Pragmatic Environmentalist of New York Principle 9: Ridley’s Paradox

For pragmatic environmentalists Riley’s Paradox describes a fundamental concern relative to climate change policy: Economic damage from man-made ‘climate change’ is illusory whereas damage from man-made ‘policies’ to fight the said change is real.

I ran across this principle at Climate Scepticism where Paul Matthews posted a summary of former Australian Prime Minister Tony Abbott speech at the Global Warming Policy Foundation.  Prime Minister Abbott’s speech “Daring to Doubt” described climate science with a skeptical viewpoint then went on to talk about climate policy with an emphasis on Australia. He said:

In what might be described as Ridley’s paradox, after the distinguished British commentator: at least so far, it’s climate change policy that’s doing harm; climate change itself is probably doing good; or at least, more good than harm.

Matt Ridley is a British scientist, columnist, and author of several award winning books, including the Rational Optimist. I have admired his writings for a long time. He recently posted on this issue noting that climate policies are doing more harm than good and that is a moral issue. Please read his post because he explains the problem better than I can. He lists ten climate policies that are doing more harm than good.

  1. Ethanol subsidies
  2. Biodiesel programs
  3. Promotion of diesel cars
  4. Burning pellets derived from wood products
  5. Wind power
  6. Solar farms
  7. Only renewables policies
  8. Fuel poverty
  9. High energy costs
  10. The neglect of more serious environmental problems

Richard Tol also has written about this paradox. He notes that “Politically correct climate change orthodoxy has completely destroyed our ability to think rationally about the environment.”

Finally, I want to acknowledge Shub Niggurath for the definition I used of Riley’s Paradox.

 

My Comments on the RGGI September 2017 Stakeholder Meeting

When environmental rules and regulations are promulgated there are rules which include comment periods where interested parties can submit their suggestions about the proposals. This post describes the process, the comments submitted to the recent Regional Greenhouse Gas Initiative (RGGI) stakeholder meeting and includes the comments I submitted.

I have extracted my disclaimer from my comments for use here. I have been involved in the RGGI program process since its inception. In the final years before my retirement I analyzed air quality regulations that could affect electric generating company operations and RGGI was one of the regulations reviewed. The opinions expressed in these comments do not reflect the position of any of my previous employers or any other company I have been associated with; these comments are mine alone. I believe the majority of the stakeholder opinions expressed at meetings and in submitted comments are, in my opinion, very naïve relative to the actual burden implementing their preferred alternatives, overly optimistic about the potential value of continued RGGI reductions and ignore the potential for serious consequences if things don’t work out as planned.

Comment Process

Ideally the comment period enables stakeholders to suggest modifications to the rules or schedules that make the final rule better. Of course the definition of better depends on where you are coming from. Pragmatic environmentalists in industry generally comment on topics that they think will affect their ability to comply with the proposed rules or address issues related to compliance obligations, primarily related to reporting. Our comments depend on evidence so we are careful to provide evidence for our assertions.

I have never worked on the other side of the dynamic between regulators and the regulated community so I am not sure how responses to comments are handled. Generally agencies are required to address all comments submitted and if the responses are debatable the regulated community can litigate the rule to address that problem. It is not clear how regulators handle quality vs. quantity of comments. If there is one comment that makes a strong argument on a particular point and many comments that argue the opposite side of that point with weak technical or purely emotional arguments who wins? There is no doubt in mind however, that even in the most professional regulatory agency with the most educated and experienced staff, that ultimately most decisions are made by political appointees who can ignore the strongest technical arguments depending on the political agendas involved.

In this case the Stakeholder meeting presented the plan for the future of RGGI that includes tightening the emissions restrictions, extending the program beyond 2020, and tweaking some of the program elements. As of the date of this writing, October 19, 2017 there were 12 comments listed for the September 25, 2017 meeting in addition to mine. Eight comments from organizations and a combined into one comment total of 2,051 individual comments from members of the Sierra Club commended the states for their proposal to reduce the emissions cap after 2020. The NY Independent System Operator commented that the analysis used to justify the rule had not handled the New York electric system correctly and that should be corrected. The Environmental Energy Alliance of New York (EEANY) pointed out that substantive issues they had raised throughout the program review process had not been addressed so it was prudent to slow down the implementation schedule. The NJ Department of Environmental Protection submitted comments that seemed to be the issues RGGI needs to address before they would consider re-joining the program. Here is a summary of the comments:

