The problematic governance of climate engineering

Deployment of climate engineering faces formidable and perhaps insurmountable governance challenges, even if it looks technically feasible.  This prospect should reinforce efforts to reduce emissions.

If climate change becomes too severe some might favour climate engineering  …

This post looks very briefly at governance of climate engineering – managing the total net solar radiation the earth absorbs (Solar Radiation Management), most likely by injecting particles into the stratosphere[i].  I’ll assume a highly favourable case in which deployment appears technically feasible, likely to be at least partly  effective and cheap; is gradual and modified in response to experience; and seeks only to moderate changes, for example by offsetting (say) half of the additional radiative forcing in order to reduce the risks[ii].

Whatever its merits, almost no one who has looked seriously as the issues thinks that climate engineering is a substitute for reducing emissions.  There are problems that climate engineering won’t fix, such as ocean acidification.   There are also likely to be severe side-effects, such as disruption to rainfall patterns.  And the full effects of deployment are impossible to know in advance, even after thorough research.

Despite these drawbacks, many are becoming concerned that slow progress in reducing emissions may require climate engineering as the least undesirable option – an emergency response to forestall imminent catastrophic climate change.

But the control of any “global thermostat” is likely to be contentious …

However, it is not at all clear how agreement would be reached to deploy climate engineering, and how the deployment would then be governed.  The effects of climate engineering will be global, so some kind of global arrangement will be necessary for general acceptance of its legitimacy.  But different parts of the world would be affected differently, with consensus about what constitutes an emergency unlikely[iii].  Some vulnerable countries might favour deployment even at a relatively low threshold.  Others may be more cautious.  Some are likely to be against deployment on principle.  There might also be demands by some for compensation for adverse effects that could be very difficult to agree.  And acceptance may need to go beyond governments to the public, which is likely to have widely differing views.

These difficulties are likely to be compounded because early action may be required to forestall an emergency, because of lags in the climate system.  However signals may not be sufficiently clear early enough, so any emergency may become irreversible before there is agreement on action.

Intergenerational effects complicate things further.  Climate engineering would commit future generations to certain pathways, and the legitimacy of this would be difficult to establish.

With unilateral action a severe risk …

Failure to reach some kind of global agreement might lead to a single country, or small groups of countries, deploying unilaterally whatever the doubts about the legitimacy of such actions.  This would be very likely lead to international tension and potentially to conflict as states saw their vital national interests threatened.  This conflict would likely be exacerbated the problems of dealing with climate change, including, for example, threats to food supplies and large-scale migration.  This could in turn reduce trust and political co-operation, making agreement even more difficult.  It is hard to say how serious such a scenario would be, but it is not a welcome prospect and could potentially become an immensely dangerous threat to global political and social stability.

But no clear route to building the necessary frameworks to ensure legitimacy of  deployment …

All of this implies at the very least the need for strong frameworks – international treaties and processes, perhaps underpinning new institutions – to manage any deployment and reduce the risks of conflict.    There is currently very little in place.  Some existing laws and institutions are relevant, and initial regulation is likely to build gradually drawing on some of these[iv].  For example, states that are party to the UN Convention on Biological Diversity have adopted a decision that explicitly restricts implementation of climate engineering that may affect biodiversity (which is in practice all likely cases) until a scientific basis exists to justify it taking account of the risks.  However this is not intended for broader decisions making.  The Convention on Long Range Transboundary Air Pollution (CLRTAP) may require Environmental Impact Assessments (EIAs) to be made.  In some cases the Convention on the Prohibition of Military or other Hostile use of Environmental Modification Techniques (ENMOD) may be relevant.  The UNFCCC could play a role, although does not appear to be doing so to date, as could UNEP and international forums such as the G20.  The UN Security Council could get involved in the case of conflict.  Lessons from outside environmental governance may be helpful, such as those from nuclear non-proliferation.

However none these arrangements appear sufficient for wider governance of climate engineering deployment, or to be likely to grow into something adequate.  This implies the need for a new institution or at least a set of formal arrangements for global governance, which at the very least substantially expands the remit of current institutions and treaties.

The precedents for effectiveness of any such regime do not look promising.  The UNFCCC has over 20 years failed to reach adequate agreement on mitigation pathways, despite reduction of emissions being unambiguously a good thing, although potentially costly.  Whatever agreement is reached in Paris in a few weeks it looks likely to remain inadequate to the required task.

Indeed there does not appear to be an example of global agreement to effectively manage a problem anything like as consequential, difficult, and diverse and extensive in its impacts as climate engineering.  For example the Montreal Protocol on ozone depletion dealt with a much more tractable problem.  Effective arrangements for governing climate engineering may simply prove impossible to realise.

Some sorts of global emergency might arise that is so clear cut that all major nations can agree that the only remaining possibility is deployment of climate engineering.  But this sounds more like international panic than international governance.

Implying all the more need for greater emissions reductions …

It is often said that the technological problems and risks of climate engineering imply that there in every need to put as much effort as possible into emissions abatement.  This is true.  But governance also matters.  The lack of good prospects for adequate and effective governance of climate engineering, as much as any technical challenges it may raise, should reinforce concentration on efforts to reduce emissions.

Adam Whitmore – September 2015

Thanks to Carlos Munoz Browning, who provided me with his research, on which some of this post draws .


