Sgt Hulka Uncut

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Archive for category Economics

OK, I am starting to have some questions of my own

Mar 17

Posted by Sgt Hulka in Economics, Good Ideas, International, Other Topics, Science | Comments off

No news may be good news for a bit, but after a while if there is no news (information) you start to wonder if people are keeping bad things from you. Certainly that is what the Japanese people are expressing on TV and with their feet as they start to proactively evacuate totally. TEPCO does not have a great record about being open and forthright in it communications about incidents. The ominous sign is the still the evacuation of the plants, with only 50 staff remaining, where 1000 once worked, and perhaps this is why the people in Tokyo who can are voting with their feet.

Yesterday, US Energy Secretary, Steven Chu (a real smart guy with tons of credibility) told Congress: “If workers have to be permanently evacuated from the site it is unclear if the damage can be effectively contained.” Unfortunately, that is true. I know that if I was managing an emergency situation at an industrial facility during a persistent fire and chemical spill, I would need a lot more than 50 guys to regain control of the situation.

So, significant questions need to be directly asked by journalists now. The first has got to be cooling. What precisely are they doing with the cores of these three reactors? Do all three have a continuous flow of water, what is the temperature down to at present, and are they ensuring capacity and supply of coolant in redundant forms yet on each reactor. Is #4 at cold shutdown? The spent fuel rods in #4 reactor building have also clearly lost their cooling bath, as fires re-ignite there daily, and steam is almost always coming out of the building. How much and how long were these spent fuel rods dry, what is their temperature at present, and are we supplying coolant flow to them yet?

Clearly, reactors that have triple redundant cooling systems that can lose pumping and liquid supply lines at every line of defence during earthquakes and the resulting tsunamis have got to go. I mean if they can build an earthquake proof container for a little patch of sun on earth, then surely we can build water-proof containment systems for our backup pumps, earthquake-proof piping as much as possible (segmenting in solid sections?, flexible connections?) and provide quick reconnection facilities on standby for re-establishing cooling, monitoring, and electrical and mechanical control?

And if we can’t make these plants catastrophe proof, then we can’t build more. Let’s completely convert over to electricity supply bridging only with gas and fuel we can grow (but not eat) on the way to solar, wind, wave, geothermal (I mean fuck, the world ain’t running out of that on the ring of fire) as fast as possible, regardless of the cost. And I don’t say that lightly. I don’t mean regardless of the cost, so let’s let the big corporations rip off the whole program of conversion over to renewables, and control the energy game at the end of the transition.

I mean that whatever it costs to convert over to renewables on a macroeconomic scale, let’s pay it, and the sooner the better. You need research money to finish up the conversion of a useful scientific invention into a renewable power source at the home or industrial level? You got it. You need capital to take your electric plant off coal and onto gas? Here’s a low interest loan. Are you a massive power user (steel) that if given enough capital at low cost could become a power producer, and make your business carbon-proof from dirty international competition? I’ve got some cash for you too. However, each of you had better spend the money on what you said you will, and stay out of corruption and theft with my money, because I will be watching. In fact, your project accountant will actually be employed by me. Work for you, take all instructions from you, but I pay the salary, and get monthly reports form him/her. That’s all the oversight I need.

But there is a decision to be made, and it is as old as democracy itself. What is government’s role? Because only government’s (and maybe Warren Buffett) have the money and credit to accomplish a massive conversion to renewables. If you don’t want to do that, by doing the kind of things I outline above, then I guess we have to head back to find out if there is anything more I can do to make the nuclear plants safe from incident, and the waste safe for eternity.

And finally, I have a long-term question. As time goes on, I am wondering if there is no way to catalyse chemically a nuclear reaction, and is there such a thing as an intrinsically safe nuclear reactor?

How do you reach those who are wilfully ignorant

Mar 8

Posted by Sgt Hulka in Bad Ideas, Climate Change, Economics, Politics | Comments off

So, it’s been about a week and the Coalition scare mongering campaign over the carbon tax introduction has apparently started to do its expected damage, with the announcement of the Newspoll today that show Labor as being less popular than leaving your kids alone with a Catholic priest at 30% primary support. Nothing much else has happened federally in the last week, so the drop must be mostly due to people who were polled believing the Coalition’s spin, or they believe that if ignored long enough, the climate change issue will go away. In either case, the only way you could believe either of these alternatives to the carbon tax is to be wilfully ignorant.

