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TEQs & Kyoto2

 
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jo



Joined: 20 Oct 2007
Posts: 184
Location: London

PostPosted: Thu Mar 20, 2008 12:24 am    Post subject: TEQs & Kyoto2 Reply with quote

Date: Mon, 17 Mar 2008 00:07:35 +0000
From: chris...@TISCALI.CO.UK
Subject: Critique of contraction and convergence?
To: CRISIS-FORUM@JISCMAIL.AC.UK


I've been reading about Kyoto2 recently, and I'm not sure C&C is the way
forward - it doesn't account for embedded energy - all those Chinese
beavering away to make consumer junk for the West have the emissions
involved counted towards *their* budget, which is obviously unfair.

I wonder if a scheme involving auctioning of emission rights to energy
corporations, with the proceeds going to an international body like the
UN, would be better. They could then use the revenue to help the
majority world develop along a zero carbon pathway, putting money into
R&D, renewables etc. And we could do away with all those loopholes in
Kyoto, like the CDM, which are supposed to finance this development of
renewables there, but have hardly made any difference and which are
effectively preventing the setting of a real cap, the most important
think we need now.

I know that C&C is supposed to finance this, but the trouble is, payment
for emission rights goes to governments, and I think the UN would be
better, since so many governments are corrupt, and even if they aren't,
they are under so much pressure to cut taxes there will be a great
temptation for them to use payments they get for emission rights to fund
general government expenditure, rather than low carbon, or zero carbon,
development.

But I might be wrong. What are people's views on this?

Chris
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jo



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PostPosted: Thu Mar 20, 2008 12:27 am    Post subject: TEQs & Kyoto2 Reply with quote

From: jo...@HOTMAIL.COM
Date: 17/03/2008 20:44
To: To: CRISIS-FORUM@JISCMAIL.AC.UK
Subj: Re: Critique of contraction and convergence?

Dear Chris & Crisis Forum,

I'm sorry but I'm going to have to rubbish Kyoto2 here.

Kyoto2 is an implementation proposal of the idea of "Cap & Auction", basically capping Carbon Emissions by stating a fixed number of Carbon Emissions Rights, and then selling them to the highest bidders.

There are two very basic problems with this : one of which has already been raised :-

1. Cost is Relative

The Cost of any Carbon Emissions under a Kyoto2 or similar auction (like making the European Emissions Trading Scheme NAP National Allocations 100% auctioned), would effectively be a flat Carbon Tax.

Just like VAT, the cost of the Carbon would percolate down to the end consumers.

Since the economy is 90% reliant on Carbon for Energy, and Energy underpins every business and domestic activity, the extra cost for Carbon would apply to everyone, everywhere.

This would outcome as everything getting more expensive. This is inflation. After a while, despite any adjustment activity in the amount of Carbon people use, the cost of living will relativise again, and the added cost of Carbon will be absorbed in the economy.

Costing Carbon does not Cap Carbon, as any scheme like Kyoto2 or EU ETS needs to be bouyed up by "input" Carbon Credits from somewhere else.

But the principal problem is that all costs are relative, and any Carbon Abatement will be short-term.

2. Wealth as Usual

Those organisations rich from Carbon will be best-placed to bid for all the Carbon that is auctioned.

The Carbon-intensive industries and businesses are those that will buy the Carbon, and continue burning.

It will be wealth-as-usual as well as business-as-usual.

BY CONTRAST : Contraction and Convergence is the correct framework for operating scarcity economics - effectively making Carbon a parallel currency.
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jo



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Posts: 184
Location: London

PostPosted: Thu Mar 20, 2008 12:32 am    Post subject: TEQs & Kyoto2 Reply with quote

From: tmko...@tiscali.co.uk
Date: 19/03/2008 10:39
To: CRISIS-FORUM@JISCMAIL.AC.UK
Subj: Response to critique of contraction and convergence?

Hi Torsten, George, thanks for drawing my attention to this critique from Jo Abbess. To put the record straight as regards the Kyoto2 proposals and how they would operate ...

1. The auction price for Permits is not a "flat rate tax". The price is on the contrary determined by the balance at any point in time between supply and demand.

The biggest danger is that the price might go too low (reducing long term incentives for investment) or too high (inflicting needless economic damage and hardship), dangers which are explicitly addressed with K2 by means of reserve and safety valve prices.

