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Lecture #5 - Global Warming


Global Warming and Climate Change


  • Greenhouse effect - As these gases accumulate in the atmosphere, they trap infrared radiation (heat) that would otherwise escape into the earth’s atmosphere.
    • The effect is natural.
    • Without the greenhouse effect, the earth’s temperature would be -180C (-0.40F), rather than +150C (590F).
  • Global warming - greenhouse gases (made by man) are accumulating in the atmosphere, trapping more solar energy, and causing the world to become warmer through the greenhouse effect
    • Climate change comes from the impact of higher temperatures
  • Swedish scientist Svante Arrhenius
    • Proposed 100 years ago that man made greenhouse gases may enhance the greenhouse effect.
  • Evidence
    • 18 of 20 warmest years in last 100 years were in last 20.
    • Global mean sea level has risen between 10 and 25 cm (18 cm average) during the last 100 years.
    • Since 1850, European Alps glaciers have lost 30-40% of surface area and half of their volume.
    • Aerial surveys show that more than 11 cubic miles of ice is disappearing from the Greenland ice sheet annually
    • Readings of infrared light from the earth's surface in 1970 and 1997 found less was escaping into space in 1997.
    • Disappearances of species of frogs and toads
    • Upward shifts in the ranges of mountain birds, and declines in lizard population.
    • Ocean levels become higher as the polar ice caps melt
    • Shrinkage of glaciers and sea ice
    • Thawing of permafrost
      • Permafrost - in cold climates, the ground is always frozen through out the whole year
  • Earth is experiencing a warming trend
  • Are greenhouse gases causing the world to be warmer or is this one of the earth's natural cycles?
    • Global warming is a theory
    • Sun is having a lot of activity
      • Spike in sun spot activity
      • 17th century – very few sun spot activity, which is called the mini-Ice Age
    • 1960s – the public was worried about an impending ice age
      • Slight cooling trend between 1930s and 1960s
  • Carbon dioxide is main greenhouse gas
    • Concentration level was 270-290 ppm for thousands of years before the Industrial Revolution
    • By 1998, concentrations were at 365 PPM.
      • Parts per million (PPM)
    • The human activities may be increasing the growth
  • CO2 concentration from Mauna Loa Observatory, Hawaii

Carbon Dioxide Concentration at Mauna Loa Observatory, Hawaii

  • What percentage of (dry) air is composed of carbon dioxide?
    • Dry air is: 78.08% nitrogen
    • 20.95% oxygen
    • 0.93% argon
    • 0.038% carbon dioxide
  • Global Warming is probably a combination of sun and human activities
  • Below is connection between temperature and CO2 concentration
    • Predicting a 2.50 C increase in global temperature
    • A difference of 30 C determines whether we go into an ice age or not.

    CO2 and temperture change

  • Below is forecasted trend for temperature change in the troposphere
    • Boundary layer - from 0 to 1 km
    • Troposphere - second layer from 1 km to 15 km
    • Stratosphere - top layer from 15 km

Linear tropospheric temperature trends

Greenhouse Gases


1. Global Warming Potential (GWP) - 1 metric ton of carbon dioxide in the atmosphere traps a specific amount of the sun’s radiation

  • Carbon dioxide is always defined as a GWP of 1
    • Other greenhouse gases are compared to carbon dioxide
  • Note
    • Many compounds break down over time
    • Example – methane has an initially high warming potential but drops over time as methane breaks down in atmosphere
      • Carbon dioxide is stable and persists for centuries
    • GWP is defined over a period of time, usually 100 years
Greenhouse Gases Global Warming Potential (GWP)
Carbon dioxide (CO2) 1
Methane (CH4) 23
Nitrous Oxide (N2O) 296
Sulfur Hexafluoride (SF6) 22,200
Hydrofluorocarbons (HFCs) varies
Chlorofluorocarbons (CFCs) varies
Hydrochlorofluorocarbons (HCFCs) varies

2. Carbon dioxide (CO2)

  • CO2 contributes to 49% of greenhouse gases
  • Sources
    1. Deforestation (because forests are carbon sinks)
    2. Fossil fuels
      • Electricity – coal
      • Transportation – diesel and gasoline
      • Heat – natural gas and heating oil (i.e. diesel)
    3. Animals, bacteria, and humans
  • Sinks - algae, plants and trees

3. Methane (CH4)

  • Methane contributes 18% of greenhouse gases
  • Sources
    1. Industries
    2. Swamps, wetlands where anaerobic decay of organisms occurs
      • Anaerobic - without oxygen
    3. Cattle – enteric fermentation
      • Cows have two stomachs.
      • The first stomach ferments grass into nutrients that the cow and use
    4. Leakage from natural gas pipelines.

