pelicanweblogo2010

Mother Pelican
A Journal of Sustainable Human Development

Vol. 7, No. 7, July 2011
Luis T. Gutiérrez, Editor
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Status of the Transition to Clean Energy
(Work in Progress - Revised Draft)

SUMMARY & OUTLINE

1. Energy Dimension of the Sustainable Development Paradox
2. Energy Transition Scenarios for the 21st Century
3. Energy Flow Through the Global Economic System
4. Status on Non-Renewable Energy Resources
5. Status on Renewable Energy Resources
6. Current and Alternative Energy Taxes and Subsidies
7. Democratic Valuation of Land & Energy Resources
8. Transition from Fossil Fuels to Clean Energy
9. References and Data Sources
NOTE ON THE EVOLUTION FROM SDSIM 1.5 TO SDSIM 2.0

Due to the rapid succession of events related to sustainable development worldwide, the entire SDSIM simulation project is under review. It has been determined that the basic structure of the Version 1 series must be reworked to focus on the two sets of feedback loops that matter the most: human development (including gender equality) and the replacement of fossil fuels by clean energy. This will take time, and therefore there will be a hiatus between SDSIM 1.5 and the next series of simulations to start with SDSIM 2.0. This revision of the SDSIM model will be based on the series of editorials from November 2010 to May 2011:

During the SDSIM model reformulation, this supplement will serve to keep track of significant social, economic, and technical developments related to clean energy. The latest SDSIM 1.5 documentation is available here, and the web-based version of the simulation model is available in the FORIO server. Please share any ideas or suggestions for SDSIM 2.0 via email to the editor.

1. Energy Dimension of the Sustainable Development Paradox

Sustainable development is a paradoxical undertaking. Continued population growth and economic development (in the sense of human consumption) are bound to exacerbate the process of biosphere degradation and climate dislocations; but limiting population growth and economic development in order to mitigate - let alone reverse - environmental degradation are bound to exacerbate vexing issues of financial stability, poverty eradication, and social justice.

The following is a concise definition and visualization of the sustainable development paradox:

ecocosmdynamicsfigure16.jpg
Figure 1. Visualization of the Sustainable Development Paradox
by Willard R. Fey and Ann C.W. Lam, Ecocosm Dynamics Ltd
Reprinted with Permission

The loops on the left-hand side of the diagram are driven by the human propensity to consume and accumulate wealth. The loops on the right-hand side of the diagram are driven by the human propensity to reproduce. Both sets of loops require a sustainable flow of energy.

In the current global system, most of the energy is provided by burning fossil fuels. The resulting accumulation of GHGs and toxic wastes does have social and environmental consequences: both human health and the ecological integrity of the planet are adversely affected, and potentially catastrophic climate changes may come to pass. Two sets of strategies are possible to resolve this crisis: mitigation and adaptation.

Mitigation entails doing more with less, i.e., developing technologies that deliver more products and services per unit of natural resource consumed. Adaptation entails doing things differently, i.e., changing human behavior to comply with the principles of solidarity, subsidiarity, and sustainability. Mitigation buys time at the expense of the future. Eventually, human adaptation will be required. The following is an extension of Figure 1 with some plausible adaptation incentives:

EDLFIG16FVTUGI
Figure 2. Visualization of the Sustainable Development Paradox
(by Willard R. Fey and Ann C.W. Lam, Ecocosm Dynamics Ltd)
WITH ADDED NOTES ON THE FOLLOWING ADAPTATION INCENTIVES:
(LEFT)
(TOP
(RIGHT)
(BOTTOM)
Do not tax value added to natural resources by labor and capital
Tax the depletion of valuable natural resources at the points of extraction
Distribute surplus tax revenues via a guaranteed personal income
Tax the generation of toxic wastes and GHG at the points of emission

Incentives are key for adaptation. Basically, the incentives suggested in Figure 2 entail taxing resources at the point of extraction ("depleters pay principle") and taxing pollution at the point of emission ("polluters pay principle"). Negative taxes (subsidies) for developing renewable energy resources would provide additional incentive. Taxes are not to be levied on earned income. Taxes on resources and pollution are to be set at levels that would provide adequate revenue for public services with a surplus to be distributed via a guaranteed minimum income for all citizens.

Tax resources at the points of extraction
Tax pollution at the points of emission.


2. Energy Transition Scenarios for the 21st Century

No matter how intolerable the environmental deterioration and climate repercussions become, the economic system needs energy. The following chart (dated 2010, before the recent tsunami) shows the outlook for electric power generation in Japan:

JAPANENERGY2010
Figure 3. Japan Electric Power - Past and Projections,
Source: Agency for Natural Resources and Energy (ANRE), Japan, 2010

The increasing use of nuclear energy may have to be reconsidered after the recent tsunami, but the outlook for using renewable energy sources is not promising. Can the following alternative scenario come to pass?

WWF-Energy-Transition-2000-2050
Figure 4. The Energy Report: 100% Renewable Energy by 2050, Page 92
Source: World Wide Fund for Nature, January 2011. Copyright 2011 WWF.

A number of energy scenarios and simulation models have been developed in recent years, and there are significant discrepancies regarding the estimated timing and magnitude of supply, demand, and specific events such as "peak oil." For instance, Figure 4 shows peak supply of fossil fuels peaking before 2020 and followed by very aggressive shifting to renewable energy sources with almost 100% clean energy by 2050. However, the following simulation shows "peak oil" happening in 2047, and it is improbable that renewables will take off before the depletion of fossil fuels makes energy supplies scarce and costly.

