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Ahead of the World Energy Conference (WEC) in Daegu, South Korea, Siemens is hosting a series of panels throughout the world as part of a "Road to Daegu" series. The results of this exciting journey through the energy systems of the world will be presented at the WEC on October 13-17. 

Joint Program Co-Director John Reilly participated in the U.S. panel on July 9th in Florida. The panel was on "Affordable and sustainable energy for the USA: Competitive advantage for the future?"

He was joined by Tom Kuhn, President of the Edison Electric Institute; Jim Robo, President and CEO, NextEra Energy; Michael Suess, CEO, Siemens Energy; Randy Zwirn, CEO, Siemens Energy Service Division, and CEO, Siemens Energy Americas. 

About the Panel

Affordability, security and sustainability are the three goals most countries are pursuing when it comes to their energy supply.  In the U.S., there is a strong focus on affordability, and energy prices have always been low compared to international levels.  And this is even more so today than ever before:  The country’s “shale revolution” is slashing natural gas prices to all-time lows.

But can the U.S. achieve both goals – affordability and sustainability? This was the opening question at our third Round Table discussion with Michael Süß, this time held at the headquarters of Florida Power & Light in Juno Beach, Florida... 

For John Reilly, Senior Lecturer at the renowned Sloan School of Management of the Massachusetts Institute of Technology, the efforts being undertaken in the U.S. on behalf of the environment aren’t enough. “We are a wealthy society in the U.S. and don’t have a real affordability problem in regard to energy prices – but what we can’t afford is not to be sustainable.”...
 

Read more...


Watch the panel's recap...


Watch the panel in full...

With global warming, a study finds, tropical cyclones may become more frequent and intense.

(Also covered by USA Today)

By: Bryan Walsh

Maybe Mayor Michael Bloomberg would have gone through the troubling of putting together a 430-page report outlining a $19.5 billion plan to save New York from the threat of climate change had Hurricane Sandy not hit  last year and inflicted some $20 billion in New York City alone. But somehow I doubt it. There’s a reason that a satellite image of Hurricane Katrina highlighted the poster for An Inconvenient Truth, or that belief in man-made global warming tends to spike after extreme weather. Heat waves are uncomfortable and drought is frightening, but it’s superstorms—combined with the more gradual effects of sea-level rise—that can make climate change seem apocalyptic. Just read Jeff Goodell’s recent piece in Rolling Stone about what a major hurricane might be able to do to Miami after a few decades of warming.

But there was one hopeful side effect to climate change, at least when it came to tropical storms. The prevailing scientific opinion—seen in this 2012 report from the Intergovernmental Panel on Climate Change—is that while tropical storms are likely to become more powerful and rainier as the climate warms, they would also become less common. Bigger bullets, slower gun.

A new study in the Proceedings of the National Academy of Sciences, however, suggest that we may not be so lucky. Kerry Emanuel, an atmospheric scientist at the Massachusetts institute of Technology (MIT) and one of the foremost experts on hurricanes and climate change, argues that tropical cyclones are likely to become both stronger and more frequent as the climate continues to warm—especially in the western North Pacific, home to some of the most heavily populated cities on the planet. But the North Atlantic—meaning the U.S. East Coast and Gulf Coast—won’t be spared either. Bigger bullets, faster gun

Emanuel is going up against the conventional wisdom and much of the published literature with this paper. But the reality is that we don’t have a very good grasp of how tropical cyclone formation or strength might change in the future. As Adam Freedman points out at Climate Central, hurricanes may be huge, but they’re still too small to be easily tracked by computer climate models, which do better on a larger scale. Emanuel embedded higher-resolution regional and local models into an overarching global framework. Emanuel’s “downscaled” model simulates the development of tropical cyclones at a resolution that will increase as the storm gets stronger. For each of the six IPCC global climate models, Emanuel simulated 600 storms every year between 1950 and 2005, then ran the model forward to 2100, using an IPCC forecast that has global carbon dioxide emissions tripling by the end of the century. 