[i] A good review of such techniques and their application is provided in the US National Academy of Sciences recent report at

[ii] For more on this type of scenario see:  A temporary, moderate and responsive scenario for solar geoengineering, David W. Keith  & Douglas G. MacMartin Nature Climate Change 5,  201–206 (2015)

[iii] For a fuller discussion of some of these points see Climate emergencies do not justify engineering the climate, Jana Sillmann, et al. Nature Climate Change 5, 290–292 (2015)

[iv] For a discussion of some of these possibilities see Options and Proposals for the International Governance of Geoengineering, Bodle et al. (2013)

Development of carbon pricing could benefit from a two hundred year old idea

Cap-and-dividend and tax-and dividend arrangements, where proceeds from carbon pricing are returned equally to all citizens, at least in part, are already in place in Switzerland, and under discussion elsewhere.  They could help gain support from a wider constituency to enhance carbon pricing. 

A stake for all in the atmosphere …

Over two hundred years ago the political philosopher and campaigner Thomas Paine wrote a pamphlet called Agrarian Justice.  It was an extraordinarily farsighted document (see notes at the end for relevant extracts).  He identified natural resources as the common property of humanity, with rights distinct from those of private property created by labour.  He thus distinguished between the value added to land by the work of proprietors and the common value of land, implicitly arising from its scarcity, which he linked to the idea of a ground rent.  He recommended that the natural property rights in the land that are owned by all citizens should be recovered for all, most conveniently in the form of a payment into a fund on inheritance of land.  He proposed redistributing this fund equally to all adults in the form of a payment when they turned twenty-one, and a universal old age pension.

Something very like this idea seems to offer a constructive way forward in the development ofcarbon pricing.  The atmosphere is common property to a greater extent even than land, because it is continually mixed and globally mobile.  It therefore, following Paine’s argument, belongs equally to all.  Anyone making use of that property by emitting greenhouse gases should pay for that right in the form of a payment (a carbon price) into a fund.  Again following Paine’s argument, the proceeds would then be distributed to all citizens equally, most likely as an annual payment.  Eventually this should be to all of the world’s people, but starting with one or more jurisdictions would establish the approach.  This is usually referred to as cap-and-dividend or tax-and-dividend, depending on the type of carbon pricing scheme – it can work well as part of either an emissions trading scheme or a carbon tax.

Such a mechanism is already in place in Switzerland, where part of the revenue from the Swiss carbon tax is returned to citizens.  In the USA bills for such schemes have been proposed at both Federal and State level, with current proposals introduced in the state legislature in Oregon (see notes at the end for details).

Has many advantages …

Such an arrangement has number of advantages.

It gives citizens a direct stake in higher revenue from higher carbon prices, which may help carbon prices reach levels sufficient both to reflect the cost of damage and to provide adequate incentives for the scale of investment required for the transition to a low carbon economy.  At present prices are too low to do either.  (There is an implicit assumption here that citizens benefit from tighter caps and higher prices – e.g. a 20% reduction in the cap is likely to raise prices by more than 20%.  There might come a point when revenue is increased by higher emissions as elasticities fall below one, but we seem a long way from that, and indeed that point may never be reached.)

It also give citizens a direct stake in wider coverage of carbon pricing, , which would be likely to increase the economic efficiency of abatement.

It automatically provides compensation to residential consumers for higher energy bills due to carbon pricing.  Poorer consumers who on the whole have lower energy consumption would see a larger net benefit, especially as revenue would be raised from non-domestic consumers.  There are some exceptions to this – people on low incomes but with a large heating load for example – but further protection for vulnerable households can still be provided.

It also funds a basic income or “citizen’s dividend” to all.  The payment would currently be rather small but not insignificant.  With price of $40/tonne and global average current greenhouse gas emissions of about 7.5 tCO2e per capita this would provide an income of up to $300 per year.  As emissions reduce the dividend might also reduce, but rising prices may more than offset this.

There is an argument made in the environmental economics literature that a lump-sum dispersal to citizens is suboptimal, because it is better to use funds to reduce other taxes and so reduce distortions.   There is little if any empirical support for this argument as far as I am aware.  But in any case the view that citizens own those property rights makes the limitation of the argument clear.  Not providing citizens with the proceeds from sale of allowances (or a tax on emissions) is in effect a 100% tax on everyone for that revenue.  This is indeed non-distortionary, but a fixed per-capita tax is not regarded by governments or their citizens as a good idea anywhere, for sound reasons.

Although there are other compelling calls on uses of funds  …

There are also powerful arguments for using revenue to adapt help and compensate those adversely affected by climate change.  However this has proved enormously difficult to achieve.  Cap and dividend can go some way towards providing benefits for all as carbon pricing continues to spread around the world, especially if emissions per capita gradually converge.  Indeed it provides a way of institutionalising benefits for all, which has until now proved unachievable.  Nevertheless further compensation and help with adaptation is likely to be needed for the poorest, and reducing impacts on future generations and on the biosphere will be a continuing challenge.

There are also good arguments for regarding the atmosphere to be as a joint, indivisible resource to be managed for the common benefit.  This goes further than Paine’s perspective in arguing for joint property rights, in part because of the different characteristics of individual land holdings and the global atmosphere.  The Pope’s recent encyclical on climate change adopts this type of perspective (see Section VI of the encyclical).  However, institutions for optimally managing common assets at the required global scale are weak or non-existent – if they were not the climate change problem would probably be well on the way to a solution by now.  Cap-and dividend falls short of an optimal approach, but nevertheless marks a practical step towards better management for all.

