A carbon tax on electricity to promote stable green energy developments

probe

In France we have the “bonus/malus” system. (bon = good; mal = bad). If you buy a Prius, you get a bonus of €2,000. If you buy a Porsche 911, you pay a malus of €2,600. The malus paid by the high CO2 vehicle owners funds the bonuses paid to the low CO2 vehicle owners. It is a smart system because it doesn’t affect the government’s tax take – ie it is a self funding system.

It seems to me that this concept could be leveraged in Ireland to encourage a more stable, diverse, green electricity generation infrastructure. At the moment, most money in the green sector is going into windmills, and most of them are located in a few areas of the country – notably the North West, which has the highest incidence of wind. The problem with this is that it is not always windy in the North West.

One possibility would be to charge a “malus” (ie carbon tax) of say 1c per kW on gas generated electricity and say 1.5c per kW on coal generated electricity, and pay this money to green energy producers as a bonus. Ideally it should be accounted for on an hourly basis.

Eg: At 14h00 to 14h59 on day x, 4,000 MW of electricity was generated by gas (for simplicity). That would create a bonus pool of €40,000 for that hour to be paid out to carbon fuel free generators of electricity. The payment would be allocated to the green suppliers based on the number of kW they delivered to the grid during that hour.

So if it was very windy in the NW and 800 MW of wind energy was generated, the wind guys would get 5c per kW generated credited to their bank account.

Now let’s assume that they had zero wind in the NW, but there was a good wind offshore in Co Wexford, and an offshore farm in WX generated 200 MW of wind energy. The €40,000 would go entirely to the windfarm in Wexford – i.e. a bonus of 20 c per kW produced. This would incentivize operators to spread their generation assets more widely, reward them for the additional cost of offshore wind installations which have a better ability to generate power when there is very little wind blowing over land. It would also encourage other green energy developments such as tidal energy – which produces a very predictable energy flow based on the movements of the tides which are easily forecast.

Finally it would be a disincentive to companies who are in for the quick buck, burning gas to generate electricity because they would have to pass the carbon tax on to their customers, or bear the cost themselves. ESB’s electricity has a CO2 content of 642g per kWh. Overall, the Irish electricity market’s output has a CO2 content of 549g per kWh.

Heroditas

probe wrote: »

Finally it would be a disincentive to companies who are in for the quick buck, burning gas to generate electricity because they would have to pass the carbon tax on to their customers, or bear the cost themselves. ESB’s electricity has a CO2 content of 642g per kWh. Overall, the Irish electricity market’s output has a CO2 content of 549g per kWh.

So which companies might these be?

probe

Heroditas wrote: »

So which companies might these be?

Companies that burn fossil fuels because it is cheap. These fossil fuel resources took millions of years to be developed, and won't last forever. We basically need sustainability in everything. In financial markets, in energy, in food production, transportation, manufacturing, the structure of the global economy, etc.

Otherwise Ireland is heading for a "WalMart" society.

Fanny Cradock

I thought that carbon tax was all but a certainty at this stage. Any idea if and when it is coming in and for who?

probe

Fanny Cradock wrote: »

I thought that carbon tax was all but a certainty at this stage. Any idea if and when it is coming in and for who?

Who can say!

This proposal is not a "carbon tax" in the Brussels scheme of things.

It is a self financing incentive program to promote diversity of renewable electricity production to make green energy a big, stable contributor to national energy needs. The amount of the tax could be adjusted over time in the light of real world experience.

Energy ministers from the 12 main exporters of natural gas met in Moscow today (23.12.08) to create a "GAS OPEC" - ie a cartel to keep natural gas prices high. It is estimated that Russia has just over 20 years of natural gas left, before it goes into steep decline as we have seen in Britain and with the Kinsale gas field. Understandably they want to milk every cent they can out of what is left.

http://www.ft.com/cms/s/0/e11a283a-d0f1-11dd-8cc3-000077b07658.html?nclick_check=1