If you believe that the issue of climate change is going to just go away, then I hope you don’t have any kids. Not because you shouldn’t be allowed to breed, but because I am a nice guy and don’t wish to see the results of your ignorance to be manifested on anyone’s kids.

The other option also requires wilful ignorance, because the detail has been out there for quite a while. You can have a look a the Coalitions direct action policy and my analysis of it from more than a year ago (!), and it clearly shows more than $700 million in spending per year.

This week, Tony Abbott has been out demonising the carbon tax proposal as something that will kill the economy (a lie that I will deal with separately), and putting forward the contention that the direct action policy is (1) better; (2) that no one’s costs will rise; and (3) that it can be implemented with no additional taxes. It’s the life is all ice cream and no pain approach to climate change.

This is where wilful ignorance comes in, because you don’t need to be Paul Krugman to recognise that if a government is going to spend more than $700 million a year in picking winners in the emissions reduction area through paying for the abatement out of the federal budget, and they aren’y going to raise taxes to fund that spending, then clearly budget cuts in other areas are going to have to pay for them. The cuts are likely to come in areas that the Coalition does not approve of, so expect to see funding for things like public schools, public transport, public health care and pretty much anything with a public in it to get a cut in the next Coalition-prepared budget. And if you rely on any of those public things that get cut, your costs to replace them will go up.

Its a pity that honesty doesn’t poll well, because a carbon tax is simple, direct and honest (even if I let people lie and call it a tax). Once again, here is how it works:

• Government makes anyone who is a major emitter of CO2-equivalent (CO2-e) gases pay for each ton of those emissions annually;
• They eat those costs, or pass them on to the buyers of their goods or services (probably the latter);
• The government uses some of the money raised to support long term shifts to alternative energy sources through research, low interest loans and other incentive programs; and
• The government returns any left over money to the taxpayers to offset their rise in cost (if any).

You may not like it, but a carbon tax is at least honest and will do what it says it will.

If I had any control over the situation, I would also apply the tax to all significant imports to the country that have high CO2-e intensity to address issues of major industries here that face significantly rising costs that large polluters elsewhere do not have to pay. That way, I can use local law to also influence behaviours of foreigners who want to sell their stuff in my market. Now that’s what I call effective tax policy.

The real enemy

Mar 2

Posted by Sgt Hulka in Economics, Evil Motherfuckers, Other Topics | Comments off

So, I am talking to my buddy Otto the other day, and he’s got a libertarian streak significantly wider than my own, and we are talking about the public service (PS) union issue in Wisconsin, USA. And during the conversation, I conceded that it might be the case that the unions had been given something ‘above and beyond’ by the state over the years and that those in the private sector (union or individual) do not get. That they are the new “welfare queens” of the Republicans and tea-partiers.

So, I went and did some more research, and I found it that this is factually not the case, and more. The fact in Wisconsin is that out of every dollar that funds Wisconsin’ s pension and health insurance plans for state workers, 100 cents comes from the state workers. Union members negotiate a total compensation packages that includes salary, pension contributions, and their health care plan. They could take it all in salary, or defer some salary to get the other two. Either way, it’s their money.

Let’s repeat that: All the so-called “employer contributions” made by the state to pensions come out of an overall compensation package negotiated by the PS employees collectively which includes salary, pension and other benefits. Furthermore, the fact is that overall compensation packages for PS employees are the same or lower than those in the private sector. The salary portion of their compensation, in particular, is about 25% below, on average, comparable positions in the private sector. That’s where, at other times, we get the impression that people in the PS don’t get paid that much, but they have easier jobs (a misconception that can be addressed elsewhere).

The lie that is being spun is that these PS employees are getting a “gift” of public money by those who want to rouse your basal tea-party sentiment. The truth is the money in the PS pensions is THEIR money as deferred payment. Of course we all know that saving salary money for the future as deferred payments is evil, right? Those public employees and their unions are so evil and irresponsible, I bet they caused the whole global financial crisis.

To be honest, from my perspective, the only mistake the people in the unions made is taking deferred salary that is not identified as such by an employer that guarantees it – you can’t get it back if no one knows it’s yours.

As Paul Krugman puts it, “Public sector workers are not, on average, grossly overpaid compared with the private sector — period. You can fiddle at the edges of this conclusion, but it’s just not possible to conclude, based on any honest assessment of the data, that schoolteachers are the new welfare queens.”

