Home > Economics - General, Environment > One-percenters underbid by McKinsey

One-percenters underbid by McKinsey

February 15th, 2008

I’ve put up quite a few posts supporting the conclusion of the Stern review that large cuts in C02 emissions could be achieved at very modest economic cost. Mostly, the analysis has focused on policies aimed at reducing developed country emissions by 30 per cent by 2020 and 60 per cent by 2050, and the typical conclusion is that the cost would be around 1 per cent of national income. For Australia, at current income levels that would be about $10 billion per year. Today’s news reports a study by McKinsey estimating a much smaller cost, around $3 billion per year. I haven’t seen the report yet but a quick Google found a similar study for the US.

I suspect the report is over-optimistic in the sense that it estimates the cost of doing the job in the most technically efficient fashion, whereas any feasible policy to induce adoption of the necessary measures will have higher costs. But it’s easy to show that the order of magnitude estimate must be approximately right. You can see this by looking at an absolute upper bound assuming we just replace all energy generation by expensive but feasible sources like solar (given the costs of generation, the extra cost required for large grids and pumped storage to smooth out supply variability is a rounding error here). That cost is no more than 10 per cent of income. Taking account of the obvious adjustment responses such reduced consumption in response to higher energy prices implies an even tighter bound, maybe 5 per cent of income.

The most important criticism to be made here is that it is increasingly evident that a 60 per cent reduction in emissions by 2050 may well not be enough. That suggests that, after exhausting the easy options to improve energy efficiency, substitute away from energy intensive activities and so on, there will be a residual 40 per cent of energy demand, almost entirely electricity, that has to be delivered with less than half the emissions of current best practice. Taking Australia’s current consumption of around 250 Twh/year, that’s 100 TwH at a cost of maybe $25 billion a year (=25c/Kwh) or 2.5 per cent of GDP.

One point that came up in the earlier thread linked above, and that I wanted to note, is that the problem of intermittent supplies of solar and wind, much stressed by some pessimists, will be greatly mitigated by a shift to electric vehicles/plug-in hybrids. 10 million or so car batteries would constitute a large storage capacity for Australia. At a minimum, assuming pricing reflected scarcity, recharging would be timed to match high availability of cheap electrons (motorists are ready-trained to hunt for cheap fuel, so no cultural change needed here, and the meters currently being rolled out are sophisticated enough for this kind of thing).

With slightly more advanced technology, but not requiring any fundamental breakthroughs, car batteries could recharge the grid in times of peak demand (some of my colleagues at the ARC Centre for Complex Systems have been looking at this).

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  1. wizofaus
    February 15th, 2008 at 09:52 | #1

    But has any economist taken account of the tendency of human innovation to speed up when the motivation is higher? That is, now that increasing efficiency and finding new energy sources are “interesting problems” with significant rewards attached to them, businesses will become more innovative than they would have been otherwise. And now that there are new challenging problems to solve, employees are likely to be motivated to work more productively.

    Others have pointed out at least one other economic benefit of “cleantech” type jobs: they are not easily off-shoreable.

    If GDP growth is held back by anything in the coming decades, I don’t see it being the attempt to de-carbonise the economy.

  2. February 15th, 2008 at 10:14 | #2

    The first 30-40% of “low hanging fruit” will actually be pretty cheap and achieved mainly through energy efficiency. Its the last 30-40% that’s going to be expensive. Very expensive.

    The most important criticism to be made here is that it is increasingly evident that a 60 per cent reduction in emissions by 2050 may well not be enough.

    Good to see you coming around John!

    Of course, it should be noted that our leaders show absolutely no sign of taking 60% reductions seriously, let alone 80-90%.

    We live in a country where huge imported SUVs get a tax break, the FBT encourages you to drive further, state governments subsidise petrol (Queensland of course!) and we can fly between capital cities for less than $100. If we can’t fix these small things, what chance 90% reduction by mid-century?

    Buckleys to none.

  3. Ian Gould
    February 15th, 2008 at 10:21 | #3

    “there will be a residual 40 per cent of energy demand, almost entirely electricity,”

    There at least three extremely intractable areas of emissions that are not in the energy sector: steel production, cement production and air transport.

    Of those three, steel production is probably the easiest to decarbonise – there are already prototype plants working using thermal lance technology that require little or no coal.

    Cement and air transport are more problematic.

    If we accept that the long-term objective for the developed countries has to be a 90%+ reduction in emissions, then we may have to settle for a lower level or reductions in those three areas and seek to virtually eliminate emissions from the energy and surface transport sectors.

  4. wizofaus
    February 15th, 2008 at 10:22 | #4

    We won’t have a 90% reduction by mid-century.

    But so long as we can maintain the capacity for big technological solutions (including geo-engineering), we’ll use them, and they’ll likely work well enough to keep at least the wealthy countries of the world doing OK.
    Given the current BRIC boom, that should actually mean most of the world’s population.
    It’s Africa I don’t have too much hope for.

    It’s either that or the global economy will completely collapse, and emissions levels will plummet anyway.

    Either way, we’re not likely to cook the planet irreparably.

  5. observa
    February 15th, 2008 at 10:29 | #5

    Relax everybody the technology is upon us http://www.news.com.au/adelaidenow/story/0,22606,23216816-2682,00.html?from=public_rss
    44c/kwhr buyback when I pay between 7c off-peak and 22c peak now,(about 16c average) coupled with up to $10k Fed govt subsidy and REC credits and and I’m ringing up the 10% after tax, risk free returners right now. There was going to be a sunset clause in 2013, but thank God for the Greens and their 20 years amendment. I’m going into the power generation business pronto. Struggletown are going to be positively Green with envy, but then you know how it is guys. We’ve all gotta make sacrifices for the planet and those State Cabinet CO2 offsets.

  6. O6
    February 15th, 2008 at 11:14 | #6

    Has anyone really done the sums on the SA govt’s new new law? I don’t think the new prices will make our solar panels (installed in 2002 with approx. 20% govt capital subsidy) profitable.
    We need the new technologies – e.g. dye photovoltaics e.g. http://www.dyesol.com – to drive steep declines in capital cost.

  7. February 15th, 2008 at 11:53 | #7

    There at least three extremely intractable areas of emissions that are not in the energy sector: steel production, cement production and air transport.

    I believe there are alternatives to cement such as
    Eco-cement

    Energy Requirements
    Ordinary Portland cement requires a kiln temperature of around 1450 Degrees C. The reactive magnesia in Eco-Cement requires a lower kiln temperature of 750 Degrees C[1], which lowers the energy requirements, and hence the use of fossil fuels and emission of CO2.

    CO2 Sequestration
    Eco-Cement sets and hardens by sequestering CO2 from the atmosphere and is recyclable.The rate of absorption of CO2 varies with the degree of porosity and the amount of MgO. Carbonation occurs quickly at first and more slowly towards completion. A typical Eco-Cement concrete block would be expected to fully carbonate within a year.

    Sounds too good to be true. Lets hope they can deliver.

    Agreed on air transport. There will be some efficiency gains over coming decades (in the order of 20-50%) but this will be more than offset by rapid growth in air travel.

    To quote Monbiot again:

    On Wednesday the secretary of state for communities launched a bold plan to make new homes more energy efficient. She claims it will save 7 million tonnes of carbon(2). On Thursday Douglas Alexander, the transport secretary, announced that he would allow airports to keep growing: by 2030 the number of passengers will increase from 228 million to 465 million(3). As a result, according to a report commissioned by the department for environment, carbon emissions will rise by between 22 and 36 million tonnes(4). So much for joined-up government.

    None of these calculations takes into account the other greenhouse gases aircraft produce. According to the Intergovernmental Panel on Climate Change, these create a global warming effect 2.7 times as great as the carbon dioxide alone(9). Nor do they recognise the fact that 70% of people flying out of the United Kingdom live in this country: all the estimates give the UK a 50% share of the flights landing or taking off here, rather than 70%(8). Throw these numbers into the equation, and you discover that aviation will account for between 91% and 258% of all the greenhouse gases the United Kingdom will be permitted, under the new law, to produce in 2050.