  • Ceres
    • Commends the states for their proposal to extend and strengthen the program through 2030.
  • The City of New York
    • Supports the cap emission reduction and formation of ECR but notes that RGGI States must go further if they are to align with the goals of the Paris Climate Agreement.
  • Collaborative for RGGI Progress
    • Voices strong support for the states’ consensus draft program recommendations released August 23, 2017.
  • Dynegy
    • Voices strong support for the states’ consensus draft program recommendations released August 23, 2017.
  • EEANY
    • Reiterates prior comments that were not addressed
    • Recommends delaying implementation of the cap reductions until we see what happens when the effects of earlier revisions become effective
  • Joint Comments (4 Industry Organizations)
    • Overall, supports the proposed changes and the extension of the program through 2030. We believe that the base cap has been set at a reasonable level
    • Specific recommendations for tweaks for improvement
  • Joint Comments (35 Environmental Organizations)
    • Thanks for open, transparent and responsive process
    • Strongly supports reducing the emissions cap
    • Recommendations for further reductions and tweaks to program
  • Joint Comments (16 Environmental Justice Organizations)
    • Supports proposal
    • Recommends stronger caps and more restrictions
  • NJ Department of Environmental Protection
    • Requested specific information relative to NJ participation in RGGI
    • Offered some criticisms of the supporting documentation
  • NYISO
    • Requested corrections to NY electric system modeling for IPM analyses
  • Physicians for Social Responsibility (PSR)
    • As health professionals who recognize the adverse health impacts of climate change and the need to mitigate those impacts now, we support the governors’ decision to strengthen the Regional Greenhouse Gas Initiative (RGGI) by committing to further cut carbon pollution.
  • Sierra Club Members (2,051 Individuals)
    • These comments were form letters signed by Sierra Club members that thanked the States for protecting the climate, reducing pollution, creating jobs, and growing the economy by reducing the cap.

My recommendation is the same as EEANY. Because past reductions are not going to be as easy as in the past it would be prudent to delay further emission reduction requirements.

In my opinion, all RGGI policy decisions have been and were in this case made for political reasons. As such no amount of technical arguments are ever going to win the day. You might ask then why bother submitting comments. Frankly, the only reason I go through the motions because if the problems I have documented actually happen I want to be in a position to say don’t blame the affected sources because RGGI was told that this could happen and the comments were ignored.

My Comments

I am submitting these comments on the September 25, 2017 RGGI Program Review Meeting and the proposed revision to the emissions cap in light of the RGGI Investment Proceeds report that was issued after the meeting. Based on the CO2 reduction numbers claimed in the Proceeds report the revised emissions cap appears to be risky and threatens the credibility of the program. It would be prudent for RGGI to delay implementation of any cap reductions post-2020 to determine the feasibility of meeting additional reductions based on the actual rate of CO2 reductions produced by RGGI and other programs.

CO2 Reductions from RGGI Investments

Before I use results in the Investment of RGGI Proceeds in 2015 report I want to comment on a relevant issue with it. The Executive Summary notes that “the RGGI states have reduced power sector CO2 pollution over 45 percent since 2005”. There is no better example of the pervasive mis-direction in the reporting on the impact of RGGI in this document and the RGGI reports overall than this statement. The casual reader would certainly conclude that the RGGI program itself was responsible if not for the entire reduction at least a sizeable portion of the reduction. However, looking at CO2 reductions in the RGGI states that is not the case. In the first place, the program started in 2009 not 2005. As shown in Table 1, the reduction from the last year before RGGI (2009) was instituted was 31%, much less than the 45% claimed. (Note that my numbers don’t match the RGGI report which I believe is because I relied on the EPA Clean Air Markets Division database with the assumption that summing all the annual CO2 from the all programs that report CO2 was a good enough approximation. If RGGI only summed data from RGGI-affected units it could certainly account for the difference between numbers.)

However, it is even worse. CO2 emissions in 2015 were 41 million tons less than the 2006-2008 baseline so the investments that were projected to avoid the release of 20.5 million tons of CO2 could account for no more than 50% of the observed reduction. The 20.5 million decrease is only a 16.1% reduction from the 2006-2008 baseline. This is consistent with the white paper submitted to RGGI by the Environmental Energy Alliance of New York which showed that RGGI is only responsible for between 24% and 5% of the observed reduction.

Importantly, there is an implication to the RGGI investments “success” with carbon reductions relative to the proposed 30% reduction in the emissions cap. The proposed program revisions released last month for RGGI call for an annual post-2021 cap reduction of 2,275,000 tons per year. In the Proceeds Investment Report, Table 1 Benefits of 2015 RGGI Investments, it lists the annual benefits of 2015 investments and shows an annual CO2 reduction of 298,410 tons. As also shown in the white paper submitted to RGGI by the Environmental Energy Alliance of New York the affected electrical generation units have made most if not all of the cost effective reductions possible from their operations. As a result, future reductions will have to come from sources outside the affected units and RGGI has no track record providing any assurance that its investments will be sufficient to meet the targets proposed. The fact is that RGGI has not provided a roadmap for the 30% reductions that they have proposed so it is not clear how this will work.

