I’ve been a bit under the weather for the last few days, so I thought I’d get my readers to do the work for me. Here’s a piece I’ve been working on for the Fin. Comments and criticism much appreciated.
With the major scientific issues in the debate over global warming having been resolved, attention has turned to the economics of climate change, and of stabilising the global climate. The release of the Stern Review in the United Kingdom had a powerful effect on public debate in Australia, an effect that has been amplified by the recent Interim report of the Garnaut review.
Part of the impact was due to the dire assessments of the impacts of uncontrolled growth in emissions of greenhouse gases put forward by Stern and even more vigorously by Garnaut. Coming from mainstream economists with a longstanding reputation for cautious policy judgement, these assessments had a greater impact, for many, than similar assessments offered by environmentalists or climate scientists.
But Stern’s pessimism on the consequences of doing nothing was matched by striking optimism regarding the cost and feasibility of stabilising global climate. Stern concluded that the global climate could be stabilised with CO2-equivalent concentrations of 550 ppm.
Garnaut drew on more recent evidence suggesting both that the safe level of emissions was 450 ppm than Stern’s 550 ppm and that rapid growth in China and India had already made the achievement of such a target difficult, if not impossible, in the absence of immediate action. Still Garnaut endorsed Stern’s main point – the cost of stabilisation is far less than the cost of doing nothing.
The Stern review was highly controversial. Naturally, we heard from the noisy, but rapidly shrinking, group who still deny the reality of the problem. But the main dissent from economists focused on Stern’s estimates of the cost of doing nothing, and particularly on his treatment of the way in which future benefits and costs should be discounted.
This debate is exceptionally complex and unlikely to be resolved soon. Fortunately, at least for anyone willing to accept the view that massive changes in the climate are a bad idea regardless of the economic number attached to them, the problems of discounting can safely be left to the professionals to sort out.
There was much less criticism of Stern’s estimates of the cost of stabilising climate. Even the sharpest critics among economists only suggested that Stern’s estimates were at the optimistic end of a plausible range, the upper end of which might be 5 per cent of national income, or around two years of economic growth. That is, by 2050, a low-carbon economy might have the material living standards that would otherwise have been reached by 2048.
This is, on the face of it, a striking conclusion. We use energy in nearly everything we do, and it is, therefore, widely assumed that a modern economy is dependent on cheap energy. Yet mainstream economists, even those most critical of Kyoto, are unanimous in the view that we could greatly reduce emissions of carbon dioxide while continuing to improve living standards at much the same rate as in the past.
Stern’s optimistic view that CO2 emissions could be greatly reduced without a corresponding reduction in living standards is rejected by critics beginning from two diametrically opposed positions. Although deeply hostile to each other, the two groups find some surprising common ground.
The first group are ‘Deep Green’ pessimists who see the end of consumer capitalism as both inevitable and desirable. At least since the reports of the Club of Rome in the 1970s, members of this group have argued that continued economic growth is inherently unsustainable.
The Club of Rome initially focused on claims that stocks of various mineral and energy resources would be exhausted within a few decades, but claims of this kind have been refuted by experience. Most mineral resources have actually become cheaper. Even in cases where prices have risen, the economic impact has been marginal, relative to the long-run trend of increasing income.
As a result, most Deep Greens now focus on limits to the capacity of the natural environment to support continued growth and assimilate waste products like CO2. Their central claim is that economic growth depends critically on the use of the natural environment as a dump for our waste products.
The Deep Green position is qualitatively different from that of participants in the climate change debate, including James Hansen and Stephen Schneider, who argue that we are already close to, or perhaps past, a point where our activities will critically damage the environment. From the point of view of these commentators, damage to the environment is the result of mistaken (but hopefully reversible) policy choices, rather than an inherent consequence of modern civilisation.
The mirror image of Deep Green pessimism is that of the ‘Dark Brown’ pessimists who say that we should do nothing to stabilise the climate because to do so will wreck our standards of living. Dark Brown commentators from thinktanks like the Competitive Enterprise Institute warn of ruinous economic consequences even from modest first steps such as the implementation of the Kyoto Protocol.
As with the Deep Greens, the Dark Brown school must be distinguished from participants in the climate change debate, such as William Nordhaus, who recognise the necessity for large scale mitigation, but argue for a slower pace of initial action than is implied by the Kyoto process. Whatever the merits of this argument, it is driven by beliefs about relative costs and benefits, rather than an assumed fundamental conflict between the environment and the economy.
The track record of Dark Brown pessimists is no better than that of the Club of Rome. Time after time, Dark Browns have opposed environmental improvements as too costly, repeatedly overestimating the costs and underestimating the benefits. The debate over CFCs and the ozone layer provides a good example, since it was one of the first issues to be addressed on a global scale. The doomsayers repeatedly attacked both the science behind the ban on CFCs and the economics of the policy, claiming it would cause massive economic damage. In reality, even without taking account of health benefits, it seems likely that the CFC ban yielded positive net economic benefits.
Although many Dark Browns got their start in the CFC debate, there have been some new entrants to the camp. For example, Bjorn Lomborg has taken up the mantle of the late Julian Simon, and has repackaged Simon’s arguments with some success. More importantly in political terms, the Dark Browns are now part of the Republican party establishment in a way that wasn’t true when Richard Nixon signed the Clean Air Act. But the central arguments haven’t changed.
Both groups engage in a fair bit of wishful thinking about their position, the Greens arguing that we’ll all be happier in the long run and the Browns claiming that the environmental problems will solve themselves if we ignore them. But these opposing claims are secondary to the shared presumption that economic growth depends on increasing exploitation of the natural environment and, in particular, on the burning of fossil fuels.
Underlying both Deep Green and Dark Brown positions is a fundamental misunderstanding of the nature of economic progress and of economic activity in a modern society. The concept of economic growth is so firmly embedded in our thinking that we forget it is just a metaphor. The idea of growth implies physical expansion, and any process of physical expansion has limits.
Economists have contributed to these misunderstandings. The traditional model of economic growth is based on the accumulation of capital equipment, capable of converting an ever-larger volume of natural resources into physical products for human consumption.
Such a model leads naturally to the conclusion that economic growth cannot continue indefinitely. The classical economists of the 19th century, beginning with Malthus, were the first to reach this conclusion, which they phrased in terms of the idea of diminishing returns.