    Hilarious! We have to stop pretending we can allow air travel to expand exponentially.

  8. wilful
    February 15th, 2008 at 12:05 | #8

    carbonsink, air travel for all is a very recent development, one that is not cemented into our cultures and expectations, one that can be manipulated out with some easy price signals. I reckon it’s more solvable than other problems.

    Sailing ships will be cool too.

  9. February 15th, 2008 at 12:21 | #9

    carbonsink, air travel for all is a very recent development, one that is not cemented into our cultures and expectations

    Cemented?! :)

    Which politician is going to tell the public that sub-$100 air travel is no more? It ain’t gonna happen. The only way air travel will be curtailed is by oil prices going through the roof (which is entirely possible).

    I can’t see any government deliberately slowing development of new airport capacity, can you? That would be like stopping new road construction. Hugely unpopular.

    I can’t see any government whacking on a hefty flight tax, just when we got used to flying to the Gold Coast on Jetstar for $49. Can you?

    Oh BTW, according to Monbiot emissions from international flights aren’t counted in either country’s emissions, they just conveniently disappear. Also, apparently there is no tax on aviation fuel for international flights.

  10. wilful
    February 15th, 2008 at 12:58 | #10

    Politicians wont have to tell the public anything, prices will simply go up. The prices will rise with the reduced oil supply, and as part of a more comprehensive carbon tax. The planned airport expansions will be shelved, because the planes wont be landing. Since they’re privatised, this isn’t very political, it’s the market.

  11. Salient Green
    February 15th, 2008 at 13:19 | #11

    Perhaps Richard Branson should be investing his environmental efforts and money into Very Fast Trains instead of/as well as ethanol fuels.

    http://www.greencarcongress.com/2008/02/alstom-unveils.html#more

  12. February 15th, 2008 at 13:39 | #12

    Yes, observa. We know. But I don’t think you can accuse our host – or, frankly, the Australian plogosphere – of ignoring this point.

    As far as air travel goes, there are alternatives in the longer term, including hydrogen.

  13. observa
    February 15th, 2008 at 13:56 | #13

    “Has anyone really done the sums on the SA govt’s new new law?”
    Sure have. A basic system producing 5.01Kwhr/day on average, costs between $4500-$6500 net installed after $8501 Govt subsidy. Now that’s 5.01 x 0.44 x 365 or $804.60 and that’s 17.9% return on $4500 or 12.4% on the dearer $6500 outlay. Kick up to a 10.5Kw/hr average system ($13950-$15950 nett outlay with $9050 subsidy) and that’s $1686.30 or 12.08% to 10.6% depending on cost. I pay about $1500/yr now for power (all electric) and if I produce/sell more than I consume/spend I will get it rebated back to me. The falling returns are due to the fixed $8000 Fed subsidy although REC credits rise with output offsetting that marginally. You should know your average output per day and times by 0.44 by 365 will give you your annual return on outlay. Federal tax clawback aside here, there’s no need to guess who’s subsiding that risk free after tax return as your power utility passes on their new cost of 44c/kwhr. That’s the new green leftism of subsidies and quantity controlling for you, rather than level playing field resource taxing. Enjoy!

  14. February 15th, 2008 at 14:18 | #14

    wilful, ships will have to sail. came across an article recently that pointed out that shipping has escaped emission controls, and it’s not negligible: more than air travel.

    i remember some numbers from a design project done in 1960: 8 knots, 800 hp. 16 knots,6000 hp. this was a small gp trader of 1000 tons, what a lot of co2 modern tankers must be emitting!

    mb globalization isn’t going to last…

  15. observa
    February 15th, 2008 at 14:20 | #15

    So many with the curse of the dismal science upon them Robert, yet ever faster down this dismal path. In one respect I guess it makes some sort of sense.

  16. Hermit
    February 15th, 2008 at 14:48 | #16

    SA’s feed-in solar tariff is curiously similar to Germany’s 45 eurocents per kwh. Last I heard they wanted to build 20 new coalfired power station. None of the energy savers mentioned appears capable of the dramatic CO2 cuts Pr Q cites. I haven’t seen the latest technofix estimates but here are some problems: clean coal -doesn’t work, nuclear -unpopular, carbon taxes -raise prices, biofuels and offsets -dubious claims, wind and solar -high capex and energy storage problem unsolved, efficiency -recessionary beyond shallow cuts, and so on.

    I think our present economy feasts when everything is within easy reach and starves when it gets a bit harder. I’ll think we’ll change GDP to some other measure of wellbeing to tell ourselves we’re keeping up with ‘aspirations’.

  17. February 15th, 2008 at 15:06 | #17

    As far as air travel goes, there are alternatives in the longer term, including hydrogen.

    As we’ve discussed before Robert, the real alternative to isn’t hydrogen (poor energy density, high pressure tank, expensive to produce, puts water vapour in upper atmosphere, leaks out of everything etc etc etc) but propellor planes, perhaps even piston-engined propellor planes. They’re not that slow (~900km/h), they’re more efficient, and they’ll run on conventional fuels including biofuels.

  18. February 15th, 2008 at 15:31 | #18

    mb globalization isn’t going to last…

    Oil increased from ~$10/bbl in the late 1990s to $100/bbl in 2008. If we get another 10-fold increase over the next 10 years, then we’re looking at $1,000/bbl oil around 2017-2018.

    Does globalisation work at one thousand dollars a barrel?

  19. February 15th, 2008 at 15:34 | #19

    Carbonsink: sure, those too.

    Not to mention capturing CO2 directly out of the atmosphere, which may become affordable.

  20. wizofaus
    February 15th, 2008 at 15:44 | #20

    carbonsink, the rise has been closer to linear than exponential though. On that basis, I would expect $200/bbl by 2018, although $300/bbl wouldn’t surprise me. $1000/bbl by 2018 would be truly devastating to world trade and all sorts of things. I would think actual supply shortages would occur before that sort of price.

  21. Peter Wood
    February 15th, 2008 at 15:45 | #21

    I haven’t read all of the McKinsey report yet, but my first impression is that it seems quite good. It should considerably reduce the uncertainty about climate change abatement costs. Their estimate of a gross cost of only $2.9 billion to the Australian economy of a 30% reduction in emissions by 2020 suggests that cost-benefit analysis would imply much greater reductions in emissions would be optimal. I say this because of the conclusions of David Spratt and Philip Sutton in “Climate Change Red” and Martin Weitzman in “On Modeling and Interpreting the Economics of Catastrophic Climate Change” which both suggest that the risks from low probability high cost impacts of climate change should dominate decision making.

    It is interesting that the McKinsey report estimates that about 80 Mt CO2-e of emissions abatement will have very significant gross benefits (negative costs). This is primarily from buildings where negative costs average around $125 per tonne CO2-e! This is very much due to market failures such as misaligned incentives between builders and tenants. It sounds like a case for urgent improved regulations of energy efficiency for building construction. It would be cheaper to build efficient buildings now than retrofit them later. Addressing these split incentives directly by splitting the costs of utilities between landlords and tenants would also be a good idea.

    It is interesting that the largest source of emissions abatement is in forestry sectors (109 Mt Co2-e) . This includes avoided deforestation, reforestation, afforestation, conservation tillage, forest management and biomass. I argued for significant emissions abatement in this area to be funded from auctioning permits in a submission to the Garnaut review. Many of these activities will have additional cobenefits in terms of reducing and reversing the habitat destruction that is driving much of the species loss in Australia.

    Forest management is an interesting one. At the moment this is not measured as part of Australia’s greenhouse gas accounts. This means that when an old growth forest is logged, if a forest will grow back then emissions are not measured. This suggests that options for including all lands in Australia’s greenhouse gas accounts should be considered.