4. Nitrous Oxide (N2O)

  • Laughing gas / NOZ in racing cars
  • Contributes to 6% of the greenhouse effect
  • Sources
    1. Agricultural soil – application of fertilizers
    2. Decaying of animal manure
    3. Sewage treatment
    4. Combustion of fossil fuels

5. Sulfur Hexafluoride (SF6)

  • Sources – completely created by man
  • High-voltage transformers and switchgears, magnesium smelting, and semiconductor manufacturing

6. Hydrofluorocarbons (HFCs) / Chlorofluorocarbons (CFCs) / Hydrochlorofluorocarbons (HCFCs)

  • Man made chemicals
  • CFCs – used as refrigerants for air conditioning and refrigerators
  • HFCs – various chemicals including refrigerants
  • HCFCs - used as refrigerants, solvents, blowing agents for plastic foam manufacture, and fire extinguishers.
  • Montreal Protocol – developed countries stopped producing chlorofluorocarbons (CFCs)
    • CFCs deplete the ozone layer, allowing more radiation to enter atmosphere
    • Example – car manufacturers switched from Freon (R) 12 to HFC 134a in air conditioners
      • 134a is a greenhouse gas
      • GWP is 1,430

7. Water vapor – a greenhouse gas

  • Water is very efficient at absorbing and transferring heat energy
    • Water is used to cool car and diesel engines
    • Water (steam) is used in electric power plants to drive steam turbines
  • GWP is not calculated because water vapor is sensitive to temperature changes
    • Cold temperatures causes vapor to condense

Cost Benefit Analysis of Global Warming and Climate Change


1. World is too complicated

  • Feedback loops - global warming causes earth to be warmer but something changes that strengthens or weakens warming effect
    • Water vapor
      • Positive feedback - water vapor is a greenhouse gas that increases greenhouse effect
      • Negative feedback - water absorbs energy to become vapor
        • Some of the sun's energy is used to change water's state
    • Clouds
      • Positive feedback - clouds absorb and re-radiates infrared light, increasing the greenhouse effect.
      • Negative feedback - clouds prevent less sunlight from hitting the earth, reflecting sunrays back into outer space
    • Oceans
      • Positive feedback - warmer water releases its stored carbon dioxide, increasing greenhouse gases.
      • Negative feedback - oceans can absorb heat, thus slow down global warming
    • Which effects dominate?

2. Estimating the Damages from Climate Change

  • How do you put a value on these events?
  • How do separate the damage from global warming and earth's nature weather cycles
  • Costs
    • Rising sea level increases loss of land area, including beaches and wetlands
    • Loss of species and forest area, including coral reefs
    • Disruption of water supplies to cities and agriculture
      • Ground water becomes contaminated with salt water
    • Health damage and deaths from heat waves and spread of tropical diseases
    • Increased costs of air conditioning
    • Loss of agricultural output due to drought
  • Benefits
    • Increased agricultural production in cold climates
    • Lower heating costs
    • Less deaths from exposure to cold
  • Less predictable but possibly more damaging effects, including:
    • Increase frequency of hurricanes and other extreme weather events
      • Hurricanes come in cycles
    • A possible rapid collapse of the Greenland and West Antarctic Ice Sheets, which would raise sea levels by 12 meters or more, drowning major coastal cities
    • Sudden major climate changes, such as a shift in the Atlantic Gulf Stream, which could change the climate of Europe to that of Alaska
      • "The Day after Tomorrow"
  • Preventive measures:
    • Mitigation - reducing emissions of greenhouse gases
      • Use less fossil fuels.
      • Install pollution control devices.
      • More energy efficient technology
    • Sequester - something absorbs carbon dioxide and stores it
      • Forests, crops, and plants convert CO2 into oxygen
      • Carbon is stored in the wood, roots, and plant structures
        • Even if wood is made into lumber, the carbon is still there
    • Re-Cycle - absorb carbon dioxide from atmosphere and re-lease it for energy
      • Biofuels
        • Liquid fuels - ethanol, butanol substitute for gasoline and biodiesel for diesel
        • Biomass - burn wood and plants to generate bio-electricity
        • Manure - burn manure to generate electricity
          • Manure releases methane as it decays
    • Adaptive measures include:
      • Construction of dikes and seawalls to protection against rising sea level and extreme weather events such as floods and hurricanes.
      • Shifting cultivation patterns in agriculture to adapt to changed weather conditions in different areas, and relocating people away from low-lying coastal areas
    • Note - much more complicated in practice
      • Have to look at life-cycle emissions
        • Solar cells do not release greenhouse gas emissions when in operation
          • Releases a lot of greenhouse gases during manufacturing
        • Constructing a power plant, etc. with concrete
          • Concrete uses limestone, which releases a lot of carbon dioxide into the atmosphere

