Articles by Sean Casten

The goal of climate policy is not high GHG prices

There's an implicit assumption in much of the climate policy debate that to meaningfully lower greenhouse-gas emissions, we need a high price on carbon. The assumption is wrong.

Economics 101

In a market setting, price is a function of supply and demand. For a given commodity, prices will be high when demand outpaces supply and low when supply outpaces demand. Thus oil, for instance, is expensive. And autographed copies of my pen and ink cartoons are cheap (in spite of their rarity, I might add).

A cap-and-trade system is an attempt to create a market around a particular commodity, namely GHG emissions. The same dynamic will apply: if demand for GHG reduction outpaces supply, the price of GHG reduction will be high; if supply of GHG reduction outpaces demand, the price will be low.

If we pass a cap-and-trade policy that yields sustained high prices for GHG emissions, it will not be a sign of a successful policy. Quite the opposite: it will mean that the supply of GHG reduction is insufficient to meet the demand.

Coal is no longer cheap — so what comes next?

This article first appeared in Spark, and is reprinted here with their permission. It's somewhat long, and it's got numbers and graphs. It helps if you imagine Scarlett Johansson reading it.

When it comes to power generation, coal isn't cheap. Both power plant and fuel costs are up by nearly 300%, and projected to rise farther¹. Even before factoring in the risks of future greenhouse gas legislation, this has conspired to make a bet on coal-fired central station power equivalent to a bet on massive retail power price increases. Increasingly, this is a bet that neither equity nor debt providers are willing to take.

And yet we continue to operate under the assumption that coal is cheap -- to the extent that we have largely framed our greenhouse gas policy conversation as a tradeoff between environmental stewardship and the cheap coal fantasy.

On balance, this is good news, because it means that the perceived conflict at the heart of our current climate change debate is false. We need not quibble about whether or not we can afford to address global warming; indeed, we can lower greenhouse gases and grow the economy. But first, we have to get beyond coal.

The Electric Sector's Role in Greenhouse Gas Emissions

In the United States, coal is primarily a power plant fuel, and the electricity sector is our single biggest source of greenhouse gas (GHG) emissions. As a result, any discussion of greenhouse gas reduction must confront coal-based electricity. Figure 1 shows total US greenhouse gas emissions by sector, and Figure 2 shows how the electric sector has steadily increased its share thereof.

Figure 1: 2005 US Greenhouse Gas Emissions, By Source²

The challenges of reconciling science and policy

This is a post that I'm virtually certain will be misinterpreted. But it's an important enough issue that I'm going to bet that my writing skills are sufficient to provide clarity to a rather muddy issue.

First off, though, a disclaimer: Science is good. Policy informed by science is good. Leadership informed by science is good. The alternative to all of the above is bad. Nothing I am about to say is to be taken as support for creationism, global warming denial, diminution of White House science advisers or the re-excommunication of Galileo.

However, there is a conflict that lies between the fuzziness that is innate to scientific inquiry and the precision that is required for policy -- and more broadly, leadership. We see this conflict whenever global warming deniers trot out scientists who disagree with mainstream theories and we are forced to explain to the deniers that while the nature of scientific inquiry invites debate, the presence of a debate per se does not imply anything about the preponderance of evidence. As Joe Romm has pointed out, Einstein's revisions to the laws of motion did not prove that Issac Newton was an insufferable quack. It just meant that science is innately fallible and subject to revision. Or as Keynes famously said, "When the facts change, I change my mind. What do you do?"

So far, I don't think I've said anything novel or controversial. But here's the catch: The same logic that compels us to acknowledge that science is fallible and evolves must also compel us to acknowledge that policy based on science might be wrong. This is not to suggest that a 1-percent doubt ought to stand in the way of policy based on 99 percent certainty, but rather to recognize that good policy must retain sufficient flexibility to "change its mind."

Electric emissions growth outpaces generation in 2007

The EIA just released data on 2007 that shows total electricity generation increased by 2.5 percent in 2007, but total CO2 emissions from the electric sector increased by 3 percent. That's right: the electricity sector, already the single largest contributor to U.S. CO2 emissions, is increasing its CO2 intensity.

Intriguingly, this increase has come about despite a 25 billion kWh increase in wind and nuclear generation in 2007, as the gains from those zero-carbon sources were offset by a 40 billion kWh decrease in production from hydro-electric facilities.