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Tak3natheFlood (91.47)

A Capitalist Solution to Climate Change and Peak Oil

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April 28, 2009 – Comments (17)

Amazingly half of the solution is already in place to tackle these two challenges. Half of that solution is our current market system. Over the past few years we have seen a dramatic increase in wind capacity as traditional fossil fuel source power generation has become more expensive. In the U.S. alone wind capacity rose 49.7% due to environmental awareness but mainly due to the economic factors that make renewable energy the most viable long-term energy solution. This stems from the fact that returns on oil exploration and production are falling dramatically not to mention the costs associated with importing oil and the transport energy required.

 

Another feature of markets that aids the battle with peak oil includes the fact that buyers constantly seek the lowest price. Soon enough electric car costs will be the clear low-cost solution vs. combustion powered gasoline cars that use oil as an input. The market is an amazing animal and can work in some fantastic ways. The electric car, with the aid of the crucial long-distance car battery, will allow us to use our extensive highway system while expending far less energy. It is almost impossible to tell what brave innovator will make the first mass produced electric car. Progress should be slow though as it has taken years for even the Toyota Hybrids to gain any meaningful market share.

 

A cap and trade emissions structure is the second step that could leverage the power of the market with clear goals for moving our economy off of the growth stunting impact of oil. In the simplest essence cap and trade is an emissions ceiling set to limit the CO2 and other greenhouse gas emissions across a specific industry. Each company in the industry would be allotted permits for emission with the total overall number of permits governed by specific emissions reduction goals. Companies that emit more than others would be able buy permits from those that require fewer permits (mainly because of their ability to more easily lower their emissions). In this sense both companies are benefited as both companies collectively become more efficient. Overtime utilities would have to replace coal/oil/natural gas plants with viable options like wind turbines or solar farms and find ways through this new market system of delivering clean energy while tracking underneath the downward graduated cap. This market system would add just another incentive to get a better return from renewables. Every year as more solar and more wind are installed their costs decrease and grid parity is closer. A cap and trade market feature would help to accelerate us from the finite resources to the infinite resources of the Sun whose byproducts are PV energy and wind energy.

17 Comments – Post Your Own

#1) On April 28, 2009 at 10:37 PM, devoish (99.59) wrote:

The only value of "cap and trade" is to transfer a portion of energy spending into financials and will be ripe with abuse and price manipulation, just as todays trading markets are. Tax and Refund is a better plan to reduce CO2 by far.

The free market has little to do with the success of renewables. The success is due to European Gov't subsidies belatedly followed by the USA and the power of the electoral process, without which the oil industry would still have no threat to their hold on world energy markets. Last years oil price manipulation was a scare that helped to garnish support for a process that was already well under way.

It has been and continues to be a hard and difficult battle for liberals, tree huggers, and health advocates.

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#2) On April 28, 2009 at 10:48 PM, soycapital (83.54) wrote:

Another wonderful government program.CAP and TRADE? How about TAX CHARADE!! This is nothing but big government getting bigger. Taxes and regulation increases and basically the government interfering in the free market. Is there anything they will keep their nose out of at this point. Please, Cap and Trade does nothing good for me or you. I'm sorry this burns me, nothing against you sir I assure you.

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#3) On April 29, 2009 at 12:49 AM, AbstractMotion (77.85) wrote:

Yeah sorry but cap and trade is just a ridiculous way to say "hey you can keep producing CO2 as long as you can make the consumer pay for it in the end".  There's no reason the government just can't mandate lower emissions and higher MPG to meet the goals it's set forth.  I hate to be the bearer of bad news with solar, but technology still isn't mature enough for wide spread application.  Cells are simply too inefficient.  There's been some great work done in laboratories, but until we start seein 40-50% efficient cells on the market I can't see gaining wide spread adoption.

 All that said wind power is picking up and I agree it shows some real potential for expansion.

 

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#4) On April 29, 2009 at 9:13 AM, skifree99 (< 20) wrote:

Cap and Trade has worked successfully in Europe and is now working well in the RGGI region (the 10 NE states). The RGGI system has been squeaky clean and is very well monitored. Its only failure was to not be aggressive enough with CO2 reduction targets.

Europe tried for 6 years to get a C tax but failed so they moved to Cap and Trade. It has not damaged the EU economy. It is here to stay and can be done well with proper oversight and regulation.

The flaw of tax and refund (aka tax and dividend) is that the revenues from the sale of the allocations are best spent on 1) energy innovation 2) energy efficiency and 3) mitigating the impacts on low-income familes.  

To the extent that we fail to adopt Cap and Trade or something similar we become less competitive over the long term. What happens when China bans gasoline cars in several major cities. Who does that electric car market go to?

