Although it no longer gets really discussed these days, one argument against rushing to a full-blown emissions trading system was that we should wait and see about the effects of greenhouse gas emissions and then work out what to do. While that argument has long passed us by, there is another side to that coin: what if it is much much easier to substitute away from fossil fuels than we thought?
There is one good reason to believe why this might be the case: historically, very little R&D resources have been devoted to things like solar energy. But in anticipation of global demand for alternative fuels, resources are flowing. And breakthroughs are occurring. Today’s is from a start-up SUNRGI who think they can have affordable (aka competitive to other energy) solar power in a year. Not only would this be a big step in resolving the emissions problem but it may change the Middle East conflict too (although I think there might be a few unintended consequences there).
But here is the thing: if technologies like this work, the pressure to put in place a strong environmental policy will be off too. And if that is the case, will those new innovators earn a sufficient return? Resolving this dilemma to keep innovation on track requires a commitment to costly environmental policy even if, after the fact, that policy might not be necessary. The good news is that only a few significant economies need such a commitment. The problem is: do any of those economies have the political system that can sustain that sort of commitment?
Core Economics 
The running costs of todays geothermal and solar thermal power plants is half the cost of fossil fuel burning plants. It costs about $3000 capital to generate a kw continuous clean energy. It costs $1300 for a coal fired power station. The average total energy use per Australian is either 70,000kwh or 90,000kwh per year depending on the data source. Assume 90,000 kwh per year. As there are 9,000 hours in a year the capital cost per person in Australia is about $30,000 to give clean energy for each Australian.
There is no need for emissions trading. All that has to happen is for investment to be directed to clean energy. A surcharge on fossil energy of about 10% directed to clean energy investment would give us enough investment money provided it went directly to clean energy or energy savings infrastructure, to give zero emissions in 20 years. A surcharge of 30% gives zero emissions in 10 years.
Trying to get investment in clean energy via the indirect method of increasing the price of existing energy through emissions trading is an economically inefficient way to achieve the result desired. It can be done simply, easily and efficiently by directing investment straight at the problem.
If you doubt my figures go look at http://www.geodynamics.com.au/IRM/content/home.html and http://www.ausra.com/
The Rewards concept http://rewards.edentiti.com is a market based approach to getting the best value for our investment dollars and does not depend on governments directing expenditure or on existing power utilities directing expenditure. Rather it gives the surcharge to “frugal” members of society to spend but they have to spend it on infrastructure to reduce greenhouse emissions.
This approach increases the cost of energy but compensates the frugal (typically the poor)by giving them the returns on their investment in renewable infrastructure and hence is socially equitable.
The approach redirects funds from consumption (like higher house prices) to investment and it could be argued will increase the GDP of the country not reduce it but I won’t press that point:)
We have the technology today. We only need an appropriate economic system to make it happen. Emissions trading may work but it is problematic and is inefficient. Directed infrastructure investment is guaranteed to work and using market mechanisms to distribute the resources will be done for minimum cost.
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There’s also argument about whether there are technical solutions that are easier and cheaper than a hugely expensive “decarbonising” of the economy.
For example, reducing solar radiation getting to earth through high altitude particulates. Modelling suggests that would work.
Or capturing carbon by seeding the southern ocean with iron to encourage algal blooms which then sink, taking a proportion of the carbon with them.
Meanwhile we’re pissing away millions on carbon capture, which essentially drags coal down to being on par with nuclear in the cost effectiveness stakes. Hmm.
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Jacques: I think there’s recent research floating around that suggests that putting particulates into the high atmosphere would ruin the ozone layer.
As for iron seeding, don’t get too excited until it’s been demonstrated that it actually sinks to the bottom, and stays there for significant time periods, and doesn’t completely screw up the ecosystem in the process.
Finally, I might suggest to our fine host that he applies the following simple rule to any claims by tech startups: divide their claims in half, and double their time scales, and add 50% to their costs. If it still sounds too good to be true, repeat.
Robert Rapier’s blog archives contain a number of postmortems of failed energy startups, if you want to depress yourself about the chances of any new technology ever succeeding.
Locally, does anybody remember the guys promising to build a 1 km “solar power tower” near Mildura, in Western Victoria? Nothing has happened, seven years on, though their website is still around.
In any case, electricity is the easy part (as a backstop, there is always nuclear). Distributed emissions from transport and agriculture are the toughies.
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Joshua, I don’t quite understand your argument. If these technologies do prove to be cheap ways to massively reduce emissions, emissions will only be reduced and the problem go away (and no further need for intervention etc) if the technologies are actually deployed widely. And if they’re deployed widely, they’ll be earning a very nice return, so what’s the problem?
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David,
There will not be the massive investment required to get the change needed as quickly as it is needed even if the technologies are much cheaper unless investment is directed. Oil companies, Coal Companies, current polluters will fight to keep their markets. The economics of solar thermal and geothermal are already comparatively good and depending on how you do the sums (the discount rate you use) they are already cheaper than building new fossil fuel burning plants. The trouble is we have to start to shut down existing plants that might run for another 50 years and we have to somehow stop oil producers producing (or get oil used for some other purpose – such as food production) when we have alternatives.
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Robert;
You are absolutely right, of course, that more research is needed. But it’s not being funded, primarily for political reasons. We don’t know if either approach would do any good; and if they did work, wouldn’t have side-effects too harmful to countenance.
This is a bit like how the WWF / coal carbon capture thing played out. The WWF director said that it should be researched and settled one way or the other, greenpeace et al were furious and said any such move was supporting global warming. A political statement, rather than a scientific one.
But suppose one or both of these technologies is viable, it would be awfully silly not to investigate them thoroughly.
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For what it’s worth, Jacques, I put a submission into the sustainability stream of the 2020 summit saying precisely that.
That said, if you take into account the other effects of fossil fuel combustion on health and the environment, decarbonization is still a no-brainer.
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Good to hear this being talked about.
I’d prefer tax incentives for the new energy as opposed to punishing old energy.
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Robert;
Sure, but I think that the public health aspects of energy from fossil fuels should be addressed separately from the global warming aspects.
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