The central idea is most easily seen in terms of agriculture. The output of a given piece of land can be improved by the application of fertiliser, the use of more agricultural machinery and more labour. Initially the returns to such increases in intensity may be high. But the total amount that can be grown on a given plot of land is bounded, and eventually the benefit of additional inputs must decline or become negative.
The same logic applies in industrial capitalism. Productivity can be increased by investing in more capital equipment but if the labour force is held fixed, the marginal return to additional investment must eventually decline. It was this that led the classical economists (notably including Marx) to talk about the inevitability of a declining rate of profit.
Long experience of sustained growth suggested that the classical economists were missing something. For a long time, growth models made to fit by adding an unexplained and exogenous source of growth called technological change, but this was always unsatisfactory. Technological change is itself the product of economic activity, and therefore subject to the same logic of diminishing returns. Something was missing.
It has gradually been recognised that the missing ingredient was information, embodied in technological improvements and in the minds of skilled and educated workers. Unlike physical inputs to production, information is not subject to diminishing returns. Once some piece of information, such as an improved way of producing a good or service is discovered, it can be used and reused indefinitely. Use by one person does not diminish its availability to others. This insight led to the development of ‘endogenous growth theory’ as opposed to older theories based on exogenous technological change.
The public-good nature of information explains how economic progress can continue without additional resources. Most obviously, improvements in information technology allow more and faster communication which in turn allows for yet more technological improvements. There is no apparent indication of diminishing marginal returns in this field; if anything the opposite.
Once we think in terms of information, it is natural to think of economic progress, not as more of everything, but as a set of qualitative improvements. This can be seen most obviously by looking at the areas of the economy that are growing most rapidly, such as health services. Health care is all about information, from the skill and expertise of doctors and nurses to the information embodied in medicines and medical equipment. By contrast, the physical resources required are modest. Even a hugely expensive piece of medical equipment, such as a CT scanner, embodies less raw materials, and consumes less energy, than a passenger car.
As new treatments become available, and as the knowledge available to medical workers expands, the capacity of the health sector to improve both the length of life and the quality of life increases. The length of human life may be bounded, but there is no reason to suppose that limits to growth in the quantity and quality of health services are going to be reached any time soon.
What is true of health care is even more true of education, the information service par excellence. The only limit to our capacity for education is the capacity of the human mind. And while some have always argued that this limit is tight enough to mean that more extensive education should be confined to an elite few, supposedly tight limits have regularly been broken. High school completion, once a rarity except for the upper-middle class is now the norm, and the numbers going on to universities have increased massively. Yet the demand for educated workers, and for more skilled workers of all kinds, continues to outpace the supply.
That is, there is nothing in the nature of economic progress in a modern society that inherently requires increased volumes of physical output. Most growth will occur in activities where information is the crucial factor. But, it might still be argued, energy is essential to all of these activities, so a reduction in energy use must bring growth to a halt. The first part of this claim is true, but the second is false.
The most common problem with ‘energy fundamentalism’ is the failure to understand prices. As Hayek observed long ago prices are the critical information generated by a market economy. Even where explicit prices are not present, for example within firms and government agencies, increasing scarcity of any resource is reflected in higher implicit prices.
Before considering the future, we can use prices to assess the importance of energy in existing activity and the extent to which our current prosperity depends on readily available supplies of cheap energy. At current prices, primary energy accounts for less than 5 per cent of total expenditure. An immediate implication is that a doubling of the cost of primary energy, arising from a switch to more expensive sources of energy could cost no more than an additional 5 per cent.
But this is a substantial overestimate. An increase in the cost of carbon emissions would provide signals to users, from energy suppliers to industry to final consumers, of the need to become more efficient in using energy. Decades of cheap energy have produced a system characterized by inefficiencies at every stage of the process from production to final consumption.
Where the scope for efficiency improvement is limited, prices will signal the fact that some kinds of consumption are more costly than others. Consumers will respond, as they always have done, by changing consumption patterns to favor items that are relatively cheaper. Of course, this will entail social change, but relative prices change all the time, in many cases by much more than the likely change in energy prices. The plummeting cost of computers and the rapidly rising cost of healthcare provide two of the most important examples.
Taking account of efficiency improvements and substitution effects, it seems likely that a doubling of energy prices over a long period would reduce average income by no more than 2 to 3 per cent. Optimists like Stern can easily justify a lower number on the basis of plausible estimates of potential efficiency improvements and the like. Pessimists can argue for higher numbers. But even the most pessimistic cost estimates of economists are an order of magnitude away from those offered or implied by the Deep Green and Dark Brown doomsayers.
Would a doubling of energy prices be sufficient to permit a switch to a low-emission or zero-emission technology over several decades? As far as electrical energy is concerned, almost certainly it would be. Some renewable sources of electricity, such as wind, are already competitive in many locations at existing prices or with a modest subsidy. With a substantial further increase in prices, output from these sources would increase. Other energy sources including geothermal energy and (assuming safety concerns can be resolved) nuclear energy would become competitive, as would long-distance transmission lines which would permit more effective use of existing sources of renewable energy.
A doubling of prices would also provide incentives for innovation in a range of technologies including solar photovoltaics, solar thermal and carbon capture and sequestration. It’s unlikely that all of these technologies will turn out to be economically feasible, but it’s equally unlikely that none of them will.
As far as transport is concerned, the rise in oil prices over the past five years has already converted the purchase of fuel-efficient hybrid cars from a piece of conspicuous environmentalism to an economically sensible choice. It will take a long time for carmakers to retool their systems, and some laggards will surely fail along the way, but a shift towards hybrids is inevitable in the long run. With a further substantial increase in the cost of carbon emissions will come a move towards plug-in hybrids and then to electric or fuel-cell vehicles powered by renewable sources.
Of course, it would be mistake to leave prices to do all the work. The case of lighting provides an obvious example. Lighting accounts for around 17.5 per cent of global electricity use. According to the International Energy Agency, using compact-fluorescent in place of incandescent lamps, deploying high- in place of low-efficiency ballasts and phasing-out mercury vapour HID lamps would reduce global lighting demand by up to 40%. More gains could be made by improving installations and using automatic controls.
All these steps make economic sense even at current prices, but for a variety of reasons the switch has been slow to take place. In these circumstances, it makes sense for governments to give the market a push, by developing standards and, if necessary, announcing a phase-out date for incandescents, as has been done in Australia. What is needed is a clear commitment reflected both in the price we pay for energy and in a broad range of public policy settings.
But only an international agreement embracing all major countries will suffice, and the search for such an agreement is stalled until next January, when George W. Bush finally leaves office. His successor will face the task of turning around US policy and then achieving an international agreement that includes developing countries like China and India.
