It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.
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John Quiggin 
Ross Gittins in SMH [Weekend Edition] has (by mistake) hit on a key aspect of capitalism – profiteering through politically constructed monopoly.
In Gittins’ case, the issue is patents, intellectual property and copyright, but there are many other examples. Newsagents, pharmacists, taxi services, broadcasting, airports, and etc also benefit from political economics. Even local council development and zoning processes, in effect, construct political monopolies. The relative size of an enterprise can also introduce monoploy.
The problem is that economic stability becomes impossible with monopolistic behaviour, but supposedly, growth is boosted by allowing such arrangements. The more you prioritise capitalist growth, the more you create instability. There are other problems as well, alluded to by Gittins, eg big business being able to use intellectual property as a weapon to intimidate small business.
You only get economic stability when each producer, on average, extracts normal profits. A new innovation may well create a period of surplus for one producer, but only as it absorbs the resource previously served by the older technology. As other producers switch, this surplus is competed away. By using politics to prevent this switching – some receive inflated profits while others become poorer. Bill Gates now sits on $60 billion in wealth through such politics and deals with other capitalists.
It is hard to give credance to arguments that royalties and copyright must exist after the death of a producer. Supposedly intellectual property rights ensure that an innovator can recover the R&D associated with a new technology. But capitalists are using it to maintain artificial profits and destroy competition.
As Gittins suggests: the intellectual property system has degenerated to the point where it is inhibiting innovation. He does not realise that this is caused by the lust of capitalists, nor that intellectual property is now an investment asset that has been capitalised (in Marx’s sense).
But this is what you get under capitalism.
And some things are natural monopolies. Large integrated infrastrutures like power, water, transport grids, rail and some communication infrastructures are all natural monopolies. The nation state itself should own and operate these natural monopolies so the benefits accrue to all citizens.
Some things are natural regional monopolies. Milk processing was a case in point. When we had regional co-operatives (often farmers’ co-operatives) processing and distributing milk, the outcomes were better prices for consumers and better returns for farmers. The milk was also of a better quality (being real whole milk). Now we have international conglomerates ruling the milk market. Prices actually went up initially. Farmers got poorer returns. And milk quality was degraded by re-constituting milk. This re-constituted milk may now be about the price of true whole milk from the co-operative era but true whole milk now is much dearer so far as I can tell.
This is off the track from intellectual property but illustrates how capitalism steals what should be community property (natural monopoly profits and communal regional monopoly benefits) and degrades product quality (the milk market example) whilst introducing a new form of inflation (paying the same price for a degraded product).
@Ikonoclast
Because of past history, and the problems of corruption, I am reluctant to support “the nation state itself” owning and operating natural or mandated monopolies. In most cases, all that is required is some form of ‘profit making’ co-operative mechanism that provides a normal profit – not a capitalist profit.
@Chris Warren
Hilarious.
Especially: “You only get economic stability when each producer, on average, extracts normal profits. A new innovation may well create a period of surplus for one producer, but only as it absorbs the resource previously served by the older technology. As other producers switch, this surplus is competed away.”
Somewhat nebulous without clarification of ‘normal profit’. Or an explanation of how and why a costly activity (innovation) would/could be undertaken by firms earning only ‘normal’ profits (I’m making the perhaps heroic assumption that what you mean by the term is related in some way to what it means in theory). Or why innovation appears to be a mean-reverting process; no cumulative causation then?
All profits under conditions of perfect competition (at equilibrium) are ‘normal profits’.
Normal profit is to be distinguished from capitalist profit, fuedal profit, or other exploitative systems.
Even without competition, anyone can profit from their own labour. This is also a normal profit in that situation and is often presented in a Robinson Crusoe type fable.
Innovation is irrelevant. A Robinson Crusoe scenario, or a sole producer profiting from their own labour can still create savings and pursue innovation.
@Chris Warren
Intriguing.
So your argument is that in the actual world economic instability arises from the existence of market power and you establish this with reference to a completely idealised abstract construction
designed specifically to rule out (for technical purposes) the existence of market power. While moaning elsewhere about the evils of economists and their ‘neoliberal’ theorising. Priceless.
Where to begin? Leaving aside all the issues involving an assertion about the stability of a perfectly competitive economy (there’s *quite* a great deal of general equilibrium literature concerning such questions from, say, the last 60 years, that might undermine your glibness somewhat) you seem to be throwing words like ‘profit’ around with some abandon. How exactly would I profit from my own labour in a Robinson Crusoe situation i.e in the absence of exchange? I can see how I would ‘profit’ in the ordinary language sense of ‘benefit’, but that is not what’s meant by ‘profit’ in the term ‘normal profit’, nor is there any reason to equate the two.
Since normal profit is not the same as profit from ‘exploitative systems’, and normal profit is perfectly competitive profit it seems that, for you, perfect competition is not exploitative. Hence exploitation arises from market power. I guess it’s Ricardian Socialists 1, Marx 0 then?
