The real greenhouse denialists, part 2

As reported The Age this morning, the Climate Institute has released another of its regular public opinion reports. Climate change continues to be another case study in the difference between repeating the conventional wisdom back to pollsters and taking responsibility for an issue that, if the conventional wisdom is right, has consequences for the lifestyles of us all.

As in earlier research, the level of concern about climate change is very high, at around 90%. 80% want the government to give the issue a high priority.

It’s when we get to the solutions that, as usual, things start to unravel. Three-quarters support laws to ensure all new electricity comes from clean energy sources. 87% support 25% of electricity coming from wind and solar sources by 2020. As wind electricity currently costs twice as much as coal-generated electricity, that is going to add significantly to power bills – especially as a hefty carbon charge on coal is going to be needed to make wind power financially feasible.

But how much extra are people prepared to pay for electricity? Even with their previous answers creating pressure for personal responsibility, and no real cost involved, 28% of respondents said that they were not prepared to pay anything more for clean energy. Another 32% said they were only prepared to pay another $10 a month (or about 10% more if the last ABS expenditure survey is a guide). Only 7% were in the more realistic range of $40 or $50 a month (if we can assume some technological advance and economising in response to higher prices).

Back in the real world of politics, Kevin Rudd was today announcing a scheme to reduce rather than increase energy prices.

As I said last year:

This is the greenhouse ‘denialist’ problem – not a few conservatives arguing that climate change is a left-wing conspiracy, but a public that accepts the theory but rejects the consequences of their beliefs.

29 thoughts on “The real greenhouse denialists, part 2

  1. The effect will be to reduce variation in prices. On the one hand the petrol station will not want to set its price too high, as it will miss out on sales (and more importantly chips, chocolate and coke sales) while other stations are lower. On the other hand it will not want to set its prices too low as while it gets to sell a lot of fuel, it won’t make any profit, and could easily end up worse off overall.

    End result, bargain Tuesday fuel buyers will end up paying more for petrol, and the losers that fill up on Fridays and the Thursday before Easter may benefit by a few cents, but most importantly for the Ruddster delude themselves that fuel overall is cheaper. That is the effect in WA.

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  2. In Bjorn Lomborg’s new book Cool it he estimates that each ton of C02 does about $2 damage to the environment. This estimate assumes the IPCC best guess forecast of about 2.6C warming over the 21st Century.

    Adding about 10% to people’s electricity bills may mean paying about that. Perhaps the democratic consensus is pretty close to the economic estimate of the damage of global warming.

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  3. Pedro – It is hard to see that 10% will produce the necessary changes, either to usage or to the economics of renewable energy. Much bigger hikes in petrol prices have had only modest effects on total domestic consumption.

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  4. Yes I was perplexed at the politics behind announcing a scheme which which – if it works – will knock at most a cent or two off the average price (and may just smooth the cycle with no overall average price reduction) with the soundbite “we will do anything we can to ensure Australians don’t pay one cent more than they have to”, when Rudd will later this year be announcing the details of the emissions trading scheme which should increase the price of petrol substantially.

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  5. It seems that the current game – in all countries I have read about – is how to appear to be doing something about greenhouse gasses without causing anyone any pain.
    Governments realize that their electorates will not accept the kind of energy price increases that would be necessary to reduce C02 output significantly.
    So we will see more stunts and empty gestures.
    I am not sure where all this will lead – some day the music will stop and governments will need to admit they haven’t done anything.
    Or perhaps a variation on the solution for the Vietnam war (was it Kissinger?) – declare victory and go home.
    “As a result of all our sterling efforts the battle against climate change has been won. Well done, everyone!”

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  6. Ken, it was Republican Senator George Aiken of Vermont whose proposed strategy for the Vietnam War was: say we won, and get out!

    Perhaps the 1917 words of another Republic Senator, Hiram Johnson of California, are also apposite to the ‘war’ on climate change: when war comes, the first casualty is truth.

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  7. According to the government’s greenpower website, it costs about $24 more per month for a household to switch to 100% green (wind and solar) energy. That probably reflects generous subsidies to the renewables industry.

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  8. Rajat, definitely due to subsidisies. We’re on 100% green power, and part of me definitely accepts that it means everybody else is effectively paying for our “green power”. But I also believe that given we can afford to pay for it, it’s helping channel funds and investment towards an industry that almost certainly will have an important role to play in reducing emissions. Of course, it’s possible it would be better directed to nuclear power or various other alternatives, but wind power seems a pretty safe bit.

    On the FuelWatch scheme, I wouldn’t be surprised if the government were well aware that it would be highly unlikely to actually reduce petrol prices, and that universally reducing petrol prices would be a bad decision for Australia anyway. I’m disappointed they don’t have the guts to sell the need for higher petrol prices instead, but I’m realistic about the probablity of the public ever accepting such a message. What really matters is what efforts are taken to give people realistic alternatives over being so reliant on using large amounts of petrol. For instance, I’d like to see taxes and insurance premiums (including CTP) tied to km driven, and the costs involved in purchasing and registering new vehicles (particularly fuel-efficient ones) reduced substantially. If the cost of running current inefficient vehicles were to rise slightly, but the cost of buying, registering and running new efficient vehicles were to fall considerably, a lot more people would start switching.

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  9. NPOV, I would imagine that the community at large would be paying the renewables subsidies regardless of whether particular individuals took out green power contracts. So you’re not accountable to us for your choice!

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  10. An eminently sensible analysis Andrew, but not an extraordinary conclusion. Most drastic legislative measures to a range of past problems have been in response to a real crisis (air/water pollution -> clean air/water Act).
    We are unlikely to see a race of philosopher kings who force us to take preventative medicine. Instead we will be attended by tow truck drivers well after the accident has happened.
    BTW a few of you colleagues at the CIS/IPA could spend their time more usefully pursing this line rather than the “orthodox” denialist narrative.

