Because shopping shouldn’t require matrix algebra 9

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1. 

   Gary Gifford Posted 11:57 am
   12 Apr 2007

   Perfect analysisThat is the best summation of ANY issue that I have read in a long time.  
   Forget credits; the leakage, bureaucracy, corruption, political favors and underpricing in the EU have made the cap and trade system a dismal failure.  
   Carbon taxation at the well head (or tanker, or coal mine, or natual gas head) is the way to go.  Reducing payroll taxes and supplanting the lost tax revenue through taxes paid via higher prices for a fossil fuel intensive lifestyle is a true market based system for encouraging conservation.  
   I love this site:   carbontax.org
   
   Cheers,
   
   Gary Gifford

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2. 

   ngoddard Posted 7:49 pm
   12 Apr 2007

   Not so simple...The principle seems right - but you then have the opposite problem of giving credits for carbon-mitigating activites downstream of the tax or permit.  For example, coal is taxed at the minehead.  Without a credit to a power-company for installing carbon-sequestration technology, there would be no incentive to install such technologies.  Such credits would be open to the same mistakes and gaming of downstream taxing.  
   Since mitigation is in principle possible right up to the point of actually burning the fossil fuel, it is possible that the credit system could be as complex as a downstream tax system.  I guess the best way around this would be to not credit small mitigation activities (thereby penalising them) in favour of crediting just the big mitigation opportunities.

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3. 

   Gary Gifford Posted 8:24 pm
   12 Apr 2007

   It is simple... Without a credit to a power-company for installing carbon-sequestration technology, there would be no incentive to install such technologies.
   The power company doesn't neet a credit to invest in green energy or carbon sequestration.  The market will take care of that.  Say I, as a consumer, am tired of paying $.37 per KWH to my utility for electricity.
   Due to the taxes, it now will actually save me money if I install solar panels on my roof.  
   As a private investor, I can invest in a new CGCS plant, and this would be a good investment, as the plant operators would have tax revenues (credits) returned to them for the coal they used, thus making the plant more profitable.
   Or as a small operator I could expand my windfarm and make a bigger profit than before, because of the high wholesale price of electricity due to the taxes.
   
   Cheers,
   
   Gary Gifford

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4. 

   Gar Lipow Posted 3:04 am
   13 Apr 2007

   Sequestration - the exception not the ruleCase like your coal plant with sequestration are the exception, not the rule. It is MUCH simple to give a tax credit for the occasional sequerator, than force everybody to buy permits for day to day activities. If the power company builds a wind farm they pay almost no carbon tax: some carbon tax is built into the metal and plastic use to construct the plant). NO one thinks sequestration can be the primary solution. So better to make the exception a little more complicated and the dominant solution simple than the reverse.

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5. 

   Nigel Goddard Posted 9:36 am
   13 Apr 2007

   It is simple.... not!Gary, I take your point about consumer choice enabling more carbon-efficient technologies to displace less carbon-efficient ones.
   But the point you make about the plant operator increasing profits by installing sequestration technology and thereby getting tax credits is exactly the point I was making - you need to measure the sequestration amount downstream from Gar's ideal tax place (which is the minehead) at the point of us (which is the plant).  So, taxing upstream is better, but it doesn't get rid of all the need for downstream measurements and the associated opportunites for mistakes and gaming.
   So, I think we agree, yes?

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6. 