Innovation is irrelevant? Firms earning normal profit (i.e. perfectly competitive profit) cover their costs of production exactly. Hence they have no retained earnings to spend on R&D in order to generate innovations (which would be somewhat useless anyway, given the information assumptions of the model – as would patents come to mention it). So unless you think innovation just happens (which, given your stability discussion, would put you in the RBC/DSGE camp) you might want to explain how it’s possible in your ideal world.
I am seeking some help please?
Can anyone please refer me to where I can find an estimate of what the compliance cost of the CO2 tax and ETS will be when fully implemented to the standard that will eventually be required?. (I have not been able to find any such estimate, including on the Treasury, DRET or DCCEE web sites).
I’ll expand the questions and some thoughts in a longer comment below (if a long comment is allowed).
Can anyone please refer me to where I can find an estimate of what the compliance cost of the CO2 tax and ETS will be when fully implemented to the standard that will eventually be required?. (I have not been able to find any such estimate, including on the Treasury, DRET or DCCEE web sites).
Expansion of my question and some thoughts follow:
What would be the compliance cost for the ETS once it is fully implemented and running at the level of accuracy required for trading the commodity (CO2-e) and at the level of financial security from fraud that will be expected? For example, what will be the annual cost for:
– Public servants in DCCEE, Treasury, ATO, Australian Federal Police, state police forces, state bureaucracies, Attorneys’ General Departments, Federal Department of Resources, Energy and Tourism, ABARE, BREE, the equivalent state departments of energy, resources, agriculture, forestry, environment, Prime Minister and Cabinet, State departments of Premier and Cabinet, the law courts, High Court, goals, any others I haven’t thought of?
– The businesses that have to report their emissions – what is the cost to implement and maintain the monitoring equipment and to report.? What is the cost to update and replace equipment, reporting systems and legacy data each time the rules change (as they do every few years)?
– Farmers and all the upstream and downstream industries (farming will be included eventually if the tax and ETS remain)
– Accountants, lawyers, accounting firms, law firms, courts?
– Firms that use the data, analyse it and report? What is the cost for them to have to maintain and continually update their systems and legacy data?
– I haven’t even started to ask questions about the compliance cost for purchasing overseas carbon credits
I understand the some of the costs involved in doing what the USA EPA requires (clearly we would have to move to that level of accountability and well beyond it eventually), are in the order of $21 billion per year. These two links provide some insight into the current requirements in the USA http://www.epa.gov/airmarkets/business/ecmps/docs/ECMPSEMRI2009Q2.pdf
http://www.epa.gov/airmarkt/emissions/docs/plain_english_guide_par75_final_rule.pdf
We can only imagine what the costs would be for the businesses involved and all the organisations who take this data and analyses it. Notice that the rules have been changing (for emissions other than CO2) every few years for about the last three decades (roughly); think of the compliance cost that imposes.
The EPA recently stated in a court submission that the cost to the EPA alone to manage the existing regulations would be $21 billion per year. That is not a typo. They estimated they would have to increase their permanent staff numbers from 17,000 to 233,000 permanent employees. (It is clear from this why the unions want a carbon tax and ETS – it means lots more public servants and hence lots more union dues). The cost to business could be expected to be at least ten times this cost, and the other departments who have a role to play would at least double the EPA cost.
What does this mean for Australia? Well, initially Australia does not intend to monitor or measure its emissions. It will simply estimate them. The system set up by AEMO to estimate electricity system emissions is very crude. It is nowhere near the standard the USA or even the Europeans are doing. I am sure we will have to get up to best practice eventually. That means big increases in compliance cost as time goes on. And this is for electricity emissions only. What happens when the compliance requirements are extended to all businesses emitting CO2 emissions, as will be required eventually.
Can anyone help me please?
Wylie Bradford :
Peter Lang, it’s not really clear what you mean by “when fully implemented to the standard that will eventually be required”. Obviously, the compliance cost will vary from liable entity to liable entity depending on the level of the entity’s eligible emissions, and whether it qualifies for any of the various assistance packages that are built into the scheme.
Perhaps your foreshadowed longer comment will shed some more light on what you’re getting at.
@Tim Macknay
Tim Macknay, Thank you for your reply. Yes, my longer comment expands on my question. It is held in moderation at the moment. I am looking for the estimates of the total cost (for Australia) of compliance with the ETS and CO2-eq measurement, monitoring and reporting at the standard of accuracy and accountabilty that will ultimately be required.
@Chris Warren
Oh dear. It appears you have, at best, a rough working knowledge of what your own statements are.
Let’s make it simple. You said:
1. “You only get economic stability when each producer, on average, extracts normal profits.” [note the necessary condition here]
2. “All profits under conditions of perfect competition (at equilibrium) are ‘normal profits’.” [note the definition here]
ergo, instability occurs when some producers earn above-normal profits i.e. when market power is present. Hence market power is the cause of economic instability. It’s pretty clear – perhaps not to you but that is a byproduct of the fact that you don’t understand the terms you are using. And as for the use of equilibrium to define normal profits, you might want to think about how that squares with:
“It is not neoliberal rationalism that is the problem, but the underlying equilibrium, marginal, and subjective theories that embed capitalist forms” – a gem from you in the Austerity and Academia thread. If these equilibrium theories are the problem, why are you using them (albeit cackhandedly)?
