Source: U.S. Department of Energy
As the chart above indicates, since the end of World War II, the amount of carbon being leaked into the atmosphere has increased almost parabolically, with a brief pause around 1980 after the price of oil had come unhinged from its single digit moorings and economic activity slacked off for a bit. This rise is in line with the amount of coal, oil and gas that has been consumed in the meantime. It is also highly correlated to atmospheric and oceanic temperature increases.
In 2014, 35.5 billion metric tonnes were added to the mix. So far, this has not been a pay-as-you-go proposition, rather, the effects, and the externalities have been passed on to anyone and everyone who has been in the path of rising seas, rising temperatures and the storms, droughts and fires that have spread in their wake.
(Click to enlarge)
Though the U.S. has contributed the most since 1965, when temperatures started to rise (273 billion to China’s 166 billion, out of a total of 1.14 trillion added tonnes, according to BP), China has now taken the lead in annual output (9.7 billion tonnes in 2014 vs. 6 billion tonnes for the U.S., making up 44 percent of the total between the two), mostly due to that country’s reliance upon coal for so much of its electricity. China became the world’s largest car market a few years ago and expects to sell 24 million units, compared with 16 million projected sales in the U.S., assuming the recent market selloff there does not portend a dramatic economic slowdown.
Related: Could North America Pull Off Its Own Oil Cartel?
Clearly, what China and the U.S. decide to do about the price of carbon will determine how much more there is to come, and how much hotter the atmosphere gets before renewables ascend the world’s energy throne. And it is likely that China itself will determine what that price is. When will carbon get a price? What should that price be? Will the markets decide or will politicians?
(Click to enlarge)
Can China reach its growth targets without burning more coal? What will their next 500 million vehicles use for fuel? Assuming that there are 24 million cars and light trucks sold in China this year, and figuring a 5 percent growth rate, that number (which is twice the entire U.S. fleet) will be on the streets before 2030. Can EVs come down in price in time? Can wind and PV be scaled in time? How much time do we actually have?
We Have Met the Enemy
And he is us. There was not much debate about whether or not it was critically important to get the bomb before Hitler did. This article would be written in German if we hadn’t, assuming any of us were still here, and the Reichstag approved its content.
By the same reasoning, after Sputnik animated the October sky in 1957, it was clear that we had to beat the Soviets to the moon, not because we wanted to be cooler than they were (face it, the U.S. had already won that one – JFK was way cooler than Nikita Khrushchev), but because the race to space meant that the best player could lob a nuclear weapon thousands of miles away on top of an inter-continental ballistic missile and come within 100 meters of its target. It was the same problem, really, but the enemy had a different face. The nuclear genie was out of the bottle and the risk of losing ‘the great game’ had become too high, for everyone.
The moment of truth came in Oct. 1962
This time it is different. Only a fool, or someone getting paid to do it, would debate the science of whether or not more atmospheric CO2 is making the earth’s temperature rise or deny the correlation between fossil fuel consumption and the production of that CO2. See John Oliver and friends debate the issue here. However, when it comes to beating the enemy this time around, cognitive dissonance kicks in because the enemy is the face that most of us see in the mirror; Pogo got it right.
Related: The Saudi Oil Price War Is Backfiring
We know where the carbon comes from and we know where it is going. What we haven’t yet figured out is a way to pay for it. Dumping the effects and costs on the next generation, and those to follow, seems rather reckless, unless you think there is no duty of care owed to posterity. The fellow who said: “Après moi le déluge,” King Louis XV, was right. His successor got his head chopped off. There is, however, no truth to the rumor that, after taking control of the U.S. Senate in the 2014 elections, Mitch McConnell, the new Majority Leader from Kentucky (a coal state), said: “Let them eat Carbon.”
(Click to enlarge)
Obama Didn't Kill Coal, The Market Did
So reads the headline from Michael Bloomberg’s article on August 4. On the previous day, the President announced the Clean Power Plan.
