Topic: Energy and Environment

Much Ado about Offshore Drilling

The lead story in today’s papers and the buzz on the political talk shows is about President Bush’s request to Congress that they suspend the federal ban on oil drilling off the U.S. Atlantic and Pacific coasts.

Already, drilling proponents and environmentalist opponents are gearing up for battle, and the presidential candidates are sounding off on the idea. None of their comments, so far, offer anything useful for public policy.

For people who want good policy, here are some points to consider:

  • Part of the reason for the high current price of oil (and gasoline) is that supply is “inelastic” – that is, it’s hard for producers to increase production even when prices are high and there is significant economic incentive to do so. A significant increase in production capacity would reduce oil and gas prices significantly — assuming the current condition of high inelasticity continues until the new oil is brought to market.
  • It will take a long time for that new oil to reach the market. It often takes as much as a decade or more for a new oil field to be brought online.
  • No one knows how much oil lies offshore and whether that oil is economically worthwhile to extract, as there hasn’t been any extensive studies of those areas in decades.
  • Concerns about the environmental impact of drilling are legitimate, as are concerns that the United States may be forgoing the use of a valuable resource by not drilling in these areas.

Good public policy would examine the risks and costs underlying both of these concerns, and then make a decision (or perhaps a compromise) about drilling. However, this issue will not be decided in such a rational way. The debate will be dominated by two ideological camps — the “drill at any cost” crowd and the “don’t drill at any cost” crowd” — and their ideological priors and political power will preempt any good policy discussion.

Unfortunately, that’s how we roll here in Washington, D.C.

Sustainable Architecture - A (Real Life) Straw Man?

If you’re free Friday morning, you might want to hop on over to the Russell Senate Office Building to learn about the amazing, inexplicable, short-sighted market bias against straw-bale buildings and the need for the feds to do something about it. The Environmental & Energy Study Institute, the sponsor of this event,

Invites you to learn how the ‘new but old’ method of straw-bale construction can help address some of our most serious national policy challenges, such as record energy prices and unemployment, inadequate supply of affordable housing, the threat of climate change, and pressing needs in transportation and infrastructure funding. The modern building industry places heavy demands on the energy and transportation sectors. Straw is a locally-sourced, widely available, and renewable resource that builders, architects, engineers, and home owners are turning into affordable, safe, durable, and energy-efficient buildings in many climates. The following presenters will discuss the benefits of using this American invention, the regulatory barriers and institutional biases against straw-bale construction, and the role of the federal government in resolving these issues.

And that parable about the three little pigs? A PR smear spun by “Big Brick” no doubt.

Compensating for Climate Change

Reason Roundtable has a discussion on whether developed countries should compensate developing countries for any damages from climate change. The following is from the introduction to the discussion:

Should companies or countries that have contributed to global warming be required to compensate individuals directly impacted by climate change? Is global warming a threat to private property? The latest Reason Roundtable examines these questions from a couple of perspectives.

Reason Foundation’s Shikha Dalmia says libertarians “cannot treat the earth’s thermostat as an enemy of freedom. Indeed, regardless of whether climate change eventually turns out to be real or not, the libertarian goal ought to be to ensure the protection and advancement of freedom — and all its attendant institutions: free markets, limited government and property rights.”

Jonathan Adler, professor of law at Case Western Reserve University School of Law, writes, “The whole point of protecting property rights is to ensure that property owners control exercise of their own rights. If a property owner wishes to accept another’s waste in return for compensation, that should be her choice. If not, then her right to refuse ought to be protected. Individual property rights should not be put up for a community vote or sacrificed as part of some utilitarian calculus. Libertarians readily accept this principle when government planners violate property rights in the name of economic development (think of the Supreme Court’s landmark eminent domain decision, Kelo v. New London). Yet they seem to abandon their commitment to property rights when it comes to global warming…. Given the potential impact of climate change on property rights, we ought to at least start thinking about policy measures that compensate affected parties without themselves posing a risk to individual liberty.”

