The "Air Pollution Management" Newsletter

June 2008
No. 362

Specific Event Analysis


Is it frivolous to include odds of unlikely events along with those which are likely? Unfortunately some environmental groups are making an impact because of concerns about very unlikely events. It is therefore valuable to illustrate that there are lots of unlikely events which could shape policy, but the odds against them should not weigh heavily.

The odds that a meteor would strike earth and do such major damage that it would interrupt a mercury program are certainly more than 20 million to l. Most doomsday scenarios of the earth being hit by something falling from space involve the large pieces, asteroids 10km or 20km across, that cause global destruction and mass extinction. This has happened at least five times in the history of the earth and completely changed life on the planet each time. However, these large objects arrive every hundred million years or so, and since the last one struck 65 million years ago, the odds that another one will not strike for a while are in our favor.

Global Warming Catastrophe

The debate over global warming is likely to continue with no major impact on a mercury control program. Regardless of the facts, we are likely to be continually bombarded with doomsday predictions. These are unlikely to persuade rate payers that a tripling of their electricity rates is justified. However, if some actual catastrophe were linked to warming, then there could be some abrupt change in public attitude. Despite the news stories which would indicate the likelihood of such a catastrophe, the odds are just as great for a warming catastrophe in the next fifteen years as they are for one from meteors.

One of the scenarios is for rapid loss of ice and rise in sea levels. Most scientists agree that any rise will be very gradual. Others even question whether there will be any rise.


“Global warming is not causing any significant retreat of polar ice caps, despite claims to the contrary in some media reports”, says James M. Taylor, senior fellow for environment policy at The Heartland Institute. “Although Arctic Sea ice last summer reached its minimum extent since satellites began measuring the ice in 1979, NASA scientists have discovered the sea ice retreated due to variable local wind patterns rather than global warming. Moreover, the ice re-formed at a record pace last fall. In the Southern Hemisphere, Antarctic Sea ice is at its greatest extent in recorded history. The majority of Antarctica is in a prolonged cold spell and has been accumulating snow and ice for decades.”


There are many aspects of global warming. One relates to the increases in CO2 levels. Is this harmful or beneficial? Do CO2 increases improve plant growth or do they hurt it? Do CO2 increases cause global warming or is it the other way around? Research has shown that in most cases rate of plant growth under otherwise identical growing conditions is directly related to carbon dioxide concentration. The amount of carbon dioxide a plant requires to grow may vary from plant to plant, but tests show that most plants will stop growing when the CO2 level decreases below 150 ppm. Even at 220 ppm, a slow-down in plant growth is significantly noticeable. Colorado State University did research on growing carnations in greenhouses. CO2 levels to 550 ppm produced an obvious increase in yield (over 30 percent), but the greatest benefits were earlier flowering (up to two weeks) with an increased percentage of dry matter. There is a very well organized website on CO2 science. There are detailed summaries and links to studies on various crops.


The conclusion is that nearly all agricultural crops respond to increases in the air's CO2 content by exhibiting increases in photosynthesis and biomass production, as well as their ability to deal with various environmental stresses.


You can search directly on the history of CO2 levels and find the following:  When the earth was in its infancy, some four-and-a half billion years ago, it is believed that the atmosphere was predominantly composed of carbon dioxide, which would have put its CO2 concentration, in terms of the units most commonly used today, at something on the order of 1,000,000 ppm. Ever since, the CO2 content of the air (in the mean) has been dropping.


By 500 million years ago, in fact, the atmosphere's CO2 concentration is estimated to have fallen to only 20 times more than it is today, or something on the order of 7,500 ppm, and by 300 million years ago, it had declined to close to the air's current CO2 concentration of 370 ppm, after which it rose to about five times where it now stands at 220 million years before present. Then, during the middle Eocene, some 43 million years ago, the atmospheric CO2 concentration is estimated to have dropped to a mean value of approximately 385 while between 25 to 9 million years ago, it is believed to have varied between 180 and 290 ppm. This latter concentration range is essentially the same range over which the air's CO2 concentration oscillated during the 100,000-year glacial cycles of the past 420,000 years.


