 | Peak Oil In The Australian | TOD: Australia/New Zealand | Shedding Light on the Question of Reserves Growth |  |
15 comments on The Bullroarer - Thursday 6 December 2007
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I've been saying for years that carbon taxes are much better than cap'n'trade, but to no avail (imagine my shock).
The problem is that cap'n'trade attracts financial players, who add their weight to the push to do something about global warming (which is good).
The bad thing is once that market is active (and huge) we'll face institutional incentives to keep carbon quotas fixed, not keep reducing them. Then we'll have the fossil fuel industry and the financial industry to content with. Sigh.
I live in hope the tech industry's desire to eat the energy industry will eventually win the day...
Do you know how cap 'n' trade would apply to the transport sector?
Firstly a political decision would have to be made to include liquid fuels (petrol, diesel, avgas, auto-LPG etc) in the scheme. The carbon intensity not only varies by fuel type but even with petroleum grades(eg Tapis) but it could be say 1.5 tonnes of CO2 per 1 tonne or 7 barrels of crude. The carbon spot price cannot be known in advance but say it was $40 per tonne of CO2 that might work out at say 4c per litre. Other government price influences include fuel excise, GST and local subsidies.
On the other hand the carbon charge in light rail powered by coal fired electricity should work out a lot cheaper per passenger-kilometre. An interesting point is that if the cap is strict (ie no whacky offsets) then using it up early in the year could make the cost of all fossil fuel skyrocket including transport. That hasn't happened because existing schemes are lax.
It seems then that all fuel users would be competing on the same terms, with no regard for the purpose. e.g. emergency services, tradesmen, couriers would be competing with road racers, Sunday drivers, joy flight operators and petrol heads for ever diminishing quantities of more expensive fuel.
Whoever has the deepest pockets wins.
Doesn't some form of allocation or rationing system seem preferable?
I agree. We could end up with carbon debit cards that allow say;
20L per week of petrol
5 khw per day of peak period electricity
Any extra carbon allowance will have to be bought or penalised.
I think we have to discriminate between intended uses. A farmer needing diesel to run his business should be treated differently to big truck racers.
Discretionary usage by private persons would be at the bottom of the pecking order. Sob, no more interstate football trips for me.
It's a case where the unrestricted operation of the free market would give sub-optimal results.
If a debit card comes about think of the animosity caused if the govt continues to encourage population growth and all existing people's allowances are reduced in addition to the expected depletion rate.
I don't see why a farmer should get it cheaper than a regular person. That's what we do with water - the more you use, the cheaper it is. And that's got us our current water shortages, which I don't think is a good result.
A relatively small carbon tax could actually raise quite a lot of money without common people even noticing, while large carbon users could with small efficiencies make up for it. For example, the average emissions per Australian are about 25 tonnes of CO2e annually. $0.01/kg would raise
25,000 x 0.01 x 21,000,000 = $5.25 billion
We could raise about half that simply by taxing the major emissions causers, for example it'd be about $0.01/kWh for coal-fired stations, $0.022/lt for petrol, $0.25/kg for meat, and so on. This would be charged at the retail end of things, like the GST. We could raise from this about $3 billion annually.
With that money, we could invest in renewable energy, mass tranist and so on. And that amount - a couple of hundred bucks per Aussie - is not going to bankrupt any common people, while it will force large companies to seek efficiencies in fossil fuel and electricity use.
We'd just raise the tax by a couple of cents a year. Pretty soon everybody would be clamouring for renewable energy, more mass transit, and so on. The market demand combined with the carbon tax-generated subsidies would deal with things very effectively.
I agree - a steadily increasing carbon tax is the engine that can solve both global warming and peak oil (given enough time).
I like the idea of a carbon tax to reduce demand, but if there is not enough petrol to go around how can you justify price being the method of allocation rather than need?
Should the Porsche hill climb club have preference over Meals On Wheels?
Food rationing in war-time seems quite morally defensible.
Do you think the military, police, emergency services etc will bid in the open market for ever diminishing supplies at ever higher prices? I think not. They will have first bite of the cherry and the scraps will be thrown to the public chooks.
I stick to my point that some uses are more important than others and we must discriminate on that basis rather than merely fighting it out in the market place. The good guys don't always have the most money.
The thing is that if you have a relatively small tax, it hits small users lightly, and heavy users heavily. Petrol already jumps up and down five cents just on a weekly basis through the strangeness of the servo market, so if you've a carbon tax of five cents, the people who use 45 litres a week won't even notice, but the people who use 450 litres or 450,000 litres certainly will. So Meal on Wheels and Bob driving to his minimum wage dishwashing job will be fine, but taxi drivers and trucking companies are going to start looking at alternatives and efficiencies.
Rationing's quite morally defensible, but I don't see that it's needed right now. And the flipside to rationing (or high taxes) is the creation of a black market - and black markets favour those who are already wealthy, so again this time you really do get the problem that the Porsche driver gets fuel but the Meals on Wheels people don't.
I do think it's likely that government services will be given preference over private citizens in a limited supply situation. But again, that's a problem with rationing, not with carbon taxes.
And we're talking about what we think should happen, not what we think will happen. Neither a carbon tax nor rationing is politically likely.
Rather, I think that as the oil supply dwindles and its price rises, governments will actually stop taxing it and start subsidising it to try to keep the price low and the public's howls of outrage quietened. The prices will rise nonetheless and we'll have a recession, with many cities in the West looking a lot like a good chunk of Detroit, with abandoned homes and factories. Some cities will do better, and manage to get a good supply of fuel to keep everything going, and shanty towns will build up on the outskirts of these cities.
But we're talking about coulda woulda shoulda, not about willya.
Leaving aside my fundamental disagreement with this whole line of thought, you should allow for green power here.
I happily pay extra for 100% green power, and as a result I would firmly resist any sort of rationing of electricity - I'm not emitting any carbon and as far as I'm concerned I can use as much power as I like, when I like.
(Before you hurl any abuse my way I'll note that all my appliances are as energy efficient as I can get, and I very rarely run the air-con - but this is as much an idiosyncracy as it is something I think I need to do).
With what line of thought do you fundamentally disagree?
The idea that rationing anything actually works - especially when there are substitutes available.
Rather than focus people's attention on trying to grab a share of a fixed or dwindling cake, I prefer to make them aware of other alternatives.
In this case, while I believe oil supplies are limited and annual production will start to decline in the not too distant future, I also believe there is a lot of energy available from alternatives, and I'd rather see the attention of people, government and corporations directed towards harnessing these.
I think the psychology of this works out a lot better in the long run...