USDOE-USGS-PeakOil
Figure 5. Simulation of Global Oil Supply Scenario 1900-2125
Note: R/P is the Reserve to Production Ratio, and indicator of how long existing oil reserves will last.
Source: US Energy Information Administration

Wide discrepancies in estimates of energy supply and demand (either in the aggregate or by resource) contribute to a sense of uncertainty about the energy transition. The energy uncertainties are further compounded by climate change uncertainties. The geographic distribution of energy shortages and climate changes are even more uncertain. But while the timing, magnitude, and geographic distribution of the energy crisis are very uncertain, it is almost certain that the crisis is coming. Therefore, it seems reasonable (per the precautionary principle) to so something about it, and sooner rather than later.

In this context of complexity and uncertainty, it is not "simply" a matter of using fossil fuels more efficiently. Managing the huge accumulation of GHG already in the atmosphere, and containing further accumulation in the decades ahead, is not possible by increasing energy efficiency alone. Mitigation by technological means is helpful to buy time for human adaptation. But mitigation without adaptation would merely prolong the agony for both humanity and the planet. Distractions such as climategate notwithstanding, the emergence of objective evidence about human-induced climate change is overwhelming.

Mitigation alone will not do. Adaptation will be required.


3. Energy Flow Through the Global Economic System

Energy flows through the economic system and is eventually dissipated as heat. The chart below is for the USA, but the supporting energy structure of the economic system is driven by the state of technology and economic practices which, with some minor variations, apply throughout the world. Energy from oil, natural gas, and coal constitute 78.5% of the flow. Electricity does not produce GHG emissions, but 33.7% of electricity generation is driven by coal, natural gas, and nuclear plants. At the moment, the contribution of solar, wind, geothermal, and other forms of renewable energy to the economy's energy mix is very small.

LLNL_US_Energy_Flow_2009-600x400
Figure 6. USA ENERGY FLOW 2009 - LLNL & Dept. of Energy - Livermore, California, USA
To view a larger image, click here.

Efficiency technologies can improve these numbers, but the intrinsic physics of the energy production and consumption system would remain basically unchanged unless human adaptation minimizes the use of fossil fuels to produce electricity and support transportation; and just improving efficiency may actually increase end user energy consumption (Jevons paradox). In other words, adaptation is needed in both the production and consumption sides of energy flows. It is hard to imagine that such radical adaptation can come to pass unless penalties (taxes) and incentives (subsidies) can be radically shifted in favor of clean energy.

"Business as usual" is no longer sustainable,
but political will is lacking to shift priorities.


4. Status on Non-Renewable Energy Resources

Global-Carbon-Emission-250
Figure 7. Global annual fossil fuel carbon dioxide emissions through year 2007, in million metric tons of carbon. Source: Carbon Dioxide Information Analysis Center, US DOE, 2007. For a larger image, click here.

ENERGY-NESL-UCAR-250
Figure 8. Visualization of the biosphere-hydrosphere-atmosphere interactions and the roles of energy, aerosols, carbon, water, organics and nitrogen. Source: Earth and Sun Systems Laboratory (ESSL), UCAR-UCAR, 2008. For a high resolution image, click here.
There is nothing wrong with fossil fuels, except that they are limited and non-renewable, and when burned release emissions that pollute the planet. Since the industrial revolution, the use of fossil fuels - and the consequent accumulation of GHGs - have grown exponentially, with consequences that probably include impending climate changes with severe social side effects. This is just the way it is, and any form of scapegoating is pointless.It would be more hellpful to seek solutions that are technically and politically feasible. What is politically unfeasible today must be made politically inevitable before it is too late.

It is not possible to stop using fossil fuels overnight. In fact, significant additional accumulation of GHGs in the atmosphere is inevitable due to irreversible investments in production. But it is possible to gradually overcome vested interests and foster a nonviolent transition from non-renewable to renewable (and clean) sources of energy tu support human activity in harmony with the human habitat. Who cares whether or not we are beyond the point of "peak oil"? What matters now is to ensure an adequate supply of clean energy for sustainable human development, now and in the future.

But the situation with foth fossil fuels is going from bad to worse. According to the most recent report by the IPCC (dated 14 June 2011), energy demand is increasing faster than supply, with productivity in fossil fuel exploration declining, prices going up, and GHG accumulation in the atmosphere much higher than had been forecasted, to the point that containing global warming to 2ºC by the end of the century may no longer be possible.

According to Nobuo Tanaka, IEA Executive Director, the age of cheap energy is over:

"The Executive Director of the International Energy Agency (IEA) has warned [13 March 2011] that curbing rising fossil fuel prices will require significant investments and further development and deployment of renewable energy technologies, energy efficiency, and advanced vehicles. He noted that the renewed debate on nuclear energy could have an impact, not only on climate change but also energy security. The only question now is, will the extra rent from dearer energy go to an ever smaller circle of producers, or will it be directed back into the domestic economies of the consumers, with the added benefits of increased environmental sustainability?"

Who cares about "peak oil" anymore?
We need clean energy, now and for the future!


