Hard News: Done like a dinner
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Another question is why, back in 1971, the government built and owned the dam and the aluminium company the smelter? Things might have worked better if they'd had the same ownership (either both government or both aluminum company).
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Gareth Ward, in reply to
Without having looked too closely at the economics, I agree with you - I wouldn't subsidise the smelter to any huge degree. It should be left to fail if it can't land a commercial - not political - deal with Meridian. But to be honest, that kinda feels like where we're at - a basic subsidy was offered, rejected and the Govt seems to have left it at that for now...
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Rich of Observationz, in reply to
I don't think the government has any special immunity: both the Companies Act and the Securities Act bind the Crown. I don't believe the formal prospectus has been issued, but when it does there will probably be some sort of clause indicating that the government may have undisclosed knowledge or take actions which may be to the detriment of a shareholder.
(Legislation could in any case never bind future from taking action to the detriment of purchasers).
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Ross Mason, in reply to
Another question is why, back in 1971, the government built and owned the dam and the aluminium company the smelter?
Check out these links i posted:
http://publicaddress.net/system/cafe/hard-news-done-like-a-dinner/?i=50#replies -
Brent Jackson, in reply to
Russell wrote:
But we had to let go of solar water heating – it was just such a big investment that would take a long while to pay off.
Ben Wilson asked :
How much, how long? How does it compare to money in a term deposit? Or even the stockmarket?
Before we put in our Solar Hot Water I did the sums and found that it would never pay for itself. We would be better off financially, by investing the money that the Solar would cost, and using the income from that to pay for electricity (and have a bit left over). But we wanted Solar Power and knew that our existing cylinder was quite old, and it was in the way of our kitchen re-development so we went ahead and got solar anyway.
It has been great. We turn it off (ie turn off electicity to the element in the cylinder) in early November and turn it back on in late April, so we 6 months of completely free hot water. Our power bills during the Summer are around the $70 mark. It makes us feel good - seemingly saving money (even if we aren't actually) and helping the planet and the country. Sometimes there are considerations other than purely economic ones.
I'm sure Solar will continue to get cheaper, so hopefully more people can take it up.
We're also keen to get an electric car, but the price point for those seem way too far above break even point at the moment. We've never been early adopters, so we'll bide our time on that one for now.
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The mystery is that, inspite of it all, National and John Key look likely to get a third term.
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Farmer Green, in reply to
Bjorn Lomborg provides a perspective on where we are currently at with renewables:
GLOBAL warming is a problem for the future but a benefit now. Lots of people like to point out that global warming means more deaths from heatwaves, but they forget that fewer die from cold. In the UK and almost everywhere, more people die from cold than heat.
Likewise, higher temperatures mean higher costs for air-conditioning but lower costs for heating. Temperature rises will push some crops beyond their optimal range and reduce yields, but CO2 in the atmosphere acts as a fertiliser and has increased global yields significantly.
When economists estimate the net damage from global warming as a percentage of GDP, they find it will indeed have an overall negative impact in the long run — but the impact of moderate warming (1-2C) will be beneficial.
It is only towards the end of the century, when temperatures have risen much more, that global warming willturn negative. One peer-reviewed model estimates that it will turn into a net cost only by 2070.
We need to stop claiming that it will be the end of the world. Just as it is silly to deny man-made global warming, it is indefensible to describe it as the biggest calamity of the 21st century.
Here is how to quantify this. The most well-known economic model of global warming is the DICE model by Professor William Nordhaus of Yale University. It calculates the total costs (from heatwaves, hurricanes, crop failure and so on) as well as the total benefits (from cold waves and CO2 fertilisation). If you compare these over the next 200 years, the total cost of global warming is estimated at about £22 trillion.
While this is not a trivial number, you have to put it in context. Over the next 200 years, global GDP will run to about £1,500 trillion, so global warming constitutes a loss of about 1.5% of this figure. This is not the end of the world but a problem that needs to be solved.
Next, consider CO2 levels. With huge, green subsidies showing up on our electricity bills, you would be excused for believing that we have managed to cut CO2 substantially. You would be wrong.
Global CO2 has risen relentlessly since 1950. In 1997 the Kyoto protocol put legally binding limits on rich-country emissions. But Kyoto and all our fine policies have had no real impact, as you can see in figure 1 of the graphic.