  22. wizofaus
    February 15th, 2008 at 15:49 | #22

    Robert, capturing C02 directly out of the atmosphere is already affordable – it’s called photosynthesis! Are humans likely to perfect a better technology than that in the next 40 years? Natural selection has been working on it for billions of years.

  23. wizofaus
    February 15th, 2008 at 15:59 | #23

    Peter Wood – is it really a market failure that buildings are not energy efficient?
    I’s say the failure is with the renters – if renters actually discriminated based on running costs, that would provide the incentive for builders (and even existing owners) to supply more efficient buildings. So how can we motivate renters to discriminate based on running costs?
    Again, boosting the cost of energy seems like it should be sufficient – at least for longer-term renters. But an educational / informational campaign would probably help too, given that people naturally tend to discount ongoing future costs.
    For cases where buildings are only ever occupied by short-term renters (<12 months), it’s more problematic.

  24. conrad
    February 15th, 2008 at 16:55 | #24

    Carbonsink,

    I don’t know why you worry about the price of oil. There are lots of alternatives, like methane, or ones that we already know work now, like converting coal to oil, as appears the Chinese government knows also.

    http://english.peopledaily.com.cn/200706/22/eng20070622_386664.html

    Also, if you are worried about flights internal to Australia, then sticking in a fast-train seems much more sensible than propellar air-craft and the like, as any European can tell you (perhaps you need to travel more to see how other countries work).

  25. wizofaus
    February 15th, 2008 at 17:15 | #25

    conrad, there are lots of very good reasons to be concerned about the price of oil. And if CTL is the best alternative (it’s not economic yet, but may well be in the next decade), then we can expect to see CO2 levels go well above what any climate scientist would claim was “safe”.

    I’d love to see a VFT in Australia, but given the distance our cities are apart, it’s not all that useful to compare Australia to Europe. Further, they travel about 1/3rd the speed of planes, so you’re looking at 6 or 7 hours from Melbourne to Brisbane.

  26. ken nielsen
    February 15th, 2008 at 17:31 | #26

    To me, the fascinating thing about this debate is the split between those who say “It won’t hurt much” (Tim Flannery, for example) and those who say “You’ve all got to suffer” (Clive Hamilton).
    That doesn’t have much to do with the science but is mostly dependent on the inclinations of the writer.
    Clive H has been arguing that for a long time and has only recently joined the climate change issue.
    Which perhaps suggests that all of us are victims of our fundamental beliefs….

  27. conrad
    February 15th, 2008 at 18:07 | #27

    I think you don’t know about VFTs wizofaus. As an example, I take one where I work now and then between two cities in France that are about 800ks away (very similar to Melbourne to Sydney). It takes 3 hours, you go from centre of city to centre of city, and you can get on the train 2 minutes before it leaves (and buy the ticket 4 minutes before). This is _faster_ than all the hassles included in air-travel (getting to the airport, going through customs, waiting for the plane to be late again, etc). You can also take any old crap on it you want (I take a bike and sometimes laptop that I do work on whilst travelling). If there was such a service between Melbourne and Sydney (a trip I also do now an then), I would never take the plane, just like I never do in France for such a similar trip (and I imagine many people would be similar, especially given that it is also cheaper).

    As for the price of oil — I’m just not concerned about it reaching astronomical levels — since it won’t (or at least it won’t for long) as there are heaps of alternatives. Whether they happen to generate more CO2 or not is another argument (I personally think new technologies that don’t generate much CO2 will become much cheaper over time — as they already are doing. If they don’t I’m sure we’ll be putting up with a warmer world).

  28. ken nielsen
    February 15th, 2008 at 18:16 | #28

    “I think you don’t know about VFTs wizofau”

    The difference, conrad, is population density. Capital intensive systems like VFT or even metro systems need very dense populations, which we don’t have in Australia.
    Mass transit needs mass people. Otherwise you should use flexible low capital system like busses.

  29. conrad
    February 15th, 2008 at 19:15 | #29

    Ken,

    I agree with metro systems, but not longer train lines. The line I take, for example, is from Marseille (population 1.5 million — including Aix, Cassis etc.) to Paris (11 million — the RP). Thats 12.5 million versus Melbourne plus Sydney, which is 7.5 million. There are also now lots of other little TGV lines around the place, which seem to survive just fine (the TGV is profitable in France) despite low population densities in many of the regions. Thus I’m not sure what population density you really need to have a decent train service (its not like TGV is any different to a normal service, excluding that it goes at 300ks per hour and needs better tracks — if it can’t exist, I don’t see why normal passenger trains can). Busses are obviously out, because they go too slowly and people would still take the plane for long distances.

    Not that I’m demographer, but as for smaller lines, I imagine the best benefit would be Sydney-Newcastle-Wollongong and Melbourne-Geelong-Ballarat, which would allow better population distribution (it would be quicker to go from, say, Newcastle to Sydney’s centre than many of the suburban lines to Sydney’s centre). Surely lines like this would be hugely popular.

  30. February 15th, 2008 at 19:55 | #30

    Not to mention capturing CO2 directly out of the atmosphere, which may become affordable.

    What we really need is some kind of self-replicating, self-sufficient widget, that captures CO2 out of the atmosphere and stores it, using just sunlight and water. Oh yeah … we chopped those down.

    On that basis, I would expect $200/bbl by 2018, although $300/bbl wouldn’t surprise me.

    Short of a global recession, we’re gonna see $300/bbl by 2010. Remember, we haven’t hit peak yet. If we actually hit peak, and global oil production declines while China’s boom continues unabated, the sky’s the limit.

    There are lots of alternatives, like methane, or ones that we already know work now, like converting coal to oil…

    Really?! Can they convert coal to liquid fuel? Those Chinese really are clever. And those fast trains you speak of sound cool. I must go to another country one day. :)

    To me, the fascinating thing about this debate is the split between those who say “It won’t hurt much� (Tim Flannery, for example) and those who say “You’ve all got to suffer� (Clive Hamilton).

    I think the “It won’t hurt much� camp is still trying to win the political argument and convince government to do something (anything!) about climate change. The “You’ve all got to suffer� camp (e.g. Monbiot) has moved on from that and have actually looked at what is required to solve the problem.

  31. Hermit
    February 15th, 2008 at 20:08 | #31

    Ideas like transport corridors might achieve big energy cuts but they require a massive investment with popular support. The current mindset is that results can be achieved with minor and relatively painless incremental changes. Thus year after year we hang our hopes on the latest technical innovation then abandon it for the next fad oblivious to lack of progress; remember we were supposed to be driving hydrogen cars by now.

    That’s why I expect difficulties to keep piling up with associated finger pointing such as the demonization of China. If we were on track emissions would be declining and they are not.

  32. February 15th, 2008 at 20:11 | #32

    As for the price of oil — I’m just not concerned about it reaching astronomical levels — since it won’t (or at least it won’t for long) as there are heaps of alternatives.

    Oh I’m just fascinated to know what those “heaps” of alternatives are, and so would every oil company in the world. Please do tell. I’m all ears!

  33. Ikonoclast
    February 15th, 2008 at 22:15 | #33

    The shakeout will be massive I am sad to say. Humanity entered this century with 6 billion people. Humanity will exit this century in the range of zero to 1 billion persons. Extinction is a real possibility at one end of the scale and it’s hard to see enough energy sources, food sources and clean waters sources being left to support more than 1 billion people at the upper end.

  34. pablo
    February 15th, 2008 at 23:04 | #34

    It is just so depressing listening to Anthony Albanisi talk about the big wins in jobs and infrastructure investment with the expansion of air services to the US today. This from a former shadow environment minister!

  35. mugwump
    February 16th, 2008 at 06:07 | #35

    Humanity will exit this century in the range of zero to 1 billion persons.

    What a load of Malthusian tripe.

    I’ll wager $100,000 in 2008 USD that by the end of the century there are less people dying from starvation as do so today, and that the Earth’s population is at least 5B.

