Category Archives: climate change

The Hitch Hiker’s Guide To Planet Carbon

Douglas Adams’ ‘Hitch Hiker’s Guide To The Galaxy’ begins with his hero, Arthur Dent, belatedly realizing that a fleet of bulldozers is about to demolish his house to make way for a by-pass. As Dent sits down in front of the bulldozers, an alien fleet of spaceships pounces. The aliens are putting a by-pass through the galaxy, which will take out Planet Earth altogether and render Dent’s concerns utterly inconsequential.

Today, the inhabitants of Planet Earth, preoccupied as they are with political and financial upheavals and turf wars of all kinds, are facing a similar existential threat that is poised to totally eclipse their current concerns. It is called ‘man-made climate change’. Even now, regardless of our present-day action or inaction, the atmosphere above our earth is dangerously and unstoppably damaged by the carbon we have emitted without thought for its cost. This ongoing damage is called our ‘carbon inheritance’ and it is changing beautiful Planet Earth into uninhabitable Planet Carbon.

Historically speaking, our carbon inheritance began with Newcomen’s steam engine in 1712, at the beginning of the Industrial Revolution. Since then, it has been building up in our thin atmosphere with each tonne of fossil fuel we burn. About two-thirds of Newcomen’s CO2 emissions are still there, 300 years later. This ever-growing accumulation will remain for hundreds of years, come hell or high water – both, actually: because of global warming, heat waves and forest fires are on the increase, and sea levels are rising.

What’s to be done? Switching from fossil fuels to renewables such as solar and wind might seem the obvious answer, but can they, without fossil-fuelled, backup power plants, provide sufficient, secure, reliable energy for when it is dark or the air still? And are there unaccounted-for CO2 emissions in such ‘green’ solutions?

In order to make this assessment we needed to determine, scientifically, a carbon price that was directly attributable to CO2 emissions – and without regard to politics. As such, it’s actually the only carbon price that really matters. Having achieved this, we now use that price to carry out carbon auditing of power sources – coal, gas, wind, solar, nuclear, biomass, tidal – and of transportation – trains, planes, ships, motor vehicles (including electric vehicles: the electricity has to be generated somewhere) – so that all carbon emitters can be assessed on a ‘level playing field’.

Our recently published carbon audit of Hinkley Point C Nuclear Power Station[1] is a case in point, where we compare the gas and wind power alternatives. The audit shows that the carbon cost alone of the equivalent gas fired power plants approximates to the entire lifetime costs of Hinkley. Worse still, when comparing the costs of various combinations of wind with gas-backup, the maximum gas to wind percentage for cost parity with Hinkley is 12%. More than 12% would again exceed Hinkley’s costs. Would the UK National Grid judge 12% of gas-backup adequate to cover the risk of insufficient wind blowing in wind farm areas?

Unless we can come up with renewables that don’t require fossil-fuelled backup then, the nuclear option is today’s clear winner for a future of clean electricity. Technology has moved on from the last century disasters of ‘Three Mile Island’, and ‘Chernobyl’. Those undeniably dreadful events took place in the infancy of the nuclear power industry. Even ‘Fukushima’ this century failed not through any fault of its nuclear reactor. It failed because the tsunami breached the diesel backup power to the cooling pumps.

PAL has made carbon pricing, based on the actual cost of loss and damage attributable to manmade climate change, a scientifically defendable reality. If we want to make properly informed decisions that deal effectively with climate change, we must measure up projects for the true comparative cost of their carbon impact. Otherwise we simply continue to sit in front of the ‘bulldozers’, thumbing our smart phones, while beautiful Planet Earth becomes uninhabitable Planet Carbon.

Bruce Menzies, Chairman, Predict Ability Ltd (PAL)

© Copyright Predict Ability Ltd 2017. All rights reserved.

[1] Predicting The Price Of Carbon: How to crack the climate change code for good, by Richard H. Clarke, Supplement 1: Hinkley Point C Nuclear Power Station Enhanced Carbon Audit LCA Case Study, by Edward J. Coe and Richard H. Clarke, Predict Ability Ltd, 2016.

The post The Hitch Hiker’s Guide To Planet Carbon appeared first on PAL Carbon Pricing.

Towards a Trillion Dollars of Carbon-Related Loss & Damage in 2016

The global loss and damage arising from all weather events that were attributable to man-made climate change in 2016 was
This is based upon estimated carbon emissions for 2016 of 37,705,000,000 tCO2, and PAL’s global one-year Carbon Loss Index (CLIX) of $25.30 per tonne of CO2. The CLIX benchmark measures loss and damage attributable to manmade climate change. It additionally provides the minimum floor price required to raise sufficient revenue from carbon emitters to fund the cost of AIMS (Adaptation, Insurance, Mitigation and Social Fund) projects and programmes that tackle the impacts of climate change.

