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#15 Sean Hernandez, Energy Economist

March 13, 2018

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Economics isn’t all about money. It’s about human action, decisions and choices. In fact, economists and environmentalists could be natural allies in solving climate change. Unfortunately, a good number of environmentalists take a hardline stance on geoengineering, arguing that any further human manipulation of the environment is a bad idea. But with CO2 levels reaching more than 400 PPM, mitigation alone will not solve our problem. So how would an economist approach climate change?

Sean Hernandez is a professional economist, data scientist, and environmental policy expert with a Master’s degree in economics from USC. In his current role at an energy utility, Sean specializes in energy marketing, trading and financial analysis. Today, he joins Ross and Christophe to define what is meant by the phrase ‘moral hazard’ and explain the argument against a technofix for global warming. They discuss the problem with lumping all forms of geoengineering together, pointing out that some techniques are widely accepted while others are much more controversial. 

Sean employs his national champion debate skills to explore the mitigation camp’s moral hazard argument against geoengineering and offer insight around cap and trade as well as carbon market policy in California. Christophe, Ross, and Sean cover the accelerating effect of climate change, the risks around solar radiation management, and the fuel switching issue. Listen in for Sean’s take on a portfolio-based approach to climate change that continues civilization while employing a combination of advanced techniques—including geoengineering.

Resources

Is Geoengineering an Immorality of Last Resort? by Sean J. Hernandez

“Geoengineering, Climate Change Scepticism and the ‘Moral Hazard’ Argument” in Philosophical Transactions of the Royal Society 

350.org

“Arctic Temperatures Soar 45 Degrees Above Normal” in the Washington Post

“Dutch Move to Ban Sale of Combustion Engines from 2025” in The Irish Times

The Population Bomb by Paul R. Ehrlich

Guns, Germs and Steel: The Fates of Human Societies by Jared M. Diamond 

Key Takeaways

[2:21] The definition of ‘moral hazard’

  • Attempt to reduce risk leads to incur more risk (i.e.: drive faster with seatbelt)

[4:04] The moral hazard argument against a technofix for global warming

  • Would disincentivize doing right thing (reducing emissions)
  • Addiction, rent-seeking

[9:14] The problem with lumping all forms of geoengineering together

  • Planting trees, any form of agriculture qualifies

[11:50] The counter to the mitigation camp’s disincentivization argument

  • CO2 levels already too high to be safe (>400 PPM)
  • Mitigation won’t remove CO2 from atmosphere

[14:14] The problem with the moral hazard argument in carbon removal

  • Mitigation = prevent emissions
  • CO2 removal and mitigation both result fewer molecules in atmosphere

[16:34] Why a portfolio-based approach to climate change is necessary

  • All emissions to zero tomorrow, would still take 1,000 years for climate to stop changing
  • Can’t rely on ‘spiritual change,’ need effective ways to motivate

[19:33] The accelerating effect of climate change

  • ‘Global warming leads to more global warming’

[20:37] The challenge around cap and trade

  • Demand can’t grow as large as supply

[23:06] Sean’s insight on carbon market policy

  • Bound marketplace (both floor and ceiling on price)
  • Carbon permits free to certain companies

[25:07] The failings of the California cap and trade market

  • Renewable portfolio standard leads to reduced demand for cap and trade permits
  • Reduced demand results in reduced price of cap and trade permits

[26:18] The flaw in the Netherlands’ plan to ban the sale of internal combustion engines

  • Shifts emissions from pipe to smokestack (fuel switching issue)

[32:02] The risks of solar radiation management (SRM)

  • Nori doesn’t condone SRM, focus on carbon removal
  • Space-based would be safest (shades in orbit)

[36:51] Sean’s take on natural gas and fracking

  • 1% increase in renewables leads to >1% natural gas burning
  • Fracking has environmental problems of its own

[40:14] Sean’s approach to solving climate change

  • Establish global carbon tax, establish price of carbon
  • Geoengineering budget (CDR, SRM and blockchain)
  • Way forward is to continue civilization, advanced techniques

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