"Conventional" environmentalists have been advocating for "Carbon Pricing" as a way to cut CO2 pollution emissions, most notably in the electricity sector, and as a way to deal with CO2 pollution induced Global Climate Change. Of secondary (but considerable) importance "Carbon Pricing" is assumed likely to stimulate our economy by providing more of an incentive to be energy efficient, and also to stimulate the production of non-polluting renewable electrical energy in order to replace polluting energy sources, such as coal, natural gas and nuclear sourced electricity. However, the "carbon pricing" approach will be more costly and impose larger costs on the bulk (and generally the less wealthy portion) of our population than by simply allowing renewable energy to be priced as a function of its real production costs in conjunction with giving it priority access to markets. Those higher potential costs and/or unfair distribution of costs and opportunities resulting from "carbon pricing" approaches will result in an inability to make them "politically viable". In other words, it is unlikely that carbon pricing at levels that would have the desired effect on decreasing CO2 pollution and increasing renewable electricity production could ever get imposed via legislation.
Furthermore, without a primary emphasis on job creation as "Job 1", any legislation aimed at curbing CO2 pollution in the U.S. is probably either doomed to fail or an absurdly difficult proposal, despite the best intentions and the moral, ethical, economic and environmental logic of the promoters of such policies.
Perhaps environmentalists should attempt to build a huge base of support in renewable energy production, renewable energy device manufacturing as well as energy efficiency (Green Jobs/Green Economy) sectors before concentrating on "fossil fuel/nuclear energy demand destruction", where the real external costs of such electricity sources get added to their prices. Only when millions of people are connected via paychecks/business income, family, neighbors (i.e. either they have Green Energy jobs or know someone who does have them) and community economic viability might the political power of the polluting energy sector realistically be challenged. Or so it seems.
Introduction
2009 and apparently 2010 will produce no significant and effective energy and climate legislation in the U.S. It was nice that a large fraction of the Democratic Party tried for something with at least good intentions with respect to dealing with CO2 pollution, foreign oil importation and a real (U6 measure, not U3) unemployment rate that is getting more grotesque and pathetic as the time rolls by. But, maybe it's time to examine what might work as well as why efforts such as the Waxman-Markey ACES bill plus Senator Kerry's and Senator Cantwell's well meaning efforts became more like the theme song to a Cheech and Chong Movie ... "All My Dreams Went Up In Smoke"... And those legislative efforts were so mild in comparison to what needs to be done, too...!
Most of the liberal efforts at taming the CO2 pollution of the U.S. were based on the idea of, in effect, taxing CO2 pollution, and also mandating a quota of renewable energy into our energy "mix" (Renewable Portfolio Standard = RPS, Renewable Energy Standard = RES) that would increase as time goes along. There also were efforts aimed at stimulating energy efficiency - often funded with money from the sale of or taxation of CO2 polluting or other polluting based energy. In some instances, quotas on the CO2 pollution emitted were proposed, or auctions similar to what worked for SO2 pollution from large coal burning facilities. In addition, there have been proposals to set up massive gambling operations to ration/speculate/apportion the "Right to CO2 Pollute". To date, not much has been proposed for the LEADING cause of CO2 pollution in the U.S. - and the most lucrative to supply, at something like $500 billion per year at the wholesale level ($75/bbl) - oil, and those incredibly useful oil products like diesel, kerosene and gasoline. Usually there are subsidies (existing or increased ones) proposed for renewable energy efforts, often with the money for these subsidies coming from the non-renewable CO2 polluting fuels, or else, in effect, from (mostly) poor and middle class taxpayers.
These efforts at lowering the amount of CO2 pollution are morally and ethically the right thing to do, in that they attempt to deal with and alleviate a major problem - Global Warming. And the science underlying the Global Warming hypothesis is sound. The Global Warming hypothesis - human made CO2 dumped into the atmosphere is causing temperatures on the planet's surface to rise - is a scientifically valid hypothesis, right up there with evolution and special relativity. And there will be a whole lot of nasty consequences popping up in increasing severity as time goes along - and at an exponential rate, too - as a consequence of CO2 pollution induced Global Warming. The longer that doing something about CO2 pollution is avoided, the worse things will eventually get, climate-wise, as well as for all things climate-related, like agriculture, sea levels, drinking water supplies (unless obtained from sea-water), etc. As for the ethics and morality of dumping this on future generations so that present pollution related low energy prices, consumption levels and more importantly, PROFITS from those operations can be maintained - those are not good, either.