I have personal serious doubts where the additional reductions will come from. There is a lot of hopeful reasoning if the presumption is that other state programs will provide the necessary energy changes needed to reduce CO2 emissions from the affected entities. Even though it has been said before, I will say it again: if a compliance entity has no allowances available to cover emissions their only compliance alternative is to stop running. If that happens then RGGI will have a whole lot of explaining to do in order to salvage any credibility as a template for a successful control program.

Potential Impact

RGGI has never quantified the potential impacts of their program on global warming. In order to address that shortcoming I have adapted data for RGGI emissions in Table 2 RGGI 30% Reduction Impact on Global Warming  from the analysis in Analysis of US and State-By-State Carbon Dioxide Emissions and Potential “Savings” In Future Global Temperature and Global Sea Level Rise. The original analysis of U.S. and state by state carbon dioxide 2010 emissions relative to global emissions quantifies the relative numbers and the potential “savings” in future global temperature and global sea level rise from a complete cessation of all CO2 emissions in the RGGI region as well as the proposed 30% reduction.

My analysis shows current growth rate in CO2 emissions from other countries of the world will quickly subsume any reductions in RGGI CO2 emissions. According to data from the U.S. Energy Information Administration (EIA) and based on trends in CO2 emissions growth over the past decade, global growth will completely replace an elimination of all 2010 CO2 emissions from RGGI states in 190 days. The proposed 30% reduction in the RGGI emissions cap will result in an additional reduction of 22.5 million tons but global growth will completely replace the expected reductions in 10 days.

Furthermore, using assumptions based on the Intergovernmental Panel on Climate Change (IPCC) Assessment Reports we can estimate the actual impact to global warming for a change to the cap. The proposed 30% reduction in the RGGI emissions cap will result in an additional reduction of 22.5 million tons which is projected to ultimately impact global temperature rise by a reduction, or a “savings,” of 0.00033°C by the year 2050 and 0.00069°C by the year 2100.

These predicted temperature savings for the 30% RGGI emission reduction have to be put in context to fully appreciate their insignificance. The National Oceanic & Atmospheric Administration’s Requirements and Standards for NWS Climate Observations states that: “The observer will round the entered data to whole units Fahrenheit”. The nearest whole degree Fahrenheit (0.55°C) is over 1600 times greater than the projected change in temperature so the impact will not be observed.

Another way to relate to the savings is to compare those temperatures differences to climatological temperature variation. Table 3 RGGI 30% Emission Reduction Temperature Savings  compares the projected temperature savings to the temperature climatology of Syracuse, NY. I chose Syracuse because I live there but using any location in the RGGI states would show similar numbers. On an annual basis the temperature range for the highest and lowest recorded temperatures in Syracuse was a 129 deg. F which is 214,000 times greater than the temperature difference that would result from the proposed 30% reduction in emissions. On a seasonal basis the ranges between the daily maximum, minimum and average are all listed and the lowest ratio is that the daily minimum temperature range over the year is 77,000 times greater than the temperature difference that would result from the proposed 30% reduction in emissions. There also is a range in temperature every day and the maximum, minimum, and average hourly maximum and minimum difference ranges are listed. The lowest ratio is for the minimum difference between the observed maximum and minimum temperatures and that is over 22,000 times greater than the temperature difference that would result from the proposed 30% reduction in emissions.

Unfortunately those numbers still don’t completely reflect the futility of claiming that the 30% RGGI emission reduction is anything other than a symbolic gesture. A more relatable context would be to consider them in relation to typical changes in temperature with elevation and latitude. Generally, temperature decreases three degrees Fahrenheit for every 1,000 foot increase in elevation above sea level. The temperature difference projected for the 30% reduction in RGGI emission is equivalent to a one inch drop in elevation. The general rule is that temperature changes three degrees Fahrenheit for every 300 mile change in latitude at an elevation of sea level. The temperature difference projected for the 30% reduction in RGGI emission is equivalent to going south 159 feet. Given that those changes are insignificant compared to everyone’s daily experience it is clear that no environmental impacts caused by global warming could possibly be affected with this emission reduction.

