Isn’t this like the emissions trading scheme?
Yes and no. Yes it may involve trading – but also it aims to avoid the biggest weaknesses of the emission trading scheme.
The emissions trading scheme was put together by many clever people and in theory should allow governments to restrict carbon emissions to a level the atmosphere can handle. As we can all see it has not worked so far.
We can see many weaknesses in the ETS – but the biggest is that governments (who control the supply of credits) have not actually been able to restrict the supply to a level where the price rises high enough to make carbon capture and other carbon mitigation schemes viable.
Why not? Probably because the political pressure is too high – it puts governments directly in the position of raising fuel prices for end users.
With our scheme, governments would have a much less obvious role – making sure that the supply of fossil fuels, which are planned to be burned with emissions of CO2 to the atmosphere, are kept to a level the IPCC is comfortable with. This will clearly ultimately raise the price of fossil fuels to the buyer, but not as a direct result of government involvement.
The Emission Trading Scheme is also a trade of ‘permission to emit’ – something explicitly allowed by government. Our scheme would be a trade of ‘ability to produce hydrocarbons allowed to be burned free into the atmosphere’ which is slightly different.
Also with the Emissions Trading Scheme too much attention went to the actual trading itself (and this is where many people managed to make money). The actual cause behind it is easily forgotten. With our scheme, the fundamental message is not about trading, it is about restricting the flow of ‘free burn’ hydrocarbon, something everybody can agree on.
A further problem with ETS is that the price needs to rise to a high level before any CO2 emissions is mitigated – until the price reaches this level, there is just a lot of expenditure, no-one knows where the money goes – so it imposes a lot of cost on industry without achieving any benefit. With our scheme, the amount of carbon capture required starts very gradually and can be shared between everyone, but it definitely happens.
How will you make this work globally? Will Venezuela, Saudi Arabia, Russia, support it?
Good question – but bear in mind that the global warming community has been trying to get global agreemnents for decades with limited success, perhaps this is the wrong question – or at least time to look for an alternative question.
So we’re starting with the question of ‘how could we make this work in the EU’?
or a red hydrocarbon scheme could also be introduced for a specific industry, for a group of companies, even a single company.
From a market point of view, a red hydrocarbon scheme will mean increased costs, but also possible benefits. For example, some airlines are spending lots of money developing biofuels because they would like a low carbon way of fuelling planes – they are already willing to spend more money.
From a regulatory point of view – it would be best to introduce this across a large country or group of countries. For example if the UK or Netherlands unilaterally decided to adopt a red carbon scheme (which would include imports as well as production) it would make their emissions uncompetitive with other countries. But the EU is probably big enough to adopt a system – there are already plenty of regulatory processes which make the EU uncompetitive with other parts of the world (such as safety laws) but the EU still manages.
Our theory is that a red hydrocarbon scheme could gradually be introduced in different parts of the world, different industries, different companies – until the net gets wider and wider. In the end, you only have Saudi Arabia or Russia’s domestic energy consumption which doesn’t go red (assuming that Saudi Arabia and Russia are not interested in carbon capture at all, which may not be true).
Isn’t this going to be really complicated to manage?
Yes and no to give a maybe unhelpful answer.
On a basic level, we just say this – the market determines all the pricing. It is up to market participants to ensure that the appropriate amount of red hydrocarbon is made available (ie the carbon capture is acheived and paid for) and every price is negotiated. The end user will pay more in the end, of course.
In practise it could work like this.
A coal mining company can sell coal to a power station operator. The coal company is obliged to make 20% of its coal black. This means that 20% of the coal needs to go through a carbon capture plant.
To begin with, perhaps another company could offer services to do carbon capture by trading. So you can buy carbon capture for 100 tons of coal.
The carbon capture plant is more likely to be operated by the power station operator – so the ‘red hydrocarbon’ would be sold (by the coal mining company to the power station operator) at a discount to black hydrocarbon to compensate for the cost of doing this.
Or if the red hydrocarbon requirement is being forced by a buyer (someone wants to buy red hydorcarbon), then a market operator (like Ecotricity, in the UK wind sector) can pay for carbon capture services from a carbon capture operator, and in return sell the red electricity to buyers – so in this case, the red electricity is more expensive.
What happens when all the power plants have CCS on them – how will you make red petrol then?
To answer this question you have to look at the basic pathways which are interesting although outside the scope of this project.
If we want to decarbonise 100% – we can achieve say 17% of that with carbon capture (in that 17% of carbon emissions are from electricity consumption).
What we do beyond that is well known – heating homes and running cars with electricity (which can be generated carbon free in many ways) rather than gas or gasoline – and running planes, ships and cars on hydrogen power – and also reducing consumption.
The zero emission scenario is actually quite easy to imagine – and achievable today, if people were willing to pay for it!
The difficulty is getting from here to there – finding ways to move society to more zero carbon and doing it gradually so that people can absorb the price rises slowly. Also doing it in a way which can be driven by politicians without politicians looking to their voters like they are increasing the cost of their driving. This is what this project addresses.