So why can't anything get done about this? Could this commonly-held approach to dealing with Global Warming/Climate Change that has been pushed by environmental groups, liberal/progressive groups as well as like-minded and sort-of like-minded legislators be wrong (carbon pricing and renewable energy quotas), even if the goals are ever so right? And if so, what would be a better approach?
Discussion
Here is just the math projection of the present CO2 pollution rates, extrapolated into the future (it's an 8th order polynomial equation based on 47 data points of CO2 concentrations in our atmosphere, up to 2005):
This might actually be a best case scenario, as it does not directly incorporate all those feed-back loops, like more forest fires resulting from warmer air leading to drier soil, or warmer ocean waters leading to less ice, less plankton growth and lower surface water pH resulting in lower rates of CO2 dissolution, etc. Or economic changes that lead to temporary spikes in polluting energy use in third and second world countries, like China and India ("Chindia") maxing out on coal consumption. On the other hand, if petroleum prices once again go bonkers in 2012-2014 (like 2007-2008), that will once again lead to the Greater Recession (as opposed to the current "Great Recession"), which will probably slow down worldwide petroleum consumption. And with the demand destruction of higher oil/higher natural gas and eventually higher coal prices... less CO2 pollution will happen, but that seems to be a horrible way to limit energy usage.So, the science is down pat, and a quick examination of the mass balance around CO2 in the atmosphere shows why CO2 levels in the atmosphere are rising. CO2 accumulation (can be positive or negative) equals CO2 in minus CO2 out. The primary way CO2 is removed from the atmosphere is via absorption in the ocean, once the land is covered in trees (although destruction of forests just acts like burning coal...). But if the rate that CO2 is being dumped into the atmosphere is greater than the rate that the top 100 meters of the ocean (called the mixing layer) will consume it, well, positive accumulation happens, as does an increase in CO2 concentration in the air.
Next, a simple energy balance will show that when more energy is coming from the sun (mostly as ultraviolet to visible wavelength photons, which get absorbed/converted eventually into ambient temperature infared photons) than is being emitted into outer space as longer wavelength photons, well, that means there is a net accumulation of heat. The current net energy accumulation is about 1 watt per square meter of surface (referred to in climate-speak as a "forcing" - see James Hanson link). What happens next is that the increase in heat will go towards melting ice, and once the ice is melted, then water temperature will rise (due to the size of the earth and it's spherical shape, a bit of both happens until the ice is mostly gone). The energy accumulation happens because photons with wavelengths/frequencies corresponding to the -20 C to 40 C range have a harder time making it past CO2 molecules, which absorb strongly at 14.5 microns (690 cm^-1). It's the Blackbody Radiation Law meeting the Beer-Lambert Law. As the earth gets warmer, the average ambient temperature photon wavelength moves to more energetic levels (shorter wavelengths), by-passing this "photon gauntlet" (methane also absorbs super intensely near that wavelength). But this re-equilibration could take a long time to occur...
As for the ethics and morality of wiping out about 1/3 of the species on the planet by raising the surface temperature of the planet too much and adjusting the pH of the mixing layer ocean water (a result of too much CO2 being absorbed at too fast a rate due to too high an atmospheric CO2 concentration by the ocean surface layer) by making it more acidic - well, not good - actually, pretty detestable, and all for pursuit of slightly cheaper energy. Or of drowning out lands where close to a billion people live (= most of the port cities of the world). And of trashing the food growing potential of much of the tropical and near tropical regions of the world, where the vast majority of humans on the planet currently reside. Well, that just can't be good, either....