Despite the claims of Dark Browns and Deep Greens, we can, if we choose, have both a stable climate and steadily improving standards of living throughout the world. But the fact that we can achieve these things does not mean we will. At this stage, failure seems all too possible, as does a half-hearted response that will imply the need for much more costly action in the future.
John Quiggin 
My view is:
1. The cost of the transition to a clean energy economy will be much higher than the ‘one-percenters’ (Stern, Quiggin et al) believe.
2. The political will to pay the price for climate change mitigation will soon evaporate, especially if economic conditions turn for the worse.
3. It it ludicrous to compare Montreal and Kyoto. Climate change is a problem several orders of magnitude more difficult to fix. We have completely overhaul our energy infrastructure (in less than 20 years, if Hansen is right) and for some sectors of the economy (e.g. aviation) we don’t have a clue how we’re going to do it.
I guess that makes me ‘Deep Green’. How about we call the “one percenters” the ‘Deeply Deluded’?
Frankly John that’s nonsense. Even at today’s oil prices a hybrid like the Prius (almost $50K optioned-up) makes no sense economically. What makes much more sense is a little diesel like the Hyundai i30. It will do 4.7L/100km, and starts from $21,490. You might just make your money back over 5 years, depending where crude heads from here, and the strength of the AUD.
The price differential between a diesel and a petrol is minimal. $2.5K in the case of the i30.
By comparison the base Honda Civic costs $21,790 and the Civic Hybrid costs $32,990.
That’s why diesels make up more than 50% of new car sales in Europe, as high as 70% in some countries, and more than 40% in countries where petrol is cheaper than diesel. I don’t think there’s a market outside Hollywood where hybrids represent more than 2 or 3 per cent.
Certainly, if you use a five-year timeframe (implicitly, a discount rate of 20 per cent or more) you’re unlikely to find many environmental investments paying off.
But the life of a car is typically ten years or more rather than five, and fuel-efficiency is reflected in trade-in prices. So you should either do a full lifetime analysis or take trade-in price into account at the end of five years.
Also your analysis seems to compare optioned-up hybrids with base model alternatives. A more plausible Civic comparator would be the VTI-l automatic at $26990. Assuming savings of 4l/100km, and 20 000 km/yr, and petrol $1.50/l the hybrid gives you savings of $1200/year, which (I swear I didn’t rig the figures to do this) gives you a payoff period of exactly 5 years.
I’m sure you can argue with details of this. But your description of my claim as “nonsense” was strong, so I think you need more than adjustments at the margin.
One point that does jump out from the Civic comparison is that driving a manual makes a big difference to the analysis since you save on both purchase price and fuel costs. So I guess I should say “an economically sensible choice for automatic buyers”
A good analysis. I’ve long thought that it was remarkable that communists, capitalists, greens and everyone else all had the same basic assumptions about wealth and its growth. There seemed to be something missing, and you’ve added that – information, or skills.
It’s a bit like the old equation Impact = Population x Affluence x Technology. The root assumption is that increased technology always has more impact, which implies that a 35mpg hybrid is lower-tech than a 12mpg SUV. And the assumption is that increased affluence invariably means increased waste and pollution, so that working backwards we must suppose that countries with lower impacts all have lower affluence – is Denmark less affluent than Australia? Germany less affluent than the US?
These ideas we have are often missing something. I hope you keep filling up those blank spaces on the map 😉
A news story from the US supporting my argument on hybrids. I’m not saying this is proof, but you need more than you’ve put up so far to convince me, carbonsink. Also, hybrids now have nearly 3 per cent of the total US market and rising fast, which suggests that your Hollywood jibe needs some updating, though it’s true that this is still a small share.
The information contained in an idea, once captured, is potentially available to all. However, when you take an entire field of scientific knowledge, growing at an exponential rate, there is a deeper issue. Until now, we have been able to effectively partition and compress the salient points of a scientific field into a few years of study. I imagine that as time moves on, there will be quite a bit of re-engineering of our education methods in the attempt to manage the knowledge explosion. If we can’t get our heads around a field we will inevitably waste effort reinventing things, and performing other inefficient behaviours.
As for the arguments about the cost of moving to less damaging energy sources, I find it inexplicable that people panic over this, yet accept recessions as part of the backdrop. If the volatility of an economy over a lifetime is managable for most people, I don’t see why a change of the sort implied by switching to renewable energy (which has an as yet uncertain impact upon any economy) is more concerning to them, than copping a recession under a business as usual scenario.
When all is said and done, is the main contributer, the thing that the ever-growing “middle class” is going to devour at accelerating rates – air travel? Is that what most of it, in practical terms, comes down to?
And what’s the solution? Inevitably lots and lotsa trains?
Hybrids necessitate an automatic transmission. Its just one of the many complexities hybrids add to a motor vehicle, and one of the reasons the price differential between a base-model and a hybrid is so great.
The fact is I can buy a base model diesel with a manual transmission — they’re the top selling models in any range in Europe — and I can’t buy a base-model hybrid … and that kinda proves my point.
You can throw Newsweek articles at me, but the market speaks volumes, and in Europe where fuel prices are higher than anywhere, the market has spoken.
BTW, I love hybrids. I think they are a stepping to PHEVs, and eventually full EVs (and full EVs is where we need to go) but right now they just don’t add up for the average punter. Personally, I’d like to some “feebates”, congestion charges, and of course, higher fuel taxes, so they would add up, but we have Buckley’s to none chance of that happening. See point 2 in my first post.
Disclaimer: I own two late-model turbodiesels, but I bought those for ‘Deep Green’ reasons, not economic reasons.
… and because I subscribe to GCC and read it daily I know that hybrid sales were up and down over 2007 between 1.5% and 3.0% with no real trend in either direction. Certainly not “rising fast”.
If you wanna see a trend, this is a trend!
Diesels reach 53.3% Share of New Car Registrations in Europe
Well, we seem to have reached a point of furious agreement. I’m happy to concede that you can do better than hybrids by going for a manual or (though I should check the numbers for myself I guess) a diesel. On the other hand, there’s a large market for automatic-transmission petrol-fuelled vehicles and you appear to have conceded that, for this market, hybrids are an economically sensible choice.
As regards trends, monthly sales have increased approximately 700 per cent in four years according to the graph you point me to. That counts as rising fast to me, but, as they say, YMMV.
But as regards my main argument, the stuff on diesels is all to the good. I don’t have bets on any particular horse here.