5. Status on Renewable Energy Resources

The crucial tradeoff between non-renewable and renewable energy is one between the short-term profits of a few and the long-term sustainability of human civilization. It is clearly a situation in which short-term profits win as long as the common good of humanity is not brought into the picture. Thus what is needed is a radical reformation of business and government institutions to embrace, and put in practice, the principles of solidarity and sustainability. It cannot be overemphasized that technologies are ready or can be developed, and other barriers can be removed, if there is the political will to do it. Currently, this is the situation:

UNEP-SEFI-2010.jpg
Figure 9. Renewable power (excluding large hydro) generation & capacity as a percentage of global power
Source: Adapted from Global Trends in Sustainable Energy Investment 2010 Report
EIA, IEA, Bloomberg New Energy Finance, REN21, UNEP SEFI

It is noted that, while the percentage of new additions since 2004 are encouraging, the percent of total capacity is still very low. The European Union has been leading in the promotion of renewables, but even there the situation is not much better:

EuroCleanEnergy19932007
Figure 10. Share of renewable energy supporting final energy consumption
Source: The European Environment – State and Outlook 2010
European Environment Agency

We know that GHG emissions for 2010 were greater than ever, but the impact of the current economic slow down on renewables has yet to be ascertained. It is a lose-lose situation, with industry trying to reduce energy costs while lacking incentives for investment in clean energy technologies and facilities. Nevertheless, the journey must continue:

"Renewable energy sources will have to play a central role in moving the world onto a more secure, reliable and sustainable energy path. The potential is unquestionably large, but how quickly their contribution to meeting the world's energy needs grows hinges critically on the strength of government support to stimulate technological advances and make renewables cost competitive with other energy sources. Government support for renewables can, in principle, be justified by the long-term economic, energy security and environmental benefits they can bring, though it is essential that support mechanisms are cost-effective.

Renewables are generally more capital intensive than fossil fuels, so the investment needed to provide the extra renewables capacity is very large. Investment in renewables to produce electricity is estimated at $5.7 trillion (in year-2009 dollars) over the period 2010-2035. Investment needs are greatest in China, which has now emerged as a leader in wind power and photovoltaic production, as well as a major supplier of the equipment. The Middle East and North Africa region holds enormous potential for large-scale development of solar power, but there are many market, technical and political challenges that need to be overcome." World Energy Outlook, IEA, November 2010

It is technically feasible for renewable power to meet most energy needs by 2050:

"There are no technical or economic barriers to providing all of the world’s energy from renewable sources, according to a recent study. With a concerted effort, including reduced demand and international cooperation, the researchers suggest that the world could be entirely reliant on renewable energy for electric power, transportation and heating/cooling by 2050." Science for Environment Policy, European Commission, 14 April 2011

Furthermore, global human well-being possible at low levels of energy and carbon:

"High levels of energy consumption and carbon emissions are not necessary for high standards of living, according to a new study. In recent decades, the same human needs have been met with ever decreasing energy and carbon levels, achieving a steady decoupling of human development from energy use and carbon emissions." Science for Environment Policy, European Commission, 12 May 2011

Politically, the first requirement is democracy. As Reinhold Niebuhr succinctly pointed out: "Man's capacity for justice makes democracy possible; but man's inclination to injustice makes democracy necessary." But we are going more. In addition to democracy, we are going to need homo economicus to become homo ecologicus and embrace a mentality of solidarity, subsidiarity, and sustainability. This is the splendid challenge we face at this turning point in human history.

Humanity needs both energy and the human habitat.
Clean energy is the way to rebuild a clean planet.

6. Current and Alternative Energy Taxes and Subsidies

It is time to stop subsidizing fossil fuels. It is time to start taxing fossil fuels and subsidizing clean energy. The urgency of this fiscal reform is well stated in the IEA WEO 2010:

WEO2010COVER
World Energy Outlook
IEA 2010
"Fossil-fuel subsidies, which remain commonplace in many countries, result in an economically inefficient allocation of resources and market distortions, while often failing to meet their stated objectives. Subsidies that artificially lower energy prices encourage wasteful consumption, exacerbate energy-price volatility by blurring market signals, incentivize fuel adulteration and smuggling, and undermine the competitiveness of renewables and other low-emission energy technologies. For importing countries, subsidies often impose a significant fiscal burden on state budgets, while for producers they quicken the depletion of resources and can thereby reduce export earnings over the long term."

"Fossil-fuel consumption subsidies, comprising subsidies to fossil fuels used in final consumption and to fossil-fuel inputs to power generation, worldwide amounted to $312 billion in 2009. The annual level fluctuates widely with changes in international energy prices, domestic pricing policy, exchange rates and demand. In 2008, when international energy prices spiked, subsidies amounted to $558 billion. In 2009, oil products and natural gas were the most heavily subsidized fuels, attracting subsidies totaling $126 billion and $85 billion, respectively. Subsidies to electricity consumption were also significant, reaching $95 billion in 2009. At only $6 billion, coal subsidies were comparatively small. The vast majority of these subsidies are in non-OECD countries, which are projected to contribute 93% of incremental global energy demand to 2035 in the New Policies Scenario.

"Considerable momentum is building globally to cut fossil-fuel subsidies. In September 2009, G20 leaders committed to phase out and rationalize inefficient fossil-fuel subsidies, a move that was closely mirrored in November 2009 by APEC leaders. Many countries are now pursuing reforms, but steep economic, political and social hurdles will need to be overcome to realize lasting gains. Eradicating subsidies to fossil fuels would have a dramatic effect on global energy balances, enhancing energy security, reducing emissions of greenhouse gases and air pollution, and bringing economic benefits. WEO-2010 estimates that a universal phase-out of all fossil-fuel consumption subsidies by 2020 — ambitious though it may be as an objective — would cut global primary energy demand by 5%, compared with a baseline in which subsidies remain unchanged. This amounts to the current consumption of Japan, Korea and New Zealand combined. Oil demand would be cut by 4.7 mb/d by 2020, or around one-quarter of current US demand.

"Phasing out fossil-fuel consumption subsidies could represent an integral building block for tackling climate change. A complete phase-out would reduce carbon-dioxide emissions by 5.8%, or 2 Gigatonne (Gt), by 2020, equivalent to the current combined emissions of Germany, France, the United Kingdom and Italy. This amounts to over 40% of the abatement needed to be on track by 2020 to limit global warming to a 2°C rise.