But there is actually more to the story, as there always is with Krugman, and why I have gone back to read so much of his old stuff. The real problem we aren’t being told from the media in the US is worse, The current problem with public (and possibly private) pensions is that they are all pretty much all “at risk” these days as well. Gone are the days when pensions were put in rock solid low interest things like government bonds. No, today those funds are in the stock market. Yeah, that same stock market that crashed when the greedy bankers sold really bad collateralised debt to unwary or greedy investors who were also mostly bankers. Have a look at this graph from Krugman that shows what pension funds would be worth with simple interest, and what they are actually worth as a result of the GFC.

Screen shot 2011-03-02 at 10.27.25 AM

In a perfect world, the folks at Goldman, Citi, BofA and Wells Fargo that caused the whole fucking problem in the first place should be made the fund managers at these public pensions as indentured servants until such time as the pensions are back to where they would be if they made nothing more than the long term bond rate.

The most amazing thing to me of all, looking from the outside in at the US at present, is that the media seems to be characterising the issue relating to the fiscal crises in the states (and federally) as a battle of priority between the unions and the regular taxpayers, with their newly installed tea party inspired paymasters. The middle class (every one of the people in the union in this story) is not ripping off the state. The banks and rich arseholes that brought the global financial crisis on, then got government support to get through it, and are now paying massive bonuses to those same arseholes are the problem. So, the poor and middle class ought to quit being pitted against one another, and start making the rich see some consequences of their failure.

Facts about the carbon tax

Mar 1

Posted by Sgt Hulka in Climate Change, Economics, Good Ideas, Politics | 1 Comment

Right, so I have heard a lot of the political hubbub following the announcement, and I have heard the opposition’s position on it, and I have even done some informal polling of my own to canvas views, so I had better make a comment on the carbon tax. It’s my preferred option, if you have been checking in regularly, and if it goes through, also possibly the first time I have ever predicted the future where it wasn’t something bad.

The Coalition’s position, put forward formally by Malcolm Turnbull (who has just got to be loving life having to carry this bag of shit), is that their proposed direct action proposal will be better, but that he personally favours the ETS. So, basically, they got nothing. And all they want to do is scream about the election lie of not having a carbon tax prior to the last election. A furphy.

Here’s the facts. Three blockages by the Coalition with the assistance of the Greens in the last parliament meant that labour wasn’t going to get its ETS up without a pound of flesh to the Greens, and that cost is a fixed price sooner, hence the carbon tax. Julia Gillard made the promise of no carbon tax prior to the last election, based on a Labor government ruling in its own right, not as a minority government. So, while we all like to call all politicians liars, the truth is that promise was null and void when she didn’t win the election outright.

So take that as a lesson Coalition (including you Malcolm): If you go too far to the right (climate change denial) and block something by any means (roll your leader and renege on a deal), then you sometimes end up getting something you like even less when your previous conspirator joins your enemy.

My position on a carbon tax has been stated before. To summarise, its far less elegant a solution that an ETS, but also more transparent and less easy to corrupt. The Coalition’s only substantive complaint so far has been that the proposed carbon tax is low on detail, so here are some more boring facts about the carbon tax, functionally.

It will have a short-term fixed price to allow the parties who believe in climate change [Multi-Party Climate Change Committee (MCCC)] to defer a final decision on a 2020 greenhouse gas (GHG) emissions reduction target for three to five years, in which time they hope to have another international agreement on targets to replace Kyoto, which expires in 2012.

The price will remain fixed for three-to-five years until, and unless, a review recommends moving to an ETS. Once the shift to an ETS occurs, the market will set the price of a ton of CO2. At that time, Australia’s emissions will be capped and controlled by Australia according to the international agreement, through the use of emissions trading in Australia (which will undoubtedly look a lot like the CPRS) or other model like that passed in California late last year, since we failed to get ours up first here in Australia. Barring the achievement of an international agreement, Australia will most likely try to pursue a regional agreement, linked to others already being formed, or start our own closer to home.

Under a carbon tax, business would have some certainty but no comfort. They will not know a limit on how much they can emit, but they will know the exact cost of their emissions for the next 3-5 years.

More importantly, the fixed price carbon tax will give certainty to energy consumers and renewable energy investors, about the exact cost of carbon pollution. Electricity providers, fuel providers and anyone else included in the program will undoubtedly pass on their costs to users, so we can actually see if our electricity bill is going to go up $300 a year.

Then, based on what industries actually do with the cost applied to them, we can then start arguing over what government can do with the actual of tax it will have raised each year, that should amount to about $5 billion, assuming a price of $15/ton CO2e and including the emissions from energy, industrial processes and waste, but excluding land clearing and agriculture (for now).

