News Releases
Chinese policymakers, senior academics, and more than 100 researchers, scientists and industry leaders gathered last week for the Second Annual Stakeholders Meeting of the Tsinghua-MIT China Energy and Climate Project (CECP). At the yearly gathering, participants reflected on the state of climate policy in China and the progress of the multi-disciplinary partnership, which launched last year to develop new tools to solve China’s most challenging climate and energy policy questions.
“In light of the recent agreement between Presidents Obama and Xi to limit hydrofluorocarbons—a potent greenhouse gas—we hope that close work between the two countries continues,” said Henry Jacoby, co-director emeritus of the MIT Joint Program on the Science and Policy of Global Change, during his keynote address. “In this context, the work of the CECP becomes ever more important.”
Jointly hosted by CECP’s parent research groups—the Tsinghua University Institute for Energy, Environment, and Economy and the MIT Joint Program on the Science and Policy of Global Change—the meeting creates a platform for a diverse group of policymakers to interact with researchers and explore future paths for China’s energy and climate policy. The number of external attendees more than quadrupled from last year’s conference, indicating the high level of interest in the Tsinghua-MIT collaboration and China's energy and climate policy more broadly. Senior officials from China's National Development and Reform Commission, National Energy Administration, Ministry of Industry and Information Technology, and Ministry of Science and Technology, as well as leading Chinese academics, formed a panel of experts that responded to the findings of the joint research team. Over 150 stakeholders representing industries, governments, and academic institutions in China and abroad attended the meeting, reflecting CECP's goal of sharing project insights with a broad range of global leaders on energy and climate topics.
The meeting’s main dialogue between CECP researchers and policymakers focused on future drivers of energy use and the design of a carbon emissions trading schemes (ETS) in China, a subset of the CECP’s ongoing work. CECP researchers compared China’s current climate policy—provincial carbon intensity targets—to national emissions trading system designs that varied in terms of sector and regional coverage. CECP researchers underscored the need for broad sector and geographic coverage to enhance ETS cost effectiveness, as well as the potential to achieve equity goals through the initial allocation of emissions permits.
In the afternoon, a panel of policy advisors representing planned pilot emissions trading systems in Beijing, Guangdong, Shanghai, Tianjin, and Hubei described the design and progress toward implementation, which is expected to be complete by the end of 2013. Panel participants emphasized that pilot schemes build familiarity with emissions trading and help policymakers evaluate the feasibility of a national ETS.
The CECP’s leaders, Dr. Valerie Karplus of MIT and Professor ZHANG Xiliang of Tsinghua, explained these findings based on two models they developed over the last year: the China-Global Energy Model (C-GEM) and the China-Regional Energy Model (C-REM). While the C-REM model allowed the researchers to uncover their ETS findings, the C-GEM model provided analysis on China’s "economic transformation"— the effort to move from an energy and emissions intensive economy focused on manufacturing for export to one that is more services and technology oriented.
Prof. ZHANG highlighted the importance of the MIT-Tsinghua relationship in bringing about these results. “The regular exchange of Tsinghua students working at MIT, and MIT students and researchers visiting Tsinghua, makes for a very productive working relationship,” Prof. ZHANG said, acknowledging the support of sponsors on both the MIT and Tsinghua sides. MIT founding sponsors include French Development Agency, Eni, ICF International (a consultancy), and Shell, while the collaboration receives support at Tsinghua from the Ministry of Science and Technology, National Development and Reform Commission, and the National Energy Administration.
Alongside government representatives, a number of senior academics from China's top universities in a variety of disciplines offered their input on the CECP's ongoing research efforts. The experts identified key ramifications from the results and called attention to future topics of interest.
“An important goal of this meeting is to bring the key stakeholders together in the same room,” said Karplus, “This helps to foster a shared awareness of the wide range of views on policy options that reflect the diverse circumstances facing China’s localities and industries.”
Creating a more food-secure world through adaptation and resilience
MIT Global Change Forum - Boston, Massachusetts
Greg Page, Cargill Chairman and Chief Executive Officer
June 4, 2013
(As prepared remarks)
I am very happy to be here this evening and glad that John Reilly extended the invitation. The theme for this year’s forum is “Water, Food and Energy in a Changing World.” In the past, I know these forums have focused on constrained resources like water and energy, so tonight we will talk more about food – which is the great natural combination of water and energy.
My remarks this evening hopefully will be a good kickoff for two interesting days talking about the intersection of water, food and energy, which are more closely linked than ever before.
There could be 9 billion people on this earth in 40 years….and we will feed them. How can we do it given the myriad factors – including climate – that are part of the food security puzzle? It's a challenge that will take our collective wisdom to solve. And it will require adaptive behaviors and resilience.
About Cargill
To give context for my remarks tonight, let me share just a few comments about Cargill.
Cargill is a company that began in the Midwest almost 150 years ago and has grown over time to where two-thirds of our employees are outside the U.S. In short, Cargill has globalized along with the world’s GDP.
Cargill operates in four key segments. The first is the business of taking food and crops from times and places of surplus, to times and places of deficit. That traditional role of Cargill in grains and primary oilseeds represents about 25 percent of the company.
The next segment is providing farmers with a variety of services and access to markets.
Third is our food and meat businesses. Our businesses here include cocoa and chocolate, malt, corn milling, flour, salad dressings, vegetable oil, and a fairly significant meat business.
Finally, Cargill has a risk management business. We trade ocean freight, coal, electricity, natural gas, petroleum, iron ore and basic metals. Clearly the prices of these commodities, particularly freight, petroleum and energy, have a dramatic impact on agriculture.
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MIT’s Global Change program is one of several university programs Cargill funds that help to better understand climate science, impact on crop yields, sustainability and implications for food security. |
Cargill and MIT
Cargill has been a sponsor of the MIT Joint Program on the Science and Policy of Global Change since 2008. I know this forum has gained an international reputation for serious and frank discussions of global issues.
MIT’s program is one of several University programs Cargill funds that are helping us better understand climate science, impact on crop yields, sustainability and implications for food security. (Others include Stanford’s Center for Food Security and the Environment, and the University of Minnesota’s Global Landscapes Initiative). Cargill also has engaged with various think tanks to build our understanding of climate change issues, including Resources for the Future. We also appreciate the work of IFPRI – the International Food Policy Research Institute – who is on the agenda tomorrow…and others in the nonprofit / IGO / academia space who are devoting their time and talent to the challenge of feeding the world.
Some of Cargill's most important philanthropic partnerships are with nonprofits like CARE, Feeding America, The Nature Conservancy, TechnoServe and others who are trying to make the world more food secure by either raising incomes, expanding access to food or ensuring that food production is done in an environmentally responsible way.
The complexity of food security
Of all the challenges facing our world today, none is more immediate than the need to provide sufficient nutrition for all. Food security involves interdependent parts, and having all those parts working together is what is complicated.