   Nigel Goddard Posted 9:49 am
   13 Apr 2007

   Re: Sequestration the exception not the ruleGar, the point of your original posting was taxing or permitting upstream being better than downstream - yes?  Not contrasting taxing vs. permitting.  I am commenting on the upstream vs. downstream issue.
   Clearly upstream is better.  Especially if as you say the need for downstream measurement of tax credits for carbon-mitigation is the exception rather than the rule.  But is it really going to be the exception?  Maybe initially.  But over time, because of whatever tax credits are arranged for mitigation activities, there is incentive to develop more and better methods of mitigation.  So we can predict that mitigation will spread (good!).  And there will be pressure to add tax credits for new mitigation methods (good!).  And all this mitigation will need to be measured - it's sort of the opposite of the problem of measuring the emission if you want to tax downstream.  So it's going to end up a complex system anyway.
   The only way out of this hole is if the non-carbon technologies (do they exist?  Even solar panels need energy to resource and manufacture) are so much cheaper than the taxed carbon-based technologies that people just stop using the carbon-based technologies.  So we can hope to get there eventually, but in the meantime we have the complex carbon-emissions and/or mitigations to measure, with all the attendent (as you point out) possibilities for mistakes and gaming.
   I'm not trying to say that upstream is worse than downstream, or that it makes no difference, just that we are going to have to have regulatory regimes to minimize mistakes, gaming, etc, in any case.

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7. 

   Gar Lipow Posted 11:37 am
   13 Apr 2007

   Sequestration vs low carbonOK - minor point first. Don't be misled by the fact that low carbon technology takes some energy to make. Even something as expensive as solar panels pay back their embedded energy in 2-4 years. Wind generators pay back their embedded energy in weeks to 18 months at most. In addition, as low carbon tech spreads embedded energy will drop, because of course steel making and so on will produce fewer emissions per unit manufactured.
   Major point - yes low carbon technology is going to predominate. Because before you get into either        clean energy or sequestration, the dominant force will be efficiency.  Electric Arc furnaces use make steel with less embedded energy, and fewer emissions than Basic Oxygen furnaces, even if the electricty is produced by coal. Insulation reduces emissions from building more cheaply than any source.  Overall, every study that looks at potential concludes that efficiency can reduce emissions more, and more cheaply than any other means. Then secondly, there are all sorts of sources that really are cheaper than sequestration. For example wind is slightly mroe expensive than coal, but it is cheaper than coal with sequestration.  Solar electricity from mirrors focused on heat engines in the desert is more expensive than  coal generated electricty or wind. But it looks like if you use the waste heat from the process for desalination, to produce fresh water for irrigation, you can compete with wind power, again producing electricity at a better price than coal with sequestration. Also sequestration has a number of gotchas. For example, dispose of captured carbon in the ocean and you contribute to acidifcation. Use old gas wells , and mines? Yes that will work, but not every well or mine is suitable, because many will slowly leak the CO2 back. You need to do close to a decade of surveys and tests to find suitable sites.
   Sequestration in soil with well managed agriculture and forests. Again this will work, but  what you can obtain from biological sequestration is not going match what we produce from fossil fuels. Every year we put into the atmosphere carbon and carbon equivalent that took nature 400 years to turn into fossil fuel. Ramping up natural processes is worthwhile (especially since it involves things like organic agriculture and responsible forest management that have other benefits).
   The most optimistic estimate I've seen of what sequestration can contribute is about 25%. And that involved assumptions I find highly questionable. Personally I think 95% emissions reductions, 5% sequestration is how it will end up. But even if you take the 75%/25% figure, taxing or permitting upstream makes more sense.

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8. 

   Gary Gifford Posted 4:10 pm
   13 Apr 2007

   It is simple...yesWe don't agree.  The idea of credits only applies to a sequestration scenario, because this is the only scenario that fossil fuels could be burned and not emit significant amounts of CO2.  The measurements that would be needed would only be how much CO2 is estimated to have been sequestered from a given amount of coal burned.  We know how much that coal was taxed, so we simply times the amount by the price by the percentage of co2 taxed to determine the credit.
   
   
   
   Cheers,
   
   Gary Gifford

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9. 

   Gar Lipow Posted 7:45 am
   22 Apr 2007

   SequestrationBut burning coal and then sequestering the carbon is more expensive than efficiency. Again, even in a sequestration scenario, the single biggest saving will still be from efficiency increases. Also wind power, at least up to a percentage of need is less expensive than coal with sequestration. Solar space and water heating is cheaper than coal with sequestration.  So an upstream tax or permitting system still keeps the larger part of the system simpler.

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