Good News: It’s Possible to Save Money & the Environment

A well-designed climate policy could slash greenhouse-gas emissions while putting money in the pockets of most Americans. The bad news: That’s not the policy Congress has been debating. A study in the US by Economists for Equity and Environment (E3 Network) found two basic principles for designing a fair, effective climate policy: We need to put a price on carbon dioxide emissions, and we need to use the resulting revenues wisely.

By Elizabeth A. Stanton & Frank Ackerman in Grist.org (16 August 2010):

With a good climate policy, we could save money and our environment.

Congress is off for its summer vacation, and once again, they left the Capitol without adopting a climate policy. Is it impossible to pass a bill that’s good for both the earth’s climate and the American taxpayer? Or did Congress just drop the ball again?

The good news: A well-designed climate policy could slash greenhouse-gas emissions while putting money in the pockets of most Americans. The bad news: That’s not the policy Congress has been debating.

What would it look like to do climate policy the right way? In a recent study released by Economists for Equity and Environment (E3 Network), we explored the impacts on emissions, and the costs to households throughout the country, under a wide range of scenarios. We found two basic principles for designing a fair, effective climate policy: We need to put a price on carbon dioxide emissions, and we need to use the resulting revenues wisely.

Start with the price: To reach the widely discussed goal of a 20 percent reduction in greenhouse-gas emissions by 2020, the price of emitting a ton of carbon dioxide in that year should be $75. That’s definitely higher than Congress has been contemplating.

How could anyone afford that? It’s simple. If most of the carbon revenues are refunded to households on an equal per capita basis, then a large majority of Americans will come out ahead. That is, your refund will be larger than the amount you pay for carbon emissions. If 85 percent of carbon revenues are refunded to households, then four-fifths of the country, including a majority in every state, will be better off. That’s a bigger refund than Congress has yet considered.

Under such a policy, you’d pay a lot for carbon emissions, at the gas pump and on your electric bill — but you’d get it all back, and more, in your refund check. You would come out even farther ahead if you save energy, whether by turning off unneeded lights or by buying a more fuel-efficient car. Then you’d pay less but still get the same refund. That’s the point of the plan: the market incentive to reduce emissions.

Now for the not-so-good news: How does this differ from the ever-changing proposals emerging from Washington? Let’s look at three basic questions.

First, is the price on carbon emissions high enough to really reduce emissions? The risks of climate change are real; the laws of physics don’t need 60 votes in the U.S. Senate to make the world grow dangerously warmer.

Reducing emissions is an urgent worldwide priority, but until the largest, richest economy (that would be us) takes the lead, the rest of the world is unlikely to follow.

On this score, all recent legislative proposals have been disappointing. They have ceilings on the price of emissions, typically limiting it to $40 per ton or less in 2020 — roughly half of what’s needed to reach the targeted 20 percent reduction.

Next, who gets the money — or the permits to emit carbon dioxide, which are worth a lot of money? If emission permits are given away to industry, it’s businesses and their stockholders that reap the benefit. If all permits are sold, then the revenues can be refunded to households, as we propose. One recent proposal, the Cantwell-Collins bill, comes closest to our suggested approach, selling all permits and refunding 75 percent of revenues to households. Other leading proposals include large permit giveaways, wait decades to give refunds to most citizens, and divide revenues among many competing uses — some worthy, others pure pork.

The third question is, what else would the policy do to reduce emissions and help build a new, green economy? Investments in energy efficiency and renewable energy can reduce emissions, in concert with price incentives.

These investments should be targeted to the states with the highest per capita emissions — generally those most dependent on coal for electricity generation.

Reducing America’s reliance on coal is essential to the creation of a new, sustainable energy system. On this point the legislative proposals are more mixed; none seek to phase out coal, but most do invest in efficiency and renewables. Under our plan, 15 percent of revenues remain available after the refunds, and we recommend spending much of this money to reduce emissions and create jobs, especially in the highest-emission states.