The globe’s population is not only increasing, it is becoming more urban and more affluent. Our ability to meet that challenge is affected by these factors:
- Diets are changing as income levels rise.
- Biofuels have become a significant consumer of traditional crops.
- Public investment in agricultural research has been declining.
- Government policies that inhibit trade or limit productivity are affecting food availability and price.
- And localized supply shocks and production shortfalls continue to occur – although in 2012 we had adequate production – even with the U.S. drought –we just didn’t share well.
Some people question whether we can grow enough food, especially in a world that needs to adapt to changes in climate.
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| Our optimism is rooted in the ingenuity of the world’s farmers. They are natural innovators - adapting to changes in the environment and technology. |
Cargill is optimistic
At Cargill, we are optimistic. We believe that the world can feed itself and that we can harness the power of photosynthesis to produce all the nutrition needed for an increasingly prosperous world.
Our optimism is rooted in the ingenuity of the world’s farmers. They are natural innovators - adapting to changes in the environment and technology – proven by the doubling of the amount of grains, rice and oilseeds that they have produced since 1975—without a significant increase in acreage, much of that coming from double cropping.
I will try to show how the stakeholders in world food production are exhibiting the adaptive behaviors that underpin resilience and provide us a more food-secure world.
Can the food systems we rely on adapt?
If we are in a period of accelerated climate change, the question is whether the food systems upon which we rely can adapt.
Sometimes when we hear the word resilience applied to agriculture, we think of a hard-working and stoic farmer valiantly saving his crop from pests, drought and frost. What I’m trying to convey is a much broader notion of “systemic resilience,” where all major stakeholders in the global food system are poised, able and willing to build solutions to broad challenges in an effective and most important, a complementary way. A global system that is sufficiently flexible to produce enough food despite localized disruptions.
The resilience of farmers
Let’s start where it all begins. On the farm.
While many people are working on climate change mitigation strategies….the farmer will be busy doing that and doing what he or she has always been doing: adapting! Clearly we need both adaptation and mitigation….it is not an either/or choice.
Farmers are the consummate optimizers. Every year, they look in their field, and look at what has been dealt to them. And -- in the best-run countries -- at the last minute, they make a decision about how to optimize their profitability – to grow what the market is signaling to the best of their ability. They look at input costs, forecasts, relative output prices, soil moisture. And then they plant.
There aren’t many of us that can come to work and turn on a dime as skillfully and naturally as farmers. And while many of my examples today relate to modern Western agriculture, we also see resiliency in smallholder farmers.
The power of price
To farmers, rising commodity prices are a potent fertilizer, motivating them to produce more when the market calls for it. In late March, the USDA predicted U.S. farmers would plant the most corn since 1936 – about 97 million acres. And 77 million acres will be planted with soybeans. That acreage is predicted to deliver huge harvests. The predictions come with a caveat of course; they are predicated on a return to reasonable weather during the growing season.
If we take good prices to farmers, incredible progress can be made on food security. In developing countries it is an issue of the economic capacity of non-farmers to put enough price into their agricultural systems to create sustainable agriculture.
Growth in non-farm income is a precondition for agricultural development in emerging economies. Climate, water, seed, technology and agronomy are all important. But the fundamental ingredient of sustainable agriculture is an adequate price to reward the farmer for her efforts. Without the signaling power of price, there will be no change in farmer behavior.
Better technology at an accelerated rate
Because of recent high prices, farmers have had a run of prosperity and are gobbling up technology like never before. Better technology is coming into agriculture at an accelerated rate. And farmers are willing to invest. Cargill has a role in this, facilitating the transmission of price signals and bringing farmers technology and risk management options so they can make decisions that maximize their profitability.
Here is an example. Some of you may know that at least in the middle of the country, we had a very late-arriving spring, and planting was delayed. But in another example of resilience, in just one week, 52% of Minnesota’s corn crop was planted. That is the fastest one-week corn planting on record.
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| A farmer plants his crops at night. View from the tractor seat. You can see the monitor, the light bar on the hood and almost no visibility in the dark, yet it is still operating – because the GPS is steering. |
Adaptation at work
Here you can see a photo from one of our farmer customers who is planting at night. From the tractor seat you can see the monitor, the light bar on the hood and almost no visibility in the dark, yet still operating – because the GPS is steering. About 75% of our customers can now plant 100% of their corn and soybeans in seven days or less.
And one of our customers in Ohio planted 6,000 acres of corn and soybeans in four and a half days. That is what adaptation, profitability and reinvestment has done on the farm.
Key driver of production: yield increase
Over a long period of history, the main contributor to increased food production has been yield gain through genetic improvement and fertilizer use. Acreage has been relatively stable from 1975 to the early 2000s. Only recently have we seen harvested acreage increase.
Farmers have met the challenge of increasing demand for food. But the environmental price of our practices in some cases was too high, and the debt to Mother Earth is now being repaid through a host of remediation efforts such as ag setbacks, and buffer strips to prevent run off; better tillage and reduced tillage practices; restoration of wetlands; and bio-digesters that recover energy from dairy waste – to name just a few.
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| A satellite image for precision agriculture. Cargill's Next-Field system uses satellite images and soil sampling to determine yield potential and crop inputs. |
Precision agriculture
One of the ways farmers are meeting the challenge is through optimization of inputs. Precision Agriculture is the integration of all sorts of optimization tools.
Basic precision agriculture uses satellite images and soil sampling to come up with an average yield potential for a field, and crop inputs like fertilizer are applied based on average yield goals. Cargill’s Next-Field system goes several steps further and develops 2.5-acre yield zones within a field to more precisely apply inputs where they make the most difference, based on that area’s individual yield environment – and in the process reduces waste and environmental impact. We should be impressed that the free market, without any intervention, has incented the conservation of valuable resources and improved sustainability.
Another example of resilient behavior in farmers was featured in a May 20 New York Times story about the Ogallala Aquifer. The aquifer is under depletion stress in High Plains states as a result of intensive farming and drought. The story was loaded with examples of how farmers are adapting to this changing environment: switching to raising dairy heifers, or switching to less water-thirsty crops such as sorghum. Or deciding to rely on rain alone and the lower resulting corn yields.
Farmers also take steps to protect moisture and soil conditions in their fields through conservation tillage and tractors with wide tracks that have a light foot print. They “tip toe” across fields so they don’t cause soil compaction. Our industrial innovators captured this market opportunity, proving their resilience.
In addition to farmers, livestock producers are optimizers, too. For example, there has been a huge surge in the addition of enzymes to animal feed, born largely out of rising ingredient prices partially connected to the ethanol boom, which signaled a need to improve feed conversion into meat and milk.
The resilience of governments and policymakers
Let’s move off the farm and into the halls of government. How are governments and policymakers showing resilience?