You also said: “Even without competition, anyone can profit from their own labour. This is also a normal profit in that situation and is often presented in a Robinson Crusoe type fable.” See, saying that something *is* something else is saying that they’re the same i.e. they are being equated. Having already defined normal profit that means that you did say that a Robinson Crusoe labouring alone can earn the profit of a perfectly competitive firm in equilibrium despite the lack of of exchange (it is after all the behaviour of price that constrains the competitive firm to zero economic profit). Furthermore, the definition of normal profit that you use requires returns that just cover prime costs and the opportunity cost of the agent involved. If I spend an afternoon pruning in the garden and make the garden look much better I may indeed benefit from that activity (‘profit’ in natural language) but there is no reason to believe that the benefit involved is not substantially greater than what might have been available from an alternative (if e.g. the alternative was cleaning out an old water tank). In which case the ‘profit’ would be economic (i.e. above-normal) rather than normal and, of course, there would be no mechanism to reduce it to normality as ‘entry’ is impossible and there’s no price operative and no exchange. In short private labour is actually quite unlike the case of a competitive firm and so using the same term to describe the outcomes is a sign that you don’t understand what the term means.
Finally you are the one talking about innovation as if it just happens as you haven’t referred to how it does come about. Innovation has to be the output of purposive activity and that activity has to be affordable (as it involves the diversion of resources away from production) and hence requires surpluses. That scenario isn’t consistent with the perfectly competitive model. In terms of your (flawed) Crusoe analogy, if I’m the single agent and I can ensure subsistence by gathering oysters and can do no better than that if I were to gather bananas or go fishing (i.e. I’m earning what you want to call normal profit) then how can I afford to suspend food gathering in order to come up with a superior process? Doing so would cause me to make a loss (by starving) and given the uncertainties of the innovation process, the time required might turn out to be longer than I can carry on without food. If, however, I was already productive enough that I could build up a surplus to live on then I might be able to lay out of production while attempting to innovate. But that would require me to have been earning above-normal profits (according to your account) initially. Innovation is a costly activity and so can only be carried out by those who can carry the cost. Perfectly competitive firms don’t meet the criteria.
And as for stability, you are presuming a lot (sans justification) about the stability of the equilibria involved when making your ‘surpluses competed away’ argument. A lot of ink has been spilled on this issue of which, naturally, you are utterly unaware.
@Peter It’s important to note that, proceeding by regulation as the US has done is likely to raise compliance costs. Further, the documents you cite refer to emissions of all pollutants. Measuring, for example, SO2 is much more difficult than measuring CO2 emissions which are determined by the amount of coal burnt. With all those caveats in place, the US is about 15 times as large as Australia, so compliance costs for all kinds of emissions control ought to be about $1 billion per year, or about $1/person/week. That’s comparable to estimates of the increase in compliance costs for GST relative to WST. The extra revenue associated with the GST over the WST was comparable in magnitude to that generated by the carbon price/ETS
Hope this helps.
Further to my longer question at #8, what level of precision and accuracy will ultimately be required for measuring CO2-eq emissions? Will we need to measure all emissions caused by man to a level of precision of 1 t or 1 kg? If not what level will be required? And to what level of accuracy, e.g. +/- 1%, 5%, 10%? At 10% accuracy the total amount readily available for fraud would be 10% of 600 Mt/a @ $50/t = $3 billion per year.
I am influenced by recollection of many inquiries into the petrol retailing industry. Petrol station owners and consumer groups were both concerned they were being ‘ripped off’. For example, there was concern that the petrol delivered at the petrol bowser was less dense (and therefore contained less energy per litre) than when it was loaded into the petrol tanker because it would warm up along the way. So people reckoned they were getting less than they were paying for. There were many inquiries over the years.
This suggests to me people will become concerned about the accuracy of measuring CO2-eq emissions once trading is well established. That implies we will be forever having to tighten the regulations on emissions monitoring. That suggests ever increasing cost of compliance at a rate well above inflation.
It strains credulity to believe some people will have to participate in emissions trading while other sources of emissions will not. We can foresee the fuss if that situation is allowed. “Why him me and not him?” Eventually, emissions measurement and reporting will have to apply to all sources, even down to cow farts. How can this be done sufficiently accurately from all emissions sources? What will be the total cost of compliance ultimately?
Peter, this is not something I have looked into, but I think all the information is gathered already – Tonnes of coal burned and its grade, volume of natural gas burned, volume of distillate burned in the odd peaking plant. It’s pretty easy to work out CO2 emissions from this as the theory of combustion is accepted by 97% of all chemists.
Hi John,
Thank you for your reply.
The EPA estimate of $21 billion per year is for an additional 233,000 full time employees to manage the EPA’s role in compliance for emissions of CO2 from sources that would emit more than 15,000 tons per year. That includes schools, food chain stores and many other medium sized businesses. I suspect that is what we would ultimately have to do. The EPA has got around that for now and is only applying monitoring to large emitters. But I doubt that will survive over the longer term.
Regarding your point that regulation is higher cost than ETS for reducing emissions, I don’t think that point applies to my question. I doubt it matters whether we regulate, tax or use an ETS, we will still have to measure all the CO2 emissions from all sources eventually. However, if I am wrong I need it explained to me why I am wrong.
