Tag: environmental economics

Posted on

Methane Emissions Controls: An Invaluable Learning Experience

FRACKING WATER

Within the Mosaic courses, we focus mainly on the UNFCCC and, thus, almost exclusively on CO2 emissions.  However, in ECON-222: Environmental Economics, a group of us from the Mosaic had the opportunity to research and learn about another greenhouse gas, one that is far more potent and dangerous to climate change: methane.  CH4 is the second most prevalent greenhouse gas emitted through anthropocentric sources, has an atmospheric lifetime of twelve years, and has a one hundred-year global warming potential twenty-one times that of carbon dioxide.  So, while it only accounts for fourteen percent of total greenhouse gas emissions worldwide, it is still a critical factor in the climate change realm; unregulated at its source, and methane emissions could undermine the work that the UNFCCC facilitates on carbon-dioxide emissions.

We focused on three main sources of methane emissions (agricultural sources, the oil and natural gas industry, and landfills) and employed various tools of economic analysis that we had learned previously in the course to critically analyze various policy options and make a recommendation as to which we believe is the most effective and cost-efficient.  My main focus was on the oil and natural gas industry, which accounts 37 percent of global methane emissions.  Natural gas is seen as a transition fuel away from fossil fuels for many economies that is both cleaner and readily available; while it may be cleaner in terms of carbon-intensity, that doesn’t mean it’s necessarily better for the environment, as between 80 to 90 percent of each cubic feet of natural gas is comprised of methane.  Thus, most of the emissions in the industry come from natural gas processes, which is fraught with inefficiencies and opportunities for emissions to escape into the atmosphere.  Thus, many of the major policy suggestions I evaluated in this research project focused on increasing efficiency along the natural gas supply chain.  These policies further fell under two umbrella categories under increasing efficiency, one being the retrofitting and upgrading of existing equipment along the supply chain to mitigate emissions escaping in the first place, and the second being the capture and sale of those emissions that do escape.  Policies under both umbrella categories are currently being employed, and have proven to be cost-effective in both achieving emissions reductions and increasing revenues for the industry as a whole

This project offered an exceptional opportunity to complement what I’ve learned in the Mosaic classes and to delve into the intricacies of my chosen field of study (economics) and how it relates to climate change generally.

 

For more information on methane emissions specifically in the US, visit the EPA website.

For more information on the methane emissions from the oil and natural gas industry and for an in-depth look at proposed emissions control policies, read through the Natural Resources Defense Council’s Leaking Profits: The U.S. Oil and Gas Industry can Reduce Pollution, Conserve Resources, and Make Money by Preventing Methane Waste report from 2012.

Posted on

Discounting the Future

globe

Many of the possible effects that climate change poses have a temporal component to them: they will be realized and compounded over time.  Thus, the actions and inactions of today’s generation will have significant effects on those that come afterwards.  This compounding effect has a fair amount of consensus among environmental economists; however, there is not consensus on how much we should take those future effects into account during current decision-making processes for policies that might effect climate change.  This disagreement revolves around the discount rate, defined by the National Oceanic and Atmospheric Administration (NOAA) as the “rate at which society as a whole is willing to trade off present for future benefits.”  Because investment is inherently productive (that is to say, money is interest-bearing), resources on hand today are more valuable than resources available later; the difference in the values placed upon money today and in the future is where the disagreement lies.  

Take, for example, a future benefit of $1000 to be accrued in ten years: how much would I need to put in the bank now in order to have that $1000 at the end of the decade?  At a discount rate of 5%, it would be $613.90; at a discount rate of 8%, it would be lower, at $463.20.  Thus, the higher discount rate signals that society is more focused on present benefits than future benefits.

Let’s look at this in the context of climate change.  As a society, how much are we willing to spend now in order to protect the climate system from further “dangerous anthropogenic interference,” as is the UNFCCC’s stated objective, and to avoid future costs and damages?  At a lower discount rate, we place a higher value upon the maintenance of the climate system and pay a higher premium now in order to protect future generations.  At a higher discount rate, we place a higher value upon the current energy consumption patterns and are not willing to pay as high of a premium.

In Environmental Economics, my “wild-card” elective course for the Mosaic this semester, we discussed the argument that a near-zero discount rate is the most appropriate response to the effects of climate change.  We need to take aggressive action now and invest as much in climate mitigation and adaptation as possible in order to stay below the 2 degree Celsius threshold put forward by the UNFCCC.  If we do not do so, the costs borne upon future generations will be greater, as will the damages and level of disruption to our lifestyle that will occur from climatic change.  A discount that is higher than zero or near-zero could jeopardize the 2 degree threshold, undercut the international negotiations of the UNFCCC, and threaten the generations that will come after us.