Depending on what the company (or people) are willing to do to change their emissions profile, we can discuss how are we going to assist losers (coal industry) in moving to the clean energy economy, while avoiding getting the government involved in picking winners and losers and letting market forces set the price over time.

Would I be interested in using some of the tax raised to provide low interest loans to those in the coal industry convert over to gas? Probably. Would I be interested in doing the same for companies that want to invest capital in large scale renewables? Possibly. What about supporting Bluescope Steel in making green steel here, or also applying a carbon tax to competing imports? I’d consider it. But would I be interested in direct funding of projects to capture CO2 from burning coal and see if we can sequester it in the ground or other Rube Goldberg device? No fucking way. But hey, even if there aren’t that many great ideas to assist in the shift to a greener economy, we could just return the tax to the 9 million households in Australia to the tune of $555 per household per year to help them afford the higher costs that will be passed on to them. Households that use more energy (or are wasteful) might not get their costs all covered, but those that are more efficient could be net winners after the tax. The bottom line, let’s not be too scared by the economic horror stories that will be peddled out by the same people who don’t believe climate change is happening.

You can also start to look at the upside. The Climate Institute report released this week also shows that, “Australia has largely untapped energy resources in geothermal, large scale solar, bio-energy, hydro, wind and natural gas.” Work in these areas will create these new employment opportunities out to 2030:

NSW: Close to 7,000 new power sector jobs
Queensland: Close to 6,300 new power sector jobs
Victoria: Over 6,800 new power sector jobs
South Australia: Close to 2,700 new power sector jobs
Western Australia: Over 3,500 new power sector jobs

Now, lets see how that compares to my previous analysis of jobs that would be lost working in the coal industry if we got off burning the magic dirt. Well, not too bad, actually, considering my prediction was based on a 97.5% reduction in coal burning, whereas the Climate Institute only predicted a clean energy usage target of 43%. Anyway, they predicted a growth of 26,100 jobs nationally (many in regional areas) which isn’t that far off half of my prediction (23,500) of the jobs lost by eliminating all burning of coal for electricity.

So, net jobs is about a wash, and the jobs gained are jobs just as good as those they replace, not low paid crappy service work. And as I have said before, don’t try to scare me with job losses. We have just gone through the second worst recession in history with massive job losses, and the world did not collapse. If dirty jobs need to be lost, they should be, even if they aren’t immediately replaced.

Tie together the following . . .

Jan 31

Posted by Sgt Hulka in Economics, Evil Motherfuckers, International, Politics | Comments off

Iran, Tunisia, Egypt, Yemen, the GFC, old regimes and a high youth population.

Screen shot 2011-01-31 at 11.31.44 AM

The first four are easy by geography. I have added Australia to the table for comparison. All the middle eastern countries are also all religious societies where the rule of law is also religious. What is likely less well known, or I haven’t heard much about recently, is how much stress the GFC has put on these governments, but I suspect it is significant. No merchant can see all their customers go broke and not feel some repercussion. All have incredibly “old” governments of between 21 and 31 years of age. And because religion so influences the daily lives of people in these countries with the traditional roles reinforced, all the countries have a high birth rate and low median age. All of the kids in these countries have never known any other government.

And you know how it is with kids, they rebel. They also have access to the internet, and see what is happening on the streets in Iran last year, and Tunisia this year, and they use it to organise on the street near their home. And old, corrupt regimes try to repress them. Hopefully, the government in Egypt won’t go too far, as Iran did, and use violence and fear to try to scare the republicans back into their box. But frankly, what else does the Eqyptian government know? It has been using fear of violence (or actual violence) to keep its people down for a long time. Hosni Mubarak isn’t necessarily an evil man, but he has been at a minimum cooperating with evil. How else do you explain the Muslim Brotherhood’s showing in the last election, where popular leaders were not even returned to parliament in their home electorates? And Egypt is also well known to have participated with elements of the US government in rendition and torture.

I suggest that perhaps the economic stress that has been felt by all in the world of buyers and sellers of things in the last couple years has been the straw that broke the back of the fear of acting out recently in the middle east. If the government that the young see as oppressing their freedoms socially and politically can no longer protect them from economic pain, then they begin to feel as if they have little to lose and will hit the streets without much additional provocation.

