William Nordhaus, The Climate Casino (2013)

As previous posts both adumbrate and expose, the human brain does not always successfully sort fact from fiction, but most of the time it does do a pretty good job in comprehending reality even if that reality is derived from imagination or rests upon probabilities.  The brain --- and I am thinking of the human brain in particular, but it could be any animal brain to an extent --- deals with uncertainties.  It deals with uncertainties in degrees.  Another remarkable feature of the human brain is its ability to anticipate and to project in the future, what Jeff Hawkins called "intelligence" where the brain recognizes a predictable set of patterns, even in the face of uncertainties.  (See November 16, 2013 post).

But even if the capacity of the human brain is remarkably successful in comprehending reality and anticipating the future, there are subjects like predicting future climate change and the inherent uncertainty in predicting the risk of harm that will occur if average global temperature rises just a few degrees over the current temperature that challenge the ability of some, if not many, to call their predictive capacity remarkable.  A previous post discussed this issue.  (See August 12, 2012 post).  William Nordhaus has spent a career studying and getting his intellect around the risk, uncertainty, and  economics of climate change.  The Climate Casino is Nordhaus' reflection on this subject; it is also a wake up call for those who can't or do not want to spend time looking into the future with the benefit of a very substantial amount of data that indicates a significant risk of harm from an average global temperature rise of just a few degrees due to increased emissions of greenhouse gases.  I will discuss this last thought in a moment.

What is not uncertain for economist Nordhaus and like-minded scientists who study climate change is that average global temperature has been increasing since the beginning of the 20th century, which is roughly aligned with the beginning of the industrial era.  What is also uncertain for Nordhaus and others is that humans are already witnessing impacts from the average global temperature increase.  Finally what is not uncertain for Nordhaus and like-minded scientists who study climate change is that human behavior resulting in increased emissions of greenhouse gases is responsible for the slow, but steady rise of average global temperatures.

What is uncertain is the potential future impacts from rising average global tempertures, not the science that connects greenhouse gas emissions to a slow steady rise of average global temperatures.  Nordhaus would be the first to admit how difficult it is to estimate and measure the impacts of climate change.  He would also be the first to admit about the uncertainty associated with future rate of increased greenhouse gas emissions. For example, "Estimating the impacts of climate change on health is yet another difficult task.  It requires estimate of climate change by region and year.  Then it requires estimates of the impacts of changing climate conditions on health for different diseases.  This is challenging because the changes take place well into the future in a world where incomes, medical technologies, and health status are evolving rapidly."  With respect to estimating the impacts of sea level rise in the future, Nordhaus notes, "One of the challenges is that sea-level rise is so delayed.  While the impacts on farming and health might arrive relatively quickly, the seal level rise slowly for many centuries because of the thermal inertia in oceans and the long delays in melting the giant ice sheets.  The long delays pose special challenges because they require envisioning the shape of our landscape and societies deep into the future and taking steps today that will produce the most benefits well beyond the present century."  With respect to the prospect for species loss in the future attributable to increased average global temperatures, there are no reliable estimates of the risk of extinction for different species; some climatic ranges will shift, and some areas might grown, so the number of species for growing ranges would be predicted to increase rather than decline, and they do not account for species loss by habitat destruction, overuse, overfishing, overhunting, and pollution that would occur even in the absence of climate change.  And even if you could devise a means of estimating the risk of species loss due to climate change, there are no reliable techniques for valuing ecosystem and species loss.


"What should we conclude at the end of this review of the impacts of future climate change?" Nordhaus asks.  "The first point to emphasize is the difficulty of estimating impacts.  They combine the uncertainties of emissions projects and climate models.  Even if we overlook the uncertainties about future climate change, the reactions of human and other living systems to these changes are very poorly understood.  In part, reactions of social systems are hard to forecast because they are so complex.  In addition, humans increasingly manage their own environment, so that a small investment in adaptation may offset the impact of climate change on human societies.  Moreover, climate changes are almost certain to occur in the context of technologies and economic structures that will differ vastly from those today.*** However, we must look through the fuzzy telescope as best we can.  A second conclusion involves the estimate economic impacts of climate change from sectors that we can reliably measure, particularly for high income countries of today or the future.  The estimates here are that economic impacts from climate change will be small relative to the likely overall changes in economic activity over the next half century to century. *** The loss in income would represent approximately one year's growth for most countries spread over several decades [because] managed systems are surprisingly resilient to climate changes if they have the time and resources to adapt.  *** A third major conclusion is that the most damaging impacts of climate change --- in unmanaged and unmanageable human and natural systems --- lie well outside the conventional marketplace:  sea-level risk, hurricane intensification, ocean acidification, and loss of biodiversity*** unstable ice sheets and reversing ocean currents."

