Wednesday, October 18, 2006

Revenue recycling

In his presentation to the Climate Change: the Policy Challenges symposium, Murray Ward suggested that an emissions trading regime covering the energy sector could raise between $150 and $300 million per year (one covering electricity alone would raise $30 to $60 million). He also thought that this revenue should be recycled, both to compensate losers and in the pursuit of "double dividends" by e.g. energy efficiency projects, sink creation or research into ways to reduce emissions. So what would that sort of money get us? Here's what we spend at the moment:

  • $5.4 million / year on EnergyWise Home Grants to retrofit insulation into older homes. This targets 300,000 homes, and retrofits 5,000 a year.
  • $2 million /year on Crown Energy Efficiency Loans to help firms overcome the problem of limited capital.
  • $4 million / year on research into reducing ruminant methane emissions.
  • $3 million / year on energy research.

Fairly clearly, even a narrow scheme would allow all of this spending to be doubled, and perhaps increased further. But what else could we do? Here are some options:

  • Provide grants, loans or prizes to assist new energy efficiency firms (total cost: $5 million)
  • Fund a serious research program into wave or tide power, with the eventual aim of commercialisation (total cost: $10 million)
  • Provide grants or loans to install 1000 solar water heaters (a 50% increase over current rates) (total cost: $5 - $7.5 million)
  • Provide grants or loans to install 1000 heat pumps (total cost: $5 - $7.5 million)
  • Provide free or heavily subsidised public transport passes to 10,000 people adversely affected by increased transport costs (total cost: $5 million)

And those are just off the top of my head (and I'm not feeling particularly imaginative tonight). So far, I've only suggested $45 - $50 million a year, which is at the bottom end of the revenue prediction. At the top end, we would be able to fund significant reforestation projects (20,000 Ha / year) and further rounds of the Projects to Reduce Emissions (supporting new renewable energy and efficiency projects with Kyoto credits), and still have a significant amount to set aside for a "carbon fund" to mitigate large scale impacts.

Every one of the projects suggested would either directly reduce emissions (while providing other environmental or health co-benefits), or have the potential to result in significant future reductions (with economic co-benefits as well). This sort of revenue recycling would therefore seem to be a no-brainer.