Recycling waste-heat to generate even more power without any additional carbon emissions certainly sounds like an appealing technology. And of course the genius of a carbon tax or a well-designed cap-and-trade system would be precisely that it helps technologies like this to emerge without requiring political pundits (e.g., me) or congressional staffers to accurately guess which technologies are the most promising low-carbon alternatives.
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Waste-Heat Recovery
02 Nov 2007 08:01 am
Comments (9)
This is what I do for a living, and this isn't new at all Matt. It's called combined heat and power and the EPA and DOE already have established, but underfunded, programs to encourage it.
We do need a emissions trade system, but we also need more funding for the large capital to install these types of systems. The think that kills these projects off most is the long payback periods, especially for our municipal clients.
A cap and trade system would be a terrible idea.
A cap and trade is basically a tax with a lot of extra paperwork attached.
The idea that we might have a cap and trade in the future is an incentive for people to pollute as much as possible now so they can get a bigger share of the cap and then they can profit by trading the credits they don't need.
A simple tax will be more effective, singificantly better for the economy, and puts money in the hands of the government and not the traders on Wall Street.
We aren't dealing w/ a point source pollution so we need to open up the market so that the technologies that are the most cost effective will prevail. A simple tax isn't going to do that as well.
A cap and trade system would be a terrible idea.
A cap and trade is basically a tax with a lot of extra paperwork attached.
EXACTLY.
That said, tradable permits do make sense where you really are allocating a fixed resource. Water use, fisheries management, that kind of thing. But carbon emissions aren't that sort of thing at all -- we don't want a certain fixed reduction, we want as big a reduction as we can get. And in any case, it is simply false that cap-and-trade is in any way more market-based than a tax. In one case, the government sets the quantity, in the other it sets the price.
The puzzle is why cap-and-trade gets so much attention. There are plenty of self-interested reasons for various groups to support it, but where's the public argument that goes beyond "(Pseudo-)markets good!"?
We aren't dealing w/ a point source pollution so we need to open up the market so that the technologies that are the most cost effective will prevail. A simple tax isn't going to do that as well.
Dustin, what's the basis for this claim? From the perspective of a particular firm, permits and taxes are exactly the same: in both cases, you face a certain dollar cost for every ton of carbon you emit. Whether you pay a dollar tax for every ton of carbon or buy a dollar permit for every ton of carbon, the incentives facing you are exactly the same.
Lemuel,
For one particular firm, I agree with you. My point is that carbon emissions could be traded between firms and more importantly industries. It's very easy to reduce carbon emissions at a landfill by capturing and burning the methane off-gas. It's much harder for emissions to be reduced at coal power plant due to the nature the process.... but both emit carbon that effect the 'commons' as a whole.
A carbon trading system is going to allow investors to quickly seize on the reductions that are most cost effective in any industry. It seems to me that is would allow us to focus on the low hanging fruit first and foremost.
Also, politically it will be easier to sell a 'market' instead of a tax.
Dustin,
You are correct that a carbon trading system will allow investors to focus on low-hanging fruit, so they can take advantage of relatively cheap offsets and owners of coal-fired generators won't have to reduce their emissions. The problem with that approach is that reducing emissions from coal plants is essential.
A carbon tax will provide every consumer of energy with an incentive to reduce carbon emissions. Owners of coal-fired generators will have an incentive to improve their generation efficiency and substitute less carbon-intensive fuels. Electricity users will have an incentive to use energy more efficiently. Similar responses will occur on the transportation side, although somewhat more slowly because the demand for gasoline is less price sensitive than demand for electricity.
The major beneficiaries of a cap-and-trade program are the middlemen. The major losers are everybody else, who would be better off getting the same benefits through a carbon tax without having to pay the middlemen.
As to the politics, that might change when people realize that they are effectively being taxed either way, but paying more with cap-and-trade to make somebody else rich. For more on politics, see Mayor Bloomberg's excellent speech today endorsing a carbon tax. And for more on carbon tax vs. cap-and-trade, see our issue paper on the Carbon Tax Center web site.
While I think cap-and-trade is dumb for an entire economy, I think the case could be made that within the electric power industry a hard and rapidly diminshing cap could work. But instead of setting allowances based on individual generators' prior emissions, the important step would be to grant carbon allowances based on electricity generated.
In year one, a coal-fired power plant would earn 1 credit for each kWh generated--but in generating that energy, it emitted, say, 1.5 credits' worth of CO2. It would then have to buy credits from a zero-emitting generator--wind, solar, nuclear, geothermal, etc.--or face a steep, steep tax (set at the cost of sequestration). Presto: subsidy for zero-C energy, paid for by coal generators.
The key would be to steadily ratchet down the credits per kilowatt-hour, perhaps by one-twentieth a unit per year, until the whole sector is net emissions-free. It doesn't work across the whole economy, and it likely doesn't work if you allow dodges like grandfathering in emissions or earning credits for tree-planting or installing CFLs. But it could work in this, limited scope.
Otherwise, tax the shit out of carbon.
Comments closed November 16, 2007.
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Heads in the Sand
the genius of a carbon tax or a well-designed cap-and-trade system
Thank you for acknowledging the formal equivalence of these two approaches.
Posted by lemuel pitkin | November 2, 2007 9:54 AM