A brief primer on variable vs. fixed costs

For those of us in the power industry, media discussions of the economics of power generation reveal an almost complete misunderstanding of how power is priced. Depending on our vested interests, we may find this either frustrating or beneficial -- but in all cases, it's false.

Herewith I attempt to explain from whence the confusion arises -- and why it is so critical for the clean energy community to understand this math and its consequences ... and to more accurately articulate the economics of those options we prefer.

Economic naïvete on carbon prices

If you put a price on GHG emissions, will it raise the cost of energy?

That question goes to the core of carbon policy. Unfortunately, many people inside and outside the environmental community consistently get it wrong, with potentially disastrous results.

Consider: if the answer is yes, then we don't need any incentives for GHG reduction. The costs of carbon-intensive energy will rise, giving we energy users the incentive they need to lower consumption.

But if the answer is no, we will find ourselves with a tax on dirty energy but no incentive to reduce its use. That is, we will end up with a greenhouse-gas policy that fails to do the one thing it's supposed to do above all else: lower our greenhouse-gas emissions.

The answer, more often than not, is no.

A Post columnist’s defenders can’t salvage his poor cap-and-trade logic

Tyler Cowen weighs in on the cap-and-trade debate. He focuses on my criticism of Samuelson’s seeming failure to understand the...

A quick read on green lifestyle magazines

Choices are good, but good choices are better. Periodically, I find myself wandering the ever-expanding magazine aisles at local newsstands...

White House says it will veto Lieberman-Warner climate bill

I received the following release from the White House this morning: —– STATEMENT OF ADMINISTRATION POLICY S. 3036 – Lieberman-Warner...

Public transit ridership is up, but no one’s talking about a better system

But how long will they wait for infrastructure improvements? Photo: Sharat Ganapati One year ago, as America prepared for the...

Conservative pundit correctly recognizes the radical implications of the polar bear decision

This ran on VanityFair.com earlier today. George Will is far from the only middle-aged Boomer pundit who spends his time...

Fewer Republicans saying earth is warming

The science is clear about the reality of global warming and the fact that humans are the dominant cause. But, sadly, that isn't clear to most Republicans.

Anybody who thinks the public debate is over -- anybody who thinks the Big Lie doesn't work -- should look at the latest poll results from the Pew Research Center:

How to reduce California auto emissions faster than Pavley

Last update: 7/22/2008

In my last post I touted the benefits of a fully refunded emissions tax. Let's take a look at how it could work in California.

When it comes to a refunded tax, more money for industry doesn't mean less money for consumers. Case in point: Today's gasoline prices in California are averaging $4.58/gal, which equates¹ to $536/MT-CO2e. That's how much California drivers are currently paying to emit CO2 -- and how much they could save from fuel economy improvements.

The same approach used by the Swedish program could be applied to motivate efficiency improvements in vehicles, consumer appliances, etc., by employing feebates, which can be implemented as a kind of refunded emission tax. The tax would be applied to projected lifecycle emissions (direct or upstream) and would be refunded in proportion to some measure of economic utility (e.g. refrigeration capacity, illumination output, etc.). The tax and refund together would incentivize lower emissions per unit of economic utility. Feebates could be used as an alternative to traditional performance standards, or could be used to effectively impose a price floor on a tradable standard.