A green bad deal

Timothy Taylor finds a paper by Michael Greenstone and Ishan Nath on the cost of renewable energy mandates for utilities.

this study finds that the cost of reducing carbon emissions through an RPS policy is more than $130 per ton of carbon abated and as much as $460 per ton of carbon abated—significantly higher than conventional estimates of the social and economic costs of carbon emissions. For example, the central estimate of the Social Cost of Carbon (SCC) tallied by the Obama Administration is approximately $50 per ton in today’s dollars.

It is plausible to me that when all of the general-equilibrium repercussions are in, the increase in cost leads to an overall increase in carbon emissions. For example, suppose that due to higher electricity costs in your home state in the U.S., you end up moving your plant to a place where the electricity comes from coal.

20 thoughts on “A green bad deal

  1. Every technology has extremely high early adopter costs, and when a society has bent its economic, foreign and military policies and resources around the prior energy modes for generations, the only way forward is for government policies to adopt policies that facilitate the new modes. We shouldn’t pretend that fossil fuels just emerged in the market without massive political intervention. They didn’t.

    It makes no sense to view policies in this phase through the lens of the final goals. We are just now approaching a competitive phase in this process.

    The choices of how to do that most efficiently would be important to explore, but the fact that any initial efforts were not competitive seems obvious.

    • I fear this style of argument devolves into, “Bad things were done to get X, which I disapprove of. Therefore, bad things must be done to get Y, which I do approve of.”

      • Bad things were done to get X, which I do approve of. Access to energy was too important to the human condition, despite the bad stuff we needed to do and the damage it causes. We had to get from there to here.

        Industrial level energy access would have been practically impossible without public accommodation.

        It now follows that I’d be willing to tolerate more bad things to move to Y, because the bad stuff we need to do is worth it to avoid the difference in damage to the human condition caused by X compared to Y.

        There has never been a path forward without public commitment, and there isn’t one now.

    • There is truth to this, but the important point is that RPS isn’t an efficient way to get where you want to go. Energy economists seem nearly unanimous that a carbon tax would be the most efficient way to do it. Unfortunately, that doesn’t seem to be politically possible, so I guess we’re stuck with less efficient approaches such as RPS and automobile fuel standards.

      The thing that bothers me most, though, is all the misinformation, disinformation, and even dishonesty on the part of the climate activists. This paper is making an important point that the costs of renewable energy are being systematically underestimated. Because of all this, I think most people vastly underestimate how difficult it will be to change our entire energy infrastructure. And it’s not at all clear if renewables are really the best way to go.

    • Fossil fuels did emerge in the market without massive political intervention.

      People were not told using horses is inhumane, so we need a program of phasing in the use of fossil fueled steam engines and automobiles as a substitute.

      Solar cells and windmills are beyond the early adopter costs so you can’t expect a 10 fold drop in costs. The majority of the cost in rooftop solar is now the cost installation not the cost in the solar cell.

  2. I think the quicker side-effect would be to lower the price of fossil fuels which would encourage developing countries to use more of them (and for western companies to further outsource any sort of energy-intensive production to such countries).

  3. I am dubious of this in the long run:

    1) Cost of early adapting and a lot of renewable energy are thirty year assets. My solar panels will continue producing in 2045. (I really wonder if they depreciating assets correctly here.)
    2) US emissions is still slightly declining.
    3) Coal usage in the US has fallen since 2005. And I like to know why coal plants continue to close in the US.

    Honestly, if libertarians really wanted to improve power distribution they really need to go after opening up markets to power distribution not power generation which are much more competitive. (And Texas has the best system and wind energy is up in a lot of places to point they are over-selling at night.)

    • Are you really this ignorant? Emissions in the US and the corresponding coal use have fallen because of the increase in natural gas usage for electrical generation.

      And, no, your solar panels will likely not be producing power in 2045- even the estimates of the most avid solar panel sellers is 25 years, and the more general estimate is 20. So, it is likely you will have to replace them before 2045.

      • And associated batteries and inverters, more like every 5 to 10 years.

        I would also worry about other weak-link issues, some of which can be addressed, but…failure of one panel leads to failure of mutiple, inability to keep up with necessary periodic maintenance, damage from inclement weather, etc.

        Nevertheless, I appreciate the value of decentralizing of power generating capabilities and its contribution to personal risk management; I expect others may not appreciate having to pay for my virtue (signalling).

  4. New Green Daals have three parts:
    1) Total amount
    2) A plan to melt a load of ice
    3) The list of Politically Correct Tax Exemptions.

    All the Dems seems to be using this formula.