With the inception of the industrial revolution, however, the air's CO2 content once again began an upward surge that has now taken it to the 370 ppm level, with the promise of significantly higher values still to come. In addition to its variation over geologic time, the atmosphere's CO2 concentration exhibits a strong seasonal variation. It declines when the terrestrial vegetation of the Northern Hemisphere awakens from the dormancy of winter and begins to grow in the spring, thereby extracting great quantities of CO2 from the air; and it rises in the fall and winter, when much of the biomass produced over the summer dies and decomposes, releasing great quantities of CO2 back to the atmosphere.


Will the ongoing rise in the air's CO2 concentration lead to catastrophic global warming? Observations of historical changes in atmospheric CO2 concentration and air temperature suggest that it is climate change that drives changes in the air's CO2 content and not vice versa. In a study of the global warmings that signaled the demise of the last three ice ages, it was found that air temperature always rose first, followed by an increase in atmospheric CO2 some 400 to 1000 years later. For all of the glacial inceptions of the past half-million years, air temperature consistently dropped before the air's CO2 content did, and that the CO2 decreases lagged the temperature decreases by several thousand years. In addition, the multiple-degree-Centigrade rapid warmings and subsequent slower coolings that occurred over the course of the start-and-stop demise of the last great ice age are typically credited with causing the minor CO2 concentration changes that followed them. There are a number of other studies that demonstrate a complete uncoupling of atmospheric CO2 and air temperature during periods of significant climate. Hence, there are no historical analogues for CO2-induced climate change, but there are many examples of climate change-induced CO2 variations.

Natural Gas Prices

A big potential for mercury control is at small coal plants which will need to install MACT. If natural gas prices were to fall below $4/MM/Btu, we would return to the situation of the 1990s where combined cycle plants would be the choice for new construction and smaller coal-fired plants would be retired. The odds of this occurring are now at least 1000 to l. At $3-4/MMBtu, gas is competitive with coal for electricity generation. At today’s prices the cost of gas-generated electricity is more than twice that from coal (even with all the latest air pollution control equipment). At $20/MMBtu the cost will be nearly four times that of coal. A family paying $2000/yr for electricity would be faced with paying $8000. This large difference in fuel prices would have a profound effect on energy decisions.

A front page article in The Wall Street Journal April 18, 2008 indicated that $20/MMBtu gas may be where the price is headed. Natural gas prices in the U.S. have risen 93 percent since August. On April 17 the price closed at $10.38/MMBtu. (On April 24 the price was $10.93). Gas heats 50 percent of U.S. residences and provides 20 percent of the power in the U.S.

Liquefied natural gas (LNG) arriving in Japan is priced at $20/MMBtu. Cheniere Energy Inc. just opened a new LNG terminal near the Texas-Louisiana border. However, the stock is down 70 percent from its high earlier this year because observers expect few tankers to deliver to the U.S. when they can achieve higher prices in Asia. Oil and gas generally trade at near equal values in $/MMBtu. It takes 6000 cubic feet to equal one barrel of oil. Gas is 1000 Btu/ft3. So at $10/MMBtu gas, is the equivalent now of $60/barrel. Oil is presently $114/barrel. So gas would rise to $19/MMBtu to keep its historic equality.

The article reports that some industry participants believe that gas will hold between $7/10/MMBtu based on a world increase of 30 percent in LNG. But anyone who has traveled to China recently can observe that the potential consumption in that country alone is enough to absorb much of the increase. The article points out that economists predicted that it would be a buyer’s market with purchasers holding down costs. The opposite has proved the case. Demand is high and producers can sell to the highest bidder.

The article also points out that when electricity demand is higher than supply, prices soar. Unlike other energy sources there is no storage. So we are very likely to have a repetition of the 2001 situation and a similar situation back in 1974. Within a few months utilities placed orders for 70,000 MW of coal-fired power plants. However, the shortage disappeared in a few years and many of the orders were canceled. But this time around it is not likely that there will be a sudden reversal.

