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December 22, 2006

And I'm focused on adaptation?


Posted to Author: Pielke Jr., R. | Climate Change | Energy Policy

An excellent and eye-opening story from Keith Bradsher in yesterday's NYT provides a new angle on the economics of the Kyoto Protocol:

Foreign businesses have embraced an obscure United Nations-backed program as a favored approach to limiting global warming. But the early efforts have revealed some hidden problems.

Under the program, businesses in wealthier nations of Europe and in Japan help pay to reduce pollution in poorer ones as a way of staying within government limits for emitting climate-changing gases like carbon dioxide, as part of the Kyoto Protocol.

Among their targets is a large rusting chemical factory here in southeastern China. Its emissions of just one waste gas contribute as much to global warming each year as the emissions from a million American cars, each driven 12,000 miles.

Cleaning up this factory will require an incinerator that costs $5 million — far less than the cost of cleaning up so many cars, or other sources of pollution in Europe and Japan.

Yet the foreign companies will pay roughly $500 million for the incinerator — 100 times what it cost. The high price is set in a European-based market in carbon dioxide emissions. Because the waste gas has a far more powerful effect on global warming than carbon dioxide emissions, the foreign businesses must pay a premium far beyond the cost of the actual cleanup.

The huge profits from that will be divided by the chemical factory’s owners, a Chinese government energy fund, and the consultants and bankers who put together the deal from a mansion in the wealthy Mayfair district of London.

It seems that mitigation pays.

Posted on December 22, 2006 01:43 AM

Comments

It seems the underlying theme of this NYT article echoes a familiar one in the application of market mechanisms: namely, how should one think about profits in the context of environmental protection. While this article takes more of a "fat cats" approach to criticising what are insinuated as unreasonable profits, another approach would state that it is just such (relatively limited) projects that attract attention to the problem, motivating (greedy?) capital to plug the biggest leaks first. Indeed projecs like HFC decomposition are hugely profitable, but that is because their mitigation impact is quite large. To me this would seem precisely the point of pricing greenhouse gas equivalents.

That theoretical debate aside, there are clearly major problems of opacity and bureaucracy in the CDM and, even moreso in voluntary markets, which are appropriate to address from a regulatory perspective.

Posted by: Nate Hultman at December 22, 2006 02:52 AM


Hi Nate- Thanks for participating. For me at least the two most striking features about the NYT article weren't just the fat cats.

It was (1) that the UN Ozone convention seeks to expand the use of HCFCs while the Climate Convention does the opposite. The UN is therefore battling itself; and (2) that some of the companies getting the massive windfalls for eliminating HCFCs are using their windfall profits to build more factories which produce HCFCs (which presumably then can be clean up under the CDM for massive profits!).

This does not strike me a a process that is effective as it might be from a policy standpoint. Coordinating the Ozone and Climate Conventions to ban HCFCs seems like a far more effective route to go, from the standpoint of policy effectiveness and efficiency.

Posted by: Roger Pielke, Jr. [TypeKey Profile Page] at December 22, 2006 07:02 AM


Hi Roger,

You write, "It was (1) that the UN Ozone convention seeks to expand the use of HCFCs while the Climate Convention does the opposite."

Actually, HCFCs are Hydro*Chloro*FluoroCarbons. The Montreal Protocol actually seeks to phase those out. They were only a stop-gap measure between CFC (chlorofluorocarbons) and HFCs (hydrofluorocarbons).

Makes sense? (Ahh..the sweet taste of alphabet soup. ;-)) The key thing is to get rid of chlorine completely.

The NY Times article is about HFC-23.

You then write, "Coordinating the Ozone and Climate Conventions to ban HCFCs seems like a far more effective route to go, from the standpoint of policy effectiveness and efficiency."

As I wrote, the Montreal Protocol does indeed require the phase out HCFCs. But the Montreal Protocol requiring the "banning" of HFCs might somehow "make sense" from a policy standpoint...but it makes no sense at all from a science standpoint. HFCs (i.e., the substances without any chlorine at all) do not harm the ozone layer. Since the Montreal Protocol is all about protecting the ozone layer, it wouldn't make sense for it to include a ban on something that doesn't harm the ozone layer.

Mark

P.S. As always (;-) ;-) ;-) ;-)!), Wikipedia has the straight poop on this subject:

http://en.wikipedia.org/wiki/Montreal_Protocol

"The Montreal Protocol currently calls for a complete phase-out of HCFCs by 2030, but does not place any restriction on HFCs."