Fortunately, when it comes to behaviors that distort markets and disincentivize farmers, today governments for the most part are showing more restraint. Unlike the embargoes we saw in the 2008-2009 time period, there have been fewer market- and price-distorting behaviors of late, such as artificially suppressing prices, hoarding supplies or banning imports or exports.
But there are exceptions. We have seen this clearly in the Indonesian beef market, where steps were taken to block live cattle and boxed beef imports in an effort to spur local production. This has resulted in dramatically higher prices for Indonesian consumers and lower supplies on grocery store shelves.
For those of us who believe the economist David Ricardo, we know that self-sufficiency is not the answer. The world will always raise the most food the most economically and in the most environmentally responsible way when farmers plant the right crops for their local climate and soils using the right technology, then trade with others. If every government set a goal of food self-sufficiency, the world would have much less food.
Resilience in the world’s largest agricultural economy
Another example of resilience is what has been happening in China. Policymakers in the world’s largest agricultural economy have shown their ability to adapt and change behaviors.
China has helped the world in aggregate produce more food through its decision to honor comparative advantage and import soybeans. When it focuses on those areas where it has an advantage – using its scarce land to produce corn, wheat, rice, which yields relatively better in China, then imports soybeans and vegetable oils, which yield relatively more poorly in China – the world in total raises more food.
The challenge for China now is that it built its model for agriculture on the assumption of inexpensive and widely available labor, and a multi-cropping environment. As wages rise, urbanization continues, and agricultural land reform evolves, China again will be tested in terms of its resiliency.
Africa’s critical role in feeding the world
Africa is another example where government action and policymaking is so critical to our ability to feed the world.
In short, Africa has the soil and the rainfall -- but not the policy, infrastructure and rule of law -- that are necessary, along with higher non-farm income, for increasing food production. But we see positive changes in the works.
Some of the lowest productivity gains over the last 40 years have existed in much of Africa. But there are countries on the continent that have shown resilience and their commitment to change the face of agriculture.
As just one example, Nigeria is working hard to transform its agricultural sector, by their own words, “treating agriculture as a business and not a development program.” And treating farmers as business people and not aid recipients. They are interested in attracting private sector investment, and creating the right conditions for both smallholder and large-scale farmers to succeed and collaborate.
Ensuring production through science and innovation
How are policymakers helping ensure the availability of food through their support of science and innovation? I believe the acceptance of science is the foundation to being resilient.
Clearly the world has benefited from the application of food technology and particularly, the appropriate and well-regulated use of genetic engineering to create foodstuffs that are cheaper to produce and require less water, chemicals and tillage.
But the use of that technology is under debate in the United States. In American agriculture, resistance to genetically modified (GM) products was pretty much seen as a European issue, but now it is an American issue. While a ballot initiative in California that called for front-of-package labeling of any GM product was proposed and then defeated, it became clear that there was not sufficient understanding of GM by the public. We need to reach out to both governments and consumers to better explain the benefits of this technology. We need to gain society’s permission to use sound, proven and well-regulated science in the production of food.
The resilience of consumers
While producers and policymakers are changing their behaviors, so are consumers.
I would argue we have seen the resilience of the world’s population as they faced higher food prices in the past six years. As food prices spiked, the conventional wisdom was that it would be a big challenge for developing countries…and that they would have no defense against the rising cost of food.
But rather, GDP rates in developing economies have continued to climb over that period. Part of the reason is that as much as 70% to 80% of the population is involved in farming….and higher prices have created an income opportunity for farmers. In fact they have been thriving….because they are producing and selling into this better price environment.
Let me share an astonishing fact with you... Based on our tracking of global incomes, we have seen real, inflation-adjusted GDP of the least affluent 70% of the world's population more than double in the last 10 years. To me that's incredible resilience during a period so widely lamented.
You may be surprised to hear that we collectively return less than 2% of global GDP to farmers for the calories they bring us in basic foodstuffs. We can afford to be thoughtful in how we compensate them.
Food is emotional
We also need to acknowledge that food is personal.
In developed countries, people increasingly want to know the "story" behind their food. Just look at the bookstore shelves to see how much we as consumers contemplate our diets. Food is emotional, but we need to address it with hard science in a resource-constrained world. We shouldn’t return to medieval agriculture. We need a science-driven agenda, not an emotion driven one.
Global production and consumption
So what kind of results does this resiliency produce?
This chart shows that the world’s variability from year-to-year in its annual total crop production versus trend line is no greater than it was 35 years ago. So despite the headlines that the world has become a far more desperate place and a far more volatile place, actual data on deviations to trend line in global agricultural production is not different from the 1970s. We don’t deny the possibility, or even the likelihood, of looming challenges ahead related to agriculture, but we haven’t seen the impact of climate change in our data so far. Climate change is a risk we cannot throw off frivolously. We need the scientific community -- and many of you in this room -- to better define the risk -- based on science.
The changing Canadian Prairie provinces
In North America, we are seeing changes not just in how food is produced, but where it is produced.
I grew up in North Dakota, where the big question up for debate in the spring was: would you plant your wheat on May 20 or May 28? Now the question is much more complicated. Your options are not just wheat, but now corn, soy, canola, sunflower and lentils enter the equation. Clearly, the variety of crops being grown in Bottineau County North Dakota is quite different from when I graduated from high school. So what does this example show?
Is the planting of corn a response to an increased number of frost-free days in the Northern latitudes? The answer is yes. At least in this microclimate it seems like something structural is happening. But I would argue that genetics, price and crop insurance are at least as contributory factors as frost-free days. Farmers’ decisions are based on a host of elements.
It is also true that these same factors are driving investments in Canada’s Prairie Provinces of Manitoba, Saskatchewan and Alberta….by Cargill and others, and that Canada’s grain mix is being transformed.
While changes in temperature and moisture may play out differently on different continents, I was encouraged to see the preliminary research that MIT presented at the last Forum on the world’s breadbaskets. I recognize that this work is preliminary but I congratulate MIT for tackling such a highly charged issue. In the absence of climate mitigation policies, the ability to adapt is critical. That is why this research is so important.
The importance of working together
Agricultural production has always been affected by variability in weather...and farmers have adapted strategies appropriate to their local situation.
Who knows when and how much we will tip the scales from weather volatility to climate change? We all need to look carefully for this future. We are looking for scientists to help us with these questions, to help define the borders and the scenarios so we can help create a more sustainable food system.
I believe that we have the power to adapt, and that the resilience we have shown in the face of change will continue.
So if there is one point to leave you with, it is the importance of working together on this issue of feeding the world. That is why we are so pleased to see MIT involved in this work.
Cargill is optimistic that we can, in fact, feed our world – even in a changing environment.
NOTE: These are the speaker’s “as-prepared” remarks.
June 17, 2013 
Vicki Ekstrom
MIT Energy Initiative
Energy efficiency promises to cut emissions, reduce dependence on foreign fuel, and mitigate climate change. As such, governments around the world are spending tens of billions of dollars to support energy-efficiency regulations, technologies and policies.
