05 April 2012

A Primer on How to Avoid Magical Solutions in Climate Policy

By now there is really no excuse for any professional involved in climate policy not to understand the implications of the Kaya Identity. The risks of not understanding the Kaya Identity is that one can get caught out proposing magic as the main mechanism of reducing carbon dioxide emissions.

Developed by Yoichi Kaya, a Japanese scientist, in the 1980s as means of generating emissions projections for use in climate models, the identity is also an extremely powerful tool of policy analysis, because it encompasses all of the tools in the policy toolbox that might be used to reduce emissions. The identity is comprised of four parts:
  • Population
  • Per capita wealth
  • Energy intensity of the economy (energy consumption/GDP)
  • Carbon intensity of energy (carbon dioxide emissions/energy consumption)
If we wish to reduce emissions of carbon dioxide with the goal of stabilizing its concentrations in the atmosphere, then we only have four levers, represented by each of the factors in the Kaya Identity.

In The Climate Fix, I simplify even further by combining population and per capita wealth, the result of which is simply GDP, and by combining energy intensity and carbon intensity, the product of which is carbon intensity of GDP.

That means that there are only two ways to reduce emissions to a level consistent with stabilization of concentrations at a low level (pick your favorite number, 350, 450, 550 ppm -- the policy implications are identical). One is to reduce GDP. The second is to reduce the carbon intensity of GDP -- to decarbonize. While there are a few brave/foolish souls who advocate a willful imposition of poverty as the remedy to accumulating carbon dioxide, that platform has not gathered much political steam. (See discussion of the Iron Law in TCF).

Instead, the only option left is innovation in how we produce and consume energy. That is it -- innovation is the only game in town. Consequently, the correct metric of progress in innovation is a decrease in the ratio of carbon to GDP. For those who wish to stabilize carbon dioxide emissions, the proper policy debate is thus how do we stimulate energy innovation?

Pricing carbon (or energy) is not a point of dispute. Some argue that putting a price on carbon will motivate the necessary innovation. The causal mechanism underlying carbon pricing is that higher priced energy will cause economic discomfort throughout the economy which will consequently motivate investments in innovation on the consumption and production sides of energy. Others, me and my Hartwell colleagues included, argue that the point of putting a price on carbon is not to cause economic discomfort, but rather to raise resources to invest in innovation, with the benefits of those investments securing the political capital necessary for the approach to sustain. Obviously if your goal is to cause economic discomfort you'll favor a much higher price on carbon price than those who seek to raise money for investment without causing economic discomfort.

Another point of debate is whether it makes sense to advocate for emissions reductions directly or focus on those policies that lead to an accelerated rate of decarbonzization, but can be justified on a broader basis than emissions reductions alone (examples include the economic benefits of improving efficiency and the economic and social benefits of dramatically expanding energy access around the world). Again, the Hartwell group looks at the evidence and sees that the political likelihood of dramatically increasing the costs of energy (as well as noting the social and economic consequences of higher priced energy) means that we don't really have a choice in what strategy makes more sense -- the answer is obvious.

(See TCF for a book-length treatment of these issues and more.)

So if you ever read anyone arguing that "innovation is not enough" and "emissions intensity — emissions per unit of economic output ... is fundamentally the wrong metric" then you know that they haven't done their homework, and instead are invoking magic.  Don't invoke magic, be informed.


  1. It can be more than magic.

    The other possibility is to impoverish people. This has been suggested by quite a few environmentalists on occasion and may be what some people believe is necessary.

  2. If the goal is to stabilize carbon concentrations in the atmosphere, then there is another lever which has been proposed: sequestration. Why isn't an ex post facto reversion included in the "Kaya Identity"? It may not be presently feasible, but it seems that its inclusion would be necessary for completeness.

  3. This comment has been removed by the author.

  4. Talk of "price for innovation" makes me nervous.

    Under most normal models innovation LOWERS the price of production but that is not what we have been doing. Our current model encourages outrageously uneconomical solutions like wind and solar that can only be sustained by massive subsidies.

  5. n.n.
    Sequestration is inherently part of the carbon intensity. Since it isn't practical at this point in time, it would also fall under the meme that the solution in innovation.

  6. This comment has been removed by the author.

  7. Just for precision: GDP is not a measure of "wealth", but of output (and a proxy for income). Wealth is a stock quantty (measured at a given instant in time, with dimension $), reflecting the value of a variety of assets. GDP is a flow quantity (measured as output per year, dimension $/t).
    Of course, output is a function of assets (physical, human and others), but not quite the same.
    National output (GDP) is usually taken as a proxy for national income, but is not identical to it: income also includes the net balance of income flows between the country and the rest of the world (e.g. remittances, interest, and so on).

  8. JMV:

    There are two sources of carbon which precede sequestration. One is a natural and artificial generators. And two is capture of free carbon in the environment and especially the atmosphere. In the first case, the first generator is a factor considered for moderation of the latter. In the second case, it is an ex post facto reversion, which does not discriminate between carbon according to its generator. Perhaps the specificity is undue, but "Carbon intensity of energy" [consumption] does not seem to include natural generators and free carbon. While the regulation and processing of either is likely wholly impractical, for completeness, it seems they should still be considered, if only as external factors for consideration.

  9. Roger, n.n and JMV:

    Whereas CCS at power plants "isn't practical at this point in time", large-scale bio-sequestration is.


    "Irrigated afforestation of the Sahara and Australian Outback to end global warming."

    http://www.springerlink.com/openurl.asp?genre=article&id=doi:10.1007/s10584-009-9626-y ,

    "Replacing coal with wood: sustainable, eco-neutral, conservation harvest of natural tree-fall in old-growth forests"




    which argue that, with current technology, and at reasonable cost, massive bio-sequestration can not only stop the increase in atmospheric CO2, but even reduce it to pre-Anthropocene levels, while simultaneously providing enormous quantities of sustainable supplies of near-zero CO2-footprint wood for fueling economic prosperity.

  10. 'Population, Per capita wealth, Energy intensity, Carbon intensity of energy'.

    Three of these are ratios. Why not start with the underlying set of measures:
    Population, GDP, Energy consumption, CO2 emissions?
    Then you can go on to any of the six pairs of them in one step.

  11. Len,

    Haven't finished your papers yet, but a few quick thoughts.

    As an engineer, I would not consider these to be current technology yet. Though I do think that bio-sequestration will probably need to be part of the solution.

    However, before I would consider these a ready for prime time solution they would at least need to be proven at a smaller scale. In particular, RO have some serious environmental limitations - you have to keep from swallowing too many marine species and limit the salt concentrations at the return just for starters.

    But if we invested even a fraction of the money that is spent on modeling in research of bio-sequestration we would be closer to some practical solutions.

  12. "While there are a few brave/foolish souls who advocate a willful imposition of poverty as the remedy to accumulating carbon dioxide, that platform has not gathered much political steam."

    Well, you say that but it is well under way in the UK with rates of fuel poverty sky-rocketing as more and more RO charges are added to our energy bills.