have!

To rescue the growth paradigm in an economy which monetizes everything,
we paradoxically have to shift our values!

Is a robust iPad-economy thinkable, which ADDS to this GNP, on top of its physical implementation,
which is mainly chinese -- in the US?

I doubt that.

The idea behind that is, that the Chinese are dumb manufacturers, the Americans the clever Value-Adders. And this forever.
But:
'Information' is cheap at last.

The status-quo is still the physical/material as a measure of whealth/GNP.

AND THIS HAS TO GIVE!

Even the steady-state economists (e.g. Daly) rarely mention this.

The main battle will be on value-systems.
Well, it is already.

--------------
BTW, I am surprised that Peter Corning, to my opinion an eminent systems thinker, is never mentioned in this essential debate (here, theoildrum, climateprogress, and and and!)

Why is that?

MisterMoose said...

Let's assume that we can make photovoltaic cells twice as efficient as they are now (with a few billion dollars and a few years of R & D this should be possible). So, instead of building 10,000 square miles of solar panels in the Nevada desert to replace our existing carbon-based electric generating system, we'll only have to build 5,000 square miles...

How much do PV cells cost? How many trillions of dollars will be required to build the desert solar farms and the transmission lines to get that electricity to where it's needed? How much will it cost to build the huge banks of rechargeable batteries to store that electricity for when it is needed? Yeah, we could do this, but we'll go broke in the process.

We can cut our electricity usage by using more efficient motors, insulation, etc. But, if we start transitioning to electric vehicles, we'll need to generate even more electricity.

Whenever I read anything by Krugman, I wonder how did this guy ever get a Nobel Prize? Was this all just political, like Al Gore and Barack Obama's prizes?