I don’t agree that measuring emissions is easy, and it is not done just by measuring the coal burnt. You also need to know how much carbon was in the coal, and how much was burnt. It’s not easy at all. Australia does not even weigh the coal burnt in many power stations.
The USA does it best with its existing requirements (I provided two links that explain what is involved in post #8). These measure CO2 emissions at 15 minute intervals from the exhaust stack then total them hourly and for other time periods and submit them to EPA. The emissions measuring equipment has to be calibrated for every reading. However, that applies only to fossil fuel electricity generators. It is much harder for other industries. But although USA’s monitoring is the best, it is nowhere near good enough even for electricity generators. There are so many loop holes that the emissions measurements are nowhere near good enough. The requirements will be ramped up every few years, probably for ever. This is all cost to business, to EPA, to all the legacy data and systems and to all the downstream users of the data.
The EU countries that I know about estimate the emissions from the amount of electricity generated and the performance figures for each generating unit. This is not as good as USA does and does not make allowance for the reduced efficiency when the units are cycling to follow load.
Australia’s emissions estimates from electricity generators are laughable. They have an average emissions rate for the whole power station and apply that figure to all units no matter what the efficiency the individual unit is operating at, at the time.
John, you said: “the US is about 15 times as large as Australia, so compliance costs for all kinds of emissions control ought to be about $1 billion per year.”
If we assume Australia’s compliance cost would be 10% of USA EPA’s cost (eventually) that means $2.1 billion per year for DCCEE. If we assume the cost for the other government departments involved is roughly the same, we add $2.1 billion. I’d expect the total cost to all businesses and industry would be say ten times DCCEE’s costs – i.e. about $21 billion per year.
Total about $25 billion per year.
I realise this is a very high number. But, what is the correct number? Where has it been estimated and documented?
Given that background, what I really want to know is whether or not there is any official estimate of what the compliance cost will be ultimately? Has anyone done the estimating properly? I am beginning to suspect it hasn’t because if it had someone would be able to point me to some official documentation.
Ronald Brack,
Thank you for your reply. It may seem easy in theory to measure emissions, but it certainly is not in practice.
However, there is little point in us discussing how to go about it because there is a lot to it. What I am after is to know if the total compliance cost for the ultimate system (needed for trading) has been estimated, and if so where can I see the estimate and the basis of estimate – i.e. for the ultimate system, not what we are doing now because that will not be good enough.
@Wylie Bradford
This is just a jumbled mess.
I suppose the basic flaw is confusing symtoms and effects for causes, and not being able to see beyond appearances.
It needs serious redrafting.
@Chris Warren
Yeah, yeah. Standard BS as usual. Maybe in your case appearances don’t lie, in that you’re just a pissant troll regurgitating a half-understood version of poorly-constructed and uninformed ideas.
Peter, it actually is pretty simple. There’s no need to weigh coal. We know what grade the coal is. Coal plants are built around the grade of coal in the deposit they are going to use. We know the efficiency of current plants and when the plant is operating and at what capacity is known from its sales of electricity. This is sufficient to determine CO2 emissions. As for different units in a plant having different efficiencies, I understand that electricity distributers already know which units are running and at what load in order to keep the grid operating properly.
But measuring CO2 emissions directly is not difficult. You see, CO2 strongly absorbs certain wavelengths of infrared light. That’s the whole problem really. An infrared beam can be used to measure emissions. This is old technology that’s used to measure the amount of bubbles in your beer.
So basically we already have the information to determine CO2 emissions. Direct measurement might be better but that’s not particularly difficult. Personally, I’d start with indirect methods and start installing direct measurement equipment (which would of cause measure at both set and completely random times) where ever things looked iffy or where we wanted to check our indirect measures. If direct measurement turned out to be clearly superior than I’d install direct measurement devices. If the two methods are much the same I’d use which ever was cheaper.
Ronald Brack,
I am afraind to say you are guessing and clearly don’t have the slightest understanding of what you are talking about. Did you bother to study (carefully) the two EPA links I provided in comment #8? They will give you some idea of what is involved in measuring emissions for fossil fuel electricity generators. Measuring emissions from other sources are far more difficult.
If Treasury, DCCEE, DRET etc think as you do, the Australian electorate is in for a very big, very unpleasant suprise.
The more I read of these sorts of responses – attempting to dismiss the concern or argue it is not important, or whatever other reason is given to avoid providing a direct answer to my question – the more it becomes apparent that no estimates of the compliance cost have been made.
Peter, no, I haven’t read the links. Yes, I am a bit too flip. But I’m pretty sure that if I know how much fossil fuel and of what type goes into a power plant, I can tell you how much CO2 is emitted. And I can do it even though I quit school in grade five. Mind you, they made me go right back the next day, but I quit on principle and I still stand by that decision.
@Wylie Bradford
That sort of Bogan attitude displays the level of your consciousness.
@Chris Warren
As the use of the word ‘bogan’ as a pejorative does yours.
Ronald Brak, many people are prtetty sure of what they believe. That doesn’t mean their belief is correct.