If Congress adopts a fair, effective policy when it returns in September — one with the right answers to these three questions — we can do our part to fight climate change, put money in the pockets of most Americans, and start building a green economy.

Source: www.grist.org

Temperatures Rise as Sceptics Want Their Day in Court

New Zealand’s National Institute of Water and Atmospheric Research (NIWA) faced a legal challenge by sceptics group Climate Science Coalition. The coalition has launched high court action over the institute’s climate data, calling for the country’s temperature record to be set aside and for NIWA to produce a “full and accurate” temperature record.

By Brian Williams in the Courier-Mail (17 August 2010):

SCIENTISTS have hit back at climate change sceptics, with a paper affirming the case that greenhouse gas emissions from human activities are the main cause of warming.

The Australian Academy of Science yesterday went on the front foot to clear up confusion after challenges to warming theories.

It came as New Zealand’s National Institute of Water and Atmospheric Research faced a legal challenge by sceptics group Climate Science Coalition.

The coalition has launched high court action over the institute’s climate data.

Academy past president Kurt Lambeck said the scientific statement aimed to boost climate change understanding.

The role of CO2 in the atmosphere was well understood and unless greenhouse gas emissions were reduced, an upward trend in global temperatures would continue.

“The available evidence implies that greenhouse gas emissions from human activities are the main cause (of warming),” Prof Lambeck said. If emissions continued at business-as-usual rates, temperatures would rise significantly.

Records over millions of years showed that a stable climate could not be taken for granted. Measurements over the past 100 years showed that as CO2 levels rose, the Earth also warmed.

Scientists say it is important to have debate on climate change, but spurious attacks were taking up an increasing amount of time to debunk.

In NZ, the coalition’s statement of claim calls for the country’s temperature record to be set aside and for NIWA to produce a “full and accurate” temperature record.

NZ Climate Change Research Institute senior researcher Professor Andy Reisinger said NIWA had checked its records, validated long-term trends with thousands of meteorological stations around the world and answered innumerable queries.

“The coalition has not put forward any clear and consistent scientific arguments against this local or global temperature trend; has not published its views in scientific peer-reviewed journals; has not disclosed its own scientific methods by which it claims to show that there has been a cooling rather than warming; and its members have little credibility,” Prof Reisinger said.

“The High Court action will cost taxpayer money to defend the obvious against the obscure and ridiculous.”

Massey University’s Ralph Sims said he had yet to find a recent peer-reviewed paper authored or co-authored on climate science by coalition commentator Bryan Leyland.

Source: www.heraldsun.com.au

Lucky Last – Breaking the carbon addiction

It is truly unfortunate that during this important election campaign, neither of the two major political parties is offering any real concrete steps to begin the crucial process of de-carbonising the Australian economy, writes Michael Molitor in Climate Spectator.

Despite increasingly robust claims by leading scientists that we are running out of time to lower our carbon emissions, that the cost of responding is rising fast over time, and clear statements from major companies and business leaders that this is the greatest investment opportunity of all time, Tony Abbott and Julia Gillard have both lost the carbon plot.

For Tony and Julia, let me suggest a ten-step plan in order to put Australia at the forefront of the world’s biggest economic growth opportunity and to help ensure that a widespread global carbon correction is avoided.

Although it is easy to bash the Greens for apparently blocking passage of the meaningless and useless emissions trading scheme, upon closer inspection most of their climate change policy proposals fit nicely with the ten point plan outlined here. I want to create real and sustainable wealth in Australia with a robust carbon price – I leave it to you to guess which party will be getting my vote on 21 August. Read More

Breaking the carbon addiction

Michael Molitor in Climate Spectator (17 August 2010):

It is truly unfortunate that during this important election campaign, neither of the two major political parties is offering any real concrete steps to begin the crucial process of de-carbonising the Australian economy.

Despite increasingly robust claims by leading scientists that we are running out of time to lower our carbon emissions, that the cost of responding is rising fast over time, and clear statements from major companies and business leaders that this is the greatest investment opportunity of all time, Tony Abbott and Julia Gillard have both lost the carbon plot.