I strongly suspect that ‘living standards’ will decline medium term and a general awareness will emerge of physical limits. The immediate problems being lack of cheap water and fuel. A possible escape route involves major paradigm shifts such as investment in clean tech faster than market forces dictate and acceptance of qualitative lifestyle changes. Examples of the latter include less convenient transport, forbearance on many personal luxuries we now take for granted and some seemingly backward steps such denser housing and using human wastes in agriculture. The potential for renewable energy and dare I say nuclear is vast but it may take decades of perhaps forced investment to build up to carbon replacement levels. That is even with stringent conservation.
However what is physically possible may not wash politically. Vested interests (eg Big Coal) will try to undermine a smooth transition in order to prolong their current advantage. Therefore I expect turbulence ahead.
You could potentially bet on both horses if only the car manufacturers would make us a diesel-hybrid. I’d buy one tomorrow if they were available, but again, for ‘Deep Green’ reasons only.
But they have! Google reveals the Peugeot 308 diesel hybrid which will be a natural successor to my current 307. All we need now is to get them to market it in Australia.
The 308 diesel keeps getting delayed I’m afraid:
PSA pushes back diesel hybrid and moves it upmarket
PSA Retools Diesel Hybrid Strategy to Focus on Higher-End Cars
It was originally supposed to be 2010, now its looking like 2011 or later, and because the hybrid technology is expensive, its going into higher-end cars first. Sound familiar?
Sorry, that should have read:
“The 308 diesel-hybrid keeps getting delayed…”
JQ: In a sincere atempt to be helpful, let me comment on just a couple of your claims.
OK, I’ll respond to this, but you’re on probation. Any further attacks on me or other commenters will be met with a permanent ban. If you don’t like these conditions you’re welcome to a full refund
#1. “Even the sharpest critics among economists only suggested that Stern’s estimates were at the optimistic end of a plausible range, the upper end of which might be 5 per cent of national income, or around two years of economic growth. That is, by 2050, a low-carbon economy might have the material living standards that would otherwise have been reached by 2048.”
Have you read the comment by the boss of Woodside here (in the Oz and AFR) about the impact of Garnat’s ETS on the NW Shelf? It accounts for 3% of GDP. Its closure loses not just a one-off 3% as your statement implies, but a permanent loss with multiplier effects starting soon. Same only more so for closing all coal mining now as demanded by Hansen in his letter to Rudd; if CCS is so easy and cheap why is it not being done?
Your numbers don’t stand up. According to this source, exports of LNG from all Australian sources totalled $5 billion or about 0.5 per cent of GDP in 2006. And the correct multiplier to apply in cases like this is less than 1. To clarify, the implied loss is permanent, but still small in relation to improvements that will continue to take place at a rate of around 2 per cent per year..
#2. “The output of a given piece of land can be improved by the application of fertiliser, the use of more agricultural machinery and more labour. Initially the returns to such increases in intensity may be high. But the total amount that can be grown on a given plot of land is bounded [by what?], and eventually the benefit of additional inputs must decline or become negative”. This is pure Malthus+Ricardo+Marx. It ain’t happened yet. Did they ever imagine the Green revolution of the 1960s? Ever heard of GM?
Umm, yes. If you reread the article, you’ll see that this was my point. Having exposited the Malthus+Ricardo+Marx analysis, I went on to explain why it didn’t apply in reality.
I am not sure where the improved living standard begins and ends. For instance there has been an increase in new vehicle sales for four wheel drives which are not efficient in manufacture or fuel usage ( and are quite a pain on the road as well as presenting a danger to others). People are beginning to buy Hummers. This is almost like an opposing force to the Prius. The Deep Greens vs the Dark Browns. In this instance will the use of gas or diesel make a lot of difference?
The other area where there is not a lot of joy is in unsustainable housing which requires a great deal of energy for heating and cooling. No eaves, no shade trees, thin walls, poor siting, too much glass etc.
Inside the houses are plasma or LCD TVs as well as many other optional items which are energy hungry.Technology may provide an answer but unless energy and waste collection and storage reflect the true costs it is hard to see how a sustainable future can develop quickly enough to stop the climate change patterns becoming entrenched.
The standard of living refers to the quality and quantity of goods and services available to people, and the way these goods and services are distributed within a population
The standard of living refers to the quality and quantity of goods and services available to people, and the way these goods and services are distributed within a population. The last thing we need in Australia is more of the quantity.
A sustainable future demands more quality and better distribution of goods and service, a more egalitarian society, raising the health and education standards of those who are under-performing.
JQ a timely and salient piece. I do believe you have placed an undue emphasis on technological solutions that would allow the continuation of a ‘business as usual approach’ but I can agree about the issues of theory and social organisation.
The unpalatable aspect of various orthodoxies we have all properlyfailed to question are; neo-classical economic theory, political orthodoxy and religious orthodoxy . How so you might ask? As an economist what are the great problems that we now consider to have solved in this golden age? Over population, distribution of wealth, unemployment and unintended consequences (Malthus, Marx, Keynes and Friedman). But we have deluded ourselves and our delusion is the very pragmatic outcomes and theories championed by politicians and bureaucrats today, good ideas that solved various dilemmas but in turn became their own orthodoxy, namely the green revolution, dynamic capitalism, guided capitalism, market capitalism and conveniently admitting the variables of externalities, excepting in risk and game theories. But the critical reason most fail to understand climate change of AGW is simple, they have not read and thus have not comprehend the truths hidden within the esoteric study of thermo-dynamics and the 3 laws thereof and to which we are bound – ‘you have to play the game, you cannot break even, you cannot win, you cannot quit’, such is the problem of entropy.
I am sufficiently a skeptic myself, possessing an inquiring mind, in a healthy way to say, yes, in all probability fossil fuels emissions are not the ogre they appear or would be were there less of everything and less of them as well but fossil fuels are the foundation of the world and it’s economies as we know them today. Thus, we have never been in a position before where we have the gross populations we do nor the indefinite increases in that population and thus the sheer resource demands we as a biological mass demand; of every living thing, of the earths minerals and liquids are therefore why we are not a sustainable entity. Fossil fuel and their byproduct gas emissions are symptomatic, partly causative but not entirely responsible for our problems. I am sure a century back we probably could have all done nicely had we stayed at the population numbers we were but we did not. Simply, there are not the resources of food, water, fuel and land to sustain the aggregate mass (approaching 9 Billion) we have now and the market signals and the science is clearly telling us this, it is our political delusions and the orthodoxy of success and of having conned ourselves into believing that we have solved the economic problem that we cling to at our peril. Chemist James Lovelock said as much in his attempt to synthesis some of these issues in his Gaia theory. Biologist Suzuki has said as much about the un-raveling web of nature, Physicist and Climatologist Jim Hansen says as much in his theories of the tipping points, CO2 and fossil fuels and Petroleum Geologist Hubert-King said as much about when alerting the world to the conceptual reality of Peak Oil, Richard Dawkins says as much in discussing our religious delusions and Raulston Saul says as much about our fetish for managerialism.