You say: “I’m pretty sure that if I know how much fossil fuel and of what type goes into a power plant, I can tell you how much CO2 is emitted”
We don’t know how much fossil fuel goes into the power stations unless we way it. We don’tr know how much carbo it contains unless we assay it (the carbon content varies betweeen sedimentary layers in thickness varying from millimetres to tens of metres). We don’t know how much is unburnt or in tied up in other compounds unless we assay the fly ash and the exhause gasses.
That is why the US measures CO2 and other gasses in the stack at 15 minute intervals and why EU uses models to calculate the theoretical emissions from each unit.
We need to measure emisisons at 15 minute intervals or better if wae want to be able to determine things like how much CO2 emisisons are avoided by wind turbines, for example.
I’d urge you to read the EPA pblications I linked earlier if you want to get a better understaning.
However, this discussion is not helping to answer my question about whehter or not any reputable and authoritativw organisation has done a serious and competent estimate of the compliance costs that will be incurred, eventually, with carbon pricing.
The compliance cost of CO2-eq monitoring and reporting is potentially a very large cost item that will be required by carbon pricing.
I am surprised, therefore, that the economists who follow John Quiggin’s blog have not shown more interest in this discussion.
Peter
I think your assumptions and suggested cost of CO2 emissions monitoring are ridiculous. Ronald Brak is correct. Calculating these emissions will be an easy task for the 500 stationary emitters targetted. CO2 emissions are directly proportional to the quantity and grade of fuel burnt. Calculating the outputs of coal power stations (and for that matter gas or oil plants too) is simple – unit emissions times consumption. The calorific value of coal is measured at the time it is sold – higher grade coal sells for more. There is some variation as you suggest, but not a great deal, and over a year the average variation is minimal (my brother works in a large coal power station). The quantity of coal (and gas etc) is also measured when sold, and again when it is transported to the site, and reported in annual reports, as well as analysed by the respective markets for coal and gas. So this is not a hard task, or even an extra one.
Even if you didn’t trust that data (why not??) you could monitor air quality and emissions at the 500 sites targetted for a fraction of the billions you suggest. The entire annual budget of the BOM is about $300 mlillion /year. The CSIRO is about $800 million. For that they run monitoring stations, build new ones, and process all the data, for the entire continent plus adjacent seas. Most power plants already monitor air quality in their vicinity to meet EPA regulations. Again, extra cost would be minimal.
As for your 15 minute repetition, the BOM and CSIRO already install permanent monitoring stations at remote sites that take continuous measurements (and transmit them back to a base) for a fraction of the billions you mention.
The cost you quote for running the EPA ($21 billion/year) is the total cost for running all divisions of that agency, including soil, air and water monitoring, prosecution and policy. In Australia most of these things are done by existing state agencies.
There were formerly inventories of GHG carried out at LGA level in Australia, along similar lines to the US EPA reporting convention you linked to. I was involved in two and they cost under $100K each to complete for an LGA for a given year. so even carrying out 500 a year would not cost a fraction of the billions you describe. Say 500 x $100K per year = S50 million per year. I agree it is a cost, but two orders of magnitude below what you suggest.
As always, the cheapest solution is to do nothing, which I presume is your preference.
Socrates,
Thank you for your reply, even though it does not address my question.
You said: “I think your assumptions and suggested cost of CO2 emissions monitoring are ridiculous.”
Perhaps. But where can I find authoritative, reputable, competent estimates of the compliance costs for the ultimate situation. This is the question I’ve been asking and no one has been able to or wanted to answer it. So far all the responses are attempts to dismiss the issue, the reason for wanting to do so I can only guess at.
You said “Calculating these emissions will be an easy task for the 500 stationary emitters targeted.”
But that is just the starting number. That is not what it will be eventually, as I have clearly explained in previous comments. Have you read the previous comments? If so, why are you avoiding the real issues raised?
You say: “Ronald Brak is correct.”
So you believe you and Ronald Brak understand what is involved – but EPA and EU do not – even though clearly neither of you have the slightest understanding of the subject. Ronald Brak admitted he had not even read the EPA requirements I linked, let alones studied them carefully.
Given the above, there is no point addressing any more of your comment.
However, to demonstrate just how wrong you are, could you please point me to a link where I can see how much coal was burnt in each unit of Hazelwood Loy Yang and Yallourn power stations, and the carbon content, between 10:15 am and 10:30 am on any day you choose during March 2012. If you cannot answer this question, it should show you that the information is not available.
As pointed out before, this is a distraction and is not answering my questions which is where can I find the estimates of what the compliance cost will ultimately be?
This is just silly. To give you an idea how silly it is, the entire Commonwealth Public Service currently employs about 250 000 people. At an average cost of $80 000 a year, that’s $20 billion a year. You are claiming it would cost more than that to measure the amount of coal burned in 50-odd power stations.
I should frame this and send it over to the people at Brave New Climate, who seem to take your calculations on other topics seriously.
