Disclaimer: I didn't watch the video (on a train and can't have audio right now), but here is what I know in response to the title: Grid stability is very important. For one, you need 60 Hz...
Disclaimer: I didn't watch the video (on a train and can't have audio right now), but here is what I know in response to the title:
Grid stability is very important. For one, you need 60 Hz frequency in the U.S. (50 Hz in some other countries), and a good baseline load (e.g. turbine power sources such as gas, nuclear, hydro) helps keep that stable. Additionally, without proper energy storage, the variable supply of green renewables and the variable demand throughout the day is a recipe for brown outs.
Whenever you see a post saying "California produces 120% of it's power from green sources" or "this one European country is completely green", remember that they are still relying on fossil fuels somewhere, and that will remain true until we deploy large-scale energy storage or carbon-free peaker plants (H2-burning powerplants, natural gas plants with carbon capture, et cetera).
While you allude to some important and relevant logistical problems which I would be interested in learning more about, that's not what the video discusses. The video is critiquing the...
Exemplary
While you allude to some important and relevant logistical problems which I would be interested in learning more about, that's not what the video discusses.
The video is critiquing the capitalistic need for profit under all circumstances. The author explains that private investment in renewables is inherently less profitable than oil and gas ventures because the latter are easier to exploit in a resource-inefficient way in order to generate shareholder returns. Even though renewables continue to fall in price, their decentralized nature means that their corporate owners have less of a capacity to extract "value" from the production and delivery process than they do with fossil fuels. Consequently, corporate investors are disincentivized from supporting capital projects in renewables because the profits, while present, are not universal. It's not that renewables aren't economical for society, they just aren't economical for private investment enterprises.
The author's thesis (with some corollaries) is thus: the neoliberal expectation that the market will naturally solve climate change is flawed and counterproductive. For as long as capitalistic forces inform the behavior of the energy industry, renewables are unlikely to demonstrate an ROI that exceeds that of highly centralized forms of energy extraction like oil and gas. Governments must invest directly in renewable energy sources (and probably just prohibit the use of fossil fuels in energy, barring emergencies). Even neoliberal policies like corporate tax credits for renewable investment are flawed because they maintain the capitalistic status quo of inefficient privatization. Communal ownership of the means of production, in this case the production of electricity, is essential.
I haven't read the sources he provides and I'm not a subject-matter expert in energy. It's common knowledge in finance circles that ESG funds don't compare to the S&P or total market index. This is really for a variety of reasons, only one of which is the inherent profitability (or, apparently lack thereof) of decentralized renewables—frankly, I'm not convinced that this is a truly perennial issue. I see no reason why technological advancements akin to those in the past decade will not continue to lower the upfront cost of renewable energy and therefore increase profit margins for capitalists. However, I agree with the idea that energy should not be privatized and that fossil fuels should not be used to generate it.
Thanks for summarizing the video a bit. I'm not going to watch it, but it sounds like this is high-level economic philosophy about incentives. I think before getting into that, it might be better...
Exemplary
Thanks for summarizing the video a bit. I'm not going to watch it, but it sounds like this is high-level economic philosophy about incentives. I think before getting into that, it might be better to go down a level of abstraction and see what's actually going on with renewable energy. Is there a problem with not enough investment? How do we know?
I don't know either, but here's a tweet of a graph that shows that an awful lot of renewable energy projects are getting scheduled in the US.
But what's really going on here is that projects get on waiting lists in the early stages and then they cancel them later.
Why are there waiting lists? Not enough electrical grid capacity.
Why isn't the electrical grid getting built up as fast as we'd hope? Well, it's heavily regulated. There are things like environmental impact studies. Building power lines does change the environment so people are worried about it.
Maybe this is why investors aren't more enthusiastic about renewable energy projects that will take a long time to build out? Investments that don't change the physical environment much (like software) won't get delayed by that kind of regulatory caution.
This gets technical very quickly and that's why I'm not in favor of high-level philosophical explanations for things. "Inherently less profitable" is a strong statement to be skeptical of. Profits depend on prices and costs can change when the laws change or the economy changes.