But the basic problem is the failure by the leaders of all these states to embrace the meaning of the word “republic” in the second half of all these theocratic republics. Trying to hand over power to your son in a republic doesn’t really do it. Neither does stealing from the national wealth and enriching yourself and your cronies. Torture and capricious punishment of the population is right out. Basically, you have to be willing to listen to dissent in the media and even on the streets without becoming a tyrant if you want to survive in a republic. If you want to do more than survive, you have to let go of fear and let the others participate in the republic, even when their ideas are shit. The bottom line is: If you aren’t ready to turn the government over to the other pack of idiots on occasion, without worrying about whether you will ever get it back again, then you aren’t really a democracy, or a republic for that matter.

I bet the Vatican runs on coal

Apr 15

Posted by Sgt Hulka in Bad Ideas, Climate Change, Economics, International | Comments off

The cost of producing power by burning coal is currently the cheapest of any fuel if you look strictly at material cost per heat unit.

But unfortunately, it needs to be examined more holistically, based on recent evidence in combination with my previous research. Currently, coal burners for power production are not required to internalise the costs of things such as:

HSE Performance and possible criminal prosecution
Our Australian coal companies have nothing to do with the recent coal mining disaster in the USA. But keep in mind that our coal producers have to compete with the likes of Massey Energy Company, and we know they all compete on keeping “operating” costs low. In the case of Massey, the deaths of 29 workers in early April were likely the result of the cost containment efforts of Massey in the areas of installing necessary HSE controls and even in paying fines in full and on time. The U.S. Mine Safety and Health Administration has issued more than $900,000 in fines for the Upper Big Branch mine in the past year, according to federal data compiled by Bloomberg News. Massey is appealing more than $250,000 of the largest fines, among them one in January for ventilation systems that are supposed to prevent the buildup of methane gas and coal dust that can cause explosions, like the one in the current incident. Massey has a history of disputing U.S. findings of safety violations at its mines, including one in Virginia in where 25 people were killed in 1970, records show. Of $1.77 million in safety-related fines that the Mine Safety and Health Administration lodged against the Upper Big Branch mine since 2006, Massey has paid $364,886, or 20 percent, according to agency data.

Note that someone does pay theses cost avoided by Massey at present however, the government and families of those killed.

Great Barrier Reef grounding
This month in Australia, we also have another unintended impact of the coal sales, with the grounding of the coal ship, Shen Neng 1. Whatever the outcome of the court case, the evidence this far is damning. This boat was off course in a no-go zone, and had no responsible pilot on board to guide it on a correct path through a part of one of the great wonders of the world. In the period it was stuck and hung up on the reef, dragging in the current, then anchored and moving in the current on the reef until it could be refloated. It spilled only a few tons of its 900 tons of oil on board, but it also left behind a large amount of its anti-fouling paint on the reef as it went. And anti fouling paint is one of nature’s quiet killers. I won’t go into great detail, but please look into these yourself through your favourite scientific search engine. This paint contains chemicals that can kill instantly, and are also what are called endocrine disruptors when exposed to chronically, so they also leave behind negative mutations.

Financial damages include all emergency response costs, damage protection and clean-up costs, as well as log-term monitoring and repair of environmental damage from the direct impacts of the ship, and the poisons it left behind. Coal traffic out of the Rockhampton loader that this ship departed from are projected to increase 67% this year, all of which should be directed by competent pilots from AMSA, in my opinion.

I wonder if the cost of coal fully incorporates these types of charges, as well as the cost of the court case itself, as I don’t see wind or solar generators ever being in a similar circumstance, product liability-wise.

Health issues in the Hunter Valley
Then, as of Monday, the drumbeat continued, as the ABC’s Four Corners program began an examination of the health effects of the open cut coal mining in the Hunter Valley. The program detailed a number of acute and chronic cases of asthma and related respiratory ailments suffered by residents in and around Singleton, as well as possibly identifying a cancer cluster. But we will know more about that as the government completes a study, that it refused to do until the day after the Four Corners story broke. Up until now, it has been one GP doing a study on his own.

Whether a full study reveals an acute or chronic health problem from the mining activity or not, who pays? The government and communities currently assume all health costs, as far as I can see.

Energy efficiency and greenhouse implications
The very important issues above are possibly reasons alone for discontinuing the burning of the magic dirt from making electricity. But then let’s not forget last week’s “dead” issues, energy efficiency and greenhouse emissions. The public may be tired of hearing about it and want to move on, but the facts remain. Burning coal for fuel is the most inefficient means of making power with respect to waste emissions and thermodynamic power losses.