Summary

RGGI has been a success inasmuch as it has successfully demonstrated how a cap and auction program can be run, has contributed to the observed CO2 reductions and has provided worthwhile investments in energy efficiency, energy conservation, and ratepayer direct bill assistance. On the other hand, RGGI has no demonstrated success providing the magnitude of CO2 reductions necessary to meet the proposed post-2021 cap reduction of 2,275,000 tons per year. Therefore, it would be prudent for RGGI to delay implementation of any cap reductions after 2020 to determine the actual rate of CO2 reductions produced by other programs. As shown in my analysis of global warming impacts there is no pressing environmental impact rationale to implement reductions as proposed. The success and the credibility of the program itself is endangered by the reckless insistence on a further 30% reduction in emissions at this time.

Millennium Proposed Valley Lateral Pipeline Project

There is no better example of New York State’s utter disregard of pragmatic environmental policy than the Department of Environmental Conservation’s (DEC) denial of water quality permits for the construction of a 7.8 mile natural gas pipeline to the CPV Valley Energy Center which is under construction and expected to be completed in early 2018. On October 16, 2017 the DEC filed a formal challenge to the Federal Energy Regulatory Commission’s (FERC) decision that DEC waived its jurisdiction under the federal Clean Water Act for the Millennium Pipeline Company’s proposed Valley Lateral project.

Before proceeding a disclaimer. Before retirement from the electric generating industry, I was actively analyzing air quality regulations that could affect company operations. I am convinced that evidence-based environmental decision making is necessary to maintain New York’s electrical system infrastructure and that is the reason I maintain this blog. Sadly, motivated reasoning where the conclusions are based on emotions or preconceptions and the evidence used only reflects that belief while anything else is ignored appears to be the rationale for much of current New York environmental and energy policy. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

According to the DEC website for the project the Department of Environmental Conservation (DEC) has conditionally denied water quality permits for Millennium’s proposed Valley Lateral pipeline project. The conditional denial is based in part on the inadequacy of the environmental review conducted by the Federal Energy Regulatory Commission (FERC), which failed to account for downstream greenhouse gas emissions.” DEC goes on to say: “DEC subjects all applications for environmental permits to an extensive and transparent review process that encourages public input at every step‎, and DEC’s determination included consideration of nearly 6,000 public comments. DEC will continue to thoroughly evaluate all applications to ensure they do not adversely impact the environment.”

The DEC description of the project notes:

Construction of a new 7.8 mile, 16-inch diameter natural gas pipeline lateral extending from Millennium’s existing main line pipeline north to the new 650 megawatt natural gas powered Competitive Power Ventures (CPV) Valley Energy Center. The proposed pipeline lateral is located in the Towns of Wawayanda and Minisink in Orange County, New York. The project would provide approximately 130 million cubic feet per day of natural gas to the CPV Valley Energy Center.

The pipeline lateral would be installed via horizontal directional drill (HDD) below two Class C(t) streams (Rutgers Creek) and seven federally regulated streams (no impacts). Additionally, the pipeline lateral would be installed via open trench within three federally regulated streams resulting in a temporary disturbance to the bed and banks of the streams for a total of approximately 16 linear feet.

Three state regulated Freshwater Wetlands (MD-23, MD-26 and MD-29) would be crossed via trenchless methods (no impacts). A total of 1.35 acres of federally regulated wetlands would be temporarily impacted by the construction of the pipeline lateral and 0.34 acres of federally regulated wetlands would be permanently impacted by the operation of the pipeline lateral.

From the water quality standpoint the permanent wetland impact of the pipeline is equivalent to a plot of land 120 feet by 120 feet. That is not the reason used to deny the water permit.  Instead they claim the downstream impact of the natural gas emissions have to be considered. So what are those impacts?

DEC notes that the pipeline would provide approximately 130 million cubic feet per day of natural gas to the CPV Valley Energy Center where it will be burned to produce power. To be conservative assume that the pipeline provides 260 million cubic feet per day or 94,965 million cubic feet per year. Using EPA emission factors that would result in annual emissions of 5,169,853 metric tons of CO2 per year.

I assume that the downstream impact of interest is the predicted temperature impact on global warming. For the CPV Valley Energy Center that can be estimated by adapting estimates in Analysis of US and State-By-State Carbon Dioxide Emissions (For 2010) and Potential “Savings” in Future Global Temperature and Global Sea Level Rise from a Complete Cessation of All CO2 Emissions by Paul Knappenberger. These climate change calculations are based on Intergovermental Panel on Climate Change reports using the MAGICC climate model simulator (MAGICC: Model for the Assessment of Greenhouse-gas Induced Climate Change). MAGICC was developed by scientists at the National Center for Atmospheric Research under funding by the U.S. Environmental Protection Agency and other organizations. MAGICC is itself a collection of simple gas-cycle, climate, and ice-melt models that is designed to emulate the output of complex climate models. MAGICC produces projections of the global average temperature and sea level change under user configurable emissions scenarios and model parameters. There are many parameters that can be altered when running MAGICC, including the climate sensitivity (how much warming the model produces from a doubling of CO2 concentration) and the size of the effect produced by aerosols. In all cases, the MAGICC default settings were used (for example, a climate sensitivity of 3.0°C), which represent the middle-of-the-road estimates for these parameter values.

