Castles and Henderson, again

People who’ve been following the debate about global warming closely will be aware that the economic modelling used in projections of future climate change by the IPCC has been severely criticised by former Australian Statistician Ian Castles and former OECD chief economist David Henderson. The critique emerged in a rather confused form, with a number of letters and opinion pieces before finally being published in contrarian social science journal Energy and Environment. Responses, including mine, have been similarly partial and sporadic.

I’ve finally prepared a full-scale response to the main claim made by Castles and Henderson, that the use of market exchange rates, rather than “Purchasing Power Parity” conversion factors for national currencies, biases estimates of future emissions upwards. My conclusion is that although PPP measures are preferable in comparisons of national welfare, the biases introduced by using market exchange rates are not important in modelling emissions and will, on average, cancel out. You can read it all here.

Update: Ian Castles has sent a response which I’ve posted here. It doesn’t seem to me that Ian responds to my argument except to deny that the MER/PPP issue was the main point of the critique.

I should also note that Holtsmark and Alfsen (2004), whose paper I’ve just found, present much the same argument as mine.

Further update In the comments discussion, a fair degree of common ground has been reached. Ian clarifies that he and Henderson object to MER conversion factors, but not because they bias projections of emissions, saying

I agree that these arguments (about the errors in GDP growth and emissions intensity reductions cancelling one another out) are sound as a first approximation.

Ian makes the valid point that use of MER conversion produces the incorrect conclusion that the energy-intensity of LDCs is about the same as prevailed in developed countries when their income was similar. This could lead to misleading policy inferences, for example with respect to mitigation policy and should be corrected.

I agree with Ian that it is better to use PPP measures consistently, and that the sooner the IPCC does this the better. On the other hand, I think it’s important to make the point that the widely-repeated claims that IPCC projections of emissions are fundamentally erroneous because of the choice of exchange rate are not supported by careful analysis.

92 thoughts on “Castles and Henderson, again

  1. Thank you for that JQ. I am not able to argue against Ian because I severely lack any sort of economic qualifications. This coming from another economist at least carries some weight. Ian uses his critique to bag the whole IPCC process and it is difficult to counter.

  2. So your point is that (ignoring relative prices) the estimated demand will look like (energy) E = a + b*GDP. Estimating GDP at market exchange rates for developing countries will underestimate it in developing countries so that increased growth will be needed in them to achieve convergence with GDP in developed countries. But the estimate of b will be biased upwards anyway if you regress E on an understated income variable. So the net effect of using downwardly-biased GDP figures is ambiguous. Is that it? Sounds right if so.

  3. Ian Castles is a statistician, not an economist which Henderson is.

    However when has any economic prediction ever been right?

  4. I read Castle’s response. Then I read it again. His usual game of distraction: quoting and citing numerous papers and referring to meetings and webs of exchanges between eminent persons without actually saying anything much at all. Castles alleges that you haven’t addressed the main arguments. What the hell are they, precisely? I’d like to know. If these agruments are so important, surely he is capable of summarising them himself, without subterfuge?

  5. John,

    Thank you for making your paper available.

    I don’t understand why PPP should be considered as a relevant conversion factor at all, given that the world economy does not consist of approximately 200 countries, each one the size of Monaco and adjacent to each other.

    There is an index problem, which you mentioned. But setting this aside, disaggregated PPP does not hold even approximately within some countries and this is not due only to non-tradeables (eg real estate) but due to transport costs being non-negligible because of the size of the countries. PPP implicitly assumes there is only 1 location in the sense of Debreu (1959). (Profs M. Kemp and A. Woodland have written on transport costs in a G.E. context at least 30 years ago).

    For example, petrol (and other) prices in outback Australia are much higher than in Sydney (the variation between outback and city prices exceeds the variation within cities). This is due to transport costs. Transport costs imply transport technologies and transport technologies use energy and are associated with emissions.

    I don’t understand why you consider PPP conversion more relevant for welfare questions. Firstly, given the aggregate nature of the model, any link to individuals’ welfare is in any case artificial – but I suppose this item is assumed to be treated separately at a country level. Second, with a stretch of imagination, I can see that PPP conversion might be more interesting for geographically smaller but densely populated countries than most countries in African, Australia, Canada, Argentina ………. But his thought is not consistent with any universally applicable welfare criterion I can think of.

