Cap and Trade — Complication and Bureaucracy That Won’t Help Clean Up the Environment
When 2GreenEnergy supporter Tim Kingston sent me this note on California’s “cap and trade” program earlier today, I’m sure he knew how I’d react: It’s simply a new way for smart, rich people and their lawyers to make even more money by manipulating the system and frustrating the intention of the people.
Yes, we the People want to reduce the outpouring of greenhouse gases into the atmosphere. No, cap and trade is not the way to get there.
Tim notes:
Craig: It looks as if energy prices in CA are going up, up, up. What’s interesting is that CA will be exporting its fossil fuel to the Pacific NW and importing hydropower from same. The net result will be lower emissions in CA but higher emissions in OR and WA. This is why we need a national carbon tax. Why (U.S. President) Obama is against this beats me. Have a great week!
Thanks, Tim. I fully intend to have a great week, even though news like this isn’t a terrific omen.
You’re absolutely right about a national carbon tax – preferably to be used as a blueprint for a set of international regulations in the same direction.
So, you’re asking why Obama is against a fair and practical system that will put a crimp in the expansion of the fossil fuel industry – the most profitable and powerful group of people in the world. And you’re aware that the oil companies employ more lobbyists than any other group in the known universe. Hmmm. Let me give the matter a bit of thought and get back to you…..
Seriously, I wish you a good week too.
China has just introduced a carbon tax. Should help us against our common rivals in fossil fuels.
It seems to me that it doesn’t take a lobbyist to point out that a unilateral carbon tax imposed in this country on our industries would plunge us into the deepest depression known to man. Hoping that China, India and Japan would hop on board is wishful thinking. Until that utopian state of bliss arrives, its every person and nation for themselves until we choke on our own detrius. Look how bad it is in Beijing. Bad air is not reason enough to forego economic expansion. We are in an economic war and nobody is going to lay down their weapons first.
Have a nice day and thank God for the air quality that we do have. The glass is half full.
There is a genuine validity to the statement that the cap-and-trade system would cause less economic disruption while accomplishing the same reduction in emissions.
It’s simple. There’s low-hanging fruit, and it’s more preferable to utilize all of that than it is to utilize some of that while also reaching for some of the fruit in the higher branches.
Consider this: A region has a coal power plant, a natural gas power plant, has class 3 winds, and an insolation of 5 kWh/m/d.
Solar would be costly in such a region, while wind would be absurd…
Under a carbon tax regime, the coal plant would be paying fortunes for its carbon load, while the NG plant would be paying quite a bit… and the only options to escape such payments would be for CCS – which would add far greater costs than the tax would possibly be. So under a carbon tax plan you’d see higher rates for electricity, as the coal power would cost a lot more, and the NG power would cost a little more. There’d be some dispatch switching from coal to NG as the prices converge… but very little would be done to reduce emissions, and a whole lot of economic penalty would be felt by the people who lived in that regions.
Under a cap-and-pay system, however… the coal plant would be able to invest in wind farms in class 5 wind zones, or in programs to help the locals better insulate their houses, and get carbon offset credits. On balance, those offset credits would cost less than the tax, and there would be less suffering from rate-payers, WHILE THERE WOULD BE POSITIVE MOVEMENT FORWARD ON REDUCING EMISSIONS.
Again, on balance there would be less economic disruption for the same overall good to the environment, or more good to the environment for the same amount of economic disruption.
It’s math, and it works.
But I’m far more of a believer in credits for emissions abated rather than taxes for emissions achieved.
The issue with either cap-and-trade or carbon taxes is that unilateral penalties will simply make the “playing field” even less level. So we’ll force cleaner and more expensive power here, and we’ll see yet more manufacturing jobs flee to China and SE Asia, where they are using extremely low-cost power fueled by 31% efficiency coal power plants with poor smokestack scrubbing systems.
The alternative would be to credit any installation based on the emissions that are projected to be offset over the first 5 years of operations:
Instead of a carbon tax of $20/ton, have a carbon CREDIT of $30/ton for the first 5 years. Then a new 3 MW wind turbine being erected in Kansas (assume 40% cf with ~12.5% of the potential energy curtailed for a net of 35% cf) might get credited for the abatement of ~39 GWh of coal-sourced electricity over 5 years, and ~7 GWh of natural gas-sourced electricity… for a combined projected carbon abatement of ~43,000 T-CO2, for a total credit of ~$1,290,000.
That same credit could assess a 10 MW solar field in Southern California (~20% cf) and credit that for a projected abatement of ~84 GWh of NG-sourced electricity and ~4 GWh of coal-sourced electricity, for a total of ~46,000 T-CO2, and a total credit (subsidy) of ~$1,380,000.
That would dramatically push development of renewables – especially as it could easily be scaled down to residential improvements, such as insulation or appliance upgrades, or applied to things such as replacing a cheap NG peaker with a 61% CCGT and uprating the local hydropower dam to serve as balance power. It would work… without just hitting consumers with a blanket higher bill and hitting manufacturers with a much more difficult market imbalance.
For what it’s worth, it would be very nice to see these economic disincentives set up for all harmful emissions. While we are all concerned about CO2, CH4 is a more potent greenhouse gas, and after CH4 leaks are considered NG is often quite similar to coal in terms of total greenhouse forcing… but neither CO2 nor CH4 damages society as much as SO2, NOx, Hg, Cd, Pb, halides, mercaptins, carbon nanoparticles, and radioactive isotopes that are all belched out from coal plants in large volumes (NG peakers produce a huge amount of NOx, and some other acids… while next-gen CCGT’s produce very little of any of these emissions. ICE vehicles burning gasoline produce very little of any of these, while diesel engines produce some carbon nanoparticles).
Whether we’re talking cap-and-trade, emissions taxes, or emission abatement subsidies… we NEED to talk about more than just CO2. That’s not the most costly externality of fossil fuels.