In order to calculate the temperature impact of the 5,169,853 metric tons emissions from CPV Valley Energy Center the parameters estimated when the US observed 2010 CO2 emissions were simply scaled by 167.1 million metric tons divided by 5,631.3 million metric tons as shown in Table 1 CPV Valley Energy Center Impact on Global Warming. The results indicate that the project will increase global warming 0.00008 Deg. C by 2050.

DEC claims to “thoroughly evaluate all applications to ensure they do not adversely impact the environment”. In order to determine the impact on the environment we should consider the predicted temperature impact relative to the environment.

The National Oceanic & Atmospheric Administration’s Requirements and Standards for NWS Climate Observations states that: “The observer will round the entered data to whole units Fahrenheit”. The nearest whole degree Fahrenheit (0.55°C) is over 7,000 times greater than the projected change in temperature so the impact will not be observed by the NOAA monitoring system.

Another way to relate to the savings is to compare those temperatures differences to climatological variation. Table 2 CPV Valley Energy Center Temperature Impact Relative to Middletown NY Climate compares the projected temperature impacts to the average temperature climatology of Middletown, NY near where the project is located. The annual temperature range for the maximum daily average high and the minimum daily low in Middletown is 65.8 F degrees which is 863,000 times greater than the temperature difference that would result from the potential emissions. The annual temperature range for the average daily high and the average daily low in Middletown is 19.7 F degrees which is 258,000 times greater than the temperature difference that would result from the potential emissions. There is a range in temperature every day and the maximum, minimum, and average hourly maximum and minimum difference ranges are listed. The lowest ratio is for the minimum difference between the observed maximum and minimum temperatures and that is over 178,000 times greater than the temperature difference that would result from the potential emissions.

Unfortunately those numbers still don’t completely reflect the absurdity of claiming that this facility will have an adverse impact on the environment due to downstream impacts of its emissions. A more relatable context would be to consider them in relation to typical changes in temperature with elevation and latitude. Generally, temperature decreases three degrees Fahrenheit for every 1,000 foot increase in elevation above sea level. The temperature increase projected for the potential emissions is equivalent to a 3/8” drop in elevation. The general rule is that temperature changes three degrees Fahrenheit for every 300 mile change in latitude at an elevation of sea level. The temperature increase projected for the potential emissions is equivalent to going south 40 feet.

Clearly the technical evidence is that these changes are insignificant so no environmental impacts associated with global warming could possibly be affected with these emissions. Any rational pragmatic environmental policy would weigh the benefits of this project against these insignificant impacts and approve the permits without delay.

Investment of RGGI Proceeds in 2015

This is a post on the latest Regional Greenhouse Gas Initiative (RGGI) report: Investment of RGGI Proceeds in 2015. It is another in a series of posts on RGGI that discusses how RGGI has fared so far (see posts labelled RGGI in the menu). Although the press release, RGGI Report: Investments Generating Consumer Benefits, describes the benefits of the program in glowing terms there are some unsettling numbers buried in the report.

I have been involved in the RGGI program process since its inception. Before retirement from a non-regulated generating company, I was actively analyzing air quality regulations that could affect company operations and was responsible for the emissions data used for compliance. After years dealing with RGGI I worry that whether due to boredom or frustration, that there is very little dissent to the program. It may be because, contrary to EPA and State agency rulemakings, RGGI does not respond to critical comments and rebut concerns raised by stakeholders. After years of making comments that disappear into a void, industry does not seem to think there is value to making comments. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Summary of the Report Results

According to the Executive Summary in this report:

Proceeds from the Regional Greenhouse Gas Initiative (RGGI) have powered a major investment in the energy future of the New England and Mid-Atlantic states. This report reviews the benefits of programs funded in 2015 by RGGI investments, which have reduced harmful carbon dioxide (CO2) pollution while spurring local economic growth and job creation. The lifetime effects of these RGGI investments are projected to save 28 million MMBtu of fossil fuel energy and 9 million MWh of electricity, avoiding the release of 5.3 million short tons of carbon pollution.