Posted by: Mark Bahner [TypeKey Profile Page] at December 22, 2006 12:20 PM


Thanks Mark- Thanks for ctaching my extra Cs, I read/wrote right through that. The NYT article is in error, compare:

http://www.epa.gov/ozone/defns.html

Here is what the NYT reports:

"Two-thirds of the payments are going to projects to eliminate HFC-23.

Those payments also illustrate conflicting goals under Kyoto and the Montreal Protocol, a 1987 agreement that requires the phasing out of ozone-depleting substances. The problem is that the trading program backed by the United Nations, known as the Clean Development Mechanism, is helping support an industry that another international organization is trying to phase out.

And while ozone depletion is a separate problem from global warming, some gases, like HFC-23, make both worse. The separate secretariats under the protocols have little legal authority to resolve this quandary.

“It’s tricky in that we don’t have a mechanism other than the Security Council, and who cares there about HFC’s?” said Janos Pasztor, the acting coordinator of the organization that oversees the program."

The point that the NYT should have made is that by motivating a transition to HFCs the Ozone Convention is working at cross purposes to the Climate Convention which is trying to get rid of HFCs.

Thanks for the eagle eye!

Posted by: Roger Pielke, Jr. [TypeKey Profile Page] at December 22, 2006 12:41 PM


Hi Roger,

You quote the NY Times: "And while ozone depletion is a separate problem from global warming, some gases, like HFC-23, make both worse."

Yes, that's wrong. HFC-23 only affects global, it doesn't hurt the ozone layer.

And you conclude, "The point that the NYT should have made is that by motivating a transition to HFCs the Ozone Convention is working at cross purposes to the Climate Convention which is trying to get rid of HFCs."

This is a fine point, but I don't agree that the Climate Convention is trying to "get rid" of HFCs...any more than it's trying to "get rid" of CO2 or methane. I agree that the Climate Convention is trying to reduce "unnecessarily large" emissions of HFCs.

Here is an estimate of U.S. emissions of GHGs, in CO2 equivalents:

http://www.eia.doe.gov/oiaf/1605/vr96rpt/chap7.html

You can see that U.S. emissions of CO2 in 1995 were 5,297 million metric tons.

In contrast, the combined emissions of HFCs, PFCs, and HF6 were only 132 million metric tons of CO2 equivalent.

So since HFCs are only a subset of that, HFC emission are pretty trivial (less than 2 percent of CO2 emissions, in CO2 equivalents).

However...even though HFC emissions (in CO2 equivalents) worldwide are trivial compared to CO2, it still makes sense not to just spew HFCs needlessly.

It's only where it's an easy and cost-effective thing to do that the Kyoto Protocol is trying to "eliminate" HFC emissions. In fact, I think a much better word is "reduce"...or "reduce unnecessarily large emissions" would be a better way to put it.

"Bans" are seldom (almost never, I'd say) cost-effective ways to deal with problems. Let's say that the anti-GW people convinced the anti-ozone-layer-destruction people to ban HFCs (even though HFCs do NOT harm the ozone layer).

That might substantially increase the costs of air conditioning. (BTW...have you seen the prices at Walmart, Sears, and elsewhere for 5000 Btu/hr air conditioners? Less than $80! That's amazing! I'd swear I remember the costs of window air conditioners of that size being over $200 20-30 years ago. And that was in 1970s and 1980s dollars.)

If you substantially increase the cost to purchase a window air conditioner, you're going to kill an awful lot of poor people. (Especially in the highly unlikely event global warming is as large as the IPCC says it will be.) One would hope the anti-GW people are actually trying to *save* lives, not destroy them. If so, raising the cost of the cheapest window air conditioners isn't a good way at all to save lives.

Best wishes,
Mark

Posted by: Mark Bahner [TypeKey Profile Page] at December 22, 2006 03:34 PM


Hi Roger,

Oops. Some more info. (What can I say? I do this for a living, so I like to get it right!)