But are these programs realizing their potential? Researchers from the MIT Energy Initiative (MITEI) and University of California at Berkeley’s Haas School of Business have collaborated to find out.
The researchers’ energy-efficiency research project, dubbed “E2e,” is a new interdisciplinary effort that aims to evaluate and improve energy-efficiency policies and technologies. Its goal is to support and conduct rigorous and objective research, communicate the results and give decision-makers the real-world analysis they need to make smart choices.
The E2e Project is a joint initiative of the Energy Institute at Haas and MIT’s Center for Energy and Environmental Policy Research (CEEPR), an affiliate of MITEI — two recognized leaders in energy research.
The project’s name, E2e, captures its mission, the researchers say: to find the best way to go from using a large amount of energy (“E”) to a small amount of energy (“e”), by bringing together a range of experts — from engineers to economists — from MIT and UC Berkeley. This collaboration, the researchers say, uniquely positions the E2e Project to leverage cutting-edge scientific and economic insights on energy efficiency.
“Cutting energy has lots of potential to help us save money and fight climate change,” says Michael Greenstone, MIT’s 3M Professor of Environmental Economics and a member of MITEI’s Energy Council. “It’s critical to find the local, national and global policies with the biggest bang for the buck to use governments’, industry’s and consumers’ money wisely while slowing climate change.”
Greenstone is leading the project with Christopher Knittel, co-director of CEEPR, and Catherine Wolfram, associate professor and co-director of the Energy Institute at Haas.
“When deciding on the best energy measures to implement, decision-makers should compare model predictions to actual consumer behaviors. That’s where this project comes in,” Wolfram says. “The E2e Project is focused on singling out the best products and approaches by using real experiments centered on real buying habits. It will provide valuable guidance to government and industry leaders, as well as consumers.”
The group’s motivations for studying energy efficiency are derived, in part, from the McKinsey Curve — a cost curve that shows that abating emissions actually pays for itself.
“Our goal is to better understand what the costs and benefits of energy-efficient investments are — where the low-hanging fruit is, as well as how high that fruit is up the tree,” says Knittel, MIT's William Barton Rogers Professor of Energy Economics at the MIT Sloan School of Management. “The McKinsey curve would suggest the fruit’s already on the ground. If this is true, we want to figure out why no one is picking it up.”
Former U.S. Secretary of State George P. Shultz, a member of the E2e advisory board, says, “I like the saying ‘A penny saved is a penny earned,’ which rings true from the standpoint of energy. Energy that is used efficiently not only reduces costs, but is also the cleanest energy around. The E2e Project will allow us to better understand which energy-efficiency programs save the most pennies.”
Shultz is a distinguished fellow at Stanford University’s Hoover Institution, where he leads the Energy Policy Task Force. The board also includes MIT Institute Professor John Deutch, former undersecretary of the Department of Energy; Cass Sunstein, a professor at Harvard Law School and President Obama’s former director of regulatory affairs; Susan Tierney, managing principal at Analysis Group and a former Department of Energy official; and Dan Yates, CEO and founder of Opower.
The E2e Project seeks to answer questions such as: Are consumers and businesses bypassing profitable opportunities to reduce their energy consumption? What are the most effective ways to encourage individuals and businesses to invest in energy efficiency? Are current energy-efficiency programs providing the most savings?
The project’s first experiments are already underway. For example, the team is tracking consumers’ vehicle purchasing decisions to discover if better information about a car’s fuel economy will influence consumers to buy more fuel-efficient vehicles. If so, emphasizing the calculated fuel savings in the vehicle information presented to consumers may be productive.
Other initial projects include evaluating the Federal Weatherization Assistance Program, and determining why households invest in energy efficiency and the returns to those investments.
More information: e2e.haas.berkeley.edu or e2e.mit.edu
The E2e Project was funded with a grant from the Alfred P. Sloan Foundation.
June 14, 2013
Alli Gold
MIT Joint Program on the Science and Policy of Global Change
After the 2011 Fukushima nuclear disaster, energy experts and policymakers around the world began to reassess the future of nuclear power. Countries, including Japan and Germany, have since scaled back or plan to shut down their nuclear power — sparking a global debate on how nations will replace nuclear.
Taiwan is just one country where this intense debate is unfolding. Yen-Heng Henry Chen, a Taiwan native and research scientist at MIT’s Joint Program on the Science and Policy of Global Change, decided to look at how the nation’s economy and emissions reduction strategies might be affected by future changes to Taiwanese nuclear energy policies.
“There has been little research on the interactions between non-nuclear and low-carbon policies,” Chen says. “Taiwan has a small economy and limited natural resources, making it an interesting case study for other countries looking for ways to cut carbon emissions with or without nuclear power.”
The Taiwanese government aims to cut its CO2 emissions in half (from 2000 levels) by 2050. One way they had planned to do this was through nuclear power. Taiwan currently has three nuclear power plants, with plans to bring a fourth plant, the Longmen Nuclear Power Station, online in 2015. This tightly populated country has more than nine million residents within 50 miles of its three existing nuclear reactors. Because Taiwan is similar in topography and fault lines to Japan, the prospect of the new plant — and perhaps others to come — has raised public concerns about the safety of nuclear power.
“After the Fukushima accident, more than 60 percent of the Taiwanese population was against the construction of a new nuclear power plant according to a recent poll,” Chen says. “I wanted to know what it would mean for the Taiwanese economy and the government’s emissions reduction targets if they were to eliminate or reduce nuclear power.”
Taiwan currently imports 99 percent of its energy, which includes oil, natural gas, coal and nuclear. Because the opportunities for alternative low-carbon energies such as solar, wind and hydro are limited, Chen conducted an economy-wide analysis that explored other ways to reduce carbon emissions: nuclear power, a carbon tax, and carbon capture and storage (CCS) technology.
When implementing a low-carbon and non-nuclear policy, without the availability of CCS (which is not yet cost-effective at a large scale), Chen finds that by 2050 GDP would drop by about 20 percent. If CCS were to become more cost-effective and could be added to the low-carbon strategy, GDP would drop by less than 10 percent. But the least expensive way to pursue a low-carbon policy, Chen finds, would be to expand nuclear capacity in addition to adopting CCS. If nuclear capacity was tripled (compared to current levels) and CCS option was feasible, by 2050 GDP loss would be reduced to around five percent.
Absent nuclear power and CCS, “Taiwan needs to convert its industrial structure into a much less energy intensive one if the country is serious about achieving a low-carbon environment,” Chen says. Taiwan’s industrial sector accounts for almost half of the country’s energy demands.
Costs could be lowered for industry and consumers if Taiwan were able to join an international emissions trading system — which Chen looks forward to exploring further in future research.
