What is the correct carbon price?

From PNAS

Estimating the cost to society from a ton of CO2—termed the social cost of carbon (SCC)—requires connecting a model of the climate system with a representation of the economic and social effects of changes in climate, and the aggregation of diverse, uncertain impacts across both time and space.

A growing literature has examined the effect of fundamental structural elements of the models supporting SCC calculations. This work has accumulated in a piecemeal fashion, leaving their relative importance unclear.

Here, we perform a comprehensive synthesis of the evidence on the SCC, combining 1,823 estimates of the SCC from 147 studies with a survey of authors of these studies. The distribution of published 2020 SCC values is wide and substantially right-skewed, showing evidence of a heavy right tail (truncated mean of $132).

ANOVA (analysis of variance) reveals important roles for the inclusion of persistent damages, the representation of the Earth system, and distributional weighting. However, our survey reveals that experts believe the literature underestimates the SCC due to an undersampling of model structures, incomplete characterization of damages, and high discount rates. 

To address this imbalance, we train a random forest model on variation in the literature and use it to generate a synthetic SCC distribution that more closely matches expert assessments of appropriate model structure and discounting. 

This synthetic distribution has a mean of $283 per ton CO2 for a 2020 pulse year (5% to 95% range: $32 to $874), higher than most official government estimates, including a 2023 update from the U.S. EPA.

Source: Ecochain

In most countries, the carbon price is far too low (though the EU's carbon price has increased since the date of this chart to about US$75), even if we accept the conservative price of $132.  And the truth is that we'll only get falling emissions when the carbon price is set high enough, and keeps on rising each year.  We're a long way from there.

Denmark's first zero-subsidy wind farm

In most developing countries, apart from China, renewables aren't subsidised (though fossil fuels often are).  China even has a nascent carbon price via a cap-and-trade scheme.  But in developing countries, which initiated the green revolution, there are still some subsidies as well as carbon prices set by cap-and-trade regulations or carbon taxes.  The sustained fall in the cost of renewables has meant that in developing countries they are now making up most of new capacity and in developed countries they can now be deployed without subsidy.  The first modern wind turbine built was in Denmark, and it's still operating today.  (There was one built in the USA in 1888, though)  Now it's time for unsubsidised wind:

Gusty wind conditions and the first Danish deployment of Vestas' largest wind turbine model will enable Hirtshals Havn to churn out electricity on pure market conditions, only backed by a three-year PPA.

Installation of Denmark’s first zero-subsidy wind farm has begun, writes EnergyWatch.eu. Domestic developer Hirtshals Havnefond has planned a project in partnership with Vestas featuring four wind turbines of the model V136-4.2 at the country’s northern port of Hirtshals. The machines will start spinning on pure market conditions starting from the fourth quarter of this year. The project’s only security is a three-year power purchase agreement (PPA) entered with energy trader EnergiDanmark.

“It has a unique placement and novel wind turbines,” said Hirtshals Havnefond Chair Jens Peter Lunden, explaining how the project will be viable devoid of subsidy.

With an average wind speed of 8.2 meters per second, Hirtshals Havn could hardly be better suited for wind energy generation. The V136-4.4, with its 66.7 meter blades, can harvest more wind power the any wind turbine model thus far installed in the country. The 4.2 MW machine can also, Vestas claims, generate roughly 17 GWh annually at such wind speeds – approximately double last year’s average output from an onshore wind turbine installed in the country.

Wind Denmark acknowledges that the project site was the decisive factor in planning Denmark’s first zero-subsidy wind farm. For, even though last year’s technology-neutral tender ended with a remarkable average price of EUR 0.0031 per kWh – achieving veritable zero-subsidy status is entirely special, the interest group says.

“We have reached a point where the combination of fantastic wind conditions and the latest technology make it a given that onshore wind turbines can be installed without subsidy. This is a milestone we have been working towards for many years,” said Wind Denmark Chief Executive Jan Hylleberg, who, however, does not for that reason advocate canceling future tenders with attached subsidies.

“In part, it is about promoting technology-neutral competition, and there will probably still be projects requiring some support, as last year’s tender demonstrated. Fantastic wind conditions are not found everywhere, and there will also be sites that don’t allow the for the latest technology.”

The nascent turbine technology planned for Hirtshals only relates to the tops of the towers. Nacelles will be placed atop 82-meter towers, which is roughly half the height of Vestas’ forthcoming platform. This design feature is due to Denmark’s height restriction regulations, which stipulate that tip blade height must not exceed 150 meters. If that requirement was slackened, a larger portion of Danish wind power could be subsidy free.

“There is no doubt that if it were possible to install turbines taller than 150 meters, we would have a situation that could accommodate more wind turbines completed free of subsidy,” Hylleberg said.

Hirtshals is not the only zero-subsidy green power project planned in the country. In February, Danish developer Better Energy announced a 125 MW solar farm, only secured with a PPA with Danish fashion company Bestseller.

[Read more here]

And to allow community participation, shares in the new venture will be offered to everybody who lives within a 4.5 km radius.   That's one way to prevent fake claims that wind turbines cause cancer.