In advocating this approach I recognise that there are many other potential uses for revenue raised by carbon pricing, such as funding research and development of low carbon technologies.  Each has arguments in its favour, in many cases good ones, and a balance will need to be struck in practice between different uses of funds, with not all proceeds being paid as dividends directly to citizens.

And political obstacles remain …

Opposition in some quarters to the idea of a citizen’s dividend is likely to be strong.  National treasuries, for example, may resist the loss of control.  However the measure is fundamentally one that benefits everyone.  It will be a struggle to gain acceptance, but it is a struggle Thomas Paine would have relished.

Adam Whitmore – September 2015


Thomas Paine, Agrarian Justice (1795)

Paine includes the following passages.  He first distinguishes between natural and artificial property:

There are two kinds of property. Firstly, natural property, or that which comes to us from the Creator of the universe—such as the earth, air, water. Secondly, artificial or acquired property—the invention of men.  In the latter, equality is impossible; for to distribute it equally it would be necessary that all should have contributed in the same proportion, which can never be the case; and this being the case, every individual would hold on to his own property, as his right share. Equality of natural property is the subject of this little essay.  Every individual in the world is born therein with legitimate claims on a certain kind of property, or its equivalent.

He seeks to recover the value of this common property from the current owners into a fund.  This is conveniently done at the time of inheritance:

Every proprietor, therefore, of cultivated lands, owes to the community a ground-rent (for I know of no better term to express the idea) for the land which he holds; and it is from this ground-rent that the fund proposed in this plan is to issue.

He then suggests the fund should be distributed equally to all adults:

To create a national fund, out of which there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property: And also, the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age.

He emphasises that this is a matter of respecting rights, not a humanitarian initiative:

In advocating the case of the persons thus dispossessed [from their natural rights to land], it is a right, and not a charity, that I am pleading for. 

Proposed Cap and Dividend Bills

Van Hollen Cap and Dividend Bill was proposed in the US Congress in 2009.  It proposed a cap with auctioning of 100% of allowances and border adjustments to prevent US industry being at a competitive disadvantage.  All auction proceeds would be returned in the form of a dividend to every lawful resident of the United States with a valid Social Security number.

More recently two bills have been proposed in the Orgeon House of Representatives.  HB3176 would charge fossil fuel sellers a fee (starting at $30/ton) for each ton of pollution.  All the money would go into a Trust Fund. Each September, the Department of Revenue would pay every Oregon taxpayer and taxpayer dependent a check for an equal share of the money.   HB3250, instead of creating a set fee, it would auction a capped number of allowances.


54 billion tonnes p.a. of total GHG emissions (source: EDGAR), over 7.2 billion people is 7.5 tonne per capita.  $40/tonne is an illustrative figure close to the US EPA estimate of the Social Cost of Carbon.

Property rights

The subject of who, if anyone, owns the atmosphere is far too large a subject to go into here.  I will note simply that Paine’s view seems to have far more force that the notion due to Locke that permanent ownership of land is conferred by labour on that land, and in any case Locke’s proviso that common property can be owned provided  “… there is enough, and as good, left in common for others” clearly does not hold in the case of climate change.  The attempts of modern libertarian philosophers to deal with this issue, as for example Nozick does by denying that a free market system will actually run foul of the proviso, seem to me to be wholly inadequate.  None of which should imply I entirely agree with Paine’s characterisation of property rights either.

The IEA’s Bridge Scenario to a low carbon world again underestimates the role of renewables

In this, my last post until September, I take a quick look at the IEA’s latest renewables projections.  The IEA has just produced its World Energy Outlook Special Report on Energy and Climate Change, which is intended to describe how the energy sector can transition to being part of a lower carbon world.  It includes a new Bridge Scenario which emphasises what can be done over the next decade or two.  There is much that is good in the report, including its mention of the potential to reduce methane emissions from the energy sector, a subject which I’ll return to in a future post.  However its renewables projections are less satisfactory.

I previously noted how the IEA has vastly underestimated renewables growth in the past (see here), and that their current projections show future rates of deployment of renewables slowing substantially from present levels (see here).  I had hoped that, especially given its topic, this latest report would include a more realistic outlook for renewables.  However even the Bridge Scenario projections continue to look much too pessimistic.

The table below shows a comparison of the IEA’s wind and solar PV projections for the 2020s with actual installations for last year and expected rates for this year.  It shows that the IEA projects installation rates for the 2020s at about last year’s level and below levels expected for this year, implying a stagnation or contraction of the industry rather than continued growth, even as measures to reduce emissions are increased.

Annual average installation rates for wind and solar PV (GW)

  2020s IEA Bridge scenarios (annual average) 2014(Actual) 2015 (estimated by Bloomberg)
Wind 55 51 63
Solar PV 42 43 58


Notes: Historic data is taken from Bloomberg, BP, and the Global Wind Energy Council (GWEC).  Data for wind installation in 2014 is similar at 49 GW, 52GW, and 51 GW respectively according to each source.  Different data sources give somewhat different values for the amount of solar PV installation in 2015.  BP shows solar PV at around 40GW, Bloomberg around 45GW.  I have taken the mid-point of these two values. There are various possible explanations for the difference, for example different estimates of which projects were completed by the end of the year.   Previous years’ estimates for the amount of solar PV installed are very similar between the two sources (within a GW or so).