Socrates,
I just noticed you also said: “The cost you quote for running the EPA ($21 billion/year) is the total cost for running all divisions of that agency,”
This statement is wrong. It shows you are talking through your hat. Clearly you are prepared to make statements without having a clue what you are talking about. The $21 billion is the estimate to ramp up from 17,000 to 233, 000 permanent full time staff which is what EPA estimates it would need if it has to monitor CO2 emissions in accordance with the law passed by US Congress. EPA has got around that for now, but that cannot last indefinitely as I pointed out in previous comments.
Your comments show a preparedness to make stuff up to suit your beliefs while avoiding the question I am asking. Unfortunately, such tactics are all too common and they discredit much more than just you, because those of similar persuasion are allowing and supporting such tactics rather than pointing out to you the error of your ways (and of those who use similar tactics).
John Quiggin,
Your comment is rather rude.
You have avoided the question I asked and instead say the straw-man figure I gave is silly.
Firstly, what is the correct figure? Where can I find it?
Secondly, you clearly didn’t bother to read the statement and be sure to understand it before posting your reply. I realise the straw-man number I gave is a high number (as I said at the time), but that is irrelevant. What would be the cost to measure the emissions from all sources to the level of accuracy and precision that would be needed?
Thirdly, the $25 billion does not refer to the public service. Most of it is the cost to business (as is clear from the components I provided in the comment). But importantly, I am not saying the figure is correct. It is a straw-man estimate I provided to assist you tom understand my question and the possible importance of it. It is for you and others to address and tell me what is the correct figure and what is the basis of the estimate. Why haven’t you done so? Why have you dodged the question and made an issue of something I provided to assist you to understand the potential importance of my questions? I can only interpret that you prefer to “frame the comment” and write a misleading statement along with it. There is far too much of this sort of dishonesty going on. It is unhelpful.
Why do you encourage your readers to act like this as you inevitably do by posting such a comment?
After all these dismissive comments, there has been no attempt to provide an authoritative answer to my question.
John Quiggin,
You said: “You are claiming it would cost more than that to measure the amount of coal burned in 50-odd power stations.”
I said nothing of the sort. That is a flippant and very misleading statement. Given that your previous comment was incorrect, I pointed that out to you and you did not acknowledge your errors, this second statement seems to be intentionally misleading. That is not good from a senior academic.
Peter……Peter Lang?…..is that really you?
Wow, I see that you still have a knack with the calculator. Gosh the last time I saw you writing you were declaring with authority that it would cost 4 trillion dollars to replace Australia’s handful of power stations with solar electricity. Gee I bet that you regret those comments nowadays.
I see that you have taken up a new quest. A quest to make youself look ridiculous on ETS compliance. This surely is a no brainer. Any decent high level workstation has sufficient power to crunch the numbers on emissions nationally. In the simplest method emission liability is determined at the point of invoicing for the fuel with the CO2 value being a simple one column attribute for each fuel type. The cost of monitoring that is negligible.
Anyway, the whole subject is mute if the polls are to be believed. You really need to address your inquiry to the Coalition and their environment spokesperson. The problem you will have there, though, is actually figuring out what the question is, as there is no “known” detail on what their method for saving the planet is.
Good Luck.
As usual BilB writes distortions, misrepresentations, exaggeration and …
The $4 trillion is the upper end of the range of our capital cost estimate for the ZCA2020 plan. The best estimate is $1.7 trillion and range $0.85 to $4.2 trillion.
This estimate stands. In fact, the authors of ZCA2020 plan have not accepted invitations to debate it. I include the link below so people can read it for themselves and I also include a critique and cost estimates of a more recent paper, “Simulations of Scenarios with 100% Renewable Electricity in the Australian National Electricity Market”, in which Mark Diesendorf was an author.
Matthew Wright is the lead author of the Zero Carbon Australia by 2020 report. The report has been critiqued and discredited by many people including by Martin Nicholson and Peter Lang:
The Matthew Wright analysis assumes that Australia’s domestic air transport would cease, people would move by train, bus and some electric cars by 2020. Electric trains would run all over our grain growing areas collecting wheat stalks and transporting them to the solar power stations to burn them to produce heat for when the sun doesn’t shine enough. There are many other highly optimistic to completely unrealistic assumptions underpinning his analysis. Here are the conclusions from our critique are:
• The ZCA2020 Stationary Energy Plan has significantly underestimated the cost and timescale required to implement such a plan.
• Our revised cost estimate is nearly five times higher than the estimate in the Plan: $1,709 billion compared to $370 billion. The cost estimates are highly uncertain with a range of $855 billion to $4,191 billion for our estimate.
• The wholesale electricity costs would increase nearly 10 times above current costs to $500/MWh, not the $120/MWh claimed in the Plan.
• The total electricity demand in 2020 is expected to be 44% higher than proposed: 449 TWh compared to the 325 TWh presented in the Plan.
• The Plan has inadequate reserve capacity margin to ensure network reliability remains at current levels. The total installed capacity needs to be increased by 65% above the proposed capacity in the Plan to 160 GW compared to the 97 GW used in the Plan.
• The Plan’s implementation timeline is unrealistic. We doubt any solar thermal plants, of the size and availability proposed in the plan, will be on line before 2020. We expect only demonstration plants will be built until there is confidence that they can be economically viable.