As a whole, the RGGI states have reduced power sector CO2 pollution over 45 percent since 2005, while the region’s per-capita GDP has continued to grow. RGGI-funded programs also save consumers money and help support businesses. RGGI investments in 2015 are estimated to return $2.31 billion in lifetime energy bill savings to more than 161,000 households and 6,000 businesses which participated in programs funded by RGGI investments, and to 1.5 million households and over 37,000 businesses which received direct bill assistance.

The report describes how the RGGI investments were used 2015, a brief summary of cumulative investments, and then provides specific information for each state including an example of the programs.

Critique

The first step evaluating the claims of the RGGI states is to convert the pretty graphics to numbers. Chart 4 Cumulative RGGI Investments by Category is an example of the graphical data provided. In the table, All-Time RGGI Investments by Category %, I extracted the numbers shown for each analogous State graphic. In the State information sections the amount of money invested, received and diverted to the general fund for each state is listed. In the table, All-Time RGGI Investments by Category $Millions, I listed those numbers then multiplied them by the State category percentages to get total category amounts.

When you extract the numbers a less complimentary picture of the RGGI proceeds investments emerges. For starters, Chart 4 RGGI Investments by Category does not include the embarrassing raids of RGGI funds by New York and New Hampshire. In reality, the correct percentages are shown as the last row in the All-Time RGGI Investments by Category $Millions table. Similarly, the individual state category investments do not include the General Fund raids which would have shown that 10% of the New York “investments” went to political expediency.

There are some financial issues raised when the amounts are available for each state. Note the difference between the RGGI monies received and investments made and the column labelled “investments received %” which is simply investments divided by received. There is a huge range between the states. Vermont is the most efficient turning the money received into investments but six of the nine states all managed to invest at least 80% by the end of 2015. Delaware, Rhode Island and New York did much worse. It is probably no coincidence that the Administrative cost percentages for Delaware, Rhode Island and New York were among the highest four state percentages.

Administrative costs in general and the tithe to RGGI total over $100 million.   Coupled with the general fund raids there is clearly a cautionary tale for carbon tax advocates who suggest that returning those taxes revenues to the public will minimize impacts. In my opinion, whenever there is a large pot of money available there will be politicians abusing their power to the disadvantage of the public.

The cost effectiveness of these investments is not presented in the report. The report notes that the lifetime effects of the 2015 RGGI investments are projected to save 28 million MMBtu of fossil fuel energy and 9 million MWh of electricity, avoiding the release of 5.3 million short tons of carbon pollution. In Chart 2 there is a note that states that the RGGI states invested $410,158,329 in 2015. The lifetime effects cost $15 per MMBtu, $46 per MWh of electricity and $77 per ton of carbon. I am unfamiliar with the benchmark costs per MMBtu and MWh for comparison with the RGGI effectiveness. However, the common justification for carbon reduction costs is the social cost of carbon. At a 3% discount rate, EPA says that the 2015 social cost of carbon was $36. RGGI investments are reducing carbon at twice the rate claimed to value the climate impact of rulemakings so their investments are not cost effective in this regard.

There is one other aspect of this report that needs to be addressed. The Executive Summary notes that “the RGGI states have reduced power sector CO2 pollution over 45 percent since 2005”. There is no better example of mis-direction in the reporting on the impact of RGGI in this document than this statement. The casual reader would certainly conclude that the RGGI program itself was responsible if not for the entire reduction at least a sizeable portion of the reduction. However, looking at CO2 reductions in the RGGI states that is not the case. In the first place, the program started in 2009. As shown in the EPA CAMD Annual CO2 Trend Data table the reduction from the last year before RGGI was instituted to 2015 was 31%, much less than the 45% claimed. (Note that my numbers don’t match the RGGI report which I believe is because I relied on the EPA Clean Air Markets Division database with the assumption that summing all the annual CO2 from the all programs that report CO2 was a good enough approximation. If RGGI only summed data from RGGI-affected units it could certainly account for the difference between numbers.)

However, it is even worse. The 20.5 million decrease is only a 16.1% reduction from the 2006-2008 baseline. This is consistent with my previous post on CO2 reductions due to RGGI which showed that RGGI is only responsible for between 24% and 5% of the observed reduction.