Just because we can dig it out of the ground for what appears near to free, doesn’t mean it is. If you also agree that the costs of doing the changeover from all or part of our coal burning is not as expensive as predicted by doomsayers, then the arguments for not getting off coal ourselves, and slapping a great big carbon excise tax on any that we do sell overseas, start to make a lot of sense. Just as big rich countries have the right to tie their financial aid to poor countries efforts to adopt climate change goals, so should we cause heavy users of our coal to internalise the full costs of using the product in order to advance their economies.

[Bloom Box], Things which are probably bullshit . . .

Mar 2

Posted by Sgt Hulka in Economics, Good Ideas, Other Topics, Snake Oil | Comments off

. . . as our friends at Hungry Beast say. But hey, nobody does a launch of an 18 year old technology like the yanks. A former NASA scientist (to make it sound more sexy, no doubt) has brought us the trendily named Bloom Box, claiming it to be the big thing after ten years of development. Ah, unfortunately, not.

Oh, he has got a planar design, solid oxide fuel cell in those fridge size boxes, to be sure. The problem is, they aren’t new, having been first begun commercialisation in 1992 by companies such as Ceramic Fuel Cells Limited here in Australia, or UTC in America. These companies actually sell now what this bloke is saying you can have soon for $800k and hopefully for $3000 in a few years. Hell, the Australian company had their piece of kit doing demo work on top of the old office I had in the technology park back in 2000.

I don’t know exactly what CFCL sells their piece of kit at, and to my knowledge they are still only selling them to small companies, with a consumer product to be available “sometime in 2010”. My guess is that CFCL would probably offer their unit at a cost a bit less than what Bloom is saying for a similar sized application for small businesses. The big difference is that if you call CFCL or UTC, they actually have something to install when they take your money.

In my opinion, Bloom’s entrepreneur is most likely a hype merchant so insignificant I won’t even look up his name. My suspicions were raised when I first heard his release where he says he has some “proprietary software” that is the key to his Bloom Box. Uh huh, and mine has magic beans.

According to reputable news agencies on science and technology (National Geographic News), based on the information the company has made public, the Bloom Box technology is not revolutionary. They quote Friedrich Prinz, a fuel cell expert at Stanford University, the design of the Bloom Box appears to be fairly standard and that there was nothing obviously revolutionary about it. “They didn’t reveal any new physics or any new principles, but I don’t think they need to do that,” he said.

Note the end of the professor’s statement. What he means by “they don’t need to do that” is that solid oxide fuel cell technology is exciting and very interesting. It’s essentially “burning” something, but not in the physical sense, more in the chemical sense, through a reactor that can be coated onto thin plates. It’s basically a chemical engineer’s wet dream, so I will go on, or you can do your own research elsewhere. The heart of the fuel cell is a high rate chemical battery that produces the electricity

Solid Oxide Fuel Cell

You feed it the same type of stuff you feed an internal combustion engine (methane and air) and it produces electricity (only in DC form as opposed to AC) and it also produces waste heat you can recover at high temperature for other use (like heating water for your house). But the cost of the fuel cell to manufacture is pretty high, because the methane you use to feed it is just a good source of what you really want to feed it – hydrogen. So you basically have to put a miniature stripper and reformer on the front of the rig. Plus, coating the anodes and cathodes of the reactor and getting them spaced out exactly as you require is expensive assembly work.

However, the real current manufacturers (CFCL and UTC) of solid oxide fuel cells do intend to get their equipment down in cost for home application in the next year. And then let them work the kinks out of the technology at their demonstration plants and then we will see whether I will be buying one for my back yard.

But you know, probably I will anyway just to mess around with it. Either that, or I am starting the home nuclear reactor this year. Besides, all the cool kids will have one. I thought so enough at the depth of the financial crisis that I started buying stock in the company. There’s your free stock tip for the day, for those tuning in that made it this far.

Caveat Emptor Also Applies to Carbon

Jan 23

Posted by Sgt Hulka in Climate Change, Economics, Good Ideas | Comments off

I have also recently been asked by our resident lurker to comment on dodgy providers of carbon dioxide offsets and the pursuit of those making false claims or making fraudulent deals by the consumer watchdog, the ACCC. In reading the summary’s of the cases being made by the ACCC, they seem to be of a couple varieties, including those making false or misleading claims about their offset credits, to those engaged in actual fraud by taking money from clients to buy carbon offset credits and then not doing so.

Whether or not the ACCC will prevail in its cases is uncertain, but my gut feel is that if they take a claim to court, they usually have a pretty good case. However, proving that case in court is another matter, as evidenced by the judgments against the securities watchdog (ASIC) in cases that were widely considered to be very good. One of these cases is a not-for-profit that is apparently making unsupported claims about the superior value of its credits and services. This may be difficult to prove, and more difficult to prove as malicious, given the fairly confusing landscape with regard to environmental claims. The more easy case to prove (the fraud case) is probably already moot as the company is not longer operating and a court has ordered the former directors to buy the credits it failed to previously.

