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Saturday, June 18, 2011

Cap and Trade in New Zealand

My adopted country is New Zealand.  I feel very lucky to have been allowed to settle here and very proud to be a Kiwi.  New Zealand is a Quixotic little country, a green and pleasant land,  and she punches above her weight in many ways. For instance:

#We were the first to give women the vote.

#We opposed nuclear weapons, nuclear ships in our waters and the use of nuclear power.  For our efforts we were attacked by France (Rainbow Warrior) virtually ostracized by America and took a severe hit on our economy.

#We have put in a voting system called MMP which is about as close as one gets in the world, to true representative government.

#We refused to be drawn into a war of exploitation in Iraq but sent troops when the war was over to help reconstruct the country.

#During two world wars, instead of fortifying our remote little islands and hunkering down, we sent our best and bravest  to help defeat Germany and Japan.  We took huge casualties.

#We have eliminated farm subsidies so that now, farmers farm crops rather than subsidies.  We went cold turkey from a situation of heavy subsidies and it was traumatic.  Now New Zealand competes very well with countries which heavily subsidize their  farmers;  so successfully that some of these countries; the USA for instance, puts tariffs on our agricultural produce despite their heavily subsidies.

#And we have adopted a financial obligation for our carbon emissions but here we are falling down.   We are either first country or right up there with the firsts few to do so.  We have done so despite the fact that on a world scale, our carbon emissions are minuscule.  Even if we reduced them to zero it would have virtually no effect on the emissions of the world.  And we have adopted Cap and Trade to the detriment of our businesses since a carbon obligation will make our exports more expensive.  We have adopted them and included Methane in the mix  despite the fact that it rather rapidly converts to Carbon dioxide.  That is another story.  And we have not insisted on the true value of our tree farming.  In so far as a tree is cut down and built into a long lasting house or piece of furniture, it is actually a net remover of Carbon dioxide from the atmosphere.  That also is another story and may be fixed soon.  However, I can't help feeling proud that we are making the gesture.  So how are we falling down.

We have just had (May 2011) James Hansen on tour in New Zealand.  For those of you not familiar with Prof Hansen, he is a top climatologist; arguably the top climatologist of the world.  He has pulled together the work of many scientists including his own and demonstrated with a very high level of probability that  a) the climate is changing  b) that it has changed rather suddenly in the past as certain limits have been passed and c) that it is very likely that if we continue on our present path, we are likely to cause a destabilization and a switch to a new climate regime.  Why does this matter.

Well it doesn't in the long term -- the very long term.  The point, though, is that human civilization has developed during the past 11,000 years in a period of relatively stable climate and our civilization is  adapted to it.  We have had some mini glitches in our climate since the end of the glacial and even they have had pretty wide spread effects.  The point is, that because of the relative stability of our climate and hence our sea levels, many of our cities have been built within 10 or so vertical meters of sea level.  Because of the stability and hence predictability of our climate we are  just about able to produce enough food for our huge population with our knowledge of how to farm in the present climate regime.  If we get a rapid climate change we will have New Orleans type floods in all our coastal cities,  our food production will plummet with the change in climate zones and huge numbers of species of animals and plants will go extinct with unforeseen consequences to the support systems that allow us to exist on our planet. 

Looked at on a 10million year time scale this won't matter at all.  It will be equivalent to one of the great extinctions and possibly include humans.  At the very least, we might achieve the Lovelock Number*.  The world will recover, new species will evolve and a remnant population of humans might even be left to breed up again and repeat the whole disaster.  The point is, that we have a reasonably comfortable, interesting existence and even civilized life in the present climate setting and are very much in danger of trashing it and putting ourselves back into a deep dark age.  Just imagine the effect of  the world wheat crop failing for even one year, not to mention  the failure of the rice, corn barley and rye crops failing as well.  Just imagine if the crop failure continued for 10 years or for even for a Milena.  Even worse, imagine if the climate flick flacked (flickering) between the two states for a decade or more as many scientists predict so that it is impossible to predict from year to year what the climate will do.  So why are we failing here in New Zealand.

*James Lovelock has predicted that within a few decades our world population will be down to a billion or so.   (it would only take a single year in which the rice, wheat, corn, barley and rye crops failed to cause epic starvation)

We have adopted Cap and Trade  and the consensis is amongst many comentators that the main effect of  Cap and Trade will be to make the banks rich.