  36. conrad
    February 16th, 2008 at 06:34 | #36

    “Oh I’m just fascinated to know what those “heapsâ€? of alternatives are, and so would every oil company in the world”

    There’s lots of technologies. Like converting coal (essentially limitless) to liquid fuel, which incidentally isn’t new at all (it was done in WWII by the Germans, for example — I believe many places in the world are thinking about it again — not just China, where the process has begun. Try googling “Montana oil conversion” for example). There are also all the more expensive hydrocarbons to extract that we don’t generally do now but will become viable (e.g., tar sands), hydrocarbons that people will surely develop the technology to extact (methane). Similarly, it isn’t hard to imagine that things like wind, solar, nuclear etc. will get used more and more as the price goes up also for things where liquid fuel can be substituted.

  37. wizofaus
    February 16th, 2008 at 07:00 | #37

    carbonsink, $300/bbl by 2010 would pretty much guarantee a global recession.

    There’s only so high the price can go before it seriously starts affecting demand.

    And given out inefficiently and wastefully we use oil currently, there’s plenty of room for demand to be reduced.

  38. wizofaus
    February 16th, 2008 at 07:06 | #38

    pablo – it needn’t be depressing. You could reasonably make an argument that increased competition will lead to increased incentive to make flights more efficient and less polluting.

  39. February 16th, 2008 at 07:59 | #39

    conrad, CTL, GTL, oil sands and oil shale, are all feasible, but all have major problems:

    1. They don’t scale. All attempts to ramp up production have proved prohibitively expensive.

    2. The energy return is poor. Almost as much energy is required to extract and refine the resource as is returned by burning it.

    3. The carbon emissions per barrel of oil produced are much higher than for conventional crude.

    For more than 100 years crude oil has gushed out of the ground for free. That era is about to end. All alternatives in the furure will be much more expensive in terms of money, energy and environmental consequences.

  40. February 16th, 2008 at 08:18 | #40

    carbonsink, $300/bbl by 2010 would pretty much guarantee a global recession.

    That’s what they said about $50/bbl, $80/bbl and $100/bbl. We’re still waiting.

    IMO, very high oil prices will drive lots of bilateral deals between oil producing and consuming nations much like China is doing in Africa now. The Chinese will do whatever’s required to keep their economy going by securing an affordable oil supply … and we’ve already seen the lengths an oil-industry dominated US adminstration will go to!

    Its the third world where the demand destruction will occurs. Already has actually.

  41. Ikonoclast
    February 16th, 2008 at 09:07 | #41

    On energy issues I think Australia should take the autarky road. It would solve both our energy security and carbon footprint issues in the long run. We can’t clean up the world but we can clean up Australia.

    Why are we importing petrol and diesel and exporting natural gas? This is madness. We should phase out all energy exports except (where necessary) to the USA. There’s a bit real politik from the Ikonoclast. I don’t like the US but they will still be the least worst superpower in the next 50 years. China will go “cracker dog” when it realises there aint enough fossil energy in the world for it to complete its transition to superpower. Russia under Putin or anyone like him will remain as extremely nasty proposition.

    Energy and alliances will be survival now (if there is any survival at all.) We need to phase out oil imports except for some heavy fractions for lubrication and perhaps diesel until that is phased out. We need to convert our petrol fleet to methane and the mixes of slightly heavier gaseous fractions (CNG and LPG). We need to use all our gas resources ourselves and stop pi**ing them over to China.

    Then we need to phase out coal fired power stations in one generation (30 years). We need to phase out all thermal coal exports for power but perhaps allow coking coal exports for steel making. All uranium exports must be banned except if the US wants some uranium. (Another piece of real politik.)

    Large solar convection tower projects must be started NOW scaling up though 250m 500m, 750m and then 1000 m towers. These towers will easily provide all base load power needed within a genration (30 years). The physical footprints will be no bigger than power station and coal mine infrastructures and the carbon footprint will be much lower.

    Methane powered and electric powered vehicles can run via methane generation and re-charging. Methane generation from solar power and then combustion of that methane is essentially a closed loop with no carbon footprint other than the inbuilt carbon cost in the infrastructure and vehicle fleet manufacture.

    Hydrogen is a dud fuel so forget it. Low energy density and difficulty of handling and storage mean that it will never match methane for practical application.

    The physics of the above proposal will work. The EROI will be well in the positive range, carbon footprint will be low enough for Australia to be carbon neutral when combined with reafforestation.
    Because the physics will work the economics will work. Economics properly conceived is essentially a sub-branch of physics. It’s high time main stream economists beagan to realise that.

  42. Ian Gould
    February 16th, 2008 at 09:48 | #42

    “There’s lots of technologies. Like converting coal (essentially limitless) to liquid fuel,”

    Until recently I tended to accept this.

    Then I did some additional reading.

    Estimated coal reserves have many of the same data problems as estimated oil reserves. In particular, may of the stated reserved are inferred only and haven’t been updated for years.

    China, for example, hasn’t revised its coal reserves since the 1980′s – despite mining over a billion tons of the stuff per year.

    Additionally, demand is already growing at around 5% per year, add in a big one-off increase over a decade or so to allow for widespread use of coal to oil technology and then allow the higher total to continue to grow at circa 5% per year and our several hundred years worth of coal is gone in 30 or 40 years.

    Oh and let’s not forget that oil and natural gas are currently used as the feedstock for virtually all our plastics and synthetic compounds. AS those become scarcer and more expensive, coal is likely to substitute for them there as well.

  43. conrad
    February 16th, 2008 at 09:55 | #43

    “CTL, GTL, oil sands and oil shale, are all feasible, but all have major problems”

    I’m a technology optimist. As long as billions (and billions and billions) of dollars are at stake, I’m sure someone will find a solution to some of them (also, I don’t for example know why you think CTL is not scaleable — I’m sure we’ll see plants pop up all over the place in the next decade). I also don’t see any real problems to nuclear (excluding political). Go ask the French whether you think nuclear is a problem — which means energy from such plants could be substituted for heating oil etc. in many countries, hence reducing the demand on liquid fuels (let alone if people start using electricity for mass transit). I think the main thing that will stop these advances is if cleaner technologies become cheaper quickly, which I believe is already happening now, so you never know your luck.

  44. Ian Gould
    February 16th, 2008 at 09:59 | #44

    “IMO, very high oil prices will drive lots of bilateral deals between oil producing and consuming nations much like China is doing in Africa now. The Chinese will do whatever’s required to keep their economy going by securing an affordable oil supply … and we’ve already seen the lengths an oil-industry dominated US adminstration will go to!

    Its the third world where the demand destruction will occurs. Already has actually.”

    By now we’re all aware of the problems with grain-derived biofuels.

    How many people are aware that India is in the course of planting 40 million hectares of Jatropha bushes?

    http://en.wikipedia.org/wiki/Jatropha_oil

    http://en.wikipedia.org/wiki/Jatropha_incentives_in_India#Practices

    Large plots of waste land have been selected for Jatropha cultivation and will provide much needed employment to the rural poor of India.Businesses are also seeing the planting of Jatropha as a good business opportunity. The Government of India has identified 400,000 square kilometres (98 million acres) of land where Jatropha can be grown, hoping it will replace 20% of India’s diesel consumption by 2011.

    Implementation

    The former President of India, Dr. Abdul Kalam, is one of the strong advocaters of jatropha cultivation for production of bio-diesel. In his recent speech, the President said that out of the 60 million hectares (600,000 km²) of wasteland that is available in India over 30 million hectares (300,000 km²) are suitable for Jatropha cultivation. Once this plant is grown the plant has a useful lifespan of several decades. During its life, Jatropha requires very little water when compared to other cash crops.

    And on the same general theme of fuel substitution in India:

    http://news.bbc.co.uk/2/hi/science/nature/7243247.stm

    “An engineer has promised that within a year he will start selling a car in India that runs on compressed air, producing no emissions at all in towns.