There are mitigation strategies for slowing climate change by reducing emissions.  They are not inexpensive, and because they are not inexpensive Nordhaus recognizes that humans cannot implement these mitigation strategies in one fell swoop.  But since we understand all too well where carbon dioxide emissions come from, it is not that difficult to say that if humans had the will to mitigate climate change by reducing carbon emissions we know what to do.  Here are some basic facts:

• Petroleum emits 0.9 tons of carbon dioxide per $1000 of fuel
• Natural gas emits 2 tons of carbon dioxide per $1000 of fuel
• Coal emits 11 tons of carbon dioxide per $1000 of fuel

Coal has about six times more carbon dioxide emissions per dollar of cost than natural gas and about 12 times ore than petroleum.  "Coal is a very inexpensive fuel per unit of energy but has the disadvantage that much carbon dioxide is released per dollar of expenditure."  This suggests that the "most economical way to reduce energy emissions is to reduce coal use."  When looking at emissions from the household perspective (2008 data), automotive travel is the biggest contributor to carbon dioxide emissions at 7.9 tons per household (15.2% of emissions).  Space heating contributes less than half that amount at 3.2 tons per household (6.2% of emissions); air conditioning represents 1.3 tons per household (2.5% of emissions).  Lighting use, electronics and computers are much smaller contributors.  With the exception of automotive, the contribution of heating, air conditioning and other appliances to carbon dioxide emissions could be substantially impacted by changing the fuel mix to generate electricity by significantly reducing coal in favor of natural gas or renewables.  "The results of detailed energy models suggest an important and troubling conclusion.  The favorite policies of most countries today are energy efficiency regulations such as those for automobiles and appliances like refrigerators.  However, such regulations will not touch the area where reductions are most economical --- electricity generation from coal.  While energy-efficiency regulation may be popular, reducing coal use meets with ferocious opposition from coal regions and their hired guns.  But careful analyses show that coal is king when it comes to reducing carbon dioxide emissions.***Significant reductions in emissions cannot be done quickly, or cheaply with today's technologies or those that are ready for large-scale deployment.***Yet we need to ensure that societies rely on the least expensive approaches.  Returning to our examples of refrigerators versus electricity generation, we was a cost difference of a factor of almost ten."

None of this is lost on the Obama Administration.  There is a reason that the Administration has been pursuing an "all of the above" strategy for energy:  they are driving down natural gas prices by increasing supply, which incentivizes industry and utilities to shift their fuel mix from high carbon intensity coal to lower carbon intensity natural gas.  It is working.  Additionally, the Administration is providing limited subsidies (loan guarantees) for nuclear fuel even in the face of criticism that nuclear electricity generation plants are not cost effective:  nuclear energy substitutes for coal as a fuel.  The Administration's support for renewable energy fits a similar model.

Economists recognize that there is a more efficient way to reduce carbon emissions than all these regulatory strategies:  Tax carbon emissions or cap emissions and create a market mechanism to allow emitters to pay for permission to emit above the caps.  Either way puts a price on carbon that makes it more expensive to emit carbon dioxide.  When that happens, economic actors will reduce their emissions.  Despite all the anti-tax rhetoric about a carbon tax, a carbon tax has the serious potential to enable taxing authorities to reduce a number of other taxes in a significant way.  A carbon tax does not have to be accretive to overall taxation.  There are some in the US Congress who have actually looked at a carbon tax this way.  The advantage for establishing a market in allowances (cap and trade) is that it ensures that emissions are used in the most productive manner, explains Nordhaus.  This type of system has been very successful in reducing sulfur dioxide emissions.

Nordhaus is right: "reducing coal use meets with ferocious opposition from coal regions and their hired guns."  It also meets with deceptive rhetoric from those who simply oppose government intervention in the economy.  A recent article in today's Washington Post headlined "Study: Fox News botches climate-change coverage" identifying misleading portrayals of climate science, which, by Nordhaus' view, is the least controversial piece in this discussion.  It's the economics stupid; it's not the science.  The hard part is to avoid over-estimating the costs of the damage that may ensue, as Nordhaus highlights in The Carbon Casino, so we don't make the mistake of establishing and pursuing mitigation strategies that cost more than we need to pay over the long-run.  But that is almost what is happening when we favor imposing more stringent regulations on refrigerators and light bulbs as a carbon mitigation strategy instead of raising the price of carbon, which is more efficient and will motivate economic actors to pursue their own self-interest in a way consistent with the public interest.  The other hard part is overcoming our reluctance to demonize coal, and pursue more economically efficient carbon pricing policies to reduce carbon emissions such as carbon taxes or cap and trade.  This is politics.  Our inability to do that is what is referred to as the tragedy of the commons: where acting in self-interest is not the same as the collective or global interest.  (See August 12, 2012 post).  This is exactly when governments can help.

