Seeker Blog

You may wish to first read my earlier post Beyond Kyoto on John Browne’s article for Foreign Affairs, July/August 2004. This is excellent background for the following Council on Foreign Relations seminar June 24, 2004.

Browne opened with a short summary, followed by an excellent Q&A:

There is a very strong case for precautionary action, and I believe the aim of that action should be to limit any increase in the world’s temperature to around two degrees Celsius. That translates into a stabilization of greenhouse gases in the atmosphere at around 500 to 550 parts per million sometime in the early next century. That is the best current estimate, and, of course, as knowledge advances, that estimate could be adjusted and refined.

Can that stabilization be achieved? The answer is yes. It would mean putting ourselves on a trajectory to the point where, in 2050, 50 percent of global needs would be met by conventional fossil fuels and the other 50 percent would come from fuels with lower carbon emissions, in some cases with zero emissions. Each of those two halves would be about the size of today’s energy industry. I believe that’s achievable.

A great deal of work and experimentation has been undertaken over the last few years by governments, by academics, and in the business world. We may not have an international agreement as anticipated at [the 1997 climate change negotiations in] Kyoto, but we do have a great deal more knowledge and experience than we did seven years ago. People have demonstrated that [carbon] emissions can be reduced at very low cost simply by reducing waste and inefficiencies. We did that in BP [British Petroleum], and we found that we actually made money in the process.

Cutting out waste is a first step, but beyond that, people have also begun to demonstrate that there are practical ways of managing the problem.

I think the most interesting work is that done at Princeton [University], which identifies a range of opportunities, each of which could contribute to meeting the overall challenge. They are wide-ranging and have all been demonstrated at scale. None of them would require a material advance on currently available technology, just a continued reduction of the engineering cost curve comparable to the gains the energy industry has achieved at the time; for instance, in Arctic and deep water oil production or the long distance transportation of gas as LNG [liquid natural gas]. The task is to reduce by 2050 the amounts of carbon dioxide, which on current projections would be entering the atmosphere each year by half, some 25,000 million tons.

Is such a reduction feasible? Yes. Numerous different steps could contribute to the displacement. Each of the following could reduce emissions of carbon dioxide by 1,000 million tons per year, and each could be scaled up from there:

–400 power plants using natural gas rather than coal, each generating 1,000 megawatts–that is, in total, roughly equal to China’s current power capacity.

–200 coal-fired power plants using carbon capture and storage.

–600 million cars, that is, a third of the world’s anticipated car numbers by 2050, each running at 60 miles per gallon rather than 30 miles per gallon using hybrid engine technology.

–The replacement of 200,000 megawatts of coal-generated power with nuclear.

–A 20-fold increase in wind power capacity.

–A 12 percent per year growth in solar power, half that of the last 25 years.

And there are many other things which could be done to improve the efficiency of energy use–from the development of smart grids making more efficient use of electricity transmission, to a greater use of waste heat in factories and homes; from the development of a coal gasification technology [which converts coal into synthetic natural gas], to the construction of more energy efficient buildings, an important step given that a third of all energy use is actually in buildings.

Of course, there are many uncertainties. The decisions that require changes in lifestyle may be quite unacceptable. The technology of carbon sequestration [the uptake and storage of carbon by various methods so as to keep it out of the atmosphere] may be unattainable. The development of a new generation of nuclear stations may raise unacceptable risks of proliferation and terrorism, as well as raising, again, the question of waste disposal. But equally, there are uncertainties on the positive side. Technology is moving very quickly and would almost certainly offer new opportunities over the next half century–possibilities we can’t even envisage now.

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All in all, then, I believe there is a case for cautious optimism. I know many people who care about this issue are dismayed by the fact that the Kyoto agreement has never been ratified. I understand that disappointment, but I still believe that the whole process is a very long-term enterprise, comparable in many ways to the development of GATT [General Agreement on Tariffs and Trade] and the WTO [World Trade Organization] after the Second World War. That process took decades and is still incomplete. But progress was made, starting with the 23 countries who took the first decision to reduce tariffs between themselves when they met here in the United States in the spring of 1946. Gradually people saw what was possible and the benefits it could bring.

