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. February 16th, 2008 at 14:12 | #1

    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.

  2. wizofaus
    February 16th, 2008 at 14:50 | #2

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

  3. Hermit
    February 16th, 2008 at 15:59 | #3

    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

  4. Ian Gould
    February 16th, 2008 at 17:40 | #4

    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.

  5. Ikonoclast
    February 16th, 2008 at 17:53 | #5

    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”.

  6. conrad
    February 17th, 2008 at 07:42 | #6

    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.

  7. February 17th, 2008 at 09:07 | #7

    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.

  8. February 17th, 2008 at 10:25 | #8

    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.

  9. Peter Wood
    February 17th, 2008 at 10:45 | #9

    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.

  10. wizofaus
    February 17th, 2008 at 12:06 | #10

    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.

  11. Peter Wood
    February 17th, 2008 at 12:43 | #11

    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.

  12. Peter Wood
    February 17th, 2008 at 13:57 | #12

    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.

  13. February 17th, 2008 at 15:17 | #13

    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.

  14. chrisl
    February 17th, 2008 at 18:00 | #14

    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.

  15. February 17th, 2008 at 18:54 | #15

    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?

  16. conrad
    February 17th, 2008 at 19:52 | #16

    “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.

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

    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!

  18. Brian Bahnisch
    February 17th, 2008 at 23:43 | #18

    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.

  19. Ian Gould
    February 18th, 2008 at 00:04 | #19

    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.

  20. Ian Gould
    February 18th, 2008 at 00:08 | #20

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

    I used the correct figure in my calculations.

  21. February 18th, 2008 at 07:52 | #21

    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.

  22. wizofaus
    February 18th, 2008 at 08:08 | #22

    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.

  23. February 18th, 2008 at 09:17 | #23

    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.

  24. jquiggin
    February 18th, 2008 at 09:41 | #24

    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.

  25. wizofaus
    February 18th, 2008 at 10:35 | #25

    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?

  26. wizofaus
    February 18th, 2008 at 10:38 | #26

    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.

  27. February 18th, 2008 at 11:11 | #27

    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.

  28. conrad
    February 18th, 2008 at 11:24 | #28

    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.

  29. jquiggin
    February 18th, 2008 at 12:44 | #29

    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.

  30. jquiggin
    February 18th, 2008 at 12:50 | #30

    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.

  31. February 18th, 2008 at 14:17 | #31

    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.

  32. conrad
    February 18th, 2008 at 14:43 | #32

    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/

  33. February 18th, 2008 at 16:58 | #33

    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…

  34. Ian Gould
    February 18th, 2008 at 21:58 | #34

    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.

  35. Ian Gould
    February 18th, 2008 at 22:19 | #35

    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.

  36. February 19th, 2008 at 09:15 | #36

    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.

  37. Ian Gould
    February 19th, 2008 at 10:02 | #37

    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.)

  38. February 19th, 2008 at 22:40 | #38

    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.

  39. Peter Wood
    February 20th, 2008 at 22:31 | #39

    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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