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Green Paradox
- 1. The Green Paradox Vishnu Teja IMRE TU Bergakademie Freiberg | Climate Change Economics | SS 2019
- 2. 1. What is a Paradox? 2. What is Global Warming? 3. What are Green Policies? 4. What is Green Paradox 5. How to Fight Green Paradox? 2 The Green Paradox Agenda TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Agenda
- 3. The Green Paradox 1. What is a „Paradox“? 3TU Bergakademie Freiberg | Climate Change Economics | SS 2019 What is a „Paradox“?
- 4. A paradox is a statement that, despite apparently valid reasoning from true premises, leads to an apparently- self-contradictory or logically unacceptable conclusion 4 The Green Paradox 1. Definition TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : Wikipedia What is a „Paradox“?
- 5. The Green Paradox 2. What is Global Warming? TU Bergakademie Freiberg | Climate Change Economics | SS 2019 5 What is Global Warming?
- 6. Global warming is the unusually rapid increase in Earth’s average surface temperature over the past century primarily due to the greenhouse gases released by people burning fossil fuels 6 The Green Paradox 2.1 Definition TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : NASA What is Global Warming?
- 7. • Green House Gases trap infra-red radiation emitted by the earth’s surface • This causes an increase in the earth‘s surface temperature • As a result - Rising Sea Levels - More Droughts & Heat Waves - Strong Hurricanes 7 The Green Paradox 2.2 Why do we have to worry? TU Bergakademie Freiberg | Climate Change Economics | SS 2019 What is Global Warming?
- 8. Green House Gases(GHG) - Water vapor (H2O) - Carbon Dioxide (CO2) - Methane (CH4) - Nitrous Oxide (N2O) - Ozone (O3) - Chlorofluorocarbons (CFCs) - Hydrofluorocarbons (incl. HCFCs and HFCs) 8 The Green Paradox 2.3 What is causing Global Warming? TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : NASA What is Global Warming?
- 9. • CO2 is the most commonly produced GHG by human activities • Responsible for 64% of man-made global warming • Once emitted, it stays in the atmosphere for 30,000 – 35,000 years 9 The Green Paradox 2.4 CO2 TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : European Commission What is Global Warming? % of green house effect Nitrous Oxide Ozone CFC Methane Carbon Dioxide
- 10. • Fossil Fuels majorly consist of Carbon-Hydrogen bonds • Energy is released when these bonds are broken through oxidation • CO2 is a by-product of this process 10 The Green Paradox 2.5 Fossil Fuels – Major Culprit TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : Datahub(Graph Data) What is Global Warming? 300 320 340 360 380 400 420 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 CO2 Concentration (PPM)
- 11. The Green Paradox 3. What are Green Policies? 11TU Bergakademie Freiberg | Climate Change Economics | SS 2019 What are Green Policies?
- 12. Policies aimed at avoiding, reducing or mitigating the damage caused to environment by human activities 12 The Green Paradox 3.1Definition TU Bergakademie Freiberg | Climate Change Economics | SS 2019 What are Green Policies?
- 13. • Direct reduction of fossil fuel demand • More efficient use of energy • Green electricity • Nuclear Energy 13 The Green Paradox 3.2 Ideologies behind Green Policies(concerned with fossil fuels) TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source :The Green Paradox What are Green Policies?
- 14. The Green Paradox 4. What is a Green Paradox? 14TU Bergakademie Freiberg | Climate Change Economics | SS 2019 What is Green Paradox?
- 15. An environmental policy that becomes greener with the passage of time acts like an announced expropriation for the owners of fossil fuel resources, inducing them to accelerate resource extraction and hence to accelerate global warming. 15 The Green Paradox 4.1 Definition TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : Wikipedia What is Green Paradox?