What I've written is already rather hand-wavy, but it's a little more detailed. I'd rather see articles about what's actually happening from people who are either energy experts or talking to them and doing their homework.
You make a lot of great points. It's also important to note that, in the US, much of the increased investment in renewable energy is due to financial incentives passed under Biden. The green tax...
You make a lot of great points.
It's also important to note that, in the US, much of the increased investment in renewable energy is due to financial incentives passed under Biden. The green tax credits have been even more popular than Congress estimated. Joe Manchin has been "raising hell" over the amount of spending on government subsidies. He didn't think the bills would have nearly as much impact as they are.
Since companies are profit driven, good government industrial policy can definitely steer the economy towards more renewable energy as we've recently seen. Now if only Congress could fix electrical grid permitting...
Yes, renewable energy has driven by government incentives, in the US in the 1970's due to the oil embargo and then in Germany and Japan and China. If you want a deep dive I recommend the archives...
Yes, renewable energy has driven by government incentives, in the US in the 1970's due to the oil embargo and then in Germany and Japan and China. If you want a deep dive I recommend the archives of the Construction Physics blog where there are histories of solar energy, wind energy, the US electrical grid, and other things.
That's a cool blog! Another interesting summary is this video from Vox that talks about how government industrial policy made renewable energy so cheap.
That's a cool blog! Another interesting summary is this video from Vox that talks about how government industrial policy made renewable energy so cheap.
I'm not sure if it's fair for the video to place too much blame on "neoliberalism". Governments need to just stop subsidizing fossil fuels (currently standing at around $1T worldwide), and that...
I'm not sure if it's fair for the video to place too much blame on "neoliberalism". Governments need to just stop subsidizing fossil fuels (currently standing at around $1T worldwide), and that will do a lot to support a transition to green energy and a more generally green economic structure (ex. people moving into cities to avoid driving).
Agreed - that's exactly how you do a carbon tax. It has two, or possibly three, parts: A tax on fossil fuels at the point they're extracted - that's the easy part. A border adjustment tariff on...
Agreed - that's exactly how you do a carbon tax. It has two, or possibly three, parts:
A tax on fossil fuels at the point they're extracted - that's the easy part.
A border adjustment tariff on imported goods in proportion to the amount of energy and CO2 emissions it takes to produce the good, adjusted by the amount of any carbon tax imposed by the country of origin. That's the hard part, but without it, all you've done is incentivize moving carbon-intensive industries to a country that doesn't have a carbon tax, rather than the intended goal of actually reducing emissions.
Optional, but highly recommended: pay a dividend to your citizens, to compensate for the fact that a lot of stuff just got more expensive. Making those goods more expensive is the whole point - their producers weren't paying for the externality of carbon emissions before, so they were artificially cheap - but it's going to be political suicide to hike prices on gas and steel without something to compensate.
The third point seems like a bad idea. You should use that money instead to invest in green energy, otherwise you're fighting a price shock with free money. With infrastructure investments you can...
The third point seems like a bad idea. You should use that money instead to invest in green energy, otherwise you're fighting a price shock with free money. With infrastructure investments you can then give subsidized energy to citizens and businesses - and those that use the cheap energy will get a lower burden from the carbon tax.
That would indeed be better policy, but IMO much worse politics. (I'll assume we're discussing the US in this post, but the arguments apply to any country.) Think of how much flak Biden took when...
That would indeed be better policy, but IMO much worse politics. (I'll assume we're discussing the US in this post, but the arguments apply to any country.) Think of how much flak Biden took when Russia invaded Ukraine, and gas prices skyrocketed for a while. Now imagine that happening to not just gas, but everything. Your carbon tax would be perfect, from a policy perspective, but would last a grand total of a year or two until you get voted out in a landslide in the next election.
Much better to give voters a concrete reason to appreciate the carbon tax. A check in their mailboxes definitely goes a long way towards that. It's definitely worth setting aside some percentage of the carbon tax revenues for green infrastructure investment - the US power grid is in dire need of upgrades - but some of that revenue needs to go back to the people.