The chart below (an update from my previous post) shows this data graphically, and compares it with history and the IEA’s 2014 World Energy Outlook New Policies Scenario.  It shows welcome but limited increases in the rate of installation of both wind and solar PV projected by the IEA.  There is still a clear trend break between history and the projections.


Note:  IEA projections are for 2012 or 2013-2020 and for each 5 years thereafter, and are shown at the mid-point of each interval.  

The IEA seems to continue to be concerned about the costs of renewables, leading them to be very cautious in their projections.  But with costs falling, pressure for action to reduce emissions increasing, and penetration of both wind and solar PV globally remaining well below saturation levels, continued growth in the rate of deployment seems much more likely than stagnation or decline.

The IEA’s work is widely respected and quoted.  This makes it all the more important that their renewables scenarios become more realistic.  Currently they serve mainly to distort the public debate on pathways to decarbonisation, and detract from the other good work in this area that the IEA does.   The time for the IEA to improve its projections for renewables seems long overdue.

Adam Whitmore – 27th June 2015

When Margaret Thatcher and the Dalai Lama agree

Environmental protection forms part of the mainstream of the Anglo-American conservative political tradition.  Policy debate on climate change should recognise this.

Climate change is often seen as a politically divisive issue, with those on the left more active and concerned than conservatives.  And indeed there is much evidence that those with different values perceive the issue differently[i].  However, concern about climate change can be placed firmly in the mainstream of the conservative tradition[ii].

Traditional conservatism has long emphasised the need for people to safeguard for future generations that which they have inherited.  Edmund Burke, widely regarded as the founder of modern conservatism, put this case in the context of the French revolution, arguing that people:

“should not think it among their rights to cut off the entail or commit waste on the inheritance by destroying at their pleasure the whole original fabric of their society, hazarding to leave to those who come after them a ruin instead of an habitation.”[iii] 

Environmental damage was far from being a hot political issue in Burke’s time, but it is a small step to apply this idea of safeguarding an inheritance to environmental conservation.  Republican US President Ronald Reagan again did exactly this when he said:

“What is a conservative after all but one who conserves, one who is committed to protecting and holding close the things by which we live … And we want to protect and conserve the land on which we live — our countryside, our rivers and mountains, our plains and meadows and forests. This is our patrimony. This is what we leave to our children. And our great moral responsibility is to leave it to them either as we found it or better than we found it.”[iv]

Another Republican US president, Richard Nixon stressed the need to safeguard the natural environment, and that freedom does not include the right to impose costs on others:

“Restoring nature to its natural state is a cause beyond party and beyond factions … Clean air, clean water, open spaces—these should once again be the birthright of every American. We can no longer afford to consider air and water common property, free to be abused by anyone without regard to the consequences.  Instead, we should begin now to treat them as scarce resources, which we are no more free to contaminate than we are free to throw garbage into our neighbor’s yard.”[v] 

Such sentiments have in the past been translated into action by conservative politicians.  The 1956 Clean Air Act was passed by a Conservative government in the UK, and the US Environmental Protection Agency was founded in 1970 during the Nixon presidency.

The UK Climate Change Act was passed in 2008 with cross party support, with only five Members of Parliament (less than 1%) voting against.  Going further back, the UNFCCC was signed by British Conservative Prime Minister John Major and by Republican US President George Bush, along with the representatives of over 160 other governments.  The Hadley Centre, one of the world’s leading climate research centres, was established in 1990 under a Conservative government led by Margaret Thatcher, who opened the centre herself.

Indeed Margaret Thatcher was among the first senior politicians to talk about the need to reduce greenhouse gas emissions and spoke eloquently about the consistency between environmental protection and conservative values.  In 1988, the same year the Intergovernmental Panel on  Climate Change was established and four years before the UNFCCC was signed, she said to the Conservative Party conference, talking about a range of environmental problems including climate change:

It’s we Conservatives who are not merely friends of the Earth—we are its guardians and trustees for generations to come.  The core of Tory philosophy and the case for protecting the environment are the same. No generation has a freehold on this earth. All we have is a life tenancy—with a full repairing lease. This Government intends to meet the terms of that lease in full.[vi]

This metaphor of the earth as our home of which we are guardians, and which it is our duty to protect, is common among those who otherwise hold widely differing points of view.  The Dalai Lama has said that:

“The earth is our only home … If we do not look after this home, what else are we charged to do on this earth?” [vii]

There is, and should be, much debate about the specific details of climate change policy.  But there should be no debate about the necessity and value of the objective of safeguarding the earth.  When Margaret Thatcher and the Dalai Lama can express almost the same idea in almost the same terms, people can surely develop a sense of common purpose about preventing severe climate change.  This has never been more necessary.

Adam Whitmore – 11th June 2015

[i] See here for a discussion of this.

[ii] I talk in this post about traditional conservatism.  A discussion of the more difficult case of libertarianism and climate change will need to await another post, but even there I think common ground can be found.  I also recognise that the actions of the Republican Party in the USA at the moment often diverge from traditional conservatism.  There is also a strand of thinking on the left which has in the past neglected environmental issues, but this is less prominent than it was.