I got to wondering about HFC-23, since I'm more familiar with HFC-134a...which is what's used in automobile air conditioners. I thought perhaps HFC-23 was in some window units. But that's not the case. Here's what a DOE EIA site says:

http://www.eia.doe.gov/oiaf/1605/gg02rpt/other_gases.html

http://www.eia.doe.gov/oiaf/1605/gg02rpt/tbl29.html

Trifluoromethane (HFC-23)

"The EPA estimates 2001 emissions of HFC-23 at 1,760 metric tons of gas.82 Annual emissions have fluctuated since 1990, before dropping by 32.6 percent in 2001. Although emissions of HFC-23 are relatively small, its high GWP (12,000)83 gives it a substantial potential climatic effect. HFC-23 is created as a byproduct in the production of chlorodifluoromethane (HCFC-22) and is generally vented to the atmosphere. In some cases it is captured for use in a limited number of applications. While production of HCFC-22 continues to grow (by 35 percent from 1990 to 2000), emissions of HFC-23 from this source have declined (by 15 percent from 1990 to 2000), and the intensity of HFC-23 emissions (i.e., the amount of HFC-23 emitted per kilogram of HCFC-22 manufactured) has declined by 37 percent from 1990 to 2000.84

HCFC-22 continues to dominate the refrigerant market for stationary refrigeration and air conditioning (including chillers, room and household (central) air conditioners, and dehumidifiers).85 HCFC-22 is also used as a blowing agent component for polyurethane foams and extruded polystyrene foams. The EPA administers a voluntary program with HCFC-22 producers to reduce HFC-23 emissions, which has helped to offset the rising demand for HCFC-22 in the short term. In the long term, domestic production of HCFC-22 for non-feedstock uses will be phased out by 2020 under the U.S. Clean Air Act, pursuant to U.S. agreements under the Copenhagen Amendments to the Montreal Protocol, although its production for use as a feedstock in the production of other chemicals (fluorinated polymers) will be allowed to continue indefinitely.86"

So HFC-23 is just a byproduct of HCFC-22. Since HCFC-22 DOES deplete the ozone layer, it might be reasonable to push up the phase-out time. But since HCFC-22 *is* used in window air conditioners, banning it earlier might drive up the price of window air conditioners.

It still seems to me to be better policy simply to reduce HFC-23 emissions (especially since it's a byproduct, rather than used in anything), rather than to ban HCFC-22 any earlier.

Mark

Posted by: Mark Bahner [TypeKey Profile Page] at December 22, 2006 05:18 PM


>getting rid of the chlorine
And the bromine, don't forget that.

Mark, I think the point is still good.

China isn't 'increasing the cost' and "going to kill an awful lot of poor people" ---- they haven't yet build even the electcrical infrastructure to power all these new appliances.

Where it pays they focus on efficiency. Remember they're replacing incandescent lights with LEDs, etc. -- and they're busy building more old type dirty coal plants.

They save big money with intelligent design in their consumer appliance market for conserving electricity.

I suspect they're gaming the global system by building HFC plants because they know the world will pay them to later take the plants and product out of circulation. Why build junk you have to pay to dispose of yourself, when you can build junk others will pay you to dispose of?

They don't have all that much rural electrification, let alone any system to collect the old refrigerant for safe disposal.

Posted by: hank [TypeKey Profile Page] at December 22, 2006 05:29 PM


Mark- Some further details on this following up your further information. It turns out the the CDM under Kyoto creates incentives for the production of HCFC-22, since there is money to be gained in destroying HFC-23. As you note HFC-23 is a waste gas obtained in the production of HCFC-23.

So the NYT article was correct when it wrote "The problem is that the trading program backed by the United Nations, known as the Clean Development Mechanism, is helping support an industry that another international organization is trying to phase out." It just didn't tell us that the industry being referred to was HCFC-23.

More details on how this issue was not dealt with at the latest Climate COP:

http://www.greenbiz.com/news/news_third.cfm?NewsID=34245

This part is particularly amazing:

"The Clean Development Mechanism (CDM) allows industrialized countries to buy emissions credits for the reduction of greenhouse gases in developing countries. The majority of the early projects award credits for the destruction of a chemical called HFC-23, a potent global warming gas in its own right that is a by-product of the production of HCFC-22. Because these credits are so lucrative, they create a strong disincentive to stop the production of the source chemical.

Thus far, the CDM has registered 8 companies that produce HCFC-22 to be eligible for emissions credits. One such deal announced in early October, pays two Chinese companies $1.02 billion to destroy about 100 million CO2-equivalent tons of HFC-23. To receive this money, however, they will have to produce about five times as many CO2-equivalent tons of HCFC-22."

Posted by: Roger Pielke, Jr. [TypeKey Profile Page] at December 23, 2006 07:11 AM


Hi Roger,

Just so folks don't get confused (if they haven't already lost track)...you write:

"It turns out the the CDM under Kyoto creates incentives for the production of HCFC-22, since there is money to be gained in destroying HFC-23. As you note HFC-23 is a waste gas obtained in the production of HCFC-23."