  6. John Quiggin criticises me for saying the IPCC scenarios embody ‘fantastic assumptions’ and ‘astronomical’ projections of growth rates. Well, I’m in good company amongst some economics professors. John Reilly of the Massachusetts Institute of Technology labelled the Panel’s scenario exercise ‘a kind of insult to science’ and described the method as ‘lunacy’. According to Julian Morris of the University of Buckingham the scenarios are ‘bizarre fictioins’. Richard Tol, of Hamburg, Vrije and Carnegie Mellon Universities told the House of Lords Committee inquiry that the growth assumptions were ‘ludicrous’, and that Castles and Henderson were ‘very right’ to criticise them. And Warwick McKibbin of the Australian National University finds strong evidence that the wide variety of assumptions about ‘convergence’ commonly used in emissions projections ‘are not based on empirically observed phenomena’.

    One scenario puts the world’s average consumption of electricity per head in the year 2100 at over five times the rich country average in 1990. The same scenario has the consumption of oil per head increasing more than threefold over the century. But all of the scenarios, according to the IPCC, are ‘plausible’. These scenarios are in the same category as the notorious “Limits to Growth” fantasies of the report to the Club of Rome in 1971.

  7. But Ian I think John’s basic point about the irrelevance of the specific income valuation procedure is right. One way I can imagine that indicated degrees of emission growth are systematically exaggerated is if (i) income levels were understated by using market exchange rates and (ii) the income elasticities of energy demand were obtained in a way independent of the understated income levels. An example might be if income elasticities were obtained using PPP adjusted data or guessed-at elasticities perhaps loosely based on cross-sectional data are used in the simulation exercise.

    Alternatively forecast income growth in developed countries could be estimated too high (perhaps because supply constraints from energy price effects are ignored) so that an exaggerated implied extent of required convergence is suggested. The forecast levels of electricity use (5X current rich country levels) does sound high. And scenarios where world oil use trebles would seem to ignore supply-side issues. But it sounds to me like these are problems with regard to how the scenario is constructed in terms of the income levels that need to be attained. This argument would not destroy John’s point about the comparative irrelevance of using market exchange rates.

  8. I agree with Harry that scenarios with 5x electricity use and 3x oil use sound high and might encounter supply issues in the case of oil. But if I recall correctly, these are explicitly labelled as high-range projections under business as usual assumptions. Considered in this light, I don’t regard them as evidence of lunacy or absurdity. The required growth rates for developed countries are about 1.6 per cent and 1.1 per cent respectively.

    There are plenty of problems with the SRES scenarios and analysis, but the overheated rhetoric Ian uses and quotes doesn’t help anybody (except those aiming to stop any response to global warming, such as the Lavoisier Group).

  9. A couple of questions I’ve posed to Ian by email, and will also pose here

    (1) If the MER/PPP issue is not your main objection to the IPCC modeling, could you state your main objection in a couple of sentences?

    (2) As you must be aware, your criticism of the IPCC modelling has been used extensively by bodies such as the Lavoisier Group who have no interest in promoting improved modelling and whose only goal is to sabotage any action to mitigate global warming. Do you support substantive action to mitigate global warming, such as Kyoto or the McKibbin-Wilcoxen plan, and will you say so publicly?

  10. John, My critique of the economic and statistical work of the IPCC, mostly done in co-authorship with David Henderson, runs to well over 100 pages. Are you able to show me where and when I said that the MER/PPP issue is not my main objection to the IPCC modeling? Please quote my (our) exact words.

  11. Your email to me, linked in the post, begins

    “John, You’re quite mistaken in thinking that the ‘main claim’ of Castles and Henderson is that the use of market exchange rates (MER) rather than purchasing power parity (PPP) converters biases projections of future emissions upwards.”

  12. I’ll observe further that, if I have mistaken your main point, so have lots of others. For example, McKibbin et al summarise your critique as follows:

    “Castles and Henderson (2003a, 2003b) suggest that if PPP adjusted data were used in the SRES, the projected economic growth rates would be lower and so would the projections of emission levels. We now examine the magnitude of the consequences of the Castles and Henderson critique …”

    Google produces many similar examples.

  13. Thanks John. As the full sentence shows, my objection was to your statement that our ‘main claim’ related to the effect ON EMISSIONS PROJECTIONS of using MER rather than PPP, In fact, we have laid far more stress on the effect of using MER rather than PPP-based measures on estimates and projections of output and of energy and emissions intensities.