- 16. • When the supply of a certain product is elastic, a shifting demand curve can impact the quantity demanded 16 The Green Paradox 4.2 Supply of Carbon – Elastic or Inelastic TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox What is Green Paradox? Fixed Supply Price Fossil Carbon Stocks WorldMarketPrice Reduced Demand Δc
- 17. • When the supply of a certain product is inelastic, a shifting demand curve can not impact the quantity demanded • The only change that can be seen is a increase/decrease in the price 17 The Green Paradox 4.3 Supply of Carbon – Elastic or Inelastic TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox What is Green Paradox? Fixed Supply Quantity Fossil Carbon Stocks WorldMarketPrice Reduced Demand Δp
- 18. • Demand drop in Kyoto Countries due to Green Policies • This drop in demand creates a new equilibrium for the Non-Kyoto Countries • Results in a price drop for Non-Kyoto countries, driving up the consumption 18 The Green Paradox 4.4 Carbon Leakage TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox What is Green Paradox? WorldwideCarbon Supply WorldMarketPrice Reduced demand due to Green Policies Δp Kyoto Countries’ Demand Non-Kyoto Countries’ Demand Δc
- 19. • Mechanisms of yore, with less efficiency, left a lot of Carbon un-burnt in the form of soot • With more efficient engines, every bit of Carbon is burnt and converted to CO2 19 The Green Paradox 4.5 Efficient, not Effective TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox What is Green Paradox?
- 20. • Fossil fuel extraction rates are calculated by resource owners, so as to maximize current and future profits • Green policies that hint at appropriation drives the resource owners to maximize the extraction now 20 The Green Paradox 4.6 Laws Hinting Appropriation TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox What is Green Paradox? ProbabilityofAppropriation ExtractionRate Extraction Rate Probability (Fear) of Appropriation
- 21. • India rolled out BS4 pollution norms in April‘17, making it illegal to sell BS3 certified vehicles after May‘17 • This resulted in a stark price drop of vehicles in the month of April‘17 • Vehicle prices dropped around 50%, which drove up the sales 21 The Green Paradox 4.7 Example from India – BS Norms TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : team-bhp(Graph Data) What is Green Paradox? 0 5 10 15 20 25 30 35 40 45 Deo Dream CB Unicorn CB Hornet Sales Figures – Honda Mar-17 May-17
- 22. The Green Paradox 5. How to fight Green Paradox? 22TU Bergakademie Freiberg | Climate Change Economics | SS 2019 How to fight Green Paradox?
- 23. • A to B - Increase in present consumption - High man-made capital - Global Warming • A to C - Constant present consumption - High Natural Capital 23 The Green Paradox 5.1 Pareto Improvement TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox What is Green Paradox? FutureConsumption Present Consumption A C B
- 24. • We have already observed, policies that focus on shifting the demand curve can only being about change in price and not the consumption • A solution to this - Subsidy on the stock of carbon underground - Tax on capital income earned from the extracted carbon 24 The Green Paradox 5.2 Supply Side Policies TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox How to fight Green Paradox?
- 25. • Green policies that only encompass few countries cause carbon leakage and are thus ineffective • This can be avoided if all the countries accept a cap on consumption • An extended Global Certificate Trading System can help achieve this 25 The Green Paradox 5.3 Super Kyoto TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox How to fight Green Paradox?
- 26. • Process involved in carbon capture and the long-term storage of atmospheric carbon dioxide or other forms of carbon to mitigate or defer global warming • Examples - Reforestation - Biochar Burial - Ocean Storage 26 The Green Paradox 5.4 Carbon sequestration TU Bergakademie Freiberg | Climate Change Economics | SS 2019 Source : The Green Paradox How to fight Green Paradox?