Until such an international trading system exists, “This case study can help policymakers better understand the costs of cutting CO2 emissions without nuclear energy,” Chen says, “as nuclear power becomes a less viable energy solution in Taiwan and around the world.”
June 13, 2013
Alli Gold
MIT Joint Program on the Science and Policy of Global Change
If you know how much something costs, you can budget and plan ahead. With this in mind, a team of researchers from MIT, the World Bank and the International Food Policy Research Institute recently developed a country-level method of estimating the impacts of climate change and the costs of adaptation. This new method models sector-wide and economy-wide estimates to help policymakers prepare and plan for the future.
"Previous country-level research assessing climate change impacts and adaptation either focused on economy-wide estimates or sector-by-sector analysis, without looking at the bigger picture," says Kenneth Strzepek, one of the lead authors of the study and a research scientist at MIT's Joint Program on the Science and Policy of Global Change. "By looking at the interplay between different sectors and within the economy, we are able to evaluate the indirect effects and interactions that can occur that are often not captured."
As a case study, the researchers apply their technique to Ethiopia — the second most populated country in Sub-Saharan Africa. They look at three key sectors: agriculture, road infrastructure and hydropower.
"These sectors were selected because of their strategic role in the country's current economic structure and its future development plans," Strzepek says.
Agriculture accounts for about 46 percent of the GDP in Ethiopia and is almost entirely rain-fed. Variability in temperature and rainfall will have major impacts on this crucial industry. The researchers found that with a temperature increase of two degrees Celsius, more intense drought and floods will cause a drop in crop production — triggering reductions in income, employment and investments.
Frequent and intense flooding will also damage Ethiopia's road infrastructure — the backbone of the country's transportation system and a needed link in the agricultural supply chain. The researchers found that flooding brought on by climate change will increase maintenance costs by as much as $14 million per year for the existing road network, which is expected to grow dramatically in the next 40 years.
The intense variability of precipitation will also greatly impact the country's hydropower and associated reservoir storage, which could provide energy, irrigation and flood mitigation. Because there is currently little installed hydro capacity in Ethiopia, the model showed few climate change impacts. But in the coming years, the government plans to invest heavily in this sector, meaning there could potentially be significant impacts to this sector as well.
Additionally, the researchers found that there would be an increased demand for water across sectors and create challenges for policymakers to effectively distribute this important resource. For example, Ethiopia plans to expand irrigated agriculture by 30 percent by 2050. The researchers found that some of the irrigation demands will be unmet, placing demands on other sectors requiring water resources.
"This research makes clear the impact droughts, floods, and other effects brought on by climate change can have on major financial sectors and infrastructure," Strzepek says. "For Ethiopia, we find that one of the best defenses against climate change is investment in infrastructure for transportation, energy and agriculture. By building up these sectors, the government will be able to enhance the country's resiliency."
He continued, "In predicting the outcomes of future water, infrastructure and agriculture projects, we were able to test the effectiveness of policies. This gives decision-makers in these countries, as well as international organizations, the information they need to continue to grow, develop and plan for the future with climate change in mind."
Planning for climate change is essential, Raffaello Cervigni, a co-author of the study and lead environmental economist at the World Bank, writes in a recent blog post.
"Addressing climate change is first and foremost a development priority for Africa … If no action is taken to adapt to climate change, it threatens to dissipate the gains made by many African countries in terms of economic growth and poverty reduction over the past ten years," he writes.
But, he continues, "a harsher climate need not be an impediment for Africa's development," if we can come together to address these challenges.
The integrated approach used by the authors is now being applied to studies on the costs of adapting to climate change in Ghana and Mozambique, as well as Vietnam. Others have replicated the approach to help other countries calculate the costs of adaptation.
Reprint 2013-7
June 6, 2013
Vicki Ekstrom, MIT Energy
The cost and performance of future energy technologies will largely determine to what degree nations are able to reduce the effects of climate change. In a paper released today in Environmental Science & Technology, MIT researchers demonstrate a new approach to help engineers, policymakers and investors think ahead about the types of technologies needed to meet climate goals.
“To reach climate goals, it is important to determine aspirational performance targets for energy technologies currently in development,” says Jessika Trancik, the lead author of the study and an assistant professor of engineering systems. “These targets can guide efforts and hopefully accelerate technological improvement.”
Trancik says that existing climate change mitigation models aren’t suited to provide this information, noting, “This research fills a gap by focusing on technology performance as a mitigation lever and providing a way to compare the dynamic performance of individual energy technologies to climate goals. This provides meaningful targets for engineers in the lab, as well as policymakers looking to create low-carbon policies and investors who need to know where their money can best be spent.”
The model compares the carbon intensity and costs of technologies to emission reduction goals, and maps the position of the technologies on a cost and carbon trade-off curve to evaluate how that position changes over time.
According to Nathan E. Hultman, director of Environmental and Energy Policy Programs at the University of Maryland’s School of Public Policy, this approach “provides an interesting and useful alternate method of thinking about both the outcomes and the feasibility of a global transition to a low-carbon energy system.” Hultman, who is also a fellow at the Brookings Institution, was not associated with the study.
How do technologies measure up?
According to Trancik, the cost and carbon trade-off curve can be applied to any region and any sector over any period of time to evaluate energy technologies against climate goals. Along with her co-author, MIT master’s student Daniel Cross-Call, she models the period from 2030 to 2050 and specifically studies the U.S. and China’s electricity sectors.
The researchers find that while major demand-side improvements in energy efficiency will buy some time, the U.S. will need to transition at least 70 percent of its energy to carbon-free technologies by 2050 – even if energy demand is low and the emissions reduction target is high.
Demand-side changes buy more time in China. Efficiency, combined with less stringent emissions allocations, allows for one to two more decades of time to transition to carbon-free technologies. During this time, technologies are expected to improve.
This technology focused perspective, Trancik says, “may help developed and developing countries move past the current impasse in climate negotiations.”
While reaching climate goals is a seemingly formidable task, Trancik says that considering changes to technology performance over time is important. When comparing historical changes in technologies to the future changes needed to meet climate targets, the results paint an optimistic picture.
“Past changes in the cost and carbon curve are comparable to the future changes required to reach carbon intensity targets,” Trancik says. “Along both the cost and carbon axes there is a technology that has changed in the past as much as, or more than, the change needed in the future to reach the carbon intensity and associated cost targets. This is good news.”
The research was partially funded by the MIT Energy Initiative.
May 30, 2013
In the past decade, the massive expansion of China’s production and export of silicon photovoltaic (PV) cells and panels has cratered the price of those items globally, creating tension between China and the United States, and, more recently, China and the European Union. In a new study (see PDF), MIT researchers explain why these tensions could harm the broader solar industry and have spiraling effects for China-U.S. trade relations.