    The statement in the IPCC Special Report on emissions scenarios that ‘the level of energy intensities in developing countries today is generally comparable with the range of the now-industrialised countries when they had the same level of GDP’ was an extraordinary analytical error. As Angus Maddison’s submission to the Lords Committee shows, the now-industrialised countries had far higher energy intensities when their incomes were at the levels of today’s developing countries. The IPCC’s error in turn misled the World Bank, as I pointed out in one of my first letters to Dr. Pachauri. Such mistakes, which stem directly from the use of MER converters, have potentially serious policy consequences.

  14. Fair enough, Ian. I will correct the paper to clarify that you don’t regard this as your main point. However, as I’ve noted, it has been taken to be the main point by a great many who’ve cited it. Moreover, since the primary purpose of the SRES scenarios has been to generate projections of emissions, it’s obviously important. I’d be interested to know, therefore whether you have any substantive response to my analysis of this point.

    I agree with you that the conclusion that ‘the level of energy intensities in developing countries today is generally comparable with the range of the now-industrialised countries when they had the same level of GDP’ is incorrect if PPP measures are used, and that this error could lead to mistaken policy inferences.

    The obvious example of such an inference would arise if this claim was used to justify an assumption of no energy-saving technological progress in modelling. Are you aware if this has been done?

    Also, do you have any response to my second question ?

  15. John, This is in response to your posting at 9.04 am and Harry Clark’s at 8.51 am.

    Yes, the projections I quoted are labelled high, and it is of course the warming projections derived from these that are almost invariably quoted in the media as forecasts of the future actual temperature. So let’s look at the B1 scenario, which CSIRO described as ‘best case’ in a submission to a Senate Committee inquiry in 2004. When the B1 marker was tabled in the ‘open process’ phase of scenario development in 1998, world fossil CO2 emissions were projected at 9 GtC in 2050. The final report in 2000 put the level of emissions at mid-century at 11.7 GtC – up 30%. Compared with the preliminary projections made public a year or so earlier, emissions of developing regions were 49% higher and those for developed regions 6% lower.

    It’s not difficult to guess why this may have happened. According to Richard Tol, in evidence to the Lords Committee, the SRES Team were told ‘If you come up with scenarios in which the African countries, which are a fairly large bloc (in the UN) … do not grow fast enough, they will never approve our scenarios.’ John Reilly of MIT says that his lab refused a request from the IPCC to let their models be ‘tweaked’ to support the IPCC scenarios. As the B1 scenario projects a 15-fold increase in GDP per head in Sub-Saharan Africa in the first half of the 21st century (compared with a doubling or so in the whole of the 20th century), I think that it is fair to suspect that this scenario was ‘tweaked’. Is it not revealing that the IPCC and its acolytes have not seen any need to investigate John Reilly’s very serious allegation? (Incidentally, Dr. Pachauri gave evidence on the same day as Tol, and told Lord Robert Skidelsky that the criticism of the IPCC scenarios ‘only validates the methodology the IPCC used earlier. It does not require any deviation from it.’)

    Harry, this is no more than a guess, but is it not possible that the ‘tweaking’ process is made easier to get away with if the models incorporate GDP estimates showing developing countries having average incomes of one-third or one-quarter of what they really are? If PPP comparisons had been used for the base period, the reported levels of income per head after several decades of rapid growth would look unrealistically high.

    the reported GDP(MER) series do not represent real income/production changes, but rather nominal income/production changes. What is important here is that this concerns ALL THE SCENARIOS IN THE SRES, which therefore provides a HIGHLY MISLEADING PICTURE and is worthy of criticism�

  16. The last para. of my posting at 12.09 was left there by mistake. The words come from the paper by Holtsmark & Alfsen that you said presented much the same arguments as yours, John. And yes, in response to your 11.52 am posting, first para., I agree that these arguments (about the errors in GDP growth and emissions intensity reductions cancelling one another out) are sound as a first approximation. But as you see, H&A, after making the same arguments as you, conclude that the scenarios in the SRES provide ‘a highly misleading picture.’

    I don’t agree that the primary purpose of the SRES was to generate projections of emissions. If this was all the climate modellers wanted, the SRES database could have provided some average or representative profiles of emissions from the literature. The main purpose of the SRES was to present internally consistent projections of population, output, energy use, relative costs of energy technologies, land use, etc.: see SRES. section 1.3, especially the detailing of the specific needs of each of the three Working Groups. The failure of the IPCC to use the output concept prescribed by the UN Statistical Commission has led to great confusion and has rendered the scenarios largely useless for the purposes of WG II and WG III.

