I woke up this morning to an interesting article on NBCnews.com that mentioned a new study that shows that the methane hydrates located off the East coast are destabilizing at an alarming rate. So what does this mean? Well, basically, it appears that this is caused by a change in the Gulf Stream, or the natural convection cycle where warm waters are transported north and east from Florida towards the Arctic and Europe where the water is cooled and begins its southern journey back down. However, climate change inspired temperature changes are throwing off the natural cycle and destabilizing the methane hydrates on the sea floor.
Why should we care? Aside from the fact that the Gulf Stream is responsible for the weather patters on both sides of the Atlantic, as well as the nutrients in the water that sustain our fish, this new discovery represents a something of a turning point in climate change. Methane, or (CH4) to all my chemistry nerds out there, is a potent greenhouse gas that currently accounts for 16% of GHG emissions. While less abundant than carbon dioxide, methane is 23x more potent than CO2. The fear is that we have now reached a tipping point where increased global temps actually bring on unwanted effects of their own. And believe it or not, we have a lot of methane hidden in a frozen state in the permafrost on our northern locations.
I mention this study not to be an alarmist (well, maybe), but because I believe that many of us think that climate change will be easy to solve once all parties come together to take action. This is not true. It is going to take plenty of work to solve this problem. There is definitely a tipping point where the Earth enters into a reinforcing cycle of warming – the question is: did we just pass it? If not, can we take corrective action before we reach that point.
Many of you have been asking what the difference is between regulatory approaches and market based solutions to carbon emissions. The answer is fairly simply but depends on what you want the outcome to be. The whole question can be boiled down to: Tax or Trade?
A carbon tax is a pure price instrument that establishes a certain price on pollution. While the price is guaranteed, the final emissions reduction is not. For example, a $5 tax/ ton on CO2 emissions for a firm that pollutes 100 tons of CO2/ year would cost the firm $500. This policy creates certainty for businesses and governments, but leaves uncertain the amount of emissions reduction.
On the other hand, a cap-and-trade system (or quantity instrument) determines the final output of allowed emissions, but leaves the price uncertain. In a certain year where polluters find it hard or costly to reduce emissions, the price of each credit would rise as companies bid up the price of the allowance. In a different year, the price of the credits might fall as many industries would have a surplus of their pollution credits available on the market. As companies find it harder to meet the required pollution allowances, the price of each credit would increase with demand. Every so often credits would be removed from the market in order to achieve the desired level of emissions.
So which one is better? Depends. It all depends on what the predicted damage costs are. If the marginal damage costs are high, then it is better to use a quantity mechanism because you know the level of pollution output. The market will set the rate. If the marginal damage costs are low, and policy makers are worried about the high costs of transition to a low-carbon economy, then a price mechanism would be the better option because it would provide more clarity to the business community when making future investment decision. Hit me back and let me know your thoughts.
“One degree Celsius rise in temperature is associated with 10% productivity loss in farming. For us, it means losing about four million metric tonnes of food grain, amounting to about US$ 2.5 billion. That is about 2% of our GDP. Adding up the damages to property and other losses, we are faced with a total loss of about 3-4% of GDP. Without these losses, we could have easily secured much higher growth.”
-Sheikh Hasina, Prime Minister of Bangladesh
Most people think the biggest costs associated with climate change are in trying to avoid it by reducing carbon emissions. However, a new study (Climate Vulnerability Monitor 2nd Ed) by DARA concludes that climate change is already costing us $1.2 trillion in foregone prosperity. Yes, that is trillion with a T. This is roughly 1.6% of global GDP. By 2030 the effects of climate change could amount to 3.2% of global GDP with most of the pain being felt by developing nations. Here are some more stats:
• Climate change and a carbon-intensive economy considered a leading global cause of death today, responsible for 5 million deaths each year – 400,000 due to hunger and communicable diseases aggravated by climate change and 4.5 million carbon economy deaths due mainly to air pollution
• Losses for lower-income countries are already extreme: 11% of GDP on average for Least Developed Countries already by 2030
• Major economies are heavily hit: in less than 20 years China will incur the greatest share of all losses at over 1.2 trillion dollars; the US economy will be held back by more 2% of GDP; India, over 5% of its GDP
However, the future doesn’t have to be so doom and gloom. The report concludes that much of these costs can be avoided by emissions reduction investments of just 0.5% of GDP and $150 billion per year in support to mitigate the effects in the countries most vulnerable.
While a big victory for the environmentalists, it has angered upstate residents and land owners who were looking for economic development or to simply lease out their land to natural gas companies. Mr. Cuomo is caught between a rock and a hard spot on this issue because of his committment to economic prosperity and job creation on one hand, and his environmental conservatism on the other. With both sides fervently pushing to allow or deny fracking on the New York region of the Marcellus Shale, the Governor decided to review more data and let the facts make the decision for him.
I say, “Congratulation Mr. Cuomo! Thank you for not bending to one political pressure or another and instead reviewing actual science and data. This is something that has been missing from many of the major political arguments recently.”
America really needs to learn the facts about natural gas – do not base your decision on a 30 second tv commercial sponsored by the Natural Gas Alliance. Get out and do some research. This is such a big deal for America’s economy and our environment. If fracking is for the public good, then a public health study of the effects of fracking is exactly what the doctor ordered.
FULL DISCLOSURE: I must admit that I was originally in favor of fracking in certain areas and more importantly, in favor of natural gas as a “transition fuel” until renewable sources were cost competitive. I saw the economic benefits and job creation associated with fracking as outweighing the environmental degradation. Since then I have changed my opinion. I have to ask myself, why are we taking a bunt when we could be swinging for the fences in terms of renewable energy technology. Natural gas will still play a large role in America’s future – after all, we need a diversified energy portfolio. But now I see the economic benefits of renewable energy technology being even more important to our economy. Instead of risking potential poisoning to our fresh water supplies and still being dependent on the spot price of a commodity, our renewable energy future will protect our most vital resources and at the same time create a demand for good, high-paying jobs in science, engineering, and operations and maintenance of distributed, renewable energy systems.