“China and the U.S., and China and the E.U., are in the midst of a blame game as the solar industry is on the brink of collapse — and the tensions could infect technology and commercial development globally,” says John Deutch, the lead author of the study and Institute Professor at MIT. “All the players should understand that the PV industry is globally linked, and jobs and profits are available for those who manufacture and for those who innovate. Given the complex but productive relationships, nations need to find a way to better work together rather than flirt with protectionist measures.”
Over the last decade, manufacturing of PV cells and panels expanded in China, boosting supply globally. The flood of solar panels, combined with a slipping subsidized demand for solar energy (especially in Europe), lowered the global market price to unsustainable levels, the study shows. Between 2009 and 2012, the price of crystalline silicon panels decreased from more than $2.50 per watt to less than $1 per watt, as China supplied 30 to 50 percent of U.S. PV imports.
The result? PV manufacturers globally haven’t been able to compete, Deutch and the study’s co-author, MIT professor of political science Edward Steinfeld, explain. In response, the U.S. Department of Commerce and the International Trade Commission imposed substantial anti-dumping duties — tariffs imposed on low-priced foreign imports — on some Chinese manufacturers last November, following complaints from U.S. PV manufacturers who alleged that the Chinese were selling their products below fair market value. Around the same time, Europe issued an anti-dumping inquiry; it has also threatened to announce tariffs by June 6.
China has responded with its own allegations, also threatening to issue tariffs — this time, on the materials and technology imported to make the panels. Many of those imports come from the United States. China threatens these tariffs as its PV industry also faces trouble, according to the study: Net margins of panel suppliers in China fell to double-digit negative values in 2011 and remain there now, more than a year later. The study reports that Suntech Power Holdings — the largest PV-panel maker in the world — posted a loss of $495 million in 2012. (The company declared bankruptcy at the end of March.)
Deutch and Steinfeld explain that the two nations — China and the United States — are interdependent and form a “potentially productive global ecosystem for innovation.” When one side declines — as is happening in China, with its PV manufacturers — so will the other side, as is happening in the United States, with its technology and manufacturing tools, the study says. The researchers explain that there are opportunities for the two nations to together accelerate the worldwide deployment of solar PV for electricity generation.
“The two countries have different strengths and weaknesses,” Deutch says. “The U.S. is creating the technology and manufacturing tools and China is successfully, but not profitably, manufacturing devices based on today’s technology. If both countries look at the big picture, choose to focus on their strengths, and put aside the blame game, they have a real opportunity to boost global deployment of solar.”
Arun Majumdar, the vice president for energy at Google and former director of the Department of Energy’s Advanced Research Projects Agency-Energy, says, “Deutch and Steinfeld’s factual and data-driven analysis shows that in the interdependent global market and supply chain of the solar industry, policies of individual governments that foster and leverage their domestic strengths to openly and fairly compete in the global market are better off in the long term to reach national goals of economic growth.”
Majumdar adds, “On the other hand, policies that distort the market via undue protectionism or disproportional investments to reach national goals could backfire and produce opposite outcomes.”
The study will become part of a larger report on the “Future of Solar,” to be released by the MIT Energy Initiative at a later date.
Researchers explore possible consequences of greater biofuel use
The growing global demand for energy, combined with a need to reduce emissions and lessen the effects of climate change, has increased focus on cleaner energy sources. But what unintended consequences could these cleaner sources have on the changing climate?
Researchers at MIT now have some answers to that question, using biofuels as a test case. Their study, recently released in Geophysical Research Letters, found that land-use changes caused by a major ramp-up in biofuel crops — enough to meet about 10 percent of the world’s energy needs — could make some regions even warmer.
“Because all actions have consequences, it’s important to consider that even well-intentioned actions can have unintended negative consequences,” says Willow Hallgren, the lead author of the study and a research associate at MIT’s Joint Program on the Science and Policy of Global Change. “It’s easy to look at a new, cleaner energy source, see how it will directly improve the climate, and stop there without ever considering all the ramifications. But when attempting to mitigate climate change, there’s more to consider than simply substituting out fossil fuels for a cleaner source of energy.”
Hallgren and her colleagues explored some of those consequences in considering two scenarios: one where more forests are cleared to grow biofuel crops, and one where forests are maintained and cropland productivity is intensified through the use of fertilizers and irrigation.
In both cases, the researchers found that at a global scale, greenhouse-gas emissions increase — in the form of more carbon dioxide when CO2-absorbing forests are cut, and in the form of more nitrous oxide from fertilizers when land use is intensified. But this global warming is counterbalanced when the additional cropland reflects more sunlight, causing some cooling. Additionally, an increase in biofuels would replace some fossil fuel-based energy sources, further countering the warming.
While the effects of large-scale expansion of biofuels seem to cancel each other out globally, the study does point to significant regional impacts — in some cases, far from where the biofuel crops are grown. In the tropics, for example, clearing of rainforests would likely dry the climate and cause warming, with the Amazon Basin and central Africa potentially warming by 1.5 degrees Celsius.
This tropical warming is made worse with more deforestation, which also causes a release of carbon dioxide, further contributing to the warming of the planet. Meanwhile, Arctic regions might generally experience cooling caused by an increase in reflectivity from deforestation.
“Emphasizing changes not only globally, but also regionally, is vitally important when considering the impacts of future energy sources,” Hallgren says. “We’ve found the greatest impacts occur at a regional level.”
From these results, the researchers found that land-use policies that permit more extensive deforestation would have a larger impact on regional emissions and temperatures. Policies that protect forests would likely provide more tolerable future environmental conditions, especially in the tropics.
David McGuire, Professor of Ecology at University of Alaska Fairbanks, says these findings are important for those trying to implement mitigation policies to consider.
“Hallgren et al. caution that society needs to further consider how biofuels policies influence ecosystem services to society as understanding the full dimension of these effects should be taken into consideration before deciding on policies that lead to the implementation of biofuels programs,” McGuire says.
He finds Hallgren’s incorporation of reflectivity and energy feedbacks unique compared to similar studies on the climate impacts of biofuels.
Beyond the climate
While Hallgren focuses specifically on the climate implications of expanded use of biofuels, she admits there are many other possible consequences — such as impacts on food supplies and prices.
A group of her colleagues explored the economic side of biofuel expansion as part of a study released last year in Environmental Science & Technology — a paper that was recognized as that journal’s Best Policy Analysis Paper of 2012.
The team, led by Joint Program on Global Change co-director John Reilly, modeled feedbacks among the atmosphere, ecosystems and the global economy. They found that the combination of a carbon tax, incentives for reforestation and the addition of biofuels could nearly stabilize the climate by the end of the century; increased biofuels production alone could cut fossil-fuel use in half by 2100.
But just as Hallgren found trade-offs when she dug deeper, so did Reilly and his team of researchers.
“The environmental change avoided by reducing greenhouse-gas emissions is substantial and actually means less land used for crops,” Reilly says. This leads to substantial rises in food and forestry prices, he says, with food prices possibly rising by more than 80 percent.
