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Here is a thread about big forward-looking climate change econ questions -- how do we stop climate change fast, fairly, and efficiently? #EnvEcon
This thread is a beast. Hopefully useful. 1/
This thread is a beast. Hopefully useful. 1/
First, while I think we ought to price carbon, there are huge problems with this that the Env Econ crowd (including me) has been slow to appreciate.
1. There are other big market failures.
2. Political economy prevents uniform pricing of carbon, especially sequestrations.
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1. There are other big market failures.
2. Political economy prevents uniform pricing of carbon, especially sequestrations.
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Second, I think it's now clear that renewables will beat fossil fuels on cost and quality alone, never mind tradeoffs. Some may quibble with details, but @Noahpinion spells out the big picture in his new blog: https://noahpinion.substack.com/p/answering-the-techno-pessimists-part-a3b
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So, go ahead and price carbon. But don't pretend you'll get the price right, and we'll need other policies, probably a lot of them.
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As @Noahpinion says
"For those who are concerned about intermittency, realize that we’ll just overbuild [solar] for winter/clouds/morning/evening, and use batteries at night."
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"For those who are concerned about intermittency, realize that we’ll just overbuild [solar] for winter/clouds/morning/evening, and use batteries at night."
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That's probably right as a crude first approximation. But consider what this means for surplus energy on sunny, mild Spring and Fall days: A TON of free energy.
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Consider, in turn, what this means for the value of transmission, storage (not just batteries), and demand response.
A lot of low hanging fruit is distributed, like thermal storage and electric vehicles.
How to balance transmission, distributed solutions, and hydrogen?
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A lot of low hanging fruit is distributed, like thermal storage and electric vehicles.
How to balance transmission, distributed solutions, and hydrogen?
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It's not just engineering, either. How should markets and pricing work to direct markets toward efficient solutions?
This is where other market failures lie (e.g., network monopolies and crude regulation of them). But these market failures affect the environment a lot.
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This is where other market failures lie (e.g., network monopolies and crude regulation of them). But these market failures affect the environment a lot.
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Relatedly, there's a lot we need to learn about energy demand response. @TDeryugina and colleagues MacKay and Reif have the best-yet demand response estimates for residential demand in this paper
9/ https://www.aeaweb.org/articles?id=10.1257/app.20180256
9/ https://www.aeaweb.org/articles?id=10.1257/app.20180256
And there's some solid evidence on responses to critical peak pricing, and factors that aid it, by Katrina Jessoe and @RapsonEnergy https://www.aeaweb.org/articles?id=10.1257/aer.104.4.1417
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But these scratch the surface. Big demand questions remain:
1. How much can and will households and, especially, business and government *shift* demand within and between days, aided by RTP prices, thermal storage and other tech?
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1. How much can and will households and, especially, business and government *shift* demand within and between days, aided by RTP prices, thermal storage and other tech?
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2. What amazing new things can the world do with *really* cheap energy, at least sometimes, probably most of the time. This is where techno optimism really kicks in. New opportunities and externalities from these new things.
Bitcoin enthusiasts stay away. Not interested.
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Bitcoin enthusiasts stay away. Not interested.
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We can't wait for the actual or natural experiments. We need policy that is robust to great opportunity here, for it's best, cheapest way to decarbonize. 13/
Yes to RTP. But needs also need low cost access for RTP selling at the distribution level. The legal crux may hinge on PURPA refinements, and excellent rulemaking by FERC that hopefully doesn't exclude islands like Hawaii. 14/
Getting demand side and low-cost grid access matters now because it enters into how much we ought to spend on large scale transmission, and possibly other investments to aid distribution-level multilateral trade. Capacity requirements hinge on this too; and currently awful. 15/
I expect we will navigate solutions to these tricky problems poorly, but the technological advance for renewables will be so great that fossil fuels will die anyway, and possibly die fast. I guess that makes me a techno optimist.
Still, this isn't enough. 16/
Still, this isn't enough. 16/
Here is where inequality lurks with inefficiency. Bad policy on electricity markets and regulation will aid grid defection and spur high costs for those who cannot defect. The social implications are ugly. Cue claims of "rigged system" with poor paying for obsolete assets. 17/
Electrification of most transportation will follow cheap solar+battery. But air transport will take awhile. 18/
https://www.ieee-pes.org/images/files/pdf/magazine/Electrification_June_2020_Open_Article.pdf
https://www.ieee-pes.org/images/files/pdf/magazine/Electrification_June_2020_Open_Article.pdf
Then there is electrification of heating. I think most of this will also follow cheap solar+battery+modern heat pump. Again, cleaner will simply be a lot cheaper. But very cold places may need more, and we need to cut emissions fast. See Lucas Davis. 19/ https://energyathaas.wordpress.com/2021/01/04/what-matters-for-electrification/
This is why @elonmusk is offering $100 Mil prize for the best carbon capture tech. 20/ https://www.cnbc.com/2021/01/22/elon-musk-tweets-donating-prize-for-carbon-capture.html
But this shouldn't be rocket science. As @tim_env_econ says, the solution is obvious:
Trees. Soil, too, if we're paying attention.
I won't get into co-benefits here, but they're huge. 21/
Trees. Soil, too, if we're paying attention.
I won't get into co-benefits here, but they're huge. 21/
But @TDeryugina raises eyebrows -- haven't carbon offset markets failed, almost universally?
One answer is: yes, but we've hardly tried.
Another answer is: think for a minute what global pricing of carbon sequestration would actually entail. 22/
One answer is: yes, but we've hardly tried.
Another answer is: think for a minute what global pricing of carbon sequestration would actually entail. 22/
This paper by Chuck Mason and Andrew Plantinga lays out the theory. In a nutshell: Yes, pricing carbon, positively or negatively, at the "right" price works.
Of course it works. But it has to be the right price, and it has to be global and uniform. 23/ https://www.sciencedirect.com/science/article/abs/pii/S0095069613000193
Of course it works. But it has to be the right price, and it has to be global and uniform. 23/ https://www.sciencedirect.com/science/article/abs/pii/S0095069613000193
Think about how much carbon is already stored and being captured for free. The idea with so-called "additivity" is that we can observe and enforce a clear baseline and only pay the opportunity cost for extra carbon capture above a baseline that folks would provide freely. 24/
This is what's difficult. Are we really going to pay zillions to Brazil and Indonesia and many others to keep and grow their rainforests, including payments for the inframarginal lands that would never be deforested anyway?
I don't think so. 25/
I don't think so. 25/
Efficient non-additivity requires perfect price discrimination. That’s likely impossible. But maybe a reasonable compromise will involve net benefit transfer to sequesters. Transfers to developing economies seems like a good thing, if not so large to impinge political viability.
In this report with Dan Hellerstein and Nate Higgins we discuss auctions and other mechanisms can effectively price discriminate. A good application would be for carbon sequestration. With remote sensing, it shouldn’t be hard to implement. 27/ https://www.ers.usda.gov/webdocs/publications/45333/err-181.pdf
I gather Elon Musk has different ideas, like mechanically capturing CO2 from the air and injecting back into the earth. This seems crazy expensive, but maybe less of an additivity problem. Still, an odd way to keep money from poor countries with lots of land and trees. 28/
All of this suggests that environmental economists need to embrace other fields and disciplines to better understand electricity, innovation, mechanism design, and network monopolies in order to be especially useful in our coming transition.
Let’s jump in!
-DONE-
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Let’s jump in!
-DONE-
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Very sorry -- didn't think this would get sooooo long.