Emanuel’s simulations found that the frequency of tropical cyclones will increase by 10 to 40% by 2100. And the intensity of those storms will increase by 45% by the end of the century, with storms that actually make landfall—the ones that tend to smash—will increase by 55%. As Emanuel told LiveScience:

We see an increase, in particular, toward the middle of the century. The results surprised us, but we haven’t gotten so far as to understand why this is happening.

OK, big caveats here. Emanuel is a very well-respected climatologist, but it always takes more than a single study to overturn existing scientific opinion—especially if that opinion is itself a little wobbly. Georgia Tech climatologist Judith Curry, who falls on the more skeptical side of the scientific debate on climate change, told this to Doyle Rice of USA Today:

The conclusions from this study rely on a large number of assumptions, many of which only have limited support from theory and observations and hence are associated with substantial uncertainties. Personally, I take studies that project future tropical cyclone activity from climate models with a grain of salt. 

We’ll see in the decades to come whether Emanuel is right. But in a way, it may not matter all that much. As Sandy showed, hurricanes already pose a tremendous threat to our coastal cities. And that threat will continue to grow no matter what climate change does to tropical storm frequency or intensity because we’re putting more and more people and property along the water’s edge. Remember Miami? In 1926 the city was devastated by a Category 4 hurricane. (Sandy barely ranked as a Category 1 by the time it made landfall.) The difference is that there wasn’t much of a Miami back in 1926—the city’s population had just passed 100,000. Today more than 2.5 million people call Miami-Dade county home, and a hurricane of the same sort that hit in 1926 that hit now would cause $180 billion in damages. Whatever climate change does to hurricanes, we need to be ready.

By Michael Davidson

China’s first mandatory carbon emissions trading system (ETS) pilot debuted last month before a packed auditorium in the southern city of Shenzhen. China’s first official carbon trade was greeted with fanfare and a well-choreographed script of climate officials. Shenzhen is the first of seven cities and provinces expected to unveil cap-and-trade programs in China this year, which drew skeptical reactions from foreign onlookers based on the first day’s low volume – 21,120 tons at 28-30 yuan / ton ($4.55-$5.05).

The ETS pilots are a small market-based component of a broader climate policy that has historically relied on administrative measures carried in five-year plans. The overriding priorities for provincial officials are energy and carbon intensity reduction targets, most recently allocated in 2011. Nationally, these amount to 16% and 17% reductions in energy use and carbon emissions per unit GDP, respectively, by 2015; a 40-45% carbon intensity reduction below 2005 levels by 2020. However, ensuring an early emissions peak (i.e., before 2030) will require more flexible approaches, in particular, market mechanisms, for which the ETS pilots are a useful bellwether. While the merits of the pilots should not be judged by the first trading day, significant obstacles stand in the way of creating a national ETS by 2016, as currently envisioned by the Chinese leadership. Even before the remaining six trading pilots ring the opening bell, we have a good sense of what these obstacles will be. 

Read the rest on The Energy Collective...

(Also covered by WSJ, WaPo, NYT, Reuters, Bloomberg, LA Times, Nat Geo, Nature, Discover, CNN, BBC, Guardian, Sky News, International Business Times, Financial Times, The Telegraph, Daily Mail,  China.org)

By Lousie Watt

BEIJING (AP) — A new study links heavy air pollution from coal burning to shorter lives in northern China. Researchers estimate that the half-billion people alive there in the 1990s will live an average of 5½ years less than their southern counterparts because they breathed dirtier air.

China itself made the comparison possible: for decades, a now-discontinued government policy provided free coal for heating, but only in the colder north. Researchers found significant differences in both particle pollution of the air and life expectancy in the two regions, and said the results could be used to extrapolate the effects of such pollution on lifespans elsewhere in the world.

The study by researchers from China, Israel and the United States was published Tuesday in the Proceedings of the National Academy of Sciences.

While previous studies have found that pollution affects human health, "the deeper and ultimately more important question is the impact on life expectancy," said one of the authors, Michael Greenstone, a professor of environmental economics at Massachusetts Institute of Technology.

"This study provides a unique setting to answer the life expectancy question because the (heating) policy dramatically alters pollution concentrations for people who appear to be of otherwise identical health," Greenstone said in an email. "Further, due to the low rates of migration in China in this period, we can know people's exposure over long time periods," he said.