But appeals to the business and political leaders of the U.S. don't seem to cut it, or at least haven't to date, and those appeals are also showing no signs of doing so in the near future. Demonstrations and media events... we've had those, and the Law of Diminishing Returns seems to be in effect, and that's before the corporate world initiates various forms of retaliation and econmic terrorism/actual police/military repression tactics. Plus, when the same old approaches don't seem to work, it's harder to beat that mule some more and try to make it work even harder/carry a bigger load. While most of those business leaders/wealthy people in this country weren't elected, supposedly most of the politicians were elected by various groups of people. Not necessarily by everybody and in a fair way (money seems to talk really loudly, and now corporations are "people", too), but elected nevertheless. If the vast majority of the people thought that Global Warming was a big priority, we would have a differing mix of politicians and probably business/civic leaders, too. That we don't have a differing mix, and that there is a likelihood that the NEXT mix of them in the 2010 elections will suck even more with regards to being pro-Warming and pro- CO2 Pollution (as in, more CO2 or at least continued rate of CO2 pollution proponents), also does not bode well (although, there are more optimistic views...) . And this leads to the conclusion that maybe a better approach should be tried.
And so, what if only a minority (and not that big a minority, either) of Americans ARE scientifically correct, ARE morally/ethically correct about Global Warming, and more importantly, are willing to do something about that, such as pay higher prices for energy so that this energy can come from renewable energy? Should we be prepping for the day when we can finally say "Told ya!" to that present majority who heard but did not listen, or to future Republican Party/Teabagger people and that even more dreadful thought, their "leaders"? Whooppee!
But, speaking of the ethics of Global Warming, is that approach of advocating what has not worked/is not likely to work for the next few years an ethical way to proceed? Until the majority of the U.S., and especially enough "moderates" and "conservatives" finally get hip, should we stick to our principals and insist on "CO2 Pollution Taxes", higher petroleum usage taxes, should we put an ever shrinking (and fast shrinking at that) quota on how much coal can be burned to make electricity, put quotas (RPS, RES) on how much non-pollution sourced electricity must be used (more is OK, less is not)? Should we ration how much petroleum will be sold, and in effect, determine how much car driving can be done? Even if this degrades the standard of living for most Americans (as it probably won't affect the wealthy much, except with regards to the difficulty of transporting low cost help to and from mansions and their favorite fast food joints). Do you think it possible to sell a legislative program based on lowering the standard of living for most Americans? Even if it is for their own good?
What if the current environmental tools being promoted just won't be politically viable? Is it ethical to continue to pursue them? Is it moral or immoral? Is it mostly an exercise in feeling righteous? Shouldn't policies that are doable and proven to work in other countries that deal with Peak Oil AND Global Warming be pursued instead? Something to think about as the October 10, 2010 (10-10-10) media event gets closer and closer.
What's Wrong With "Carbon Prices", and the RPS/RES Strategy?
Aside from poor performance and expensive but mediocre results? First, let's examine "Carbon Prices", which is an advertising term (as in making the concept easier to sell to the public) for "CO2 Pollution Taxes". The idea is to cause demand destruction on fossil fuel consumption by making that consumption more costly, and to incorporate some or all of the "external" costs of their usage which are currently avoided nowadays at the present "internal costs". In some ways, failure to fully include the external costs is like fraud/phony accounting, and this failure has actually led to greater fossil fuel consumption (low prices encourage more consumption), and subsidized their usage. It has also discouraged the possible use of alternatives to those polluting energy sources, especially when those "alternative competitors" can't offload external costs of that magnitude onto others or society in general and future customers/consumers. For example, those external costs for coal usage include $12 billion/yr in subsidies and tax avoidance, $62 billion/yr in particulate/acid gas/heavy metal pollution health related costs, and an estimated $170 billion/yr for CO2 pollution at the Stern Report value of $85/ton of CO2 for social cost of CO2 pollution. The external costs for petroleum include over $200 billion/yr in military protection/oil war costs, and roughly $200 billion/yr for the social cost of CO2 pollution from burning petroleum. Those are significant subsidies.....
These are all very valid and and in many ways, morality based considerations. There will no doubt be debate about the rate that these external (and now, for the most part, avoided) costs can be incorporated into the prices for these fuels, but it is known that is the price of the energy goes up a lot, usage will drop a little. And if a lower cost/lower priced renewable energy is available, it should be able to substitute for the polluting energy... but until all of those external costs are made internal, few renewable sources (some paid for hydroelectric facilities like Niagara Falls) can compete with coal as a source for electricity.
