Sunday, December 26, 2010

Game Theory: Climate Talks Destined to Fail

Greetings  Peaksters

      This confirms what many suspected.   Namely that politicians get rewards only for short term thinking,  but that climate deals require long term perspectives.   The only possible result : greenwash - assert progress is being made, but in fact there is no agreement to reduce CO2.
       
     He offers one ray of hope  (which I don't quite understand)  :

      "
There's no logical basis in the famous mantra that "global problems require global solutions," he says, contending that a series of localized, grass-roots or unilateral initiatives can add up to a solution if pursued appropriately."  

    ( But I'm not sure how a commons type problem take be fixed if some countries get a free ride)


Game Theory: Climate Talks Destined to Fail



cancun-beachCANCUN SUCCESS?: Despite seeming progress on international efforts to combat climate change at Cancun recently, a computer model based on game theory suggests that such multilateral negotiations will ultimately fail.Image: © iStockphoto.com / Mike Liu
NEW YORK -- A modestly successful outcome from the latest round of international climate change negotiations in Cancun, Mexico, has proponents breathing a huge sigh of relief.

After last year's raucous session in Copenhagen, Denmark, most governments and activists were put on the defensive to prove that multilateral action on global warming was even possible. They now feel vindicated.

But even as optimism strengthens ahead of the next year's major conference in South Africa, one famous prognosticator says it's still more likely that we'll see a repeat of Copenhagen's performance toward the end of 2011.

Last year, Bruce Bueno de Mesquita, a New York University professor and partner in a Manhattan consultancy, famously predicted the flat outcome at Copenhagen in an article he penned for Foreign Policy magazine, one month before that conference began.

Confidence in the computer model he designed that led to that conclusion informs his views on where the talks are headed next: Namely, multilateral negotiations will not fix the climate change problem, regardless of what U.N. officials and others claim.

"It's depressing, it is what it is, but unfortunately it was right," Bueno de Mesquita said in an interview. "We got nothing out of Copenhagen."

Bueno de Mesquita makes a living by calculating the likely outcomes to various scenarios under the lens of game theory, a mathematical tool political scientists use to better understand how power relationships inform various strategies in negotiations. By applying numerical values to the influence and attitudes of actors, he has used his proprietary software to accurately predict the outcome of elections, foreign aid spending decisions and the Copenhagen talks.

His main argument: Governments probably won't conclude a major international treaty to reduce atmospheric concentrations of carbon dioxide and other greenhouse gases, ever. And even if they do, any such treaty won't actually work.

"Universal treaties have one of two qualities," Bueno de Mesquita said in explaining the modeling. "They don't ask people to change what they're doing, and so they're happy to sign on ... or it asks for fundamental changes in behavior and it lacks monitoring and sanctioning provisions that are credible."

Thus the essence of the Kyoto Protocol, now scheduled to expire at the end of 2012, he said. That agreement was achieved because developing countries don't have to do anything to comply, and thus happily signed on, while developed countries were satisfied that they faced no actual punishment for not meeting their emissions reduction targets. And even then, the United States felt compelled to later leave the treaty, a further indication of the intractability of the climate change problem, said Bueno de Mesquita.

Industrial nations act individually, but public support weakens
In other words, just because climate change is a serious problem doesn't mean politicians will come together to actually do something about it, he said. First and foremost, leaders will, by and large, act on what keeps them in power or helps them to get re-elected, and promising their constituents light economic pain now for vaguely understood benefits years into the future isn't a winning formula.

"People have a tendency to slide too easily from the facts of a matter to the political response as if the facts simply dictate what politicians do because politicians are going to do what is good for society," said Bueno de Mesquita. "It's a nice thought; unfortunately, it's not how it happens. Politicians are out for politicians."

The modeling he led his students through last year, using the same methodology that has made his New York firm, Mesquita & Roundell LLC, a success, predicts that over the next 30 to 40 years, developed nations will gradually adopt emissions standards more stringent than those called for under Kyoto, in fits and starts.

At the same time, real public support for these moves will gradually weaken. That's because emissions rates will continue to increase in China, Brazil, India and other rapidly developing nations, more than offsetting any cuts achieved in the richer world.

