A couple of other thoughts:

- the AES president mentions that it is cheap to reduce CO2 emissions. In practice, that is not what the likes of TXU (Texas) and Southern Company (Atlanta) will say (the nation's largest CO2 emitters, along with AEP in the Midwest).

There *are* technologies that can deal with CO2 emission in power generation (Carbon Sequestration aka Carbon Capture and Storage), there is also nuclear power, gas turbine (much lower CO2 emissions than a conventional coal plant), renewables etc.

The best guesses are that the costs of eliminating 60%+ of all CO2 emissions by utilities are c. 2-4 cents/ kwhr. (so roughly a doubling of *wholesale* electricity prices in the US, or a 1/3 rise in retail prices, if your retail price is 12c/ kwhr now, it would go to 16 cents).

(I am basing that on the following very rough estimates of cost in cents per kwhr of power:

2 c/kwhr - written off coal plant (existing)
2-4c - new coal plant
3-5c - gas fired, combined cycle (depending on gas price!)
6-8c - new nuclear plant
5-9c - wind (onshore)
6-12c - wind (offshore)
15-20c - solar photovoltaic

(big sensitivities to assumptions about interest rates, fuel costs etc.))

*however* there are lots of tough choices in that:

- it's not clear planting trees really helps with CO2 emission (because mature temperate forests are CO2 sources, not sinks). Bomass may look clean, but it's not entirely clear it is clean.

- wind has huge opportunities, especially in the Great Plains states. However wind is not 'despatchible' or 'fast ramp' the power industry terms for being able to supply power on call, or with a very short lead time. You need fast-response gas fired stations or a way of storing power.

There are also big structural problems with wind. These range from aesthetics (Cape Wind off Cape Cod has deadlocked thanks to political opposition, and wind turbines on Vermont mountain tops) through to the cost of connecting isolated wind farms to the grid, to the issue of long distance power transmission (other countries have cracked this, but the US doesn't have one unitary grid authority-- so building high tension DC power lines from Nebraska to Ohio and New York is not something any one entity can mandate, and in a (partially) deregulated system, who would pay for this?).

If we come up with big scale, clever ways to store electricity, then wind has huge potential. Be this massive pumped storage facilities (picture the fights if New York floods Adirondack Valleys) or some clever fuel cell technology.

- solar isn't there yet. It will be, someday (the price of wind power has fallen by over 60% since 1980).

- sticking CO2 underground has huge potential *but* it has the political flavour of radioactive waste. A CO2 leak (natural) in Cameroon killed 1500 people-- do you think communities will sign up to that on their doorstep? Who will pay the legal liability if there is a leak?

Also it will require a complete change in coal-fired powerplant technology. (from pulverised coal to IGCC 'intermediate gasification combined cycle'). Although the IGCC technology is well proven, it is expensive and technologically sophisticated: utilities are cautious about reliability and cost, and again in a deregulated world they won't take the financial risk.

- nuclear has big potential, but the costs have always run way ahead of the industry forecasts. There is no place to store waste, and politically it doesn't look like there will be one anytime soon. New York wants to close Indian Point, right?

You can see the political problems mushroom, and no one has *yet* even tried to ram an airliner into a nuclear power plant.

- Quebec has Hydro power. Governor Cuomo backed off a major joint project with Hydro Quebec, after lawsuits from Indian groups. Maybe that one will come again. Certainly there is an opportunity there for New York to pay a high entry price (10s of billions of dollars), but secure energy for a long time to come *if* the snow keeps falling in northern Quebec (a big if under global warming).

- demand management has huge potential. Just reducing peaks (which are met using CO2 intensive coal and gas fired electricity) could have a big impact (nuclear and hydro meet more of the baseload capacity). I would bet replacing all the air conditioning in New York with the latest models could reduce energy demand by 10%, ditto replacing lightbulbs with compact fluorescents.

The main problem with all this talk about "competitiveness" is the assumption that a reduction of carbon budget can come at "no cost" if we do it just right. It won't. To preserve the climate of our home planet, and please keep in mind we don't have another to go to once we mess this one up, we will have to spend real money. Period. Carbon trading was one political idea to ease people into what, eventually, will have to be a very substantial tax to make everything made with carbon more expensive. The competitiveness issue does not show up on that scale, at all, of course. Why? Simply because every carbon tax in a country can and will be accompanied by a carbon import tax. So everyone who buys something in a country acting responsibly will pay the carbon tax independently of it being produced with coal at home or with coal somewhere else. The difference will mainle be one for the accounting of the tax authorities.

"You can see how this will be used in the US to block any meaningful progress on CO2 emission. Every time someone brings it up, there will be a 'what about China."

The US is simply not a responsibly acting country. There is no political will and no public interest to solve the problem. This is a matter of moral breakdown, not one of the particular scheme that would be used to reduce carbon use.

