The key debatable issue relates to technological innovation, particularly Carbon Capture and Storage (CCS).The argument is that the difficulty with CCS is one of costs rather than technical feasibility. The high costs, rather than technical feasibility, of CCS are the main reason that the CCS has not been commercially applied. Before it is commercially applied, it will bear risks and uncertainty. However, do any new technologies have no risk or uncertainty? If there are no risks or uncertainty, what is the value of research and innovation?
As to the obvious question of who will pay for all this, this is a practical question that needs to be solved by politicians rather than economists:
……there must be adequate insurance or financial reserves to cover the potential risk in the future. Unfortunately, insurance bodies…… unable to insure against the reliability of CCS technology. This leads to the obvious question: who would foot the bill…… Will the public [?]……
However, the denial of insurance providers does not mean a program will not be financially viable. Thinking about the innovation of new drugs, are they funded either by insurance companies or government? I do not see many people worrying about the bill for medical innovation.
The cost-benefit analysis for coal is dynamic. Huw is right to say that costs of risk should be taken into account in the cost-benefit analysis, and my paper does not suggest otherwise. But, I stress, the benefits side needs a full accounting also.
At least two components need to be calculated. One is an increasing marginal benefit through declining use of coal, which is a basic economic principle; another is the future productivity of non-renewable resources, which will increase over time due to the accumulation of other productive and complimentary inputs. From a dynamic perspective, even though the costs of coal use are fixed, these increasing benefits will lift benefits above costs sometime in the future.
A non-carbon future is attractive and it is my dream as well. But it is less feasible than a CCS-applied future. My paper starts from our current situation and tries to propose some practical solutions, rather than a splendid dream. From what we can see at this moment, coal alternatives also suffer from risks and are not technologically mature enough to provide all the energy we need. Hydro-electricity is much worse than it looks because of ecological consequences and surprisingly, CO2 emission intensity[paywalled].
Nuclear energy is criticised by many people and the risks may not be less than climate change! Bio-energy is blamed for the recent food crisis: it seems that rich people fill their tank with the poor’s food.
Solar and windpower look promising. However, wind power is constrained by the availability of land and wind resources. Solar photovoltaic power generation has high cost characteristics. Why aren’t we equally optimistic with the similar challenges between renewable energy and fossil energy?
One question confronting all of us is: what is the practical solution for a non-coal future? Can we cut more than half of our electricity consumption directly and indirectly in other final goods and services? Remember, we do not cut electricity consumption when we import, instead of produce, goods and services. Do you want your bill to be doubled, tripled or worse? The current debate of a carbon tax on petroleum in Australia is a reminder of this.
Xunpeng.
Following your last paragraph, I believe it is imperative we look at ways to reduce the demand side. If you look at recent trends, the global economy fallout has effectively changed the demand curve for plants to the point that the central gov’t is now comfortable shutting down small mines and plants.
Imagine if China, which has done a great job of urban planning, were to force a Gold LEED standard on all new buildings and invest in retrofitting old buildings to reduce the energy needed/ wasted by China’s built environment (estimated to be 70% of China’s energy demand).
For me, this is where we need more focus and investmet. Coal plants can be offset by nuke, wind, and solar on a percentage basis, but if the total demand keeps increasing it will not actually reduce the amount of coal used on a real basis.
Which is what is really needed.
r
http://www.cleanergreenerchina.com
To echo above, efficiency gains are substantial, and are very often cheaper than new generation.
These can be achieved easily through regulatory mechanisms. China is well placed to implement many of these, and is already doing so on things like lighting. A number of these such as high building standards have higher initial costs however, and these have not yet been taken up properly, and may yet be resisted by interests such as building developers. A strong centralised mandate on efficiency would do wonders.