It’s hard to know how to keep up with news on the problem of mitigating CO2 emissions – there’s just so much happening – so I’m just going to jot down a few thoughts. This piece on wind power in Salon by Joseph Romm has a couple of particularly interesting snippets I want to jot down.
* since 2000, Europe has added 47 GW of new wind energy, but only 9.6 GW of coal and a mere 1.2 GW of nuclear
* The carbon price required for large scale expansion in wind power (to 20 per cent of all US electricity by 2030) is estimated at $50/ton
Given our larger area of land per person, I’d imagine the economics in Australia would be at least as favorable. Ignoring for the moment the demand response, the revenue associated with permits sold at $50/ton in Australia would be about $25 billion (given current emissions around 500 million tonnes). Taking account of an emissions reduction of at least 20 per cent*, revenue would be $20 billion (enough to fund the abolition of payroll tax and a reasonably generous compensation program for low-income households). The net welfare loss would be much less than this – given the many problems with payroll tax, there might even be a net gain.
* The Salon article is only on electricity, but there are comparable savings to be made in other areas.
To get really serious about reducing CO2 emissions, we’ll need in the end to have a price of $100/tonne or so. At that price, there seems little doubt that we could halve emissions over the next few decades, so we’d be looking at revenue of $25 billion, and a welfare loss of $10 billion to $20 billion, or 1 to 2 per cent of national income. (A request that will doubtless prove fruitless: if you’d like to challenge this estimate, please provide a comparable estimate of your own, rather than thumping the table and saying you don’t believe it).
For a 90 per cent reduction by 2050, as has recently been suggested by Garnaut, we’d need to rely, not only on prices but on the innovations that higher prices will bring about. More on this soon, I hope.