• The Plan relies on many unsupported assumptions, which we believe are invalid; two of the most important are:
1. A quote in the Executive Summary “The Plan relies only on existing, proven, commercially available and costed technologies.”
2. Solar thermal power stations with the performance characteristics and availability of baseload power stations exist now or will in the near future
Matthew Wright was sent a copy of our critique and invited to post a reply and/or to participate in online discussion and/or debate. He did not reply to any of the offers and invitations.
Summary of: Renewable electricity for Australia – the cost
Researchers at the Centre for Energy and Environmental Markets (CEEM), University of NSW, did a desk top study called “Simulations of Scenarios with 100% Renewable Electricity in the Australian National Electricity Market” (Elliston et al., 2011).
The authors claim their study demonstrates that renewable energy could supply 100% of the Australian National Electricity Market’s electricity and meet the demand with acceptable reliability.
However, they did not estimate the costs of the system they simulated. I have critiqued the paper and made a crude estimate of the cost of the scenario simulated and three variants of it
Using costs derived from the Federal Department of Resources, Energy and Tourism (DRET, 2011), the costs are estimated to be: $568 billion capital cost, $336/MWh cost of electricity and $290/tonne CO2 abatement cost.
That is, the wholesale cost of electricity for the simulated system would be seven times more than now, with an abatement cost that is 13 times the starting price of the Australian carbon tax and 30 times the European carbon price. (This cost of electricity does not include the costs for the existing electricity network).
Although it ignores costings, the study is a useful contribution. It demonstrates that, even with highly optimistic assumptions, renewable energy cannot realistically provide 100% of Australia’s electricity generation. Their scenario does not have sufficient capacity to meet peak winter demand, has no capacity reserve and is dependent on a technology – ‘gas turbines running on biofuels’ – that exist only at small scale and at high cost.
http://bravenewclimate.com/2012/02/09/100-renewable-electricity-for-australia-the-cost/
An Excel file is provided which you can download, change the inputs and do your own sensitivity analyses.”
Still no answer to my question. Just diversions!
Peter, I gave you an answer, but you didn’t like it. And that’s fine, you don’t have to like it. But to be truthful you should change the final sentence of your last comment to:
Still no answer to my question that I like. Just answers that I don’t like!
Peter
I don’t know if there have been any studies of the monitoring cost of a carbon tax regime. However, as I am satisfied that the cost will be a tiny fraction of what you suggest, I don’t care.
As for the EPA budget, I found your $21 billion figure so absurd I assumed you had to be quoting a figure for the whole agency. In fact I was wrong. The budget for the whole EPA in 2010 was $10 billion, half of your claim. See http://www.epa.gov/planandbudget/
So please quote a reference for where you got your claimed $21 billion cost and 233,000 employees to implement existing regulations by EPA in A “court submission”. I don’t believe it.
I’m ready to be corrected but AIUI the entire defence budget is only about $25bn … The idea that anything like this sum would be imposed on the economy (2.5 times the first tranche of stimulus spending and double the sum to be raised by the carbon price) is simply bizarre. You’d also have thought someone in business would have mentioned it and been able to cite a study to show it.
Fran Barlow,
The idea that anything like this sum would be imposed on the economy (2.5 times the first tranche of stimulus spending and double the sum to be raised by the carbon price) is simply bizarre.
I’ve already addressed this point in my reply to John Quiggin. It is irrelevant how much we spend on Defence or the public service. What counts is how much compliance would cost for the level of precision and accuracy that would be required ultimately. If it is going to be too costly, we have to address the issue, not avoid it. But it seems we don’t have any idea what the cost will be.
I gave you an example of the level of accuracy that is needed in petrol sales, and the kerfuffle when there is a perception that people are being ripped off through lack of accuracy. In trading commodities we need to be able to measure accurately. That is where we would have to get to eventually.
So if proper estimates show it will cost too much to comply to the level that will ultimately be required, the answer is not to ignore it, dismiss it, hope it will go away, or hope no one will notice. It is to tackle the issue rationally. So far everyone, even the school teacher, is arguing to hide the problem under the desk.
If compliance, including CO2-eq emissions monitoring to the precision and accuracy that would eventually be required, is unacceptably high then we have these options:
1. dump the idea of carbon pricing and take a different approach to reducing emissions;
2. set a limit on how much we are prepared to spend on compliance, and adjust down the requirements for compliance monitoring precision and accuracy; this will lead to higher fraud so there will be a trade off and we will estimate the break even point up front and make it visible for all to see before we proceed
It may well be that the compliance cost will not be high. However, in that case we should be able to see the estimates and the basis of estimates. Where are they? Just dismissing the question as unimportant – or ridiculous – is hardly good enough.
Still no one has pointed to a reputable, authoritative estimate for the ultimate cost of compliance, and a basis of estimate. I am looking for a figure in dollars per year. Diversions and avoidance of the question continues
As a reminder the question was:
Fran Barlow,
I’ve already addressed this point in my reply to John Quiggin. It is irrelevant how much we spend on Defence or the public service. What counts is how much compliance would cost for the level of precision and accuracy that would be required ultimately. If it is going to be too costly, we have to address the issue, not avoid it. But it seems we don’t have any idea what the cost will be.
