A 10% Tax on fossil fuel to subsidize local supply of clean and renewable energy!
Sam Carana
explain, a tax of 10% can not only be very effective, it can even be
more than sufficient.
Many argue that clean and renewable energy like solar, geothermal and
wind power is twice to three times as expensive as burning coal and
therefore is not competitive. Of course, one can doubt such figures
and point out that they don't include the cost of pollution (if one
can put a price on that), but for argument's sake, let's use a cost
picture in which electricity from a source like solar power was three
times as expensive compared to electricity from a coal-fired power
plant. At first glance, it may seem like a tax of even 100% on burning
coal wouldn't be able to bridge that gap. But if the proceeds of such
a tax were used to subsidize solar power, there would be no price
difference, since a policy that taxes pollution and gives the money to
suppliers of clean and renewable energy is doubly effective. But does
that mean we need a tax that doubles the price of electricity?
Let's look at how things would work out in practice. The policy I
propose is even more effective because proceeds are used locally,
where change is needed most. If most power in an area is generated by
coal-fired plants, then a huge amount of tax will be raised in that
area, even if the tax rate was a mere 10%. If all that money was used
to subsidize a proportionally small supply of clean and renewable
energy, then such supply could theoretically be given away for free
and suppliers would still make huge profits, due to the subsidies. In
other words, market mechanisms will achieve immediate impact and the
sooner business steps in to make profits, the higher their profits
will be. It will be a gold-rush!
Of course, as the share of fossil fuel decreases, total tax proceeds
will be affected accordingly, while subsidies will have to be spread
over a larger base of many suppliers of geothermal, solar and wind-
based energy. But does that mean that we would have to increase the
tax beyond 10%? One reason why an increase will not be necessary is
that the cost of renewable energy is expected to fall dramatically. As
an example, take the following study. The cost of producing solar
power will fall to that of coal-fired electricity by the end of the
decade, according to a study by Europe's Photon Consulting into the
cost of solar power production using photovoltaic crystalline cells.
The study predicts that by 2010 solar power will be produced at a cost
of 10-12 cents per kilowatt hour in Spain, about the same as the local
cost of producing electricity from coal. In southern Germany, it will
fall to 18 cents/kWh, below the current power grid consumer price of
20 cents/kWh for the first time. In California, costs are expected to
fall to 13 cents per kWh. Across OECD countries, solar electricity
will cost less to produce than the consumer electricity price for half
of all residential consumers.
http://www.carbonpositive.net/viewarticle.aspx?articleID=645
Cost of renewables is expected to fall as economies of scale are
reached in their production, retail and installation. Furthermore,
innovation and greater efficiencies will keep reducing the cost of
renewables as technologies mature. By contrast, the cost of oil is
only likely to rise as resources are depleting and as people are less
prepared to accept the consequences of oil dependency, in terms of
environmental impact, national debt and political and military
conflict. Yes, there still is plenty of coal, but right now coal is
also the most polluting form of energy. Therefore, if the tax rate of
10% needed to be increased, we could start increasing the most
polluting fuel first. But we could consider all that later. I mean, it
should not stop us from introducing a 10% tax now!
There's another reason why we wouldn't have to raise the tax beyond
10%. Many people like the financial prospect of selling power to the
electrical grid. Also, many will install solar panels just to achieve
more independence from the grid, to avoid blackouts and as a safeguard
against future price increases. Or, they may just see solar power as a
way to improve the standing of their business. Cost isn't the only
consideration - many are prepared to do the right thing for the
environment and many feel patriotic about solar power as a way to
decrease dependency on oil from the Middle East. In other words, the
10% tax will go a long way and we wouldn't have to increase this rate
as long as the conversion to clean and renewable energy will proceed
at the fast pace I expect it to take off, even with a relatively low
tax rate of 10%.
One final twist. Once the share of fossil fuel has decreased
dramatically, there will be few tax revenues left to subsidize clean
and renewable energy. That's good! It would mean that we've solved the
problem. It also means that the tax revenues cannot be used for other
purposes. If taxes were used to fill the government's coffers,
politicians would be inclined to keep the fossil fuel suppliers going,
just so they could get their hands on further tax money for all kinds
of purposes. In this case, it would be a good thing if the tax
revenues disappeared altogether, although the tax framework would
probably need to remain in place as a warning to suppliers not to
revert to burning fossil fuel.
In conclusion, I propose a 10% tax on greenhouse gas emissions with
the proceeds used to subsidize commercial supply of clean and
renewable energy. I expect that this will increase the share of clean
and renewable energy to 20% long before the year 2020, which gives us
years to consider all the alternatives for their merits, impact and
effectiveness. The one thing we should avoid is having politicians
postpone taking action and appoint committee after committee to study
things further, or wait for a carbon trading framework to emerge or
whatever scheme one could wait for next. Let's act now!
Cheers!
Sam Carana
ghost2006 - old Google Answers nickname
where you guys have got to. In any case, please take look at my
posting up above, 'Climate action: ex Google Answer researchers
urgently needed", and check out my proposal on what to do about
climate change and Global cooling. I believe you mighht be
interested. Give me a shout if you are. Alos, if you can find
another way to connect to the Google Answer reserchers, I'd appreciate
it. Thanks
Raffaella
> of all residential consumers.http://www.carbonpositive.net/viewarticle.aspx?articleID=645