  17. Sirs, I tend to agree with the critique of PPP and MER as a forecasting tool for future emissions but perhaps for different reasons. The use of income measurement for forecasting physical emissions seems to be a case of grasping at straws in terms of a correlation to what may actually be occuring or likely to occur.

    I am curious to know why given that we know that oil and coal are finite resources, quite estimatable in terms of recoverable deposits (putting aside the marginal utility of recovery argument), thus we know how long we can continue to use these energy sources, that the physics of the energy consumption rates are not used instead? If we recover and use X amount of oil and mine and use Y amount of coal and Z for other energy emissions and we know that the product of the burning of X, Y and Z results in W amounts of emissions (plus or minus any efficiencies in the combustion process) then surely future emissions reduce to those amounts, therefore the production curve for energy deposits = the emission curve. The longer we do it the more we get, seems a simple irreducible fact, is the rate exponential? the historical data seems to suggest it is.

    I would take the hair splitting debate about income and GDP measures more seriously were they not based on income and money which appears to have an infinite exponential rate of increase and instead refocused on the physical reality of what it is we are actually doing with the stuff, we burn it for energy which we use in a wide variety of processes.

    The IPCC had to have something credible to make people pay attention but pandering to technical niceties on accounting statistics merely encourages the useless debate evident above.

  18. Mike, you say:

    I am curious to know why given that we know that oil and coal are finite resources, quite estimatable in terms of recoverable deposits (putting aside the marginal utility of recovery argument), thus we know how long we can continue to use these energy sources, that the physics of the energy consumption rates are not used instead?

    While your proposal sounds appealing, the problem with the idea is that our estimates of “recoverable deposits” (usually called “proved reserves”) is not constant as you assume. Take a look at the BP Statistical Review of World Energy June 2004, which can be found on the internet at: http://www.bp.com/statisticalreview2004

    Using your method, in 1988, the total proved oil reserves (as estimated in 1988) divided by the 1998 usage rate (including projected increases in the usage rate over time) give us about 35 years of projected oil usage.

    In 1994, using the 1994 usage rate and 1994 reserves and the same method we get … about 35 years of projected oil usage.

    And in 2004, using the 2004 usage rate and reserves and the same method we get … about 35 years of projected oil usage.

    Finally, as the Canadian tar sands example shows, we cannot blithely ignore the change in recoverable resources with respect to oil prices. As prices rise, so do proved reserves. The recent entry of the Canadian tar sands onto the market has increased the proved reserves by about 20%, a huge amount.

    While obviously this can’t continue forever, we don’t know how long it can continue. Thus, unfortunately, we can’t use your simplified method to calculate future usage or future CO2 emissions, because for the last 15 years or more, discoveries have kept pace with rising usage.

    Your method requires a fixed, known amount of recoverable deposits, and we simply don’t have that information. Thus, we are forced to choose between MER estimates and PPP estimates of future growth in order to estimate CO2 emissions.

    Regarding that choice, it is astounding to me that

    a) the IPCC continues to insist on using MER (according to Nature magazine, the IPCC now say they plan to change that, but it’s too late to update their scenarios for the FAR, so they’ll change next cycle … which, of course, means that the current scenarios are wrong and unusable), and that

    b) Prof. Quiggin supports this use of MER, in the face of opposition from economists, government economic bodies, and learned societies around the world.

    There is a special report on the costs of global warming in the latest Nature magazine (26 Jan ’06) which is extremely critical of both the IPCC’s, and by implication Prof. Quiggin’s, position. Worth reading before anyone goes bashing Ian Castles too much …

    My best to you all,

    w.

  19. To repeat myself, Willis, my view is that PPP estimates are generally preferable, but that as far as projected emissions are concerned, it doesn’t matter much which you use. On this point, Ian Castles, a few comments up says:

    “I agree that these arguments (about the errors in GDP growth and emissions intensity reductions cancelling one another out) are sound as a first approximation. ”

    though he goes on to repeat his argument that PPP estimates are misleading for other reasons.