There are big problems with this approach of "carbon pricing". Firstly, it concerns the distribution of who gets affected (disproportionately on poor and middle class people, who have already seen their standard of living drop over the last decade). Secondly, this will essentially cause ALL energy prices to rise, or at least electricity prices if the oil problem is ignored, and those will need to rise by a large percentage before some renewable sources become price competitive. For example, until coal prices rise by the equivalent of about $170/ton to $220/ton (eastern coal basis, presently about $50/ton), causing a 6 c/kw-hr rise in generated electricity pricing, the lowest cost renewable energy source (onshore wind) will not be able to compete unless it gets subsidies, too. But this will not be of any help to higher cost renewables, such as solar thermal, photovoltaic and offshore wind. And the amount of wind power enabled when half of the required coal price rise has been imposed... none!
The adverse impacts on the less well off issue is dealt with using the "cap and dividend" proposed system. In this, the proceeds from CO2 pollution taxes/fossil fuel taxes are collected and then mostly given back to the U.S. taxpayers on a per capita basis. So far, there has not been not much indication on what will happen to industrial or commercial/governmental/academic electricity consumers - presumably they pay, but get nothing back. The CO2 taxes end up getting returned to the public in a way that injects money into poor and middle class taxpayers/citizens, which is good. But that will not lead to any renewable energy installations, only possibly some energy efficiency spending/investments. If some of the money collected from CO2 pollution fees is invested in renewable energy production systems (and WHICH of kind renewable energy production systems gets subsidized matters a great deal), then less is able to be "dividended". And the temptation to use that money for other worthy efforts will be enormous.....
Another approach that has been used is the "auction" system to selling "CO2 Pollution Permits". So far, a great example of this is the RGGI system (see auction results), but mostly what has been done is raise some money for states that are currently revenue starved. It has not raised the cost of coal based electricity perceptibly, since that last auction (#8) was for $1.88/ton CO2, and this has fallen steadily (Auction #3 was $3.51/ton). To date, $663 million has been raised in all 8 auctions, but the average price ($2.67/ton) only corresponds to a $6.4/ton of coal price increase, or a 0.23 cents/kw-hr price bump. This will not appreciably discourage any electricity use or facilitate any new wind farms, though the money may eventually be spent on insulating houses, and that may allow a small amount of electricity usage to be avoided. Of course, in deregulated electricity systems, lower demand leads to lower electricity prices/lower coal prices, negating the RGGI impact on less CO2 pollution, and maximizing the use of the lowest cost source of electricity for most, which is coal....
As for the effectiveness of demand destruction, it varies depending on how indispensable the item is that is being "destructed" (termed price elasticity). For example, with electricity in NY state, a drop in demand of 5% led to a 50% drop in generation prices (more or less now at rock bottom), and at these prices, only coal and nuclear are reasonably or barely profitable. of course, aside from old hydroelectric facilities, renewables are thoroughly unprofitable at these prices.... Doubling the price of oil (as in 2007-2008) also lowered oil consumption by about 5%. So, while every bit of reduced energy consumption is good, prices have not gotten high enough to cause a 50% drop in demand for oil - and oil is the worst CO2 pollution source and biggest money drain for our country. And if oil prices begin to exceed 4% of the world GDP, Global Recessions seem to be a consequence. That is not good, either, as most people in our country do not feel like they/we have gotten out of the Great Recession that started during the waning years of George Bu$h 2's reign of error/reign of terror.
An example:
Let's say that coal sourced electricity priced at 3 c/kw-hr is barely profitable, as is wind at 9 c/kw-hr (unsubsidized basis). To make wind competitive with coal based electricity, prices for coal based electricity need to increase by 6 c/kw-hr. If this is done at 1 c/kw-hr per year, this will take 6 years before wind turbines are competitive. For projects like the 1.1 MW SUNYAB PV array, a price near 63c/kw-hr would be needed. That's 60 years....and not likely to happen. The 1 c/kw-hr/yr coal price rise will result in almost all electricity rising in price by 1 c/kw-hr/yr. Let's say that works for 85% of the U.S. electricity supply (some hydroelectric and nuke electricity stays at present levels due to supply contracts). This means about $31 billion/yr for the initial year, up to $186 billion to the point where wind becomes competitive; odds are, there would be a similar effect on prices where the electricity cost rise can or has to be passed along. Of course, once coal demand drops, prices will drop, so then another year will be needed before coal once again becomes less competitive...unless co-generation is involved (using the waste heat as an income source). For places like Kodak Park, an electricity tax of 12 c/kw-hr would be needed to stop coal usage for economic reasons, since a large part of the revenue is based on delivery of steam (thermal energy), not just electricity....