I gave you an example of the level of accuracy that is needed in petrol sales, and the kerfuffle when there is a perception that people are being ripped off through lack of accuracy. In trading commodities we need to be able to measure accurately. That is where we would have to get to eventually.
So if proper estimates show it will cost too much to comply to the level that will ultimately be required, the answer is not to ignore it, dismiss it, hope it will go away, or hope no one will notice. It is to tackle the issue rationally. So far everyone, even the school teacher, is arguing to hide the problem under the desk.
If compliance, including CO2-eq emissions monitoring to the precision and accuracy that would eventually be required, is unacceptably high then we have these options:
1. dump the idea of carbon pricing and take a different approach to reducing emissions;
2. set a limit on how much we are prepared to spend on compliance, and adjust down the requirements for compliance monitoring precision and accuracy; this will lead to higher fraud so there will be a trade off and we will estimate the break even point up front and make it visible for all to see before we proceed
It may well be that the compliance cost will not be high. However, in that case we should be able to see the estimates and the basis of estimates. Where are they? Just dismissing the question as unimportant – or ridiculous – is hardly good enough.
Still no one has pointed to a reputable, authoritative estimate for the ultimate cost of compliance, and a basis of estimate. I am looking for a figure in dollars per year. Diversions and avoidance of the question continues
As a reminder the question was:
Moderator,
could you please delete my post #39. I incorrectly coded what was intended to be the first quote.
Peter
Still no source for your ” EPA court submission” that it would cost $21 billion and need 233,000 staff? Did you make it up? Get the zeros wrong? Too bad you don’t apply the same standards of proof to yourself that you expect of others.
Socrates
EPA brief in the “UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT”:
http://www.eenews.net/assets/2011/09/16/document_pm_02.pdf#page=48
PeterL
“I gave you an example of the level of accuracy that is needed ”
this is you demonstrating that you really don’t get it. The whole purpose is to force Carbon emissions down cost signals, not mount a punitive campaign against the public.
I guided you to the optimal minimal cost approach to managing the ETS, but as usual you don’t want to hear “great understanding”. My experience of you is that you want exaggeration and chaos.
I visited your “spreadsheet”. What an illogical jumble, and so far out of date to be a huge embarrasment for Barry Brookes if he still endorses your “work”.
BilB,
We’ve had plenty of experience with your fly-by comments. All nonsense assertions and cannot substantiate any of them. If you say there is something wrong with the figures or the spreadsheet, take it up on the BNC thread. Nut first of all read the comments, because your comments and criticism will probably have been discussed at length already.
Unfortunately, because of your many unsubstantiated comments in the past, and your unfilled promises to come back and substantiate the, you have not credibility whatsoever there, and I cannot be bothered discussing anything with you. I expect that will lead to a string of more fly-by comments and abuse. So be it.
Peter,
Thanks for the reference. So the bit you are quoting under the tailoring rule (pages 48-53) was only extrapolated by EPA to demonstrated the impracticality of applying their existing permit system to GHGs in the manner you discussed. They have no intention of doing it. Also, given that the EPA case related to a legal argument over applying a bureaucratic permitting system to every emission of over 100-250 tons per year, this is completely unrelated to the Australian carbon tax – a non sequitur.
Sigh, that was 30 minutes of my life I will never get back.
I detect a recurring meme among conservative opponents of any market based reform. The implementation cost is always prohibitive and will cripple industry. We have seen this argument dredged up against reporting of executive salaries, finance commissions, and even gambling reforms. Every time, when you go through the detail, the claim is bogus.
Funny how these conservatives never question the implementation cost of limitations to personal, rather than market freedom.
Socrates,
This is getting frustrating. Most if not all readers are grabbing bits of what I’ve said and forgetting the rest. There is no point in me repeating it all again.
1. My estimate was a straw man to show you an example of what I meant by my question. I never said or implied it is the correct figure. I don’t know what the correct figure is. That is the question I am asking.
2. Yes. Correct. The EPA figure is the cost to implement the law as it exists. However, they are modifying it for now. However, eventually, all emitters would have to comply. When that situation is reached, the number of emitters will be even higher than the 6.1 million that the $21 billion per year figure is based on.
I recognise my cost is not correct. It was intended to help readers to understand the question.
Instead of continually trying to argue I have it wrong, please tell me what the correct figures is and where the basis of estimate can be found.
If you and others don’t answer the question, it is clear this is a case of diversion and avoidance. It would appear to be a strategy to avoid facing the unpalatable.
At this point the lack of any useful response from any of the respondents so far suggests I will not get a useful response on this web site.
Peter
I already answered that question back at #27. I haven’t seen a detailed study but I estimated it in Australia at up to $50 million per year assuming all the monitoring was done specially – an upper limit. In the context of a multi-billion dollar tax, that is nothing
PeterL,
Did you bother looking at the claims in that “submission”.
It basically attempts to claim that it requires 6 weeks full time work to establish a title V permit. Sounds like Republican obfuscation to me.
I substantiate all of my claims, PeterL, the only thing that I will not do is reveal Intellectual Property details. But I have given sufficient information for even a basic high school student to be able to verify substance.