Western societies are in the grip of an ideology that was based on a romantic view of the world that existed two centuries ago, neo-classical economics. If we need to take on an orthodoxy it is the orthodoxy of modern economics, that having designed an engine not with a faulty magneto as described by Keynes, but with no OFF switch. The OFF switch was in the plans, it is called the production possibility curve but we felt we would not need it if ever so never gave it any more serious thought. Some brave economists and social engineers have produced a construction diagram that tells us where the OFF switch should go, their diagram is called GPI not GDP, Only a brave few such as Charles Daly have proposed a Wegnerian solution that recognises the reality of severely limited resources and actually begins to take those limitations into account. Stern had a stab at it, Ross Garnault is having another stab at it, but they both to my mind still believe in the perpetual motion machine. Pity, seems the scientist may be right, we have run out of time. It is then I am reminded not of Pascal’s proposition (which I understand affirmed God’s existence) but that of Professor Jared Diamond, who said,of the Easter Islanders, ‘what were they thinking when they cut down the last tree’.
Here is an article on the Steady State Economy, sustainability and economic growth.
http://www.theoildrum.com/node/3759
Walking around a brand new shopping centre in the riverland, nice and comfy in shorts and t-shirts, until we entered the supermarket. Within 10mins we were shivering from the open refidgerated shelving along the entire inside walls, plus an extra aisle one side of prepared vegies, and an entire aisle both sides, which my wife refused to go down as it was like being in a ccolroom. Aa if this wasn’t enough, there were at least another 6 free standing open display fridge units at the ends of the aisles.
My point is that all the pressure, little as it is, to conserve energy seems to be on householders. It’s not good enough that Woolies and Coles etc can waste all this energy and simply pass on the cost to the public.
An interesting article on pollution in China.
http://www.motherjones.com/news/feature/2008/01/the-last-empire.html
Some friends who recently returned from China were served meals such as fish heads, crocodile head surrounded by sea horses, pig foot with straw for sucking out marrow, peking duck – skin only, chicken cleavered into cubes – bones and all. I asked where all the meat went and my mate said that from what he could see, none of the animals had meat on them when living let alone dead.
Water – if supplies for agriculture and drinking are not part of the solution then deep greenies win, I’m afraid. Technological innovations in this area amount to desalination – lead time – 3 to 5 years for plant construction. Please explain that to northern Chinese.
Famine – current food prices have not been seen since famines of early 1970’s. But the green revolution was an off the shelf fix – GM (including drought resistant plants) has the same problem – lead time. Moreover, GM is dependent upon bulk probduction of cloned varieties which are inherently unstable in the face of disease and predation threats in a climatically unstable world.
Technology – sure improved communication helps. But technological improvement relies upon both (a) paradigm busting and (b) long term theoretical investment – ‘patient money’ as they called it in the 1930’s plastics industry. Please explain where these are going to come from.
Economics – collapse of global demand due to collapse of cheap oil and unsustainable activities coming home to roost will have a more immediate effect on CO2 production than policy shifts although substitution will occur. But the point is that this needs to be taken into account. GW mitigation costs of 1 – 3% are chickenfeed compared to annual recession/depression figures. Please explain why the current economic environment appears to be greeted with such complacency in this sort of discussion.
Energy – you appear to underestimate the potential of solar thermal in particular (currently holding the record for efficent conversion of sunlight). As well, this industry claims to be now capable of base load generation so may be time to forget about nuclear – waste of money.
Coal sequestration investments make sense OTOH not because there’s great prospects technologically but because of increased reliance on coal for economic reasons.
Transport – single biggest energy saving strategy. Getting more than one person into a car.
Communcations – let’s assume that Lovelock and the deep green’s are right and there is going to be a great ‘die off’. It may be no more than intuition on my part but I strongly suspect that one of the unintended consequences of the internet revolution is that the world will be unable to sit around and watch people die. Since the 1970’s we’ve seen spontaneous responses to images of mass famine (Live Aid, Concert for Bangladesh etc.) This will be the answer to those who despair of the apparent lack of political will – albeit a late response – but consider that this time the famines may be ongoing – I can think of nothing more likely to lead to changes at the UN
this.
Upon reflection my point about technology is really in agreement with JQ – private investment will provide the ‘patient money’ that is currently driving such fields as nano and bio-tech. It’s worth distinguishing, though, these two kinds of innovations; paradigm busting innovations will be enhanced by communication and information sharing; industrial investment OTOH relies upon secrecy and patents to create their payoff.
John,
I think it is unfair to throw the work done by the Club of Rome i.e. Limits to Growth (the original and recent revision) in with extreme viewpoints. As pointed out in the 2006 Templeton lecture by the economist Jørgen Randers, it presented a range of scenarios and they were mostly not all doom. Also, its predictions were for 100 years. These key points seem to be conveniently missed by its critics. The same poor critical approach continues to be taken by critics of more recent studies.
On a side note, I first read about the “Club of Rome” in a piece by Keith Suter in 1999.
http://www.abc.net.au/science/slab/rome/default.htm
Its final paragraph says:
“To sum up, the warning from The Club of Rome remains valid. The British science writer H.G. Wells once said that life was a race between education and disaster. The Club went to the effort of issuing the warning not out of a sense that we are all destined to be destroyed in an environmental catastrophe, but in the optimistic belief that it is possible to build a better world and that humankind can be mobilized for that task.”
H.G.’s wells comment is especially relevant, especially when one talks about “Information”, which I assume is primarily scientific knowledge. I make this assumption because it was the scientific and mathematical discoveries that has allowed us to live the way we do. However, and this is key to remember, a scientific discovery can bring both good and bad. It is for this reason why our social knowledge is, off course, very important. But it can not change the underlying laws of physics and chemistry and the constraints that they set.
