Effect of climate policies on CO2 emissions: imperceptible

Guest essay by Alberto Zaragoza Comendador

When discussing climate change, one often hears this or that bad thing will happen ‘if we do nothing’. Implicit in this assertion is the notion that if we do something, well, then CO2 emissions will decrease, or at least they won’t increase as much as they would have.

It seems a duh statement: doing something about CO2 emissions causes them to be lower than they would have been if you we had done nothing. But the evidence is lacking: in this article I show how multiple countries, over a span of several decades, fail to show signs of a policy-induced change in emissions. And the few cases in which policy seemed to be driving emissions were not related to climate policy.

Counting emissions the right way

By definition, CO2 emissions are a function of:

· GDP

· The CO2 intensity of GDP

This is just a tautology, of course: if you emit one ton of CO2 and generate GDP of $2,000, then you carbon intensity is 0.5 tons of CO2 per thousand dollars. (This is approximately the current global figure).

A more intuitive way to look at it is by inverting numbers: instead of calculating how many tons of CO2 we emit per dollar, we’ll see how many dollars we generate per ton of CO2. Let’s call that carbon efficiency: in the above example, it would be $2,000/ton.

My point is that, in theory, climate policies aren’t supposed to affect GDP, and in particular aren’t supposed to make emissions smaller by making GDP smaller. Sure, some activists are open about their disdain for economic growth, but no mainstream figures in the climate movement and bureaucracy have endorsed that position (publicly). And while climate policies do have a cost and may well make GDP growth slower (than it would otherwise have been – it’s so hard to write like an economist), really, how big can that impact be? If climate policies made yearly GDP growth 0.2% lower, for instance, the effect on emissions would be negligible (though the economic costs, in the long run, would be tremendous).

So the only way climate policies can have an effect is by increasing carbon efficiency, or reducing carbon intensity (in this article I will use the former phrase). Again, this is an obvious statement. But it’s stunning that the vast majority of climate ‘pledges’ and ‘targets’ do not mention CO2 efficiency, but absolute emissions instead. For instance, California’s target for 2030 is for emissions to be 40% lower than they were in 1990 – regardless what GDP does in the meantime.

So in the case of a country whose GDP grows by 1%, while at the same time emissions fall by 1%, we have an increase in efficiency of 2%. Mathematically-obsessed readers may point out you cannot simply ‘add up’ the changes – you have to divide 1.01 by 0.99, which gives an improvement of 2.02%. No worries, that’s the way I did the numbers.

One final about counting: I look only at CO2 because emissions of this gas can be tracked through fossil fuel combustion, while emissions of other greenhouse gasses cannot. Emissions of methane, ozone and N2O are about as certain as the ‘land use’ emissions of CO2, which is to say they’re anyone’s guess:

‘Bottomup estimates (0.27±0.16GtC/a for 2000–2005) are consistent with the insitu inversion estimates (0.40±0.42GtC/a for 2001–2004)… Recent results indicate that Europe may take up considerably more carbon per year (e.g., 1.03±0.47GtC/a for 2009–2010) or 0.95±0.33GtC/a for 2003–2010) than previously thought. These estimates are similar to earlier results derived from TES (Tropospheric Emission Spectrometer) thermal infrared (TIR) satellite measurements (1.20±0.17GtC/a for 2006’

So in one of the world’s best-observed regions estimates vary by a factor of four. Given this context, talk of ‘emission cuts’ is just comedy. Countries will put forward whatever numbers suit them, and nobody will be able to verify the slightest thing about them.

While we cannot verify how much CO2 is taken up by forests in Ecuador, there are many ways to verify country’s fossil fuel consumption – and the resultant emissions. Since these make up the bulk of CO2 emissions, a gas which in turn makes up about 80% of the increase in greenhouse effect over the last few years (see table 2), we’re in fact addressing most of the ‘problem’.