Although negotiators are aiming for steep cuts in emissions by 2050, the computer model predicts that by this time, the world will come to realize that multilateral efforts simply aren't working. And by the end of the century, "political will for tougher regulations will have dried up almost completely," Bueno de Mesquita writes in hisForeign Policy piece.

The reasoning behind the model is spelled out in Bueno de Mesquita's 2009 book "The Predictioneer's Game: Using the Logic of Brazen Self-Interest to See and Shape the Future". A Central Intelligence Agency assessment says his methodology is 90 percent accurate.

Peter Wood, a mathematician and fellow at the Australian National University who studies how game theory applies in climate negotiations, sees an inherent prisoners' dilemma at work here.

"Climate negotiations themselves are not a prisoners' dilemma, but addressing greenhouse gas emissions in the absence of international coordination is very similar to a prisoners' dilemma, leading to a sub-optimal outcome," Wood explained. "This is because (almost) every country wants global emission reductions, but would prefer that someone else take on the burden."

So then why did the Montreal Protocol work?
Wood isn't as fatalistic as Bueno de Mesquita's model. He believes a new global treaty can be achieved by December 2011, or at the very least a set of individual agreements along the lines spelled out at Cancun -- money for adaptation in the developing world, an anti-deforestation strategy, and other steps. The key is to overcome the free-rider problem by incorporating the appropriate incentives that will get nations to cooperate.

"One way that this could work is to link cooperation on climate change with cooperation on other issues, such as trade," said Wood. "If a country introduces a carbon price, it may also want to introduce a 'border tax adjustment' that levies a carbon price on emissions-intensive imported goods."

The NYU professor agrees that mankind can eventually solve the problem, just not along the lines governments are currently attempting to.

"The nature ... of international, global treaties is that they almost always fail to do anything," he said. "People get so caught up in the rhetoric they don't focus, from my point of view, on where they might have a political shot at being successful."

There's no logical basis in the famous mantra that "global problems require global solutions," he says, contending that a series of localized, grass-roots or unilateral initiatives can add up to a solution if pursued appropriately.

Bueno de Mesquita would even like to apply his game theory modeling retroactively, to see if it can provide clues as to why some multilateral agreements, like the Montreal Protocol, do work. Unfortunately, no government or institution seems interested, he says, perhaps fearful of the conclusions that would be reached.

"Actually, I, with colleagues in Germany and Netherlands, put in several grant proposals to do that, and not just to do that but also to identify strategies for improving outcomes," he said. "We never get funded."

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

GTL on the horizon


Greetings Peaksters

      Well, there's  all this cheap Nat Gas and not very much oil.  Converting vehicles and setting up Nat Gas fueling stations is pretty expensive.   Why not just turn Nat Gas into diesel?  

      Of course the bonus feature is that these plants will also run on coal!   How about wood?   Corn?   The furniture from the back room?     
               



New Interest in Turning Gas to Diesel


WASHINGTON — Diesel and jet fuel are usually made from crude oil. But with oil prices rising even as a glut of natural gas keeps prices for that fuel extraordinarily cheap, a bit of expensive alchemy is suddenly starting to look financially appealing: turning natural gas into liquid fuels.