I am reminded in this political debate of  Michael Shermer's analysis of various biases that form our beliefs, and sometimes false beliefs, about things we do not really understand:  "the anchoring bias: relying too heavily on one reference anchor or piece of information when making decisions; the authority bias: valuing the opinions of an authority, especially in the evaluation of something we know little about;  in-group bias, in which we place more value on the beliefs of those whom we perceive to be fellow members of our group and less on the beliefs of those from different groups. This is a result of our evolved tribal brains leading us not only to place such value judgment on beliefs but also to demonize and dismiss them as nonsense or evil, or both."  Our modern tribal groups are political parties, religious groups, and other social clubs like those on some television talking heads groups.  (See September 12, 2011 and  June 12, 2011 posts).

Gwyneth Cravens, Power To Save The World (2007)

Three years ago, I heard a presentation by the head of the Nuclear Energy Institute about the history and then-current status of the nuclear energy industry in the United States. I had not previously given much thought to nuclear energy and my attitudes and biases with respect to nuclear energy were largely shaped by media reporting of the Three Mile Island Pennsylvania reactor meltdown in the 1970s and the Chernobyl, Soviet Union reactor meltdown in 1986. I also remember how difficult it was for Pacific Gas & Electric to get regulatory approval to startup the Diablo Canyon nuclear plant near Lompoc, California. Scary stuff that is problematic both financially and politically.

Fast forward twenty years later to a time of growing attention to carbon emissions and the reported link to a rise in global temperatures, the presentation about the nuclear energy industry's safe operating history (outside of the Chernobyl accident), the redundancy built into plant design in the name of safety, the reduction in regulatory barriers to nuclear power plant licensing and the standardization of nuclear facility designs, greater knowledge of the limited risks associated with waste storage, and nuclear power's low operating costs makes nuclear power a serious solution to reducing carbon emissions . The drawback to expanded nuclear power development remains its substantial up-front capital costs and the industry's ability to attract sufficient investment capital to expand much beyond its current 19-20% share of the contribution to electricity production in the United States. On an operating cost basis, nuclear power is more competitive than most other types of electricity production; when the capital costs are amortized and added to the equation, nuclear power is slightly more expensive. The other drawback is that it takes a long time to construct a new nuclear power facility after you have invested years in applying for a license; it is not an immediate solution if you are looking to shut down a coal-fired power plant tomorrow.

I vowed to learn more when I could find the time, and I searched for a book that would objectively address the subject of nuclear energy, because as my own experience told, beliefs (not facts) were shaped by emotional discussions about nuclear power, radiation exposure, and fear. I looked at several titles on the subject and found Gwyneth Cravens' Power to Save the World , the cover of which described Cravens as a skeptic who set about to find the truth about nuclear energy. Early on, Cravens cites polling data that lists the three sources of information that the public finds least reliable on the subject of nuclear energy --- politicians, the media, and the utility industry --- and instead she turns in her search for facts and truth to the scientists, engineers and researchers who have spent their careers addressing all of the issues that surround nuclear power. Her guide and guru is Dr. Rip Anderson, long affiliated with Sandia National Laboratories outside of Albuquerque where Cravens was raised as a child.

When I began reading her book, I thought I was departing from the winding road that holds the previous posts in this blog together. I am interested, after all, in many other things including contemporary public policy, history, art, music, and economics. This was a planned excursion to contemporary public policy and the subject of climate change and carbon. Not so fast. This is also a book about the very small --- matter at an atomic level --- and deals with the subject of uncertainty, probabilities and risk that is at the core of several earlier posts. From our knowledge of atoms, electrons, protons, and atomic nuclei, and Anderson's non-biased probabalistic risk assessment approach to nuclear safety and public health, the book builds toward the public policy conclusion that nuclear energy is one of the solutions to arresting rising global temperatures and is a safer, healthier mode of generating electricity than fossil fuel generation. Anyone who is interested in the subject of climate change, carbon policy, and clean energy should be reading this book. Our elected representatives who are deciding public policy should be reading this book.