- 27. The Green Paradox Questions/Discussions TU Bergakademie Freiberg | Climate Change Economics | SS 2019 27 Questions/Discussions
- 28. The Green Paradox Thank You TU Bergakademie Freiberg | Climate Change Economics | SS 2019 28
- 29. • Optimal Resource Taxation, HW Sinn (https://link.springer.com/chapter/10.1007/978-1-349-06980-4_12) • Carbon Leakage : An Overview by Andrei Marcu, Christian Egenhofer, Susanna Roth, Wijnand Stoef (https://www.ceps.eu/system/files/Special%20Report%20No%2079%20Carbon%20Leakage_0.pdf) • The Kyoto Protocol: A Cost-Effective Strategy for Meeting Environmental Objectives? (http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.163.910&rep=rep1&type=pdf) • Analyzing the Kyoto Protocol under the Marrakesh Accords: economic efficiency and environmental effectiveness by Michel G.J den Elzen, André P.Gde Moor • Comparing the social costs of biofuels and fossil fuels: A case study of Vietnam by Loan T. Le, Ekko C. van Ierland, Xueqin Zhu, Justus Wesseler, Giang Ngo • http://mudancasclimaticas.cptec.inpe.br/~rmclima/pdfs/destaques/sternreview_report_complete.pdf • https://ec.europa.eu/clima/change/ • https://www.team-bhp.com/forum/motorbikes/188204-may-2017-two-wheeler-sales-figures-analysis.html 29 The Green Paradox References TU Bergakademie Freiberg | Climate Change Economics | SS 2019 References
Editor's Notes
- Good Morning every one. Now, we are going to discuss about "Green Paradox"
- This is the agenda for today. We are going to talk briefly about: What is global warming? What is causing global warming? Then we are going to have a look at Green Paradox and how to fight Green Paradox
- The amount of CO2 produced by a fossil fuel is proportional to the amount of carbon present in the fuel. Hence, going forward, we are going to refer the "fossil fuel" as "Carbon"
- Green policies spread over a wide range, however, as of today, we are going to discuss about the policies that are concerned with reducing the CO2 emissions
- As you can see, the major ideologies behind green policies are:*read from slide*
- Most of the "green policies" are designed based on the ideology that the supply of carbon is Elastic. These policies target on shifting the demand curve to the left and assume that a new demand curve would reduce the consumption. But in fact, the story is otherwise.
- If we observe this illustration, it talks about a situation where the supply of carbon is inelastic, we can see that a shifting demand curve only reduces the price of the carbon. But in fact, while the consumption of carbon stays the same, the only change that can be perceived is a price drop. As in any market, a price drop can only mean more consumption.
- Imagine a church donation box. Kyoto countries are the ones who are filling the donation box. Lets say they put 10 Euros in the box. If Non Kyoto countries don't put any donation, even then the net benefit is 10 Euros But Non Kyoto countries are actually taking away the 10 Euros thus negating the benefit. "Talk about the graph"
- Soot is unburnt carbon. The old mechanisms were inefficient in converting the entire Carbon in the fuel to co2. Modern mechanisms which have higher efficiencies, are not leaving any carbon molecule unburnt, which mean more CO2 is emitted per unit volume of the fuel when compared to older times. Thus, though efficiency points towards "going green", it is not so effective overall.
- With rising fear of appropriation and insecurity, the resources owners have high incentive in converting the underground carbon into capital by extracting it now, rather than saving it for future. Hence, any law or policy with the slightest hint of appropriation actually increase the carbon extraction, thus increasing the consumption.
- “Bharat Stage”(BS) norms aim at regulation of air pollutant output from internal combustion engines
- Let us look at the efficiency frontier. Moving from point "A" to any point on the efficiency frontier is a Pareto Improvement. Moving from point A to B implies increased consumption rate. That means, we leave little natural capital for the future generations but we create more man-made capital. But that also mean we are leaving a damaged planet. Moving from A to C implies a constant consumption rate. We need to understand that we are not actually sacrificing anything when moving from A to C, yet we end up in a much higher efficiency point. Thus, an efficient way to fight the green paradox is to "reduce carbon extraction"
- Subsidy on the stock of carbon underground means everyone losing money and the resource owner getting rich. This might not be the best of solutions. Another solution is to tax on the financial capital earned on the extracted carbon can prompt the resource owners to leave a larger part of their wealth underground
- As we have already observed and understood, a green policy such as Kyoto Protocall in which only few countries take part, can cause carbon leakage. However, a policy under which all the countries act together can actually work. A very good example would be extending the carbon trading certificate system followed in EU countries to all the countries. Thus, capping the carbon consumption.
- Biochar is charcoal created by thermal decomposition of biomass waste in inert environment CO2 is injected into the ocean where the high pressure makes sure CO2 is in liquid form
- Biochar is charcoal created by thermal decomposition of biomass waste in inert environment CO2 is injected into the ocean where the high pressure makes sure CO2 is in liquid form