Hallgren says, “There is clearly no one simple cause and effect when it comes to our climate. The impacts we see — both to the environment and the economy — from adding a large supply of biofuels to our energy system illustrate why it is so important to consider all factors so that we’ll know what we’re heading into before making a change.”
Researcher Eric Martinot presents findings of two-year project at campus event
Professor Eric Martinot, the senior research director with the Institute for Sustainable Energy Policies in Tokyo, told students and faculty at a seminar on April 18 that renewables have become “mainstream” and are “a major part of our energy system.”
Martinot just completed a two-year project entitled the Renewables Global Futures Report — a compilation of 170 face-to-face interviews conducted with industry executives, CEOs of renewable energy companies, utility leaders, government officials and researchers.
“We’re still thinking about the future of renewable energy like it’s 1990 or like it’s the year 2000,” Martinot said. “Our thinking is just behind the reality of where renewables are today and where they are going based on existing market technology, cost and finance trends.”
Martinot gave an overview of various projections and scenarios from the oil industry, the International Energy Agency (IEA) and environmental groups. The data shows that investment in renewables is a key example of the current growth and expected trajectory. Renewable energy investment is predicted to double if not by 2020, then by 2040.
“For the last three years, since 2010, global investment in renewable energy has exceeded investment in fossil fuels and nuclear power generation capacity. That’s very surprising to most people,” he said.
Despite this growth, Martinot said, “existing sources of finance are not going to enable us to reach high levels of renewables. Bank lending and utility balance sheet finance are the two major current finance mechanisms and they are going to run out.” In the future we should expect to see new sources of investment — including pension funds, oil companies and community funds.
Renewables currently supply about 20 percent of global electricity — with hydropower making up about 15 percent of that and all other renewables (wind, solar, geothermal and biomass) making up five percent. Martinot sees potential in expanding renewables to heating and cooling in the near future.
“We have all of the technologies we need right now, we don’t need to wait for technology for high shares of heating and cooling from renewables, but this is going to involve huge changes in building construction, architectural practices, building materials, the whole construction industry,” he explained. “It can take decades for all of that to change. But we can do it.”
Integration of renewables into the grid, buildings, homes and vehicles is where he sees the greatest opportunities for investment, infrastructure and research.
“Power grids have been operated and designed for the last 100 years on the basis of two things: number one, energy storage is impossible and number two, that supply has to meet demand,” he said. Because of the variability of renewables, integration and management of both storage and demand are necessary.
Martinot believes we are on the path toward combating these challenges. “We’re seeing both of those turned on their head because energy storage has become practical and is being done on a commercial basis on a number of projects. We’re also seeing the so-called ‘demand response’ where you can actually adjust demand to meet supply, rather than the other way around.”
Utilities in Denmark and Germany, for example, are using new tools to manage the variability of wind and solar and are able to switch to natural gas and heat when needed.
The building sector is another opportunity to integrate current renewable energy sources with the demands of the typical family home. Martinot described homes of the future that utilize solar power for heating and hot water, electric vehicles with batteries used by the home for power and energy storage, passive heat storage in building construction, and geothermal heat pumps to power homes.
“If you were able to standardize this type of construction in architectural practices around the world this could lower the cost and make if more common in peoples’ homes,” he said.
Martinot admitted he’s bullish about renewables and has high hopes that we can reduce carbon emissions and provide affordable energy.
His research shows that we can be optimistic about the future of renewables as governments, utilities and energy companies are expanding investment, research and development in renewable power across a variety of sectors.
Read Martinot's complete presentation.
Earth Day talk details Massachusetts’ accomplishments since the governor’s MIT speech five years ago
By: David L. Chandler
April 29, 2013
Earth Day talk details Massachusetts’ accomplishments since the governor’s MIT speech five years ago, and outlines new goals.
In an Earth Day address at MIT in 2008, Massachusetts Gov. Deval Patrick outlined an ambitious set of goals that he said could achieve significant reductions in greenhouse-gas emissions and create businesses and jobs based on clean-energy solutions. In a follow-up talk this week, he described a series of successes in achieving these goals.
“Five years ago,” MIT President L. Rafael Reif said in introducing Patrick, the governor “delivered an inspiring challenge: He argued that the commonwealth could improve its environment and its economy by leading the way in energy efficiency and clean-energy innovation.”
In the ensuing years, Reif said, Patrick delivered on that promise: “Today, thanks to his leadership, Massachusetts ranks first in the nation in state-level energy efficiency.”
In addition, Reif said, “Harmful pollution and emissions are both declining, and clean-energy jobs are on the rise. Massachusetts has proven by example that we can have a strong economy and a healthy environment.”
Patrick said that five years ago, “We in Massachusetts took a fresh look at our energy future.” He noted that “with no oil, coal or natural gas of our own, we are at the end of the pipeline and are subject to the whims of a global energy market.”
To address that, Patrick pushed for three pieces of legislation, he said: “First, the Green Communities Act enabled us to set ambitious goals for renewable energy: 250 megawatts of solar by 2017 and 2,000 megawatts of wind by 2020.” (The commonwealth had previously produced only 3 megawatts each of solar and wind energy, he said.)
The second piece of legislation, called the Global Warming Solutions Act, set a series of goals for reductions in greenhouse-gas emissions, calling for a reduction of 25 percent (from 1990 levels) by 2020, and a cut of 80 percent by 2050.
The third piece was the Green Jobs Act, aimed at “capturing the opportunities to foster innovation and create jobs,” Patrick said. Currently, 80 percent of money spent on energy in Massachusetts goes to out-of-state companies. But by creating new clean-energy businesses here, he said, “With the world in the midst of an energy revolution, we were convinced that if we got this right, the world would be our customer.”
In summarizing the outcomes of those actions, Patrick said, “I am here to report that it’s working.” For example, he said, “The American Council for an Energy Efficient Economy has ranked Massachusetts the No. 1 state in energy efficiency for two consecutive years — ahead of longtime leader California.”
The governor added, “We installed more than 100 megawatts of solar power last year alone — ranking us sixth last year in total capacity added.”
Not only has this been good for the environment, but it has been good business, he said: “There are nearly 5,000 clean-energy firms in Massachusetts today, employing some 72,000 people — an impressive 11.2 percent growth in jobs in just the last year.”
There’s more in store: With the nation’s first offshore wind farm about to be built in Nantucket Sound, and a test facility for turbine blades in Charlestown, he said, “The U.S. Department of Energy projects 20,000 jobs by 2020 in offshore wind. Why not host those jobs here in Massachusetts?”
Patrick also outlined a next crucial area of environmental sustainability: “We see water innovation as the next opportunity for Massachusetts to seize,” he said. “The same concentration of brainpower in this and other world-class universities and research facilities that spawned and feeds the life sciences and high-tech revolution in Massachusetts is at the center of this next big push in water innovation.”