[iii] Edmund Burke, Reflections on the Revolution in France, 1790

[iv] Remarks at dedication of National Geographic Society new headquarters building, June 19, 1984   (A good selection of Reagan’s other remarks on environmental protection can be found at

The next passage of the same speech, less often quoted, emphasises the validity of exploiting natural resources for human ends, in a responsible way, making explicit reference to a religious rationale:

“But we also know that we must do this with a fine balance.  We want, as men on Earth, to use our resources for the reason God gave them to us — for the betterment of man.   And our challenge is how to use the environment without abusing it, how to take from it riches and yet leave it rich.”

This view is taken further by some in their advocacy of man’s right to exploit nature, often justified in terms of a passage in the Bible that refers to man’s dominion over nature, Genesis 1:26-28:

26 And God said, Let us make man in our image, after our likeness: and let them have dominion over the fish of the sea, and over the fowl of the air, and over the cattle, and over all the earth, and over every creeping thing that creepeth upon the earth. 27 So God created man in his own image, in the image of God created he him; male and female created he them. 28 And God blessed them, and God said unto them, Be fruitful, and multiply, and replenish the earth, and subdue it: and have dominion over the fish of the sea, and over the fowl of the air, and over every living thing that moveth upon the earth.

However many interpreters of the Christian tradition argue for the stewardship that is implied by dominion, for example citing Genesis 2:15:

15 And the Lord God took the man, and put him into the garden of Eden to dress it and to keep it. 

Pope Francis, among others, appears much more inclined to adopt the perspective of a Christian duty to safeguard God’s creation.

[v] State of the Union Address, January 22, 1970

[vi] Speech to Conservative Party Conference, 1988 Oct 14 Fr.  For other examples of her views on climate change and environmental issue see: Speech to the Royal Society (1988 Sep 27), Speech to Conservative Party Conference (1989 Oct 13), Speech to United Nations General Assembly, Global Environment (1989 Nov 8) and Speech at 2nd World Climate Conference (1990 Nov 6).  See for the full text of each speech.  In her later writings she expressed scepticism about the motives of some advocating action on climate change, but that should not detract from her well-informed concern and advocacy of action while in office.

[vii] The universe in Single Atom, Dalai Lama (2005), Chapter Nine.  This statement was in the context of the need to respect the Earth’s biological heritage.

Carbon prices around the world are consistently too low

Carbon pricing is spreading rapidly around the world [i].  However prices almost everywhere are far too low at the moment to price emissions efficiently.  The chart below summarises carbon prices in those jurisdictions with pricing.  The horizontal axis shows volumes, the vertical axis shows prices, as in a conventional commodity supply curve.  The vast majority of priced emissions – about 90% of the total – are priced below $14/tCO2.  Higher carbon prices are invariably for small volumes, and are found only in Europe and British Columbia.  They include prices under the French carbon tax, which covers sectors outside the EUETS, the UK carbon price floor, where the EUA price is topped up, and longstanding carbon taxes in Scandinavia.

The chart also shows the social cost of carbon – which represents the cost of the environmental damage caused by emissions – as estimated the US EPA.  This is almost certainly an underestimate[ii] of the true cost, and the concept has other limitations that imply it is no more than a lower bound to what it is worth paying to avoid emissions.  Carbon prices are thus too low even compared with a likely underestimate of the cost of emissions.  Taxes are too low and caps are too loose to price carbon adequately.  Consequently efficient abatement is not happening[iii].

Prices and volumes of carbon pricing around the world

Carbon supply curve

Price data is from May 2015.  I have excluded the Mexican carbon tax on the grounds that it does not apply to natural gas and so does not fully tax carbon.  The Chilean carbon tax is included although it does not come into force until 2018.  The South African carbon tax is scheduled to be introduced next year, but may be postponed, or may not be introduced at all.  The EUETS price would be somewhat higher but for the weakness of the Euro against the dollar at the moment.   The Social Cost of Carbon is the US EPA estimate at a 3% discount rate and converted to $2015 – see reference 2.

Prices may increase in future.  However this process looks likely to be too slow in most cases.  For example, under the California and Quebec scheme prices are currently at the floor set by the auction reserve.  This escalates at 5% p.a. real terms.  However at the present rate this will take until around 2050 to catch up even with the EPA’s estimate of the social cost of carbon[iv], which also shows increases in real terms over time.  Prices elsewhere in North America are mostly lower still.  In the EU there is little evidence from forward markets that allowances will reach significantly closer to the social cost of carbon over the next few years, and it seems unlikely that China will seek to price emissions at much above levels that prevail in the EU and North America.  It therefore seems likely on present trends to be a long time before prices in major jurisdictions reach levels that reflect the cost of damage from climate change, or are sufficient to limit temperature rises to two degrees.

This implies that further action is needed to make higher prices more politically acceptable.  Doing this will be a huge challenge, but two strands of any solution appear clear.  Ensuring that industry that is genuinely vulnerable to carbon leakage is appropriately safeguarded from competitive distortions will help mitigate political obstacles to higher pricing.  And efficient carbon pricing may further be helped by more explicit recycling of revenue to citizens, including ideas such as cap-and-dividend, in which the proceeds of sale of allowances under a cap-and-trade scheme are returned directly to citizens.  This in effect defines citizens as owners of the right to emit and so gives everyone a stake in higher prices (more on this in a future post).  Elements of such an approach are evident in British Columbia and were part of the former Australian scheme.

