carbon tax and 100% dividend

So while we're moving past the failed Lieberman-Warner climate bill, I've come across another way to get big stationary (and mobile ones too, it looks like) to cut their emissions without making basic needs such as energy unavailable to lower and middle classes. The idea is that you set up a number of credits that allow certain amount of CO₂ to be emitted each year. The number of credits will decrease, and with it the amount of pollution emitted into the atmosphere. Companies will have to purchase these credits.

So far this doesn't sound too different from the standard Cap & Trade system that was in the Lieberman-Warner bill. But where these two ideas differ is what to do with the money collected from the carbon credits. The Dividend idea would return the money to the public. I'm guessing this is to help offset some of the increased costs of energy as a result of a realistic price on carbon.

What sort of bothers me about this idea is that we have to return the money to the public. Don't get me wrong, I wouldn't mind a check coming in every month, but I can think of a ton of other uses for the money. I personally would favor taking the money and investing it in research grants and projects (NSF, DOE, etc...) instead of having some guy go out and buy a new plasma or iPod with it.

Maybe somebody has more info on this idea? I'd love to learn more about it.

Cross-posted at davidwogan.us

How CO2 Regulations Will Affect the Texas Electric Grid

I was interested in quantifying some of the effects that CO2 emissions regulations would have on Texas's electric grid, specifically in the Electric Reliability Council of Texas (ERCOT) region. I look at some of the features of command and control regulations, a CO2 tax. or a cap and trade system, then I show results of a model I created to add a CO2 cost to each generation facility in ERCOT and look at how the CO2 cost affects plant dispatch, CO2 emissions, and electricity cost.

I have a lot of results in graphical form that would take too much space to explain here, but the gist is that at relatively low CO2 prices, the price of natural gas for fuel will keep coal-fired plants cheaper to operate, so coal-fired facilities will remain running all the time as base load generation, albeit with much smaller profit margins. It takes a very high CO2 price to result in switching from coal to efficient natural gas for base load generation, and this threshold CO2 price is pushed higher by high natural gas prices. So if CO2 regulations cause a shift towards natural gas-fired generation, and this increased natural gas demand drives up natural gas prices, then electricity costs go up from both the added CO2 cost and the increased natural gas costs. Of course we would also be switching to more renewables, but until these sources make up a large percent of total generation (they were 3% of generation in 2006), the effect on electricity prices will be minimal.

There isn't enough room to explain the assumptions behind the specific values I calculated, so if you are interested, I hope that you take a look at my report. It's relatively long, so if you're short on time, the results section is the best part.

One point that I omitted from my report for conciseness is how the supply chain location where a CO2 tax is applied will affect its impacts on the electricity industry. If the CO2 tax is levied upstream at fossil fuel suppliers, fossil fuel based electricity generators will see this cost as increased fuel prices, which are a market traded commodities. Thus, upstream application of a CO2 tax would affect electricity generators similarly to a regime where CO2 is traded on its own commodity market (i.e. cap and trade). I read some economics oriented reports arguing that upstream application should more cost-effectively reduce emissions, but this approach could reduce the economic viability of technologies such as carbon dioxide capture and sequestration (CCS) that significantly reduce emissions rates without decreasing fuel use. Do we regulate at the source of the carbon, or the source of the emissions? I think the source of emissions makes more sense, but one could argue either way.

Planes of the Future!

Sorry Alix, but paralleling your title was too tempting.

The aircraft industry emits just 2% of worldwide CO2 according to the IPCC, but that doesn't mean they don't want to cut back. Aircraft industry leaders from around the world are meeting right now in Geneva, Switzerland, to discuss their plan of action as they strive to decrease their carbon footprint and eventually become carbon free. Representation includes the President/CEOs of both Boeing and Airbus, the Director/CEO of the International Air Transport Association, and the President/CEO of GE Aviation; definitely some powerful voices (links to some speeches here). There is even an "Aviation Industry Commitment to Action on Climate Change," endorsed by several aviation industry partners including the Austin Dept. of Aviation and Austin-Bergstrom Airport. Disappointing, however, is the lack of support by U.S. airlines.

At face value, this is very good to see. The rhetoric in the climate change declaration resembles oil executives' Congressional testimony in favor of carbon regulations, and it is good to see some level of industry responsibility for and acknowledgment of the climate problems we face.

Of course, with aircraft industry profits being slashed by high fuel prices, these companies and organizations have a strong incentive to support fuel efficiency gains and investigation into alternative fuels. Indeed, a good deal of the emphasis at the Geneva meeting seems to be on efficiency, not only in aircraft technology, but also in air traffic control and efficient management of planes that are already in use. Boeing CEO Scott Carson remarks "Even the most fuel-efficient airplane can’t achieve its highest efficiency levels if it is forced to fly indirect routes and to circle overhead waiting to land." Carson also mentions the pioneering Dreamliner aircraft, biofuels (under the loaded but carefully chosen jargon "sustainable" fuels), and the recent test flight of a hydrogen fuel cell aircraft.

In the end though, I still get the impression that it will take strong policy measures to see substantial emissions reductions even in the aircraft industry, and I don't in any way feel that the aircraft industry represents the "low-hanging fruit" when it comes to cutting carbon emissions. I applaud the gusto of the industry, but we've got bigger fish to fry (ground transportation and power generation, I'm looking at you).

Texas to Blame for High US CO2 Emissions? Not So Fast

This AP article blasts Texas as a hopelessly unenvironmental state whose "everything's bigger" mentality has led it to being the state with staggeringly more CO2 emissions than the rest of the US. It goes on to point out that if TX were a country (as I believe some believe it is...), it would rank 7th in the world in CO2 emissions! It does go on to point out that Texas's CO2 emissions are so high because of the state's sheer size, population, and industrial density, but my interpretation is that the article clearly intends to paint TX as a complacent entity that should learn a lesson or two from the emissions reduction initiatives in Cal. or NY.

Well, we already acknowledged that Texas's size may be a good reason for its emissions, so maybe there is a better way to compare states - how about carbon intensity! Carbon intensity is defined by the EIA as the ratio of CO2 emissions to gross domestic product and by the IPCC as the ratio of CO2 emissions to primary fuel use. One could argue that absolute emissions are all that matters, but carbon intensity is probably a better way to make basic emissions comparisons. I mean seriously, can we really compare Delaware to TX when it comes to total emissions? We're talking apples and oranges here.

So where does Texas stack up? Using the most recent 2004 data (I guess it takes a while to inventory a country's emissions), in emissions per primary fuel use, TX is #27. Per GDP? #16. So not great, but certainly not the worst of the bunch by these metrics. In case you're curious, top 3 in both measures are Wyoming, West Virginia, and North Dakota.

So my point is, cherry picking statistics to frame an article is certainly not uncommon, and we need to be aware that this practice helps shape more than just energy related policy and public opinion (seen any US article on China's energy use lately?). As the state with the 3rd highest GDP and highest fuel use, TX can certainly learn from other economically similar states like CA and NY, but care should be taken and all facts researched before we start labeling any US emissions scapegoat.