And yes, fighting a price shock with free money usually doesn't make sense, but this has one key difference from a typical price shock, too - the reason for the price shock is the tax you're using to raise the revenue for the free money in the first place! Usually, you'd be raising unrelated taxes, or deficit-spending, to subsidize demand that's chasing a constrained supply. Terrible idea. In the case of a carbon tax, though, it's not a supply constraint causing the price shock, it's the tax itself. Let's assume you pay out 100% of the tax's revenue as a flat dividend, evenly divided amongst your citizens. Everyone, from an 18-year-old who just moved out on their own, to Bill Gates, gets the same check in their mailbox. What you've effectively done is imposed a tax on emitting, or causing to be emitted via the goods and services you consume, more CO2 than the average American, and provided a tax credit for emitting less than the average, which is the whole point! If you save some amount of the fund for infrastructure investment instead, you move the breakeven point between tax and credit to less than the average amount of emissions. (Switzerland has been doing this since 2008, with a 67% dividend, and it's seemed to work out well for them.)
In the meantime, your tax has accomplished a major goal - it encourages every citizen and every business to emit less carbon. Renewable energy doesn't pay the carbon tax, so it becomes much more competitive, and energy- and carbon-efficiency comes with even more benefits than it did in the past. You can even refund the carbon tax to anyone doing carbon-capture - suddenly, fossil-fuel power plants have a financial reason to do point-source capture, and anyone who engineers a cheap way of doing carbon capture from the air can make money doing so. And if emissions trend down, and the tax makes less revenue? It did its job - mission accomplished!
This sounds good, but since we're ostensibly taxing to account for externalities (not just to artificially reduce consumption), what about addressing the actual externalities? If the reasons for...
This sounds good, but since we're ostensibly taxing to account for externalities (not just to artificially reduce consumption), what about addressing the actual externalities? If the reasons for levying the tax aren't fake, these activities are actually causing pollution, climate change, etc. So then as a society, how are we paying for the costs of these? I would think that it's more palatable to earmark this extra tax revenue for programs that address some of these problems.
Do we actually have evidence that taxing emissions doesn’t work? As in, has it been tried at a scale and degree of attempted enforcement such that we can make that claim? I’m genuinely asking...
Do we actually have evidence that taxing emissions doesn’t work? As in, has it been tried at a scale and degree of attempted enforcement such that we can make that claim? I’m genuinely asking because I don’t know. A carbon tax has always seemed a very straightforward policy choice to me to disincentivize emissions.
I don't know of any evidence that it wouldn't work in practice. It just seems like a cat and mouse game. But it's much easier to know all of the possible origination points of oil and gas.
I don't know of any evidence that it wouldn't work in practice. It just seems like a cat and mouse game. But it's much easier to know all of the possible origination points of oil and gas.
Thank you for the summary! I agree with the overall point (although based on the title, I'm surprised that is the direction the video went), and I will definitely need to watch it once I'm home.
Thank you for the summary! I agree with the overall point (although based on the title, I'm surprised that is the direction the video went), and I will definitely need to watch it once I'm home.
The video's focused on the politics on why things like these may not get implemented due to profit margins, but this is still useful context nonetheless, so thank you for posting it!
The video's focused on the politics on why things like these may not get implemented due to profit margins, but this is still useful context nonetheless, so thank you for posting it!
Disclaimer: I didn't watch the video (on a train and can't have audio right now), but here is what I know in response to the title:
Grid stability is very important. For one, you need 60 Hz frequency in the U.S. (50 Hz in some other countries), and a good baseline load (e.g. turbine power sources such as gas, nuclear, hydro) helps keep that stable. Additionally, without proper energy storage, the variable supply of green renewables and the variable demand throughout the day is a recipe for brown outs.
Whenever you see a post saying "California produces 120% of it's power from green sources" or "this one European country is completely green", remember that they are still relying on fossil fuels somewhere, and that will remain true until we deploy large-scale energy storage or carbon-free peaker plants (H2-burning powerplants, natural gas plants with carbon capture, et cetera).