Measures other than carbon pricing are in any case necessary to bring about the required transformation of the energy sector[v].  And while carbon prices remain too low there will be an even greater need for such approaches, even if these may sometimes themselves help keep the carbon price low.  Funds to subsidise deployment of low carbon technologies may come from the proceeds of carbon pricing, especially in jurisdictions such as North America where earmarking of revenues is common.

The spread of carbon pricing is a success story, but a limited one in view of the prices prevailing to date.  Efforts both to strengthen the carbon price and enhance complementary policy approaches are needed if climate change is to be limited to acceptable levels.

Adam Whitmore – 2nd June 2015



[i] See  here

[ii] See  here

[iii] The marginal price signal is at too low a level, so some economically efficient abatement is not being signalled.  It is possible that an inefficient mix of abatement is being purchased, even though the level of abatement is efficient.  This could be the case if, for example, there was too much expensive abatement through renewables programmes.  However for a number of reasons this does not seem plausible.  For example, abatement is currently insufficient to meet the agreed 2 degree target, and support for renewables globally is clearly not excessive in view of their present share of generation and the required speed of reduction (although it may well be desirable for more of the support to be in the form of a higher carbon price on fossil fuel use).


[iv] Escalating the current carbon price at 5% real terms to 2050 gives a price of about $74/tCO2, roughly in line with the EPA’s central estimate of the Social Cost of Carbon at that date of 2011$76/tCO2.

[v] See here

Reducing the costs of decarbonising winter heating needs to be a priority

Decarbonising winter space heating in the UK will require a capital intensive heat supply chain running only for the winter months.  Policy action is needed to reduce the costs of this.

A large scale challenge …

Large scale electrification of winter heating looks to be essential if the UK’s legally binding 2050 emissions reduction target is to be met, with other approaches likely playing a lesser role (see brief notes on this at the end of this post).  However electrification of winter heating poses severe challenges.

Winter heating uses a lot of energy.  Meeting the present heat load with electricity would add about 50% to present electricity consumption in the first quarter of the year – even allowing for the efficiency of heat pumps – and proportionately more in the coldest periods.  Indeed, peak heat demand is around 300GW, equivalent to around 100 GW of electricity demand from heat pumps, which is larger than present electricity generation capacity.

With expensive electricity …

Furthermore electricity generation to meet heat demand is only required during the winter months.  Consequently, capital costs of power plants need to be recovered over less than half the year, assuming no large scale seasonal storage of either heat or electricity is available (lithium ion battery storage helps a good deal with daily system management but does not look capable of helping move the very large amounts of required energy from summer to winter).  The excess capacity on the system in summer, including solar, means that there will be relatively little chance of recovering capital costs from sales into wholesale power markets over that part of the year.  Export opportunities also look likely be limited as most of Northern Europe has similar seasonal issues.

Most low carbon power is capital intensive, so low load factor operation increases costs a lot, making winter-only low carbon electricity expensive.  Nuclear looks likely, on a rough-and-ready basis, to cost around £220/MWh for winter only operation, assuming generating plant to meet heating load runs on average for a third of the year.

The penalty for lower load factor operation is potentially much reduced if power comes from CCGT with CCS.  This is less capital intensive, so the increase in cost per MWh from running at lower load factor is much less.  However the cost is still likely to be perhaps £150/MWh for winter only operation, around three or four times present market prices.  And no gas power plant with CCS is yet being built, so a huge amount of scale-up of the technology is required.

Offshore wind is also capital intensive and relatively inflexible, but benefits from higher output in the winter months.  It is likely to be between the cost of nuclear and CCS for winter only operation, although it is unlikely to be possible to run a decarbonised heating system exclusively on offshore wind.  Generation from biomass may also have a useful role to play, but again has its limitations.

And substantial costs for the rest of the chain …

The high cost for electricity is on top of the substantial capital costs of reinforcement of the distribution grid and buying and installing the heat pump itself.  In many houses it will also be necessary to replace radiators or install underfloor heating.  This is needed to allow the heating system to operate at lower water temperatures than is usual with gas boilers, in order to retain heat pump efficiency.  Indeed in less well insulated houses heat pumps may supply only part of the load, with some top-up from natural gas still necessary.

Leading to a large total cost …

Two cases for total costs are illustrated in the chart below, which compares the cost of electric heating the cost of a new natural gas boiler for household use.  To emphasise, these are rough numbers, but likely if anything to understate the problem of high cost.  The high case is based on electricity from nuclear, the low case on electricity from natural gas with CCS.  Additional distribution costs are assumed in both cases due to the large amounts of electricity that would need to be distributed with widespread use of heat pumps.  The additional cost for an average household is around £700-1400 per year.

The additional bill for the UK’s 26 million households would amount to £18-36 billion p.a. or around 1 to 2% of GDP.  That’s just to decarbonise residential space heating.   In practice of course it’s unlikely to apply to all households, but other approaches seem likely to be similarly expensive.