The policy gave free coal for fuel boilers to heat homes and offices to cities north of the Huai River, which divides China into north and south. It was in effect for much of the 1950-1980 period of central planning, and, though discontinued after 1980, it has left a legacy in the north of heavy coal burning, which releases particulate pollutants into the air that can harm human health. Researchers found no other government policies that treated China's north differently from the south.

The researchers collected data for 90 cities, from 1981 to 2000, on the annual daily average concentration of total suspended particulates. In China, those are considered to be particles that are 100 micrometers or less in diameter, emitted from sources including power stations, construction sites and vehicles.

The researchers estimated the impact on life expectancies using mortality data from 1991-2000. They found that in the north, the concentration of particulates was 184 micrograms per cubic meter — or 55 percent — higher than in the south, and life expectancies were 5.5 years lower on average across all age ranges.

The researchers said the difference in life expectancies was almost entirely due to an increased incidence of deaths classified as cardiorespiratory — those from causes that have previously been linked to air quality, including heart disease, stroke, lung cancer and respiratory illnesses.

Total suspended particulates include fine particulate matter called PM2.5 — particles with diameters of no more than 2.5 micrometers. PM2.5 is of especially great health concern because it can penetrate deep into the lungs, but the researchers lacked the data to analyze those tiny particles separately.

The authors said their research can be used to estimate the effect of total suspended particulates on other countries and time periods. Their analysis suggests that every additional 100 micrograms of particulate matter per cubic meter in the atmosphere lowers life expectancy at birth by about three years.

The study also noted that there was a large difference in particulate matter between the north and south, but not in other forms of air pollution such as sulfur dioxide and nitrous oxide.

Francesca Dominici, a professor of biostatistics at Harvard School of Public Health who has researched the health effects of fine particulate matter in the U.S., said the study was "fascinating."

China's different treatment of north and south allowed researchers to get pollution data that would be impossible in a scientific setting.

Dominici said the quasi-experimental approach was a good approximation of a randomized experiment, "especially in this situation where a randomized experiment is not possible."

She said she wasn't surprised by the findings, given China's high levels of pollution.

"In the U.S. I think it's pretty much been accepted that even small changes in PM2.5, much, much, much smaller than what they are observing in China, are affecting life expectancy," said Dominici, who was not involved in the study.

(Also covered by WSJ, WaPo, NYT, AP, Reuters, Bloomberg, LA Times, Nat Geo, Nature, Discover, CNN, CBS, CNBC, PRI, BBC, Guardian, Sky News, International Business Times, Financial Times, The Telegraph, Daily Mail,  China.org) 

New quasi-experimental research finds major impact of coal emissions on health.
By: Peter Dizikes

A high level of air pollution, in the form of particulates produced by burning coal, significantly shortens the lives of people exposed to it, according to a unique new study of China co-authored by an MIT economist.

The research is based on long-term data compiled for the first time, and projects that the 500 million Chinese who live north of the Huai River are set to lose an aggregate 2.5 billion years of life expectancy due to the extensive use of coal to power boilers for heating throughout the region. Using a quasi-experimental method, the researchers found very different life-expectancy figures for an otherwise similar population south of the Huai River, where government policies were less supportive of coal-powered heating. 

“We can now say with more confidence that long-run exposure to pollution, especially particulates, has dramatic consequences for life expectancy,” says Michael Greenstone, the 3M Professor of Environmental Economics at MIT, who conducted the research with colleagues in China and Israel.

The paper, published today in the Proceedings of the National Academy of Sciences, also contains a generalized metric that can apply to any country’s environment: Every additional 100 micrograms of particulate matter per cubic meter in the atmosphere lowers life expectancy at birth by three years.

In China, particulate-matter levels were more than 400 micrograms per cubic meter between 1981 and 2001, according to Chinese government agencies; state media have reported even higher levels recently, with cities including Beijing recording levels of more than 700 micrograms per cubic meter in January. (By comparison, total suspended particulates in the United States were about 45 micrograms per cubic meter in the 1990s.)

Air pollution has become an increasingly charged political issue in China, spurring public protests; last month, China’s government announced its intent to adopt a series of measures to limit air pollution.

