Renaissance man in the Knowledge Age Achieving more with less

Tuesday, 17 April 2007

They don't get it - Price the Enviroment

I have just finishing watch another depressing news report on our environment, this one "Earth, Wind & Fire" aired on the ABC, yes I have to say any media coverage about this problem we are all facing is good, but I am starting to feel it is time we dropped the 'fair and balanced', 'lets not make too much of a fine point' approach.

We are talking about a problem that is a human race killer and for those who keep trying to push the line it may not be a problem or the science is not 100%, sorry I just don't have the time to play your game, so look out the window and come back when it hits you. There has always been a fear in our society of those who become extreme about their issues; I am the first to advocate the middle way and finding solutions that brings everyone along. Yet currently there appears to be so little action in this area that we need a catalyst to bring us all to action.

Maybe then we can start to take some sound decisions about how we can reduce our emissions, decisions which don't contain oxymoron's like 'Clean Coal', decisions that are strategic in nature rather then a series of tactical moves to appease lobby groups with short term, single generational objectives, decisions that make economic sense and work with free market forces instead of attempting to derail them.

Firstly let’s put to bed the concept of “Clean Coal”; Coal is a fossil fuel therefore a non-renewable resource and the burning of coal for energy production generates carbon dioxide which is the cause of Global Warming. The term "Clean Coal" has been spun together to give the general public the idea that there is a new type of coal that does not produce carbon dioxide. That is not the case, rather the supporters of "Clean Coal" use the term as a catch all for a group of theoretical technologies which will attempt to reduce and/or capture the carbon dioxide generated by burning coal.

Now I have used the term theoretical above because there are no test beds or demonstrators of these technologies at the moment, what does exist is strictly experimental.

Not to rain too much on these technologies, conceptually they could be very valuable, the ability to isolate and contain emissions from an energy source which is wide spread and cheap is an advance that we need to persuade and support. Yet even accepting the time-line put forward by the supporters of this technology it would be 2020 to 2025 before we could commercially capture and sequent carbon dioxide from coal, which is of course if the technology works and it can be delivered in commercially acceptable fashion and if 2020 is not too late.

So what is my humble solution to this problem?

Well to start I think it clearly a problem for the economist rather then the scientist and government. We need to understand that our environment is a resource and the cost of that resource can only be measured from the perspective of what it will cost us when we destroy it.

Like any other resource, organisations which consume it need to compensate the owners of that resource, in this case the people or countries for it consumption. By doing this the 'Cost' of the environment, or more to the point the cost of not having it, is realized in the end price of the environment consuming products which the organisation offers the market.

So what will the effects of this and how should it be done?

The effects will be simple; free market supply & demand forces will change our behaviour. When faced with paying a higher price for a fuel with loaded environment cost or selecting an alternative with lower or zero environment cost, the consumer will direct their dollars towards the optimum alternative for their needs. The long term effect of this is a sustainable change in consumer behaviour and change in those industries that provide products that have a cost on the environment.

At this point is where we normally hear the argument that this type of solution will destroy the Australian coal industry. I would propose this would not be the case, like any industry it will adapt to the market to deliver the highest possible returns to its shareholders and more then likely the carbon dioxide producers of today will become the renewable energy moguls of tomorrow. A good example of this adaptation exist with the tobacco industry, which we tax aggressively due to the load they place health resources.

Another clear knock on effect of costing in the environment on emission generating energies is that it will foster investment by the fossil fuel industry in green renewable energy because this becomes “where the money is” and after all they are probably better suited to manage and capitalise on this investment then government agencies.

So with the phased introduction of environmental costing we will see fossil fuel prices raise and the introduction of new low or zero environmental cost fuels as investment towards the science in this area flows and all driven by market forces which are will ensure that the alternatives are sustainable.

It will take some research & modelling which will probably firstly call upon us to value the environment and what better way to do this then a free and open market, so emission trading is back on the table, maybe some kind of global environment derivative needs to created and whole library of enforcement laws. The point being here all of this is very achievable quickly and as the environmental costing is phased in and commercial pressures and profit objective will become the drive force behind alternatives and there is no quicker way achieve any thing then a organisation motivated by profit.

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