Thursday, July 24, 2014
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Winds of Vanity

COPENHAGEN – Copenhagen, Denmark’s capital, wants to be the world’s first CO2-neutral city by 2025. But, as many other well-meaning cities and countries have discovered, cutting CO2 significantly is more difficult than it seems, and may require quite a bit of creative accounting.

More surprisingly, Copenhagen’s politicians have confidently declared that cutting CO2 now will ultimately make the city and its citizens wealthier, with today’s expensive green-energy investments more than paying off when fossil-fuel prices rise. But how can deliberately limiting one’s options improve one’s prospects? These sound more like the arguments of green campaigners – and they are most likely wrong.

The first challenge that Copenhagen faces in reaching its zero-emissions goal is the lack of cost-effective alternatives for some sources of CO2, particularly automobiles. Denmark already provides the world’s largest subsidy to electric cars by exempting them from its marginal 180% car-registration tax. For the most popular electric car, the Nissan Leaf, this exemption is worth $85,000 (€63,000). Yet, just 1,536 of Denmark’s 2.7 million cars are electric.

There is also the challenge inherent in wind-generated electricity: ensuring that the city can continue to run when the wind is not blowing. To address this problem, Copenhagen has had to devise an electricity-generation strategy that enables it sometimes to run on coal-fired power when necessary, without creating net emissions.

The city’s plan is to build more than 100 wind turbines within the greater Copenhagen area and in the shallow waters around it. With a combined output of 360 megawatts, which will feed electricity into the grid, these turbines will more than cover Copenhagen’s electricity needs – and the surplus can be used to offset the city’s remaining CO2 emissions, including from the city’s millions of non-electric cars.

Copenhagen’s success thus depends on the surrounding areas not aiming for CO2 neutrality. After all, the whole accounting exercise works only if others are still using fossil fuels that Copenhagen’s unpredictable wind power can replace. In this sense, Copenhagen is hogging the chance to feel righteous.

The city’s political leaders promise that this strategy for attaining carbon neutrality “provides an overall positive economic picture and will lead to economic benefits for Copenhageners” based on the expectation that prices for conventional energy sources like coal, oil, and gas will rise in the coming years. But the often-heard justification for this assumption – that humanity is rapidly depleting these scarce resources – is inconsistent with real-world events, as innovation has effectively expanded oil, gas, and coal reserves to unprecedented levels in recent years.

Consider Copenhagen’s wind-turbine plan, the single largest expected source of savings. The total cost of construction and maintenance is projected to be $919 million. Even assuming a very large carbon tax, this amounts to a rather paltry $142 million, meaning that the project’s value – $261 million in savings – stems largely from the $1.04 billion saved on electricity payments.

While that sounds impressive, it depends on a massive 68% increase in the price of fossil-fuel-produced electricity by 2030. And Copenhagen is not alone in making such assumptions; the United Kingdom’s Department of Energy & Climate Change estimates a 51% price increase by 2030.

It is likely that these projections are unrealistic. Look at the long-term price trends of coal and gas, which power the vast majority of global electricity production. Despite a recent increase, real coal prices have been trending downward since the 1950s.

In the United States, the shale-gas revolution, facilitated by the development of hydraulic fracturing (“fracking”), has brought prices to their lowest levels since natural gas gained prominence after the oil crises of the 1970s. With many more countries set to tap shale-gas reserves over the next decade, this downward trend will most likely continue, helping to lower the price of electricity generation further. That is why Aurora Energy Research recently projected a significant decline in electricity prices for the next three decades.

Fracking technology has also enabled the US to tap its large shale-oil reserves, making it the world’s largest petroleum producer, ahead of Saudi Arabia. Citigroup estimates that, by 2020, oil will cost just $75 per barrel, and the former head of international forecasting at the OECD suggests that the number could be closer to $50.

This is inconvenient for climate mandarins in the UK and Copenhagen alike, because it reduces clean energy’s allure. Even if fossil-fuel-powered electricity prices remain constant, Copenhagen’s wind turbines become a net drain. If Aurora’s forecast proves correct, Copenhagen’s wind project would become a massive failure, costing 50% more than the saved electricity is worth.

Instead of allowing politicians to spend public money on feel-good climate projects based on distant – and unreliable – predictions, citizens should encourage their leaders to invest those funds in clean-energy research and development, with the goal of making renewables inexpensive enough to overcome fossil fuels in the market. Initiatives like Copenhagen’s, however wonderful they sound, are ultimately little more than costly vanity projects.

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  1. CommentedAndrei Sandberg

    Who is saying that "we are not the problem?". I don't see that anybody in their right mind can say that one is absolving oneself of guilt. We are all guilty and that is not the issue. The issue is to fix! The decisionmakers in the West are the problem just as much as ourselves when we voted for them. One can just take the senseless subsidies of fossil fuels. One can ask that in this age and time and time: How, of of all the energy sources possible, is this subsidizing possible? When we have all the science and data right in front of us? And one might add that we do have all the technology, skill and will to replace, incrementally, the fossils with. It all comes down to the individual. What do we want? We all make choices and let us make them so that we all can benefit from them...not to mention our children. Respectfully yours

  2. CommentedShoshon Tama-Sweet

    Thank you for the reasonable analysis on how we respond to Climate Change. Doing what feels good, or looks good politically, has almost zero effect on climate, and does nothing for the most vulnerable global citizens whose live may be effected by global climate change. If Copenhagen really wanted to do something good, they would spend the money aiding countries like Bangladesh adjust to the climate change that is already unavoidable in this century due to the long life of current CO2 in the atmosphere. It is to easy to want to say 'we are not the problem'. Never confuse absolving oneself of guilt with an actual solution.

