Articles by Gar Lipow

Since the Kyoto ETS went into effect, traded emissions have risen

From 2005 through 2007, emissions from within facilities covered by the Kyoto Emissions Trading Scheme have risen by around 1.8 percent. (If we adjust for facilities entering and leaving the system, which I'm not sure we should, that total would be more like 1.6 percent.)

This rise in emissions happened in spite of the fact the E.U. emissions as whole have fallen. This is not a secret, exactly, but when people talk about instituting cap-and-trade in the U.S. it is worth remembering this is not a case of taking something that worked, just not as well as we like, and making it better. Phase I of European cap-and-trade was a failure.

Big is beautiful if it breaks our dead-dinosaur addiction

I've heard arguments lately for local photovoltaic solar power (PV) from rooftops, roadways, and parking lots as a primary source of electric energy, mostly accompanied by arguments against long distance high-voltage transmission lines (HVDC). I keep picturing a revised Treasure of the Sierra Madre with bandits telling Humphrey Bogart: "Transmission lines? We don't need no stinking transmission lines!"

I think the key to this argument is whether you are satisfied with slow incremental growth in renewable energy that gradually rises to providing 20 percent of electricity use, or if you want renewable electricity use to grow large enough to displace coal, natural gas for electricity, and even natural gas for heating and oil for transport (via ground source heat pumps and electrified transport).

Let's look at data from the Carnegie Mellon Electricity Industry Center for one [PDF] PV system for one day in Prescott Arizona.

click image to zoom

Deployment precedes innovation

In energy efficiency circles, the story of Jan Schilham's 1997 redesign of a pumping system for a Shanghai carpet-making factory is famous. Schilham saved 92 percent of pumping energy and lowered capital costs by using a well-known principle: Pumping water slowly through fat, straight pipes reduces friction and saves energy relative to pumping the same volume quickly through narrow twisty pipes.

Why isn't it always done that way? Because the bigger pipes cost more than the energy saving. Schilham's insight was that energy is not the only payback. Fatter pipes lower the size of the pumps and motors required, so even with the additional plumbing expenses, total capital costs are lower. Energy savings in this context are free, or better than free.

In a narrow sense, this was an improvement in cost accounting, not technology. Nothing unknown or untested was deployed. No breakthrough enabled the lower costs -- they'd always been possible. Schilham simply counted a benefit that had been overlooked, demonstrating that a technique usually considered unprofitable actually saved money.

The key that allowed Schilham to exercise his genius was that Interface carpets had already decided to reduce its ecological footprint drastically. "Whether" had already been decided -- Schilham was worrying about the "how." Essentially he was in the position of someone complying with a standards-based efficiency rule.

Carbon pricing needs to supplement, not undermine, other means of cutting emissions

In solving the climate crisis we need to avoid creating the type of large secondary emissions trading market Kyoto did. Large secondary emission markets constitute a whole new sector with strong incentives that conflict with a really large drop in emissions. Maybe carbon traders are so noble and dedicated to saving the planet that financial self-interest won't influence them. But, if your view of human nature is that incentives matter, then a strong secondary market creates a group of people with the wrong ones. If incentives matter, then a secondary carbon market runs a real risk of becoming the new sub-prime.

For example, it has been noted that the European Emission Trading Scheme and other emission markets tend to be subject to high volatility, something that undercuts long term success. Large price variations for emissions permits discourage long term investment in savings, because it is hard to predict the value of the savings. Volatility can also lead to crashes, where emission prices temporarily drop near zero, which further reduces investment in reductions. The problem is traders tend to profit in the short term from volatility, because prices that vary encourage a larger number of transactions; more transactions produce more profit. While there are regulatory approaches that can discourage such volatility, such as high mandatory minimum emissions prices, financial industries in general tend to resist this type of regulation.