"Although the stated intent of many energy-consumption subsidies is to make energy services more affordable and accessible for the poor, the reality is that only a small proportion of fossil-fuel subsidies go to poor households. In countries with low levels of modern-energy access, subsidies in the residential sector for kerosene, electricity and LPG — fuels that often support the basic needs of the poor — represented just 15% of fossil-fuel consumption subsidies in 2009. Nonetheless, subsidy reform programs need to be carefully designed as low-income households are likely to be disproportionately affected by their removal."

World Energy Outlook, International Energy Agency (IEA), November 2010.

The USA National Academy of Sciences is currently undertaking a comprehensive review of how current tax policies affect the GHG emissions of the economy. For a number of years, Earth Track has researched and published reports on the issue of environmentally harmful subsidies (see references listed below). Global warming must be limited to a 2°C rise if environmental sustainability is to be achieved. The IEA proposals for shifts in taxes and subsidies, which are politically unfeasible at the moment, must become politically inevitable during this decade.

Minimize subsidies to fossil fuels.
Maximize subsidies to clean energy.

7. Democratic Valuation of Land & Energy Resources

AlannaHartzok-BookCover
Book by
Alanna Hartzok
Earth Rights Institute
If the way to foster the transition to sustainability is to minimize subsidies on fossil fuels and maximize subsidies to clean energy, then the required tax shift would be to minimize taxes on improving energy resources and maximize taxes on using energy resources. It follows that taxes on "improving" (finding, extracting, refining) fossil fuels ought to be minimized and taxes on using fossil fuels ought to be maximized. In general, taxes on improving natural resources ought to be minimized - thus providing incentive for improvement - and taxes on using natural resources ought to be maximized - thus providing incentive to conserve them.

The terms "minimization" and "maximization" are used here in the sense of either minimizing depreciation (cost), or maximizing appreciation (value), under applicable constraints due to either intrinsic physical limits of the resource or reasonable limits deemed to be required for social justice. For instance, in the case of fossil fuels, taxes ought to be minimized on revenues earned by delivering energy in consumable form, and maximized for using the energy - with the upper limit for taxing the use of energy increasing as resource (coal, oil, natural gas) reserves are depleted and costly side effects (such as global warming) become socially intolerable. In the case of clean energy resources, again taxes on earnings derived from transforming the natural energy resource (wind, solar, biomass) into usable form ought to be minimized, and taxes maximized for using the energy; but since renewable energy resources are not depleted and produce little or now pollution, the upper limit on taxing usage should remain fixed or increase only slightly. The same "min-max" formulation follows for any other kind of natural resource, such as any mix of land, mineral deposits, and ecosystem services.

Sections 4 and 5 above provide evidence that the required technologies are already available or can be readily developed. But is this kind of fiscal policy economically feasible? Is it politically feasible? Would it lead to greater social justice? These are the issues that really matter. It would not seem reasonable to assume that free market economies can evolve toward the "triple bottom line" or any other practice balance profits, people, and planet priorities by the end of this century, let alone this decade. Likewise, it would not seem reasonable to assume that "the art of the possible" can self-reform to the same end anytime soon; even in the most democratic systems now in existence, politics are driven by the oxymoron of unlimited growth in a limited planet. However, some modifications of free market economics, and some modifications of democratic structures, have been proposed that should be reconsidered for the sake of human solidarity and environmental sustainability.

Economically, there is the "Land Value Tax" (LVT) theory proposed by Henry George in Progress and Poverty (1879) and Protection or Free trade (1886). The following is a brief synopsis of "Georgist" economics:

"Most taxes, noted George, stifle productive behavior. A tax on income reduces people’s incentive to earn income, a tax on wheat would reduce wheat production, and so on. But a tax on the unimproved value of land is different. The value of land comes from two components, its natural value and the value that is created by improving it (by building on it, for example). The value of a vacant lot in its natural state comes not from any sacrifice or opportunity cost borne by the owners of the land, but rather from demand for a fixed amount of land. Therefore, argued George, because the value of the unimproved land is unearned, neither the land's value nor a tax on the land’s value can affect productive behavior. If land were taxed more heavily, the quantity available would not decline, as with other goods; nor would demand decline because of land's productive uses. By taxing the whole of the value of unimproved land, the government would drive the price of land to zero." Charles L. Hooper, The Concise Encyclopedia of Economics, 2008.

George also argued that this kind of fiscal policy is the best way to synchronize economic progress with the mitigation of poverty. The subtitle of his 1879 book is "An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy." According to George, LVT is the remedy. It is a bit more complicated than this, as the interested reader can find by exploring some of the references listed at the end of this section. But the fundamental idea is that the economic system should be guided - via fiscal policy - to work primarily for people, within the physical and ecological constraints of the human habitat, by rewarding human efforts to improve - and protect - unearned natural resources. In a Georgist economy, the so-called "externalities" would cease to exist. This makes sense ecologically. Since the LVT theory is yet to be fully implemented, the jury is still out on the social justice implications.

Politically, resolving the social justice issue entails determining how to distribute the LVT revenues - over and above the cost of public services - to all citizens. In this regard, the Socioeconomic Democracy work of Robley George (no relation to Henry) should be considered in conjunction with any LVT-like reformation of fiscal policies. Basically, a "sociodemocratic society" would be one in which there is a guaranteed basic income (or "citizen's income") for every citizen:

"Socioeconomic Democracy is a model economic system, or more precisely, socioeconomic subsystem, in which there is some form of Universal Guaranteed Personal Income (UGI) as well as some form of Maximum Allowable Personal Wealth (MAW), with both the lower bound on personal material poverty and the upper bound on personal material wealth set and adjusted democratically by all society." Socioeconomic Democracy, Robley E. George, Center for the Study of Democratic Societies (CSDS), 2002.