Indur M. Goklany, author of the book The Improving State of the World: Why We’re Living Longer, Healthier, More Comfortable Lives on a Cleaner Planet, writes, “Not only is there no proven harm that can be specifically attributed to the warming, but, more importantly, even if there were such harm, a proper respect for property rights might preclude compensation…. If only some countries had contributed to global warming and benefited from causing it while others had neither contributed nor benefited from it, there might have been an argument for compensation from one to the other. But that’s far from the case. That every country is both a contributor and a beneficiary not only makes it infinitely more difficult to calculate who owes whom how much, it also vitiates anyone’s moral standing for compensation — a normative commitment to property rights notwithstanding.”

The Roundtable essays can be found in the following:

Global Warming: Keeping Property Rights at the Forefront
Looking for solutions that would least empower the government — and least threaten property rights
By Shikha Dalmia

Climate Change As If Property Rights Mattered
Individuals should be compensated by those whose actions create environmental problems that produce provable damages to their property
By Jonathan H. Adler

Climate Change: No Harm, No Claim
All countries have engaged in greenhouse-gas generating activities
By Indur Goklany

Is Climate Change the World’s Most Important Problem? Part 3

In Part 1 of this series we saw that even if one gives credence to the oft-repeated but flawed estimates from the World Health Organization of the present-day contribution of climate change to global mortality, other factors contribute many times more to the global death toll. For example, hunger’s contribution is over twenty times larger, unsafe water’s is ten times greater, and malaria’s is six times larger. With respect to ecological factors, habitat conversion continues to be the single largest demonstrated threat to species and biodiversity. Thus climate change is not the most important problem facing today’s population. 

In Part 2 we saw that even if we assume that the world follows the IPCC’s warmest (A1FI) scenario that the UK’s Hadley Center projects will increase average global temperature by 4°C between 1990 and 2085, climate change will at most contribute about 10% of the cumulative death toll from hunger, malaria and flooding into the foreseeable future. It would simultaneously reduce the net population at risk of water stress. 

Clearly, climate change would, through the foreseeable future, be a bit-player with respect to human well-being

Here I’ll examine whether, notwithstanding that climate change is likely to be outranked by other factors when it comes to human well-being, whether it is likely to be the most important global ecological problem if not today, at least in the foreseeable future.  

As in Part 2, I’ll rely on estimates of the global impacts of climate change from the British-government sponsored “Fast Track Assessments” (FTAs).  

The following figure, which presents the FTA’s estimates of habitat converted to cropland as of 2100, shows that the amount of habitat lost to cropland may well be least under the richest-but-warmest scenario (A1FI), but higher under the cooler (B1 and B2) scenarios. Thus, under the warmest scenario, despite a population increase cropland could decline from 11.6% in the base year (1990) to less than half that (5.0%) in 2100: Climate change may well relieve today’s largest threat to species and biodiversity! 

One reason for this result is that higher atmospheric concentrations of CO2 might make agriculture more efficient, and this productivity increase would not have been vitiated as of 2100 by any detrimental impacts of higher temperatures.

The next figure shows that in 2085 non-climate-change related factors will dominate the global loss of coastal wetlands between 1990 and 2085.

[In this figure, SLR = sea level rise. Note that the losses due to SLR and “other causes” are not additive, because a parcel of wetland can only be lost once. For detailed sources, see here.]

Thus we see that neither on grounds of public health nor on ecological factors is climate change likely to be the most important problem facing the globe this century. 

So if you hear anyone make the claim that climate change is the most important environmental problem facing the globe now or whenever, ask to see the analysis that compares climate change with other problems. 

In future postings I’ll look at the policy implications of the results from the FTA in greater detail.

A Stagflation Sideshow: The Wall Street Journal’s Flawed Theory of Oil Prices

Yesterday’s Wall Street Journal editorial “The Stagflation Show” (June 9) has a graph showing the price of oil generally rising while the fed funds rate was falling (if you don’t look too closely at flat or falling oil prices from November through February).