Nadine Hutton/Bloomberg News
Sasol, led by Pat Davies, may capitalize on cheap natural gas.
The New York Times
A South African firm, Sasol, announced Monday that it would spend just over 1 billion Canadian dollars to buy a half-interest in a Canadian shale gas field, so it can explore turning natural gas into diesel and other liquids. Sasol’s proprietary conversion technology was developed decades ago to help the apartheid government of South Africa survive an international oil embargo, and it is a refinement of the ones used by the Germans to make fuel for the Wehrmacht during World War II.
The technology takes “a lot of money and a lot of effort,” said Michael E. Webber, associate director of the Center for International EnergyEnvironmental Policy at the University of Texas, Austin. “You wouldn’t do this if you could find easy oil,” he said.
But with the huge spread between oil and gas prices, and predictions of oil topping $100 a barrel next year, the conversion technology could be a “a money-maker for whoever is a first mover in that space.”
Several other companies have intermittently tried to make liquid fuels from natural gas or coal. For example, the energy company Baard has been planning a coal-to-liquids plant in Ohio but has not been able to pull the pieces together, and Peabody Coal has discussed a similar plant.
Sasol figures that the natural gas needed for a gallon of diesel, plus operating costs, comes to about $1.50 a gallon. In comparison, a gallon of diesel made from crude oil now costs more than $2, even before refining, and many forecasts are for the price of oil to go higher.
But there is a hefty cost of building the chemical plant to do the conversion, which might run over $1.5 billion for a new Canadian plant that would handle 40,000 barrels a day.
The calculations also exclude another cost: greenhouse gas emissions, which may be higher for a conversion plant than a typical refinery, depending on how the work is done.
“Everything ugly is in vogue again,” said Josh Mogerman, an energy specialist at the Natural Resources Defense Council, which has been fighting a proposed coal-to-liquids plant in Ohio.
From a financial perspective, the technology is far from ugly. A barrel of oil has historically cost one to two times as much as the equivalent amount of energy from natural gas. But right now, vast supplies of natural gas from shale formations in North America have driven prices down, so oil is triple the price of the gas equivalent.
The new ratio creates “a very attractive economic option,” said Lean Strauss, senior group executive at Sasol.
While the operating costs favor conversion, the cost to build the chemical plant is another matter; gas-to-liquids plants are far more capital-intensive than traditional refineries that make the same products from crude oil.
A plant opened by Sasol in Qatar in 2006, in partnership with the national oil company, Qatar Petroleum, cost $37,000 per barrel of daily capacity, but costs in Canada would be higher, Mr. Strauss said. Sasol produces 160,000 barrels a day of its liquids — diesel, naphtha and propane — in South Africa. It also turns out jet fuel, which is routinely blended into fuel for airliners departing from Johannesburg. In August, Sasol supplied 100 percent of the fuel for aBoeing 737 flight from Johannesburg to Cape Town.
In the deal announced Monday, Sasol acquired a 50 percent stake in Farrell Creek shale gas assets, in British Columbia. With the other owner, Talisman Energy, it will begin a feasibility study early next year on building a gas-to-liquids plant, and Talisman will have the option to own 50 percent of that.
Sasol is building a similar plant in Nigeria with Chevron, and last month, it completed a feasibility study in Uzbekistan. It also recently submitted a proposal to Shenhau, the Chinese coal company, for a similar plant.
The Sasol process cooks a hydrocarbon, either coal or natural gas, into a fuel gas made of hydrogen and carbon monoxide. Using a patented process that involves cobalt catalysts, it converts that gas into a mix of liquids: 80 percent diesel fuel, 15 percent naphtha and 5 percent liquid propane.
But the process is not 100 percent efficient. In fact, the finished product has only about 62 percent as much energy as the raw material did.
In addition to losing energy, the process creates excess carbon dioxide, compared to burning the natural gas or coal directly for energy. But starting with natural gas, said Mr. Strauss, the amount of carbon dioxide released per finished gallon of liquid fuel was comparable to the carbon footprint of a gallon from a traditional refinery.
Environmentalists are not so sure. “It’s unclear right now,” said Simon Mui, a scientist at the Natural Resources Defense Council. “There hasn’t been a large global experience in natural gas to liquids.”
But, he added, “it’s definitely not a greenhouse gas reduction strategy.” And recovery of gas from shale can itself be energy intensive and environmentally challenging, he said.
The Sasol move comes as Canada is increasing its production of oil from oil sands, which is clearly carbon-intensive. Environmentalists in the United States are trying to stop large-scale imports of oil from oil sands.
Mr. Mogerman, of the Natural Resources Defense Council, said that given the historical market prices for oil and natural gas, only countries with no other choice had pursued the conversion process. “The only ones who’ve done it are people with their backs against the wall, and who had no financial considerations,” he said.
But if oil prices stay high and gas prices remain low because of shale gas, that view could be history.