Posted by: ericgrimsrud | November 17, 2014

The NFPTFCPFM Energy Plan

At the onset of this blog, back in June of 2012, one of my first posts was entitled “The Best Energy Policy” (ericgrimsrud.wordpress.com/2012/06/15/the-best-energy-policy/).  It is appropriate at this time to repeat and expand the theme of that post.  The energy policy it describes is the only way forward that makes sense – it is both “obvious” and “fair”.  For those very same reasons, however,  the fossil-fuel-related industries are terrified by the possibility that this plan might gain traction within the general public.  Therefore,  they do everything in their power prevent its exposure.  And the fact that this plan constitutes the most “market-based” of all plans, requiring the least government involvement of any really causes the Business as Usual (BaU) forces of America to soil their trousers.  Their only hope is to not let this plan reach first base.  OK, so what is this plan exactly?  A thorough explanation of it is the purpose of this post.

The Basic Plan Before assigning any name to it, let’s first start by explaining what it is.  The basic plan is to recognize and account for all appropriate costs associated with each method of energy production and then charge the users of that energy an amount that covers all of those costs.  In addition, the government should not be involved in deciding which means of energy production provides the best value to the public.  Let the free market decide who the winners and losers are.  Similarly, no government grants and tax breaks should be allowed – let the forces of a free and open market do the job. All of this should sound great to any red-blooded American businessman who has been raised on the notion the we have open and free markets, right?.

The problem with our existing BaU system, however, is that it needs to be significantly corrected so that it really is fair and provides a level playing field for all competitors.  In order to do that, ALL costs of energy production must be included – including the costs associated with WASTE DISPOSAL.  Again, you might be thinking:  “of course, the costs of waste disposal must be included – after all, we don’t allow the nuclear power industries to scatter their nuclear wastes over our fields, rivers and oceans, do we?”  No we certainly do not – so why do we let the fossil fuel industries use our atmosphere as a waste dump for the disposal of the CO2 produced by fossil fuel combustion?  That is the question that cannot be answered with a straight face. A correction for its corrupting effect on our free market system must be made. According to all credible scientific organizations of the world, our dramatically increasing atmospheric levels of CO2 are causing the greatest environmental problem and challenge ever faced by mankind.  It will be exceeding costly to address that problem and those future costs get much greater every year as we continue to use our atmosphere as a waste dump for CO2.  Shouldn’t these costs of waste disposal finally be included in the use of fossil fuels just as any level of common sense would suggest?

So how do we charge for CO2 waste disposal? That charge should be made in proportion to fossil fuel production at the point of extraction.  These extra costs would, of course, be passed on to the consumers of that fossil fuel.  Because of the stress that always accompanies change, the magnitude of those additional charges for future fossil fuel use should be relatively small at first with gradual and annual increases thereafter.  The amount of annual increases would then have to be linked to observations of CO2 levels in the background atmosphere and our goals with respect to reducing those levels.  This essential function is the only aspect of the plan that could not be left to the free market system.  The government’s traditional role of monitoring and controlling waste disposal would be required.

So what would happen in the next couple decades? As the total price of fossil fuel use gradually increased, the use of alternate sources of energy would become increasingly attractive. More entrepreneurs would enter this field,  public use of alternates would increase, and the total costs of the alternates would decrease. Therefore, a point would be reached – possibly within the first decade – when the costs of alternates would be lower than the costs of fossil fuels and the goal would be accomplished – we will have made the sought for transition to the alternate renewable sources of energy and would soon stop using fossil fuels.  Because of our past love affairs with fossil fuels, it is useful to remind ourselves that this is the desired and necessary outcome – we must stop all fossil fuel conversions to CO2.

What would we do with the money thereby collected from fossil fuel users? This is an excellent question that must be very carefully considered.  One must always be especially careful whenever the disbursement of money is being considered, right?   If we don’t disperse that money appropriately, all benefits of the plan will be lost. Some ideas for disbursement immediately come to mind – but most then fall apart upon further consideration.  One of these, for example, is why don’t we use these funds to offset existing taxes?  That is a terrible idea because it would leave the disbursement of this large sum in the hands of  lobbyists and legislators in Washington DC.  The inside track would go to those with the deepest pockets, as usual. Cynicism and corruption of the entire process would follow. Another idea is to use this large sum for the support of needed alternate methods of energy production or for badly needed improvements in our country’s infrastructure?  This is also a poor idea because, again, it would make Washington DC the spigot of funds to be directed towards the winners in battles played out by lobbyists and legislators.  Remember, we want the free market of ideas, entrepreneurship, and private investments to determine the winners in this competition.  While the government will have a essential role to play, that role should not be determine the outcomes. There are many other ideas, of course, but all but one are fatally flawed, in my opinion.  OK, so what do we do with the money?