  20. John, this is in response to your second question (posting at 9.19 am today). As the head of the Australian Bureau of Statistics for nearly nine years, I became accustomed to the notion that many (perhaps most) users were less interested in the reliability and accuracy of the statistics in which they were interested than in the utility of those statistics in supporting the causes that they favoured. It was not uncommon to find that particular interest groups (including government agencies) would prefer to have no data at all than to have information, however reliable, which might be used against their interests or preferences. So I’m generally disposed to ‘let the light shine’, and not to be swayed by considerations of how information may be used in deciding whether or not it should be published. I take the same position with respect to emissions scenarios and the economic analysis of climate change generally.

    To be frank, the IPCC has been a shock to me. The UNDP has responded positively to the criticisms I raised about the Human Development Report (mentioned in your paper) which were confirmed by a group of expert statisticians appointed by the UN Statistical Commission. I took for granted that, if a scientific body wanted to use statistical concepts such as GDP in its analyses, it would also want expert advice from national accounting statisticians and index number specialists. Instead, the reaction of the IPCC has been totally negative. Their approach has been focused on how to deal with the criticism, rather than on examining its possible validity. It is disturbing that no statisticians were selected for the IPCC writing teams for AR4: can there be any possible reason, other than a disinclination to have the IPCC’s scenarios opened to scrutiny?

    I’m also concerned that the ‘modeling community’ seems to believe that it should be the arbiter of good statistical practice (do the climate modelers try to second-guess the physicists?). I believe that there is much more to developing long term scenarios than modeling. At Amsterdam, David Henderson developed with others a proposal for a special meeting on “Long term economic scenarios in the context of the work of the IPCC’ and sent it to Dr. Pachauri. Possible speakers were named: Nicholas Crafts for reviewing and building on the past, Shankar Acharya on projecting growth in poor countries and rich, Paul David on the interactions of economic and technical change, me on the basis for international comparisons, William Nordhaus on the uses and limits of model-based scenarios and Angus Maddison on methods and ways of thinking about the future. Again this proposal got nowhere: I wonder why?

    But at least, for whatever reason, the Economic Affairs Committee of the House of Lords decided twelve months ago to review the economics of climate change – and, perhaps to their surprise, they found themselves querying the IPCC’s role and conduct, including some of the assumptions underlying both UK and international climate change policy. To quote from the submission that David Henderson and three other leading British economists have made to the Stern Committee: “It is a striking fact that a group of eminent, experienced and responsible persons, drawn from a national legislative body and spanning the political spectrum, with the help of an internationally recognised expert adviser and after taking and weighing expert evidence, has published a carefully considered and unanimous report … in which, among other things, the work and the role of the Panel are put in serious question.’

    I agree in general with the policy conclusion reached by the Lords Committee. I look forward to the findings of Sir Nicholas Stern and his team , which will become available later this year. Like David Henderson, I feel very strongly about the use of economics in administration. So far as the economics of climate change is concerned, I have hopes that the Stern review may yield insights that are not readily produced by an intergovernmental panel (and certainly not, on its recent track record, by the IPCC).

    You ask whether I ‘support substantive action to mitigate global warming, such as Kyoto or the McKibbin-Wilcoxen plan’. If by ‘Kyoto’ you mean the ‘targets and penalties’ approach embodied in the 1997 agreement, the answer is of course no. If you include in ‘substantive action to mitigate global warming’ the support and expansion of ‘research and development to increase the variety and cost-effectiveness of available mitigation options’ (the words are from Indur Goklany’s submission to the Lords Committee inquiry), the answer is yes.

    I wish that in Australia we could have our own review, along the lines of the Stern review, into the economics of climate change. Such a review does not fit easily into our present policy structures, but the same could have been said about the UK – and the review is up and running. The appropriate balance between mitigation and adaptation would clearly be a key issue before such an inquiry. The principles underlying the McKibbin-Wilcoxen Blueprint seem to me to be right, and I would like Warwick to have the opportunity to present specific proposals for examination by a task group of experts. In the end, expert examination can only go so far towards reaching a decision on such a plan, and the political decision should be based on the best possible information. On prospective emissions (which I recognise is only one consideration) why can’t Australia conduct its own scenarios exercise (I advocated this in 2002, before my first letter to Dr. Pachauri).