  5. “Renewables” electric generation for utility power has caused large increases in costs* and prices** in every single industrialized country which has implemented them. There is no known way to avoid this, because large-scale renewables (solar, wind) are hopelessly unreliable due to weather (hydro and geothermal are short-term reliable but severely limited by geography). Worse, solar and wind produce unwanted temporal surpluses of power which must be disposed-of lest it destroy the distribution grid.***

    Because renewables are very unreliable, utilities must operate parallel conventional generation or else subject customers to blackouts. The first option is very costly (and interferes with reduction of CO2 emissions, if you care about that). The second option ditto, because the customers buy and run their own backup generators– more costly and smoky because small and inefficient.

    Renewables boosters often suggest energy storage schemes to buffer renewables’ chaotic output and deliver it smoothly to consumers’ steady demand. However, storage increases utility costs (and greenhouse emissions) even more than additional reliable generation.

    Electricity from renewables is a politically-imposed monumentally-bad idea. Costs go up dramatically, reliability falls, lifecycle greenhouse-gas emissions do NOT fall.

    *Really-large increases in costs: multiply by three or more.

    **Retail prices do not strictly track costs because of tax-based subsidies. But in the end, the costs get paid even if some of them plump up tax bills instead of utility bills.

    ***Commenter Collin says Texas has the best system because they have so much wind energy at night they are willing to pay folks elsewhere to take it off their hands. That shows Collin doesn’t understand the problem: excess wind power is not an asset, it is a liability. If Texas can’t get someone to absorb the surplus wind power, the distribution grid and utility-customers’ electrical equipment will be physically damaged by overvoltage and frequency excursions. Wind power is horrible for reliability. Much of the time it supplies too little or too much power and technical means to compensate cost a fortune. If it were not for idiotic mandates and tax subsidies, no one would build or operate utility-scale wind power.

    • My understanding on Texas wind energy is limited ability to sell wind energy outside of Texas. I have yet to understand outside of certain quirks of Texas utilities why wind can’t be sold to surrounding states and Mexico.

      • Duh! Because if Texas at night doesn’t have a use for excess wind power, neither does Northern Mexico or wherever. Wheeling the power through however many time zones to find some customer to utilize it is costly on its own, and the further you try to go the more risk you impose on the various grids and interties.

        If you put aside your blind worship of ‘renewables’ you could see that they are a problem, not a solution. Piling-on more and more hacks to try to counteract renewables’ problems just makes things worse.

    • The other reason I want power distribution companies to compete in states is because every power provider will advertise how much green renewable energy they use, or they are fastest growing renewable energy or they are investing the most in renewable energy. (Or whatever claim they can make.)

      • To the extent that ‘renewables’ means wind, how green do you think it is to kill all the birds in the USA or the world? Windmills murder billions of birds, which is cruel enough, but has all kinds of ecological side effects, like insect population explosions.

    • Can you give some idea why “technical means to compensate cost a fortune.” It seems part of the design that the turbine blades feather to stop rotation when power is not needed. It also seems relatively easy to predict winds within a turbine field, if nothing else by watching speeds at turbines on the edge and changing blade pitch on downwind turbines. Do you have something else in mind?

  6. With Indonesia threatening to pull out of the Paris Accord, Brazil already gone, China saying one thing and doing another, and the defeat of climate cultists in Australia, one might be tempted to think the world has gone sane.

    But, note that Taylor mentions that Greenstone has been, among a number of other professional affiliations, “Chief Economist for President Obama’s Council of Economic Advisers.” And earlier, back in 2016, Dick Morris, a campaign strategist for Bill Clinton, came out and said:

    “Renewable resources will be appropriate only for certain areas, very few areas, and with heavy subsidies so that it can compete with market prices — the subsidies too expensive, the areas too limited. And so the environmentalists are saying, ‘Well, if you can’t have perfection, then let’s not improve the current system, let’s not replace coal with natural gas. Let’s replace it with renewable resources that are not practical, are not available, not economical.’ So keep our eye on the ball: reducing carbon emissions where possible. But don’t destroy the whole American economy and make us non-competitive with global economies simply because of it. It is a major problem, but it is not only or even the only major problem we face.”

    There is division on the left with some wanting to be on the right side of history rather than go over the cliff with the green lemmings. Pereira, Marques, and Fuinhas, write in the 1 March 2019 volume of the journal Energy about what has been obvious, what with the growning numbers of homeless freezing to death in Germany, and the transformation of California into Sidewalk Camp Ground Housing Solutions R’Us, renewables are bad for people:

    “An empirical analysis using 2005-2015 data from 15 EU countries indicates that as more renewable energies (i.e., solar PV) are deployed, energy costs increase, household poverty risks rise, and incomes decline.”

