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Making Climate Policy Economically Profitable

June 4th, 2008 · 1 Comment

Reality deniers are hard at work, with $100s of millions supporting them, arguing that doing something about global warming would be disastrous for the economy. Let us be clear: THIS IS FALSE! Smart climate policy will, even within traditional economic definitions, pay off for the economy. But, in fact, there are a multitude of payoffs here:

  • Insurance: Reducing emissions (even going to carbon negative) is an insurance policy against potential impacts of catastrophic climate change. There will be impacts but we have, hopefully, the chance to control how bad they will be.
  • Security: Reducing Global Warming impacts will improve national security (by reducing risks), but a key path will also mean reduced oil imports which might lead to lower global tensions and fewer drives for deployments of military forces into conflict situations.
  • Economics: Well, the economic payoffs are enormous, from reduced health care costs from lowered pollution, to improved balance of payments due to lowered oil imports and increased exports of green technologies, to green jobs, to …
  • As for the last, let’s take two great examples from the Sightline Institute that each highlight the payoff potential, along with innovative thoughts on how to accelerate and improve the payoffs.

    Riding Herd on Refrigerators: “Financing free fridges for fairness.”

    Refrigerators are a great poster child for energy efficiency and the value of standards. Average annual power use for refrigerators has fallen roughly by two-thirds over the past 20 years, meaning new refrigerators use about 1000 kilowatt hours less per year. For every 10 old refrigerators replaced, that is about the equivalent of taking a house off the grid. Hmmm … not bad.

    But, this bumps into the classic upfront capital versus long-term savings from efficiency challenge. One that is difficult for those lower on the economic spectrum to deal with and one counter to how our culture considers economic payoffs (individuals in their own lives), as we discount future savings too heavily.

    In an environment of profit decoupling, where the utility has a value for fostering reduced power use, why not set up a program where utilities bulk-buy refrigerators and offer them for purchase, with the payback to occur via the monthly electric bill. This can help get past “one of the stickiest problems in energy conservation”, the landlord-renter challenge as the landlord wouldn’t have to pay for the appliance, since it would go into the utility bill. If we want to talk 15+ year old refrigerators, how many do we think are sitting in low-end rental units around the country?

    Take a look. A sensible path for, effectively, taking a huge chunk of homes off the grid.

    Cap and Caulk: How Smart Climate Policy can cut our energy prices

    This is a truly excellent discussion, right into many of my own passion zones, and very highly recommended reading. Alan Durning discusses low-income energy improvements in Cascadia, how the programs are highly successful, but resources fall far short of demand. $8 million per year for 5 million homes, with ten times as much money going to bill paying assistance (giving the man a fish) as opposed to energy efficiency (teaching people to fish). Roughly 4 percent of relevant homes have been treated … over the past 30 years. Do we have 750 years to make it 100 percent?

    What Derning does, quite effectively in this piece, is link fairness with a cap on emissions and how energy efficiency programs for lower-efficiency people could promote fairness and lower the cost of energy.

    Under a cap, one thing that efficiency programs most assuredly do is lower the price of carbon pollution permits. When Pacific Power drops out of the market for certain permits, there is less demand for the permits, so ExxonMobil or Northwest Natural gets the permits for a slightly lower price. Ultimately, consumers pay lower prices than they otherwise would have. After all, consumer prices are dictated by the market value of permits.

    Energy price reductions are a good thing (in a capped carbon economy), because higher energy prices are economically regressive. They’re also a good thing because high prices are politically perilous: they might prompt legislators to raise—or poke holes in—the cap.

    Durning discusses many other benefits from energy effficiency programs from better utility bill payment rates, reduced homelessness (a little), improved health, etc …

    As is typical, Durning has written something worth reading … and incorporating into policy.

    Just a taste …

    Despite what one might hear from fear-mongers like the National Association of Manufacturing, George Will, the coal industry, James Inhofe, Robert Samuelson, and others, choosing to deal with Global Warming has the potential for creating tremendous opportunities. If we do this in a smart way, Energizing America will create a path toward a prosperous, climate-friendly society.

    Now, “cap and caulk” doesn’t solve everything, it doesn’t mitigate cost implications in transport and products from sensible climate legislation. Thus, other paths for fairness (like a partial dividend) will be required. But, cap and caulk is an excellent discussion of the type of win-win opportunity that the entire strategy of striking fear about economic costs of dealing with global warming is choosing to ignore.

    Tags: Energy · Global Warming · Uncategorized · analysis · business practice · cap and trade · climate change · conservation · electricity · emissions · energy efficiency · environmental · environmental justice

    1 response so far ↓

    • 1 Refrigerator Filters // Jun 30, 2008 at 8:20 am

      Refrigerator Filters…

      There was only one refrigerator in all of the rural houses that I saw. In homes in the city of Buôn Ma Thu?t, however, the three houses I visited all had refrigerators….

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