“Everyone understands it’s unpleasant to be in a polluted place,” Greenstone says. “But to be able to say with some precision what the health costs are, and what the loss of life expectancy is, puts a finer point on the importance of finding policies that balance growth with environmental quality.”

A river runs through it

The research stems from a policy China implemented during its era of central planning, prior to 1980. The Chinese government provided free coal for fuel boilers for all people living north of the Huai River, which has long been used as a rough dividing line between north and south in China.

The free-coal policy means people in the north stay warm in winter — but at the cost of notably worse environmental conditions. Using data covering an unusually long timespan — from 1981 through 2000 — the researchers found that air pollution, as measured by total suspended particulates, was about 55 percent higher north of the river than south of it, for a difference of around 184 micrograms of particulate matter per cubic meter.

Linking the Chinese pollution data to mortality statistics from 1991 to 2000, the researchers found a sharp difference in mortality rates on either side of the border formed by the Huai River. They also found the variation to be attributable to cardiorespiratory illness, and not to other causes of death.

“It’s not that the Chinese government set out to cause this,” Greenstone says. “This was the unintended consequence of a policy that must have appeared quite sensible.” He notes that China has not generally required installation of equipment to abate air pollution from coal use in homes.

Nonetheless, he observes, by seizing on the policy’s arbitrary use of the Huai River as a boundary, the researchers could approximate a scientific experiment.

“We will never, thank goodness, have a randomized controlled trial where we expose some people to more pollution and other people to less pollution over the course of their lifetimes,” Greenstone says. For that reason, conducting a “quasi-experiment” using existing data is the most precise way to assess such issues.

In their paper, the researchers address some other potential caveats. For instance, extensive mobility in a population might make it hard to draw cause-and-effect conclusions about the health effects of regional pollution. But significantly, in China, Greenstone says, “In this period, migration was quite limited. If someone is in one place, the odds are high they [had always] lived there, and they would have been exposed to the pollution there.”

Moreover, Greenstone adds, “There are no other policies that are different north or south of the river, so far as we could tell.” For that matter, other kinds of air pollution, such as sulfur dioxide and nitrous oxides, are spread similarly north and south of the river. Therefore, it appears that exposure to particulates is the specific cause of reduced life expectancy north of the Huai River.

In addition to Greenstone, the paper has three other co-first authors: Yuyu Chen, of the Guanghua School of Management at Peking University; Avraham Ebenstein, of Hebrew University of Jerusalem; and Hongbin Li, of the School of Economics and Management at Tsinghua University. The research project received funding from the Robert Wood Johnson Foundation and the National Natural Science Foundation of China.

Another reason to limit emissions

Scholars say the paper is an important contribution to its field. Arden Pope, an economist at Brigham Young University and a leading researcher in environmental economics and air pollution, calls it “one of the most dramatic and interesting quasi-experimental studies on the health effects of air pollution that has been conducted.” At the same time, Pope observes, the results are “reasonably consistent” with other air-pollution research using different study designs.

Pope notes that while many air-pollution studies have occurred in the United States and Europe, “It is important to conduct studies in China and elsewhere where the pollution levels are relatively high.” Going forward, he suggests, it would also be desirable for researchers to look for ways to specifically study the health effects of fine particles, those less than 2.5 micrometers in diameter. 

Greenstone notes that the researchers were not sure what result they would find when conducting their study. Still, he says of the finding, “I was surprised by the magnitude, both in terms of [the quantity of] particulates, and in terms of human health.”

Greenstone says he hopes the finding will have a policy impact not only in China, but also in other rapidly growing countries that are increasing their consumption of coal. Moreover, he adds, given the need to limit carbon emissions globally in order to slow climate change, he hopes the data will provide additional impetus for countries to think twice about fossil-fuel consumption.

“What this paper helps reveal is that there may be immediate, local reasons for China and other developing countries to rely less on fossil fuels,” Greenstone says. “The planet’s not going to solve the greenhouse-gas problem without the active participation of China. This might give them a reason to act today.”