"The Basic Income Guarantee (BIG) is a government ensured guarantee that no one's income will fall below the level necessary to meet their most basic needs for any reason. As Bertrand Russell put it in 1918, "A certain small income, sufficient for necessities, should be secured for all, whether they work or not, and that a larger income should be given to those who are willing to engage in some work which the community recognizes as useful. On this basis we may build further." Thus, with BIG no one is destitute but everyone has the positive incentive to work. BIG is an efficient, effective, and equitable solution to poverty that promotes individual freedom and leaves the beneficial aspects of a market economy in place." Basic Income Guarantee, U.S. Basic Income Guarantee (BIG) Network, web site as of 30 May 2011.

"A basic income is an income unconditionally granted to all on an individual basis, without means test or work requirement. It is a form of minimum income guarantee that differs from those that now exist in various European countries in three important ways:
  • It is being paid to individuals rather than households.
  • It is paid irrespective of any income from other sources.
  • It is paid without requiring the performance of any work or the willingness to accept a job if offered.
Liberty and equality, efficiency and community, common ownership of the Earth and equal sharing in the benefits of technical progress, the flexibility of the labor market and the dignity of the poor, the fight against inhumane working conditions, against the desertification of the countryside and against interregional inequalities, the viability of cooperatives and the promotion of adult education, autonomy from bosses, husbands and bureaucrats, have all been invoked in its favor. But it is the inability to tackle unemployment with conventional means that has led in the last decade or so to the idea being taken seriously throughout Europe by a growing number of scholars and organizations. Social policy and economic policy can no longer be conceived separately, and basic income is increasingly viewed as the only viable way of reconciling two of their respective central objectives: poverty relief and full employment." About Basic Income, Basic Income Earth Network (BIEN), web site as of 30 May 2011.

The theoretical connection and joint implementation of natural resource taxes/subsidies and supporting checks and balances is intuitively appealing but requires further investigation. The Georgist/LVT and CSDS/BIG/BIEN communities are cordially invited to provide feedback pursuant to a synthesis that could be proposed to the wider community of economists, political economists, engineering economists, scholars, and "global citizens" who are concerned about the future of humanity and the human habitat.

Minimize taxes on improving natural resources.
Maximize taxes on using natural resources.

8. Transition from Fossil Fuels to Clean Energy

Except for those who don't want to see, it is clear that a transition from fossil fuels to clean energy must happen, and sooner rather than later. The required technologies are mostly ready (see references listed in Section 9). The most critical factor to make it happen is human action:

capitalizing-on-climate-FOE
Friends of the Earth
Capitalizing on Climate: the World's Bank Role in Climate Change and International Climate Finance
June 2010

"As a carbon-intense lender and promoter of deforestation, the World Bank has far more experience causing climate change than preventing it."
CIDSEFTTCOVER2
International Cooperation for Development and Solidarity (CIDSE)
The Financial Transaction Tax for People and the Planet: Financing Climate Justice
June 2011

"Climate investments will need to be ambitious, innovative and transform societies and economies to stabilize rapidly increasing emissions and strengthen resilience to climate change effectively."
challenge_newbalance_CSEINDIA
Centre for Science and Environment-India
Challenge of the New Balance
May 2011

"Study of the six most energy/emissions-intensive sectors of India - Power, Steel, Aluminum, Cement, Fertilizer and Paper & Pulp - with the aim of determining India's low carbon growth options."
Figure 11. Human Initiatives to Adjust Financial Investment Priorities, Taxing Financial Transactions with Dubious Social Value, and Isolating the Best Opportunities for Mitigation of GHG Emissions

The following time frame was initially offered for consideration in the June 2011 issue of this journal, and has been further refined as follows:

Table 1. Hypothetical Phases of the Transition from Fossil Fuels to Clean Energy by 2050
TRANSITIONCONCEPT2050V4
Note: The following acronyms and terminology are used in this transition concept and subsequent discussion:
Financial Speculation Tax (FST = FTT)
Financial Transaction Tax (FTT = FST)
Global Citizens Movement (GCM)
Human Development (HD)
Human Development Index (HDI)
Human Development Report (HDR)
Integral Human Development (IHD)
Land Value Tax (LVT = RVT)
Maslow's Hierarchy of Human Needs (MASLOW)
Maximum Allowed Personal Wealth (MAPW)
Non-Governmental Organization (NGO)
Principle of Solidarity (SOLIDARITY)
Principle of Subsidiarity (SUBSIDIARITY)
Principle of Sustainability (SUSTAINABILITY)
Resource Value Tax (RVT = LVT)
Sustainable Development (SD)
Sustainable Human Development (SHD)
Universal Guaranteed Personal Income (UGPI)

The four phases in this transition concept will not necessarily be sequential. In fact, complex recursions (iterations) between them are to be expected. It is not possible to attempt a detailed analysis of the dynamic succession of events in advance, but it is possible to envision the goals for each phase and how to achieve them.

PHASE I - CONCIENTIZATION (2011-2020)

The first phase (2011-2020) is concientization to enable incentivation. The objective is to create widespread popular support for the required revisions of tax codes and energy subsidies. In other words, the first phase is about creating a collective mindset of social responsibility. The global citizens movement has received new impetus with the recently launched Widening Circles initiative. The new ISO 26000 guidelines on social responsibility can also be instrumental in fostering a mindset of solidarity and sustainability in business and government.