The conclusion is that if the Fed had not cut interest rates since last September the oil price would not have go up. Perhaps so, but the most obvious reason for any link between Fed easing and oil prices is not mentioned at all. And the stated reason (a “dollar rout and commodity boom”) is at odds with the facts. The timing is way off.

The most obvious connection between oil prices and Fed policy is cyclical.

There have been nine big spikes in oil prices since the 1950s and every one of them was followed by a U.S./world recession within a year.

Every recession, in turn, was followed by a huge drop in the price of crude oil. West Texas crude fell by 44-71% in the wake of the last three recessions.

If the Fed had left the interest rates on bank reserves at 5 ¼% – the U.S. would very likely have led the world into a significant recession long before now. And a U.S./world recession would indeed have pushed the oil price down. But that is not what the Journal editorial page seems to be suggesting. Instead, they blame the Fed for a “dollar rout and commodity boom.”

The big spike in oil prices since early March happened when the dollar was not falling and also when prices of many non-energy commodity prices were falling. There has been no dollar rout and a no generalized commodity boom since February (when oil fell as low as $87 even as food prices soared).

The Fed’s trade-weighted index of the dollar’s value against 26 currencies was 95.77 in March and 95.83 in May. The narrower index of 7 major currencies was 70.32 in March and 70.75 in May.

From March 4 to June 3 The Economist index of 25 commodity prices – excluding oil –fell by 7.8% in dollars (from 271.9 to 250.6) but by only 5.7% in British pounds. The dollar price of wheat fell by 40%, cotton by 26%, and prices have also fallen sharply for livestock, lumber and most industrial metals. This is a “commodity boom”?

It is true that lower short-term interest rates have made it cheaper for producers and “speculators” to hold crude oil off the market (e.g., in tankers or in the ground) if they expect a higher price in the near future. But speculation in the futures market can’t keep prices in the cash (spot) market higher than the market will bear. And the world does not have an unlimited budget to pay more and more for petrochemicals and fuel. As firms cut back or shut down production in energy-intensive industries worldwide (U.S. airlines are just the most obvious example) the demand for oil can drop quickly.

Oil above $130 involves a massive transfer of income away from oil-importing countries, raising their cost of living and cost of production. That greatly increases the likelihood of a significant economic slowdown or contraction in most oil-importing countries, even India and China. And that, in turn, always causes the price of oil to collapse.

Is Climate Change the World’s Most Important Problem? Part 2

Despite using the World Health Organization’s scientifically suspect estimates of the present-day death toll “attributable” to climate change, we saw in Part 1 that climate change contributed less than 0.3% of the global death toll. At least 12 other factors related to food, nutrition and the environment contribute more. 

Here I’ll examine whether climate change is likely to be the most important global public health problem if not today, at least in the foreseeable future.  

Once again I’ll rely on analyses done by scientists who are not part of the community of skeptics. Specifically, I’ll use estimates of the global impacts of climate change from the British-government sponsored “Fast Track Assessments” (FTAs) which have been published in the peer reviewed literature. Significantly, they share many authors with the IPCC’s latest assessment. For example, the lead author of the FTA’s study on agricultural and hunger impacts is Professor Martin Parry, the Chairman of the IPCC WG 2, responsible for the section of the IPCC report dealing with impacts, vulnerability and adaptation. 

I’ll adopt the FTAs’ estimates for the sake of argument, despite some flaws in their analyses, noted here

I’ll also consider “the foreseeable future” to extend to 2085 since the FTAs’ estimates purport to provide estimates for that date, despite reservations.  In fact, a paper commissioned for the Stern Review (p.74) noted that “changes in socioeconomic systems cannot be projected semi-realistically for more than 5–10 years at a time.” [Yes, that’s the same Stern that did a climate change analysis extending to 2200, or was it 2300? No matter.] 