The numbers

First, I downloaded emissions data from the BP statistical review. Their methodology is described here. Basically they take fossil fuel consumption, subtract the part that they estimate is not burned (because it’s used as feedstock instead of fuel), and multiply (depending on the carbon content of each fuel). Ethanol and other biofuels are excluded.

They do this with the oil, coal and gas burned in each country. This means that, for instance, if Austria uses electricity imported from coal-burning plants in Poland, these emissions will be counted as Poland’s, not Austria’s. The same happens if a factory closes down in the US and reopens in China. But there is really no other way, as accounting for ‘upstream’ emissions is essentially impossible: who is generating that electricity, who is making the batteries that go into electric cars, who mines the minerals that go into the batteries, etc. So using emissions at the tailpipe (or the smokestack) seems the only workable solution, even if no method is perfect.

To avoid issues with countries that spent decades under a Communist system, or that have changed borders, I pick fifteen (mostly) rich nations in Western Europe; these are the countries traditionally seen as ‘climate leaders’. I compare them with the US, where allegedly climate policies have been much weaker. I exclude Germany as I wasn’t sure how to deal with the reunification. In the future it would be useful to account for it, as well as other developed countries (Canada, Australia, etc).

That leaves us with fifteen countries, almost all having several decades’ worth of emissions data. To compare them with GDP I get the growth rates from the World Bank. I put it all together in this file.

But before we get to the pictures, one last thing…

How not to display compound growth

Imagine if, to remark the strength of the US economy in the last decade, I show this chart.

Pretty misleading, isn’t it? Of course GDP per capita grows most years, and since it was much bigger in 2010 than in let’s say 1960, even a major slowdown in growth can still show up as a big jump in GDP in the chart. Indeed, the percentage change paints a less rosy picture:

You would never assess the impact of a politician, for instance, looking at a chart like the first. You’d use one like the second. The problem is that, although many have recognized that improving carbon efficiency (i.e. gradual decarbonization of the economy) is the only good way to measure the impact of climate policies, for some reason they use the first kind of chart. Like this:

In that article, the author comments that one cannot see if British Columbia’s carbon tax had any effect. The truth is, whatever the merits or demerits of this tax, you wouldn’t see the effect even if it was massive. Visually, if you plot the reduction in tons of CO2 emitted per dollar of GDP, you cannot ever reach zero, because emissions will never reach zero; you can only approach it at an ever-slower pace. (To his credit, the author then cites the percentage change and compares it with the US. And yes, it’s truncated at 250 rather than 0, but the point remains).

Going the other way, if one plotted dollars generated per ton, on the other hand, the line would surge – even if there was a slowdown in the rate of decarbonization. Neither of these is a good way to visualize the data.

Summing up, when dealing with compound growth you should not show the absolute values, but the percentage change; with an absolute-value chart it’s impossible to tell what the rate is doing. I’ve never seen CO2 efficiency plotted on a percentage chart so there we go.

The charts

In all charts I smooth the data by showing a 5-year trailing mean; since the first year with CO2 data is 1965, and the first change in CO2 emissions therefore is reported in 1966, the mean starts in 1970. Remember it’s all in this Excel so you can take a look.

First off, America, land of the free and ‘climate deniers’ too. Never mind the Koch brothers, the country has had exactly seven years (out of fifty) in which carbon efficiency declined; as you can see the mean has been positive except for the very first year it’s reported, and it’s nearly always been above 1.5%. (Furthermore, three of those seven years happened very early in the period, before the 1973 oil shock).

In other words: if the US economy had grown since 1966 at a rate of about 2% a year, CO2 emissions wouldn’t have increased over the period at all.

That’s the key message in these charts, I believe. Rising carbon efficiency isn’t a fluke or a paradox or an anomaly: it’s the norm. It’s what happens most of the time in a modern economy, by which I mean a post-1973 economy (though there is some evidence carbon efficiency was already rising before) When the price of energy shoots up, people have an incentive to be more frugal in how they burn oil and gas, and so the decarbonization rate. But this progress is not reversed when the price of oil and gas declines; it simply slows down.