I actually meant to have a para in there pointing out some more sensible things in the Club of Rome, about the assimilative capacity of the environment – I’ll try to work it back in. But having been around at the time I can say that predictions of resource exhaustion by the end of last century were put forward in all seriousness.
One of the problems with making an economic case for Diesel-hybrids is the diminishing returns from repeated fuel savings.
Let’s say a petrol vehicle uses $1000 worth of fuel a year and hybrid technology can save you 20% – that’s $200 per year.
Now assume that the equivalent diesel uses $800 a year in fuel – the saving from adding hybrid technology is only $160 a year.
However hybrid technology is still developing rapidly. Lithium batteries (or battery/capacitor combos like CSIRO’s ultrabattery) will deliver major weight savings which will translate into significantly better fuel efficiency.
Carbonsink, I remember seeing the story on the 308 delay, but I wasn’t thinking of it in the specific context of diesel hybrids.
Still, even if it doesn’t reach the mass market until, say, 2013, it still offers the prospect of big emissions reductions in the longer term.
The really bad news part of the story is competition regulators getting in the way of environmental sustainability. This fight has yet to play out with WTO as well as the EU regulators. However, I predict that the competition guys, who are not much loved (I should know, having been one) will get crushed if they really get in the way of the environmentalists.
“Umm, yes. If you reread the article, you’ll see that this was my point. Having exposited the Malthus+Ricardo+Marx analysis, I went on to explain why it didn’t apply in reality.”
I would turn that around, and say that the piece is currently still too heavy and obscure. This should be telling you what still needs work, since it was so easy for an intelligent reader to read what he did. If it needs rereading, you didn’t get it across as well as you usually do. (I actually felt that from reading the piece, before I got to that comment and your follow up.)
Some of the subject matter tends to make it heavy regardless, e.g. all that layering of theory to clear up perceived deficiencies (for what it’s worth, I think the Malthus approach remains sound, once we appreciate that the bounding parameters are themselves functions of other things and not fixed, but I won’t go into what I think that shows us just here). Anyhow, the endless multiplication of layers makes for heavy prose, just like epicycles, and makes the general approach seem unsound in principle, an attempt to keep adding fudge factors with no certainty that the latest version has got it right either. It feels wrong, suggesting an unnecessary multiplication of entities that would indicate that everyone is on the wrong track. (Yes, I know that’s the state of play – but it still makes clear and accurate prose hard for you to achieve.)
Deisel is denser than petrol and has a higher energy content. Burning a litre of Deisel produces around 10-15% more carbon dioxide than burning a litre of petrol.
http://www.epa.gov/otaq/climate/420f05001.htm
This means that measuring the fuel efficiency of Deisel and petrol cars in terms of km/litre tends to overstate the greenhouse gas reductions available from awitching to Deisel.
There’s still a benefit but it’s more like 10-20% rather than 20-30%.
Of course, biodeisel, which is cheaper and more energy-efficient to make than ethanol provides much greater carbon dioxide reductions while doing away with most of the pollution problems assoicated with Deisel engines.
With respect, those talking about diesels aren’t grasping the magnitude of the problem. I use about 1000L a year of biodiesel costing me under $500, but I can see the writing on the wall. The problems seems to be that diesel from coal has process emissions as great again as tailpipe emissions, diesel from algae is not yet proven, biodiesel and hydrogenated tallow have severely limited feedstocks and diesel from cellulose (eg Choren process) is expensive and requires atypical site logistics.
Full marks to residents of leafy suburbs who can afford a Peugeot 308 and $3/L fuel by the time they hit the market. However residents in outer suburbs with no public transport are already bled dry with high mortgage repayments, grocery bills and commuting costs. They will keep driving their petrol Aussie Big Sixes since they can’t afford to switch. Now consider the effect of the next doubling of diesel prices for trucks, buses and tractors, the workhorses of the economy. There will be no BAU and I don’t see a smooth path to lower carbon use.
I’ve been thinking a bit about this blog post today and my understanding of it is that:
(1). The costs of climate change mitigation are low compared to climate change itself, and we can therefore prevent the worst climate change from happening with only a marginal impact on GDP.
(2). This is indicative of the fact that GDP is not really about how much energy or ‘stuff’ is produced and consumed but is something more abstract that also takes into account efficiency and information.
If my understanding of what has been stated is correct then I pretty much agree with these conclusions. I think they raise some interesting questions, though.
With respect to (1), Hansen has been suggesting that we keep CO2 concentrations below 430ppm and eventually reduce them to something like 350 ppm if I remember correctly. So is this also possible to do relatively cheaply? I suspect so, but how hard will it be to achieve politically? It seems to me that the politics is much more difficult, but the change in that area, especially in terms of public awareness, over the past 2-3 years has been very encouraging.
With regard to (2), are other environmental challenges, such as habitat loss, increased extinctions, damage to major river systems from too much water use from them, pollution in general, overfishing, and so on, also able to be addressed without too much impact on growth. Conversely, what other forms of growth are or are not sustainable? Is population growth sustainable, and if so how much? And how do we address the issue of feeding everyone while addressing all of these issues?
And on the subject of vehicle emissions. While a carbon price (and fuel costs in general) will help to make technologies like hybrids and efficient diesels more economic (if you drive the car enough), it will also encourage substitutes for car use such as public transport, bicycles, walking, living closer to city centres, and so on.
I remember seeing a news report saying increased fuel prices in the U.S. were driving up public transport use. Unfortunately I don’t yet have the time to chase up the link right now.
A couple of thoughts….
Carbon capture and storage: The technology to capture CO2 and pump it underground is not new. Of course it is more expensive and old power stations might not be easily retrofitted (most likely not). The big question is really whether the geological sinks which can store the CO2 are viable – both geologically and economically. It is now often said, by people in this area of research, that we are still 10-15 years away from knowing the answer to this.
Diesel: Most diesels on Australia’s roads are heavy polluters. You can see this in the black soot coming out of a Australia’s trucks (which are old by OECD standards). The new generation of European cars are much better, but I do not think they have got around the problem of organic micro particulates. These are micron in size and go straight to the depth of your lungs. There is a a research group at CSIRO who would be the ones to ask if anybody wants to know more. If you factor these in, Diesel does not look like such a good idea.
kyangadac:
Economics – collapse of global demand due to collapse of cheap oil and unsustainable activities coming home to roost will have a more immediate effect on CO2 production than policy shifts although substitution will occur.
I don’t understand this: what makes you think that we’ll fail to burn all the oil and gas we can get, down to the point where EROI is too small? Can you say more? Does that mean you think the price of oil & gas (& fertilizer) will be trending down?