Morals will change as ocean levels will rise. It will probably be half a century too late and a hundred trillion dollars more expensive to solve the future crisis than if we had acted early, but then, nobody says grandchildren are not allowed to spit on the graves of their grandparents if they deserve it.

Solution to those that do not opt in: Extremely high tariffs on imports from such countries covering both the carbon cost plus a punitive fee.

Yes, this is a punishment. What the EU can do is say "if you want to trade in out economy then you play by our rules". There does not stop another nation from going its own way but there is a cost.

What the world needs is a carbon tax union, where each member agrees to implement laws and regulations to abide by carbon goals and where nations not members of the union are punitively taxed for engaging in trade with the union, unless or until they comply.

I'm not sure energy is 5% of the worlds economy probably closer to 10-15%.

If you take into account all transportation/power generation and oil based synthetic production energy or better carbon based products are a big part of our economy. Rising energy costs have a profound impact throughout the economy.

I think its better to think of the price of oil as the central energy banks interest rate since it has a similar economic effect. Or you could consider the price of oil as a sort of commerce tax applied to almost every transaction.

Rising oil prices almost directly result in inflationary price pressure throughout the economy.

The reason is money spent on oil does not result in high value economic activity if oil production is past its peak.

Before oil peak's as the price of oil increases we expect expanded production to reduce price. For example as the price of corn grows more land
is planted in corn.

Next its almost common sense to realize that energy costs must be a much bigger part of our economy than 5% simply consider the effect of doubling or tripling energy costs. I'd guess that if energy costs were 3 times higher than today we would have 50% less economic activity.

You can't use places like the EU that charge a high tax on gasoline since this tax money. Energy costs are higher in the EU but not as high as final pump prices suggest since its offset by the fact that a big part of the cost is taxes used internally and lower per capita consumption for the same economic activity.

Yes, lets keep our fingers crossed for another Katrina.

Conservation/efficiency is a personal virtue, not a social one, unless you are one of those old Europeans.

Americans as a group no longer understand the idea that less does not equal poor. As a matter of fact, they don't even understand the idea that less can mean higher profits - Porsche definitely earned more in profit than GM, for example.

I think it is hard for outsiders to understand how Americans view the world at this point, since it is so foreign, excluding what seems to be common sense or prudence.

This is also a part of the 'doomer' debate here - notice just how many people who aren't American suggest that societies can adapt and survive by simply planning and changing, while many Americans feel that planning and changing won't work - and if their view generally only encompasses America, they may be correct.

Boof,
I think it is fair enough to assume the economy can absorb surprisingly high increases in energy prices. Take what's happened to the oil price over the last five years (3 x), gas price in the US and Europe (2-3 x).

This, together with carbon taxes in Europe has had a big impact on el gen prices (in Europe anyway), and though there has been an impact on energy intensive industry (ore processing etc) the rest of the economy has proved surprisingly resilient.

So can we withstand an increasing use of fossil+CCS and other alternative low carbon power generation? (wind, nuclear, energy efficiency etc)

I think that we have to - or take a risk of potentially huge environmental consequences. I guess the general population isn't there yet, but it will be soon - the world managed to eliminate CFC's why not CO2?

How indeed to punish free riders . . . .

Suppose the EU and the U.S. get on board with tough carbon taxes: How do you propose punishing China? Bomb their coal mines?

In the absence of a global authority, I think there is no practical way to reduce CO2 emissions. You think we've seen global warming? I think we have just had a small taste of what is to come. And if you (or anybody) have a realistic proposal to deal with the free rider problem, I'd sure like to hear what it is.

Would Iran be your first candidate for receipt of these reactors?

Beyond doubt they have a need for it: declining energy reserves, booming population and demand.

In practice the world has 482 operating reactors (civilian power reactors, from memory).

If we build 1,000 new reactors, (which replaces the 482 and adds 500 new ones), that is one 'Socolow Wedge' ie 1bn tonne pa of abatement on a 15bn tonne carbon pa 'Business as Usual' scenario for 2050.

So nukes are piece of the puzzle, but not the whole solution (no one technology is).

Feh. I am not advocating new CO2 emitting power plants, but even if everything from now on was nuclear or wind installations there are too many CO2 emitters now. They're not going to be replaced; develop CO2 sequestration or the CO2 concentration keeps going up.

A system that recognises that richer countries are going to be able to buy more CO2 permits, is far more likely to succeed than a system that aims for total 'equality'.

Richer countries both can buy more permits *and* use more advanced technology to reduce their CO2 emissions. In practice, they will do both.

Waiting around for civilisation to collapse so that we can impose the 'perfect' system is probably not a good strategy.

I can only agree... conservation followed by massive investments in renewables would pay for themselves in three decades and our children would reap the benefits. Instead, they will probably be reaping the storms their parents were sowing. Quite literally.