Assumptions: Heat pump capital cost of £6,000-8,500 including installation, distribution grid reinforcement and upgrades to radiators/underfloor heating, likely to prove a favourable assumption in practice.  Gas boiler capital cost of £2300 including installation.  Winter low carbon power £150-220/MWh wholesale, electricity network losses 7%, additional distribution costs included in capital cost of system.  Natural gas £34/MWh GCV, gas consumption 18MWh p.a..  Boiler efficiency 85% of GCV, so heat load is 15.3 MWh, heat pump CoP = 3. Required rate of return is 10% with 15 years.  Reducing required rate of return for the consumer to 5% would still lead to a substantial premium (£550-1100 p.a.) for the electricity option. 

There are some caveats to this.  Heat pumps make much more economic sense off the gas grid (about 10% of households) where they compete with heating oil, or with electrical resistance heating.  They also make more sense in very well insulated housing.  This will include new-build, where there is the further advantage that the capital cost of the heat pump is more readily accommodated as part of the cost of the building.  However the turnover of the UK housing stock is very slow.  As a result the contribution that new-build can make is limited, even over a few decades.

With no improvement in the service for consumers …

This additional cost does not bring a better service, and indeed some are likely to find disadvantages.  Heat pumps are noisier than gas boilers and run for more of the time, and the radiators to deal with the lower water temperatures are somewhat bulkier.  An additional cost of £700-1400 per household every year for something with no advantages and perhaps some drawbacks is likely to be politically difficult to implement.

Implying significant new policies …

There are clear lessons from these estimates for making decarbonisation of space heating more tractable.

First, it makes sense to focus initially on new residential and commercial buildings, and properties off the grid, even if this is a limited market.  Second, the benefits of additional insulation become even more compelling, again especially in new build.  Third, the benefits of improving heat pump efficiency are huge.

Fourth, reducing the capital costs of low load factor low carbon electricity is also essential.  In the absence of cost-effective seasonal storage his will in practice require low cost generation from gas with CCS, although biomass generation may also play a role.  Proving this technology at scale and achieving capital costs well below those of other low carbon generating technologies looks to be essential  if seasonal heating is to be decarbonised at acceptable cost.

Fifth, any technology for storing energy seasonally, for example as hydrogen or methane generated electrically or from fossil fuels with CCS, would be potentially transformative for decarbonising heat and much else if it could be done at very large scale with reasonable cost and energy cycle efficiency.   This is currently an underdeveloped area.

Reducing the UK’s emissions from space heating by electrification looks likely to require major technological and infrastructure developments.  All this is likely to take time, making the need to reduce costs urgent, even if large scale decarbonisation of the heating load is some way away.  This needs to be a matter of priority.

Adam Whitmore – 18th May 2015


Notes and details of calculations

Other ways to decarbonise heat

Other approaches such as the use of biomass and heat networks may also play a significant role in decarbonising winter heating, although there is not space to cover them fully in this post.  Each approach has its own challenges.  Heat networks could be fed by natural gas with CCS, either producing heat only or combined heat and power.  This requires new heat networks serving urban areas, as well as a CO2 transport network covering large parts of the country, which will be much more expensive than would be required if only large central generating plant were to have CCS.  In some other parts of Europe there are more existing heat networks, reducing costs there, although very extensive CO2 transport networks would still be required in most cases.

Use of biomass directly for space heating may also play a role, but is unlikely to predominate in the UK, for example due to the lack of storage in most UK housing, the scale of the demand, and in some cases problems with high lifecycle emissions.

Air source heat pumps look to be the most promising technology for very widespread electrical heating, although ground and water source heat pumps and resistance heating will have a role.  Reliance on resistance heating would make the problem of very large demand for expensive winter-only electricity demand much more severe.


Around 150TWh more gas is used (outside power generation) in the first quarter of the year than in the third quarter.  Replacing this much gas requires around 45TWh of electricity if heat pumps are used.  This adds about 50% to present electricity consumption of around 85TWh in the same period.

The calculation of additional electricity demand assumes that additional non-power sector gas demand in the first quarter compared with the third quarter is due to the heating load.  Totals quoted are an average of 2013 and 2014.

For peak heat demand of 300GW see, page 11.

For estimates of the coefficient of performance for heat pumps see:

Costs of electricity

I’ve assumed a 33% load factor (equivalent for running 4 months of the year, from mid-November to mid-March) for electricity to serve heat load.  This assumes that capacity can run continuously at full load during these months, which is unlikely to be the case for most capacity due to variations in demand within day and across days.  The assumption here is thus likely to be somewhat favourable.  Diurnal storage may help achieve smoother output but will add further to costs.

Full system modelling would be required to estimate the cost of low load factor electricity accurately, but would be unlikely to change the conclusions, especially for such a large change to the current system, and if anything would be likely to raise costs assumed here somewhat.

The amount of decarbonisation also matters.  Allowing some emissions from fossil plant running during the periods of highest heat demand, or allowing top-up from gas boilers, can reduce costs.

Hinkley C nuclear plant has a cost of £92.5 per MWh escalating with inflation.  This price is after other support in the form of loan guarantees.   Without this support the cost would be higher.  85% of the cost is capital and fixed operating costs.

Recent tenders showed prices of £114-119/MWh for offshore wind.  However there is likely to be scope for further cost reduction alongside the benefits from higher winter output to offset the costs of lower load factor operation.

