Wednesday, August 30, 2006

A decent proposal

I ran across an interesting proposal for restructuring our energy use over at sustainablog.

Called FairPriceEnergy, the concept is to use a pair of rebates and fees based on currently externalized costs of our energy. The fees and rebates are based on each sources "external" carbon cost and security cost. An external cost is like a tax that society pays, but is not reflected in any one member's economic considerations. The result is frequently a tragedy of the commons, where all of society ends up paying a huge price because no individual member has a specific incentive to reduce the external cost.

A carbon tax has long been advocated as one solution in (environmental) energy circles, but deep down nobody really wants more taxes.

What is different about FairPriceEnergy's proposal is that all the fees collected are refunded directly to the citizens. This is why I suggested that they be called deposits rather than fees.

So what is the point of charging a deposit, if the individuals that pay the deposit are the ones that then get it back? The point is that it creates an out of pocket cost for using carbon-heavy and unsecure energy sources. Once people (and businesses) see this energy cost, they will attempt to reduce it, by using energy more efficiently or switching to energy sources that are comparatively more secure and carbon efficient. Those that reduce their usage to less than the average come out ahead.

The obvious loser in this scheme (as it is proposed) is business, because only taxpayers/consumers get rebates. But then again, it is ultimately the taxpayer/consumer that pays for everything business does, and collectively businesses have proven very adept at looking out for their own profits.

Chaz Teplin is the NREL scientist that has put forward the idea and set up the fairpriceenergy website to promote it.


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