No subject

a result of deliberately reducing fossil fuel consumption can hardly be
compared with the overwhelming catastrophe that unbridled Climate Change
would bring. However, policy makers may look at the evidence through an
entirely different lens - one that discounts the future in favor of the
present.

In financial markets, the discount rate is the rate that a stock analyst
might use to discount a company's future earnings stream for the
purposes of present investment. In his book Material Concerns:
Pollution, Profit and Quality of Life (1996), Professor of Sustainable
Development and UK government advisor Tim Jackson describes it this way:

"[F]uture costs and benefits are taken to have a lower value than
present costs and benefits. We can think of the discount rate as the
rate of return which is required on capital invested by the company. The
higher the discount rate, the lower the value of future costs against
present costs. For example, a cost of $200,000 which occurs twenty years
in the future has a net present value of $44,000 at five percent and
$10,400 at ten percent discount rate. The further into the future costs
and benefits arise, the lower their value compared with present costs
and benefits."

Environmental psychologists argue that discount rates are rooted in
fundamental human psychology, and perhaps even hardwired into our genes
and nervous systems. We instinctively value the concrete present over
the likely or hypothesized future.

The relevance for Climate Change - and other environmental issues, such
as resource depletion - is clear: we tend to discount future costs (such
as the impact of melting glaciers) just as we do future profits. Thus,
asking society to endure present pain in order to avert more widespread
suffering in the future is problematic. The present pain must be minor,
and the future suffering profound and credible and not too many years
distant, in order to persuade us to take an action that we will find
uncomfortable or unpleasant.

In the early years of the decade, as the global economy was booming,
policy makers in many nations gave considerable attention to Climate
Change. Heads of state conferred, strategies were debated, and
agreements were forged. Today, as energy scarcity cripples national
economies with pain that is both palpable and growing, there is likely
to be a greater tendency to discount the future costs of Climate Change
in favor of satisfying immediate demand for fuel, no matter how
carbon-intensive it may be. There is abundant evidence that this is
indeed occurring.

In Europe, while top climate experts offer ever-shriller warnings about
the effects of carbon emissions, Italy is planning to increase its
reliance on coal from fourteen percent of total energy to 33 percent.
Throughout the continent, about fifty new coal-fired power stations are
being planned for the next five years. The driver for this new coal boom
is unequivocally clear: higher natural gas prices. In Germany, 27 new
coal plants are planned by 2020, many fueled by lignite - which can
produce a ton of carbon emissions for every ton of coal burned.

In the US, despite the cancellation of so many new coal plants in recent
years, the National Mining Association projects that about 54 percent of
the nation's electric power will be coal-fired by 2030, up from the
current 48 percent.

Depletion defeats climate policy in other ways. Carbon taxes become a
harder policy to sell as energy prices climb; coal cutbacks are more
difficult to make when natural gas is getting more expensive and
electricity grids are browning out; and using coal to make liquid fuels
starts to look attractive as diesel prices escalate.

Will efforts to address Climate Change solve the economic problems
arising from coal, oil, and gas depletion and increasing scarcity? It is
possible in principle, but in reality the stronger likelihood is that
energy scarcity will rivet the attention of policy makers and private
citizens alike because it is an immediate and unavoidable crisis. The
result: as scarcity deepens, support for climate policy may fade even as
climate impacts worsen.

A Combined Approach

Clearly, the world needs energy policies that successfully address both
Climate Change and fuel scarcity. Such policies are likely to be devised
and implemented only if both crises are acknowledged and taken into
account in a strategically sensible way.

If policy makers focus only on one of these problems, some of the
strategies they are likely to promote could simply exacerbate the other
crisis. For example, some actions that might help reduce the impact of
Peak Oil - such as exploitation of tar sands or oil shale, or the
conversion of coal to a liquid fuel - will result in an increase in
carbon emissions. On the other hand, some actions aimed to help reduce
carbon emissions - such as carbon sequestration or carbon taxes - will
make energy more expensive, which, in a situation of energy scarcity and
high prices, may be politically problematic and therefore a waste of
climate activists' and policy makers' limited resources.

However, many policies will help with both problems - including any
effort to develop renewable energy sources or to reduce energy consumption.

For strategic purposes, it is important to understand our human tendency
to discount future problems. We must assess which threats will come
soonest, and make sure that our sometimes frantic efforts to respond to
these immediate necessities do not exacerbate problems that will show up
later. Peak oil is clearly the most immediate energy and resource threat
that policy makers must deal with. Peak Coal and Climate Change may seem
comparatively distant. But all must be taken seriously if we are to do
any better than merely to lurch from crisis to crisis, with each new one
worse than the last.

If energy scarcity forces policy changes before climate fears can do so,
then perhaps world leaders will find that it makes more sense to ration
fuels themselves by quota, rather than the emissions they produce. In
any case, it will help everyone concerned to have a clear idea of the
ultimate extent of coal, oil, and natural gas reserves and future
production, as well as a realistic understanding of climate sensitivity
and hence the environmental and economic costs of continuing to burn
fossil fuels even in depletion-constrained amounts. Otherwise, the
policies pursued may simply waste precious time and investment capital
while actually making matters worse.

References:

{1} BGR report: "Lignite and Hard Coal: Energy Suppliers for World Needs
until the Year 2100 - An Outlook 2007"
http://globalpublicmedia.com/Museletter_196_Coal_and_Climate

{2} "Estimates of Oil Reserves" by Jean Laherrere
http://www.iiasa.ac.at/Research/ECS/IEW2001/pdffiles/Papers/Laherrere-long.pdf

{3} "Implications of 'Peak Oil' for Atmospheric CO2 and Climate"
http://arxiv.org/abs/0704.2782

{4} Global Warming Twenty Years Later: Tipping Points Near
http://columbia.edu/~jeh1/2008/TwentyYearsLater_20080623.pdf

{5} Global Warming Exaggerated, Insufficient Oil, Natural Gas and Coal"
(May 18 2007) http://www.energybulletin.net/node/29845

{6] The Coal Question and Climate Change by David Rutledge (June 2007)
http://www.theoildrum.com/node/2697

{7} Target Atmospheric CO2: Where Should Humanity Aim? by James Hansen
http://www.columbia.edu/~jeh1/2008/TargetCO2_20080407.pdf

http://globalpublicmedia.com/Museletter_196_Coal_and_Climate


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