It was of course the people who currently monetise our present IOU's - which are equally valueless - who are so enthusiastically behind these "deficit-based" carbon trading and emissions trading schemes.
My proposal essentially reverses the polarity from "deficit-based" to "asset-based" Units. I aim to do so through monetising the energy value of carbon, since the Units created will be redeemable for energy - which actually has intrinsic value.
Such "Carbon Dollars" will, IMHO, be readily accepted in exchange for value - which is of course what money should be all about.
I like to use a metaphor to illustrate the comparison between an "energy-based" carbon Dollar, and a CO2-based Unit - heard at a traders' conference a few years ago:
"If you want to keep a donkey healthy, you don't regulate what comes out of it: you regulate what goes in"
The amount of energy carbon-based fossil fuels doesn't decrease as alternatives are introduced, so their value holds. I do not see how this then, would reduce the incentives to not use carbon-based energy or find ways to reduce carbon gases released by converting the fuel into energy.
I am again likely missing your point, but doesn't this make environmentally hazardous carbon-based fuels — like oil sands — even more valuable? I could see how this would be appealing to an oil-rich nation like Iran.
I'm not seeing how it does anything to help prevent the release of carbon gases into the atmosphere. Maybe it is because the more energy potential a person has secured, then the richer he or she is?
guess I don't understand completely. Sorry to be so thick.
But I admit that the "carbon dollar" label is a slight misnomer, for the purposes of a presentation in Iran. This is because that presentation will relate to Units redeemable in (say) gasoline, and to call it an energy dollar would be too confusing at this point.
In fact, where this leads is to what may better be described as an "Energy Dollar" consisting of a fixed amount or "Value Unit" - it doesn't matter what that is - of energy.
A Unit of (say) 10 Kilo Watt Hours or equivalent is as good as any.
The point is that it will be possible to price other forms of fuel or energy by reference to this Value Unit.
So as carbon fuel become more scarce and expensive, it will increase in price in terms of (say) the number of Energy Dollars per barrel.
The policy framework I envisage - a new "Global Settlement" - would apply a "Carbon levy" to all carbon-based energy transactions and thereby create an "Energy Pool" - a fund of (say) US dollars on US transactions, but denominated in Energy Dollars at the Energy Dollar/ US Dollar exchange rate.
So, imagine we make a carbon levy which raises $100m initially in the US.
At an initial energy price of $1.00 for a Unit of 10 Kilo Watt Hours, that means the resulting fund or Pool may be "Unitised" initially into 100 million Energy Units. As the US dollar gets more expensive over time against energy, so the number of Units new US dollar investments will buy in the Pool will decline.
Let's try an example:
A "Pool-Manager-formerly-known-as-Investment-Banker" appraises a plan for a 1 Mega Watt wind turbine - decides it stacks up in that location - and decides to fund it by investing $2m of Pool funds.
The Wind Turbine is built and then has a liability to the Pool not in $US, but in Units.
At the initial $ per Unit price this is 2m Units of 10 Kilo Watt Hours or 20,000 Mega Watt Hours of future production.
This investment is then repaid over the (say) 20 year design life of the turbine at a rate of 1,000 Mega Watt Hours per year.
If the turbine operates at a "load factor" of only 30% (ie 30% of the time) it produces 2,628 Mega Watt Hours (or 262,800 Units) in a year.
If a proportional share of production is paid to the "Operating Member" - then the balance will stay with the developer or land owner or community - in whatever proportions are agreed.
Unlike a Carbon Tax, where all the taxpayer sees is a "cost", in this model he gets in return for the levy (which is therefore a compulsory investment) "Units" in return.
These may then be redeemed for renewable energy consumed; against repayment of Pool investments used to achieve energy savings (so-called "Nega Watts"); or he may just sell them off at the market price.
The Energy Dollar market price is not some arbitrary politically determined price, like that of CO2, or come to that, Central Bank interest rates, but is a reflection of the intrinsic value of energy, whatever that is.
marco: 2628 MWH is 30% of 8760 MWH. But where did that latter figure come from? Does it somehow come from it being a 1 Mega Watt wind turbine? ChrisCook: One Unit is 10 Kilo Watt Hours: therefore 100 Units = 1 Mega Watt Hour
ChrisCook: One Unit is 10 Kilo Watt Hours: therefore 100 Units = 1 Mega Watt Hour
In other words, it should have occurred to me that there are 8760 hours in a year.
marco: Also, the 1000 MWH (i.e. 1,000,000 Units) per year gets paid to the "Operating Member" -- that is, the entity that built the wind turbine -- is that correct? ChrisCook: No. This 1m Units per year of production goes to the Pool in repayment of what is essentially a "Loan" repayable in Energy Units rather than dollars. The entitlement to the output is split proportionally between: (a) the Developer/Operator - maybe 10 to 20% of output; (b) the Land Owner - (who probably is the "Community"), and certainly needs the Community's permission; (c) the Investor - ie the Pool (d) the Community The "Community" is a broad term. It could have the skills to be the Developer.
ChrisCook: No. This 1m Units per year of production goes to the Pool in repayment of what is essentially a "Loan" repayable in Energy Units rather than dollars.
The entitlement to the output is split proportionally between:
(a) the Developer/Operator - maybe 10 to 20% of output;
(b) the Land Owner - (who probably is the "Community"), and certainly needs the Community's permission;
(c) the Investor - ie the Pool
(d) the Community
The "Community" is a broad term. It could have the skills to be the Developer.
marco: I imagine the "Pool-Manager-formerly-known-as-Investment-Banker" would get a cut as well, right? ChrisCook: Yes, He will be part of the Developer/Operator consortium.
ChrisCook: Yes, He will be part of the Developer/Operator consortium.
marco: Which would leave 1628 MWH, minus the Pool-Manager-formerly-known-as-Investment-Banker's share, to the developer/land owner/community who owns the turbine. These may then be redeemed for renewable energy consumed; against repayment of Pool investments used to achieve energy savings (so-called "Nega Watts"); or he may just sell them off at the market price. Could you explain what the first two mean in practice? ChrisCook: Units are essentially "tickets" or IOU's redeemable by the Community ownd turbine against electricity production at the retail price. So, yes they would be used to "pay for" renewable energy. When you get billed by your power supplier, you pay in both dollars, and in tickets. The power supplier (an intermediary) then pays a renewables producer with them. It doesn't matter what source your electricity actually came from. The key point is that using this mechanism, renewables and energy savings are literally "self funding".
Could you explain what the first two mean in practice?
ChrisCook: Units are essentially "tickets" or IOU's redeemable by the Community ownd turbine against electricity production at the retail price. So, yes they would be used to "pay for" renewable energy. When you get billed by your power supplier, you pay in both dollars, and in tickets. The power supplier (an intermediary) then pays a renewables producer with them.
It doesn't matter what source your electricity actually came from.
The key point is that using this mechanism, renewables and energy savings are literally "self funding".