“Critics of the Environmental Protection Agency’s new Clean Power Plan are describing it in apocalyptic terms. But much of what they believe about the plan -- that it will destroy the coal industry, kill jobs and raise costs for consumers -- is wrong. And it’s important to understand why. . . . the fact remains that King Coal is dying of natural causes: Market forces, technological advances, and public demands for clean air and climate action have combined to make alternative sources of energy more financially attractive. The price of new wind power, for example, is lower than that of coal in most parts of the country,” Bloomberg wrote.
Mr. Bloomberg is certainly correct about the trend for coal in the U.S. However, the biggest player in the world of coal is China, which burns close to 4 billion tons per year; in the U.S. the figure is around 1 billion tons. A glance at the chart below tells the tale. The arc for coal consumption bent sharply upward around the year 2000 when China began its all-out push for more power production. Chinese demand at that time was roughly equal to U.S. demand. Looking at this chart, it should not be a surprise if King Coal goes back to the top of the table before China’s braking maneuvers take full effect; momentum is governed by mass.
Related: Top Trader Sees $500 Million Evaporate In July Thanks To Low Oil Prices
Source: BP
King Coal is not dead. “He’s just mostly dead.”
China Will Decide
As discussed in a recent article on Oilprice.com, China’s energy ambitions are directly at odds with its climate goals. “Since coal is a major source of carbon emissions in China, the Chinese government is aiming to reduce its usage to 62 percent of primary energy consumption by the year 2020 in order to reduce its air pollution levels and greenhouse gas emissions. In a rather alarming revelation, a recent report from China’s Ministry of Environment Protection revealed that only eight of its cities could pass the national air quality standards in 2014.”
An article posted on Greenbiz.com on July 27 sheds more light on China’s intentions. In order to achieve an overall peak in emissions by 2025, China plans to:
• Obtain 20 percent of its energy from non-fossil fuels by 2030
• Slash the economy’s carbon intensity by 60 to 65 percent below 2005 levels
• Start a national cap-and-trade program in 2016 that will include a meaningful price on carbon
Posterity may well be amused if it takes a Communist country to establish a price for carbon; it will also be relieved.
The Case for a Carbon Tax
On June 6, the editorial board of the New York Times published: ‘The Case for a Carbon Tax.’ “In a welcome development, businesses are asking world leaders to do more to address climate change. This week, the top executives of six large European oil and gas companies called for a tax on carbon emissions. . . . These companies — the BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total — are not taking a bold environmental stand. They are being pragmatic. They want an efficient and predictable policy to limit greenhouse gas emissions because they realize something must be done.
“A carbon tax would raise the price of fossil fuels, with more taxes collected on fuels that generate more emissions, like coal. This tax would reduce demand for high-carbon emission fuels and increase demand for lower-emission fuels like natural gas. Renewable sources like solar, wind, nuclear and hydroelectric would face lower taxes or no taxes. To be effective, the tax should also be applied to imported goods from countries that do not assess a similar levy on the use of fossil fuels.
“British Columbia started phasing in a carbon tax in 2008 and used the revenue to reduce income taxes. The province’s fossil fuel use fell after the tax was put in place, even as fuel consumption increased in the rest of Canada, and the economy of British Columbia has grown faster than that of the rest of the country. The tax is currently capped at 30 Canadian dollars per ton of carbon, or about 24 cents per gallon of gasoline.”
Whether or not America’s political class can manage to install a carbon tax, or perhaps something their friends and contributors can more easily game, i.e. a cap and trade system, remains to be seen. But it probably doesn’t matter since the Chinese will likely go first and their clout and size will matter the most. In other words, it’s got everything to do with the price of C in China.
The editorial board concludes: “But world leaders, who will meet in Paris later this year to negotiate a climate change agreement, cannot give up in the face of this opposition [from Republican lawmakers]. Carbon taxes are one of the best policies available to solve this global problem.” The time has come: Cry 'Havoc!', and let slip the dogs of the market place.
Où sont les neiges d'antan?
By Henry Hewitt for Oilprice.com
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