2. The cost of carbon will indeed percolate to consumers, business etc. Where else can it go? But bear in mind:

(a) at present we are as consumers in EU already paying a carbon price in electricity, but this is a windfall profit to utility companies

(b) the energy price for oil, gas, coal etc is determined by the balance of supply and demand, with a 'reserve' representing the cost of production and a 'scarcity premium'; as such a carbon price, contained within the energy price, would make little if any difference to the market price, and would come out of the scarcity premium and so reduce resource owners' profit much more than it will increase consumer price

(c) the money raised in this way will go to reduce demand for fossil fuel by way of investments in renewable energy etc; this will have, over time, the effect of reducing demand for fossil energy and reducing energy prices, and is thus anti-inflationary (high fossil energy prices being a major inflationary driver).

The market measures would also be complemented by regulations aimed at overcoming market failures which are at present preventing negative cost energy conservation etc; by reducing costs these would also be anti-inflationary.

3. Costing carbon does indeed not cap carbon. This is why K2 proposes a cap, not merely a carbon price. The EUETS is indeed not so much buoyed as undermined by Kyoto FM carbon credits. K2 is not.

4. Abatement depends on the contraction curve that is adopted. The K2 proposal is for a steep abatement curve leading to carbon neutrality by 2050, and leading to stabilisation in the 300-350ppm (net) range. Abatement would be long term.

5. There would be an open, global auction for Permits using the uniform price sealed bid system open to anybody with an internet connection (and even without). No single player is so big as to be able to corner the market. There would also be an active secondary market.

As explained in (1) there would also be reserve and safety valve prices at which the permit banker would at any time buy (at reserve price) or sell (at safety valve price) Permits. The cost of carbon would reduce
the level of profit in the fossil fuel energy chain and increase that in renewable / clean energy and energy demand reduction and energy recycling.

Moreover much of the money raised from the auction would be spent on stimulating such activities especially in developing countries, reducing fossil fuel demand while boosting access to energy where presently lacking.

6. Under K2 there would be business, but not business-as-usual. The entire business landscape would be transformed, and in the process made far more sustainable.

There would be wealth, but not wealth-as-usual. A major redistribution of wealth would take place (much of it away from fossil fuel production and to clean energy industries), and from rich consuming nations and individuals to poor nations and individuals.

Do quote / forward on to the network.

All best, Oliver.

Oliver Tickell
Kyoto2 - for an effective Climate Protocol
www.kyoto2.org
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jo



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Posts: 184
Location: London

PostPosted: Thu Mar 20, 2008 12:37 am    Post subject: TEQs & Kyoto2 Reply with quote

From: jo...@HOTMAIL.COM
Sent: 19 March 2008 23:12:53
Reply-to: jo abbess (jo...@HOTMAIL.COM)
To: CRISIS-FORUM@JISCMAIL.AC.UK

Dear Crisis Forum, Oliver, Torsten,

I would like the opportunity to clarify my remarks further, in response to yours.

1. Cost is Relative

There are many proposals for how you do the "Auction" in any
"Cap and Auction" model to control Carbon Dioxide Emissions.

The point that I am trying to make about Cost being Relative is,
that within any regime for Carbon Pricing, the actual cost of the
Carbon to any consumer or producer becomes "relativised" within
the Economy, after an initial adjustment period.

First, there is the step up in Cost for Carbon, as the Auction is
implemented (whichever way it is implemented). This disincentivises
a proportion of Carbon Emissions.

Second, the added stepping cost (and of course, it can be a varying
cost, depending on the way you do the Auction), percolates through
the Economic system.

Third, since everything we currently do in the industrialised world
depends highly (probably greater than 90%, at least greater than 80%)
on Carbon, everything becomes more expensive.

Fourth, this inflationary pressure causes a "cost wave", after which
the Economy stabilises again, having devalued the currency to a
certain extent.

The fifth stage of applying a Carbon Cost through Cap and Auction
is that Carbon is un-de-permitted again, as its Cost becomes Relative
in the Economy at the same Relative level it was before the Auction
was applied.

At no stage is there any incentive to de-carbonise. There may be some
actual cut in consumption, temporarily, but no de-carbonisation of
Energy sources.

You would need to step up the Carbon Cost on a programmed,
ratcheted basis in order to persist in incentivising Carbon Cuts.

Otherwise the full quota, plus any safety valve "store" would always
be used, plus there would be extra leakage (guaranteed).

A Cap-and-Auction without a "base price" for Carbon cannot
continue to deliver Carbon Cuts, as the Cost re-relativises in a
short timeframe.