    The OneCAT will be a five-seater with a glass fibre body, weighing just 350kg and could cost just over £2,500.

    The project is being backed by the Indian conglomerate, Tata for an undisclosed sum. It says the technology may also be used for power generation.

    The car will be driven by compressed air stored in carbon-fibre tanks.

    The tanks, built into the chassis, can be filled with air from a compressor in just three minutes – much quicker than a battery car.

    Alternatively, it can be plugged into the mains for four hours and an on-board compressor will do the job.

    For long journeys the compressed air driving the pistons can be boosted by a fuel burner which heats the air so it expands and increases the pressure on the pistons. The burner will use all kinds of liquid fuel.

    The designers say on long journeys the car will do the equivalent of 120mpg. In town, running on air, it will be cheaper than that.

    Analysts say the fact that the project has the backing of an internationally well known company such as Tata makes the idea much more marketable.”

    The air car is obviously not a solution to the greenhouse problem – in India it will likely derive its power from coal-generated electricity.

    But it does show that companies are responding to the high oil price by finding substitues.

  45. conrad
    February 16th, 2008 at 10:03 | #45

    Ian,

    On the flipside, I believe a number of huge resevoirs of coal have been found in the last decade (like the stuff off Norway’s coast), its just that the it is harder to get at — but I’m sure people will try and get it if neccesary. My hope would be that coal starts becoming replaced by other technologies. I might note that Chinese government certainly understands the problems of coal use, and whilst they aren’t doing lots about it quickly, they certainly try and promote it (Suntech, for example, was given start-up money by the Chinese government).

  46. Ian Gould
    February 16th, 2008 at 10:06 | #46

    Ikonoclst, I’d add two major points to your proposal.

    1. Sequester carbon dioxide from coal-fired plants, use water and solar energy to convert it to methane, burn the methane in gas-powered powerplants and then close the loop by reprocessing it back into methane.

    Solar generated methane gets around all the problems with the intermittency of solar and wind power and allows us to continue using existing gas-powered powerplants, reducing the financial land resource cost of the transition.

    2. Develop biofuels industries in the outback based on Jatropha and algae, This would probably allow us to go beyond autarky and become an energy exporter.

  47. Ikonoclast
    February 16th, 2008 at 12:17 | #47

    Re Comment #46 above. It may prove an interim useful solution in energy cost terms to use the CO2 from coal-to-syngas power plants IF coal-to-syngas power plants are developed. However, if the CO2 is processed to methane (by solar power) which is then combusted back to CO2 and water then I don’t see that any CO2 emissions are thereby avoided. Solar convection power is better used for direct electricity generation.

    Personally, I wouldn’t give the fossil fuel industry any oxygen at all. (That’s a pun of sorts.)

    Conversion of even indedible plant matter to biofuels (essentially photosynthesis of biofuels if we name the first and last steps) will never be an efficient use of land or water. Better to just whack up the towers.

    The biosphere is a closed system energy-wise except for incoming energy from the sun and heat energy from the earth’s core. Energy is also lost back to space by radiation.

    Clean and inexhaustible energy (until the end of the earth or sun) can only come from the core and from the sun. Geo (hot rocks) can supply some niche energy. The bulk will have to come from solar power either directly and solar power indirectly in the form of winds, tides and hydro. Winds, tides and the natural water cycle all being powered by solar energy of course.

  48. wizofaus
    February 16th, 2008 at 12:18 | #48

    carbonsink, there’s a very big difference between $10/yr rises in oil price (1998-2008), and $100/yr rises (2008-2010)

  49. February 16th, 2008 at 12:44 | #49

    carbonsink, there’s a very big difference between $10/yr rises in oil price (1998-2008), and $100/yr rises (2008-2010)

    Actually, most of the increase has happened since 2002 when the growth starts to look decidedly non-linear (chart).

    Oil started 2007 at $50/bbl and ended the year at $100/bbl (chart). If we heat peak by 2010 (and that’s still a big if) or some Katrina-like crisis hits the oil industry, then I believe $300/bbl by 2010 is entirely possible.

  50. February 16th, 2008 at 13:16 | #50

    Ian, I’ve read dozens of compressed air car stories in recent years. They never seem to go anywhere. To quote the BBC story you link to:

    Mr Negre has been promising for more than a decade to be on the verge of a breakthrough.

    Enough said.

    Jatropha is promising. Certainly infinitely preferable to palm oil plantations in SE Asia.

    I don’t for example know why you think CTL is not scaleable

    Conrad, I suggest you read about the problems scaling up production in the Alberta oil sands:

    http://en.wikipedia.org/wiki/Athabasca_Tar_Sands#Future_production
    Best estimates: Less than 5 mbpd (most of it bitumen) by 2020 when according to most forecasts world oil demand will be closer to 120 mbpd.

    http://en.wikipedia.org/wiki/Athabasca_Tar_Sands#Environmental_impacts
    Even if you ignore the horrendous energy requirements and greenhouse emissions, the real limiting factor seems to be the amount of water in the Athabasca River and a shortage of skilled labour.

    Most of the same issues that apply equally to coal-to-liquids. Its inherently expensive and energy intensive to refine a poor quality hydrocarbon (coal, oil sands, oil shale) into a good quality hydrocarbon (liquid fuel).

    I believe a number of huge resevoirs of coal have been found in the last decade

    Is that supposed to be good news? Just about the worst thing that could happen to humanity at the moment is to discover huge reserves of coal.

  51. February 16th, 2008 at 14:12 | #51

    On energy issues I think Australia should take the autarky road.

    Ikonoclast: Nice post. Dunno how it fits into the prevailing wisdom of free market economics and free trade. If we don’t sell LNG to China they might not sell us, well, everything. Lets face it, we don’t make anything anymore.

  52. wizofaus
    February 16th, 2008 at 14:50 | #52

    Further, if we don’t sell LNG to China and they want it anyway, they’ll come and get it themselves.

  53. Hermit
    February 16th, 2008 at 15:59 | #53

    I’m hearing the ghost of the late RFX Connor in the last few posts. http://www.adb.online.anu.edu.au/biogs/A130538b.htm

  54. Ian Gould
    February 16th, 2008 at 17:40 | #54

    Firstly, as an aside, it appears we may now actually have the technology to achieve carbon capture at a realistic cost:

    http://www.technologyreview.com/Energy/20295/page2/

    This has always been a key deficiency in the various capture and storage plans. Current carbon dioxide capture technology is extremely expensive in both financial and energy terms.

    Now a couple of specific responses to Ikonoclast and Carbonsink:

    47. “However, if the CO2 is processed to methane (by solar power) which is then combusted back to CO2 and water then I don’t see that any CO2 emissions are thereby avoided.”

    As I said in my first post on the subject, you capture the carbon dioxide and recycle it again.

    Until and unless we get something like the ultrabattery or the vanadium redox battery working on a large scale, methane is one of the most efficient ways of storing solar energy to provide baseload power. Additionally, long distance pipe transfer of methane has far lower transmission losses ( in terms of vagrant emissions and energy used to pump the gas)than electricity.

    Even if you convert the methane into liquid fuel for vehicles you’ve effectively doubled the amount of energy produced per unit of carbon dioxide produced.

    There’s also the issue I raised earlier of the need for feedstocks for plastics, drugs, detergents, paints, synthetic fibres etc. Sequestered carbon dioxide seems like the best bet for that.

    From 50: “Ian, I’ve read dozens of compressed air car stories in recent years. They never seem to go anywhere.”

    That was my reaction to and my initial impulse to to ignore the story as more of the same.

    But the difference is that now he has a multi-billion dollar corporation putting their reputation on the line that the vehicles will actually be in production inside a year.