While you allude to some important and relevant logistical problems which I would be interested in learning more about, that's not what the video discusses.
The video is critiquing the capitalistic need for profit under all circumstances. The author explains that private investment in renewables is inherently less profitable than oil and gas ventures because the latter are easier to exploit in a resource-inefficient way in order to generate shareholder returns. Even though renewables continue to fall in price, their decentralized nature means that their corporate owners have less of a capacity to extract "value" from the production and delivery process than they do with fossil fuels. Consequently, corporate investors are disincentivized from supporting capital projects in renewables because the profits, while present, are not universal. It's not that renewables aren't economical for society, they just aren't economical for private investment enterprises.
The author's thesis (with some corollaries) is thus: the neoliberal expectation that the market will naturally solve climate change is flawed and counterproductive. For as long as capitalistic forces inform the behavior of the energy industry, renewables are unlikely to demonstrate an ROI that exceeds that of highly centralized forms of energy extraction like oil and gas. Governments must invest directly in renewable energy sources (and probably just prohibit the use of fossil fuels in energy, barring emergencies). Even neoliberal policies like corporate tax credits for renewable investment are flawed because they maintain the capitalistic status quo of inefficient privatization. Communal ownership of the means of production, in this case the production of electricity, is essential.
I haven't read the sources he provides and I'm not a subject-matter expert in energy. It's common knowledge in finance circles that ESG funds don't compare to the S&P or total market index. This is really for a variety of reasons, only one of which is the inherent profitability (or, apparently lack thereof) of decentralized renewables—frankly, I'm not convinced that this is a truly perennial issue. I see no reason why technological advancements akin to those in the past decade will not continue to lower the upfront cost of renewable energy and therefore increase profit margins for capitalists. However, I agree with the idea that energy should not be privatized and that fossil fuels should not be used to generate it.
Thanks for summarizing the video a bit. I'm not going to watch it, but it sounds like this is high-level economic philosophy about incentives. I think before getting into that, it might be better to go down a level of abstraction and see what's actually going on with renewable energy. Is there a problem with not enough investment? How do we know?
I don't know either, but here's a tweet of a graph that shows that an awful lot of renewable energy projects are getting scheduled in the US.
But what's really going on here is that projects get on waiting lists in the early stages and then they cancel them later.
Why are there waiting lists? Not enough electrical grid capacity.
Why isn't the electrical grid getting built up as fast as we'd hope? Well, it's heavily regulated. There are things like environmental impact studies. Building power lines does change the environment so people are worried about it.
Maybe this is why investors aren't more enthusiastic about renewable energy projects that will take a long time to build out? Investments that don't change the physical environment much (like software) won't get delayed by that kind of regulatory caution.
This gets technical very quickly and that's why I'm not in favor of high-level philosophical explanations for things. "Inherently less profitable" is a strong statement to be skeptical of. Profits depend on prices and costs can change when the laws change or the economy changes.
What I've written is already rather hand-wavy, but it's a little more detailed. I'd rather see articles about what's actually happening from people who are either energy experts or talking to them and doing their homework.
You make a lot of great points.
It's also important to note that, in the US, much of the increased investment in renewable energy is due to financial incentives passed under Biden. The green tax credits have been even more popular than Congress estimated. Joe Manchin has been "raising hell" over the amount of spending on government subsidies. He didn't think the bills would have nearly as much impact as they are.
Since companies are profit driven, good government industrial policy can definitely steer the economy towards more renewable energy as we've recently seen. Now if only Congress could fix electrical grid permitting...
Yes, renewable energy has driven by government incentives, in the US in the 1970's due to the oil embargo and then in Germany and Japan and China. If you want a deep dive I recommend the archives of the Construction Physics blog where there are histories of solar energy, wind energy, the US electrical grid, and other things.
That's a cool blog! Another interesting summary is this video from Vox that talks about how government industrial policy made renewable energy so cheap.