Policy Options


1. Greenhouse gases are a stock pollutant

  • If humans stop generating greenhouse gases, then the amount we put up there is still there.
    • Economics - many policies just have firms and people pay for generating externality
    • Internalizing the cost of the externality
    • All policies that reduce greenhouse gases would increase market prices and lower market quantities
    • Thus, policies may not slow down global warming
      • They would still producing greenhouse gases.
  • Developing countries argue that they should not have to limit their emissions
    • Limited emissions may limit growth
    • Should developed countries compensate the undeveloped ones to reduce greenhouse gas emissions?
    • Developed countries already used fossil fuels to develop a rich society
      • Environmental Kuznet's Curve
  • United States
    • Has 5% of world's population
    • Emits 25% of world's CO2 emissions
    • USA is world's biggest emitter
  • China is currently the second largest emitter
    • Expected to over take the United State
    • Dutch Scientists already said it happened.
  • Decreasing greenhouse gas emissions depend on future technologies
    • Especially in technologies where carbon dioxide is abated, sequestered, or recycled

2. Appeal to people’s civic duty

  • Green energy costs more than standard fossil fuels
  • People invest in green technologies even though they are more expensive
  • Example
    • Homeowner invests in solar panels for home
    • Supplements 500 watts of power during the day time
    • Electricity from the grid costs $0.08 per KWH
    • Electricity from solar panels costs $0.20 per KWH
    • Thus, homeowner places a $0.12 per KWH implicit price on protecting the environment
  • Benefits
    • Environment would benefit as the public invests in green technologies
    • Private parties solve an externality without the government’s help
  • Problem
    • People lose sight of the big picture
    • People may desire to help the environment
    • However, people tend to always buy at the lowest price, ignoring long term impacts

3. Lawsuits - U.S. has a variety of laws that allow people to sue that address externalities

  • If firms know that they are creating greenhouse gases (or pollution), they reduce emissions in order to reduce likelihood of being sued
  • Problems
    • Courts are slow
    • Renting seeking behavior – encourage attorneys to sue for large legal fees and damage awards
    • Leakages – manufacturing firms may flee to developing countries with weak environmental laws
    • Courts usually do not come up with comprehensive plans
    • Rules are developed from a case-to-case basis
  • Lawsuit Example
    • Clean Air Act of 1990
    • Gives EPA the authority to regulate 189 toxic chemicals
    • EPA specifies (or mandates) how businesses and companies lower pollution 
    • Massachusetts vs. EPA – several states sued the EPA because they believe they will lose coastlines in a 100 years from now
    • The EPA lost and has to add greenhouse gases on to the list of pollutants
  • Thus, the EPA was given vast authority to regulate every facet of American society

4. Command-and-control regulations - government uses laws and regulations that dictate the standards and technology used to reduce greenhouse gases

  • Government imposes the technology and machines that an industry uses
  • Government fines and penalizes companies that violate the rules
  • Benefits
    • Government easily enforces the rules
    • Lower greenhouse gas emissions
  • Problems
    • Regulations limit a firm’s flexibility and freezes technology
    • Firms may not produce at minimum costs
    • Bureaucrats have a tendency to perpetually change the rules
    • May encourage violators
    • Gov. could have a large cost to monitor, prosecute, and punish violators
    • Encourages leakages

5. Market incentives - government uses price and quantity mechanisms to internalize the externalities

  • Price incentives
  • Greenhouse gas tax - puts a price on greenhouse gas emissions
    • A firm emitting greenhouse gases pays the tax or abates by using technology to reduce emissions
  • Subsidies
    • Firms planting trees (sequestering carbon)
    • Public uses biofuels to recycle carbon from atmosphere
  • Global warming potential (GWP) is used as an exchange rate
  • If the tax is $100 per metric ton of carbon dioxide emissions, then firms pay $2.220 million to emit 1 metric ton of sulfur hexafluoride
    • Sulfur hexafluoride has a GWP of 22,200


  • Quantity incentives
  • Cap and trade system – gov. places the maximum limit on amount of greenhouse gases that can be emitted
  • Gov. creates tradable permits
    • Quantities specified within the permits add up to the limit of greenhouse gases
    • Gov. auctions or gives permits to greenhouse gas emitters
  • Use global warming potential (GWP) as an exchange rate for different gases
    • Allow producers to create permits if they abate / sequester / recycle greenhouse gases
  • Create a market for tradable permits
  • Market incentives give firms more flexibility
    • Some firms will invest in technology to reduce greenhouse gases
    • These firms could sell their permits to other emitters
    • Some firms will choose to emit and buy the permits
    • Firms may meet pollution objectives with the lowest costs
  • Benefits
    • Gov. dictates level of greenhouse emission, firms are given the flexibility in how to meet objectives
    • Emitting greenhouse gases becomes a property right
    • Permits and taxes put a price on emissions
    • Possibly a subsidy on abatement, sequestration, and carbon recycling
    • Gov. collects revenue
  • Problems
    • Imposes higher enforcement costs on government
    • Greenhouse gases have many sources
    • Will gov. allow some sources to be exempt?
    • Gov. may be more interested in tax revenue or revenue from auctioned permits

