Thursday, August 30, 2007

Cost of Freedom

I've been expecting a revival of Crosby, Stills, Nash and Young ever since the President said that Iraq is just like Vietnam. Those haunting lyrics:

Find the cost of freedom
Buried in the ground.
Mother Earth will swallow you
Lay your body down.


fit with Iraq even better than Vietnam since if we just left oil buried in the ground, we would not be spilling blood all over the sand. And, we'd be a heck of a lot more free too. Oil, coal and gas are like the chains ghosts rattle to show their misery.

But, the President is a kidder. In Korea or Vietnam we were there by invitation under a theory that we were fighting for our own freedom. In Iraq we are fighting for our enslavement to oil because any theory that we are fighting for someone else's freedom breaks on the hard rock that we are fighting all sides in a civil war; no motive but oil is left. So, what is the cost of freedom from oil?

I mentioned already that I'd raised the idea with Phil Sharp that rationing makes the most sense. This is an idea that I'd been kicking around for a few years on green email lists. The idea would be to have a second currency (like postage stamps) but instead of rationing the way we ration money to set the inflation rate, distributing the resource at the top, we would distribute the resource equally to all so that every one's creativity would become engaged in figuring out how to get off ghost energy. The way we ration cash is a cap-and-trade system at the top of the banking system. The way to ration carbon is a cap-and-trade system at the consumer level. I want to say right now that the term white market, as I coined it a few years ago, is a ration free portion of the economy that is already off carbon. As many Amish are moving to solar power for their workshops, the goods they sell would be pretty much part of a white market already. But, I don't mind a different coinage at all. E. Swanson's idea is that the white market is the place where people who have been especially successful in reducing their fossil fuel use go to sell their extra rations to people who need more time to get things figured out. And, I don't mind calling the rations icecaps as George Monbiot proposes, but I do think that his proposal to give the government it's share for free is a mistake. Government should recover the ability to use carbon the way that it recovers the ability to use cash. Then it is apparent to citizens how well the government itself is doing on getting off carbon. Citizens can't practice eternal vigilance if the government use is not coming out of their pockets. Monbiot's view seems to be changing though compared to the rationing ideas he presented in his book Heat. He does not mention granting rations to the government here but he is still concentrating on rations for electricity and fuel rather than having the rations trace fossil fuel use throughout the economy. (Note to George: the highest rate of sea level rise mentioned by Hansen et al. (2007) is 5 meters per century, it could go higher but when talking about 25 meters they say centuries rather than millennia. See this response at realclimate.org.) Ultimately, icecaps need to trace back to as close to the mine or well-head as possible to be retired. In the case of oil, many will be retired at the tanker, for coal at the mine and for imported goods at the border. It is doubtful to me that the WTO will object to requiring rations appropriate to the use of fossil fuels in the manufacture and transport of imported goods since all goods face the same treatment. To get a low ration burden a Chinese manufacturer need only use solar power and a sailing ship.

At first, the total rations match current use and then the total issued is reduced each year reaching zero at a particular date. That date should be set so that the impact on total demand for oil and gas is substantial even if production is curtailed for physical reasons such as the effects of exhaustion of the resource. The date should also be set to minimize the cost of carbon dioxide sequestration out of the atmosphere that we may well need to undertake. Finally, we need to work within a time frame that makes converting the transportation fleet, electrical energy sources and home heating feasible. The shape of the curve to zero should likely be steep at first down to a 20% reduction because conservation can manage this kind of reduction fairly easily and this saves everyone money. The time-scale for energy source conversion is about 20 years at the present rate of growth of renweables (45% annual) while the longest time-scale is for home heating since oil and gas furnaces last a long time. Fleet conversion has a shorter time-scale since automakers anticipate putting plugin hybrids on the market in 2010. Their retooling could take 5 years from that point so that fleet turnover would be nearly complete in 17 years. Monbiot urges a 23 years to zero emissions date. Very cheap renewable electricity might persuade those who rely on oil or gas for heat to convert before their furnaces are worn out so his date may be a good choice. A 5% of current use reduction per year for 4 years gets us to cheap oil and gas and captures the low hanging fruit of conservation. The remainder of the curve though would be nearly as steep at 4.2% of current use per year. Taking the date at 2035 would have us reducing at 3% of current use per year after the first four years, a rate that enhanced economic activity owing to lowering energy costs could likely sustain. Continued growth of the US renewable energy industry over the following few years after US zero emissions would cover world energy needs and would be produced below the cost of production of fossil fuels so that any lagging countries would be easily persuaded to get with the program. Presumably our balance of trade will be nicely positive as a result. This would also be the time to undertake technological carbon dioxide sequestration efforts since this would be the point at which the cheapest renewable energy equipment could be produced most abundantly and also the point at which we would know what scale of effort will be required.

The most important aspect of people-level rationing is that it makes a transition to real energy affordable because it reduces the cash price of coal, oil and gas by reducing demand. A carbon tax makes things more expensive by raising (cash) prices so people do not see the benefit in their wallets and don't have extra funds to buy a new plugin hybrid electric car, for example. Tax shifting only works up to the point where there are remaining taxes to shift and a rapid transition would need a very steep carbon tax which would likely overrun current taxation. Rations give everyone room to maneuver, a bit of freedom on the way to even greater freedom.

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