I'm not sure if it's fair for the video to place too much blame on "neoliberalism". Governments need to just stop subsidizing fossil fuels (currently standing at around $1T worldwide), and that will do a lot to support a transition to green energy and a more generally green economic structure (ex. people moving into cities to avoid driving).
Governments need to not only stop subsidizing fossil fuels, but start imposing a significant Pigouvian tax on carbon emissions as well.
Taxing emissions won't work, it's too easy to cheat the system. You need to cut it off at the source and tax hydrocarbon extraction.
Agreed - that's exactly how you do a carbon tax. It has two, or possibly three, parts:
The third point seems like a bad idea. You should use that money instead to invest in green energy, otherwise you're fighting a price shock with free money. With infrastructure investments you can then give subsidized energy to citizens and businesses - and those that use the cheap energy will get a lower burden from the carbon tax.
That would indeed be better policy, but IMO much worse politics. (I'll assume we're discussing the US in this post, but the arguments apply to any country.) Think of how much flak Biden took when Russia invaded Ukraine, and gas prices skyrocketed for a while. Now imagine that happening to not just gas, but everything. Your carbon tax would be perfect, from a policy perspective, but would last a grand total of a year or two until you get voted out in a landslide in the next election.
Much better to give voters a concrete reason to appreciate the carbon tax. A check in their mailboxes definitely goes a long way towards that. It's definitely worth setting aside some percentage of the carbon tax revenues for green infrastructure investment - the US power grid is in dire need of upgrades - but some of that revenue needs to go back to the people.
And yes, fighting a price shock with free money usually doesn't make sense, but this has one key difference from a typical price shock, too - the reason for the price shock is the tax you're using to raise the revenue for the free money in the first place! Usually, you'd be raising unrelated taxes, or deficit-spending, to subsidize demand that's chasing a constrained supply. Terrible idea. In the case of a carbon tax, though, it's not a supply constraint causing the price shock, it's the tax itself. Let's assume you pay out 100% of the tax's revenue as a flat dividend, evenly divided amongst your citizens. Everyone, from an 18-year-old who just moved out on their own, to Bill Gates, gets the same check in their mailbox. What you've effectively done is imposed a tax on emitting, or causing to be emitted via the goods and services you consume, more CO2 than the average American, and provided a tax credit for emitting less than the average, which is the whole point! If you save some amount of the fund for infrastructure investment instead, you move the breakeven point between tax and credit to less than the average amount of emissions. (Switzerland has been doing this since 2008, with a 67% dividend, and it's seemed to work out well for them.)
In the meantime, your tax has accomplished a major goal - it encourages every citizen and every business to emit less carbon. Renewable energy doesn't pay the carbon tax, so it becomes much more competitive, and energy- and carbon-efficiency comes with even more benefits than it did in the past. You can even refund the carbon tax to anyone doing carbon-capture - suddenly, fossil-fuel power plants have a financial reason to do point-source capture, and anyone who engineers a cheap way of doing carbon capture from the air can make money doing so. And if emissions trend down, and the tax makes less revenue? It did its job - mission accomplished!
This sounds good, but since we're ostensibly taxing to account for externalities (not just to artificially reduce consumption), what about addressing the actual externalities? If the reasons for levying the tax aren't fake, these activities are actually causing pollution, climate change, etc. So then as a society, how are we paying for the costs of these? I would think that it's more palatable to earmark this extra tax revenue for programs that address some of these problems.
Do we actually have evidence that taxing emissions doesn’t work? As in, has it been tried at a scale and degree of attempted enforcement such that we can make that claim? I’m genuinely asking because I don’t know. A carbon tax has always seemed a very straightforward policy choice to me to disincentivize emissions.
I don't know of any evidence that it wouldn't work in practice. It just seems like a cat and mouse game. But it's much easier to know all of the possible origination points of oil and gas.
Thank you for the summary! I agree with the overall point (although based on the title, I'm surprised that is the direction the video went), and I will definitely need to watch it once I'm home.
The video's focused on the politics on why things like these may not get implemented due to profit margins, but this is still useful context nonetheless, so thank you for posting it!