During the concientization phase, the following reinforcing loops must become stronger than resistance to change:

concientizationloops
Figure 12. Feedback Loops to Reinforce Concientization During Phase I
Links labeled positive have a reinforcing effect. Links labeled negative have a suppressing effect. Positive (reinforcing) loops have zero or an even number of negative links. All the loops in shown above are positive. But material comfort and many other forces (not shown) make overcoming resistance to change a formidable challenge. Other concientization initiatives are needed before environmental pressures overcome resistance to change in ways that may or may not be benign.

Resistance to change is very powerful. Citizen's concientization must grow to compensate for resistance to change and foster mitigation and adaptation strategies. Environmental pressures (e.g., climate change) may contribute to convince many citizens that "burn, burn, burn" fossil fuels, and "drill, drill, drill" for more, is dangerous for humanity. Whether or not environmental pressures alone can induce change before it is too late remains to be seen. It seems prudent to democratically and nonviolently expedite concientization by other initiatives. The following are some suggested concientization initiatives:

PHASE II - INCENTIVATION (2021-2030)

The second phase (2021-2030) is incentivation to pave the way for redistribution during the third phase (2031-2040). The second and third phases would probably unfold iteratively rather than sequentially. During the second phase, the objective is to reform tax codes and energy subsidies to expedite the transition to clean energy. Applicable reforms include shifting taxes from earned income to unearned resources (via "Land Value Taxes" or, more generally, "Resource Value Taxes") and taxing financial transactions of dubious social value (via "Financial Transaction Taxes"). These resource usage revenues and financial transaction revenues should be set high enough to yield a surplus after public services and clean energy subsidies. This surplus should then be distributed to all citizens via a guaranteed basic income (third phase).

During the incentivation phase, the following reinforcing loops must become stronger than resistance to change:

incentivationloops
Figure 13. Feedback Loops to Reinforce Incentivation (Tax Reform) During Phase II
Links labeled positive have a reinforcing effect. Links labeled negative have a suppressing effect. Positive (reinforcing) loops have zero or an even number of negative links. All the loops in shown above are positive. But material comfort and many other forces (not shown) make overcoming resistance to change a formidable challenge. Other incentivation initiatives are needed before environmental pressures overcome resistance to change in ways that may or may not be benign.

The following are some resources that may be helpful in planning for Phase II:

PHASE III - REDISTRIBUTION (2031-2040)

The third phase (2031-2040) is redistribution to enable democratization. The second and third phases would probably unfold iteratively rather than sequentially. During the third phase, the objective is to institutionalize democracy with distributive justice. Applicable reforms include adopting a Universally Guaranteed Personal Income (i.e., a basic minimum income rather than a minimum wage) and a Maximum Allowable Personal Wealth (i.e., an upper limit on financial wealth accumulation) that can be adjusted periodically. This democratic reform is required to reverse the unsustainably widening rich-poor gap but should not be confused with state socialism. Minimum income and maximum wealth thresholds are to be used as checks and balances against both left-wing and right-wing extremism. The RVT and FTT (started during the second phase) are to be democratically adjusted so as to ensure a surplus for distribution as basic income to all citizens.

During the redistribution phase, the following reinforcing loops must become stronger than resistance to change:

redistributionloops
Figure 14. Feedback Loops to Reinforce Redistribution (Basic Income) During Phase III
Links labeled positive have a reinforcing effect. Links labeled negative have a suppressing effect. Positive (reinforcing) loops have zero or an even number of negative links. All the loops in shown above are positive. But material comfort and many other forces (not shown) make overcoming resistance to change a formidable challenge. Other redistribution initiatives are needed before environmental pressures overcome resistance to change in ways that may or may not be benign.

The following are some resources that may be helpful in planning for Phase III:

  • Center for the Study of Democratic Societies
  • Basic Income Earth Network (BIEN)
  • The U.S. Basic Income Guarantee (BIG) Network
  • Data on the need for distributive justice: "Above and beyond any particular ideology or world view is the raw reality of the horrendous maldistribution of wealth on planet earth:
    • The richest fifth receives 82% of total income, while the poorest fifth received 1.4% of world income.
    • The incomes of 20% of the world's people are approximately 140 times those of the poorest 20%.
    • The world now has more than 350 billionaires whose combined net worth equals the annual income of the poorest 45% of the world's population.
    • The richest 1% of Americans possesses greater wealth than the bottom 90%....
    • A U.N. study of 83 countries showed that less than 5% of rural landowners control 75% of the land.
    • According to a government report, 2% of landowners hold 60% of the arable land in Brazil while close to 70% of rural households have little or none.
    • Just 342 farm properties is Brazil cover 183,397 square miles - an area larger than California....
    • In Florida, 1% of the population owns 77% of the private land. Other states where the top 1% owns over 2/3 of the land are Maine, Arizona, California, Nevada, New Mexico, and Oregon....
    • 86% of South Africa is still owned by the white minority population.
    • 60% of El Salvador is owned by 2% of the population.
    • 80% of Pakistan is owned by 3% of the population.
    • 74& of Great Britain is owned by 2% of the population.
    • 84& of Scotland is owned by 7% of the population
    "Many of our modern nation states were founded on territorial conquest and domination, on the old Roman stance of "dominum" - the legalization of land acquired by conquest and plunder. And we continue to be ruled by might rather than by what is right. "Neocolonialism" and the globalization of the economy have become code phrases for the Challenges arising from earth's control by so few." Hartzok, Alanna. The Earth Belongs to Everyone, Earth Rights Institute, Institute for Economic Democracy Press, 2008, pp. 190-192.
  • For current data on the need for distributive justice, see the following:
  • Alternative measures focused on integral human development:
  • NOTE: A data base of UGPI and MAPW test cases & lessons learned would be instrumental for Phase III.