Kyoto Protocol


1. Kyoto Protocol - an international agreement that attempts to stabilize greenhouse gas buildup in the atmosphere

  • Kyoto was adopted on December 11, 1997 in Kyoto, Japan
  • Why?
  • Transboundary pollution - all countries are producing greenhouse gases
    • For people to reduce greenhouse gas emissions, then all countries have to organize and develop a uniform policy
    • This prevents leakages
  • Kyoto Protocol is the first attempt
    • 183 Countries signed the agreement
    • Gives countries flexibility in how to meet emissions
      • Permits, command and control regulations, etc.
    • United States signed but did not ratify agreement
    • 13 countries did not sign, including China
      • China surpassed the United States as a major greenhouse gas emitter
    • India did sign the Kyoto Protocol
      • India introduced the $2,000 car
      • The developing countries want the Western living standard
  • The agreement only forces countries to reduce emissions 5.2% below a country’s 1990 emission level
    • Even if all countries signed the Kyoto Protocol, our net greenhouse gas emissions are still increasing
    • Kyoto Protocol does not prevent global warming
  • Kyoto Protocol entered into full force on February 16, 2005
    • European Union should reduce emissions by 8%
    • United States should reduce by 7%
    • Japan should reduce 6%
    • Russia reduces by 0%
    • Australia can increase emissions by 8%
    • Iceland can increase emissions by 10%
  • United States signed, but did not ratify it.
    • Why?
    • Economic growth!
    • President Bush set a goal of reducing greenhouse gas intensity by 18%
    • Illusion
      • Greenhouse gas intensity is the ratio between greenhouse gas emissions and GDP
      • Using more efficient technology decreases greenhouse gas emissions relative to GDP
      • Although economy is bigger (i.e. GDP), greenhouse gas emissions are still increasing, but the ratio (i.e. intensity) is decreasing.
        • This was already happening without President Bush
      • Countries are supposed to reduce emissions to below 1990 level
  • Some complained about former Soviet Union countries
    • Many former Soviet Union countries are under their 1990 levels and have room to grow
    • Russia
    • President Putin signed Kyoto in 2004
      • The following opposed Kyoto: Russian Academy of Sciences, Ministry for Industry and Energy, and economic adviser, Andrey Illarionov
      • Politics - Europe supported Russia admission to the World Trade Organization (WTO)
  • Penalties
    • If a country does not comply, then they have to make up the difference plus an additional 30%
    • Kyoto has weak enforcement
      • What if country does not comply?

2. The European Union Emissions Trading Scheme (EU-ETS)

  • Each country gets allowances based on its national cap in Kyoto.
    • Specific industries will participate in trading
      • electric utilities
      • oil refineries
      • coke ovens
      • iron & steel
      • cement kilns
      • glass manufacturing
      • ceramics manufacturing
      • the pulp and paper industry
  • If a company is going to exceed its greenhouse gas emissions
    • It buy carbon credits from the market
    • Or has to abate its emissions
    • Possible for international permits
      • One country that cannot meet emission levels can buy credits for countries who are below their emission levels.
      • Theoretically possible - one country plants a forest. Trees sequester carbon dioxide from atmosphere and earn carbon credits.
      • Credits can be sold to a factory in China that is emitting greenhouse gases.
  • European Countries - to generous in passing out permits
    • Countries have incentives to give more allowances to industries that trade goods, so that they do not have a competitive disadvantage with firms from other countries
    • Has not been effective in reducing carbon dioxide
      • 2005, permit's price was €30 per ton
      • 2006, permit's price was under €10 per ton
      • 2007, permit's price was under €1 per ton

3. Comparison of the U.S. SO2 program and the EU CO2 trading program (EU-ETS)

  • European Union program is larger
    • Around 11,500 sources, compared to about 3,000 for U.S. SO2 market
  • E.U. program decentralized
    • Individual countries have jurisdiction
    • Value of allowances higher
    • Worth around $41 billion, compared to about $5 billion worth of SO2 permits.
    • However, required reductions much greater for U.S.
  • SO2 permits call for 50% reduction from baseline, compared to just a few percent reduction for E.U.
  • SO2 was a pollutant that had been controlled before, so there was experience with abatement costs.

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