Bob Greens Communist Browns socialist tax to transfer money from the wealthy to the poor.
Carbon taxes energy production and technology: more green nonsense
Gerard Jackson BrookesNews.Com Monday 1 March 2010
Greens argue that solar and wind power are genuine alternatives to centralised electricity generation. Therefore the long term effect of a carbon tax would be to substitute the latter for the former with little or no loss in production. Critics counter that these alternative energy sources are very inefficient and would require substantial subsidies. This approach leaves me somewhat bewildered. To argue that solar and wind are inefficient alternatives to coal-fired power stations because they are more costly is no argument at all.
The greens' response is to state that a carbon tax would have the effect of inducing greater efficiency while encouraging the development of new technologies. Our critics have remained silent in the face of this defence. No wonder considering that Professor Sinclair Davidson used a similar defence when defending a rise in the value of the Australian dollar. (Australia Will Survive the Greenback's Fall, Wall Street Journal, 9 November 2009).
We all know that a rise in the exchange rate has a similar effect as a direct tax on exports. A carbon tax has basically the same effect. Hence Davidson's efficiency argument against alternative energy is undermined by his own advice to Australian manufacturers to overcome the effect of a rising exchange rate by simply becoming more efficient, despite the fact that there is a strict limits to just how efficient a firm can be. Moreover, there is no reason whatsoever to assume that exporters have not already reached that limit. It is this kind of elasticity of thinking by our rightwing that has given the greens a free ride.
Let us now do what the critics have failed to do and that is examine the nature of the inefficiencies that would make alternative energy sources a complete economic disaster. First and foremost, solar energy is extremely dilute (wind* is also a form of solar energy). The maximum amount of solar energy striking the Earth under optimum conditions is just under 1Kw. (Optimum conditions are rare and could only be maintained for a short period.) This means that vast collecting areas are required, not to mention the colossal amounts of materials needed for the construction of collectors.
What this means in economic terms is that solar and wind involve massive diseconomies of scale. In plain English, unlike centralised power generation these so-called alternatives are marked by long run rising average costs of production. For those who think otherwise, they should bear in mind that solar and wind involve no indivisibilities to speak of. No indivisibilities means no economies of scale, a fact that even the critics have overlooked.
If we make the simple assumption (as do mainstream economists) of basically treating capital (the material means of production) as uniform wooden blocks that can be easily fitted together the situation will become much clearer. Firms — including power companies — will combine a number of blocks (capital) with labour and land in such away as to try and minimise their average costs of production.
Having done this the politicians now decides that it would be an absolutely spiffing idea to upset the whole capital structure by imposing a carbon tax with the intention of totally destroying certain factor combinations, meaning coal-fired power stations, so as to replace them with solar and wind. But because of the extremely dilute nature of solar energy many more blocks (capital) are need to produce the same output.
As it takes x number of blocks and y amount of land for a coal-fired power station to produce z amount of power and, say, 20x and 1000y (this is no exaggeration) for a solar plant to produce the same amount of power it becomes crystal clear why solar is grossly inefficient. Actually, the situation would be even worse. A determined switch to solar power would quickly deliver a double whammy to the economy. The first effect would be to drain away masses of capital which in turn would deprive industry of investment funds. This would be swiftly followed by a devastating rise in energy costs that would savage the economy and slash the standard of living.
Actually it would not reach this state of affairs because the damaging effects of the attempted switch would quickly make themselves felt long before the process could be completed, as the case of Spain amply demonstrates. We can therefore conclude that given the insurmountable natural limitation that solar power diluteness presents it is a physical impossibility for solar to satisfy Australia's electricity needs, or that of any advanced economy, a fact that critics have so far failed to note. (Of course, the situation would be different if the average standard of living was reduced to that of a medieval peasant.) It is also clear that there is absolutely no way in this universe that the barrier of diluteness can be overcome, unless greens think they can repeal the first law of thermodynamics.
If critics of the carbon tax want to make a greater impact they must do all within their power to inform the public of the insuperable problems that afflict so-called alternative energy sources. They must also stress the massive social and economic costs of these alternatives. So far they have failed to do both.
Technology and taxes
The idea that raising the cost of energy will induce the emergence of new technologies could only be proposed by people completely ignorant of economic history and the history of technology. I cannot think of a single instance of this happening. Taken to its logical conclusion we can argue that the Romans would have developed the steam engine — if not the car — if only the emperors had have had the foresight to put a heavy tax on horses and bullocks. (Horses were so inefficiently harnessed in ancient times that they where not even used in agriculture.) And if taxes are all that is needed to bring about technological progress why haven't heavy petrol taxes in Europe led to new transport technologies?
Note: Rather than make several brief comments on the nature of technological progress allow me to refer the reader to the following highly informative works:
A Short History of Technology: From the Earliest Times to A.D. 1900, T. K. Derry and Trevor I. Williams, Dover Publications, 1993
The Economic Laws of Scientific Research, Terence Kealey, Macmillan Press LTD, 1996
The Mediveval Machine: The Industrial Revolution of the Middle Ages, Jean Gimpel, Pimlico 1993.
The Sources of Invention, John Jewkes, David Sawers, Richard Stillerman, Macmillan & Co. LTD, 1958
Ordeal by Planning, John Jewkes, Macmillan & Co. LTD, 1948
A History of Mechanical Inventions, Abbott Payson Usher, Dover Publications, Inc. 1982
Technical Change: The United States and Britain in the 19th Century, S. B. Saul, Methuen & Co LTD, 1976
Science Technology and Economic Growth in the Eighteenth Century, A. E. Musson, Saul, Methuen & Co LTD, 1972
Forbes: Greatest Technology Stories, Jeffrey Young, John Wiley & Sons, Inc. 1998
Then there is Fernand Braudel's monumental three volume work:
The Structures of Everyday Life: Civilization and Capitalism, Volume 1.
The Wheels of Commerce: Civilization and Capitalism 15th-18th Century, Volume 2.
The Perspective of the World: and Capitalism 15th-18th Century, Volume 3.
(All three volumes published by Phoenix Press, 1988. Unfortunately, Braudel, a former Marxist, was not a very good economist. Nevertheless, these works are of considerable intellectual value).
*Wind has a maximum efficiency of 59.3 per cent. This is called the Betz limit. In addition, wind power is severely restricted by the third power, meaning that small changes in wind velocity result in large disproportionate changes in output.
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