Costs of early CCS are expected to be higher than the figure quoted here, but there are ambitions to reduce this to £95/MWh by 2030 for gas with post combustion CCS.  See .  However this looks likely to require substantial learning.  The capital cost of £1300/kW assumed by DECC for gas plant with CCS appears to exclude transport and storage costs and to include some early stage appraisal optimism.  I have therefore adopted a capital cost of £1950/kW ($3000/kW) including transport and storage, though reducing fuel costs to retain a total cost of £95/MWh in baseload.  Getting the total capital cost down to this level would be a substantial achievement.

In short, most of the assumptions for the cost of electricity generation to serve heat load seem to tend towards the optimistic.

Costs of residential consumers

Heat pump and gas boiler system cost calculations are approximate only and will vary greatly with circumstances.  More detailed modelling would refine them but would be unlikely to change the overall conclusions.  The costs exclude the effect of any incentive payments.  Annuitisation of capital costs for domestic consumers assumes a 10% rate of return required over 15 years, with a sensitivity to lower rates of return noted under the chart.  Domestic consumers are likely to require higher returns than this in practice, but financing schemes may be made available to reduce their cost of capital.  The change of rate of return assumption does not apply to power generation.

Average household gas consumption is from  Mean rather than median consumption is estimated.  Ofgem use a somewhat lower figure based on median consumption.  Typical gas consumption includes some hot water and often cooking use.  I’ve largely ignored these factors, which complicate the story somewhat, but again do not change the nature of the central challenge.

Climate change in UK general election manifestos

Comparing manifestos for May’s UK general elections highlights important similarities as well as differences among the parties.

All of the manifestos published by UK-wide parties make reference to climate change policy, but to greatly differing extents.  The chart below shows the number of times the various manifestos mention “climate” (in the context of climate change) and “carbon” (in the context of carbon targets or a low carbon economy).  The number of references ranges from a mere 6 by UKIP to over 100 by the Green Party.

Number of references to “climate” or “carbon” in party election manifestos

Manifesto metions

The total number of references broadly matches the extent and ambition of each party’s policies for emissions reduction.  UKIP’s references to climate change are in the context of their policy of abolishing the Climate Change Act.  In contrast, the Conservatives continue to support the Climate Change Act with its legally binding obligation of an 80% cut in emissions by 2050.  Labour go further with a specific binding target for decarbonising the power sector by 2030, and a commitment to push for a goal of net zero global emissions in the second half of this century.  The Liberal Democrats seek a net zero carbon UK economy by 2050 alongside a binding power sector target for 2030.  The Greens seek an even more ambitious binding target for the power sector in 2030 (25-50g/kWh vs. 50-100g/kWh preferred by the Liberal Democrats), along with a zero carbon economy by 2050, and a 90% reduction in emissions from 1990 levels by 2030.

It should be noted that some these targets will be difficult to achieve, and perhaps impractical.  A net zero carbon economy, for example, is likely to require substantial deployment of negative emissions technologies such as biomass with CCS or use of international offsets.  A 90% reduction in emissions from 1990 levels by 2030 requires huge and relatively rapid changes to long-lived infrastructure, and will not be made any easier by the Green Party’s commitment to phase out nuclear power within ten years.

The Liberal Democrat and Green manifestos also say much more than Labour and Conservative manifestos about the action that will be required.  The Liberal Democrats are, for example, targeting 60% of renewable electricity by 2030 enabled by additional storage and smart grid technology, all non-freight vehicles to be Ultra Low Emissions by 2040, discounts on council tax for improved building insulation, and increased research and development.  (The other parties do mention some of these issues.  For example, the Labour Party also mentions improved home insulation, and Conservatives aim for almost all zero emission vehicles by 2050 and commit to investing £500million over the next five years towards this.)

The Greens have ambitions to reduce energy demand by half by 2030 and two thirds by 2050, including through a huge programme of building insulation.  They also seek very large scale investment in renewables, and plan a system of individual carbon quotas.  The fine detail of these policies is not spelt out, but one would not expect an election manifesto to set out a full and specific implementation plans.

Despite the differences, there is very welcome common ground among the parties (UKIP apart).  All support at least the targets in the Climate Change Act.  All support international action, including an ambitious international agreement to reduce emissions.  All support adaptation to climate change.  This is encouraging, in that it represents the prospect of continuing progress whoever (other than UKIP) is in power after the election.  Indeed as recently as two months ago the three main party leaders signed a joint pledge on climate change, including an agreement to work across party lines on future carbon budgets.

Delivery on all these promises will of course be the crucial test.  But in the meantime the amount of common ground between the parties continues to be encouraging.

Adam Whitmore – 17th April 2015



Note for non-UK readers:  The Conservative Party is the largest party in the current governing coalition.  The Liberal Democrats are the smaller party in the coalition, but the Secretary of State (senior minister) for Energy and Climate Change is a Liberal Democrat.  The Labour Party is the main opposition party.  The Green Party and UK Independence Party (UKIP) currently have very few Members of Parliament (1 and 2 respectively) but opinion polls show them each having significant support.

The manifestos can be found at:



Liberal Democrats:

Green Party:


For a report on the joint pledge by the three main party leaders signed in February 2015 see:

They pledge:

  • to seek a fair, strong, legally binding, global climate deal which limits temperature rises to below 2C
  • to work together, across party lines, to agree carbon budgets in accordance with the Climate Change Act
  • to accelerate the transition to a competitive, energy efficient low carbon economy and to end the use of unabated coal for power generation