And if you try to set a "base" or "minimum" price, you can expect
much in terms of compromise, and so it will always be a weak price.

You will quickly find there is a "cartel" going on, and the price of
the Carbon will never become a simple function of supply and
demand.

The British Columbia Carbon Tax proposal does not expect to
affect more than 5% of Carbon Emissions. If you don't believe me,
I can find the reference again for you.

About variable pricing : if you have a rolling Auction, and there are
day or spot prices for Carbon, the same argument applies.

The current Carbon Price through Auction will always be Relative at
the same level to other Costs in the Economy as it is now.

A Carbon Price (applied through any means) is therefore effectively
a "flat" tax. It not only applies to everything, but it is also Relative
to everything.

The same arguments can be applied to all forms of Cap and Trade
of Carbon, for the simple reason that Carbon Dioxide is not a "loner"
chemical. It cannot easily and cheaply be replaced by another
Climate-friendly chemical.

Carbon Dioxide is implicitly involved in every part of technological
life, industrial life, Western/Northern social life, the operation of
governments, everything.

It has been speculated that the effect of Carbon Trading will be to
touch approximately 5% to 10% of Carbon Dioxide Emissions. The
reason is that insufficient amounts of Carbon Credit will be found,
and compromises will be made on the stepping down of the Cap.

The research on sources of Carbon Credits within CDM and so on,
has already shown that there is a problem with bringing Carbon
Credits of sufficient quality and quantity to market.

This means that the Carbon Market will always be smaller than
it should be to be effective.

2. Flow-Down Pricing

Any system that permits the "prime polluters" to pass Carbon Costs
down the Carbon Chain to end consumers is not going to achieve
significant timely Carbon Cuts as there will be no incentive for them
to de-carbonise.

[ "Prime polluters" - those who are upstream in the Energy supply
and who have fixed on various forms of primary fuel - for the most
part these are Fossil Fuels today. ]

What I mean is this : if I charge you for your dirty habits, and you
make someone else pay, how does that make you stop being so
dirty ?

There is no Clean Energy Investment made possible by charging
for Carbon. All the money from a Cap and Auction would flow
eventually into a government revenue bucket - and would be used
on social adaptation and compensation for Climate Damages.

Remember, governments are bound by rules on how much they
are permitted to dictate which energy sources are to be used. There
are international trading agreements on state interference in Energy,
which is deemed to be the realm of private concerns.

Plus, governments have been supporting the Oil and Gas industries
for a very long time through subsidies and infrastructural support.
They are not going to undermine that. Why rock the applecart ?

3. Carbon as Currency

The only way to get round the problems of "re-normalisation" of
Costs, and to "finance" Green Energy investment is to treat Carbon
itself as a parallel currency, a kind of negative-value currency.

Making CARBON "scarce" by imposing reduction quotas on a
fixed timescale would definitely cause MONEY to get thrown at
a sharply rising Green Investment program.

Please stop confusing Carbon with Money. Money cannot solve Carbon.
Only Quotas can.
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jo



Joined: 20 Oct 2007
Posts: 184
Location: London

PostPosted: Thu Mar 20, 2008 12:41 am    Post subject: TEQs & Kyoto2 Reply with quote

Re: Response to critique of K2 etc?
From: Discussion list for the Crisis Forum (crisis-forum@jiscmail.ac.uk) on behalf of AUBREY MEYER (aubrey...@BTINTERNET.COM)
Sent: 19 March 2008 16:19:49
Reply-to: AUBREY MEYER (aubrey...@BTINTERNET.COM)
To: CRISIS-FORUM@JISCMAIL.AC.UK


I read here that K2 is based on: -

"Abatement [that] depends on the contraction curve that is adopted. The K2 proposal is for a steep abatement curve leading to carbon neutrality by 2050, and leading to stabilisation in the 300-350ppm (net) range. Abatement would be long term."

Global sink impairment as it now records off the rising curve of CO2 concentration . . . .

[see carbon cycle 'coupled model' - IPCC AR4 - animated at: -
http://www.gci.org.uk/Animations/BENN_C&C_Animation.exe ]

. . . . would now require zero emissions globally before 2050 [i.e. around minus 5% emissions growth globlally for forty years and a long tail of negative emissions globally thereafter.

Ambitious, laudable!! . . . . but beyond any reach of a global carbon pricing mechanism with or without K2 at this stage, if the feedback models now published are noticed and regarded as relevant information.