That last one should be HCFC-22, in case anyone was confused.

:-)

But your final paragraph is what's really important:

"Thus far, the CDM has registered 8 companies that produce HCFC-22 to be eligible for emissions credits. One such deal announced in early October, pays two Chinese companies $1.02 billion to destroy about 100 million CO2-equivalent tons of HFC-23. To receive this money, however, they will have to produce about five times as many CO2-equivalent tons of HCFC-22."

Wow! That is indeed a pretty screwed up situation! Why is it that the Kyoto Protocol allows the productions of "five times as many CO2-equivalent tons of HCFC-22"? I guess that's because they only PRODUCE it, and don't emit it (right there at the plant)?

It seems to me that Kyoto could and should be changed to not allow people to manufacture five times as many CO2 equivalents as they are reducing...simply because the five times greater value isn't being released right there at that plant.

But it's even worse than that...because HCFC-22 actually is bad for the ozone layer. So they've got a situation where not only are they manufacturing five times as many CO2 equivalents as they're destroying, they're also being encouraged to generate more of the HCFC-22 that actually destroys the ozone layer.

That is indeed a major, major mess. I can see how Kyoto should be amended to not allow that sort of thing to happen. They shouldn't be allowed to produce 5 times the number of CO2 equivalents they're destroying, and get credit for reducing global warming. And they should also not be encouraged to vastly expand HCFC-22 production, since the HCFC-22 is not completely ozone-layer-friendly.

Thanks for the info,
Mark

Posted by: Mark Bahner [TypeKey Profile Page] at December 23, 2006 05:41 PM


The discussion of CFCs, HCFCs, and HFCs is all very interesting, and several ideas have been proposed to "solve" this problem. But y'all seem to be focused on the secondary problem -- a conflict between two UN regulatory regimes. I accept that this conflict is real and serious, but there is nothing unusual about it. Governments routinely engage in regulatory policies that conflict. If there is anything unique about this case, it's that regulators have tried to graft onto one of the regulatory regimes a market-based instrument.

I predict that the blame for regulatory failure will be placed on the market-based instrument (as the NYT begins to do) and not on the conflicting policy objectives (which the NYT mentions and thinks is ironic) and not on the appallingly poor way the UN has implemented market-based instruments (which the NYT ignores). Any policy instrument (market-based or otherwise) that rewards and encourages cynical rent-seeking will not gain public legitimacy. The Chinese and their Western enablers will ruin market mechanisms for GHG abatement if they can use them to extort $500 million in rents for projects that cost $5 million to implement.

For advocates of Kyoto and its progeny, the success of market-based instruments is essential. Allowing them to be so thoroughly corrupted by rent-seeking will destroy public support for HGH abatement.

In a previous comment I speculated that the UN's Oil for Food programme was the best that could be expected from a UN-based regulatory regime. I figured that 10% of the programme's value would be lost to graft, and suggested that the UN considered that a great accomplishment but that it was unacceptable to the US polity.

What the NYT article suggests is that a graft rate of 99% is not only feasible, but going on even now. If a candidate for president in 2008 makes clear that 99% of what American taxpayers and consumers are paying for GHG abatement is graft, then GHG abatement is dead as a policy. Do not resuscitate.

The NYT calls this "troubling." How would they describe a 99% graft rate if it was a military procurement program?

Posted by: Richard Belzer [TypeKey Profile Page] at December 29, 2006 06:50 AM


Richard- Thanks for this comment, the point about "graft" is very interesting. But it is worse than this because some of that graft goes into producing more GHGs (to sell as future reductions!).

Posted by: Roger Pielke, Jr. [TypeKey Profile Page] at December 30, 2006 08:29 AM


Roger,

Historically, some of the returns from graft have been expended on current consumption; the rest has been invested for the production of more graft. If it weren't for investments made by the Five Families, we wouldn't have New Jersey.

The American public might yet be convinced that GCC is a serious problem. It is also possible (but much less likely) that they can be convinced to make sacrifices. But I see zero chance that the US public can be persuaded to tolerate even a 5% graft rate (never mind 99%). Compared to the rest of the world, the American public is puritanical about such things. These are people who think congressmen (like journalists) can be bought for the price of a steak dinner.

RBB

Posted by: Richard Belzer [TypeKey Profile Page] at January 2, 2007 08:13 PM




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