In the following figure, using mortality statistics from the WHO, I have converted into annual mortality the FTAs’ estimates for the population at risk (PAR) for hunger, malaria (which is responsible for an estimated 75% of the global burden of disease due to the main vector-borne diseases), and coastal flooding. Details of the methodology are provided here

In this figure, the left-most bar shows cumulative global mortality for the three risk categories in 1990 (the baseline year used in the FTAs). The four “stacked” bars on the right provide mortality estimates projected for 2085 for each of the four main IPCC scenarios. These scenarios are arranged from the warmest on the left (for the so-called A1FI scenario which is projected to increase the average global temperature by 4.0°C as indicated by the numbers below each stacked bar) to the coolest on the right (for the B1 scenario; projected temperature increase of 2.1°C).  Each stacked bar gives estimates of the additional global mortality due to climate change on the top, and that due to other non-climate change-related factors on the bottom. The entire bar gives the total global mortality estimate. 

To keep the figure simple, I only show estimates for the maximum (upper bound) estimates of the mortality due to climate change for the three risk factors under consideration. 

This figure shows that climate change’s maximum estimated contribution to mortality from hunger, malaria and coastal flooding in 2085 will vary from 4%-10%, depending on the scenario. 

In the next figure I show the global population at risk (PAR) of water stress for the base year (1990) and 2085 for the four scenarios.  

A population is deemed to be at risk if available water supplies fall below 1,000 cubic meters per capita per year.  

For 2085, two bars are shown for each scenario. The left bar shows the net change in the population at risk due to climate change alone, while the right bar shows the total population at risk after accounting for both climate change and non-climate-change related factors. The vertical lines, where they exist, indicate the “spread” in projections of the additional PAR due to climate change.  

This figure shows that climate change reduces the population at risk of water stress! This is because global warming will decrease rainfall in some areas but serendipitously increase it in other, but more populated, areas.   

The figure also suggests that the warmest scenario would result in the greatest reduction in net population at risk.  

[Remarkably, the original source was reticent to explicitly point out that climate change might reduce the net population at risk for water stress. See here (pages 12-14 or 1034-1036).].  Thus, through the foreseeable future (very optimistically 2085), other factors will continue to outweigh climate change with respect to human welfare as characterized by (a) mortality for hunger, malaria and coastal flooding, and (b) population at risk for waters stress. 

In the next post in this series, I’ll look at a couple of ecological indicators to determine whether climate change may over the “foreseeable future” be the most important problem from the ecological perspective, if not from the public health point of view.

Is Climate Change the World’s Most Important Problem?

A 2005 review article in Nature on the health impacts of climate change provided an estimate of 166,000 deaths as the annual global death toll “attributable” to climate change. This estimate, based on global vital statistics for the year 2000, was derived from a study sponsored by the World Health Organization (WHO) that even the study’s authors acknowledge may not “accord with the canons of empirical science” (see here). Let’s, nevertheless, accept this flawed estimate as gospel, for the sake of argument.

Where would this rank climate change in the list of global threats to mortality?

In the year 2000, there were a total of 55.8 million deaths worldwide. Thus, climate change may be responsible for less than 0.3% of all deaths globally (based on data for the year 2000). In fact, it would place climate change no higher than 13th among mortality risk factors related to food, nutrition and environment, as shown in the following table taken from pages 355-356 of the book, The Improving State of the World.

[Notably, all extreme weather events (whether due to climate change or the normally abnormal climatic variability) contribute all of 0.03% of global deaths on average. See Table 2, here.]

Specifically, climate change is easily outranked by threats such as hunger, malnutrition and other nutrition-related problems, lack of access to safe water and sanitation, indoor air pollution, malaria, urban air pollution.

With respect biodiversity and ecosystems, today the greatest threat is what it always has been – the conversion of land and water habitat to human uses, i.e., agriculture, forestry, and human habitation and infrastructure. See,e.g., here.

Climate change, contrary to claims, is clearly not the most important environmental, let alone public health, problem facing the world today.

But is it possible that in the foreseeable future, the impact of climate change on public health could outweigh that of other factors?

I’ll get to this question in subsequent blogs over the next couple of weeks, but for those who can’t wait, the answer can be found here.