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Energy and society

Week 1: Energy and Climate Policy

PB AF 595

Michael Lazarus & Matt Steuerwalt

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Overview of Day 1

• Introductions

• Syllabus and logistics

• Lecture/discussion: Energy and Society:

Past, Present, Future

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Syllabus and Logistics

• Syllabus is subject to change over coming weeks

• Mix of lectures, discussions, exercises/simulations, guest speakers

• Most classes split into two sessions: – 3:30-5:00 (part A), 5:00-6:20 (part B)

• Assignments – Required readings, plus responses (2)

– Problem set

– Wedges assignment

– Class project/presentation

– Draconian late assignment policy

• Best time to get Michael and Matt is after class

• Feedback encouraged!

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Follow emerging issues

• See list of URLs in course overview on

website

– Politico, BBC, NY Times, blogs

• Subscribe to and review Point Carbon

North America (biweekly)

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Expensive?

• Prices averaged over $94/barrel in 2011, $20 more

than average of last five years

• Prices dipped last week on news of 5th consecutive

month of Chinese manufacturing declines….to $105.

• US consumption is still double that of the next largest

user – China, but…

• China is now the #2 consumer of oil, and its growth

in demand in 2011 was half the incremental demand

globally.

What to Do?

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This: June 30, 2009 - “EPA approves California

auto emissions standard”, Reuters

•The Obama administration on Tuesday approved

California's long-standing bid to set its own tough

standards for vehicle emissions, a decision in tune with a

national plan to boost fuel efficiency and reduce

greenhouse gases linked to climate change

•In a brief statement, EPA said this decision marked a

return to the "traditional legal interpretation of the Clean

Air Act," an apparent swipe at the Bush administration,

which balked at granting this waiver and at imposing any

mandatory economy-wide limits on climate-warming

emissions.

•Gov. Arnold Schwarzenegger of California: "After being

asleep at the wheel for over two decades, the federal

government has finally stepped up and granted California

its nation-leading tailpipe emissions waiver.“

•The American Petroleum Institute: "Using the Clean Air

Act to regulate greenhouse gases would impose costly

requirements for hundreds of thousands of businesses,

large and small, as well as schools, offices and buildings

across the United States."

Or this: Newt Gingrich has a plan to get gas to $2.50/gallon

Gingrich's plan is to boost domestic daily production by almost half by promoting drilling in

Alaska, off both coasts, the Gulf, and the US interior.

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Or that?

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Or perhaps, now this?

"Today I've come to Cushing, an oil town, because producing more oil and gas here at home

has been and will continue to be a critical part of an all-of-the-above energy strategy," Obama

said, speaking to a crowd of pipe workers, residents and officials from TransCanada, the

company seeking to build the pipeline.

LA Times March 22, 2012

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Coal is Still King – and China is the Kingdom

China’s consumption of coal rose 500% since 1980.

In 2009, china became a net importer and now consumes 50% of coal globally.

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“China now no. 1 in CO2

emissions; USA in second

position” – 2007 (and ever since)

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•House Passes Waxman-Markey Climate

Change Bill

•July 2009 •Late on Friday, June 26, 2009, as Congress was about to leave Washington for its

Fourth of July recess, the House of Representatives passed, by a margin of 219 to

212, The American Clean Energy and Security Act of 2009 (H.R. 2454), authored by

Congressmen Henry Waxman of California and Edward Markey of Massachusetts.

The 1,428-page Waxman-Markey bill would establish a "cap and trade" program to

regulate U.S. greenhouse gas emissions and would create or expand myriad federal

programs designed to transform an economy based on energy produced almost

entirely by burning fossil fuels—oil, coal, and natural gas—to one based almost

entirely on alternative energy sources. To accomplish the latter goal, the bill

proposes to spend about $200 billion to promote various forms of "clean energy" and

energy efficiency while establishing new federal climate change standards affecting

many aspects of everyday life, such as local building codes, mortgages, and

homeowners insurance.

•U.S. Greenhouse Gas Emissions Would be Reduced to 17 Percent of 2005

Levels by 2050

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Reactions to Durban

• COP17 agrees a timetable for a

new global climate agreement

• The UN climate talks in South

Africa have been heralded a

success after a deal was struck

on measures to cut global

carbon emissions.

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Climate Change Summit:

A deal in Durban

Something came out of it. Which is

probably better than nothing

The Economist

Headlines from IEA World Energy

Outlook 2011: What’s up?

• Short-term uncertainty does little to alter the longer-term picture

• Steps in the right direction, but the door to 2°C is closing

• Rising transport demand and upstream costs reconfirm the end of

cheap oil

• Golden prospects for natural gas

• Renewables are pushed towards centre stage

• Treading water or full steam ahead for coal?

