A Clear Price Signal to Visualize the Optimal Energy Investment Shift
[The Note for July 2014]
The single most significant obstacle to moving major investment capital into clean energy is uncertainty about the future market value of doing so. Will such a move put a business at a competitive advantage or at a relative disadvantage, if everyone else is buying cheap fuel that fits seamlessly into the prevailing infrastructure? What has long been missing is a way to move market-dominant private-sector capital into clean alternatives. In a sense, the biggest challenge everyone is facing, when thinking about the future, is how to visualize the future itself, and how to trust that one’s visualization is reliable. The most cost-effective and practically efficient way to do this is with a clear, decisive price signal that allows market players to more clearly visualize an optimal investment-transition trajectory.
[ The Note for June 2014 ]
The transition to a clean energy economy requires a number of significant changes to the status quo. Most central to motivating the transition is the project of revealing the hidden costs associated with how we get energy from carbon-based fuels. As it stands, the whole of civilization and a vast web of natural systems are financing the business model that makes lots of money for a few people and provides us with what appears, due to pervasive market distortions, to be cheap energy. The market fails in this way, because costs remain hidden from view. Consumers, businesses, investors and public policy planners cannot make appropriate decisions about cost efficiency, because they cannot see the costs in dollar amounts.
Regional Economic Models, Inc. (REMI), one of the most respected economic modeling firms in the world, has produced a new study, using proven and reliable models, which shows that a steadily rising carbon fee returning 100% of revenues to households would create millions of new jobs, expand GDP and save hundreds of thousands of lives. In the first 10 years alone, the plan would generate 2.1 million net new jobs, across the entire US economy.
It is commonly thought that putting any kind of price on carbon emissions would cause costs to rise unbearably and the economy to slow disruptively. REMI’s new study The Economic, Climate, Fiscal, Power and Demographic Impact of a National Fee-and-Dividend Carbon Tax [pdf] shows that the manner in which the price is applied is what matters, and that getting it right can relieve and even reverse grave inefficiencies in our current market dynamic.
The Environmental Protection Agency has announced new rules to curb carbon emissions, under the Clean Air Act. The program is called the Clean Power Program and aims to reduce emissions from coal-fired power plants by more than 30% within 20 years. It is the single most significant step toward reducing power plant greenhouse gas emissions ever taken by the US government.
Many environmental activists are celebrating; predictably, opponents of climate action are warning of grave economic costs. The real impact is less, and less immediate, than many suspect. If the targeted emissions are reduced by the target percentage, then overall US greenhouse gas emissions from industrial, household and transportation sources, will decline by roughly 10% over 20 years.
[ The Note for May 2014 ]
When we try to judge what comes next, economically, scientifically, politically and culturally, we have some very specific and significant limitations. We can only use past experience and our perceptions about our current situation to make judgments about what has not yet happened. We can only quantify what is quantifiable, and what is not observable can hardly be quantified. When we think about future roads, we tend to look at roads we have now; when we think about future energy, we tend to look at combustible fuels as the most commonplace and naturally occurring way of harvesting energy for human uses. When we think about economic behavior, we tend to assume that all future values will be related to what we are already observing now. The intangible element of human thought, innovation, collaboration and discovery, is generally left out, leaving us looking through a very problematic blind spot.
We are now living in the beginning of a period of global transition. Over the next two decades we will be rebuilding the infrastructure of our civilization. We could choose to replace existing infrastructure with something similar, but slightly newer and more expensive… or we could choose to build the economy of the future. There’s no question about which is a better investment.
As we come to grips with the mounting costs of inefficient outdated technologies, we are beginning to see the unprecedented economic incentive for moving swiftly to redesign the built environment that we inhabit. The amount of energy trapped in hydrocarbon molecules deep underground is minuscule in comparison to the amount of solar energy that lands on the surface of the Earth and the resulting kinetic energy that moves around our planet all day, every day.
On Friday, April 11, 2014, at 11:00 am, Citizens Climate Lobby hosted a seminar to present a draft whitepaper outlining a 2-step global climate solution. The plan focuses on putting carbon pricing first, to transform national and regional energy economies, then creating a more effective funding mechanism for needed climate response and deployment of new technologies.
CCL representatives at the April 11 event were:
- Sieren Ernst—Principal, Ethics and Environment; CCL DC Co-Leader
- Erica Flock—Online Manager, EarthShare; CCL DC Co-Leader
- Daniel Richter, PhD—Legislative & Science Director, Citizens Climate Lobby
- Joseph Robertson—Strategic Coordinator, Citizens Climate Lobby
Central to the new whitepaper proposal is the involvement of stakeholders in helping to shape national policies and report local impacts to strengthen the efficacy of a post-mitigation Climate Impact Response Fund (CIRF). This seminar aimed to bring to light both ways of measuring the hidden costs of inaction and the economic efficiencies related to revenue-neutral carbon pricing.
[ The Note for March 2014 ]
We are used to thinking of oil, and other hydrocarbon fuels, as highly valuable mineral resources that almost guarantee major profitability. We have been taught to see things that way by a dizzying array of special incentives, protections, direct subsidies and market conditions, that combine to make it possible to cover most of your costs in the fossil fuel business using other people’s money, while the overall framework of our economic activity blocks out meaningful competition. The perception that fossil fuels are “cheap”, that they are the most “convenient” way to access, transport and release naturally occurring energy, and that investors are virtually guaranteed high returns, is a major contributing factor to the dominance of fossil fuels the world over.
[ The Note for February 2014 ]
Before we can get into the value of natural systems, we have to learn to see what is brought into being through processes prior to all human intervention, and we have to be honest about whether any part of those processes is really able to be replaced by human invention or intervention. To produce rainwater, for instance, across most of the world’s land area, would be so costly an experiment as to render the numbers we now assign to gross domestic product (or overall spending within a given economy) functionally obsolete.
The planet-wide natural process that builds resilient life-support mechanisms is made up of genuinely delicate systems, life-forms and collaborative relationships. Though it seems too vast and powerful to be directly affected by human behavior, our own industrial activity is so complex and far-reaching as to disrupt those delicate systems at the most intimate levels.
Everything we do that can be called “economic activity” rests on a solid foundation of these delicate natural systems, life-forms and collaborative relationships. And the word to describe how those life-support mechanisms come together, and how energy moves through and around them, is “climate”. We are, in our mainstream culture, only now beginning to talk more effectively about the ecological weight of climate-destabilizing activities.