  55. Ikonoclast
    February 16th, 2008 at 17:53 | #55

    The free market is a myth. Free trade is a myth. It’s only as free as the big players want it to be. It is only free in the manner their power allows it to be. It is only free where the flow is in their direction and very unfree where the flow is not in their direction. There are always terms, conditions and the countries with big armies who impose their version of “free trade”.

  56. conrad
    February 17th, 2008 at 07:42 | #56

    carbonsink: Whether these types of projects are good or bad for the enivornment is a different arguement. My bet is that the second of these comes a long second to having enough energy for most countries. Australia is a good current example — one of the richest countries on Earth, and the most we do is stand around telling each other how good we are by not using plastic bags (cf. did the Greeks care when they cut down all their forests to plant olive trees?). Its pretty clear what poor countries where small amounts of money actually mean something to the average person are going to do. I also think you are too pessimistic about human ingenuity. I imagine none of these problems are completely intractable (give me a billion dollars, for example, and there will be no skilled labor problem). To me its a race as to whether other technologies become even more tractable.

  57. February 17th, 2008 at 09:07 | #57

    Lets re-examine what ProfQ says is achievable at the cost of just 2.5% of GDP:

    1. Completely decarbonise electricity generation with wind and solar.
    2. Build the energy storage capacity required to smooth out supply variability inherent with most renewables.
    3. Replace our entire vehicle fleet with electric vehicles.
    4. Build a new refuelling infrastructure for EVs (hot swappable batteries or somesuch?)

    All by 2030! Anyone here buying that?

    Even if you believe that is technically feasible, is it politically possible when this kind of populist nonsense is what passes for energy policy today:
    Meet the man to fix petrol price problems

    Oh BTW, surely people would want to recharge their EVs at night when the sun doesn’t shine.

    Correction here: The target date I suggested was 2050, which makes a pretty big difference.

  58. February 17th, 2008 at 10:25 | #58

    I’d like to buy a complete switch to clean energy for 2.5% of GDP – and I’d like to think its possible.

    Of course, it depends on your assumptions about cost of building in energy storage and the cost of wind / solar etc in future.

    I’m less bullish about the V2G (using electric car batteries to provide distributed energy storage services to the grid) even though I’ve long been enthusiastic about the idea (as it’s a technologist’s wet dream).

    The problem isn’t so much that people are out during the day (if this mode of operation became widespread, presumably car parks would eventually be fitted out with the infrastructure to support it) but more that they don’t want their batteries drained (and thus limit the range of their vehicle if they decide to jump in the car), and (most importantly) current battery technology isn’t suited to the constant discharge / recharge required for vehicles to feed into the grid.

    That is actually one advantage of the air car (assuming it ever works as advertised, which I have my doubts about) as compressed air doesn’t have the same issue as batteries.

    In any case, I’m encouraged by the range of energy storage technologies being developed, even if V2G doesn’t end up working.

  59. Peter Wood
    February 17th, 2008 at 10:45 | #59

    carbonsink,

    2030 is 22 years away, 22 years is a long time, 22 years ago in 1986 personal computers were still in their infancy. Investing 2.5% of GDP per year would add up to something like $550 billion which could buy a lot of renewable energy generation. ProfQ’s estimate can be thought of as an upper limit for an approximate 60% reduction by 2030. I couldn’t find an estimate of the cost by 2030 in the McKinsey report for a 60% reduction in emissions by 2030 but they estimate a 30% reduction by 2020 will have a gross cost of $2.9 billion per year. It gets very speculative to try to estimate costs by 2030 of course but both the 30% 2020 reductions and the 60% 2030 reductions are estimated to occur at a carbon price of $65. Quiggin’s estimate does not consider emissions from forestry and land use or emissions reductions with negative costs such as improvements to buildings which it is why it is likely to be higher. Neither the McKinsey report or Quiggin’s estimate consider measures such as increasing cycling or public transport – McKinsey only considers measures that do not include lifestyle changes. If we stopped eating and exporting beef that would be a lifestyle change that would reduce emissions more than all of our emissions from transport at a very low cost.

    I can’t help finding it ironic that with these emission reductions we most likely would lose most of the Barrier Reef. It is estimated that the Barrier Reef is worth something like $6 billion per year in tourism benefits.

    While I think that it is technically possible to have these emission reductions at these sort of costs, I don’t know how politically likely it is. You are absolutely right that what passes for energy policy today is populist nonsense.

  60. wizofaus
    February 17th, 2008 at 12:06 | #60

    Peter, Australia could reduce its emissions to zero tomorrow and it wouldn’t make any direct difference to the state of the Barrier Reef.
    Our best bet is surely to prove to other nations that its not actually that hard or expensive to reduce emissions, and work closely with China to help it continue its rapid economic growth without a corresponding rise in emissions.

  61. Peter Wood
    February 17th, 2008 at 12:43 | #61

    I mainly brought up the Barrier Reef example to illustrate how the investments in avoided climate change being considered are still less than the likely costs of climate change (with these mitigation measures).

    I agree that the main impact of greenhouse gas emission reductions in Australia will be its effect on other countries by providing a good example and technology spillovers. Both Cananda and the US have similar per-capita emission to Australia, so demonstrating to these countries in particular that it is possible to significantly reduce emissions at low cost is also likely to be important.

  62. Peter Wood
    February 17th, 2008 at 13:57 | #62

    I was able to find a link to the report in a link from a news article in The Australian.

    http://www.theaustralian.news.com.au/story/0,25197,23216638-11949,00.html (the article)

    http://www.theaustralian.news.com.au/files/greenhouse.pdf (the report)

    Their methodology is to estimate carbon abatement cost curves for 2020 and 2030, and then estimate the cost and carbon price required for a 30% 2020 reduction and a 60% 2030 reduction. It would have been nice to examine a greater range of emission reduction scenarios (their methodology should allow this but they don’t do this). I would be interested in how much a 40% 2020 reduction may cost, or how Monbiot’s recommended 80=90% reductions by 2030 may be possible.

  63. February 17th, 2008 at 15:17 | #63

    2030 is 22 years away, 22 years is a long time, 22 years ago in 1986 personal computers were still in their infancy

    Sure, but the rate of technological advancement in the computer industry is almost unique. 22 years ago the typical car was more or less the same (e.g. Toyota Corolla, tranvese front wheel drive, 4 cylinder DOHC petrol engine, fuel consumption of ~8L/100km). In 22 years the electricity generation infrastructure has hardly changed (90% coal) and very little new public transport has been built in most Australian cities.

    The problem isn’t so much that people are out during the day (if this mode of operation became widespread, presumably car parks would eventually be fitted out with the infrastructure to support it)

    Sure but a lot of work needs to be done to make that happen. i.e. Some kind of ubiquitous smart power point that sorts of the billing. The reality is, cars spend most of their time in the owners garage at night, and that would be the ideal time to recharge. In many ways the charging cycle of EVs is much better suited to off-peak coal and nukes than renewables.

    The much-touted load balancing capability of V2G seems a little dubious also. There seems to be a mis-match between when an electric vehicle would be fully charged and peak electricity demand. For example, cars returning home from the evening commute would plug in and recharge at the same time as the evening peak in electricity demand.

  64. chrisl
    February 17th, 2008 at 18:00 | #64

    Carbonsink: Further to your petrol should be higher/lower post, The Victorian Government is spending huge amounts on running Greenhouse gas advertisements.To represent Co2 they have black balloons(which are probably worse for the environment)
    At the same time they have banned people from taking their bikes on trains
    Try and un mix that message.

  65. February 17th, 2008 at 18:54 | #65

    Carbonsink: Further to your petrol should be higher/lower post…

    I laughed out loud when I read about the new Ford Falcon that boasts a 0.1L/100km improvement in fuel efficiency. No doubt it will be praised to the heavens by politicians state and federal, and will be duly awarded COTY, just as the new Commodore was.

    Did no-one tell the moronic execs that run the local branches of Big Auto that large family cars will not survive in a post-peak, carbon-constrained world?