[Coal we can argue about.]
You may want to look at Kharecha & Hansen’s “Implication of “peak oil” for atmospheric CO2 and climate”
Click to access submitted_Kharecha_Hansen.pdf
Another point that I’ve made before but that nobody seems to have picked up on much – the increased motivation that now exists for new technological breakthroughs seems to be me quite likely to have the effect of speeding up technological development. The need to reduce carbon emissions and conserve fuel is like a new challenging problem – and new challenging problems generally seem to inspire people to not only think harder and more imaginatively, but to work harder towards finding solutions.
On that basis, it wouldn’t surprise me in the least bit if global economic growth over the next 20-30 years continues at an even faster pace than it has over the previous 20 or so. Indeed, the only thing I see likely to seriously pull back economic growth are shortages in two key resources: water & oil. OTOH, most of that growth is going to come from the BRIC nations, so whatever happens we will be looking at a fairly different world in 20 or 30 years’ time.
A few months ago the issue of GPI v GDP was raised by JQ in terms of a measure that captured not merely nputs/outputs. It is perhaps worthwhile considering again in terms of what is possible what is not.
When you look at the GPI as an indicator of what is possible, it shows growth as we think of it currently has flat-lined for some time now, in other words GDP is illusory when you count most of the known costs of business as usual.
Another measure is world overshoot, accepted by biologist D Suzuki see here:
http://www.footprintnetwork.org/gfn_sub.php?content=overshoot
This conceptual assessment of our planetary capacity also indicates we are beyond what the planet is capable of sustaining. My view until we throw out GDP and replace it with GPI or similar we have little likelihood of making any reasonable judgments or salvaging our current dire position.
To what extent are out living standards dependant on our wasteful, greedy over-consuming life-styles?
As the cost of water, energy and oil rises and feeds in to higher prices for basic essentials, more and more people will find themselves only being able to afford the essentials. Many pensioners are in this position now and for them to live adequately will need an injection of funds from the rest of society. This is a progression that will continue to reduce wealth.
This is all pretty obvious but the relationship between overpopulation, rampant consumerism, the rapidly growing cost of resources and the price of food and other essentials is becoming more evident to more people.
As those at the bottom, the have-nots, come under stress to provide the essentials, so will jobs be lost in non-essential sectors and the drain on the wealth of the haves will be two-fold, the increasing costs of providing for themselves plus increasing demands for a reasonable standard of living at the bottom.
This should all lead to a more sustainable society but will a major re-distribution of wealth prevent economic collapse or is that a symptom of economic collapse? We need massive change in our thinking, and I can see GPI being a catalyst for that.
John Mashey:
what makes you think that we’ll fail to burn all the oil and gas we can get, down to the point where EROI is too small?
With respect, you and Karecha & Hansen are missing the point here, because you assume that economic activity will continue at the same rate despite rising energy prices. But the rate of investment depends also on the availability of investment funds as well as on the potential returns.
You’ve got to bear in mind that the current economic environment has been created by long term oversupply of goods to a market that has been artificially propped up by credit creation. Markets (especially those driven by credit) depend upon that rather slippery ideal of confidence as well as the existence of supply and demand.
People are notorious for losing confidence in their govenments in response to food price rises and imminent shortages of water for instance and in markets when their reliable investments (eg houses)turn sour.
The current US demand for energy (a significant proportion of global demand) is being driven by the US economic boom which is a product of artifice(credit) not reality. Indeed the medium term outlook for the US economy is rather dire by my reckoning and is a consequence of hubris as much as a dependence on oil.
We won’t fail to burn oil because at least some of the demand for oil is relatively inelastic but some of it is elastic especially that consumed in the production of consumer goods etc.
Finally, I’m not arguing that this is a fix, but merely that it needs to be considered.
Why even care whether increased GDP can be done sustainably or not? Measuring living standards by GDP is an anachronism. As a stat, GDP is a basket-case.
We need to concentrate on reducing per capita GHG; on increasing per capita calorific intake; decreasing population growth rates.
None of these actions will push up GDP figures. But if done, living standards for 6 billion people will be immeasurably improved.
Very difficult things to get done of course – and I am pessimistci about them – however that’s where the focus should be – not on meaningless stats like the GDP of industrialised economies.
I the impact on happiness of someone’s wealth increasing by a given amount if their income was less than $10,000 say, would mu much greater than the impact on happiness of increasing someones wealth by the same amount if their income was over $20,000.
So from a utilitarian perspective, improving happiness by redistributing income (by making the tax system more progressive for example), would be more efficient than increasing GDP.
With respect, those talking about diesels aren’t grasping the magnitude of the problem.
Believe me Hermit, I grasp the magnitude of the problem. I am fully aware that switching the current fleet of gas-guzzling petrol cars to ultra-efficient diesels is not a long term solution for transportation. Its a five-year stop gap at best.
That said, the fact remains the cheapest way to reduce emissions from personal vehicles right now is to switch to diesels.
Yes there are problems with particulates, NOx and other pollutants but several diesels that meet California’s ultra strict standards will be available this year. Yes diesel is more energy dense than petrol and releases more CO2 per litre burned, but because diesel engines are 30-40% more efficient than petrol engines the increase in CO2 is more than offset.
In Europe, 99% of the vehicles sold that emit less than 120g/km of CO2 are diesels. Virtually all the reduction in CO2 emissions from personal transportation in Europe is due to the switch to diesels. Hybrids have contributed virtually nothing anywhere in the world, despite the monumental hype.
Again, I will point out that in the only vehicle market in the world where CO2 emissions are taken seriously, and where fuel prices are almost twice what they are in Australia, the market share is 53% diesel, and less than 1% hybrid.
What does that tell you?
Mr Sink,
What are your views on this option to reduce my personal motor vehicle CO2 pollution?
Buy a 2nd-hand Aussie Six/Four and convert to LPG.
Don’t I then have
Pollution reduced : less CO2 per km than petrol
Pollution reduced : no emissions bldg a new car
Cost reduced : much cheaper initial purchase
Even ignoring the last point isn’t my option better than a new diesel?
re: #38 kayangadac
I’m definitely not assuming economic activity continues at some particular rate. I’d be ecstatic if the US burnt a lot less oil, especially imported.
This bubble is especially stupid, of course.