Although the focus of the MIT Energy Initiative-sponsored talk was Earth Day and environmental issues, Reif’s introduction also alluded to the governor’s leadership since the Boston Marathon bombing. “I believe I can speak for the entire MIT community in saying thank you for your leadership over the past 10 days,” Reif said. “It has been a terrible and confusing time, and you offered calm, clarity, sympathy and reassurance.”
Patrick noted those events also, including his attendance at Wednesday’s memorial service: “Yesterday’s tribute to Officer Sean Collier was beautiful and fitting,” he said. But, he said, despite the tragic events, “One shining remnant of this experience has been the re-emergence of a strong sense of community, the notion of common stake and common cause.”
He said that in light of that, “I am convinced that there isn’t a single challenge that we face in this state or in this country that can’t be surmounted by a renewed sense that we have a stake in each other’s dreams and struggles.”
Watch the Governor's speech here.
First workshop convened high-ranking Chinese environmental officials and experts from top government, university and research offices.
The MIT-Tsinghua China Energy and Climate Project held a workshop on Tuesday March 12 to kick off a landmark study on the impact of China’s vehicle emissions and fuel standards on energy, economic, emissions, air quality and health. The study is being supported by a grant from the Energy Foundation, which provides resources to institutions that most effectively leverage change in transitioning to a sustainable energy future. The workshop, held at Tsinghua University, was hosted by collaborators at the university’s Institute for Energy, Environment, and Economy.
“Understanding the role fuel quality standards could play in cutting China’s emissions and air pollution is crucial to the health of the communities, as well as to addressing growing urban sustainability challenges,” says Valerie Karplus, director of the MIT-Tsinghua China Project and a co-researcher for the study. “This study will provide that insight. We’re grateful to have the support of the Energy Foundation, as well as feedback from a varied stakeholder base.”
The researchers will perform a comparison of policy options for reducing transportation emissions in China. This process will begin with an analysis of China’s transport sector and an updated inventory of emissions by sector. Researchers will also identify regional air quality impacts using a regional chemical transport model and analyze the impact of various policy options on energy use, emissions, the economy and human health.
“This study will be the first to use of an integrated model – simulating travel demand, fuel use, vehicles emissions and air quality – to determine health and economic impacts of fuel policies in China,” Eri Saikawa, a professor at Emory University and the lead researcher for the study, said. “The model will be a powerful tool for assessing transport policy options currently under discussion in China.”
Throughout the project, researchers will communicate their results to policymakers through an ongoing and interactive process. The March 12th workshop was the first of several of these meetings. It brought together stakeholders from China’s Ministry of Environmental Protection and the Beijing Environmental Protection Bureau, as well as experts from Tsinghua University, Beijing University, Nanjing University, Clean Air Initiative-Asia, the International Council on Clean Transportation, the Energy Foundation, and the Health Effects Institute.
At the March 12th meeting, the stakeholders provided input on which policy questions would be of greatest interest for the study to consider and explored how the results of the study might be used within their organizations. It was decided that the research would focus on assessing the impacts of fuel quality standards and tailpipe emissions standards in China, with a focus on the potential benefits of implementing the China 6 standard, which is the toughest standard announced so far and targets deeper reductions in nitrous oxide emissions country-wide before 2020.
MIT researchers find vehicle efficiency standards are at least six times more costly than a tax on fuel.
IN CASE YOU MISSED IT: Valerie Karplus makes her case in an op-ed in the NY Times here.
Vehicle efficiency standards have long been considered vital to cutting the United States’ oil imports. Strengthened last year with the added hope of reducing greenhouse gas emissions, the standards have been advanced as a way to cut vehicle emissions in half and save consumers more than $1.7 trillion at the pump. But researchers at MIT find that, compared to a gasoline tax, vehicle efficiency standards come with a steep price tag.
“Tighter vehicle efficiency standards through 2025 were seen as an important political victory. However, the standards are a clear example of how economic considerations are at odds with political considerations,” says Valerie Karplus, the lead author of the study and a researcher with the MIT Joint Program on the Science and Policy of Global Change. “If policymakers had made their decision based on the broader costs to the economy, they would have gone with the option that was least expensive – and that’s the gasoline tax.”
The study, published this week in the March edition of the journal Energy Economics, compares vehicle efficiency standards to a tax on fuel as a tool for reducing gasoline use in vehicles. The researchers found that regardless of how quickly vehicle efficiency standards are introduced, and whether or not biofuels are available, the efficiency standards are at least six times more expensive than a gasoline tax as a way to achieve a cumulative reduction in gasoline use of 20 percent through 2050. That’s because a gasoline tax provides immediate, direct incentives for reducing gasoline use, both by driving less and investing in more efficient vehicles. Perhaps a central reason why politics has trumped economic reasoning, Karplus says, is the visibility of the costs.
“A tax on gasoline has proven to be a nonstarter for many decades in the U.S., and I think one of the reasons is that it would be very visible to consumers every time they go to fill up their cars,” Karplus says. “With a vehicle efficiency standard, your costs won't increase unless you buy a new car, and even better than that, policymakers will tell you you’re actually saving money. As my colleague likes to say, you may see more money in your front pocket, but you’re actually financing the policy out of your back pocket through your tax dollars and at the point of your vehicle purchase.”
Along with being more costly, Karplus and her colleagues find that it takes longer to reduce emissions under the vehicle efficiency standards. That’s because, with more efficient vehicles, it costs less to drive, so Americans tend to drive more. Meanwhile, the standards have no direct impact on fuel used in the 230 million vehicles currently on the road. Karplus also points out that how quickly the standards are phased in can make a big difference. The sooner efficient vehicles are introduced into the fleet, the sooner fuel use decreases and the larger the cumulative decrease would be over the period considered, but the timing of the standards will also affect their cost.
The researchers also find that the effectiveness of the efficiency standards depends in part on the availability of other clean-energy technologies, such as biofuels, that offer an alternative to gasoline.
“We see the steepest jump in economic cost between efficiency standards and the gasoline tax if we assume low-cost biofuels are available,” Karplus says. “In this case, if biofuels are available, a lower gasoline tax is needed to displace the same level of fuel use over the 2010 to 2050 time frame, as biofuels provide a cost-effective way to displace gasoline above a certain price point. As a result, a lower gas tax is needed to achieve the 20 percent cumulative reduction.”
To project the impact of vehicle efficiency standards, Karplus and her colleagues improved the MIT Emissions Predictions and Policy Analysis Model that is used to help understand how different scenarios to constrain energy affect our environment and economy. For example, they represent in the model alternatives to the internal combustion engine based on the expected availability and cost of alternative fuels and technologies, as well as the dynamics of sales and scrappage that affect the composition of the vehicle fleet. Their improvements to the model were recently published in the January 2013 issue of the journal Economic Modelling.