2014/12/01

Idea: Incentivizing CO2 sequestration by appealing to rich tax-dodgers (and their bankers)

James Hamilton has a nice post about what happened to the RE<C project, an initiative by Google that was intended to render renewable energy cheaper than coal.

Like most ridiculously ambitious projects, the goal was never realised, but some interesting learnings were gleaned from the experience of trying, as two of the engineers wrote about in the IEEE Spectrum magazine from whence the chart to the right was taken.

Long story short: switching completely to renewable energy takes the foot off the accelerator, but doesn't put us on the right direction in CO2 emissions, which should be: in reverse. To go into reverse, you need carbon capture and sequestration (CCS), taking CO2 out of the atmosphere and storing it somewhere.

James' mention of using economic systems to align incentives got me thinking about carbon credits, carbon taxes etc. As I understand it, both systems act as industrial regulation. They appeal to the rational side of human nature, but what's stopping us from fixing climate change is exactly the opposite: it's a collective action problem (CAP) and so in today's coldly rational geopolitics, nobody wants to move without anybody else. So how about appealing to the less sophisticated traits of human nature - the desire for riches and the reluctance to pay taxes?

It occurred to me that if a nation with a developed banking system issued a major tax break on all wealth denominated in tons of sequestered CO2, then the fiscal optimisation experts would do the rest and the financial giants of Wall St. and the City would soon be pointing the smart money at CCS technology.

Like the stones of Yap, the carbon doesn't have to be accessible to be usable as currency. An assaying/auditing authority would be responsible for issuing the currency units, which could be made liquid, transferable and splittable into smaller, more usable amounts using a Bitcoin-style blockchain. The 'worth' of each unit issued could be pegged to a major currency as a function on e.g. the last parts-per-million (PPM) figure for CO2 issued by the NOAA, and the exchange rate for other currencies determined by the currency market as usual.

This hare-brained scheme has several extremely cynical advantages. CCS technologies are immature and need lots of investment; and the banks managing the truly insane wealth of the 0.01% have lots of money sloshing around. Rich entities like billionaires and major corporations have lots of money and need to keep it somewhere, and don't like paying tax. Experience shows they will evade taxes anyway, but by giving them a way to do it closer to home, they can shut down their 'head office' in the Cayman Islands, and burnish their green CSR credentials at the same time. And finally, other countries might follow suit and issue their own tax breaks for CO2-denominated wealth, in which case, party on! Humans spit 29 gigatons of CO2 into the atmosphere every year and the more people doing the opposite, the better.

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