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Climate change seems like this complicated problem with a million pieces. But Henry Jacoby, an economist at MIT's business school, says there's really just one thing you need to do to solve the problem: Tax carbon emissions.

"If you let the economists write the legislation," Jacoby says, "it could be quite simple." He says he could fit the whole bill on one page.

Basically, Jacoby would tax fossil fuels in proportion to the amount of carbon they release. That would make coal, oil and natural gas more expensive. That's it; that's the whole plan.

Jacoby's colleague John Reilly told me the price of gasoline might rise by 25 cents a gallon in the first year. Over time, that would increase. By 2050, Reilly figures the carbon tax would add about $1 to the price of every gallon. Across the economy, prices of energy-intensive goods and services would rise. This would encourage people and businesses to be more efficient.

This is why economists love a carbon tax: One change to the tax code and the entire economy shifts to reduce carbon emissions. No complicated regulations. No rules for what kind of gas mileage cars have to get or what specific fraction of electricity has to come from wind or solar or renewables. That's by and large the way we do it now.

Reilly says the current web of rules is a more complicated and more expensive way of getting the same outcome as a carbon tax. The current system "pretty much is one of the worst ways we could do it," he says.

As with any fix for climate change, a carbon tax would hit some people harder than others. People with long commutes would pay more. People who work in coal mines could lose their jobs.

But here is where Reilly brings up what is perhaps the most surprising thing about a carbon tax: If you do it right, he says, carbon tax can be nearly painless for the economy as a whole. 

Besides reducing carbon emissions, a carbon tax brings in a bunch of money – it's a tax after all. So, Reilly says, you can reduce, say, income tax to balance out the new taxes people are paying for carbon emissions. People pay more for gas, but they get to keep more of their income.

I called around and talked to a bunch of economists about this, and they said the basic idea was sound: If you give the carbon-tax money back by cutting income taxes, you can probably offset a lot of the pain.

President Obama has indicated he would support a market-based solution to climate change. But a carbon tax would of course require an act of Congress. And right now, that seems unlikely.

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.”

By: Joel Kirkland and Peter Behr

June 26, 2013

President Obama's plan to use a mixture of mandates and flexible regulation to cut greenhouse gas emissions is being viewed by energy industry experts through an age-old axiom: The devil is in the details.

The plan appears to be a shot in the arm for natural gas, as Obama's proposed regulation of carbon dioxide emissions from existing coal-fired power plants would provide a boost to cleaner-burning gas generators.

The White House's second-term climate agenda faces daunting head winds. Opposition from Republicans and resistance from coal-state Democrats, and the nuts and bolts of crafting a policy that would mark a significant shift for the nation's electric power industry, are immediate hurdles. Court challenges could create a protracted process for regulating carbon, as it has for U.S. EPA regulations of toxic air pollutants pushed through by the Obama administration.

But the daily stir of coal, natural gas and electricity markets in the United States also matters. With details of the new carbon policy still to come, unpredictable market prices will continue to be an underlying driver of decisions by electricity producers about where to invest and what energy sources to dispatch. Abundant coal will battle it out with growing shale gas production, several experts interviewed by EnergyWire predicted.

"There is no disagreement that the environmental regulations, many of which were proposed during the Bush administration, are going to bind and cause several -- tens of gigawatts -- of coal plants to be uneconomic," said Jay Apt, director of the Electricity Industry Center at Carnegie Mellon University. "If gas prices stay reasonable, then people will be buying gas plants. 

Obama rolled out his climate plan in the blistering summer heat. Yesterday's speech on a Georgetown University quad rested on the premise that rising concentrations of heat-trapping gases in the atmosphere are the result of industrial emissions and that unregulated U.S. power sector emissions are contributing too much to rising temperatures.

The White House directive for EPA to begin drawing up a proposal to regulate existing coal-fired power plants had already been set in motion. In 2007, the Supreme Court ruled that EPA could not sidestep its authority to regulate emissions tied to climate change. The agency later issued an "endangerment finding" that created a legal foundation for regulating carbon. 

"We limit the amount of toxic chemicals like mercury and sulfur and arsenic in our air and water, but power plants can still dump unlimited amounts of carbon pollution into the air for free," Obama said in the speech. "That's not right, that's not safe, and it needs to stop."