  3. CommentedNichol Brummer

    Why is any article by mr Lomborg still taken seriously anywhere. He actually advises Copenhagen to subsidise 'more research' IN STEAD OF deploying currently known technology. Doesn't he like it if government elected by the people is willing to think towards the future, and if necessary even be somewhat entrepreneurial, and take some risks, where private capital is too timid? But he finally shows his true colors when he uses connotations like 'mandarin' to paint 'the other side', since he has nothing constructive to contribute. This story is vying in quality with negative advertising in US elections. It is just empty rhetoric without making a single constructive point. It is a non-article, and project syndicate should be ashamed of systematically give this man a platform.

      CommentedShoshon Tama-Sweet

      I disagree. I felt the article had a valid point- that Copenhagen will, in fact, still need to create CO2 to function, and that the expenditure would have more effect in fighting CO2 if it were spent to reduce the costs of alternative energy rather than buying in at today's prices. Please attack the ideas put forth, instead of defaming the character of those whom you disagree with.

  4. CommentedKen Presting

    Mr. Lomborg commits again the fundamental fallacy of anti-environmentalism - to ignore the role of externalized costs in a global economy. This is especially poignant for a Danish resident of Copenhagen, an unusually lovely waterside city in a preternaturally flat region. Copenhagen itself will cease to exist unless the world as a whole solves the problem of global warming.

    But Denmark is no longer the world-dominating power it was in the days it settled Greenland. The town of Copenhagen must both prove to the world that sustainable power is feasible, and persuade the rest of the world to embrace it. If that counts as vanity to Mr. Lomborg, then all I can say is, he is no Viking.

    All of us who follow the climate debate should be prepared to dispose immediately of the phony "calm days" and "what about night-time" objections to wind and solar power. The practice of pumping water uphill to store energy is as old as hydro power itself. Mr. Lomborg knows this very well. He is insulting his readers by ignoring it. (Caveat - never read a climate denier without Google open in another window)

    Copenhagen doesn't need anybody elsewhere to burn coal on quiet days. All they need is a place with hills and high valleys, to build a dam and string a wire. Hills truly are a scarce resource in Denmark, but they are well-known in the world outside Mr. Lomborg’s business school.

    We all should remember, there is no place in the world more emotional about global warming than Greenland. The current residents would love for their country to deserve its name. But all the melt water from all those glaciers will make short work of Copenhagen.

    Greenland's Revenge?

  5. CommentedAndrei Sandberg

    One does not have to be a highly indoctrinated person to see that Project Syndicate may have a few fossil industry lobbyists working in business schools playing games with numbers and trying to prove something. Whatever it may be let the text in itself do the math.

    What is the point? That there might be windless days? I think Copenhageners can handle that with good solutions by creative minds, mutual effort and creative as well other clean energy forms. Wind is just one but a good one. Clean-tech is advancing as we speak.

    Is the articles point that we need fossils? Of course we do, but we have to incrementally get less dependant on this and finally get rid of it. For example a combustion engine does not have to have petrol as its fuel. This by the way offers a market in which business opportunities are limitless.

    One could perhaps say that this text is not creative solution thinking anymore. The cost of climate change is already at numbers not known, not to mention the cost human suffering globally. Fracking and tar sand? We have to start thinking responsibly and see the forest for the trees. One cannot be without amaze when one sees these kinds of analysts making their own conclusions from predictions and models.

    "Copenhagen hogging to feel righteous?". Give me a break. Responsibility and accountability always starts from a human being and then grows from there. We live by setting examples. If others do spew carbon and toxic gases into the air it does not make it right for us to do it. Two wrongs does not equal one right. Real change starts from the bottom and luckily Copenhagens decisionmakers have realized that are a part of the bottom, as we all are.

    Maybe we can all agree that whatever the numbers in this article they are just as speculative as Lomborg himself argues other costs and calculations to be. I'm for heavy carbon tax and with the majority of Copenhageners and Mr. Ross. Entertaining but leave it at that. Respectfully Yours
    Andrei Sandberg

  6. CommentedDavid Morgan

    We should congratulate Copenhagen for trying, cost aside we need to decrease CO2 emissions. As usual with politics, we will do too little too late. It will take a number of climate fueled disasters to convince governments of the economics of climate change, that it is better to act now and prevent, rather than trying to mitigate the effects in the future.

  7. CommentedPaul Ross

    Although entertaining to read, I miss your point. If you are trying to say it is not economically viable to try to become CO2 neutral in teh near term, I may agree. BUt when you hedge your argument with the fantasy of unlimted fossil fuels I start to wonder where you earn your pay.

    I suppose we shold also believe that we can fish forever because the ocean is big?

    Fossil fuels, regardless of where they are currently stored arise from a known process and one that is not nearly as fast as our desire to use them. Thus, at some point, they will run out. To sit back and say "no worries" is foolish.