On the other hand there is Jim Hansen's solution called tax and dividend.  Wheras the congressional document in America on Cap and trade runs to some 2000 pages, Jim Hansen's Tax and Dividend can be expressed on one side of a sheet of A4 paper---------------  double spaced.  It is highly likely to be extremely effective.  It has the added advantage, unlike Cap and Trade, of economically protecting Joe Citizen during the transition to Renewable Energy.  What is his system.

As I said, it is called Tax and Dividend and I won't even need one piece of foolscap to describe it.  Two short   paragraphs will be enough.

Paragraph 1
Hansen suggests taxing fossil fuel as it comes out of the ground or through your borders.  The tax will start low and increase gradually every year.  This of course will make everything we use more expensive.

Now here is the good part.

Paragraph 2

Every cent of this fossil fuel  tax, however collected, will be returned equally to every citizen by no-cost electronic transfer.  Jim has suggested an equal portion to every adult and a half portion to each child up to a maximum of two children per family.  I think it might be easier to give an equal portion to every human registered tax payer (people only, not businesses).  The income tax data base exists in every country and it would encourage anyone who is not registered to register.  There it is.    The downstream effects from this policy, however, take a little more paper to describe.

Incidentally, The New Zealand failure is that we brought Prof Hansen here, sponsored him, listened to him and then ignored what he had to say.  Not even the Green Party is proposing Tax and Dividend.    Lets look at the effects of his  system.  They are many.

Someone who is modest in their energy use, who has an insulated home, cycles to work, has energy efficient appliances etc. will actually end up with a net gain despite the increases in the price of everything.

Someone who drives an SUV, uses resistance electricity instead of a heat pump and has old, inefficient devices will be out of pocket.  There will be a great incentive to get efficient and in fact to use this tax money to buy LED light bulbs to replace the existing ones as they burn out, to buy locally,  to replace the family car with an electric lizi when the old one is finished and so forth.

Long before renewable electricity becomes cheaper than fossil fuel generated electricity, investment will flee.  It will be clear that as the tax on fossil fuel rises steadily year by year, fossil fuel will become more and more expensive and investing in fossil fuel, less and less worthwhile. The shift of investment to renewable energy will accelerate our climb up the learning and technological curves.  This will result in less and less costly electricity.  Better still. It will be stably priced electricity.  All renewable energy systems are fuel free. None of them use a resource that is every increasing in scarcity and cost.  Competition will also cut in and achieve the same result.  With many countries and many companies competing for the market to sell renewable energy devices, price will inevitably come down.

The pollution from the burning of fossil fuels will decrease and continue to decrease as renewables replace fossil fuel.  People will be healthier and medical costs will decrease.

With the decrease in the cost of solar panels, many households will find it worthwhile to have their own home system.  Baring a revolution in battery technology, it generally will not be worthwhile to have batteries and instead, the grid will be used as the energy storage system.  This will produce diffusely generated energy and the Internet effect will be achieved.  The Internet was invented by the military to eliminate the vulnerability of their communication systems to be knocked out by a single strike.  Likewise when our energy is generated by wind farms distributed all over our country, from hydro dams at various locations and from the solar panels on the roves of our buildings, the system becomes far more robust in the face of  human or natural disasters.

There may also be a psychological effect.  If you are generating energy on the roof, it emphasizes your connection with natural processes.  There may well be a differential between the cost of energy you buy from the grid and the cost they pay for your electricity.  It will be worth your while to vacuum, bake, wash dishes, wash clothes, charge up your electric car etc. when the sun shines and it is your own electricity you are using.  A certain awareness of natural cycles is encouraged.

And finally, if New Zealand adopts Tax and Dividend, it just might tip Australia over the edge to doing the same.  The Green Party in Australia has the balance of power this year (2011) and they could follow suit.  This just might be enough to induce China to follow suit.  They are desperate not to fall into the fossil fuel trap they way the western world has.  If this happens, the rest of the world has to follow.  I don't understand the details but apparently the agreements between countries are such that if you put a carbon tax on your own coal, for instance, and export it overseas, the receiving country doesn't tax it.  If you don't put on a carbon tax   the receiving country can.  Essentially the receiving country collects your tax for its own use.  New Zealand is too small to induce such a change, Australia with her huge exports of coal, may be large enough.  China is another story.  If she puts this in place the world must follow.  This might just be enough to save our sorry selves from ourselves as the specter of sudden climate change comes down the turnpike at us.

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