Carbon economics

How you get there might be left up to the most unpredictable factor of them all: the economy.

"If you want to stabilize the concentration of carbon dioxide in the atmosphere, you need a substantial reduction of emissions," Apt said.

"Meeting greenhouse gas targets in a flat-growth economy, where the industrial use of electric power is the same now as it was in the early 1990s, is very different than a scenario in which you blithely say growth is going to be 3 percent a year," he said.

A range of factors affect the immediate future of electric power generation, said Metin Celebi, a principal with the Brattle Group. "The most important one is the gas price relative to the coal price," Celebi said.

The future direction of that price is anyone's guess, given how many questions remain about the pace of shale gas production.

Of the nation's approximately 300 GW of coal-burning power generation capacity, nearly 40 GW was targeted for retirement by 2016, according to a Brattle analysis.

More "lenient" regulatory controls, along the lines expected from the Obama administration, could cause that total to rise to nearly 60 GW, the Brattle report says. A very strict policy could raise that to 77 GW of coal plant capacity retirements.

Lower gas prices plus strict regulations could cause almost half of the U.S. coal fleet to retire, a scenario that Celebi and his colleagues concluded in an October 2012 report would likely be untenable for electricity producers.

This shift is occurring for both short-term price and longer-range policy reasons that are not easy to separate. Most energy companies expect that at some point, an explicit or implicit price will be placed on power plant carbon emissions, and that particularly burdens coal plants, whose carbon footprint is twice that of efficient gas generators, said Katherine Spector, executive director of commodities strategy for CIBC World Markets Corp.

That expectation affects companies' decision on retiring or retaining older, inefficient coal plants. "It's actually a combination of the two" -- price and policy -- "and the policy environment could significantly accelerate the trend," Spector said.

The drop in natural gas prices over the past two years has tilted production in gas's favor, particularly in competitive power markets where the two kinds of power plants seek low-bid opportunities to run hour by hour.

Until shale gas production flattened gas prices, coal held a solid lead. In April 2011, coal-fired plants accounted for 41 percent of electric power output, compared to 23 percent for natural gas. A year later, the two fuels' shares were almost identical. Then gas prices moved up again from less than $2 per thousand cubic feet to $4 recently, and coal made a comeback. Its share of electricity production was 38 percent this April compared to 26 percent for gas.

But an expectation of relatively cheap gas also affects decisions on the future of coal plants. "It is a different world in gas prices than we had three or four years ago," Celebi said. "Gas price projections have come down substantially, and that's something you can put more weight on."

The Energy Information Administration, the statistical arm of the Energy Department, noted in its 2013 annual energy outlook that "the interaction of fuel prices and environmental rules is a key factor in coal plant retirements."

For all the price and production scenarios EIA considered, less than 15 GW of new coal-fired capacity would be added between 2012 and 2040. "For new builds, natural gas and renewables generally are more competitive than coal, and concerns surrounding potential future GHG [greenhouse gas] legislation also dampen interest in new coal-fired capacity," EIA said.

Shutting one-third of coal

A 2012 paper by a team led by Massachusetts Institute of Technology researcher Henry Jacoby said the increased gas supply boosts the power industry's flexibility to meet baseload electricity demand if expectations about nuclear power don't pan out or coal retirements speed up.

Under an aggressive policy to slash carbon that requires a 50 percent emissions reduction below 2005 levels by 2050, there would have to be "substantial changes in energy technology."

If the development of shale gas became too expensive, gas use would "grow slightly for a few decades." Toward the end of that period, however, "it would be priced out of this use because of the combination of rising producer prices and the emissions penalty."

Renewable energy would grow to 29 percent of power demand, and coal would keep a substantial position in the power pie. 

Fact sheets issued by the administration yesterday left crucial questions about the policy plans unanswered, noted ClearView Energy Partners, "especially the threshold levels of emissions that will govern new and existing [generation] units."