Munich Re, the world’s largest reinsurance company, reports US$175 Bn of disaster and catastrophe loss in 2016. NOAA’s 2016 global land surface and ocean temperature anomaly is 0.94 Celsius but, as 82% of the climate-related loss hazard is in the Northern Hemisphere, PAL estimates that the effective temperature anomaly for 2016 is 1.063 Celsius. Using PAL’s methodology this equates to $4,673 Bn of weather related losses globally, of which 20.4% is attributable to climate change.

The PAL gamma prediction algorithm puts a dollar value on historical and future loss and damage. Allowing for regional variations, the 2016 loss was $876 bn. This rises to $1051 bn if all losses were calculated equitably. By this measure, global weather-related losses have exceeded $1 trillion for the first time ever.

See how this year’s Carbon Liability is evolving by taking a look at our Carbon Liability Clock.

Predict Ability Ltd (PAL) is committed to supporting the adoption of a universal and transparent carbon price.  PALcarbon is a real-time carbon pricing and reporting system for clients that takes into account the real cost of damage caused by carbon emissions.  PALgamma is a computing risk engine for forecasting extreme weather related disaster events and identifying the impact of man-made climate change. CLIX is a Carbon Loss Index providing a benchmark for the real cost of loss and damage caused by carbon emissions. Predicting the Price of Carbon: How to tackle the climate change code for good is a recent publication that addresses the goals and strategies for tackling climate change.

Loss and damage associated with Climate Change impacts to reach $1 trillion a year by 2021

Climate change  is once again under the microscope at COP22 this month and one point in particular will be a review of the previously established Warsaw International Mechanism for Loss and Damage and whether developed countries would be able to fulfil their commitment to provide a total of $100bn a year of financial aid by 2020.

PAL’s view is that the loss and damage attributable to climate change in 2016 is around the $800bn mark, increasing to $1 trillion in 2021. In carbon pricing – or rather carbon cost – terms this equates to about $22 per tonne today, rising to $26 per tonne in 2021. Around 20% of global weather related losses are attributed to climate change, and this figure is increasing at around 0.5% a year.

Moreover we put the case that a 40% share of the funding ($320bn) should go towards adaptation projects. Adaptation is one of the four funding categories in AIMS – Adaptation ($320bn), Insurance ($240bn), Mitigation ($200bn) and Social Impact ($40bn) as explained in Richard Clarke’s recent book ‘Predicting the Price of Carbon: How to crack the climate change code for good’.

AIMS - adaptation, insurance, mitigation and social fund

Figure 1 – AIMS – adaptation, insurance, mitigation and social fund – a possible protocol for allocating carbon-tax revenues.(© Predict Ability Ltd.)

Put simply, the COP pledge of $100bn is a long way short of the $800bn expected cost of damage being caused by climate change. In fact it covers a little over 12% of the total funds that we believe are needed. The current pledges are simply not enough.

PAL’s new climate financing mechanism Carbon Pay, a marketplace bringing together enterprise (business, city corporation, regional and national governments) and AIMS projects, is designed to address this. Contact us if you would like to find out more.

How will global warming impact insurance claims?

In Science magazine, one of the leading US research journals, there is a comprehensive overview of the evolving impact of climate change on the insurance industry by Evan Mills[17], a senior scientist at LBNL (Lawrence Berkeley National Laboratory).  Mills is a respected chronicler of the insurance industry’s action on climate change.  One graph stands out.  It shows data obtained by a long-established US insurance firm, the Hartford Steam Boiler Inspection and Insurance Co.  Along the y-axis was temperature (°F) and on the x-axis were the number of claims filed in several north eastern US states for lightning strikes.  Several years’ data from the mid 1990’s lay on the general trend, a logarithmic curve (inset).  Here, below, the data has been transposed and temperatures converted to °C.  The log-linear plot shows there is an exponential relationship with temperature.  It can be used to make an estimation of the relative number of claims there will be as the temperature anomaly increases.

PALca and Lightning claims recorded by Hartford Boiler Insurance

Plot of lightning claims recorded by Hartford Boiler Insurance Co. (inset = original)

This is how the PALca[16] algorithm works.  Suppose the global, pre-industrial temperature, T, was 16 °C – actually, the precise value does not matter.  According to the algorithm, there would have been 23.5 hypothetical claims.  If the world is now 0.8 °C warmer i.e. the globally averaged Tanomaly = 0.8 °C, there would be 27.1 claims.

Of course, for a simpler correlation a linear equation would suffice; but it might under-predict the effect on claims of an increasing temperature anomaly.

The 2013 IPCC climate change science report[18] defines Tanomaly and the data from the US National Ocean and Atmospheric Administration (NOAA) provides us with an excellent and coherent source of yearly, monthly and daily (imagery) data[19].  NOAA’s ‘land and sea’ temperature has been found to be the most suitable.

In Chapter 3 the benefits and drawbacks of using temperature anomaly as a proxy for the effects of climate change were discussed.  Whatever the concerns, Tanomaly is recognised worldwide and the ‘2° C target’ is one of the IPCC’s clear goals[20].

As explained in Chapter 7, we define the extent to which climate change damage can be attributed to man-made (anthropogenic) CO2 emissions using x, a term that can now be defined as follows:

x = PALca{ Tnow } / PALca{ Tpre-industrial } – 1


Tnow = Tanomaly (now) + Tpre-industrial and

Tpre-industrial = T before global warming began.