While this increased reality of climate-change urgency is upon us, developing countries are still in the name of 'equity' being exhorted by a nexus of Western NGOs [irresponsibly] to make full use of their uncapped "Greenhouse Development Rights", while developed countries must unilaterally accept and act out their carbon retirement in the name of 'historic responsibility' ['blame'].

It is not clear to me what the introduction of K2, and the removal of C&C, adds to that situation that has any meaningful purchase, but perhaps someone can contribute by pointing out the the bit I have missed.

As things stand all countries are fossil fuel consumers while only some, a minority of countries, are fossil fuel producers.

K2 address addresses the minority of countries with a contraction supply proposal for what is nonetheless a global demand curve that is exerted, albeit unevenly, by all countries. Producers will inevtiably exploit the 'demands' of free riders for their own interests ["the people want it so we supply it"], the integral of carbon consumption that saves us isn't even conceptualised, let alone agreed, and the political energy of resistance to b-a-u has little numerical sense of the global rates of change needed and the collective [global] institutional momentum that can't be harnessed becasue that clarity has been lost.

C&C addresses all countries with a contraction demand proposal where consumption is conceptualised and computed in the rational/constitutional framework of C&C ["unless we all agree the stabilisation goal of the UNFCCC and read the urgency of achieving it soon enough to avoid runaway, the partial efforts continue to be the vague integral of doing too little too late i.e. its a busted flush and James Lovelock dies laughing."

K2 is not a replacement for C&C; it is at best an adjunct.

If it was simply fossil fuel producers versus everybody else uniformly in opposition to fossil fuel consumption, then we wouldn't need anything.

Sadly nothing could be further from the present truth of the matter. A global deal is a global consumption/conversion deal and declining sub-global fossil fuel production, if it happens, will be significantly a function of that. On its own it will not stand and certainly not at the rates suggesed by the K2 commentator, who one suspects, hasn't kept abreast of the numerical reality of emissions:concentrations.

Aubrey

Some current info follows.

Perhaps K2 advocates would indicate if they are in conflict with these initiatives.

Blair fronts C&C pre G-8 Japan Aubrey Meyer
Mar 16, 2008 00:48 PST

Of course there will be some who quibble, but . . .

"We have reached the critical moment of decision on climate change.
There are few if any, genuine doubters left. Even on the mildest
application of the precautionary principles, failure to act on climate
change now would be deeply and unforgivably irresponsible. It?s true
that the issue is now centre stage. But, the amount of emissions, adding
to the stock already in the atmosphere, continues to rise, 30% of that
rise still coming from the developed world.

So though it now occupies its rightful place at the top of the agenda
and though there is acute awareness, from political leaders and the
public, that it is time to act, the unavoidable fact is that the problem
continues to get worse.

What is more, when we examine future trends, the reality of the scale of
change necessary to bring about a reversal of the rise and deal with the
problem, becomes uncomfortably obvious.

*Per capita GHG emissions are over 20 tonnes per year in the USA; in
Europe and Japan over 10 tonnes; in China close to 5 tonnes. Some
estimate they will need to be around 2-2.5 tonnes as a world average by
2050 to allow the necessary reduction of 50% in the global total. But
since the poorer nations will see their emissions rise as they
industrialize and since the world population may well grow from 6 to 9
billion, the emissions in the richer nations will have to fall close to
zero and those in the poorer countries, will have overtime to fall as
they industrialize.*

Put it like that and you can see the vast nature of the challenge. In
fact, I would go further; the scale of what is needed is so great that
the purpose of any global action is not to ameliorate or to make better
our carbon dependence; it is to transform the nature of economies and
societies in terms of carbon consumption and emissions. If the average
person in the US is say, to emit per capita, one tenth of what they do
today and those in the UK or Japan one fifth, we?re not talking of
adjustment, we?re talking about a revolution.

Which brings me to this inescapable conclusion. To transform the way the
world grows, is unlikely to be done by measures, however well meaning,
taken by individual people, companies and countries. I?m not saying
these things are worthless. Far from it. They create innovation. They
create awareness of the options. And taken together, have a real impact
on the problem. And in theory, each nation, acting unilaterally could
take action that together amounted to the necessary change. But in
practice that is unlikely. In practice, without collective action,
collectively agreed, at a global level, the revolution is unlikely to
occur.

Hence the need for a global deal. The purpose of such a deal is to set
an overall global target for the world; and to establish a framework for
its implementation, one that is effective, efficient and equitable."

