Monday, December 30, 2019

Decarbonizing: Running the Numbers and Economic Modeling

(This is a reply to a Twitter question from a retired OECD energy policy expert on what numbers I would like to see run when thinking about decarbonization.)

When I wrote “if anyone has actually run the numbers, I haven't seen their work” I was thinking “built an economic model of the transformation required to move the world away from fossil fuels.” It seems to me direly important that we do so.
We’ve been talking about natural gas. We know that as various subsidies are removed the price of natural gas will rise. (By the way, the USA has a production subsidy, the depletion allowance.) Ideally, users of natural gas as fuel will, therefore, replace their systems with some combination of heat pumps and electric furnaces. Many furnace owners quite literally cannot afford to upgrade their systems. Others may be able to afford the change but will be adversely affected by it. All businesses in this area will be in competition with international businesses that have not converted their systems. So subsidies and, probably, tariffs will be needed for this change to be carried out in an equitable way.
Natural gas is also used for transportation, and natural gas liquids are used as a chemical feedstock for plastics manufacture. DOE’s Energy Information Agency does not even know the amount of NGLs that are used in plastics manufacture; probably no-one does.
The scale of this problem is vast. In the USA, there are tens of millions of single-family homes with gas furnaces. If fuel prices spike sufficiently, there is likely to be a voter backlash against the conversion. There is going to be resistance in any event.
The scale of the mobilization required to decarbonize the economy will be vast and it must be done very quickly. Back in 1991, Al Gore said we needed the equivalent of a Manhattan Project to guide the change. Time has gone by, and the urgency is much great. Now we need a mobilization equivalent to that required for a total war.
If this is going to be done at all, we need the best planning possible. Hence, we need models, and I am not aware of anyone who has built even the prototypes of those models.
Enough of an answer?

4 comments:

  1. Why must it be all or nothing?
    Can't we back off in areas that are easily replaced? And swapping gas heat for electric heat only works if electricity is all from renewables.

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  2. It need not immediately be all or nothing, but at least we need to get started, and we need modeling to base our policies on. As far as I can tell – admittedly I have not done a full literature search – right now we have almost nothing, only hope and hope is not a plan.

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  3. Tomorrow, maybe, I'll write something about what proceeding without planning implies.

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  4. We do need to get started. And I agree, going all panicky with no plan will crash everything.

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