The default position for both major parties is to do nothing as, in their view, Australia accounts for less than 2 per cent of global emissions and we are currently making a lot of money exporting carbon-intensive commodities (coking and thermal coal) and products (alumina) with “cheap” coal-fired electricity.

The Prime Minister wants to throw about a billion dollars at connecting renewable energy projects to the grid, and another $100 million at improving the energy efficiency of buildings.  At the same time, the federal government is spending billions to ensure that we can ship more and more coal overseas and continue operating our large and inefficient coal-fired power plants.

Pavan Sukhdev, an international expert in attempting to put a price on nature, recently gave a few public lectures in Australia. His robust thesis is that we are spending the natural capital of the planet faster than it is being regenerated and that these real costs are simply not accounted for on the balance sheets of companies or national economies.  Extending his argument to the Australian economy has staggering ramifications and suggests that we are actually experiencing negative growth.  That is, if you reflect the full cost of the loss of natural capital on our national accounts, Australia’s total GDP is less than zero.

The full cost of coal to Australia, for example, is actually larger than the $1 trillion of GDP that is generated by the Australian economy every year. This imbalance will ultimately be corrected by physical changes in the climate system, large-scale economic corrections, or both.  Ross Garnaut and Lord Stern both caution about the gargantuan scale of the damages that would be associated with either type of correction.  Avoiding this outcome must become the paramount focus of our national government.

For Tony and Julia, let me suggest a ten-step plan in order to put Australia at the forefront of the world’s biggest economic growth opportunity and to help ensure that a widespread global carbon correction is avoided.

Step 1:  Recognise that coal is the world’s most expensive energy carrier. I know this one is difficult, because it means letting go of our large supply of the world’s reserves, but coal has not been commercially viable for decades.  Coal is artificially cheap because its production and use is directly subsidised, as well as its transport. If you price in the full health, social, economic and environmental costs then you quickly realise that coal is the world’s most expensive energy carrier – not the cheapest.  Eliminate all fossil fuel subsidies and force coal companies to bear the full cost of its extraction, use and waste and you will see how fast renewable and distributed energy technologies grow and flourish.

Step 2: Our national energy system is about 10 per cent efficient – only 10 per cent of the energy that passes through the system finds its way to perform useful work. This should be considered a national disgrace and not something we continually celebrate.  Energy regulators have recently approved retail electricity price increases of up to 40 per cent to cover the billions of dollars that will be spent to keep this staggeringly inefficient system operating.  Please note that this investment does not improve the system’s efficiency or expand its capacity, it only allows the old inefficient system to keep running.

Tony Abbott does not want Australians to have to pay for a carbon price through, for example, higher electricity prices, but he has no problem forcing us to pay substantially more for a 19^thCentury energy system relic. Change the focus of the introduction of a carbon price through regulation from one which primarily addresses climate change to one which moves investment into a 21^st Century smart grid-distributed energy system that is more than 40 per cent efficient by 2015.  If we can afford $43 billion for a National Broadband Network then we can certainly afford a similar amount for a National Smart Energy Network.

Step 3: Start the process of a full phase out of all coal-fired power plants in Australia. Premier Brumby wants to spend a few billion dollars buying and quickly retiring the biggest source of carbon emissions in Australia – the Hazelwood brown coal-fired power plant in Victoria’s Latrobe Valley. A robust carbon price would rapidly correct the inflated value of these Victorian-age clunkers and make the buy-out process much cheaper. Raise tax revenue from either a robust carbon tax or a carbon trading scheme (without a large free allocation of permits) and spend the money on retiring the biggest and least efficient coal-fired power plants once their valuations reflect their true costs.  Carbon prices need to start at around $25 per tonne of carbon dioxide in order to sufficiently change the market conditions that keep dirty coal alive. 

