Thursday, December 31, 2020

Why Do 'Carbon Emission Credits' (And Other Economic Fixes) Fail In An Accelerating Greenhouse World?

 



The WSJ article: 'Carbon Credit Prices Jump Despite Drop In Emissions',  Business Exchange, Dec. 26-27, p. C3)  was interesting from the point of view of the anomaly it highlights.  That is, how is it the price of carbon credits could possibly jump (e.g. by 31 % in Europe this year) despite a "record drop in output from power plants, steel mills etc. that need them to operate."  

One's first reaction is there has been some form of economic miscalculation, especially when one also reads (ibid.): "The rise in carbon credits used by governments to curb greenhouse gases and traded by hedge funds has put it ahead of gold as one of the best performing commodity -linked assets."

But why?  Well we then learn:  "Driving the latest rally is the recent decision by the European Union to cut greenhouse gas emissions by at least 55% of 1990 levels by 2030."    Then quoting one carbon trader, Ariel Perez,  of Hartree Partners (ibid.):  "It's the pricing of an increased future ambition.  All that explicitly reduces supply and lower supply should lead to higher prices."

Here's the core of the quandary:  the Global Carbon Project expects global emissions to fall by 7 percent in 2020 -  a drop that's nearly 5 times as large as in 2009 (during the global financial crisis).  And yet, carbon credit prices have surged.  As the WSJ piece notes:  "Higher prices in theory should spur electricity generators to switch to cheaper, dirtier coal.  But because coal releases twice as much carbon as natural gas power plants need additional credits to burn it, sending the price of those credits higher."

But here's the thing, in the end all this carbon credit manipulation and commodity trading may just be like a dog chasing its tail. Especially because "the rising carbon credit prices suppress carbon emissions by making it unattractive to burn coal even though the raw material is cheaper."   And yet despite all that the CO2 in the atmosphere is increasing at a parlous, terrifying rate.

We know the CO2 concentration in the atmosphere has accelerated from 400 ppm in 2013 to 415 ppm recorded in 2019. That is an approximately 6 year interval for a per year change in concentration of :

(415 ppm - 400 ppm)  / 6 yr  =   15 ppm / 6 yr  =  2.5 ppm/  yr.

This is 25 % higher than the previous average rate of increase, i.e. 2.0 ppm/ yr. Given we know that every increase in CO2 concentration by 2 ppm increases the radiative heating effect by 2 W/ m2,  we also know that the associated radiative heating is now significantly higher.  This accounts for a major part of the increase of atmospheric temperature with CO2 concentration.

While it is true that  there is a yearly rise and fall   in CO2 concentration and May is usually the peak month for atmospheric CO2, we have also seen each yearly peak is inexorably higher than the last one.  This behavior has been noted for decades and hearkens back to the well -known Keeling curve.  (See top graphic).

Less appreciated is the accumulation effect of CO2 in the atmosphere. CO2 accumulates because earlier depositions remain even as new burdens are added yearly. Thus, the CO2 warming we’re now experiencing is not the result of just one year – but  100 years’ accumulation. The process may be described something like a series with terms being added, viz: to describe the CO2 content now in the atmosphere, we must initiate the series with n= 1 (for 1920), viz. 


CO2( 2020) =   x  1  x  2 +  x  3 +   x  4 +.............+  x  1 00 

E.g. terminating at the last term 100 years later. Here each ‘x’ denotes the CO2 burden added for each year in succession.

Thus, the CO2 effect for a given year is not just for that year, but rather inclusive of the cumulative additions for all the years - starting up to 100 years before!

This means things can only get worse, and no amount of carbon credits pricing or trading will save the day.  This is what neither the hedge funds or the governments have yet worked into their future plans, policies.  So does that mean we can't assume any technical, social or economic innovations will spare us from a future immiserated by global warming?  

Well, consider: the CO2  accumulation effect, even hanging around for centuries, means even if we started drastically cutting emissions today, the amount of CO2 in the atmosphere (and its attendant problems) would continue to grow. 

Basically,  just like the water in a bathtub will continue to rise - even if you reduce its flow - but don't shut off the tap, so also will CO2 in the atmosphere continue to rise. In other words, Earth will keep warming until emissions are shut down completely. Even in that drastic step, the warming pace would only slow - so we wouldn't even detect it for at least another hundred years. Assuming we're still around to measure it.

Even more sobering, we've yet to experience the full effects of the CO2 we've already emitted - mostly because it takes the oceans a long time to warm in response to a given level of CO2 -  and the oceans are the primary buffer mitigating the worst greenhouse warming effects right now.  Once the oceans reach their CO2 absorption capacity, the spillover effects  into the atmosphere will be severe.  Look for a sudden 4-6C increase in mean global temperature.

In the end the carbon credit price trading, like similar economic schemes ("cap and trade") are merely minor efforts to try to halt the tsunami of warming effects headed our way.  They may make us feel like we're doing something substantive, but the ever rising CO2 concentration shows we are really living in a kind of fantasyland.  A good analogy?  Moving chairs around on the Titanic after the ice berg collision.

See Also:

Climate report understates threat

Excerpt:

"So far, average temperatures have risen by one degree Celsius. Adding 50 percent more warming to reach 1.5 degrees won’t simply increase impacts by the same percentage—bad as that would be. Instead, it risks setting up feedbacks that could fall like dangerous dominoes, fundamentally destabilizing the planet. This is analyzed in a recent study showing that the window to prevent runaway climate change and a “hot house” super-heated planet is closing much faster than previously understood."

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