PHASE IV - DEMOCRATIZATION (2041-2050)

The fourth phase (2041-2050) is democratization with widely institutionalized solidarity, sustainability, and subsidiarity. The principle of subsidiarity has already been included in the constitution of the European Union. It prescribes decisions to be made at the lowest possible level consistent with governance capabilities and the common good of the global commonwealth. In other words, a world government would only act (i.e. make laws) if, and only if, any possible action by individual countries is insufficient. Keeping the peace between nations, and formulating laws pursuant to the ecological integrity of the planet, are the two areas where some form of democratic global governance is required. Global problems require global solutions. National problems require national solutions. Local problems require local solutions. There may be regional problems that require regional solutions.

During the worldwide democratization phase, some reinforcing loops must become stronger than resistance to change at the local, national, and international levels. However, the hypothetical diagrams shown in Figures 12 to 14 already push the limits of inductive thinking.

wwdemocratizationloops
Figure 15. Feedback Loops to Reinforce Worldwide Democratization During Phase IV
"TBD" when visibility permits

It is possible to identify some resources that should be helpful in planning for Phase IV:

Our finite planet is common property.
Tax the use of common property!

9. References and Data Sources

  • Basic Income Earth Network (BIEN). Basic Income Earth Network (BIEN), Note: The Basic Income Earth Network was founded in 1986 as the Basic Income European Network. It expanded its scope from Europe to the Earth in 2004. Web site as of 30 May 2011.
  • Basic Income Guarantee (BIG) Network - USA. The U.S. Basic Income Guarantee (BIG) Network, Note: Started 1999. Web Site as of 30 May 2011.
  • Benson, Sally M. and Franklin M. Orr. Sustainability and Energy Conversions, Global Climate & Energy Project, Stanford University, 2008.
  • Bossong, Ken. Sustainable Energy Network - Weekly Newsletter, Sustainable Energy Network, 2009-2011.
  • British Petroleum (BP). Energy Outlook 2030, 2011.
  • British Petroleum (BP). Statistical Review of World Energy 2011, 2011.
  • Chefurka, Paul. Connecting the Dots: Food, Fossil Fuel and Population, 31 January 2011.
  • Chefurka, Paul. Peak Oil is Here. Is Peak Population Almost Here?, 22 February 2011.
  • Climate Action. Roadmap for moving to a low-carbon economy in 2050, European Commission, March 2011.
  • ClimateTechWiki. Online Platform for Technologies for Mitigation and Adaptation, Web Site as of 28 May 2011.
  • Common Ground-USA. Common Ground USA, Since 1997. Web site as of 30 May 2011.
  • Council of Georgist Organizations. An Introduction to Georgist Philosophy & Activity, November 2010. Web Site as of 29 May 2011.
  • de Wispelaere, Jurgen and Lindsay Stirton. The Many Faces of Universal Basic Income, The Political Quarterly, 2004.
  • Delucchi, Mark A. and Mark Z. Jacobson, Providing all global energy with wind, water, and solar power, Part II: Reliability, system and transmission costs, and policies, Energy Policy, December 2010.
  • European Environment Agency. The European Environment – State and Outlook 2010, SOER 2010.
  • Fey, Willard F. and Ann C.W. Lam. The Ecocosm Paradox, Ecocosm Dynamics Ltd, 1999.
  • Fey, Willard F. and Ann C.W. Lam. The Bridge to Humanity's Future, Ecocosm Dynamics Ltd, 2000.
  • Gaffney, Mason. George's Economics of Abundance, GroundSwell, March-April 2009.
  • Gaffney, Mason. Sleeping With the Enemy: Economists Who Side With Polluters, GroundSwell, January/February 2011.
  • George, Henry. Protection or Free trade, 1886 (available online at the Library of Economics and Liberty).
  • George, Henry. Progress and Poverty, 1879 (available online at the Library of Economics and Liberty).
  • George, Robley E. Introduction to a Democratic Socioeconomic Platform, Center for the Study of Democratic Societies (CSDS), 2009.
  • George, Robley E. Different Possibilities for the Magnitudes of the Two Democratically Set Bounds of Universally Guaranteed Personal Income (UGI) and Maximum Allowable Personal Wealth (MAW) in the practice of Socioeconomic Democracy, Center for the Study of Democratic Societies (CSDS), 2008.
  • George, Robley E. Ramifications of Socioeconomic Democracy, Center for the Study of Democratic Societies (CSDS), 2009.
  • George, Robley E. Socioeconomic Democracy, Center for the Study of Democratic Societies (CSDS), 2002.
  • Grantham, Jeremy. Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever, GMO, April 2011.
  • Hansen, James, et. al. The Case for Young People and Nature: A Path to a Healthy, Natural, Prosperous Future, Columbia University, May 2011.
  • Hansen, James, Makiko Sato, Pushker Kharecha, and Karina von Schuckmann. Earth's Energy Imbalance and Implications, NASA Goddard Institute, Columbia University Earth Institute, and Centre National de la Recherche Scientifique, LOCEAN Paris, May 2011
  • Hansen, James, and Makiko Sato, Paleoclimate Implications for Human-Made Climate Change, NASA Goddard Institute for Space Studies and Columbia University Earth Institute, New York, May 2011.
  • Hartzok, Alanna. The Earth Belongs to Everyone, Earth Rights Institute - Institute for Economic Democracy Press, 2008. See pp. 190-192 for data on global maldistribution of wealth.