    John says rightly that most of the SRES projections have global emissions declining after 2050, but in many cases the levels remain much higher than at present. What is being assumed about technology, implicitly and explicitly, in such projections (I don’t know the answer to the question you raised about the possible effects of MER/PPP on this, John). Why do ALL the scenarios assume that methane concentration will continue to rise, when they’ve remained stable for the past five years (I know that there are reasons why they may rise again, but there are also reasons why they may fall. All of this should be being examined in a less highly charged atmosphere (no pun intended).

  21. John, thank you for your response. A few questions:

    1) Since according to you, and Castles and Henderson, and everyone else, PPP estimates are preferable, why do you suppose the IPCC is so opposed to using them? Why did they use them in the first place? And why have they (and you) been fighting so hard to discredit Castles idea that the IPCC should use PPP?

    2) You say that MER estimates contain errors that will “on average” cancel out. However, this clearly implies that in any particular case, they don’t cancel out. Since the IPCC SRES scenarios are used for particular as well as general cases, won’t this make anything but the most general IPCC results unreliable?

    In particular, the location of the emissions is critical for both worldwide and regional computer climate forecasts. In this case, even the overall situation may not “average out”, because the total numbers may be right but the locations are wrong.

    To take another example, suppose a bunch of your students take a test, and an error in your software adds or subtracts a random normal number of points from each score. The errors will, as in your analysis of MER, cancel out “on average” (although they will still contain an error of unknown size and sign). However, each score will be wrong, some of them wildly so.

    Now suppose that you want to see if students from a particular area do better or worse. In this case, the location matters (as with the scenarios) and so your results are useless. They present, as Holtsmark & Alfsen say of the SRES scenarios, a “highly misleading picture.”

    Perhaps you could explain why this “highly misleading picture” is a satisfactory result, particularly given the remaining error of unknown size and sign in even the most general of results?

    3) As you point out, Ian Castles says (above) that the MER based SRES estimates are misleading for other reasons, and he has detailed those reasons in his response. Could you address those issues?

    4) Finally, given the detailed, multi-page nature of Castles response to you, your claim that

    It doesn’t seem to me that Ian responds to my argument except to deny that the MER/PPP issue was the main point of the critique.

    glosses over a wide variety of other very germane points made by Castles and supported by citations from very reputable sources.

    In particular, you have not touched on any of the number of papers, both from Castles and a variety of other authors, which have discussed this issue. Since many of these papers have discussed, and often emphatically denied, points that you have made in your paper, this omission is a significant one. Do you plan to discuss those other studies and points?

    Many thanks,

    w.

  22. Willis, I agree that the level of reserves changes (but a change over ten years extending the life of known reserves by only the same amount, is to my mind not realy significant), however, there are two issues here.

    One, we have already burned through vast amounts of oil, coal and shale oil (dirty energy) this is evident by the increasing Co2 load in the biosphere thus it becomes an issue of the rate of increase of the Co2 load which is created by continuing to burn these fuels. (I am inclined to accept Hubberts bell curve on this, perhaps not the timeline).

    Second, I see no attempt by anybody barring those who signed up to the Kyoto agreement to reduce emissions, therefore by simplistic deduction I assume that what is left is what will be burned and therefore that is what is going to be added to the Co2 levels in the biosphere. The prime issue therefore is at what rate and what is the best measure for that rate, assuming the continued need to have most nations operating at a growth rate of 2-4% annualised increase in GDP and without price signals for alternative to substitute, then we will continue to burn the remaining reserves. It is that consumption of dirty energy that has to change and us with it. I am actually more concerned that market price signals are already being distorted by subsidies in many parts of the world and thus energy efficencies and alternative sources are being excluded.

  23. Mike, thanks for your response. My main point is this – we don’t know how much recoverable oil is in the ground. Simple as that.

    Like I say, our estimates of how much recoverable oil there is just went up by ~20% because of the entry of the Alberta tar sands into the equation. This is a huge jump. How much will they jump again when the use of oil shale becomes practical?

    A second missing link is the actual amount of reserves in the mideast. Most of the nations there have not done any further exploration since the big oil companies were kicked out fifty years ago … no need to, you see, they have plenty of oil for now. Will they find more if they look? Undoubtedly. How much? No one knows.

    A third question involves all of the areas in the US and other countries, like the whole coast of California, which are closed to exploration. How much oil is there, and will we ever burn it? We don’t know the answer to either question.

    Fourth, not all oil is burnt. A significant part of fossil fuels (oil, gas, coal, etc.) is feedstock for industry, making such things as plastics and fertilizers. Much of this will not ever go into the air as CO2.