There is one final implication to the RGGI investments “success” with carbon reductions. The proposed program revisions released last month for RGGI call for an annual post-2021 cap reduction of 2,275,000 tons per year. In the Proceeds Investment Report Table 1: Benefits of 2015 RGGI Investments Program the annual benefits of 2015 investments lists an annual reduction of 298,410 tons. As shown in a white paper submitted to RGGI by the Environmental Energy Alliance of New York the affected electrical generation units have made most if not all of the cost effective reductions possible from their operations. As a result, future reductions will have to come from other investments but RGGI has no track record providing any assurance that RGGI investments will be sufficient to meet the targets proposed. For the record if a compliance entity has no allowances available to cover emissions their only compliance alternative is not run. If that happens then RGGI states will have a whole lot of explaining to do.

 

 

New York State Carbon Pricing

The report “Pricing Carbon into NYISO’s Wholesale Energy Market to Support New York’s Decarbonization Goals” was prepared by the Brattle Group for the New York Independent System Operator (NYISO) and the New York State Department of Public Service (DPS). According to the Brattle Group the report finds “that adding a carbon charge into the wholesale energy market could improve the state’s ability to meet its decarbonization goals cost-effectively. The study reveals that refunding collected carbon revenues back to customers results in minimal impact on customer electricity costs compared to current policies.” This is a post on the basis of the study only because much of the analysis is beyond my capability to review.

Disclaimer: I am writing posts on New York State (NYS) energy policy because I am concerned that this whole thing is going to end as an expensive boondoggle and drive electricity prices in expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Overview

This report is a useful example of New York State energy policy in general. It universally refers to New York State policy when in reality it is implementation policy for Executive Orders from multiple Governors. The fact is that the legislature has never voted on any aspect of the policy, the DPS has been loaded with Cuomo appointees so it is not clear whether it will rate the interests of NYS ratepayers over the Governor’s agenda, and NYISO has also been cowed into sponsoring a report that is no more than a politically correct roadmap for an untried policy option. Needless to say I am disappointed with the response to date within New York.

The biggest problem in New York is that no one has provided an analysis of the total costs to meet the electric sector’s part of New York’s State Energy Plan (SEP) that calls for reducing state economy-wide greenhouse gas emissions 40% by 2030 and 80% by 2050, relative to 1990 levels and the call for generating 50% of electricity from renewable sources by 2030 to help meet that goal. This report illustrates the need for an overall summary. In particular it notes that “although average wholesale energy prices would increase, about 50% of the cost could be offset by returning carbon revenues to customers; another 18% would be offset by reduced prices for RECs and ZECs in the presence of higher wholesale energy prices, and increased TCC revenues; finally, another 23% would be offset by dynamic effects on investment signals.” This clearly shows that the component costs cannot be estimated individually and then combined for a total. Instead someone has to consider the interactions between the components to get a total price.

Ultimately, however, the biggest issue in the study is its use of the Social Cost of Carbon (SCC) as the basis for the report.   The report notes that “The Brattle Group was retained by the NYISO to evaluate conceptual market design options for integrating the social cost of carbon, a widely recognized regulatory standard, into competitive wholesale energy markets administered by the NYISO.” I am absolutely sure that the vast majority of New Yorkers have no clue what the SCC is, much less the shortcomings of its use in general, and the political manipulation of its numbers by the Obama administration in particular.

The SCC is the present day value of projected future net damages from emitting a ton of CO2 today. In order to estimate the impact of today’s emissions it is necessary to estimate total CO2 emissions, model the purported impacts of those emissions and then assess the global economic damage from those impacts. The projected global economic damage is then discounted to present value. Finally, part of the future damage is allocated to present day emissions on a per ton basis.

The ultimate question is whether using the SCC for NYS CO2 emissions reductions benefits is reasonable. Jonathan Lesser has evaluated Cuomo’s Clean Energy Standard and concludes that “the appropriate value for these CO2 emissions reductions is effectively zero. The reason for this is not that climate change is a hoax or that CO2 emissions do not affect the climate. The reason is simple economics: the marginal benefit of reduced CO2 emissions caused by the CES cannot be valued at the SCC because the latter reflects an average value of reducing many billions of tons of CO2. Moreover, because climate change is, by definition, a global phenomenon, the benefits to New Yorkers themselves from reduced CO2 emissions will necessarily approach zero, as virtually all the putative benefits will be captured outside New York.”

Someday I will prepare a more detailed post on the SCC but I also want to highlight some of the short-comings of the current value of the SCC used in this report. Consider that the future net damages includes impacts out 300 years. It is an act of extreme hubris to claim that any projection of how the world will operate in 100 years much less 300 years should be used to guide current actions simply because no one could have imagined the technology available in today’s society in 1917. Another key component of the SCC is that it considers global impacts not just NYS impacts. In other words we are being asked to pay today for some estimated future impact elsewhere. Were it not for the fact that there are plenty of global problems that could be funded today with demonstrable effects at a fraction of these proposed costs then I could accept the premise of this noble gesture. Ultimately when the State claims benefits exceed costs buried in there somewhere are SCC benefits that are not in anyone’s wildest imagination a direct connection to today’s NY costs.