• Second thoughts on nuclear would have far-reaching consequences

• The world needs Russian energy, while Russia needs to use less

• Achieving energy for all will not cost the earth

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This course will address the intersection of

energy and climate policy

• Energy and climate issues are linked, and their fate intertwined in the public policy agenda

• We will examine policy instruments and perspectives related to managing energy use, supply, and the greenhouse gas (GHG) emissions, of which carbon dioxide (CO2) is main but not sole culprit

• We will touch more briefly on: – Other energy policy concerns: oil dependency, energy

resource availability, reliability, other environmental, social, and economic dimensions

– Mitigation strategies in agriculture and forestry

– Climate impacts, adaptation and geoengineering

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Take Gov. Gregoire’s Executive Order 07-02

It links the major energy and climate challenges

Energy and Climate Challenge Exec Order 07-02

Avoiding dangerous climate change Return GHG emissions to 1990

levels by 2020; 50% below 1990 by

2050…

Decreasing oil dependency, its

macroeconomic vulnerabilities and

geopolitical liabilities

Reduce expenditures on fuel

imported into the state 20% by 2020

Spurring innovation, economic

opportunity, and technology change

Create 25,000 clean energy sector

jobs by 2020 (compared with 8,400

jobs in 2004)

Enabling sustainable development

in the South (the developing world,

that is)…

(can’t do everything)

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Energy and Society: Past,

Present, Future

• Goals of energy policy

• Brief historical view on energy transitions

• Energy today, numbers and concepts – Energy use, resources, and technologies

• The times ahead

Energy Policy Goals

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Energy:

• Enabler of major social transformations

• Lifeblood of the industrial economy

• Prerequisite for poverty alleviation

• Linked to the major environmental,

social, and political stresses of our time

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Rather than crisis management

Converting to alternative fuels in response to the 1973 oil crisis,

Potlatch, Washington, Source: Wikipedia

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or silver bullet technological solutions • Not all work out as planned; this one

was going to be “too cheap to meter”

• Public concerns, cost overruns, $billions stranded in never-completed plants in 1980 and 90s, including the WPPS debacle here in WA state

Or, in our worst moments, both

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Energy policy must balance multiple

aims, such as: (Holdren, 2007)

ECONOMIC AIMS

• provide reliable fuel & electricity for basic needs & economic growth

• limit consumer costs of energy

• limit cost & vulnerability from imported oil

• help provide energy basis for economic growth elsewhere

ENVIRONMENTAL AIMS

• improve urban and regional air quality

• avoid nuclear-reactor accidents & waste-mgmt mishaps

• limit impacts of energy development on fragile ecosystems

• limit greenhouse gas contribution to climate change risks

NATIONAL SECURITY AIMS

• minimize dangers of conflict over oil & gas resources

• avoid spread of nuclear weapons from nuclear energy

• reduce vulnerability of energy systems to terrorist attack

• avoid energy blunders that perpetuate or create deprivation

History of Energy Transitions

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How did we get here?

A brief historical perspective

Source: Arnulf Grubler

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Drivers of Historical Energy

Transitions • Energy quality and

services provided (comfort, convenience, …impact?)

• Technological change

• Supply reliability and price volatility

• Not necessarily supply scarcity or policy initiative

• Often poorly represented in models/forecasts

Source: Arnulf Grubler

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What transitions lie ahead?

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Many technology transitions are

dismissed early on

• Especially by incumbent

interests, e.g.

– Buggy industry (vs. Model

T)

– Gas light industry (vs.

Edison’s light bulb)

• Seem inevitable only in

hindsight

• Others often oversold

– Hydrogen economy?

Can transitions be engineered?

• df

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Source: Rocky

Mountain Institute,

2011

Painting by numbers:

the language of energy and

climate analysis

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BP’s BAU

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BP Energy Outlook 2030 (BP, 2012)

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Large differences among

and within countries

In energy use and supply patterns due to resource

endowments and economic, natural (hot and cold

climates), and cultural circumstances.

What implications does this have for:

• Energy policy and trade?

• GHG emissions and reduction opportunities?

• International climate negotiations?