That same CO2 pollution tax logic would also apply to natural gas (Ngas), but because of the way natural gas is priced, all Ngas sourced electricity would also rise. Nevertheless, governmental revenues would be about $200 billion/yr extra at year 6 via this gradually rising CO2 pollution tax ($16 billion/yr extra for the Ngas to make electricity derived CO2). However, consumer prices would be another story....
The Other Approach
Instead of raising everyone's electricity prices via taxing on coal and natural gas (2 c/kw-hr for Ngas for each 6 c/kw-hr of coal), electricity prices for renewables could be increased to the point where subsidies are no longer needed (approximately 9 to 10 c/kw-hr on average). At present, about 2.5% of the country's electricity is provided by wind turbines. If the current "going rate" is about 3 to 4 c/kw-hr (lots of subsidies, lower cost items/lower cost capital), prices would more than double (at a cost of $4.6 billion/yr) if they went up by 6 c/kw-hr. This pales in comparison to the needed $186 billion/yr increase just to get to the point where wind energy would be economically competitive with coal and possibly where Ngas , wind and coal would be competitive. The 1 c/kw-hr/yr electricity price rise would be a 7%/yr price rise for NY State (retail basis), or a 16%/yr price rise for places like Iowa and Nebraska (retail basis) - see the EIA Electricity Page map.
Let's say on average 2% per year of our nation's electricity was converted to wind, or other renewables with the same production cost as onshore wind. This would mean that an extra $4.42 billion/yr for each 2%/yr (8.4 GW/yr average continuous basis) of the national electricity (renewables addition) converted to non-polluting routes would be paid by electricity consumers - this would add 6 c/kw-hr for 2.5%/yr of the country's electricity onto customers for new wind derived electricity. Another way to picture this is a 0.15 c/kw-hr average rise in electricity prices, or about 1% (NY retail prices) to 2% (Iowa retail prices) rate of electricity price rise. In 10 years, the extra cost would amount to $44 billion/yr to the nations electricity customers, but at least 20% of the country's electricity would be from new, non-hydro renewables (about 84 GW). In terms of capacity at a 33% operating factor, that would be 252 GW of wind capacity, and an investment of around $0.5 TRILLION dollars (all with no government tax based subsidies, no less). Job-wise, that adds up to a need for about 800,000 direct jobs to make those 25,200 MW per year of wind turbines (or similar priced RE systems) with an average of 8.4 GW of new non-polluting electricity installed each year.
While this would most likely initially replace a lot of natural gas based electricity, some coal and possibly some nuclear would also get replaced. And since the country now uses Ngas to supply 20% of our electricity....after this point, coal based units would start to get replaced.
Lets assume that the wind effort replaces non-renewable on the half coal/half Ngas basis (42 GW Ngas sourced and 42 GW coal sourced electricity). The CO2 pollution avoided by year 10 would be 192 megatons/yr from the Ngas and about 368 megatons/yr CO2 - a total of about 560 megatons/yr. Obviously, that's only 560 megatons out of the 4,000 megatons/yr of CO2 pollution presently coming from coal and Ngas combustion (2,600 and 1,400 respectively), but, it's better than nothing. Of course, if only coal burners were replaced (unlikely), about 736 megatons/yr of CO2 pollution could be avoided, or about 10% of current total U.S. CO2 pollutant emissions.