 

 

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#5) On April 29, 2009 at 11:34 AM, devoish (99.59) wrote:

The flaw of tax and refund (aka tax and dividend) is that the revenues from the sale of the allocations are best spent on 1) energy innovation 2) energy efficiency and 3) mitigating the impacts on low-income familes.  

Mitigating the impact on low income familys; Collecting a tax on all the carbon produced in the USA and then refunding tha total dollar value in equal amounts to every Citizen (taxpayer or impoverished) would in most cases leave the poorest with a net positive, because poor people consume less, and will therefore pay less of the tax.

2) Energy efficiency  This is the low hanging fruit of CO2 rreduction. If each family collects their $1600 share of a carbon tax regardless of whether or not they conserve electricity, they could potentially profit by conserving electricity and paying a lower proportion of the tax merely by turning out lights and unplugging appliances, and chargers, etc.

3) energy innovation Tax and refund will spur innovation as low CO2 energy generation will become the cheaper model.

With tax and refund you get the quick encouragement to conserve while at the same time allowing self determination to to guide your own benefit or cost level, and you encourage low CO2 technologys to replace the soon to be higher cost, high CO2 technologys. plus you do not have a boondoggle determining what levels to cap carbon at, what qualifies as a carbon credit, or offer con men the opportunity to promote a carbon credit investment that suddenly does not qualify, and oh well, we all lost money. A forest that would never have been cut down because the wood is junk, suddenly gets a credit because someone says it might have been cut down and now we need people to verify, who may or may not take bribes.

Abstract,

While limiting emissions might be the quickest and surest way to a CO2 reduction, it would also creat a quick and sudden hardship without any means of mitigating that effect.

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#6) On April 29, 2009 at 12:38 PM, skifree99 (< 20) wrote:

Without a Cap there is no guarantee of lowering CO2 emissions - which is the whole point of it after all. And I'd say that the "junk forest" has shown considerably more value - continuing to sequester CO2 for free, continuing to clean water for free, continuing to provide habitat and provide for diversity for free, and continuing to clean the air for free - than has most of the Wall St. junk we have seen over the last few months. At least you can go out and see the forest, measure it, get useful products from it, etc. etc.

Limiting emissions need not be a quick and sudden hardship. Initial Caps are likely to be modest and would only get more stringent over time - think 40 years. The first step is to put a price on CO2. 

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#7) On April 29, 2009 at 1:23 PM, Tak3natheFlood (91.47) wrote:

Ultimately Cap and Trade has two benefits: we gradually lower CO2 emissions over time giving industry and private corporations time to find the most efficient way to reduce pollutants, secondly proceeds from the auctions can aid energy efficiency efforts, and further renewable energy proliferation. By leveraging a market with a downward graduated ceiling and a market with greater parity (and therefore greater returns) we can move from foreign energy sources which cost our consumers billions every year to reliable, constant, domestic energy sources.

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#8) On April 29, 2009 at 8:10 PM, devoish (99.59) wrote:

We don't have 40 years.

Please don't believe I don't value the "junk forest". I did not make myself clear, in that I was trying to convey the difficulty of qualifying "offsets".

When you value the carbon offset of a forest, will you include scrub pine with no commercial value and unlikely to be cut? Will conifers be worth more than deciduous trees? If I plant one acre in trees will I only be able to sell the offset of a 2 foot tree, or do I get paid in advance for the offset of the 100' oak it might someday become? After I plant the tree will you check that it grew and absorbed carbon? How much will you budget and tax to monitor the program? Will monitoring be the first item cut from a budget? What if the "offset" salesman disappears before he plants a tree? How much will swampland be worth? How much will adding 6 inches of insulation to your house be worth? Is it worth more if it is the first 6 inches than the second? How big and what will be the budget of the Department of Figuring All This Crap Out and Making Sure Noone Cheats or Games the System?

On the other hand;

Each KWH of coal produced electricity also produces 2.1lbs of CO2.  Taxing each lbs at $.03 would achieve grid parity between coal and concentrated solar. It would also increase the price of coal produced electricity by 150%. Gradually phasing in the tax over ten years, to the point where coal cost more than CSP, would encourage all new energy generation to be low or no carbon. It would encourage the conversion of high CO2 coal plants to lower CO2 nat gas and the addition of cogeneration equipment. Right away we grab the low hanging fruit of turning off lights.

And then we give the tax money to everybody in equal proportions.