    Finally, oil reserves are considered by most governments and nearly every oil company as a very closely guarded secret. We think we know how much oil Russia has, for example, but we don’t know, any more than we know how much reserves Mobil actually has.

    Thus, for better or worse, we’re left with PPP and a string of economic assumptions, and unfortunately, your simplified system won’t work.

    Regarding your second point, market signals are indeed distorted by subsidies. However, they work opposite to what you claim. The largest of these subsidies is that the consumption of oil is subsidizing most governments, through taxes. The amount of these taxes worldwide dwarfs any subsidies to the energy companies, and these tax-based government subsidies act in the direction you want, that of energy efficiency and the support of alternative energy through higher oil prices.

    My best to you,

    w.

  24. I would think that there is actually an incentive on the part of oil producing nations to minimise market knowledge about reserves. That way the price is likely to be higher.

    Of course as and when the price of oil (and other fossil fues) rises new reserves become viable. However so do alternate energy sources.

  25. Recoverable oil and coal reserves are based on the theory that these are derived from compressed remnants of the biosphere, “fossil fuels”.

    On this basis, from an inventory of the known sedimentary basins, finite reserves (not in JORC terms) are estimated. These estimation would for the basis of IPCC economic forecasting.

    However coal and oil reserve estimations become problematic when mantle derived, abiotic hydrocarbon production is introduced into the analysis.

    Opponents of the Russian-Ukrainain theory of Abiotic oil need initially to show how the Second Law of Thermodynamics has been repealed, in order to scientifically substantiate their assumption that oil is principally biogenic.

    If these basics are flawed, then any model built on those basics will also be flawed.

  26. Willis – “Like I say, our estimates of how much recoverable oil there is just went up by ~20% because of the entry of the Alberta tar sands into the equation. This is a huge jump. How much will they jump again when the use of oil shale becomes practical?”

    The size of the reserve is not the point. Only by using half of Canada’s entire natural gas output could the tar sands be ramped up by 2020 to 5 million barrels per day. As demand is likely to be 100 or 110 million barrels by then this is really a drop in the ocean. Really Tar Sands should be regarded more like coal as an oil resource that has to be mined.

    “A second missing link is the actual amount of reserves in the mideast. Most of the nations there have not done any further exploration since the big oil companies were kicked out fifty years ago … no need to, you see, they have plenty of oil for now. Will they find more if they look? Undoubtedly. How much? No one knows.”

    If anything the reserves will be overstated as most mideast countries artificially raised their reserves about 1985. Most oil bearing places have been extensively explored and the rate of discovery even with the most modern technology is dropping. Only half the oil used is replaced by new discoveries.

    “A third question involves all of the areas in the US and other countries, like the whole coast of California, which are closed to exploration. How much oil is there, and will we ever burn it? We don’t know the answer to either question.”

    Actually the US peaked in 1970 despite all the exploration.

  27. Louis – “Recoverable oil and coal reserves are based on the theory that these are derived from compressed remnants of the biosphere, “fossil fuelsâ€?.”

    For the last time even if this abiotic theory was nearly true do you think the oil wells will refill at 83 million barrels per day. If they did the entire globe would be swimming in oil.

    Also please explain why so much oil is found using the fossil theory of formation?

  28. Ender,

    Swimming in oil” I have no idea where you get the number of 83 million barrels per day. Not from I.

    Your last question is easy to answer – no one has been looking elsewhere, hence there is no data, and hence no theory.

  29. Louis – 83 million barrels per day is the world’s current consumption – are you claiming that oil wells could refill abiotically at this rate?

    Wildcat wells are drilled all the time in unlikely areas – the only ones that produce oil are usually in the areas where oil of fossil origin is likely to be found.

  30. Louis can you briefly explain what you’re on about so that a non-specialist can understand it?

    Curious if Ian will keep ignoring John’s question no. 2 above.

  31. W.E. says: “How much will they [recoverable oil] jump again when the use of oil shale becomes practical?” [added]

    ?practical? Do you mean technologically possible or financially profitable?

  32. Waratah,

    gladly but what is John’s q 2 above ?

    And what point of mine confuses you ?