Kyoto is the little dot in 2010 that the rich world had promised to strive for. We shot right past it. The only indication of a CO2 reduction was in 2009 when the global recession put us on track to fulfil Kyoto. Had the recession continued to cause more job losses and GDP reductions, we might have been able to achieve Kyoto. Not surprisingly, such a policy has no appeal for politicians — or voters — in the real world.
Kyoto set a target of 36.6% for the rise in global emissions since 1990. In fact they have gone up by 45.4%. With no Kyoto at all, they would have increased by only about half a percentage point to 45.9%. Put simply, the past two decades of climate discussions have had virtually no impact on global emissions.
But you look around and see lots of solar panels and wind turbines. In the UK, more than 6,000 massive onshore and offshore turbines will be raised over the next seven years, despite increasing opposition. Surely this will quickly change the picture? Well, no.
The International Energy Agency (IEA) in its latest estimate shows that in 2010 the world got just 0.7% of its energy from wind and a minuscule 0.1% from solar. The vast majority of renewables are hydro and especially biomass (largely poor people burning twigs and dung).
Looking forward to 2035, even with an optimistic (and somewhat unrealistic) green scenario, the IEA does not see much change. We will get 2.4% from wind and 1% from solar. The world will still run mainly on fossil fuels. In 2010, 81% of all energy came from fossil fuels; by 2035, 79% will still come from the same source.
Many people ask why we do not go more green. The simple answer is that it would cost too much. If you look at figure 3, you can see a strong one-to-one relationship between economic performance and energy emissions. Renewables cannot deliver a steady supply of power. Plainly put, nations burn fossil fuels not to annoy the environmentalists but because they support economic growth.
Fundamentally, no matter what carbon cuts we make in the next couple of decades, they will make no measurable difference until the second half of the century, because the climate system is such a super-tanker.
This means that a smart climate policy is not about doing just anything now but doing something significant that will be sustainable and cut a large amount of CO2 in the long run. This is the difference between doing something that feels good and focusing on something that will do good.
Similarly, the emissions that matter in the 21st century are from the developing world. Yes, we in the rich world emitted most of the CO2 in the 20th century, but we are slowly sliding towards insignificance. Today we emit just 43% and by the end of the century, we will be down to 23%, as you can see in figure 4.
Fundamentally, UK climate policies (and even all the rich countries’ climate policies) will not matter much unless China, India and the rest of the world are in on them. And they really are not right now, because our feelgood policies are all high cost for little benefit, which poor countries cannot afford.
There is another point to make here. When the EU congratulates itself for cutting carbon emissions significantly, this is mostly hypocrisy. We have simply exported most of our emissions to China.
Take Britain’s carbon emissions from 1990–2010. You like to brag that your emissions are down some 14%, as you can see in figure 5. Yet this counts only the production of CO2 inside the UK. Ever more of your responsibility for CO2 production comes through imports — typically from China.
If we count that CO2 as well (and deduct the CO2 emissions that you export), we see a different picture. Britain has increased its CO2 emissions over the past 20 years by 18%. You are not the good guys, it just feels that way.
Denmark, my own country, has the same pattern, so we are just as hypocritical. And this is true for most nations in the developed world.
EU emissions have declined (as the EU constantly intones) but the entire reduction from 1990–2008 is exactly matched by the increase in the CO2 from imports from China.
SO, REALLY, what should we do about global warming? For a start, we must accept that the current, old-fashioned, approach has failed.
This approach, attempted since the 1992 Earth Summit in Rio, is to agree on promises of large carbon cuts 10–15 years into the future. Only one real agreement, the Kyoto Protocol, has emerged from 20 years of talk and — as I have shown — it really did not do anything. The 2009 Copenhagen follow-up turned into a spectacular failure.
The Kyoto approach is not working for three reasons. First, cutting CO2 is expensive. We burn fossil fuels because they power almost everything we like about modern civilisation. Cutting emissions without affordable, effective replacements for fossil fuel means expensive power and lower growth. The only current comprehensive global-warming policy, the EU 20−20−20 — which aims to cut greenhouse gas emissions to 20% below 1990 levels by 2020, and ensure 20% renewable energy — will cost about £165bn a year.
Second, even if successful, this approach would not solve the problem. If everyone implemented Kyoto, temperatures would drop by the end of the century by a minuscule 0.004C. The EU policy will, across the century, cost about £13 trillion, yet will reduce temperatures by just 0.05C.
Third, green energy is not ready. It is generally much more expensive than traditional sources, its deployment does not create new jobs — its higher, subsidised costs destroy jobs in the rest of the economy — and it does not reduce oil dependence, because it typically produces only electricity, which is rarely generated with oil.