Another colleague asked me a week ago about how her organisation could buy offset credits. I explained to her the process of getting an inventory of emissions certified, and also buying certified credits. She didn’t quite understand why both the emitter and the seller of the credits required independent verification, and that got me to thinking that maybe it isn’t all as simple as I think it is. So I backed up, and started over on the basis of the concept of trust. To be truly greenhouse neutral means that I have to trust what your emissions are, and I have to trust that you bought real offsets. That helped clarify it for her. The introduction of the National Carbon Offset Standard (NCOS) may improve things somewhat by further clarifying what is and what is not genuine reduction in greenhouse gases that can be traded, and doing away with some types of credits that are of debatable validity. But it won’t make things crystal clear in all situations, and the purchase of credits will always require a well informed buyer.

My rule of thumb is to first see if you can tie the credits you want to buy to a clear standard (like the NCOS) with independent verification and oversight by a government accredited program. Then, do a bit more research on the company offering the credits, particularly if they are sourced internationally. A relatively simple internet search can usually tell you a lot. Reputable companies probably have a background and history in some type of environmental work. If you cannot find anything about the company, I would worry a bit. If you can find some information, and it tells you that the head of the company offering the credits was a disqualified horse trainer in Australia that now lives in PNG and once ran Philippine cockfighting ring, I would probably move on to the next one.

Simplicity for Simpletons

Jan 21

Posted by Sgt Hulka in Bad Ideas, Climate Change, Economics, Good Ideas | Comments off

After a significant hiatus to take some holidays, see a cricket test match and do some billable work, I have returned and want to announce that I am now fully against the implementation of the CPRS in favour of a straight input tax on carbon in fossil fuels. This is not to say that I have become a climate skeptic, nor have I decided that an emissions trading system would not work. However, having examined both the process and results of the Copenhagen summit on climate change, I have now joined the ranks of those who believe that an emissions trading system (ETS) will be too little, too late.

The basic premise of all of the ETS that are currently functioning in the world (and yes they are in fact proven to function) as well as that proposed for Australia under the CPRS legislation, is that you can harness economic market forces to drive emissions down more quickly and efficiently than mandated emissions cuts, or a straight input tax on carbon in fossil fuels. Essentially, all of the ETS are based on the concept of “cap-and-trade” where the government sets an overall emissions cap, and individual entities under the cap can trade amongst themselves in an independently verifiable manner, allowing some to emit more from their operations, if they pay others (through buying excess emissions credits) for the emissions reductions made at the sellers facilities. These ETS, as I have said above do work in fact, but they don’t work in reality, for a number of reasons:

• People Lie – Everywhere that I have seen the attempted introduction of an ETS, I have seen people with a vested interest in not seeing anything done about the basic issue lie about the details of the ETS, its purpose, its effect, or all three. The lies pretty much start on day one of the introduction of the legislation, as they did in my home state of Montana, where the US Congressman Reberg ( a wholly owned subsidiary of the energy lobby) penned an editorial in his local newspaper calling the legislation “Cap and Tax”, and hyping it as a new tax on everything to his base of libertarian minded constituents. That’s how the discussion started from day one. No thoughtful, logical evaluation of the pros and cons of the design, the fairness of the implementation or even the economics and outcome. Nope, it was straight to the third grade name calling, and then downhill from there. A similar welcome accompanied the introduction in Australia, albeit with less juvenile but no less significant misrepresentation from the likes of Senators, Joyce, Minchin or Fielding.

• People are lazy – People get away with the lying identified above primarily because the masses are arses and are typically either too lazy or too stupid to seek out some basic information on the subject and decide for themselves whether they are in favour of an ETS (or even doing something about climate change or not). So, they are swayed by whoever has the most money, the loudest voice, or the sexiest celebrity in forming their opinion.

• Complexity leads to corruption – Any ETS legislation gets a bit complicated, often in an effort to create fairness in implementation, but just as often to buy off enough support of moneyed constituencies, or put in loopholes for those same constituencies. Because of the complexity of these systems, they are even harder for the lazy and uninformed to support, and they often take forever to get through the legislative process and into function. Then after they do get into action, the loopholes and payoffs get exposed by the press who feed on controversy, and their support is further eroded.

