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Friday, December 18, 2009

Jim Hansen's Climate Change Solution

Jim Hansen is the chief climatologist for the Goddard Space Institute of NASA. He has done much of the analysis of data showing that the world is warming. He has also suggested a way to reduce green house gases and, therefore, if the green house theory is correct, cool the planet back down. In case you haven't caught up with his suggestion, here it is.

And in case you are a climate change skeptic or even just an anthropogenic skeptic*, there are many other reasons to phase out fossil fuels

*you don't believe we are causing it.

Jim Hansen's solution is as follows. He suggests that fossil fuel should be taxed, initially a little but rising each year. If the coal or oil is produced at home, it is taxed at the extraction point. If it is from overseas, it is taxed as it crosses your border. The tax increments are such that in, say, 10 years it will make electricity generated by coal about equal in price to electricity generated renewably.* At first glance it looks as if this tax would cost each of us by increasing the price of electricity, and goods which are produced using fossil generated electricity (virtually everything) This increase in price would last for a decade or so as we mount the learning and technological curves of renewable energy.  Not so. Here's the good part of Prof Hansen's solution.

*actually we may have nearly gone beyond that point. Estimates for wind generated power run about 8.3c/unit (kWh) NZ.
{2020.  This blog is completely out of date.  New wind and solar is less expensive than even existing coal fired power}

Prof. Hansen proposes that every cent of the tax money collected is divided up equally and sent by electronic mail to the bank account of every legal adult in the country* and a half share per child up to two children per family. Electronic transfer costs virtually nothing.    For the average power user, this will compensate him for the increase in costs. The modest power user will end up with some cash in hand. The excessive power user will end up out-of-pocket.  There are some interesting implications from such a policy.

*An alternate idea would be to send an equal share to every registered tax payer.  The data base already exists and it would encourage anyone who is not a registered tax payer to register.  You don't have to be earning money at the time to get this dividend and in fact, a greater benefit to the economy is gained by unemployed people getting this money.**  Whatever system is adopted it should ensure that the maximum possible portion of the money collected goes to the people and the least to administration. 

{Cheques are expensive to create and send and many banks as of 2020 are phasing them out}

**When the poor get more money they spend it immediately just to keep their heads above water.  This is a much stronger stimulus to the economy that the rich getting this money.

Right at the outset there would be a strong motivation to exchange your SUV for a more modest car and to install LED lights as your incandescent and fluorescent bulbs burn out. You would want to insulate your house, paint the roof white in hot parts of the country and so forth. The more you save on your energy footprint, the more of this money remains in your pocket. In fact, it would be very worthwhile to invest all this money into energy saving measures for a few years to reap the benefits long into the future.

Then we have the effect on investment. Long before the cost of coal-generated and renewably-generated power became equal, in price, investment would start to shift towards renewables. The writing would be on the wall and everyone would want to get out of coal and oil before they lost the value of their investment. The actual amount of the tax is far less important than the inevitability of the increase each year.  The increase can be arithmetic (1,2,3,4,5 etc) or geometric (1,2,4,8,16,32 etc)

With a shift in investment a number of factors cut in. The economy of scale alone will bring down the price of building, installing running and maintaining renewable energy systems and hence the cost of electricity. Then there will be the cost-reducing-effect of competition as more renewable energy companies start up to access this burgeoning market. A great increase in revenue will enable more research and accelerate our climb up the technological and learning curves. All would contribute to the reduction of the cost of renewably generated electricity.

Note that as of today (late 2019) it appears that building and operating wind turbines is less expensive (more profitable) than just operating existing coal powered generators.  Add to this the recent experience with the mega battery that Elon Musk built for a South Australian wind farm.  Half way through it's first year, the battery is on track to earn the wind farm $20m by the end of the first year of operation.  A return of about 30% on the investment.  Do you wonder why we still have coal powered generation.

Since all types of renewable energy are fuel free, renewable generation systems will produce electricity for less than coal or oil generators, especially as coal and oil become ever more expensive. As the initial investment to install renewable energy 'plant' is paid off, the true cost of electricity will continue to fall.

At this point a curious result will occur. With the shift away from coal and oil the price of both coal and oil will decrease (supply and demand) and transport fuel for large trucks and earth moving equipment, which are more difficult to   power by electricity will decrease.* Any factories which use oil or coal as an industrial feed stock will find this resource less expensive.

*(2020) Note the transport truck developed by Elon Musk which only waits on an increase in the output of batteries to be rolled out.

Likewise, air travel with its high fuel cost component will become less expensive.

Air pollution will decrease and with it state financed medical costs. Of course, on the other hand, people will be living longer so the costs of pensions will go up.

A curious effect may be a ramp up of global warming.  With less aerosols going into the atmosphere, the umbrella effect of the aerosols will decrease.

Electric cars will begin to replace petrol driven cars and the ability to charge them when power is available (demand balancing), will help to balance our grids and will even make existing hydro power plants more financially viable. With Demand balancing in place, more water will be sent through the generators, less over the  spillway.

We may even be able to use the cars as a storage system when they are not in use.  Cars can be charged when power is available and hence cheap and feed power back into the grid when outside sources of power are scarce and hence expensive. This would generate a small but much appreciated revenue for the Electric car owner, especially during periods when he didn't need to use his car such as when on vacation overseas.

Another interesting implication of such a system is that it is a serious economic stimulus package.  Since an equal share is going to every tax payer, people at the bottom of the socio-economic ladder are gaining a nice nest egg.  Since they are generally struggling to put food on the table, they will tend to spend all this windfall.  All companies benefit and the tax take to the government increases.  All at the expense of the carbon polluters.  What the economists call 'velocity' increases and with it revenue to the government*.

*Big business finds ever more inventive ways of avoiding taxes.  The little guy has no choice.  PAYE comes out of his salary before he even sees it.

Incidentally, if the country from which you are getting your fossil fuel itself puts on tax and dividend, you do not tax their goods or fuel as they come into your country.    If there is no tax on carbon in your supply country you may impose such taxes and keep the tax revenue.  Once even one major importing country has put the tax in place, exporting countries will rush to impose it themselves so as to reap this revenue.

ps.  Just recently I have read Jim Hansen's publication, China and the Barbarians.   In it he makes a most interesting statement.  He suggests that China could, all by itself, bring the world to adopt tax and dividend.  He suggests that they introduce the system unilaterally or in concert with whatever other entities could be brought on board.  The European Common  Market was mentioned.  Of course the US of A would not join.  The senate and the congress are in the pocket of the fossil energy  lobby.  Now here is where it gets interesting.  Apparently, due to trade laws, this would entitle China to impose import tax on all goods (not only fossil fuel) from any country which hadn't introduced similar measures.  Go figure???  I don't understand these things but look at the result.  American goods in what is becoming one of its main trading partners and with any other countries which came on board, would become non-competitive.  They would simply be priced out of the market.  America would have the choice of either adopting the measures at the same rate as China and collecting the revenue itself or of sinking even faster into becoming a second or third world country.

So far, I haven't been able to see any down-side to Jim Hansen's solution. Of course, vested interests such as the oil and coal companies will scream their heads off and lobby for all they are worth against the idea. In America, the primary world polluter*, it is very unlikely that The Hansen Solution will be implemented. Big business completely controls the congress and senate and the president. The more money big business puts into lobbying against the Hansen Solution, the surer we can be that we are on the right track. Can anyone suggest a technical down-side to the Hansen solution.

*China has surpassed the USA as the major polluter but is working harder than almost any other country to shift to renewables.

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