    Regards
    Louis

  33. Louis I was asking Ian to address John’s q 2 above so you can ignore that.

    Louis you make a point that ‘coal and oil reserve estimations become problematic when mantle derived, abiotic hydrocarbon production is introduced into the analysis’ etc etc. Your point rests on highly technical theories that the average reader would just gloss past. Can you explain your point about mantle derived, abiotic hydrocarbon production (in simple language); and can you explain why the Second Law of Thermodynamics would need to be repealed for oil to be principally biogenic? What’s the problem with current estimates or assumptions?

  34. Waratah, You say that I’m continuing to ignore John’s ‘question no. 2’ above. I responded to John’s ‘second question’ in my posting at 5.44 pm on 29 January. What is the ‘question no. 2’ that I’m ignoring?

  35. Andrew – “A quick look here may give you pause for thought. I would be interested to see your response.”

    What about abiotic oil? First of all oil and coal, despite what Louis says, is fossil based and finite.

    Even if this ‘theory’ was true the oil would be made over millions of years essentially making oil reserves finite anyway as we cannot wait a couple of million years for new oil. We use it at 83 million barrels per day.

  36. Ernestine, thank you for posting. You say

    W.E. says: “How much will they [recoverable oil] jump again when the use of oil shale becomes practical?� [added]

    ?practical? Do you mean technologically possible or financially profitable?

    I mean when shale oil begins entering the marketplace in significant quantities, as has happened recently with the Alberta tar sand oil.

    w.

  37. Ender, thanks for your comment. You say:

    If anything the reserves will be overstated as most mideast countries artificially raised their reserves about 1985. Most oil bearing places have been extensively explored and the rate of discovery even with the most modern technology is dropping. Only half the oil used is replaced by new discoveries.

    This was exactly my point, that we can’t use Mike’s simplified method because we don’t know what the possible (as opposed to the proved) reserves are. They may be more, they may be less, but we don’t know, and thus Mike’s method won’t work. And thus (to return to the topic of this thread) we need to use estimates based on PPP to calculate how much will actually be used, and where it will be used.

    However, your claim that “half the oil used is replaced by new discoveries” does not agree with the fact that for more than 15 years, the number of years of oil remaining has stayed stable at about 35 years (see the figures I cited earlier in this thread). This clearly means that for the last 15 years, all of the oil used has been replaced by increases in proved reserves.

    w.

  38. Waratah, In your first posting (Jan. 28, 11:34 pm) you said “I read Castle’s response. Then I read it again. His usual game of distraction: quoting and citing numerous papers and referring to meetings and webs of exchanges between eminent persons without actually saying anything much at all. Castles alleges that you haven’t addressed the main arguments. What the hell are they, precisely? I’d like to know. If these agruments are so important, surely he is capable of summarising them himself, without subterfuge?”

    By way of contrast, Willis Eschenbach said (Jan 29, 6.33 pm) that ‘given the detailed, multi-page nature of Castles response to you [JQ], your [JQ’s] claim that ‘It doesn’t seem to me that Ian responds to my argument except to deny that the MER/PPP issue was the main point of the critique’ glosses over a wide variety of other very germane points made by Castles and supported by citations from very reputable sources. In particular, you [JQ] have not touched on any of the number of papers, both from Castles and a variety of other authors, which have discussed this issue. Since many of these papers have discussed, and often emphatically denied, points that you [JQ] have made in your paper, this omission is a significant one. Do you [JQ] plan to discuss those other studies and points?’

    Willis also said “As you [JQ] point out, Ian Castles says (above) that the MER based SRES estimates are misleading for other reasons, and he has detailed those reasons in his response. Could you [JQ] address those issues?’

    So far as I know, I have responded to all questions asked by JQ. You alleged that I have continued to ignore a question from him (29 Jan., 10.17 pm), but you didn’t say what the question was and have yourself ignored my request for clarification (30 Jan., 6.41 am). I am awaiting JQ’s response to Willis Eschenbach’s questions, and your response to mine.

  39. I agree that Ian has responded to all the questions I raised, and I’ll now respond to the main questions I can derive from Willis’ comment.

    As I’ve mentioned in email to Ian, though not here, the paper was prepared fairly quickly, and is still in draft form. I’ll be happy to add the references Ian suggests many of which (including the House of Lords report) I have read.

    Since we appear to be in agreement on my main substantive point (that the choice of conversion factors doesn’t much affect projections of emissions) I will also try to expand the paper to discuss some of the other issues raised by Ian, but that’s going to take a bit more time.

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