The only good option I have been able to envision is to follow the principle of what is called the “shared commons”.   So what does that term mean? All of us breath and share the same atmosphere, right?, and depend on the critically important functions that thin blanket of gas serves in maintaining life-friendly conditions on our planet’s surface.  Therefore, our atmosphere is an example of a “shared common” of which we all lose a bit whenever it is used inappropriately by  others.  But again, what do we do with the money? The answer to that question is made clear by use of the following analogy.  Lets say a half dozen ranchers (I spent about 40 years in Montana, OK?) go together to buy a nice piece of grassland which they will share for grazing their cattle.  That piece of land not of infinite size, however, and would be ruined by over grazing if all of the ranchers were allowed unlimited grazing on it. And, of course, it would be unfair to let just one or two of the rancher to use it as they wished and not the others who have equal rights to it. The solution is obvious, is it not?  A good and fair solution would be to charge everyone a set fee for their use of the common field and then distribute those collected funds equally among the six ranchers at the end of each season.  In order to ensure that the field is not overused, the fee would continuously adjusted as to prevent overgrazing.  With this understanding, some of the ranchers might use the commons only to the extent where they would get their use payments back at the end of the year.  Others might chose to not use the common field at all and receive one-sixth of the pool of money collected at the end of the season.  This plan turns out to be fair to all – whatever  choice the individuals make.

OK, but how would this work for dispersing the pool of money collected for use of our atmospheric commons?  Answer: essentially in the same manner.  Every US citizen would by assigned a share for the joint ownership of the atmosphere.  Dependents and children might be assigned half  a share.  At the end of each year or quarter, the pool of money collected would be distributed equally to all share holders for them to do with it as they wish.  This disbursement  process could be handled easily by our existing Internal Revenue Service which already has all the information it requires for doing this automatically. With this system, a family of four, for example, might receive say $5,000 per year after the plan has been operative for say 5 years.  They could use that money as they wished – to cover the extra costs of the then more expensive fossil fuels, for example, if they wished.  Alternatively, they might want to look more closely to alternatives available to them – such as the purchase of higher mileage vehicles,  increased use of public transportation and simple changes in their lifestyle. Those chances might enable them to pocket a larger portion of their annual dividend.  At the same time, a citizen who is less concerned about the energy costs of his lifestyle would be free to use as much fossil fuel as he wishes and thereby contribute a larger amount to the atmospheric commons pool.  Eventually, however, even that individual would be likely to change the form of energy he uses as the alternates become better and much less costly. A very important aspect of this plan is that minimizes the roles of lobbyists and legislators in Washington DC.  The only decision of importance to be made in DC would be to set the magnitude of the fossil fuel change each year and that would have to be done in conjunction with an agency that understands the climate science involved.

Ya but, how about China and India?  Thanks for asking!  It turns out that another great advantage of this plan is that it would put a great deal of pressure on all other countries to adopt the same plan.  This would result simply by charging an additional import duty on all goods coming in from countries that do not have the same waste disposal plan for CO2 emissions that we have.   This, of course, would induce every country to collect such fees internally rather than have those funds collected in our country.  In this way, we would be using our greatest international force – our role as consumers of all things made elsewhere – to get other countries to follow our lead.

So finally, what is the name of this plan? While it doesn’t really matter what the plan is called, in this day and age of denigration by “name calling”, some care should be given to this detail.  While it has been called the “Carbon Fee and 100% Dividend Plan” (see more details about it at http://citizensclimatelobby.org/carbon-fee-and-dividend/), many who are petrified by its prospects prefer to call it a “Carbon Tax” because they know the word “tax” turns many against any idea so labeled.  Therefore, if it has to have a name, I would like to see it called something like the “No Freebies, Pay the Full Cost, Pure Free Market” plan (or the NFPTFCPFM plan, for “short”.  While I will acknowledge that my preference is a bit of a mouthful, whatever we end up calling it, I believe that my suggestion is the most descriptive. So lastly,  please get your legislative representatives behind the NFPTFCPFM plan! (PS. And please do not call this plan some sort of “commie plot”.  If you do, you might find yourself contributing to a batch of one of those Montana rancher’s Rocky Mountain oysers!).