  66. conrad
    February 17th, 2008 at 19:52 | #66

    “Sure, but the rate of technological advancement in the computer industry is almost unique.”

    You’re far too pessimistic. 22 years ago, solar cells were basically rubbish. Now I can ring up and have someone stick them on my roof tommorow, all for a very reasonable price (and pay basically no electricity bills again). Similarly, in some places of the world, little wind generators start getting popular. 22 years ago, wind generators were things that reminded us of a cheesy stereotype of the Netherlands. 22 years ago, nuclear power was a disaster waiting to and happen (and it did — in 1986). Now the reactors are far safer. 22 years ago, trains went at most 100 kms per hour. Now they go 300. etc. 22 years is a long long time for some things.

  67. February 17th, 2008 at 21:13 | #67

    conrad:

    22 years ago solar PV was completey uncompetitive with coal, as it is today.
    22 years ago less than 0.5% of the world’s energy was supplied by solar PV, as it is today.
    22 years ago more than 80% of the world’s energy was supplied by fossil fuels, as it is today.
    22 years ago more nuclear power stations were being built than there are today (and I believe nukes have declined as proportion of total supply).

    Granted, wind has expanded in 22 years from an infinitesimally tiny proportion of world energy supply, to just disappearingly small.

    And you know what, the TGV has been in service since 1981, and the bullet train since 1964, with speeds of 210 km/h. Not that I’m holding my breath in expectation of a VFT between Brisbane-Melbourne-Sydney. They’ve been promising that for, oh, at least 22 years!

  68. Brian Bahnisch
    February 17th, 2008 at 23:43 | #68

    In the Climate Code Red report Spratt and Sutton suggest that we should shoot for 320ppm CO2e ASAP by whatever means are at our disposal. That means that China and India should immediately plan to phase out the coal-fired power stations they built last week.

    For Australia they estimate that 3-4% of GDP invested in renewables and energy efficiency should achieve the following:

    allow us to close every coal-fired electricity generator, transform our rail and
    transport system and key industries, and provide a just transition for those economically displaced by the changes.

    It doesn’t sound undoable.

    Peter Wood has been suggesting we need to consider land use and forestry. I totally agree. If we look at the 2006 emissions chart fossil fuels emissions account for only a bit over 60% of the total. Land use change (mostly deforestation) and agriculture together account for 31.7% of emissions.

    On the other thread I suggested that emissions might have to come down to 9.9Gt of CO2e. This is about a 77% reduction world-wide.

    The land use component at 18.2% net has to be turned into a minus figure. Agriculture at 13.5% is a worry because only a slither involves energy use. If we can’t do anything about agriculture then it will comprise over half the allowable emissions.

    In Australia on 2005 figures we have a problem. Land use (6%) and agriculture (15.7%) comprise 21.7% of emissions. Cuts of 80 to 90%, or even 95% if world equity in per capita terms is mandated, will mean that we will have to make severe cuts in agriculture.

    The answer to this in part, I think, is that if we are supplying food to the rest of the world some allowance must be made for this. Either that or we take Ikonoclast’s approach and they go hungry.

  69. Ian Gould
    February 18th, 2008 at 00:04 | #69

    To come at John’s 2.5% per annum figure from the other end.

    Assume current GDP of $700 billion.

    Assume growth per annum of only 1% per year from now to 2030.

    2.5% per annum over than period sums to $514 billion dollars.

    Over that period virtually our entire vehicle fleet will need to be replaced regardless of greenhouse emissions.

    Assuming population growth of 2% per year, we’ll have a population of circa 30 million by 2030. Assume 1 car for every two people and you’re talking 15,000,000 vehicles.

    Let’s ignore the health benefits from lower pollution and the savings on fuel costs.

    Shifting to plug-in hybrid vehicles, using current technology, would cost around $10,000 per vehicle.

    Plug-in hybrids would reduce fuel use by enough that we could meet residual demand from locally-produced biofuels such as ethanol.

    $10,000 per vehicle by 15 million vehicles is $150 billion.

    That leaves us $350 billion to decarbonise the power sector.

    Similar principles apply as for the transport sector, virtually our entire generating capacity will need to be replaced over the next 28 years regardless of greenhouse. So that $350 billion is the incremental cost of solar wind etc as compared to coal.

    That’s hell of a lot of solar cells even if we assume no price reductions.

  70. Ian Gould
    February 18th, 2008 at 00:08 | #70

    The “28 years” figure in the last para should be 22 of course.

    I used the correct figure in my calculations.

  71. February 18th, 2008 at 07:52 | #71

    Over that period virtually our entire vehicle fleet will need to be replaced regardless of greenhouse emissions.

    Meanwhile back in the real world both Ford and Holden have just released big heavy family cars with 10 year model cycles. So we know that for at least the next 10 years two of the biggest car manufacturers will be flogging cars that will do absolutely nothing to reduce our greenhouse emissions or dependence on imported oil.

    Shifting to plug-in hybrid vehicles, using current technology, would cost around $10,000 per vehicle.

    Have you seen the price tag on a Prius?! You don’t get much change out of $50K. When fuel prices hit $2, $3 and $4/litre the masses won’t be rushing out to buy $50K hybrids, they’ll be buying little diesels like the <Hyundai i30 CRDi. Just $21,490 and 4.7L/100km.

  72. wizofaus
    February 18th, 2008 at 08:08 | #72

    There’s no reason to assume current prices for the Prius are reflective of what hybrid vehicles will cost once the benefits of economies of scale kick in, and cheaper battery technologies are adopted. But I agree, in the mean time, smaller diesels are a better bet.

    Ford and GM (Holden) seem pretty much determined to “drive” themselves out of business. They won’t be manufacturing cars here in 10 years’ time.

  73. February 18th, 2008 at 09:17 | #73

    Let’s ignore the … savings on fuel costs

    I’ll certainly be ignoring that, unless you believe efficiency gains can outpace the rising cost of oil. In nominal terms oil is up 10-fold in 10 years, while average fuel economy in some countries (e.g. the U.S.) has actually declined.

    That’s hell of a lot of solar cells even if we assume no price reductions.

    I’ll also ignore that, because the price-per-watt for solar PV has been trending upwards over the past four years (source)

    virtually our entire generating capacity will need to be replaced over the next 28 years regardless of greenhouse.

    And back in the real world, that Costa idiot will probably approve a new coal-fired power station this year.

    I’m sorry, I’d love to believe all this 2.5% stuff, and that everything will turn out hunky dory, but I see no evidence to support that. Show me one measure that been heading in the right direction over the past 22 years, or indeed since Kyoto was signed, just one! Global CO2 emissions up, oil consumption up, coal consumption up, proportion of energy supplied by fossil fuels static, average fuel economy static, tropical forests declining etc etc etc.

  74. jquiggin
    February 18th, 2008 at 09:41 | #74

    Carbonsink, I think the only real good news at this stage comes from Europe, which is the only place that has made any serious effort on Kyoto. The evidence there suggests that, even after the once-off benefits available in the 1990s are taken into account, significant reductions in emissions can be achieved at costs to small to relevant relative to GDP.

    What I find unhelpful about your approach to the debate is that you continuously conflate what could happen, given appropriate policy, with what will happen, assuming wrong policies. The result is, as far as I can see, to give support to those advocating wrong policies.

  75. wizofaus
    February 18th, 2008 at 10:35 | #75

    John, to what extent though has Europe been able to achieve that by offshoring dirty manufacturing?
    And how realistic is a similar plan for Australia when we are so dependent on exporting energy-intensive resources, and not in a position to adopt nuclear power any time soon?

  76. wizofaus
    February 18th, 2008 at 10:38 | #76

    Oh, carbonsink, apparently tropical rainforests might not be declining after all:

    http://www.carbonpositive.net/viewarticle.aspx?articleID=953

    If confirmed, it would be one of the rare pieces of globally good environmental news.