• Stakeholders and interests?

http://www.iea.org/textbase/stats/pdf_graphs/29TPESPI.pdf

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USA, China, World in 2005 (from Holdren, 2007)

USA China World

Population, millions 297 1306 6420

GDP/pers, 2005$ (ppp) 42000 7300 9150

Total energy supply, EJ 106 80 514

Oil consumption, EJ 42 15 175

Oil imports, Mb/d 12 3.4 50

Electricity generation, TWh 4200 2500 18200

Electricity share from coal 50% 80% 40%

C emitted in CO2, MtC 1700 1400 7500

ppp = at purchasing-power parity, EJ = exajoules, TWh = terawatt-hours, MtC = megatons of carbon in CO2. Total energy supply includes biomass fuels. Electricity generation is gross, not net.

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Energy units and terms:

• Units: so many different ways to say the same thing – Energy (stock): kcal, Joules (J, GJ, EJ) , BTUs, Quads, barrels, and barrels of oil

equivalent (BOE), TOE (tons oil equivalent), TCE …. Kilowatt-hours (kWh)

– Power (flow): Watts, kilowatts, kWh/yr, and aMW (a northwest specialty)

• Power prefixes from K - kilo (thousand or 103)) to E - exa (1018)

• Types of energy: – Primary energy (what you nature gives you)

– Final energy (what you buy and consume)

– Useful energy (what you can actually do with it)

– The difference among these is conversion (coal to electricity, crude oil to gasoline, gasoline to vehicle travel) and other losses

• Reserves – Proved, Economically Recoverable, etc

• Simple scale, unit, and term errors frequently create misperceptions and cloud debates (e.g. value of wind power, ANWR reserves, internet and electricity)

Don’t worry… you don’t need to know the details, just that they matter, and when and how to check them.

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Global energy flows from resource/reserves to primary energy

to conversions to final/delivered/end-use energy… by sector

Oil refining, gas processing, and other conversion losses not shown

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Navigating the Numbers, WRI, 2006 http://pdf.wri.org/navigating_numbers.pdf

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Understanding economic, societal,

and technological drivers

• Among the simplest, most important of analytical tools in energy/climate analysis

Dan Kammen, ER100/200 lecture (2007)

… * CO2 (t) = CO2 (t)

energy(J)

What does this tell us about past

and future drivers of energy use?

• And about levers for change? 41

BP Energy Outlook 2030 (BP, 2012)

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US energy, economy, and emissions

Kammen, 2007

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Why did this happen?

Kammen, 2007

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Decoupling

• Structural economic change

• Saturation of demands

• Energy efficiency investments

– (savings >$170 billion/yr since 1990)

• …factors that help explain why past projections were so off the mark

– Neglect of “end-use analysis”

• and provide caution about reliance of forecasts

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Competing visions 30 years ago ( Lovins)

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Lovins 30 years later…

• What did he get right, what did he get wrong?

• Is his (hard/soft) premise still relevant today?

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And why does it happen differently?

Do you prefer this scale….

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Or this one….

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The road ahead

• What are the major challenges for energy

policy?

– Scarcity?

– Distribution?

– Impacts?

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Are we running out of energy?

Out of oil? Not really…

IPCC, 2007

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Another, simpler way to look at it (Holdren, 2007)

Some mid-range estimates of world energy resources. Units are terawatt-

years (TWy). Total world energy use is ~15 TWy/year.

TWy

OIL & GAS, CONVENTIONAL 1,000

UNCONVENTIONAL OIL & GAS (excluding clathrates) 2,000

COAL 5,000

METHANE CLATHRATES 20,000

OIL SHALE 30,000

URANIUM in conventional reactors 2,000

...in breeder reactors 2,000,000

FUSION (if the technology succeeds) 250,000,000,000

RENEWABLE ENERGY (available energy per year)

sunlight on land 30,000

energy in the wind 2,000

energy captured by photosynthesis 120

Plenty of Coal

It has been estimated that there are over 847 billion tonnes of

proven coal reserves worldwide. This means that there is enough

coal to last us around 118 years at current rates of production.

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Coal production/consumption by

region

Supply does not mean

demand

Projected US power plant additions

for the next 25 years are 60%

natural gas.

What is driving this projection?

How good is it?

From EIA Annual Energy Outlook 2011

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Oil reserves-to-production (R/P)

ratios •Reserves-to-production (R/P) ratio

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What about all that “peak oil” talk?

• In 1969, King Hubbert developed an exponential equation (resulting in the bell shaped curves below) based on whale oil markets to predict the shape of future oil production

• Countries overstate reserves; companies overstate advanced technologies

But…

• Limited historical evidence for the curves (whale oil), especially for the symmetry condition (decline after peak)

• Ignores market response and substitution possibilities

• Doesn’t account for advanced technologies (enhanced recovery) or higher cost resources

Campbell and Lahererre, Scientific American March 1998

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What about all that “peak oil” talk?

