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
--
379 Meadow Lane
Oxford OX4 4BL
+ 44 (0)1865 728118
[log in to unmask]
--------------------------------------------------------------------------------
From: Torsten Mark Kowal [mailto:[log in to unmask]]
Sent: 18 March 2008 09:43
To: Oliver Tickell
Subject: Fw: Critique of Kyoto2 - contraction and convergence?
Oliver! Your proposals are being attacked! Would suggest that you mount your defense...!
Mark Kowal
----Original Message----
From: [log in to unmask]
Date: 17/03/2008 20:44
To: <[log in to unmask]>
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.
jo.
+44 77 17 22 13 96
http://www.changecollege.org.uk
http://www.blackoutbritain.org.uk
http://groups.google.co.uk/group/blackoutbritain
http://www.planet-positive.org.uk
http://www.workface.co.uk
http://groups.google.co.uk/group/climate-energy
> Date: Mon, 17 Mar 2008 00:07:35 +0000
> From: [log in to unmask]
> Subject: Critique of contraction and convergence?
> To: [log in to unmask]
>
> 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
----Original Message----
From: [log in to unmask]
Date: 19/03/2008 10:39
To: <[log in to unmask]>
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
--
379 Meadow Lane
Oxford OX4 4BL
+ 44 (0)1865 728118
[log in to unmask]
--------------------------------------------------------------------------------
From: Torsten Mark Kowal [mailto:[log in to unmask]]
Sent: 18 March 2008 09:43
To: Oliver Tickell
Subject: Fw: Critique of Kyoto2 - contraction and convergence?
Oliver!
Your proposals are being attacked! Would suggest that you mount your defense...!
Mark Kowal
----Original Message----
From: [log in to unmask]
Date: 17/03/2008 20:44
To: <[log in to unmask]>
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.
jo.
+44 77 17 22 13 96
http://www.changecollege.org.uk
http://www.blackoutbritain.org.uk
http://groups.google.co.uk/group/blackoutbritain
http://www.planet-positive.org.uk
http://www.workface.co.uk
http://groups.google.co.uk/group/climate-energy
> Date: Mon, 17 Mar 2008 00:07:35 +0000
> From: [log in to unmask]
> Subject: Critique of contraction and convergence?
> To: [log in to unmask]
>
> 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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