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  11. Rajat, but surely for the subsidies to be effectually bringing down prices, they must match the uptake rates? If next week 100000 new households signed up for 100% green energy at existing prices and there was no increase in taxpayer subsidies, they’d surely be operating at a loss (assuming of course there’s even sufficient supply).

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  12. NPOV, actually having just discussed this with a more knowledgeable colleague, it is more complicated than I first thought. Retailers are obliged to purchase a small proportion of their total energy from renewable sources. Green power contracts in excess of that obligation are priced on a cost-reflective basis and it does not seem that renewables plant get subsidised directly. So $24 per month extra is probably about right, although that clearly would not allow for *all* customers to switch to green power overnight.

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  13. And nothing is discussed in favour of nuke power by Rudd and his cronies. Taking nuke off the table is denialism writ large.

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  14. Rajat, but are retailers still selling the renewable energy they buy at a profit? Presumably not at the same profit they could get from selling fossil fuel energy, or you wouldn’t need a government-legislated obligation to purchase renewable energy.

    JC, trying to sell nuclear power to the public is probably even harder than trying to sell the need for more expensive petrol. Who knows what Rudd (or his cronies) thinks of it personally.

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  15. Andrew, in his book Lomborg advocates more spending on alternative energy to be the main focus of money spent to avert global warming. Indeed, he recomends spending 0.5% of GDP in developed countries for this purpose. Assuming that spending on energy is about 6% in a developed country a tax of about 10% could finance this.

    The idea is probably pretty smart. It is startling to look at the price reduction in solar technology over the past 50 years. It has been reduced by several orders of magnitude. There was an excellent special about it in the Economist last year. At the moment thin film technology that is not based on hyper pure silicon is starting to be commecialised. Nanosolar and Konarka are doing very interesting things. Standard solar technology costs about ten times as much as coal power at the moment. One more order of magnitude reduction would mean that it would be really viable. This sort of reduction in cost in materials technology is not unknown. If you look at the price of the films on blank CDs and DVDs you see a reduction in the past 10 years of two orders of magnitude.

    People make jokes about how solar is just like nuclear fusion – only 10 years away for the past 40 years. However, this unwisely disregards the massive progress that has been made with solar technology in comparison to the slight progress made with fusion research.

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  16. Retailers typically make a margin on their costs (energy purchasing and network charges), so I can’t see why they wouldn’t make a similar profit on green energy contracts than on regular contracts – possibly more if they assess a higher willingness to pay on behalf of green power customers. The government regulation is due to the fact that most customers do not want to pay an extra 30% on their bills.

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  17. Pedro, AIUI, it isn’t so much the solar technology itself that is the price barrier, but the supporting storage technology needed to enable base-load power. But I agree that there is good reason to believe that solar-power will become price-competitive with coal within the next 10 years. On that basis, if we left it entirely to the market, low-carbon energy sources would probably completely replace fossil-fuel based energy sources within 50 or 60 years. With a relatively low carbon levy, that surely could be brought down to 30 or 40, which, unless the worst-case “tipping point” scenarios really are true, would seem to be sufficient.

    Rajat, my point is that 100% green power should cost a lot more than 30% extra. So somebody is subsidising us somehow, surely?

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  18. Indeed, only about 30% wanted nuclear power.

    i bet a good portion of that 70% would vote against nuke too. Amazing.

    And what the public wants to spend to mitigate doesn’t equal the real bill, not even by a fraction. Moreover the 30 electorates that decide elections are always looking for extra cash in their pocket.

    Is the public on planet earth here? LOL.

    Or

    The most optimum policy isn’t being introduced, which raising a carbon tax and offsetting income taxes.

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  19. I don’t know what would happen if a lot (e.g. 50%) of consumers chose green power. A lot of electricity is coal-generated and those plants often cost less to run than gas or renewables.

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  20. Sacha, presumably at some point they would have to tell customers that they had insufficient capacity.
    I did actually ask our retailer this when we first signed up, and they basically said that there are so few customers on 100% green power that it’s not an issue…yet.
    It does seem strange to me that the uptake is so low – for anyone on an above-average salary, the extra cost is barely noticed, and it’s far less hassle than constantly remembering to keep lights off, turn appliances off at the point, and myriad other techniques for reducing electricity usage that various people I know do actually make an effort with. I’d happily pay 30% extra for “100% green gas” for heating too if such a thing existed.

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  21. NPOV, don’t forget that electricity generation costs are only about one-third of retail tariffs. The remainder is for the recovery of distribution (50%) and transmission (10%) network costs, the retailer’s margin and other misc charges. Therefore, even a doubling of generation costs would only increase retail tariffs by about 30%. Mind you, a doubling might be conservative given the low ‘load factor’ of wind and solar plants, driven by the low reliability of such sources of energy. This means that you need to build much more renewables capacity (in MW) than you would thermal plant capacity.
    In Europe, many customers on solar energy have benefitted from favourable ‘feed-in’ network tariffs, I suppose on the basis that more local/distributed generation avoids the need to spend money on network infrastructure. However, this only makes economic sense if distributed generation makes such networks truly avoidable. If you have a solar panel but still need to use the grid from time to time, you cannot avoid building distribution networks and hence should not receive rebates on network tariffs.

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  22. Sure, I’d accept if the generation costs for wind power were only twice as much as coal power w/h for w/h, then a 30% increase in retail price would be about right. In fact, from various figures I’ve seen around, wind power is less than twice as expensive to generate than coal power, so I may well be overpaying for green power…but those figures were for the U.S. and Europe where different conditions apply.

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