This is the average fraction of losses that is attributable to man-made (anthropogenic) warming (assuming that natural variations in temperature have been fully taken into account).  In the case of 0.8 °C of warming x = 27.1/23.5 – 1 = 0.15.  By extension, 15 per cent of today’s weather related losses need to be attributed to the cause: the producers of CO2 – all of them, from Newcomen[21] in 1712 right through to the Big Energy, Big Cement, Big Land and Big Everything companies of today.  Pragmatically, though, the 1960’s make a good baseline.  But more of that later!

Returning briefly to the question of lightning, in 2014 there was a major study published in Science magazine by David M. Romps[22] et al.  Their algorithm for lightning strike prediction, links several mechanisms that are likely to be significantly affected by increasing Tanomaly.  Using a number of leading climate prediction models, which are well suited to work with their methods, Romps et al. determined that the number of lightning strikes (in the continental US) will increase by 12 ± 5 per cent per °C.  The PALca prediction lies within those bounds.  Romps et al.’s results are illustrated below.

Mean of CAPE, precipitation, CAPE times precipitation, lightning flashes.

Romps et al.[23] ‘Projected increase in lightning strikes in the United States due to global warming’ (Science, November 2014) predicted flashes bottom left, actual flashes bottom right.

The above article is taken from Predicting the Price of Carbon – How to Crack the Climate Change Code for Good.

Carbon Intensity Weighting

A particular problem in carbon pricing is that a one-size-fits-all carbon price is a blunt instrument for encouraging behavioural change.  A set of prices based on impact and fuel/energy type would be more effective.


A Change of Course

The UN, the World Bank and many other bodies are now calling for carbon pricing, either as a means of implementing carbon emissions caps or in recognition of the power of markets to effect change.  It is this second aspect that is explored here.

“The transition to a cleaner future will require both government action and the right incentives for the private sector.  At the centre should be a strong public policy that puts a price on carbon pollution.  Placing a higher price on carbon-based fuels, electricity and industrial activities, will create incentives for the use of cleaner fuels, save energy, and promote a shift to greener investments.  Measures such as carbon taxes and fees, emissions-trading programs and other pricing mechanisms, and removal of inefficient subsidies, can give businesses and households the certainty and predictability they need to make long-term investments in climate-smart development.” – Christine Lagarde, Managing Director at IMF and Jim Yong Kim, President at World Bank Group (October 19th 2015)[1].

Whatever the framework or carbon pricing methodology, a primary or secondary outcome of a carbon price is a signal, as Lagarde and Kim describe, that creates incentives for the use of cleaner fuels etc.  The logic is the logic of the market; that market players are dissuaded – to varying degrees – by an increase in the price of a commodity.  This only works if there are alternatives to coal, for example, to make electricity competitively.  But if an investment decision is about to be made in a coal-fired power station, then a small or erratic price movement may not be enough to prevent it.  For a carbon price to be credible it has to provide a sustained signal of significant magnitude, one that is both verifiable and to some extent predictable.  This, we believe, is where Predict Ability Ltd’s damage-based carbon price has an advantage over ‘cap and trade’.  The latter will only work if there is sustained credibility that the system will be supported and that it cannot be manipulated by political or other factors.  Their history is not encouraging here.   Nonetheless, both the damage-based and ‘cap and trade’ mechanisms would require careful audits.

Suppose a stable carbon price could be generated, of $20 per tonne of CO2 say, would that be enough to curtail emissions sufficiently to enable internationally discussed or agreed targets to be met?  Probably not.  In the UK, one of the most fuel-taxed nations[2], US $20 per tonne (~£13.50) equates to about ¢5.5 (4p) per litre for diesel and ¢5 (3p) per litre for petrol[3].  Unless imposed overnight, the carbon price effect would be dwarfed by existing duties and, indeed, international energy price movements.

A one-size-fits-all carbon price is a blunt instrument for encouraging behavioural change.  More importantly, as the World decarbonises, carbon markets will become literally incredible and could collapse.

In the case of ‘cap and trade’ systems, as we head towards the 2050 goal, fewer and fewer emissions permits will be issued.  The price will escalate, exceeding the cost of coal itself, at which point politicians will come under pressure to relent and issue more permits.  Alternatively, market players will have found low carbon alternatives.  Even though some decarbonisation will have been achieved, the revenue stream will either become illegal or evaporate.  The whole process is predicated on the idea that 2 °C of global warming is acceptable; it is not, there is great damage already.

With all forms of carbon pricing that are based solely on CO2 emissions, the price will increase over time and eventually become absurd.  Political pressure will then mount, to rein in prices, thereby curtailing revenues.  Yet carbon tax revenues are vitally important in completing the loop, to provide incentives for low carbon alternatives, adaptation or compensatory measures.  So what has to be done?  There has to be an on-going, long-term revenue stream to ensure that the increasingly compounding effects of already-released emissions (legacy CO2) are counteracted.