On a back-of-the-envelope assessment, ClearView said that if the administration adopts a formula proposed by the Natural Resources Defense Council calling for a limit of 1,500 pounds of CO2 equivalent per megawatt-hour of electricity production, it could add another 70 GW of coal plant retirements by 2020. That's on top of the 40 GW of expected retirements tied to current EPA rules on mercury emissions and air toxins, the ClearView analysis said. 

"In the aggregate, this adds up to a shutdown of roughly one-third of U.S. coal-fired generating capacity within the space of a decade," ClearView said. "Program design matters, too. The inclusion of offsetting emissions reduction mechanisms could keep more coal online."

Republicans in Congress have accused the Obama administration of threatening grid reliability through its pressures on coal-fired generation.

Celebi said that remains a big question. "It depends on where and when those plants retire," he said. "If it's a long period of time, the markets will have a chance to respond by cutting consumption or adding other resources. 

"If it's too much, too quick, that will not be feasible," he said. 

State foot-dragging

Politics soured the policy debate starting in 2009, electricity demand declined as the economy slumped, and natural gas prices fell to record lows in 2012.

Meanwhile, the technology-driven onshore drilling boom has turned up a "bridge fuel" to cleaner forms of electricity. And the White House has been openly supporting gas's role in combating climate change and spurring economic growth, despite concerns about methane emissions -- a potent greenhouse gas -- tied to upstream gas production.

"Sometimes there are disputes about natural gas," Obama said yesterday. "But let me say this: We should strengthen our position as the top natural gas producer because, in the medium term at least, it not only can provide safe, cheap power, but it can also help reduce our carbon emissions."

For electric utilities, the latest White House climate plan comes nearly four years after a bruising period of political wrangling over carbon cap-and-trade legislation. In 2009, the Edison Electric Institute was mired in the details of a bill that would distribute emissions credits for power generators to buy and sell under a carbon pollution cap. EEI's Tom Kuhn, president of the trade group of investor-owned utilities, had put together a fragile coalition of companies that could support the approach to ratcheting down emissions.

The premise behind the coalition-building had been that it's better to have a "market-based" program shaped by Congress than to leave it to top-down EPA regulations under the existing Clean Air Act.

The House passed the cap-and-trade bill by a slim margin in the summer of 2009, a signature achievement for House Democrats, but one that rested on compromises too politically hot for the Senate. The divisive debate revved up an opposition campaign targeting the science and politics of climate change. Republican leaders used the defeated legislation as a cudgel in the 2010 elections.

Since then, EPA has continued to tighten rules around conventional pollutants. New plants will have to comply with Mercury and Air Toxics Standards (MATS) rules. Other regulations addressing water intake and cooling water discharge are also shaping utility industry plans. Conventional coal gradually is being forced out of power portfolios.

Also on the table is an EPA draft rule that would cap carbon emissions at 1,000 pounds per megawatt-hour of generation for newly built power plants. The standard, which encourages fuel-switching to gas, would put the kibosh on new coal-fired power plants.

In a prepared statement after the president's speech yesterday, EEI's Kuhn urged EPA to put in place measures that "contain achievable compliance limits and deadlines" and "are consistent with the industry's ongoing investments to transition to a cleaner generating fleet and enhanced electric grid." 

"It is also critical that fuel diversity and support for clean energy technologies be maintained, not hindered," Kuhn added.

The slowdown in electricity demand in the United States has helped enable efficiency technology and power plant retrofits to control pollution. But analysts and executives from powerful utilities like Georgia-based Southern Co. and Ohio-based American Electric Power Co. Inc. have said carbon limits pose the biggest risk to their coal fleet. 

State utility commissions responsible for regulating power plants could slow the shift to low-carbon standards, analysts said. 

"There will be litigation and foot-dragging on the part of some states in developing implementation plans," said Adele Morris, an energy economist at the Brookings Institution. "I think EPA is in the early stages of what they would even propose."

By: Elizabeth Rowe

June 25, 2013

We all know that air conditioning eats up an enormous amount of energy. We also know that installing ceiling fans would allow us to use the air conditioner a lot less. And we all know the savings over time would pay for the ceiling fan. So why aren’t there more people buying ceiling fans? 