Whole speecch at: -
http://tonyblairoffice.org/2008/03/tony-blair-speech-to-gleneagle.html
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Ballard



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Posts: 826
Location: Surrey

PostPosted: Fri Mar 21, 2008 12:58 am    Post subject: Reply with quote

carpet bombing is not nessesary.
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jo



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Posts: 184
Location: London

PostPosted: Mon Mar 31, 2008 11:29 pm    Post subject: TEQs & Kyoto2 Reply with quote

From: crisis-forum@jiscmail.ac.uk on behalf of Oliver Tickell oli...@ITS.ME.UK
Sent: 20 March 2008 15:04:42
To: CRISIS-FORUM@JISCMAIL.AC.UK
Subject: Response to critique of contraction and convergence? Kyoto2 crititique

Jo, you have made a very long reponse. I could respond myself to all your
points but I would be at it all day and I don't think anyone would terribly
want to read it all anyway. So I am only going to address what I see as your
main points.

Your point about relativity has some truth, in that rising energy costs do
tend to push up the cost of pretty much everything else. However there is no
doubt that putting a price on carbon would favour clean energy sources that
are carbon free or carbon light relative to high carbon sources. Much of
this would be taken care of by markets, and the secure knowledge of a long
term minimum carbon price would do wonders to incentivise long term
investment in clean energy production, energy efficiency etc. The spending
of the revenues would also bring about great changes. While a lot would be
spent on adaptation there would still be plenty for altering the whole path
of energy development now taking place in India, China and other countries,
which is heavily coal and oil reliant, and shifting that development path
towards renewables by paying incremental costs. K2 also proposes regulatory
measures designed to overcome market failures which would have the effect of
raising economic efficiency and reducing fossil fuel demand.

You seem to be prejudging many issues - like that the base price will be
weak. Actually there will be strong pressure for a highish base price as
this is what is needed for companies to commit to capital investments they
actually quite want to make. Many big corporates (Shell comes to mind) are
lobbying government to do this. As far as the permit price trajectory goes,
it will be determined by the balance of supply and demand and that is hard
to predict, but I would envisage beginning at a relatively modest price in
the region of $/E 20-40, which will persit until the 'reservoir' of lost
cost options for emissions reductions such as CCS and wind are exhausted,
after which it will rise quite steeply. But by that time the world's energy
infrastructure will be far less dependent on fossil fuels and major
renewables and efficeincy investments will have taken place both from
private funds and from auction funds, limiting the economic / inflationary
impact of the permit price rise. So the emissions reductions would be real,
long term and progressive.

I could go on but mindful of other peoples' time I won't. The book is due
out in June (Zed books).

Oliver Tickell.
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jo



Joined: 20 Oct 2007
Posts: 184
Location: London

PostPosted: Mon Mar 31, 2008 11:31 pm    Post subject: TEQs & Kyoto2 Reply with quote

From: crisis-forum@jiscmail.ac.uk on behalf of Tom Barker to..@LIVERPOOL.AC.UK
Sent: 25 March 2008 11:21:41
To: CRISIS-FORUM@JISCMAIL.AC.UK
Subject: Critique of contraction and convergence?

Hi Chris

What about this scenario?

If C+C is adopted, industrial nations that produce lots of goods,
such as China, will have to purchase bigger emissions quotas. This
will put their costs up, thus increasing the purchase prices of their
export goods. If they continue to buy quotas under an annually
reducing cap (contraction), prices will rise higher and
higher. Eventually the point will be reached when their goods will
be too expensive for other countries to purchase. Hopefully, this
might be spotted before it happens, and might even stimulate local
production for local consumption.

I think C&C is the way forward, but it will need full acceptance,
including trading by vouchers that can be redeemed against low-carbon
technology rather than dollars, and will have to be the framework for
a global-scale but locally realised economic reduction towards
sustainable communities. If you remember Ted Trainor's book The
Conserver Society, he shows that a sustainable community will be more
like an Amish community or an early kibbutz than a modern Western
city, and explains clearly why replacing fossil fuels with renewables
and nuclear can never enable the world to continue as present, let
alone allow "developing" countries to develop. He calls them "never
to be developed" countries (and the rich nations
"overdeveloped"). Maybe 'green' technology and efficient recycling
can permit a good deal of modern lifestyle within a locally-based
society, but his central point must be true. There will be no global
manufacturing centre once the oil runs out.

Cheers, Tom
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