In terms of climate change and long-term energy security, we’re now beginning to see what can be done, and there are ways to meet the challenge at a manageable cost. I do think that one of the real challenges of this issue is that it seems almost too big, too global, and too full of uncertainty to be susceptible to the normal policy process. And that’s why I think the answer lies not in finding a single instant solution but in taking an incremental approach supported by market forces, setting some objectives, doing what we know we can do, learning from experience, and then doing more. This isn’t an insoluble problem. We can find a solution, and we should start now.

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AUSUBEL: Anywhere with your colleagues from Shell or Phillips-Conoco or ExxonMobil or other major energy companies around the world, do you feel their thinking resembles that of BP, or do you feel there are real very divergent views within the industry?

BROWNE: When BP looked at what it was doing and concluded that continuation of business as usual was not possible and not correct and not right, we at that time were a member, along with most of the oil industry, in a coalition to fight any restrictions on the industry relating to analysis of climate change, carbon dioxide. We left that group. We were the first to leave. And then we made a very clear statement that we needed to do something, some precautionary actions, to begin to reduce the amount of carbon going in the atmosphere and therefore to change the business in a way which was appropriate. But at that time it was difficult for us with out partners. It was a surprising act, and one which obviously changed relationships.

I would say where we are today is that the oil industry has come an awfully long way in the way it behaves, the way it conducts its affairs. We should become much more efficient, much more conserving of energy, and much less emitting of carbon dioxide. They are very much voluntary agreements. Not everybody says it the same way. But the progress over the last seven years has been more, I think, than I expected when we started this, which is very pleasing.

AUSUBEL: Let me turn to my side of the world. I come from the research world. We consume lots of taxpayers’ money that is channeled through Washington or Brussels or Tokyo for doing research.

In your paper, you speak about the known and the unknown. At the same time, is it possible that much of what we would like to know now, the additional knowledge that we wish to have, in fact is not unknown but unknowable? Is it possible that the models, the climate models, these large simulation models, have become so complex, have so many equations, so many parameters, so many fudge factors, that we really know about as much as we’re going to? You know, is all the research money just to buy off the intelligentsia now? In a way, it seems to me you’re saying the real question is, "How risk-averse are we?" At least in BP we know enough to make the major decisions. So should the world be spending whatever it is now, 3 or 4 billion [dollars] a year, on climate research?

BROWNE: Well, I think–if I may say so, I guess you know the answer to this, but let me try.

Without wishing to go into areas where I’m no longer current–I’m not a researcher–is that research in these areas is about–not about analysis of history where everything is bolted to the ground and all we know is laid before us because it is the past. It’s just not like that. Everything is about estimating the future, and the future is of course actually unknowable. And so we are limited in some ways by the limits of our minds on how we can model that future based on limited experience of the past. And so we find from all this analysis that there’s a reasonable range of outcomes, and each one has a risk attached to it.

Over time you can get greater and greater understanding, but in the end you are in diminishing returns because the difference between having a–let’s take a case of–the difference between a 10 percent chance of something happening and an 11 percent chance of something happening wouldn’t, I believe, change people’s behavior. The difference between a 10 percent and an 80 percent chance would change people’s behavior. So at this stage, I think people are trying to find out just what exactly this is, and can we do a bit better?

In our industry, we spend billions of dollars based on models of the future, models of things we can never see, that are in the minds of our scientists and engineers. It’s called exploring for oil and gas. You can never see and never touch a reservoir. It exists as a figment of the imagination, nowadays as a projection in three dimensions, built on simply remote sensing. We can never see it. We don’t know whether it exists. But we have to try to model it, and then we make some tests to see whether it’s there.

Our modeling is all about working out–reducing the risks of failure. This is not unsimilar. So you think about modeling in some ways this analysis as a different form of insurance policy.

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AUSUBEL: And I finally follow up with a question on the trading system. The European Greens have been able to block the inclusion of nuclear energy within the European–proposed European trading system for reduction of emissions. Of course, the building of nuclear power plants is the main way that France, for example, has been able to keep very low emissions. Even in the U.S., nuclear power provided 6 percent of electricity at the time of [the 1979] Three Mile Island [nuclear power plant meltdown], 10 percent at the time of [the 1986] Chernobyl [nuclear power plant explosion] and more than 20 percent today. What’s your view and the BP view on whether nuclear should be part of the trading system?

BROWNE: Well, there are so few choices for energy sources in the world. It’s all gas, coal, and nuclear fission, is the vast bulk of today’s energy. Alternatives and renewables globally amount to under 3 percent. And certainly for the next decade or so, it’s not going to grow that much. It may well do in several decades’ time. So to do it partially, without considering all energy sources and how you can trade one against the other, is probably not a logical or effective way to go.

