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Funding Australia’s move to renewable energies

By Kevin Cox - posted Tuesday, 28 November 2006

In 2006 it appears as though the global warming message is finally making some headway in Australia. Every other day mainstream media leads with cautionary tales that project the consequences of unchanged behaviour, while at the same time politicians are falling over themselves to announce the latest climate-friendly policies.

The need for cleaner, greener power is no longer debatable. Instead the issue has become how to make the switch. Given embracing renewable energies will require a massive investment in infrastructure, the major question for Australia (and the world) is one of funding.

The fundamental problem is that relying on traditional energy market forces to provide the necessary investment will not work, because the infrastructure for energy from renewable resources costs more than the infrastructure required for the burning of fossil fuel. This is because energy from fossil fuels requires less capital to establish while the running costs are about the same or similar to the major renewable alternatives such as wind, solar, or geothermal plants.


The other reason is that the infrastructure of petrol stations, cars, power stations and electricity grids all exist and are tuned to the burning of fossil fuels. Obtaining the required investment to shift to fuels that produce less greenhouse gases is a massive task.

Let us make the assumption that we have no choice and we must change. Who is to finance such a change and who is going to own the infrastructure that is created? At present the thinking is that funding will come from general taxation and or a carbon tax, while ownership of infrastructure will be left to those organisations that can persuade governments that they have worthwhile projects.

Neither of these approaches is viable for the enormous investment required. The first because people are loathe to pay taxes and the second because markets are better than edicts at picking winners.

Instead, the funds required should come from the users of all products that generate greenhouse gases as a by-product and who cause the problem. There are numerous sources of greenhouse gases that are not yet held accountable for their contributions to the global warming problem. For example, the 2003 National Greenhouse Gas Inventory by the National Greenhouse Office reported that Australia’s livestock industries accounted for 12 per cent of the net national greenhouse gas emissions. It is time for everyone playing a role in greenhouse gas production to work towards solving the issue.

Similarly, ownership of the infrastructure could belong to those organisations and people who supply the funds. Thus instead of creating a tax on carbon let us include a fee within the overall product price that reflects the cost of the greenhouse gas emissions generated.

Let’s make it mandatory that every carbon emitting product or service sold on the market be bundled with a Greenhouse Rehabilitation Investment (GRI) as part of the overall purchase price. GRIs will quickly be dispersed into the broader population, as consumers acquire GRIs with almost every energy purchase.


Greenhouse Rehabilitation Investments

A form of investment bond, the GRIs are special funds that can generate financial returns for owners, but may only be used to invest in processes that reduce greenhouse gas or that generate energy without greenhouse gas emissions. As GRIs accumulate among the population, Australia will create a ready source of investment funds at the same time as fostering a market for technologies that reduce greenhouse gas emissions.

Given that the GRI approach will work, the next step is to establish how long we have to reduce emissions (and perhaps even take greenhouse gases from the atmosphere). Once this has been determined, we then have to work out how much investment is required to achieve the goal for Australia.

Australians consume about 70,000 kilowatt hours (kWh) per person per year. For simplicity but to get an idea of the magnitude of the problem let us assume that all energy is electrical energy.

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About the Author

Dr Kevin Cox is an entrepreneur. Previously he has taught Information Systems in Canberra and Hong Kong and worked with computers for various multinationals in Australia, the USA and Indonesia.

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