Given these truths about the realities of an ETS, I believe it is far more favourable to just go with a simple carbon input tax on all fossil fuels. This will blunt the criticism of the liars who will just want to call it a tax anyway, it is real simple so we should be more easily be able to sell it to the punters who donít want to know too much (and will like the straightforward payback they will be able to see), and wit will be nearly impossible to cheat or get loopholes into the legislation since I could write it in a couple of pages.

Here’s how a simple carbon tax would work. First we figure out how much we need to tax our dirtiest fuel (coal) in order to make it the same price as the cleanest fuel (solar). Then, on that basis, we set a carbon tax for all hydrocarbon based fuels on the basis of an assay of how much carbon they contain in relation to coal. The tax on coal will be very high, oil less, gas significantly less, hydro, wind and solar nothing. All of the tax will be applied at the first point of sale of the fuel so there will be no chance to escape the tax man, and there will be no double taxing. All of the money will come in to the federal government that already has the infrastructure and resources to collect the taxes (it’s one of the only things governments are really good at, after all) so administrative costs will be low. All of the tax revenue generated will be redistributed evenly on a per-household basis (not a per person basis, so we don’t encourage overpopulation). Heavy users of energy will pay the most, and everyone will benefit on an egalitarian basis. Want to drive a Hummer and feel good about it? Go ahead, you will have paid for the fuel tax. Want to feel great about the purchase of that solar panel? You can too!

The price of virtually everything will go up, it’s true, since everything is pretty much manufactured and transported now with one fossil fuel or other. But that’s OK, since every household will also be getting a big payment every year as their portion of the return on the tax, and eventually less carbon intensive energy sources will be the norm. This will also allow every household to budget (if they want to) each year and directly see what their energy inputs are, and compare that to the amount they get back from the carbon tax. With people being able to examine the data more directly for their own household (if they choose to look), there will be great incentives for the smart to become more fuel efficient. And I always like incentivising the smart.

More on the future (or why humans make me sick)

Dec 29

Posted by Sgt Hulka in Climate Change, Economics, Science | Comments off

I was doing some more research into the last comment by the Chairman to my post on how we could eliminate virtually all use of coal for electricity production. I was concerned that I had made a wild assumption that we could switch over to such a large proportion of gas use (up to 44% from 14%) in the short term. It turns out that we actually could (with a current known reserve of 849.5 billion cubic metres, and 43.6 billion cubic metres of production capacity, and currently predicted growth in that production capacity) provided we were willing to cut off about all of our exports.

However, the really interesting thing that came out of my analysis is what a completely achievable task reducing our carbon dioxide emissions to less than 50% of what they are now would be, and how apathetic and narcissistic we are as a species. See, what I did was make up a little spreadsheet to calculate the emissions of CO2 based on fuel mix to achieve our required amount of electricity production that I could then compare to the current and predicted availability of production rates for those fuels and still meet our Kyoto target value. I also used the following assumptions:

• No energy efficiency improvements
• Rise in electricity production required is 2.2% per year in line with GDP growth forecasting
• Data on emissions rates from various fuels from the US Department of Energy from July 2000.

Now just a comment on how amazingly conservative these assumptions lead me to be. First, there are credible estimates (Flannery, etc.) that about 80% of the reductions we would require to achieve the worldwide CO2 emissions reduction target could be done with bog-standard energy efficiency improvements alone using technology that has been around for decades. Second, I predicted a rise in electricity production required each year based on GDP, using the widely documented correlation between GDP growth and electricity usage (UN).

If anyone wants the spreadsheet to critique it, please let me know, but my findings are as follows.

The base case I modelled is the current emissions with a breakdown of fuel from my 10 December post. The first really pathetic finding is that even currently burning coal to make up 77% of our electricity, Australia is still on track to meet its Kyoto commitments. The second thing I found is that with my 2020 case modelled, going to 25% nuclear and 44% gas to eliminate virtually all coal burning while achieving the 20% renewables target set by the government results in us passing our Kyoto target by a whopping 68%! Emissions using the above fuel mix would actually be only 45% of what they are today.

So, I then went back to see how far we could get by keeping some coal and dropping all the nuclear out of the mix to placate those that would rather burn coal than go nuclear. By doubling our gas usage (to 29%) and dropping coal back to 40%, we reduce emissions overall to half of the 1990 figure without any expansion of nuclear use.

The bottom line – this ain’t that tough, and the failure to actually commit to some solid changes that would be significantly less challenging than putting a man on the moon shows how much we have changed in 40 years, and not for the better.