And what I would say about the energy trading system in–or the trading system in Europe is that phase one, which is ‘05 to ‘07, is a learning period. The actual process becomes much more effective in ‘08. So I think, again, there’s a lot of understanding that has to take place with what is now a wider Europe.

QUESTIONER: I’m Dick Stewart with New York University. How long can a cap and trade system in Europe or in a few American states or voluntary efforts like BP’s or the Chicago Climate Exchange sustain itself if major competitors are outside such a system? And how can they be included?

BROWNE: I think the answer is, "Who knows?" It depends exactly on whether the trading system first induces–which is quite possible–could actually induce more productivity. It’s just possible that what it will do is cut waste and improve efficiency. It’s very possible over a period.

Long-term, this–the question of the atmosphere is global, and it cannot be solved simply by one part of the world operating. So it’s going to have to have everyone in it. But it doesn’t have to happen immediately. It certainly can take a few years for people to come in. But I suppose, in the end, if the world is divided, longer-term, between those who want to do something and those who would then be construed as free riders on the problem, then it won’t–it will not sustain. It will not sustain.

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QUESTIONER: I want to push you–Dan Esty from Yale. I want to push you beyond the low-hanging fruit, the early efforts that might yield efficiencies, and go to the point you raised earlier about how hard a problem this is. It’s across a great amount of space, global; it’s inter-generational. Some of the models are showing that those who are likely to cause the greatest harm may bear the lowest burden of that harm–the United States particularly, where the models are showing, perhaps, not very great damage. So isn’t this ultimately a terrible problem to attack from a cost-benefit point of view? Because, from every politician’s point of view, the costs are borne locally, the benefits are spread broadly, and it doesn’t look good. So how do you overcome that? And I guess maybe you were hinting at it at the end of your last answer. Is it really a moral question?

BROWNE: Well, I could add some more difficulties to your set, which include, critically here, the enormous time difference between doing something and seeing the benefit, which can’t be an easy thing for anyone in political life to preside over, for it is always their successors that gain the benefits for the incumbent’s cost. So yes, indeed, there are lots and lots of difficulties. But so, too, have there been in many other agreements between nations where there appears to be the need to give and to take and to lose something and maybe gain something on a [inaudible] time scale.

I have a sense that as people look at what is going on, and as they see other people working, it is very difficult to see people just ignoring action. And in the end, in the big nations, the highly developed nations of the world, this is about what populations think; it isn’t necessarily about what individual leaders think.
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QUESTIONER: Thank you. Ruben Kraiem from Paul, Weiss. I know that you’ve avoided speaking about public policy and have focused specifically on what business can do and what can happen more or less spontaneously, but I’m concerned if I imagine a legislator or a senior member of the executive branch of this country listening to your presentation. I might come to the view that, in fact, it sounds like things are going to get themselves worked out and haven’t heard in the presentation what, as a matter of public policy, the governments of the world, and particularly the United Sates government, ought to be doing. For example, is it necessary in order to achieve these objectives, that there be a massive investment in certain types of renewable energy technologies that is supported by government, or is the cap and trade system going to, assuming it came into effect, going to address the problem more or less on its own?

BROWNE: I would–well, the first point I would make is that there is no denying that in due course, at some stage, with everyone working at a different speed, people will have to come together. There has to be some sort of policy umbrella. Otherwise, surely, there are no rules of the game, and the rules of the game will effectively establish the market.

The second is, I do believe very firmly that it should be a market-based approach. You would expect me to say that; I still will repeat it. And therefore it requires a sensible framework, regulation and principle, and not subsidy and not intervention, picking winners which may not be winners.

Thirdly, I think it requires development of an understanding that that is where governments can come in, which is to continue to support the basis for understanding the basic science of the technology and the basic science of the phenomena itself.

But in the end, governments will have to come together. Governments do have to set the framework within which business works. But quite a lot can happen over a period of time. It is not as if Kyoto is a litmus test, is it? It’s a binary switch, on and off. It would be very good if we could learn from the past and spend perhaps less than getting on for 50 years developing the WTO. Hopefully there’s a learning curve, and we’ll get there a little faster. But maybe it’s not unexpected that we didn’t get there in one leap.