Fundamentally, with the current policies we pay way too much for way too little.
It is also easy to show how even individual climate policies are simply silly. Look at the damage from an extra ton of CO2.
The latest peer-reviewed overview of the 311 published estimates show that the entire cost of the most likely future damage is about £3.50 a ton. This means that cutting CO2 for less than £3.50 a ton is probably a good idea, whereas cutting for more is probably a bad deal.
Unfortunately, almost all current policies for fighting global warming are bad deals by this £3.50 yardstick. The UK and most other large nations have managed to enact climate policies for electricity that cost a lot more than the good they do.
China has one of the most efficient climate policies on electricity. Yet it still pays about £26 to cut a ton of CO2, which is nearly eight times more than the global, long-term benefits. The UK pays more than £1bn to cut about 10% of its electricity emissions, essentially paying about £81 a ton of CO2, or more than 20 times too much.
On biofuels, the excess is even greater and emission reductions even smaller. The UK pays 57 times too much at £193 per ton of CO2, cutting just 0.4% of its total emissions at a cost of £391m. America pays a staggering 133 times too much, at £456 per ton of CO2, costing £12bn a year and cutting just 0.5% of its total emissions.
The cost is not just economic: public resentment at high energy costs is rising. In Germany electricity prices have gone up 61% in real terms since 2000 (shown in figure 6). A quarter of the price is now direct subsidies to renewables. These prices means that upwards of 800,000 German households can no longer pay their electricity bills.
In the UK, there are now more than 5m fuel-poor people, and Ofgem’s chief executive, Alistair Buchanan, publicly worries that environmental targets could lead to blackouts in less than eight months’ time. This makes the current policies unsustainable in the long run.
You will often hear that we just need to put a price on carbon, either through a carbon tax or an equivalent cap-and-trade. This argument typically assumes that a tax would be a significant step towards solving global warming. It would not.
If the tax were high enough to curtail emissions significantly, it would also curb economic growth significantly — political suicide as well as poor economics.
If the tax were equal to the £3.50-a-ton real cost of CO2 damage (or less than a penny on a litre of petrol) it would make little difference. If enacted across the world, it would cut global emissions by less than 10%. If just one country or region adopted the tax, the effect would be unnoticeable.
Moreover, in most rich countries taxes on fossil fuels such as petrol are already much higher than a penny, so you could argue that we already have the correct carbon tax.
Anyway, the proof is in the eating: carbon taxes have not worked where they have been imposed. They have led to political breakdown (in Australia), climate policy breakdown (in America) or to expensive policies with little benefit (in the UK and the rest of the EU).
So the bottom line is that the old-fashioned policies have failed. Current green technologies just do not make it.
THE only way to move towards a long-term reduction in emissions is if green energy becomes much cheaper. If it cost less than fossil fuels, everyone would switch — including the Chinese.
This, of course, requires breakthroughs in green technologies and much more innovation.
At the Copenhagen Consensus on Climate, a panel of economists, including three Nobel laureates, found that the best long-term strategy was to increase dramatically investment in green R&D — research and development.
They suggested doing so 10-fold to $100bn (£66bn) a year globally. This would equal 0.2% of global GDP, with a commitment of about $5bn from the UK. Compare this with the cost of the EU climate policies: just for the UK the bill is $34bn annually.
Of course, R&D holds no guarantees. We might spend billions and still come up empty-handed in 40 years’ time. But it has a much better chance of success than continuing the futile efforts of the past 20 years.
The analogy here is the computer in the 1950s. We did not get better computers by mass-producing subsidised vacuum tubes. We did not provide grants so that all westerners could have a computer in their homes in 1960. Nor did we tax alternatives such as typewriters. The breakthroughs were achieved by a dramatic increase in R&D, leading to many innovations, which enabled companies such as IBM and Apple to produce computers that consumers eventually wanted to buy.
This is what America has done with fracking. It spent about $10bn in subsidies over the past three decades on innovation, opening up huge new resources of previously inaccessible shale gas. Despite some legitimate concerns about safety, it is hard to overstate the overwhelming benefits: a dramatic fall in natural gas prices and a shift in US electricity generation from 50% coal and 20% gas to 37% coal and 30% gas.
This has reduced US annual CO2 emissions by 400m-500m tons — about twice what the rest of the world has achieved over the past 20 years.
