This past semester, I studied the price of oil and its relationship to the cost of climate mitigation. It culminated in a paper for Professor Michael Oppenheimer that showed sustained record prices for oil will help make deep emission cuts much cheaper than before. The current price acts not only as a large tax on oil, to the tune of $200 per ton of carbon dioxide, but also pulls the price of other fossil energy sources up as well (as we have been reporting for natural gas and coal). Such a price level was unfathomable in previous mitigation cost models such as the Stern Review estimate of a high oil price being $80 per barrel (70% below today). If oil prices rise to $250 per barrel next year as Gazprom projected that would be equivalent to an almost $500 per ton of carbon dioxide without policymakers having to intervene. The current higher prices, as modeled in the Stern Review, would move optimal concentration of greenhouse gases down a great deal from the 550 parts per million (ppm) level originally estimated by the 2006 study.
Current prices seem to make even the recent calls by climate activists Bill McKibben and James Hansen for 350 ppm, a reduction from today’s 385 ppm, a possibility as long as we can figure out carbon capture and sequestration for new coal plants. They point to the scary fact that the last time concentrations were in the 550 range, sea level was several meters higher than today. So here’s to some swift innovations in efficiency, wind and solar along with policy that maximizes current technologies available to get developed world emissions falling quickly and developing world emissions cresting soon. Germany is a top model for the sustainable energy transition necessary which I will explore in a future post…
Tags: climate change, Oil