  • Intergovernmental Panel on Climate Change (IPCC). Special Report on Renewable Energy (SRREN) - Full Report, May 2011.
  • Intergovernmental Panel on Climate Change (IPCC). Special Report on Renewable Energy (SRREN) - Summary for Policy Makers, May 2011.
  • Intergovernmental Panel on Climate Change (IPCC). IPCC Fourth Assessment Report: Climate Change 2007 - Synthesis Report, 2007. Note: The Fifth Assessment Report is in preparation, scheduled for 2012.
  • International Energy Agency (IEA). Renewables in Global Energy Supply, January 2007.
  • International Energy Agency (IEA). Prospect of limiting the global increase in temperature to 2ºC is getting bleaker, 30 May 2011.
  • International Energy Agency (IEA). CO2 Emissions from Fuel Combustion, November 2010.
  • International Energy Agency (IEA). World Energy Outlook 2010 - Summary, November 2010.
  • International Energy Agency (IEA). Renewable Energy: From Analysis to Action, March 2011
  • International Energy Agency (IEA). World Energy Outlook 2010 - Full Report, November 2010.
  • International Energy Agency (IEA). World Energy Outlook 2010 - Part B: Outlook for Renewable Energy, November 2010.
  • International Energy Agency (IEA). World Energy Outlook 2010 - Part C: Focus on Energy Subsidies, November 2010.
  • International Energy Agency (IEA). World Energy Outlook 2010 - Factsheets, November 2010.
  • International Energy Agency (IEA). World Energy Outlook 2010 - Key Graphs, November 2010.
  • Jacobson, Mark Z. and Mark A. Delucchi, Providing all global energy with wind, water, and solar power, Part I: Technologies, energy resources, quantities and areas of infrastructure, and materials, Energy Policy, December 2010.
  • Katofsky, Ryan, Matthew Stanberry and Lisa Frantzis, Sustainable Energy Scenarios and the Role of Renewable Energy, Navigant Consulting, March 201
  • Koplow, Doug and John Dernbach, Federal Fossil Fuel Subsidies and Greenhouse Gas Emissions: A Case Study of Increasing Transparency for Fiscal Policy, Annual Review of Energy and the Environment, 26:361-389, 2001.
  • Koplow, Doug. EIA Energy Subsidy Estimates: A Review of Assumptions and Omissions, Earth Track, March 2010.
  • Koplow, Doug. Scoping Suggestions for NAS Review of Effects of the Tax Code on Greenhouse Gas Emissions, Earth Track, April 2011.
  • Koplow, Doug. Federal Energy Subsidies: Energy, Environmental and Fiscal Impacts, Alliance to Save Energy, 1993.
  • Morey, Jessica, Lewis Milford, Lindsay Madeira, and Valerie Stori. Moving Climate Innovation into the 21st Century: Emerging Lessons from other Sectors and Options for a New Climate Innovation Initiative, UK Department of International Development and Department of Energy and Climate Change - May 2011.
  • Orr, Lynn. Technologies to Mitigate Climate Change, Global Climate & Energy Project, Stanford University, 2007.
  • Philibert, Cedric. Interactions of Policies for Renewable Energy and Climate, International Energy Agency, March 2011.
  • Pontifical Academy of Sciences. Fate of Mountain Glaciers in the Anthropocene, Vatican, May 2011.
  • Reed, David and Pablo Gutman, Energy+: Opportunities, Challenges and Options, International Architecture for Climate Finance, March 2011.
  • Renewable Energy & Energy Efficiency Partnership (REEEP). Renewable Energy & Energy Efficiency Partnership , Web Site as of 28 May 2011.
  • Roberts, David. How to get to a fully renewable power system, Grist, 26 May 2011.
  • Sher, David. Fossil Fuel Subsidies: A Closer Look at Tax Breaks, Special Accounting, and Societal Costs, Environmental and Energy Study Institute, 23 June 2011.
  • Subsidy Scope. Pew's Tax Expenditure Database, Pew Charitable Trusts, 2001-2011.
  • Swim, Janet, et. al., Psychology's contributions to understanding and addressing global climate change, American Psychologist, May-June 2011.
  • The Henry George Institute. Understanding Economics, 1995-2011. Web Site as of 29 May 2011.
  • The Henry George School of Social Science (HGSSS). The Henry George School of Social Science, Note: Founded 1932. Web site as of 30 May 2011.
  • Tipper, Richard. Greenhouse gas management and energy efficiency – six reasons why you shouldn’t get these confused! , Ecometrica, April 2011.
  • UN Development Program (UNDP). Technology Needs Assessment for Climate Change Handbook, December 2010.
  • UN Environment Program (UNEP). Green Economy Report, February 2011.
  • UN Environment Program (UNEP). Decoupling natural resource use and environmental impacts from economic growth, May 2011.
  • Union of Concerned Scientists. Climate Change and Your Health: Rising Temperatures, Worsening Ozone Pollution, June 2011.
  • Union of Concerned Scientists. Climate Change and Your Health: Rising Temperatures, Worsening Ozone Pollution - Technical Appendix, June 2011.
  • US Energy Information Administration (EIA). Annual Energy Outlook 2011, April 2011.
  • US National Academy of Sciences (NAS), America's Climate Choices, May 2011.
  • Weyant, John P. Energy Technology Assessments: Engineering, Economics, and Institutional Perspectives, Department of Management Science & Engineering, Stanford University, 2006.
  • World Wide Fund for Nature (WWFN). Energy Report & Scenarios 2000-2050, February 2011.
  • For democracy with solidarity and sustainability,
    let us tax the use of common resources
    and let us have a universal basic income!


    |Back to the SUMMARY|

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