The fracking bonanza also creates long-term social and economic benefits through lower energy costs: US consumers benefit by about £66bn in lower gas prices. By contrast, estimates show that a 330m-ton CO2 reduction in the EU using carbon taxes would cost £165bn.
It illustrates why we must confess to the failures of the past 20 years. As long as renewables are not ready, we are spending vast sums of money on tiny cuts in CO2. Instead, we should focus on investing dramatically more in R&D into green energy over the next 20–40 years.
The solution is not to make fossil fuels so expensive that nobody wants them — because that will never work — but to make green energy so cheap that eventually everybody wants it.
Dr Bjorn Lomborg is director of the Copenhagen Consensus Centre. He is the author of The Skeptical Environmentalist and Cool It
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Farmer Green, in reply to
. As long as renewables are not ready, we are spending vast sums of money on tiny cuts in CO2. Instead, we should focus on investing dramatically more in R&D into green energy over the next 20–40 years.
The solution is not to make fossil fuels so expensive that nobody wants them — because that will never work — but to make green energy so cheap that eventually everybody wants it.
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Ian Dalziel, in reply to
Breakfast in the ruins…
inspite of it all, National and John Key
look likely to get a third term.Noooooo, say it ain’t so…
<fug sets in>Go wash your mouth out!
<angrily, he lashes out>Who can stop them, their Everyman appeal works somehow…
<resignation washes back in>Oh! Phew! I see what you were saying…
1: feckless
2: hapless
and now the third term
3; brainless
<straws clutched>…now I need a strong drink,
maybe that new Kool-Aid flavour,
…Lethe<and so it goes…>
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Paul Campbell, in reply to
Before we put in our Solar Hot Water I did the sums and found that it would never pay for itself. We would be better off financially, by investing the money that the Solar would cost, and using the income from that to pay for electricity (and have a bit left over)..
And I largely did the same math when I bought a Prius 8 years ago - but we did anyway because we saw it as a technology that needed to be bought into because it was bound to get cheaper and more common over time - if no body bought them we'd be stuck with the traditional technology
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Farmer Green, in reply to
When a registered business does the same sums , it can claim the interest and the depreciation as expenses, reducing taxable profit and thus taxation, while enjoying the reduced cash outgoing on energy expenses. It can make economic sense.
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BenWilson, in reply to
We’re also keen to get an electric car, but the price point for those seem way too far above break even point at the moment. We’ve never been early adopters, so we’ll bide our time on that one for now.
Yup, early adopters are righteous, but it's not usually a financially sound decision, in much the same way that owning a new car, period, is not financially sound (it is perfectly sound in other ways, not least, because you might just like it). The Cost vs Age curve is U shaped, and the best place to buy to keep the cost of car ownership down is at the bottom of the U, which is usually between the 10-20 year old mark. I was hoping this might also apply to electric cars, but I'm not so sure - the most expensive part by far is the batteries, and that's the very part that wears out the fastest. So this curve may be a much shallower U.
And I largely did the same math when I bought a Prius 8 years ago – but we did anyway because we saw it as a technology that needed to be bought into because it was bound to get cheaper and more common over time – if no body bought them we’d be stuck with the traditional technology
I've kept my eye on second hand Priuses. They're still a reasonably expensive car second-hand, considering the class of vehicles they are effectively in, in terms of the priorities of customers - a Toyota Corolla is probably a better buy at the same age, it will last 10 years mechanically, has similar petrol efficiency to the Prius, and will most likely be cheaper. It's also a devil that is known. The Prius is a very complicated vehicle, there's so many ways it can go bad.
Also, I insist that my first electric car is a plug-in. That's just basic to the whole idea of fuel efficiency in electric cars. Converting a Prius for that is an added cost that should never, ever have been there. Why, oh why did Toyota not make this a standard feature?
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Farmer Green, in reply to
. Why, oh why did Toyota not make this a standard feature?
Possibly because in the majority of the target market locations 70% of the electricity was NOT coming from renewables. Godzone is exceptional.
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Is there a way to do spoiler tags on system?
Would be nice to collapse copy-paste chunks.
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We own a boring (reliable) Toyota Corolla 1600 hatchback. Thinking of getting a Prius, we hired one for a week last time we went to Christchurch. I kept track of the fuel use and distance travelled and decided that it was actually comparable to the Corolla for fuel efficiency per km travelled. And the Corolla (2nd hand, one careful owner) was a lot cheaper than we could get a Prius. I think one difference is that the Prius is a bigger heavier vehicle, so we weren't really comparing apples with apples. Unfortunately for the Prius, we don't need a people mover.