As a last resort to meet demand, utilities could operate their single cycle peaking gas turbine plants. These units are only 60 percent as efficient as the combined cycle plants. This means that if they are buying gas at $20/MMBtu, it would be the equivalent impact of $33/MMBtu gas in a combined cycle plant. TXU had initiated the fast track construction of 11 coal-fired power plants in anticipation of this kind of problem. Most of those projects were canceled. Texas is heavily reliant on natural gas and is quite vulnerable along with California and others.

Carbon Tax is Exorbitant

There are a number of factors which will determine whether there is an exorbitant carbon tax. The word “exorbitant” implies a miscalculation. This may be the most important element of risk. We could somehow stumble into a situation where a carbon tax is so punitive that it has a great negative economic impact. However, the European experience is otherwise. In fact Europeans are more positive about coal-fired power generation as a long term solution than Americans are.

The Wall Street Journal observed in an April 26, 2008 article that Polls are cruel. Voters consistently say they want to stop global warming. They also say consistently that energy prices, especially for gasoline, are too high. Excerpts from this article follow.

“So what are politicians supposed to do? The answer, apparently, is to pretend the contradiction doesn't exist. The latest episode in this long-running bipartisan ruse aired last week, when John McCain proposed a "gas tax holiday" that would suspend federal levies between Memorial Day and Labor Day. "Americans need relief right now from high gas prices," a press release put it, and the holiday will "act immediately to reduce the pain." His Arizona colleague, Jon Kyl, promptly introduced it as Senate legislation.

Most of the price of gasoline is determined by the global price of crude oil, which is spiking now due to a combination of the weak dollar and commodity speculation. The source of the problem isn't the tax. Domestic demand for gas always goes up with summer driving, but the McCain holiday doesn't affect production, and anyway, only applies over the short term.

More notably, it makes a hash out of the climate-change policies that the candidate purports to favor. In 2003, Mr. McCain and Joe Lieberman introduced the first Senate bill to mandate greenhouse-gas reductions through cap and trade. "There is no middle ground," Mr. McCain said in 2005. "You've got to have an immediate effort to reduce emissions of greenhouse gases. Anything less than that, is a fig leaf and a joke."

As honest environmentalists admit, any effective policy to reduce emissions must increase the price of carbon, encouraging cuts in consumption and creating an incentive for competing energy sources. This is justified as a necessary sacrifice to avert "dire consequences if we let the growing deluge of greenhouse gas emissions continue," as Mr. McCain said last year.

But as the gas-tax moratorium gambit shows, such purity is dumped as soon as voters start complaining about high prices. Not that the Republican is alone:  Hillary Clinton, slipping into her new role as tribune of the working class, has endorsed the holiday, while Barack Obama is opposed because he believes a windfall profits tax on oil companies would provide more relief.

The evasions continue down the line. It is easy for everyone to say the U.S. needs a "Manhattan Project" for alternative energy because the phrase is meaningless. Most politicians favor a cap-and-trade regulatory policy, instead of a carbon tax, because it would shift higher emissions costs onto businesses, which would pass them on to consumers indirectly. Yet the most popular Senate bill that would create a cap-and-trade program applies only to utilities and industry. It excludes automobiles, though about one-third of annual U.S. carbon emissions come from cars and trucks.

Such contradictions are easy to paper over now, because big climate change legislation is still a way off in Congress. But it's becoming clearer all the time that whatever emerges will be so shot through with loopholes and exemptions that its effect on carbon emissions will be minimal, while still imposing economy-wide distortions.

No one could get elected, or for that matter govern on a platform that called explicitly for increased energy prices. So we get contradictions like a gas tax moratorium married to cap-and-trade carbon limits. To quote Mr. McCain, it's "a joke.” (End of WSJ excerpt).

It is instructive to review the history of natural gas power generation. The low cost of natural gas coupled with environmental pressures led to a huge building program of natural gas fired plants in the U.S. at the turn of the century.

The price of natural gas then rose substantially. The public essentially had the choice which was to utilize all this new gas-fired power generation and help reduce greenhouse gases or to switch back to the old coal plants.

The answer was that the independent gas turbine power providers went bankrupt because the public was unwilling to pay a substantial premium for cleaner energy.


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