For sure, a big chunk is elastic, including a lot of optional travel, but there is plenty of inelasticity to go around. Here’s a useful chart (for US, sorry, I don’t know Oz equivalent) of the transport uses of oil. Of course, the light truck category is annoyingly ambiguous:
Click to access figure2_oil_use.pdf
Since you didn’t answer the bottom line questions, let me ask again, more precisely:
Over the next 20 years, how will the inflation-adjusted prices (in US$ or ??)) for:
– oil
– natural gas
– nitrogen fertilizer
generally trend? I.e., use linear regression from 2008-2028.
Very nice piece John.
I feel Carbonsink might be even happier riding a bicycle.
Cars bad, bicycles good. Shank’s pony even gooder.
When living in Sydney for several years I could almost measure the passage of the seasons by the unrelenting growth in commute times. Probably the silliest day of all involved an almost four hour commute on public transport for less than 20km. Could have walked home and back in that time. How State Labor stay in power there is bizarre…
Anyway, the point is that we are building the outer suburbs of large cities in a manner that cements in the personal car as the only realistic option – for each occupant of the household. The homes themselves generally are built without consideration of reducing consumption of energy and so on. After the credit orgy of the last decade, the collective decision to have ‘burb sprawl with inefficiencies built into the housing product (and associated system inefficiencies in travel), has been frozen in place for the next few decades at least.
My guess is that these sorts of conflicts between individual preferences and system-wide “optima” will be the inertia that prevents rapid disarming of the GHG issue, even though we individually may want it.
Time for my walk along the Murray river…
Don. Murray Bridge
wbb: Converting an older car to LPG is a very good option, especially if you don’t need a boot and you don’t drive long distances out of the city … but we were talking about new car purchases and I doubt that the typical hybrid buyer is in the market for a 2nd hand Falcodore. I mean, it hardly has the same smugness factor as a Prius now does it 🙂
Indeed. I ride a bike whenever possible. Walkable, bikeable residential areas closer to public transport and shopping centres is all part of the transition we have to make. The outer suburbs are destined to become ghost towns. The spiralling price of crude alone will do that.
re #25, “But having been around at the time I can say that predictions of resource exhaustion by the end of last century were put forward in all seriousness.” John, I’d have to say that you weren’t paying attention. Table 4 of Chapter 2 of “The limits to growth” (ISBN 0856440086) which contains figures about the probable lifetime of various resources, assumed “that the current growth rate in consumption will continue.” In the next paragraph they write “Of course the actual availability in the next few decades will be determined by factors much more complicated” than their simple exponential growth model, and then give as an example the availability of chromium based on a model taking into account developments in mining technology and the effects of price rises (Figure 12). But these models are only to illustrate the point of this chapter, “Given present resource consumption rates and the projected increase in these rates, the great majority of the currently important nonrenewable resources will be extremely costly 100 years from now.” For more on the fable of LTG predicting resource exhaustion by 2000 (in which William Nordhaus played a small part) , see Cassandra’s curse: how “The Limits to Growth” was demonized.
You might like to look at the article Peak Minerals which shows that for four metals (mercury, lead, cadmium and selenium) production has declined from a peak and will be close to zero in a few decades. The same for helium, see Goodbye Helium, Goodbye Brainscans, the difference is that once helium is released to the atmosphere, it is lost forever. For mercury, lead etc you only need The Universal Mining Machine. Unfortunately to run a Universal Mining Machine you have to be a Type II civilisation, one
that controls the power of the sun itself.
re #43 John Mashey
The answer to your ‘bottom line’ question is that I don’t know – I’m simply pointing out some of the economic uncertainties that exist in trying to answer this (and related) questions, although my comments were not originally about prices but were about energy consumption.
Thanks, C-sink. 10/10 for me. Again. And you reckon I’m not smug!
My next question then, is why, for the new car market, aren’t you spruiking LPG models? Why is diesel better than LPG?
#46 carbonsink,
“Walkable, bikeable residential areas closer to public transport and shopping centres is all part of the transition we have to make.”
Yes, for sure.
1) I recommend UCLA Professor Don Shoup’s book “The High Cost of Free Parking” in which the perverse structural effects of free (or cheap) parking cause long-term problems. he also does interesting case studies on turning areas back into walkable places.
Suppose local rules cause condos, apartments, offices, and other buildings to be supplied with a certain number of parking spaces per {person, employee, customer, whatever}. Below ground parking costs more to build than parking garages, and it’s more than surface parking lots. Hence, in many places, new development chews up land for the latter.
Of course, that effect means that buildings get further apart, which in effect means that it’s harder to do without cars. On Google Earth, I’m looking at the Knox City Shopping Centre near Melbourne. In some parts of the US & Canada, one can find whole areas covered with multiple sets of stores like that in the middle of big parking lots, not bike or pedestrian-friendly, and where one is almost forced to move a car several times.
When condos/apartments are built with parking required and wired into the price, the price is higher, and someone has already paid for the space, so they “might as well” have a car.
Likewise, if a business is required to provide parking spaces for employees, and they are free, that’s another subsidy for the car. Smart policies encourage businesses to subsidize bus/train for their employees to even the balance. Locally, Google runs a bunch of WiFi-enabled busses to transfer employees around to trains and elsewhere, and Stanford runs multiple bus shuttle services.
2) There’s quite a bit of gas wasted by people cruising blocks looking for free parking. Shoup looks at that. In cities, one can do much better by using variable pricing, in which the metered prices dynamically vary to keep about 1 space/block open. This causes people who just want to to run into a store to go to that one space, park for 20 minutes, and leave, and if they’re going to be around for hours, they’ll probably go to a parking garage.
3) However, I don’t think all this means that all outer suburbs must turn into ghost towns, even though we shouldn’t be building a lot more of them in the same old way. Given the huge investment in existing homes & infrastructure, it seems more likely that they’ll get reworked a bit. In addition, PHEV and BEV electric vehicles change the equation. Assume adequate electricity [a big assumption, but not too bad in places with a lot of sunlight]. Then electric vehicles, either pure BEV or PHEV are interesting, in that:
a) They have some range “for free”, i.e., on batteries alone. Maybe that’s enough to get to a bus or train station, or to a business that supports charging stations. I’ve seen the electric version of the MB SMART car around Palo Alto, and a friend has gotten many years of use from a rare RAV4-EV.
b) If PHEV, then the range is extended, although one is back into “fuel cost ~ mileage*efficiency”, but one need not worry about running out of juice.
However, 2-hour-each-way commutes from the CA Central Valley to Silicon Valley by car are going to disappear, because that still takes a lot of fuel.