Of course, if an economy is growing below the rate of decarbonization, this means emissions will fall even as GDP expands; no wonder the list of countries in such a situation is basically a list of countries with low economic growth. Only those with a very tenuous grasp of math would claim such a phenomenon is evidence of ‘decoupling’ or ‘cutting the link’ between emissions and GDP growth. Following their logic, global GDP growth of 0.1%, while emissions likewise fall 0.1%, would be evidence that we have ‘decoupled’ these things.

So you can see why reporting the rate of decarbonization is so important: whether an economy decarbonizes is a pointless question. Of course it does, most of the time. It’s natural and it doesn’t require any special measure or any COP meeting. The real question is how fast does it decarbonize.

The rate over the Obama years has been 2.67%, something of an improvement over the 2% seen in 1966-2008. Of course 2009-2015 was also a period of very high oil prices, combined with low gas prices which displaced coal generation. The average over 1966-2008 is 2%, but this rises to 2.43% if one excludes 1966-72. Put other way: compared to the average since 1973, the rate of decarbonization accelerated by 0.24% during the ‘shale revolution’ years.

Let’s cross the pond now. As the old adage goes, Americans have heated swimming pools while Europeans have shoebox apartments. It’s a bit of an exaggeration, but my point is that differences in the carbon efficiency of the US and European economies didn’t arise as a result of climate policy. Rather, economic and social differences have existed for a very long time; Europeans didn’t start living in apartments as a result of climate policies.

To make this point, I will report the average decarbonization rate for all European countries involved since 2000. Kyoto was signed in 1997, the Emissions Trading System started in 2005, Energiewende started in 2000… one can quibble about the start date, but it’s really hard to see how European countries are improving the decarbonization rate over time, or how they are besting the US in this regard.

For Austria, the 2000-2015 average is 1.61% (2.3% in the US over the same period). no obvious trend other than the increase in the rate starting 2006 or so. In general, small economies will be more volatile and less reliable – a single power plant, or refinery, or reclassification of some kind of fuel can skew the emission numbers.

2.89% in Belgium, also for 2000-2015. You can see the peaks due to the two oil crises of 1973 and 1979, displaced to the right a bit by the trailing 5-year mean. Little improvement in efficiency when oil was very cheap, but lots of improvement since 2008. A couple years above 10%, but again, small countries are volatile.

4.27% in Denmark, perhaps one of the few cases of decarbonization success. (The country has less than six million people and can use the much larger German grid as a ‘battery’ by exporting surplus wind power).

4.03% in Finland.

2.75% in France. The bulge in the early 1980s due to the country’s push into nuclear is very obvious.

1.63% in Greece.

That mega-spike is due to Ireland’s phenomenal 26% GDP growth last year. Excluding the mysterious figure, the average over 2000-2014 is 4.21%.

1.74% in Italy. As in several other countries, in 2015 with the plunge in oil prices efficiency slowed down greatly.

1.41% in the Low Countries.

1.97% in Norway. The country is part of the European Union’s Emissions Trading System, and has quite the reputation as a ‘climate leader’. But it’s a big oil exporter, and so more or less shielded from oil shocks; unlike in most other nations, efficiency didn’t spike in 2009-2014 (if anything the rate declined).

1.72% in Portugal.

1.90% in Spain.

3.81% in Sweden. Not only is the rate quite high; it’s also increased further in 2015.

2.75% in Switzerland.

1.50% in the UK. While the rate itself is pretty bad, since 2009 or so it’s shot up. And it was still over 4% in 2015.

All in all the European pics look a lot like the latter part of this chart:

The swings in the price of oil, which usually correlate with natural gas, seem to determine the pace of decarbonization far more than any policy.

That said, the decarbonization rates for Denmark and Sweden are certainly higher than in the US, and seem to be increasing over time; unlike other nations their efficiency hasn’t slumped along with the price of oil in 2015. The same is true of the UK for the last 6 years or so. Perhaps they’re doing something right, or perhaps there is something else that escapes me.