Responses

  1. Let’s settle something and get nuclear power on the table. I want the private and public sector investing together on nuclear power. Eric, you and Dr. James Hansen might agree with me but government gets mixed opinions on a future energy plan dedicated to nuclear power. Nuclear investment takes lots of money. Please consider sending any carbon tax dollars toward nuclear power. I’ve lived near a nuclear power plant in Red Wing, MN for many years. If nuclear energy and coal are both phased out over time, I question if wind and solar will meet demands. More bikes and fewer cars? Possibly, but not likely.

    • Why do you see things so clearly while your brother is on the wrong side of every issue?

      I don’t worry about the temporary eclipse of nuclear power given that in the long run it is as inevitable as day following night. Yes, the Malthusians like brother Eric are right…..we will run out of fossil fuels but it won’t matter because nuclear (fision) power will last at least another 100,000 years.

      In the really long term thermonuclear fusion will provide all the power we need until the hydrogen runs out. Given that hydrogen is by far the most abundant element in our solar system.

  2. Dave, A big problem with nuclear is that it generally requires gov funding, execution, management, and monitoring – a combination destined for inefficiency and very likely failure.. Given the costs of the present forms of nuclear, that would amount to an “all eggs in one basket” commitment and would eliminate the free market approach to energy production. I am for nuclear if it can be done with private investments so the that people who promote it have lots of skin in the game – just as all of the other energy producers would under the Carbon Fee and 100% Dividend plan. And, of course, you also have its costs related to waste disposal. Your wastes in nearby Red Wing are still stored on that site – to be baby sat for 20,000 years! – an example of the political obstructions associated with nuclear. In short, I think you are giving the gov too much credit for its capabilities. We need gov for monitoring and setting policy, but not for actually doing everything. In addition that would result in a big waste of public talent and creativity.
    Eric

    • Eric,
      You could not be more wrong. “Old Nukes” produce electricity for ~$0.03/kWh…..by far the cheapest source of electricity and by far the safest.

      On the other hand “New Nukes” such as the Westinghouse AP1000 cost at least $5/W to build in the USA compared to $2/W in the RoC (Republic of China). This explains why the RoC is building an NPP every month while we are closing more NPPs than we are opening:
      http://diggingintheclay.wordpress.com/2013/06/02/electric-power-in-florida/

  3. Government isn’t operating our Red Wing nuclear plant. The private sector has skin in the game and would in future development. You took my words and made a black and white assumption. That’s okay. It doesn’t mean shit either way. After all is said and done, more will be said than done. The future will focus on engineering and military. Protect the borders. People will be moving north.

    [reponse from EPG: Dave, the government remains more involved in commercial nuclear power than in any other industry in the USA. There are lengthy, detailed requirements for the construction and operation of all reactors, enrichment and waste disposal procedures. The US government, through its own national research laboratories and projects at university and industry facilities, is the main source of funding for advanced reactor and fuel research. It also provides incentives for building new plants through loan guarantees and tax credits. Your observation that the Red Wing facility is privately run reflects the tip of that ice berg. I suspect that there would not be private skin in that game if it were not for the direct and strong help provided by government. What all of this means is there in not a level playing field for all means of energy production. The government determines the winners by its assistance. So that’s what you want, OK. But it works against the use of our countries total brain power and creativity. I believe in a pure and fair market place – even though we don’t often see one. It exists in some aspects of American life but not in the energy sector. ]

    • The USA has decided to give up its leardership position in space exploration, nuclear power, ship building, automobile manufacturing…….the list goes on and on.

      Relinquishing our leadership role is possible because the government dominates much of the related research. Eric is quite right…..government chooses the winners and losers, thereby driving out entrepreneurism while fostering corrupt “Crony Capitalism”. I see this as a metaphor for excessive intervention destroying innovation and with it the prosperity of our children.

      In the long term it won’t matter as other nations will gladly take over the leadership because it gives them a competitive edge. When it comes to nuclear power Canada, Russia, the RoC and India are the countries to watch. Even small countries such as the Czech Republic may contribute significant innovations.

      The “Has Beens” are the USA, the UK, Germany and Japan. These countries will suffer economic decline unless they change their loony energy policies.

      The big question is France. Will they continue to buld on the Mesmer plan? Or will they emulate Germany & Japan?


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