We supposedly have a comprehensive national energy policy law reflected in the Energy Policy and Conservation Act and several other statutes, but it is questionable just how comprehensive our public policy really is given that we all but abandoned nuclear energy for forty years now and have never devoted significant resources to renewable energy supplies. Europe and Japan have leapfrogged over the United States in their share of energy production from nuclear power facilities during that time period and have moved to the head of the technological class. Amazingly, the U.S. nuclear industry has steadily maintained its 19-20% share of electricity production over the intervening decades, not from building new facilities, but from making the existing facilities more efficient. Ultimately, there is a limit to the gains to be achieved from that strategy and if nuclear is going to retain its current share the United States will have to build new reactors. As of December 31, 2009, there were 18 applications pending at the U.S. Nuclear Regulatory Commission (NRC) to build 28 new reactors. There are a few other announcements of investment intentions for new reactors as reflected in early site permit applications, and only last week a letter of intent was announced by Areva to consider a new nuclear facility in California's Central Valley near Fresno. According to the Nuclear Energy Institute's website, the US Department of Energy estimates that 3 new reactors will have to be brought online every two years beginning in 2016 in order for nuclear energy to maintain its 19-20% share as electricity demand increases by 21% over the next two decades. So if all the pending applications are ultimately approved, nuclear may hold its own or enjoy a slight gain over its current share if the estimated demand for electricity is correct and the financial community is able to raise sufficient capital to build them by 2030. That is an optimistic scenario because it does not factor in the litigation that seems to ensue with every application and leads to delay in the development of this clean energy.

But a more thoughtful comprehensive energy strategy might not consider maintaining the nuclear status quo enough. Pending energy legislation aimed at promoting "clean energy" renewable power sources such as hydroelectric, solar, wind, and tidal are looking to increase their share, yet ironically the House climate change legislation (Waxman-Markey) is nearly silent on nuclear energy and does not consider nuclear to be a renewable energy resource, although from a depletion point of view the supply of uranium is vastly longer than fossil fuel resources. A separate piece of legislation (HR 2768) would declare nuclear energy a form of "clean energy." To pass clean energy legislation in the Senate, it appears that there will have to be a provision that enhances nuclear energy's contribution to our national electricity supply. Instead of focusing on increasing the share of renewable energy sources for the future supply of electricity, the public policy discussion and decision should be focusing on increasing clean energy's contribution (including nuclear) to the supply of electric power. Renewable energy sources, as defined in the Waxman-Markey legislation, have their limits too, and they will never be able to satisfy the planet's energy needs. In this respect, Waxman-Markey seems short-sited. This is the balanced conclusion of Cravens' Power to Save The World.

To understand the relative role of nuclear power as a "clean energy," Cravens' research comes to this conclusion: "An inclusive analysis of the life cycle of nuclear power--the extraction of uranium and its transformation into fuel, the construction of plants, the decommissioning of reactors, and the disposal of waste--shows that throughout the process, nuclear power emits about the same amount or carbon or is slightly less than is typically produced during the typical life cycle of wind turbines and solar panels. Radiation from nuclear plants, strictly regulated, is so insignificant that it is difficult to distinguish it from normal background radiation. Even when American plants have accidentally released radioactive materials, the actual exposure of humans has been miniscule compared with what we receive daily from natural sources."

After confronting all the challenges laid at the doorstep of nuclear energy and spelling out the facts uncovered by her questioning of researchers, engineers, and nuclear scientists, Cravens has two messages for the public and policymakers. The first is a simple equation: one nuclear fuel pellet weighing 0.0007 pounds can generate the same amount of electricity 1,780 pounds of coal, or 149 gallons of oil, or 157 gallons of regular gas. The second is that the risk to health and safety from possible radiation exposure is very small; there are greater risks from chemical plants and refineries and driving automobiles, all of which are not regulated as strictly as nuclear power.

So this is a public policy book after all, but ultimately the policy begins with knowledge and understanding of the very small pieces of atomic matter that have created this issues that Cravens describes in this book. Cravens closes the book with a statement from Rip Anderson: "One day God could say to us: 'I gave you the brainiest men and women in human history to come up with an understanding of the atom and its nucleus. I gave you enough uranium and thorium to last you for thousands of years. I gave you an understanding of how when uranium decays it releases energy. You didn't need to invent anything else. You had everything you needed to provide energy for yourselves and your descendants without harming the environment. What else did you want?'"