  77. February 18th, 2008 at 11:11 | #77

    What I find unhelpful about your approach to the debate is that you continuously conflate what could happen, given appropriate policy, with what will happen, assuming wrong policies. The result is, as far as I can see, to give support to those advocating wrong policies.

    I’m not supporting those advocating wrong policies, that’s why I make these comments here (and not some RWDB blog) because there are very few denialists here. Almost everyone here has good intentions, and hopefully we can have a frank and honest discussion about solutions, and not whether the problem exists.

    However, I feel very strongly there is a huge disconnect between the discussions we have here, and what happens in the real world. This problem desperately needs to be taken seriously, but our politicians are still giving it little more than lip service. I also see very little evidence in my day-to-day life that the general public is aware of the seriousness of the issue and making lifestyle changes accordingly.

    Carbonsink, I think the only real good news at this stage comes from Europe

    Yes there is some good news from Europe, but drilling down into the data you’ll notice that most of the reductions in emissions have come from agriculture, waste disposal and industrial processes (which wizofaus alludes to above). Emissions from the stationary energy sector are down only slightly, and transport emissions are growing strongly in most EU countries.

  78. conrad
    February 18th, 2008 at 11:24 | #78

    cabonsink,

    you really are too depressing. On the one hand you are going around telling everyone how prices are going go through the roof, and on the other hand you think that demand won’t abate if it will. There’s lots of good news out there, as far as I’m concerned (aside from Ford going bankrupt due to their own stupidity). For example, whilst you think that solar is still hopeless, lots of people think the opposite and are willing to put their money where there mouth is. For example, recent gains in solar are going to make it cheaper than coal in the near future. It seems so likely that stories like this:

    tp://www.wealthdaily.com/articles/grid+parity-renewables-coal/1013

    now appear in the popular press (there’s also an article in yahoo finance today telling people to buy this concept as a defensive play). Obviously Australia is not the right country to compare for this, but for lots of other countries (especially like China which already has massive pollution problems due to coal — so they have an additional reason to invest in alternative technologies), it seems pretty clear where the cheapest future lies.

  79. jquiggin
    February 18th, 2008 at 12:44 | #79

    As regards solar, there’s a sense in which the failure of costs to fall over the last few years reflects good news.

    Until a few years ago, solar cell producers sourced their silicon from offcuts from the semiconductor industry. That was very pure and quite cheap.

    Now demand has outrun that supply, and they are being forced to source their own silicon, which is producing a lot of innovations to lower costs (thin films, for example). In the long run, this should be good, but in the short term, it means higher prices.

  80. jquiggin
    February 18th, 2008 at 12:50 | #80

    Carbonsink, here’s my suggestion. In comments on a post about whether emissions could be reduced to a given level at low cost, under appropriate policies, please focus on the analysis supporting that claim and what you see as wrong with it.

    If you want to make the point that there’s no sign of the required urgency, you could do so on an appropriate post or in the regular open threads.

  81. February 18th, 2008 at 14:17 | #81

    please focus on the analysis supporting that claim and what you see as wrong with it.

    Fair enough.

    Getting back to Brian’s post (#68) and the fantastic chart he found.

    In Australia on 2005 figures we have a problem. Land use (6%) and agriculture (15.7%) comprise 21.7% of emissions. Cuts of 80 to 90%, or even 95% if world equity in per capita terms is mandated, will mean that we will have to make severe cuts in agriculture.

    Almost half the GHG emissions from argiculture are from livestock and manure. If we all gave up red meat we could significantly reduce agricultural emissions overnight, and would probably be a lot healthier.

    Land use change (~18% of global total) could be turned into a positive with reforestation, and a worldwide ban on tropical forest products, palm oil and the like.

    Cement manufacture (~4% of global total) could also be reduced if something like Eco Cement lives up to its promise.

  82. conrad
    February 18th, 2008 at 14:43 | #82

    You can add mini-wind generation to things that are going drop in price too. These are going to be especially good for the hundreds of millions of poor people that want access to energy but don’t necessarily need perfect supplies nor huge amounts of energy (the expensive mini-generators are also likely to become cheaper too — which would be great for cities like Melbourne where it is constantly windy). These, for example, seem great in terms of really cheap power:

    http://www.inhabitat.com/2007/03/21/micro-wind-turbines-small-size-big-impact/

  83. February 18th, 2008 at 16:58 | #83

    the expensive mini-generators are also likely to become cheaper too — which would be great for cities like Melbourne where it is constantly windy

    I know I’m not allowed to say anything negative but micro wind generation really doesn’t work in urban environments. The wind is too turbulent in built up areas. Wind turbines need to be placed away from buildings to work efficiently. And then there’s the noise issue…

  84. Ian Gould
    February 18th, 2008 at 21:58 | #84

    If people go to honda.com, they’ll see that the price difference between the hybrid and conventional versions of the Honda Civic in the US is around US$7500.

    Meanwhile plug-in conversion kits are available from US$5000.

    Given those two figures and the economies of scale from building the plug-in capacity in on all vehicles, I don’t think my figure of A$10,000 per vehicle is particularly unrealistic.

    As john, sort of said, the point here isn’t to argue about what will happen – it’s to point out what could happen if we get policy right.

  85. Ian Gould
    February 18th, 2008 at 22:19 | #85

    Here’s a possible solution to the cement problem:

    Serpentine, a common rock, is already used as aggregate in some types of concrete.

    Serpentine has an interesting characteristic – it reacts chemically with carbon dioxide from the air, breaking it down and absorbing the carbon.

    I wonder if it’d be possible to tweak the properties of serpentine concrete so it absorbed carbon dioxide over time, offsetting the carbon dioxide emissions from the cement production.

  86. February 19th, 2008 at 09:15 | #86

    Given those two figures and the economies of scale from building the plug-in capacity in on all vehicles, I don’t think my figure of A$10,000 per vehicle is particularly unrealistic

    Ian, in a high fuel price environment (created by the market or by policy) it is more likely diesels will dominate than hybrids, and the premium for a diesel engine (over petrol) is generally less than $3000. Look at Europe where they’ve been paying more than $2/L for years. 50% of new car sales are diesels, whereas hybrids represent less than 1%.

    I don’t know what the “right” policy is regarding diesels vs hybrids. Hybrids are obviously a good stepping stone to electric vehicles, but battery disposal is an issue. Equally diesels produce more particulates in the exhaust, but are cleaning up rapidly to meet strict U.S. standards.

    Ideally we’ll see diesel hybrids like the Peugeot 308 Hybrid HDi in mass production soon. This car is rated at 4.0L/100km and just 90g/km. The price premium over a petrol 308 is likely to be considerable though, and production won’t start until 2010.

    Serpentine has an interesting characteristic – it reacts chemically with carbon dioxide from the air, breaking it down and absorbing the carbon.

    That’s what Eco-cement does. It actually sequesters CO2. Brilliant! Makes me wonder why we’re not using it exclusively now.

  87. Ian Gould
    February 19th, 2008 at 10:02 | #87

    Carbonsink, I have to confess that when you mentioned ecocement earlier I confused it with ecocrete and didn’t bother to follow the links. (Ecocrete is polymer-based and reduces the initial emissions of carbon dioxide but doesn’t sequester it.)

    Ecocement sounds even better than serpentine cement because the magnesium oxide actually displaces some of the portland cement. (For people not following this in insane detail: making portland cement involves heating limestone to drive off the carbon dioxide.)

  88. February 19th, 2008 at 22:40 | #88

    Ian here’s a good read for you:
    Four Billion Cars in 2050?

    It explores a world in which we build Four Billion Plugin Hybrids.

  89. Peter Wood
    February 20th, 2008 at 22:31 | #89

    Ross Garnaut has given a speech on what Australia should do to promote international action on climate change. The text is at

    http://www.garnautreview.org.au/CA25734E0016A131/pages/public-forums-public-lectures

    It sounds like he will be releasing an interim report in the next few days.

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