Step 4: Everywhere possible, start to fuel switch the remaining coal-fired power plants to burn our abundant supplies of gas. Provide both carbon price relief and other tax relief to power companies who invest in these changes early. The goal should be to eliminate all coal-fired power generation as soon as possible, but no later than 2015. This also means not approving any new coal-fired power plants. Burning gas also produces carbon emissions, but the emissions are reduced almost by half and this helps buy time until zero carbon energy sources are fully commercial.

Step 5:  Invest substantially more public dollars into large-scale renewable energy projects. The Solar Flagships initiative is a good start, but simply not enough.  We also need more diversity in the technology mix so more funds should be available to geothermal and wave energy projects on a scale commensurate with their ability to deliver large-scale de-carbonisation benefits quickly.  Think of these funds as investments into the biggest energy market opportunity in history and a means to quickly make up for the revenue lost from kicking the old business of coal to the kerb.

Step 6:  Recognise that carbon capture and storage is a waste of time and money.  No one working on this technology believes it will be commercially viable on any scale meaningful to the carbon management challenge.  Former climate change opposition spokesman Ian McFarlane made the same statement just before Malcolm Turnbull lost his Liberal Party leadership last year. If the US and China want to spend money on this technology then let them go for it. It does not make sense for Australia to pursue this option when we have so many better choices in front of us.

Step 7:  Move to leverage the massive opportunity around the production and export of sustainable biofuels. We now have an approved drop-in aviation biofuel that is the only option to allow airline travel to remain commercially viable and to achieve the industry’s stated objective of reducing their carbon emissions by half by 2050. Australia is one of a handful of countries that will be able to grow the large quantities of the plants and trees required to meet the global demand for aviation biofuels.  With Asia the region with the largest expected growth in airline travel, we are uniquely positioned to service this growing market opportunity. We need much better rules governing the production and use of biofuels in Australia and appropriate assistance to companies wanting to establish large-scale sustainable biofuel feedstock projects.

Step 8: Take improving energy efficiency seriously and create a national market-based scheme that trades in energy efficiency credits.  Most green policy initiatives never address the scale or timing of the new investment required to achieve environmental objectives. We need a national energy efficiency scheme that is capable of driving a few billion dollars of new investment towards improving how buildings use energy.  If the scheme is not capable of creating new market conditions that make it attractive for this level of annual investment, then it will be a waste of time. This is where most government environmental initiatives fail – they never drive sufficient amounts of new capital to solving the underlying problem. In most cases this does not mean using public treasury dollars – just changes to the tax regulations or a new market-based trading scheme.

Step 9:  Dick Smith is correct; we need a sustainable population policy for Australia. The cheapest way to abate carbon emissions is to have fewer people. We do not need more people to pay for the retirement of the baby boomers or to adequately support our national defence.  Companies that depend on wasteful and meaningless consumption want more people in order to be able to sell more to them.  Let the population slowly rise to 25 million and then move it back down to 20 million by 2020. We will generate more wealth with less people and allow our smaller population to enjoy substantially higher levels of well-being.

Step 10: Pursue fully electric vehicles and battery storage now, before these disruptive technologies force us to make the switch. For more than 90 per cent of Australian drivers, a battery-powered electric vehicle is not only the more environmentally responsible option, it is also going to be much cheaper.  Although our national electricity system is only 10 per cent efficient, petrol vehicles – once you subtract the energy used to move the weight of the vehicle – are only about 1 per cent efficient.  Yes, 99 per cent of the chemical energy in the petrol is lost to heat and other inefficiencies and only 1 per cent gets you to and from the supermarket. This makes your petrol vehicle the worst piece of antiquated technology you own and a very good reason to pursue 21st century electric vehicles.

Although it is easy to bash the Greens for apparently blocking passage of the meaningless and useless emissions trading scheme, upon closer inspection most of their climate change policy proposals fit nicely with the ten point plan outlined here. I want to create real and sustainable wealth in Australia with a robust carbon price – I leave it to you to guess which party will be getting my vote on 21 August.

Michael Molitor is the CEO of CarbonShift Advisory Pty Ltd, a Sydney based consultancy

Source: www.climatespectator.com.au