Much as I'd like to have an electric car, or even a hybrid, I can't really afford one yet. I still wait in hope though.
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BenWilson, in reply to
Possibly because in the majority of the target market locations 70% of the electricity was NOT coming from renewables. Godzone is exceptional.
Perhaps not, but the efficiency is still far greater in a plug-in, even if coal is being burned to charge it up. A coal fired power plant is far more efficient in producing energy from fuel than a petrol engine is. People who have converted their Priuses to plug-in (at considerable cost, considering that this is just electronic stuff, the parts are not expensive), have got far greater savings on their fuel bill (including whatever part of their electricity bill that goes into the car). Also, the carbon conscious consumer in the industrialized world may prefer that their car gets it's power from nuclear plants, despite the fuel being non-renewable.
Furthermore, a plug-in electric vehicle makes a hell of a lot more sense in much more densely populated countries, because the commute distances are often smaller, and the emissions are close to zero.
I don't know the reasons it was left out. But it was the most important flaw in the Prius, to me.
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Ian Dalziel, in reply to
power play...
I insist that my first electric car is a plug-in.
That’s just basic to the whole idea of fuel efficiency in electric cars.Oh?
...when were we promised a power grid for life?;- )
...and it's not like 'we'* haven't sold (or long term leased) bits off for short term book gain before...
*represented by some bean counter at the SOE
but as it is Friday, let's run some current thru this sucker... -
BenWilson, in reply to
My understanding from research a few years back was that plug-in converted Priuses got a reliable 75km/liter for regular commuter use. That kicks any petrol vehicle's arse. But the stock Prius was somewhere around 20km/liter, which was not exceptional at all.
It breaks down if you're doing long distances, but therein lies the main beauty of the Prius, that it was an electric vehicle that was even capable of long distances. If there were a plethora of reasonably priced choice, though, I think I wouldn't bother with a hybrid - I'd have a pure plug-in EV for commuting, and a petrol vehicle for longer hauls. Until the battery-only EV gets a reliable range in the 4-500 kilometer spot, I'd probably want to own a petrol. After that, though, I'd probably hire one if I ever wanted it.
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…when were we promised a power grid for life?
Plug-in doesn't have to be grid connected. Plug into your windmill.
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BenWilson, in reply to
My understanding from research a few years back was that plug-in converted Priuses got a reliable 75km/liter for regular commuter use.
Note: The electricity costs were not included in this calculation. For comparison, the current Prius Plug-in, that was produced (finally) in 2012 claims electric-only efficiency of around 61km/l of petrol equivalent. So it's damned energy efficient. But it's still lugging that petrol engine around for commutes...
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Bart Janssen, in reply to
When it came time to retire the car we'd been driving for 13 years we looked at the various electric option and decided against them. They are expensive, but more important is their cost of manufacture makes the environmental equation very dubious.
At this stage I still think it's a better environmental choice to buy a two or three year old car and drive it for a long time.
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BenWilson, in reply to
Heh. For me the environmental factor is secondary to cost. Electric should be cheaper to own, because it's cheaper to run, and fuel costs far outweigh capital costs in cars in the price range I'm prepared to pay until the day I become a millionaire. But currently, except for the very newest ones that can be plugged in, electrics lose on that score. I'm gonna wait it. Gut feel is that it's gonna happen this decade.
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Well I live in a hill in Dunedin, in my (old model) Prius I can drive down town without turning on the petrol motor - by the time I get there the battery is full to overflowing (just from the braking) and I have about enough of a charge to drive the length of town (if I'm careful - it's a small battery) - I use petrol when I go back up the hill
I'd love a plug in Prius - maybe the next car - but ideally I want one that I can set to charge 3/4 full so I can claim that bonus from the hill - I'd probably never put petrol in it when driving around town.
In the US there's no road-tax on electric cars (yet) it's done on purpose to encourage them - we should do the same, it would encourage us to moving to local energy independence - importing oil has a really bug effect on our foreign balance of payments - we could do the same as we do with the excise tax on cigarettes - keep increasing it as the pool of non-electric car users gets smaller to encourage more and more adopters and then when it reaches some preset limit (say 40% adoption) switch over to a regime more like diesel
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Farmer Green, in reply to
At $80,000 + , the Chevy Volt then is not what you are looking for, even though it can be purely plug-in , up to a point.
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Farmer Green, in reply to
No road user charges on electric cars until 2020 in Godzone.
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