In the "carbon pricing" arrangement, not much happens until year 6 or so. Assuming that the same average replacement rate could happen (2%/yr new wind), only 4 years worth would get be installed, versus 10 years in the other case. And as for the cost to consumers....not even close. Here is the breakdown, in $ billions/yr:
Year ........ Feed-In Tariff ........ Carbon Pricing
................... New ... Sum ......... New .... Sum
1 .................. 4.4 .... 4.4 ............. 31 ........ 31
2 ................. 8.8 .... 13.2 ........... 62 ...... 93
3 ................ 13.2 .... 26.4 ........... 93 ..... 186
4 ................ 17.6 ..... 44.0 ........ 124 ...... 310
5 ................ 22.0 .... 66.0 ........ 155 ...... 465
6 ................ 26.4 .... 92.4 ........ 186 ....... 651
7 ................ 30.8 .... 123.2 ....... 186 ....... 837
8 ................ 35.2 .... 158.4 ....... 186 ..... 1023
9 ................ 39.6 .... 198 .......... 186 ..... 1209
10 ............... 44 ..... 242 ........... 186 ..... 1395
EEKS! Only 40% of the CO2 pollution prevention (wind turbines don't become economically viable until after year 6 in year 7) is achieved using "Carbon Pricing", and at 5.8 times the cumulative cost to electricity customers (and that's without interest rate effects/time value of money considered, either!). But, one thing to keep in mind - this table assumes that electricity prices will remain frozen where they are - which is not likely. For example, Chinese coal imports from the USA could also spike our electricity rates, too. So rates might raise, anyway, and the $171/ton adder price for coal would happen on top of any price rise for coal due to increased Chinese and Indian purchases of U.S. mined coal.
Of course, at least "Carbon Pricing" would get the government gets some income (CO2 pollution taxes) to pay back all those infernal debts accumulated during the Bu$h administration, unless all all of that money is redistributed to individuals and possibly used to buy new RE systems or to subsidize the really, really rich to buy and operate them. Nevertheless, higher electricity prices would get dumped onto customers of products made with electricity which is just about everything to some extent, and sometimes to a large extent if there is a hefty electricity input in the cost of production of something, or in the cost of operations. Thus, a lot of that money potentially redistributed to individuals on a per capita basis would go out to pay for higher priced items/services.
Of course, one effect that would lower customer electricity prices would be the Merit Order Effect (MOE) for the Feed-In Law situation. As more and more wind is admitted into the electricity supply mix, up until about a 20% level, average electricity prices would actually drop. So that cumulative $44 billion would probably be dropped by an equal amount - in other words, the higher prices charged to renewables would be negated by reducing the extraordinary profits accruing to low cost electricity providers when mixed sources with wildly different prices (coal + natural gas, natural gas + oil) are present in deregulated markets.
But when the present major low cost electricity source (coal) is taxed to raise it's price/lower its usage, there is not much MOE to be had... some, but given that all prices would be rising...not much.
One last point about those subsidies...what if they only go to the wealthiest 2% of the world because they are arranged to be taken as tax credits/tax deductions - in other words, subsidies obtained as tax avoidance? In other words, the ownership of the renewable energy production systems can only go to those eligible to use massive tax deductions (MACRS is the most important one these days for wind turbines in the U.S.) or as tax credits (the PTC). Sweet.... and guaranteed not to attract a lot of populist support... Better hope that the details are so complicated that not many can figure them out...
Conclusion
If the maximum reduction in CO2 pollution at minimum cost is a goal, Feed-In Law systems seem to be a better approach than "carbon pricing" = CO2 pollution taxes. However, CO2 pollution taxes seem like a way to raise a lot of money for the Federal government, or for any state government that uses them. Unfortunately, CO2 pollution taxes produce no initial results unless they raise the cost of coal based electricity by about 6 c/kw-hr unless some of those CO2 pollution taxes are used to subsidize renewables. And this sets up a bizarre dynamic, where renewable electricity viability is possible only via the subsidies from CO2 pollution taxes.
Furthermore, if those CO2 pollution tax based subsidies are used inappropriately, not much CO2 pollution reduction will result despite spending a lot of money. For example, $4.4 billion/yr for 20 years in subsidy would buy 8.4 GW of delivered electricity from wind, but only 0.9 GW of delivered electricity from PV systems that require a price of 60 c/kw-hr. Or, to deliver 8.4 GW of PV that needs 60 c/kw-hr price, $41 billion/yr. If that is the approach chosen, hopefully those PV's have the "Made in USA" stamp on them. Same for any wind turbines.. of course. Otherwise, this becomes an effort in subsidizing out of country economic activity, all via CO2 pollution taxes. And hopefully, that would also be politically non-viable, and also seen as immoral and unethical.
DB
Posts