Source: Port of Hirtshals

Cutting emissions to zero

I'll take Australia as an example.  The precise percentages differ in each country and for the world as a whole, but they give us a good idea.

Source

To avoid catastrophic climate change we need to cut emissions by 95% by 2050.   This implies an annual cut of 10% per annum, compounded.  And this will be very hard to achieve.  But a 5% per annum cut, compounded, will still reduce emissions by 80% by 2050 and 90% by 2060.  And a 5% per annum cut is eminently achievable.

Using Australia as an example, let's see how.

Let's start with electricity generation.  Snowy Hydro (which is owned by the Federal Government, and was founded, a bit like the US's TVA, to hold government owned hydro dams) has stated that wind and solar now cost  A$40/MWh.  This compares with the cost of coal-fired generation, just for the fuel, of $56/MWh, and for new coal of $110-$130/MWh.  Since supply of any individual wind or solar farm is intermittent, you need to add storage to the system to cover periods of low supply.  This is called "firming".  Snowy Hydro stated that "firm" supply from its renewables PPAs (power purchase agreements) cost $60-$70/MWh, an additional cost of $20-$30/MWh (presumably the higher cost of firming is for solar).  In other words, renewables are half the price of new coal, and only marginally more expensive than the cost of fuel for existing coal.  And renewables/storage keep on falling in cost.  They'll just keep on getting cheaper and cheaper.  So, switching to a 100% renewables grid should in principle be easy.  In practice, it'll be harder.  Regulators still haven't got their heads around the feasibility of a 100% green grid.  Existing coal-generated supply will have to be carefully retired with the necessary replacements already built before the existing power stations are closed down.  High voltage grid connections will need to be built.  For example, the wind in South Australia blows at different times and strengths form the wind in eastern Victoria.  High voltage interconnectors will allow regions to buy power from other regions when their own wind and solar farms are producing too little and sell it when they are producing too much.  But none of these issues is especially difficult.

So if we were to transition to 100% green renewables over the next 15 years, that would cut total emissions (ceteris paribus) by a compound 3% per annum.

Stationary energy (18% of the total) is mostly direct use of fossil fuels to produce heat, steam or pressure. It can be replaced by electricity.  If this electricity is produced from 100% renewables, then that will in time cut total emissions by another 18%.  Let's say that we replace all stationary energy over the next 20 years by electricity.  That would cut emissions by another 1% per annum.

 About half of the emissions in Transport comes from cars, with the rest coming from commercial transport (rail/air/domestic shipping).  Transport contributes 19% to emissions.   EVs are already cheaper to run than ICEVs (internal combustion engine vehicles) because they're 5 times as efficient and electricity is cheaper than petrol/diesel.  But their up-front cost ("sticker price") is still higher than petrol-driven cars.  Even Tesla's $35,000 Model 3, which has the same "sticker price" as the average US car/light truck, is still too expensive for poor people.  On the other hand, it's a luxury car.  China is making lots of very cheap, low range, EVs which for the most part are still only available in China.   For now—it won't be long before they're also being exported.  Honda plans an EV with 300 kms range to be made in China, selling for US$18,000 by 2020.  Already, Chinese car manufacturer, Kandi is selling an EV in the US for $20,000.    By 2025, 50% of car sales will be PHEVs or EVs.  By 2030, 100% will be.  If it takes 10 years for the entire car and truck fleet to be replaced by EVs/PHEVs, then by 2040, most of the emissions from transport will be gone (air and sea will still need action).   This will reduce emissions by another 1% per annum.

So we get our 5% per annum reduction.  And that's before we do anything about fugitive emissions (gas leaks), industrial processes (industrial processes are iron and steel, chemicals and emissions from products that are replacing ozone depleting substances) and agriculture.  The Labor (Australian Labor Party, or ALP)  opposition has a target of a 45% cut by 2030 in total emissions and plans to achieve this by using a cap-and-trade system applicable to any enterprise emitting more than 25,000 tonnes of CO2 per annum.  This has produced faux rage among the Right and shrill, misleading articles from the Murdochcracy, but Labor seems very likely to win May's Federal election despite this.  Australia will prolly cut its emissions by 5% per annum on average for the next 20 years, and having done it, we'll find it easy to keep on doing it, until our CO2 and methane emissions are negligible.

Can the world do this too?  Certainly.  It will be harder for developing countries, because their electricity demand is growing rapidly, in line with their economic growth.  The key here is to ensure that all new generation capacity is renewables plus "firming"—in other words, no new coal power stations.  Developing countries have a young coal fleet, but even here, the rapid cost declines for renewables will make all coal power stations horribly uneconomic by the early 2020s.  I expect emissions in developing countries will only start falling in the early 2020s.  This will mean that global emissions for the next few years will only fall by 3% per annum even if developed countries achieve reductions of 5% per annum.  But let's say the world as a whole achieves 3% per annum cuts on average between now and 2050 (and it will be higher, as the transition to a green grid and EVs accelerates).  That still translates to a 60% decline by 2050 and a 70% decline by 2060.  Not enough, but far better than business as usual.  The paid shills for fossil fuels have shifted from "there's no global warming" to "it's not us" to "it's too late to do anything about it".  This is crap.  It's not too late, and we can do something about it.