The first year at $.01 tax for each lb we would collect $1,295,877,850,000.00 and divided between 300,000,000 million Americans we would each get back $431.95. those of who use more than $431.95 worth of CO2 would lose money. Those of us who use less would make a few bucks. (homeless Americans could have their money delivered to homeless shelters). Wealthy Americans could turn off a few more lights or be rewarded for their productivity with the ability to afford more carbon. People like me who burn oil for heat and hot water could convert to lower carbon gas. Then the tax goes up until we get the needed CO2 reductions.

People who would suffer a hardship from the additional expense of Cap and Trade are probably already using less than $431.95 worth of CO2 and more likely have their financial situation improved.

It only took about an hour to track down the data and calculate the tax needed to reach grid parity.

The IRS already collects taxes and distributes refunds.

The "markets" are already corrupt.

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#9) On April 29, 2009 at 10:07 PM, skifree99 (< 20) wrote:

CO2 Allowances are sold in tons. Current prices for CO2 allowances in europe are about 13 to 18 Euros/ton.( http://www.ecx.eu/Market-Data) In the RGGI market in the US they are about $3.50/ton. And, 3 cents per lb is about $60/ton and 1 cent is $20/ton.

Forest offsets are hated by both the extreme left (they are stealing from the forest dwellers and indigenous peoples!) and by the extreme right (it is just another way for big brother to expand goverment and waste money!)

But, somehow forests have to be a part of the equation. Deforestation, mostly inthe tropics accounts for 20% of all CO2 emitted on an annual basis. Stop deforestation today and it is the same as taking all the world's vehicles off the roads today.

In this country forests take up (offset) 10 to 13% of US CO2 emissions per year. That is about 800 million tons we dont have to worry about. Is that not a value?

There has been tons of effort gone into how to validate Forest offsets. RGGI has chosen the simplest one - only new forests.They must have a conservation easement and be "permanent". You have to establish a baseline and monitor it every few years. Professional foresters can do this with one hand tied behind their back. Payment is in 20 year chunks of time. In no way would it be a get rich quick scheme.

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#10) On April 29, 2009 at 11:21 PM, devoish (99.59) wrote:

Only new forests:

We already replant forests due to the efforts of environmentalists who have worked to gain the cooperation of industry.

Wouldn't it be preferable to just plant the trees and reduce the CO2? If the goal is to also replant forests, I could support that on its own merits without offering a carbon trade.

Even if the RGGI works for now as a small voluntary program it is only a very short matter of time before people will try and succeed at gaming it.

I would prefer Carbon Caps and simply skip the Trade part. Put the value into carbon free technology, not into an exchange. Unfortunately the hardship on lower income people would be pretty excessive from either "Cap and Trade" or "Carbon Caps without trade"

RGGI may have chosen the simplest method to validate Forest offsets-only new ones, but a carbon tax and refund is the simplest carbon reduction plan. One that can also avoid excessive hardships on lower income people.

I do not think the left hates forest offsets.

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#11) On April 30, 2009 at 12:26 AM, alexxlea (78.58) wrote:

Trees cause pollution of their own, to be honest. The best solution would be to force capturing of all emissions of every form, force people to stop eating meat, produce less and consume less. I hate seeing models try to wedge in current consumption levels into the equation. It's simply not possible for there to be an American lifestyle for every person on earth, get over it already. There definitely aren't enough resources for everyone at the current levels, and there won't be until there's only about 1 billion people on earth. I love the irony of typing this up on a computer that is most likely powered by coal.

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#12) On April 30, 2009 at 10:32 PM, AbstractMotion (77.85) wrote:

Devoish:  I don't really see how mandates if properly offset through taxes or other means would cause much more hardship then taxing or forcing companies to build new power plants in the few places that they can.  I guess I'm comming from a different angle here, I agree that this is an issue that needs to be addressed.  However, I feel that in large part we simply do not have alternative technologies widely available to supplement our current power needs.  That said what we do have is lots of options when it comes to filtering exhaust gases and cleaner burning fuels.  I'd rather do what we can do today in a short period of time and put research dollars where they belong so we can actually achieve a carbon neutral economy.

 

You're right the markets are corrupt, for years energy industries and automakers have rallied against technologies that would have been easy enough to implement at minimal cost just to keep consumption high and it cannot continue.  I for one believe it has had a largely negative impact on environmental progress too, but it doesn't change the fact that large scale solar still isn't practical for many regions or can not currently compete fossil fuel sources even with the highs in commodity prices we saw last year.  Wind isn't practical for all locations either, and we still don't have very good systems for actually storing energy for somewhat sporadic drops in output many of these technologies will face.  On top of that a lot of the models for ways to successfully implement carbon neutral solutions factor in a lot of lifestyle changes for the average American that I don't believe many would take to willingly.  It's possible on paper but I don't see it getting through the political process as easy as simply mandating lower emissions and higher effiencies on key energy using appliances like AC units.