I earlier noted political manipulation by the Obama Administration. Two examples prove my point. One of the key assumptions in the estimate of future net damages is just how much the effect CO2 emissions have on future temperature. The Obama SCC did not use the latest (and lower) value available at the time of this factor in their calculations so their values are biased high. Since the publication of the latest IPCC report other estimates of the sensitivity of temperature to CO2 based on observations and not modeling have reported even lower values.

An even more egregious example of manipulation is documented by the Institute of Energy Research. In order to estimate future economic impacts the discount rate is used to estimate how much money invested today would be worth in the future so that we can link today’s costs to the future. As shown in the IER post “the Office of Management and Budget (OMB) guidelines that all cost/benefit analyses are to be scored using both a 3% and a 7% discount rate. Despite this clear directive, the Obama Administration’s task force on the Social Cost of Carbon did not bother running the computer simulations with this setting.” Why not you may ask? Cynics like me suspect it is because that there are net benefits of CO2 emissions through the year 2030 using that discount rate.

Conclusion

This report exemplifies problems with current New York State energy policy. The legislature and public have not had a chance to comment on the goals espoused by the Executive Orders that are driving this policy. Even if agree that those goals should be pursued, do we really want to go there without knowing the price? The report shows that a comprehensive analysis of costs is necessary in order to determine the total costs. What is the benefit to New York? The use of the SCC as a primary driver of the benefits is not well understood by the public and upon closer examination its use in this context is inappropriate. Ultimately, it is fair to ask why the State is pushing ahead with these programs without answering these fundamental questions.

Pragmatic Environmentalist of New York Principle 7: Golden Rule of Climate Extremes

This is a background post for my pragmatic environmentalist principles listed on the principles page of this blog.

Dr. Cliff Mass defines the Golden Rule of Climate Extremes as: The more extreme a climate or weather record is, the greater the contribution of natural variability.

I am posting this soon after Harvey made landfall, dumped extraordinary amounts of rain, and the impact of global warming on it made the news. The question that came up was the effect of climate change on the storm. The Capitol Weather Gang claims the truth is in the middle. Note that Dr. Mass concluded that global warming effects on Harvey were immaterial.

The golden rule of climate extremes is important to keep in mind because I believe it is important to point out that most climate scientists do not have extensive weather forecasting experience. It is that experience that enables meteorologists to properly determine the role of natural variability to a particular event. When an operational meteorologist looks at this kind of weather event, for example Joe Bastardi, natural variation invariably provides most of the impact.

Pragmatic Environmentalist of New York Principle 8: Gresham’s Law of Green Energy

This is a background post for my pragmatic environmentalists principles listed in the about section of this blog. Jonathan Lesser has coined “Gresham’s Law of Green Energy” that I believe is another principle of a pragmatic environmentalist.

Gresham’s Law is named after Sir Thomas Gresham, a 16th-century British financier who observed that “bad money drives out the good.” Lesser shows that green energy subsidies transfers wealth and does not create wealth. The subsidies or “bad” money take money out of the system that was “good” inasmuch as it was being used productively. In particular he notes that “subsidized renewable resources will drive out competitive generators, lead to higher electric prices, and reduce economic growth”.

He explains his rationale as follows:

“The subsidies paid by ratepayers transfer wealth from existing generators to a chosen few renewable resource owners. One may like to rail against the existing generators — as many politicians have — but the long-run implications of such subsidies will be to destroy competitive wholesale electric markets and drive out existing competitors. This course of action will cost jobs because businesses, forced to pay higher electricity prices, will either relocate, contract, or disappear altogether. It will reduce the disposable income of consumers, who will forever be forced to subsidize renewable resources (just as they must now subsidize corn ethanol producers) — all in the name of ’green energy’.”

This is a particularly important principle for renewable energy benefit analyses, in particular “price suppression” such as that used in NY’s Clean Energy Standard. The idea is that increasing the supply of “cheap” electricity causes market prices to decrease so that consumers benefit. However, Lesser shows that these benefits are temporary and costly in the long run. Subsidizing the construction of renewable generation in a de-regulated state results in resources that manipulates the market to make it less efficient. Moreover, it eventually drives out existing generators and reduces the likelihood that new unsubsidized generating facilities will enter the market. Lesser notes that rather than building a better mousetrap, these policies are using subsidies to artificially and temporarily reduce the price of mousetraps.