    And of course that experience has been replicated elsewhere, most notably Australia, who has wasted the most money on renewables, and suffered the highest increases in power costs.

    But don’t be fooled. Momentum, fueled by the natural gas industry which profits from the increased demand for backup power and stabilizaton energy generation required by the installation of wind and solar, is at this point too great to overcome. The schools are indoctrinating the youngsters, the courts are packed with resistance judges who will bend the law seven ways to Sunday to advance the Democrat party agenda, and the death of scientific integrity generally, are greasing the skids. And the “green energy” solutions only reinforce the millenarianism: require corn ethanol in gas, wail about how climate change is increasing the cost of food in Central America; export entire US forests to Europe to burn in their “renewable” power stations, moan about land use changes accelerating warming; incentivize the conversion of virgin Indonesian rain forest to palm oil plantations; claim the loss of species demands capitalism be extirpated; cover tens of thousands of acres with black, heat absorbing solar panels, don’t stop for a minute to think about the heat island effect you are creating; and on and on and on.

    These idiots are going to crash civilization. The best advice for anyone now is to get a passport and whatever visas you need to get to a safe bolthole, or stock up on survival gear.

  7. On carbon taxes:
    “Unfortunately, that doesn’t seem to be politically possible”

    Reps generally don’t like taxes; a carbon tax is a new tax, thus a tax increase; carbon taxes are regressive; it’s very unlikely the carbon tax will be successful in “stopping climate change”.

    A) Best non-CO2 power is nuclear — more enviro-nuts are regretfully supporting nukes. There’s a waste issue with nukes, but it’s not globally threatening. If you oppose nukes, you’re not serious about net carbon reduction with realistic production (and many enviro-nuts are not serious).

    B) To make carbon tax more politically possible — add $100/month to all Soc Sec receivers, and an extra $100/month per child tax deduction, or the amount needed to be “revenue neutral”. 1) Estimate that amount. 2) PAY that amount first. 3) Collect the tax, afterward. 4) adjust the amount based on the tax collected.
    4b) as the carbon tax is increased, to reduce use, pay more out to keep revenue neutrality.
    (In theory, this is not efficient. In practice, it’s politically needed, or something like it.)

    • Better is a tax credit of $100 (or X) per child, up to a maximum of 100%. Those who don’t pay income taxes, don’t get tax credit benefit. They are helped by other gov’t programs.

  8. To be fair, the Social Cost of Carbon might be much greater than the estimate by the Obama administration. Alas, there isn’t any consensus about key parameters, such as ‘the discount rate’ and ‘the damage function’:

    “The Modeler Has Too Much Flexibility. Put simply, it is much too easy to use a model to generate, and thus seemingly validate, the results one wants. Take any one of the three IAMs that were used by the U.S. Interagency Working Group (2010, 2013) to estimate the SCC. With a judicious choice of parameter values (varying the discount rate is probably sufficient), these models will yield an SCC estimate as low as a few dollars per ton, as high as several hundred dollars per ton, or anything in between. Thus a modeler whose prior beliefs are that a stringent abatement policy is (or is not) needed, can choose a low (or high) discount rate or choose other inputs that will yield the desired results. If there were a clear consensus on the correct values of key parameters, this would not be much of a problem. But (putting it mildly) there is no such consensus.”—Robert S. Pindyck, “The Use and Misuse of Models for Climate Policy,” Review of Environmental Economics and Policy, 11:1 (Winter 2017) 100–114, p. 107.

    To remedy this problem, Shi-Ling Hsu proposes a prediction market for climate outcomes:
    http://lawreview.colorado.edu/wp-content/uploads/2013/11/11.-Hsu-FINAL_s.pdf

    Here is part of the abstract:
    “This Article proposes a way of introducing some organization and tractability in climate science, generating more widely credible evaluations of climate science, and imposing some discipline on the processing and interpretation of climate information. I propose a two-part policy instrument consisting of (1) a carbon tax that is indexed to a “basket” of climate outcomes, and (2) a cap-and-trade system of emissions permits that can be redeemed in the future in lieu of paying the carbon tax. The amount of the carbon tax in this proposal (per ton of CO2) would be set each year on the basis of some objective, non-manipulable climate indices, such as temperature and mean sea level, and also on the number of certain climate events, such as flood events or droughts, that occurred in the previous year (or some moving average of previous years). I refer to these indices and events as climate outcomes. In addition to a carbon tax rate being set each year, an auction would be held each year for tradable permits to emit a ton of carbon dioxide in separate, specific, future years.”—Shi-Ling Hsu, “A Prediction Market for Climate Outcomes,” University of Colorado Law Review 83 (2011) 179-256.

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