That question, and many more like it, are at the center of a research project launched by the Haas School of Business at the University of California at Berkeley and MIT’s Center for Energy & Environmental Policy Research (CEEPR). The initiative, known as the E2e Project, will work to understand cost-effective ways to reduce energy use and the obstacles that sometimes get in the way.

Drawing on the skills of both engineers and economists from MIT and Berkeley, the project derives its name from its mission: finding a smart way to go from using a larger amount of energy, or “E,” to a smaller amount of energy, or “e.”

Much of the impetus for this project comes from the McKinsey Curve, a cost curve that asserts that there are “negative cost” energy efficiency investments that essentially pay for themselves. “There’s a fair bit of evidence out there that suggests there’s a lot of low-hanging fruit in terms of energy savings, but much of that evidence is based on engineering models,” says E2e co-director Christopher Knittel, a professor at MIT’s Sloan School of Management and CEEPR co-director. “Much of the engineering research ignores behavioral changes that might come in response to those investments, and those behavioral changes can manifest themselves in many ways.”

For example, Knittel says, households might turn their thermostat down in the summer or up in the winter if heating and cooling homes become more energy-efficient. Such behaviors, which reduce the benefits of energy efficiency, aren’t accounted for in engineering models, he says.

One study undertaken by E2e will determine how much energy the federal Weatherization Assistance Program saves. The project examines low-income households in Michigan that received free efficiency upgrades, such as insulation and weatherproofing, and audits their energy use over time to find out why actual efficiency gains are less than expected. Final results are expected later this year.

According to Knittel, E2e has three main objectives. One is to determine whether these “negative-cost” investments truly exist. The second is to understand which of these investments has the greatest return on investment. And third, E2e will try to understand why consumers and companies aren’t making these investments if they truly have a negative cost.

E2e’s co-director, Professor Catherine Wolfram, an associate professor at Haas and co-director of the Energy Institute, says E2e has a broader goal, too: “At the heart, I think we’re interested in finding the lowest-cost way to mitigate climate change.” She adds, “In the short term we hope to deliver to policymakers some really good information about where human behavior might influence energy efficiency technology and policy.”

John Reilly, co-director of the Joint Program on Global Change, served on the committee responsible for a new National Research Council (NRC) report on the “Effects of U.S. Tax Policy on Greenhouse Gas Emissions.”

The report found that while tax policies can make a substantial contribution to meeting the nation's climate change objectives, the current approaches do not. In fact, current federal tax provisions have a minimal net effect on greenhouse gas emissions. While the report does not make any recommendations about specific changes to the tax code, it says that policies that target emissions directly, such a carbon tax or cap-and-trade system, would be the most effective and efficient ways of reducing greenhouse gases.

Reilly, with colleague Sebastian Rausch, authored a report last summer that demonstrated the benefits of a tax on carbon emissions, that could be part of a broader tax reform package.

“Congress will face many difficult tradeoffs in stimulating the economy and job growth while reducing the deficit,” said Reilly at the time the report was released. “But with the carbon tax there are virtually no serious tradeoffs. Our analysis shows the overall economy improves, taxes are lower and pollution emissions are reduced.”

The study — “Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution?”— calculated the impact a carbon tax starting at $20 per ton would have using a national economic model that details energy, taxes and household incomes. Reilly and his co-author Sebastian Rausch, now at ETH Zurich University, found that the tax would raise $1.5 trillion in revenue. That money could then be used to reduce personal or corporate income taxes, extend the payroll tax cut that expires this year, maintain spending on social programs—or some combination of these options—while reducing the deficit.

The NRC study came after Congress requested that a committee evaluate the most important tax provisions that affect carbon dioxide and other greenhouse gas emissions and estimate the magnitude of the effects.  The report considers both energy-related provisions — such as transportation fuel taxes, oil and gas depletion allowances, subsidies for ethanol, and tax credits for renewable energy — as well as broad-based provisions that may have indirect effects on emissions.

Reilly notes that his “win-win-win” study on carbon taxes showed that by “shifting the market through a tax on emissions rather than through tax credits for renewable sources, the nation would be raising revenue rather than spending it.”

Parts of the NRC’s media release were adapted for use in this news story.

To read more about the NRC’s report, click here.

To read more about the “Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution?” click here.