Comments on: The Garnaut target: no time for a quitters strategy http://www.crikey.com.au/2008/09/12/the-garnaut-target-no-time-for-a-quitters-strategy/ now with extra source Sun, 22 Nov 2009 06:30:12 +1100 http://wordpress.org/?v=2.8.6 hourly 1 By: Kevin Cox http://www.crikey.com.au/2008/09/12/the-garnaut-target-no-time-for-a-quitters-strategy/#comment-22967 Kevin Cox Thu, 01 Jan 1970 10:00:00 +0000 #comment-22967 There is another strategy to reduce emissions than putting a price on carbon. Putting a price on carbon is NOT an effective policy because all it does is increase the price of ALL energy. Most of the cost of renewable energy is an artificial price caused by the "time value of money" or the cost of capital. Let us think for a moment. Do we have to put a value on time for the purpose of building renewables and if we didn't what would happen? Let the Reserve Bank create some money that must only be used to build renewable energy plants or reduce energy consumption through things like insulation. Let us give this money to people in inverse proportion to the amount of energy they purchase so they have an incentive not to use energy.<br /><br />What would happen?<br /><br />There would be NO inflation because the money is used to create a productive asset and that means the money we generated will return more money and that is NOT inflationary.<br /><br />People would change their behaviour to reduce energy consumption which in turn would increase the efficiency of our energy infrastructure which would again NOT increase inflation but rather be deflationary.<br /><br />So we would have a compounding system to increase the amount of renewable energy. A few small calculations show that we can use this approach to reduce our global emissions to zero within 10 years or 20 years - it only depends on how much money the Reserve Bank prints for the purpose.<br /><br />The price of energy can remain the same - or even decrease if we want to cause the coal fired power stations to close down because they are uneconomic. Renewable energy without capital charges is at least half the cost of fossil fuel plants because there is NO fuel cost.<br /><br />It is simple, easy to do, and we could start tomorrow. There is another strategy to reduce emissions than putting a price on carbon. Putting a price on carbon is NOT an effective policy because all it does is increase the price of ALL energy. Most of the cost of renewable energy is an artificial price caused by the “time value of money” or the cost of capital. Let us think for a moment. Do we have to put a value on time for the purpose of building renewables and if we didn’t what would happen? Let the Reserve Bank create some money that must only be used to build renewable energy plants or reduce energy consumption through things like insulation. Let us give this money to people in inverse proportion to the amount of energy they purchase so they have an incentive not to use energy.

What would happen?

There would be NO inflation because the money is used to create a productive asset and that means the money we generated will return more money and that is NOT inflationary.

People would change their behaviour to reduce energy consumption which in turn would increase the efficiency of our energy infrastructure which would again NOT increase inflation but rather be deflationary.

So we would have a compounding system to increase the amount of renewable energy. A few small calculations show that we can use this approach to reduce our global emissions to zero within 10 years or 20 years - it only depends on how much money the Reserve Bank prints for the purpose.

The price of energy can remain the same - or even decrease if we want to cause the coal fired power stations to close down because they are uneconomic. Renewable energy without capital charges is at least half the cost of fossil fuel plants because there is NO fuel cost.

It is simple, easy to do, and we could start tomorrow.

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