 

We need to put more money towards researching these technologies and further incentivize the process.  The absolute fact of the matter is if these technologies were all already affordable, practical and readily available there wouldn't be much debate on this issue at all.  The fact that these technologies still need huge subsidies or huge taxes to be remotely practical shows the need for further development.  

 

I don't think some convoluted way of shifting taxes around through rebates, prebates and penalties is the best way of doing this.  Going through the process of taxing production, which in turns raises prices for consumers, and then redistributing that money back seems incredibly backwards to me.  Cut out the middle man, subsidize consumers to upgrade appliances so that they save money and use less in the long term.  It'll reduce fuel consumption and reward the industries actually producing cleaner devices too.  Seriously make it a policy and put forms at every Sears and Maytag store, I'm sure we'd see a positive impact immediately.  In general I think the heating oil industry as a whole is a liability too, but that's a more complicated problem to solve.  I see no reason why we couldn't abolish the regional power monoplies and implement a nation wide grid like we should have ages ago as well.  After that's done doing something like seriously limiting the construction of new fossil fuel plants would be practical.

 

 

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#13) On May 01, 2009 at 11:48 AM, skifree99 (< 20) wrote:

Hey folks - see Krugman in NYT today (May 1) on cap and trade. He is on board - with some qualifications....

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#14) On May 01, 2009 at 8:39 PM, devoish (99.59) wrote:

Cut out the middle man, subsidize consumers to upgrade appliances so that they save money and use less in the long term.  It'll reduce fuel consumption and reward the industries actually producing cleaner devices too.

The middle man who needs to be cut is the carbon trader.

The tax on CO2 is where the money to subsidize upgraded appliances, heat, a/c comes from. At the $.01/lb tax level a family of four would get $1700 to spend on a new more efficient oil burner, or fridge. They would also spend that $1700 on the new tax. Many of us could save half that amount just by turning off lights, and we get an immediate conservation effort paid for in cash. People who already are turning off lights would finally see the reward of their effort. The more efficient appliances/heaters/ etc would be rewarded with more demand.

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#15) On May 01, 2009 at 9:34 PM, AbstractMotion (77.85) wrote:

You aren't subsidizing them though, these taxes are going to be paid in bulk by both consumers and industry anyways.  These costs will always ultimately get passed onto the consumer at the end, it won't pay for anything it's a big circular flow of money.  You'd be paying a tax to yourself.  On top of this you have all the costs of actually administering the tax anyways and the delays in distributing and collecting the money.  All so we can just say we're doing something.  Meanwhile there's nothing actually forcing companies and consumers not to maintain this same business model other then the sheer frustration of it all.  There's nothing that actually discourages this other the overhead encountered by running this big loop.  

 

You'd have to forcibly add in some form of leakage, more then likely on the side of the Federal government, that takes some of this money and puts it to some other use.  Which is ultimately what this is all about, the government getting more money for us at it's own discretion.  I'm sorry but I do not trust our elected officials to administer and oversee another source of income like this.  It'll end up exactly like social security, borrowed against year after for some other purpose while doing nothing to actually address the core issue.  I can't see it helping our already floundering manufacturing base either as our current trade policies would allow companies to relocate to countries where such taxes do not exist.  We'll have even less control over the matter then even though the same amount of pollution (or likely more) is going into the air, simply because it'll be justified on the grounds of said nations developing their economy.  The government should be doing everything in it's power to actually facilitate the transition to cleaner energy instead of using this whole "spare the rod, spoil the child" approach of cap and trade.

 

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#16) On May 05, 2009 at 10:25 PM, devoish (99.59) wrote:

Abstractmotion,

SSI was invested in treasurys, something tha was and still is  considered "safe". By "borrowed" you mean the interest got paid.

With tax and refund, the money is returned immediately, not invested for gain, not lent or borrowed.

What is within the Gov'ts power today after 30 years of smaller Gov't?

With a carbon tax, the CO2 cost of everything is accounted for. If windmills use more carbon to build than they save over their lives it is accounted for. To me it seems the least corruptible and most thorough option.

Cowardly trade policies are an issue and would have to be handled. That is true of mandates also, plus you add in Gov't discretion as to what is wotrth while to keep and eliminate.

Good luck in getting CO2 down, it needs to be done.

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#17) On September 26, 2009 at 4:39 PM, carbonfees (< 20) wrote:

Please consider our video at http://www.youtube.com/watch?v=WLHCvYj0kzk&feature=related.

Based on many years as public-sector environmental enforcement attorneys we explain the flaws of the currently proposed climate/energy legislation and how it will lock in climate degradation. 

There is a real, effective and affordable solution to climate change, just no power monied interests to push for it.

 

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