• In 1969, King Hubbert developed an exponential equation (resulting in the bell shaped curves) based on whale oil markets

• Appears to predict the rise/plateau of oil production

• Countries tend to overstate reserves; companies overstate advanced technologies

But…

• Limited historical evidence for the curves (whale oil), especially for the symmetry condition (decline after peak)

• Ignores market response and substitution possibilities

• Doesn’t account for advanced technologies (enhanced recovery) or higher cost resources

Campbell and Lahererre, Scientific American March 1998

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We are running out of

cheap, conventional oil

• With uncertain implications for climate, environment, economy and conflict

• Canada’s oil sands contain more than all of Saudi Arabia; US shale deposits, even more

• China could produce up to 1 mbd/day of coal liquids by 2020 (current global oil production – 50 mbd/day)

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What might replace conventional oil?

Hydrocarbon alternatives (as

shown here)

OR

Biofuels (ethanol, biodiesel)

OR

Electricity

OR

Hydrogen?

Farrell and Brandt, 2006

Major oil trade movements •Major trade movements 2010 •Trade flows worldwide (million tonnes)

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Dan Kammen, ER100/200 lecture (2007)

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But please, no conspiracy theories

http://www.judicialwatch.org/IraqOilMap.pdf

Chart of crude oil prices since

1861 •Crude oil prices 1861 – 2010 •US dollar per barrel •World events

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When global leaders meet in Rio this June, a very

different energy issue will be center stage

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Major challenge: Meeting energy needs

for (sustainable) development

• High oil prices and balance of payment problems hit developing countries hardest

• 1.3 billion people do not have electricity and 2.7 billion people still rely on the traditional use of biomass for cooking

http://www.planetunderpressure2012.net/pdf/policy_energy.pdf

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As the International Energy Agency’s

(IEA) 2011 World Energy Outlook notes

• Four-fifths of the total energy-related CO2 emissions permissible by 2035 in the 450 Scenario are already “locked-in” by our existing capital stock

– The 450 SCENARIO” equals temperature rise of 2C

• “we are on an even more dangerous track, for a temperature increase of 6°C or more.”

• “If stringent new action is not forthcoming by 2017, the energy-related infrastructure then in place will generate all the CO2 emissions allowed in the 450 Scenario up to 2035, leaving no room for additional power plants, factories and other infrastructure unless they are zero-carbon…”

If we miss Two Degrees?

• “For increases in global average temperature exceeding

1.5-2.5°C and in concomitant atmospheric carbon

dioxide concentrations, there are projected to be major

changes in ecosystem structure and function, species’

ecological interactions, and species’ geographical

ranges, with predominantly negative consequences for

biodiversity, and ecosystem goods and services e.g.,

water and food supply.” (IPCC Working group II summary)

• Or, for the non-scientific, uh-oh.

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No one promised this would be easy

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Major Challenge: Lack of a “silver bullet”

“No known energy option is free of question marks” (Holdren, 2007)”

• conventional oil & gas… not enough resources?

• coal, tar sands, oil shale… not enough atmosphere?

• biomass… not enough land?

• wind & hydro… not enough good sites?

• photovoltaics… too expensive?

• nuclear fission… too unforgiving?

• nuclear fusion… too difficult?

• hydrogen… energy to make it? means to store it?

• end-use efficiency… not enough smart end- users?

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Many opportunities for innovation

• And yet public long-term investment, in particular research and development funding, has been stagnant for nearly 2 decades

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40

50

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2004 2005 2006

$ B

illi

on

s

John Doerr:

Sustainable technologies are the

next big thing ... the mother of all

markets.

Private investment in clean energy

Source: K.C. Golden

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Major challenge: Managing tensions among

the goals of energy policy (Holdren, 2007)

• Long-term investment vs. short-term cost concerns – Electricity rates to transit investments

• Energy security and long increased domestic fossil-fuel production (for security) vs. protection of fragile ecosystems

• Increased nuclear-energy production (for greenhouse-gas abatement) vs. reducing risks of nuclear accidents & terrorism

• Free markets vs. market failures – Public goods (like national security) & externalities (like pollution) are

largely unpriced

– “market failures” from abuse of monopoly power, lack of information, perverse incentives, short time horizons, etc.

– Role of subsidies

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Summary of Major Energy Policy

Challenges

• Meeting energy needs for (sustainable)

development

• Managing tensions among the competing

goals of energy policy

• Avoiding intolerable environmental costs,

in particularly, dangerous climate change – Twenty years after US ratified UN Framework

Convention on Climate Change (Rio), there is still no

requirement to reduce CO2 emissions.