A high carbon tax is wrong

* This is my article in BusinessWorld last October 19, 2017.

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Political science masquerading as climate science insist that the gas that we humans and our animals exhale, the gas that is used by trees, flowers, fruits and other crops to grow and feed the world — carbon dioxide or CO2 — is a pollutant that must be over-taxed and over-regulated.

Far from the truth. CO2 is a useful gas, not a pollutant.

Since it is useful, the optimal carbon tax for coal in particular is not P10/ton, not P20, not P600, but zero. However, a zero tax on coal is unpopular from the world of climate alarmism, so we classify these tax rates as follows: P0 tax is optimal, P10/ton is rational, P20/ton is compromise, P600 is irrational.

Recently, eminent economist Dr. Ciel Habito made a follow-up paper, “The case for the carbon tax” and insist that the carbon tax for coal should be raised from the current P10/ton to P600/ton.

To support his claim, he used some ridiculous numbers that are peddled by the watermelon (green outside, red inside) movement. Here are two:

(1) “Dominated by CO2 (72%), GHGs trap heat… .”

Wrong. CO2 is 400 ppm or only 0.04% of all greenhouse gases (GHGs). About 95% of GHGs is water vapor — the clouds, evaporation from the seas, oceans, lakes, rivers, stomata of leaves, etc. The remaining 4%+ are methane, nitrous oxide, others.

(2) “CO2 averaged about 280 parts per million (ppm) for the last 10,000 years…In 2015… 400 ppm for the first time…. now triggering much more frequent extreme weather events.”

This is perhaps 5% geological science and 95% politics.

The Minoan, Roman, and Medieval Warm Periods (when there were no SUVs, no coal plants, no airplanes) were much warmer than the Modern Warm Period (mid-1800s to roughly 2000). There were wild swings in global warming and global cooling cycles regardless of the CO2 level. How would one call this — “much less frequent extreme weather events than today?” Garbage.

Climate change (CC) is true. All skeptics recognize climate change, recognize global warming. Planet Earth is 4.6 billion years old and there were climate change all those years because climate change is cyclical (warming-cooling-warming-cooling…) and natural. Global warming is true, and so is global cooling.

It is political science that masquerades as climate science to say that there is no climate cycle, that there is no global cooling that takes place after global warming.

BACK TO COAL POWER.

From the recent energy and economic experience of our neighbors in Asia and some industrial countries in the world, the hard lessons are these: (a) Countries that have coal consumption of at least 2.1x expansion over the past two decades are also those that experienced fast GDP growth of at least 3x expansion.

Prominent examples are China, India, South Korea, Indonesia, Vietnam, Malaysia, Philippines, and even Pakistan. And (b) Philippines’ coal consumption is small compared to its neighbors; its 2016 use is just nearly 1/2 of Malaysia and Vietnam’s, just 1/3 of Taiwan’s and almost 1/5 of Indonesia’s, 1/6 of South Korea’s, 1/9 of Japan’s. (see table)

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A high carbon tax is irrationalI have repeatedly argued that CO2 is a useful gas. For those who insist that CO2 is a pollutant, they can certainly help curb further CO2 emission even without legislation and carbon taxation through the following:

  • Stop breathing too often; more exhalation means more CO2 emission.
  • Stop adopting pets (if any), stop eating chicken, pork, meat because these animals exhale CO2.
  • Stop using their cars, not even jeepneys or buses, they emit CO2; skateboards and bicycles only.
  • Stop riding airplanes and motorized boats, they emit CO2; solar planes or big kites and sailboats only.
  • Stop connecting from the grid and from Meralco because 48% of nationwide electricity generation comes from coal; no gensets either. Use only solar-wind-biomass + candles at home.
  • Tell their friends, business associates, family members, to do the same so that there will be more people emitting less CO2.

The Habito proposal of more expensive electricity via P600/ton carbon tax on coal is dangerous because while the Senate version of TRAIN adopts a P20/ton excise tax, the P600 can spring up somewhere during the final and Bicameral Committee meeting. The proposal should be exposed as based on political science, not geological or climate science.

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Why a carbon tax is wrong

* This is my article in BusinessWorld last week.

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Coal power produced nearly 48% of Philippines’ actual electricity generation in 2016 despite having only 34.6% share in the country’s installed power capacity of 21,400 MW or 21.4 GW, Department of Energy (DoE) figures show.

Renewables (hydro, geothermal, wind, solar, biomass) produced 24.2% of total power generation in 2016 despite having 32.5% of installed power capacity. In particular, wind + solar combined contributed a small 2.3% of total power generation.

At a forum organized by the Energy Policy Development Program (EPDP) at the UP School of Economics last Oct. 5, the speaker Dr. Francisco Viray, former DoE secretary and now president and CEO of PhinMa Energy Corp., showed in his presentation a screen shot of Dr. Ciel Habito’s article, “Let’s get the carbon tax right.” Ciel was arguing among others, that the carbon tax for coal power should be raised from the current P10/ton to P600/ton and not P20/ton as contained in Senate bill No. 1592 of Sen. Angara.

I commented during the open forum that Ciel’s article in reality has a wrong title, it should have been “A carbon tax is wrong.” And here are the reasons why.

One, as mentioned above, coal power was responsible for nearly 48% of total electricity generation nationwide in 2016 and it is wrong to restrict its supply and/or make its price become more expensive. Kill coal or even drastic cut in coal power would mean massive, large-scale, and nationwide blackouts for several hours a day, something that consumers wouldn’t want to endure. After all, even a one minute brownout can already cause widespread disappointment.

Two, the Philippines’ overall coal consumption – in absolute amount and in per capita level – is small compared to the consumption of its neighbors in Asia (see table).

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The Philippines has only 100 kilos or 0.1 ton per head per year of coal, the smallest in the region. There is no basis to suggest restricting further coal use given the fast demand for electricity nationwide.

Three, it is wrong to advocate more expensive electricity via high carbon tax given that subsidies to renewables via feed-in-tariff (FiT), among others, are already adding upward price pressure. A higher carbon tax may be more acceptable to the consumers if the FiT scheme is discontinued and ultimately abolished. If this is not done, better to keep coal excise tax as low as possible.

The proposed P600/ton excise tax on coal power would translate to P0.24/kWh hike in power generation charge. Using Ciel’s numbers, one ton of coal can generate 2,519 kWh electricity on average. So P600/2,519 kWh = P0.24/kWh. That is equivalent to FiT-Allowance that each electricity consumer from Luzon to Mindanao must pay monthly for many years to come.

Four, it is wrong to demonize and over-regulate carbon dioxide (CO2) as a pollutant because it is not. CO2 is invisible, colorless, and odorless unlike those dark smoke coming from vehicles and chimneys of old manufacturing plants.

CO2 is the gas that humans and animals exhale, the gas that flowers, trees, rice and other crops use to produce their own food via photosynthesis. More CO2 means more plant growth, faster greening of the planet. CO2 therefore is a useful gas, not a pollutant gas that the UN, Al Gore, and other groups and individuals would portray it.

While the hike in coal excise tax from P10 to P20/ton as contained in the Senate version is somehow acceptable, there is danger that the P600/ton proposal will spring out of nowhere during the bicameral meeting of the House and Senate leaders. This should not be allowed to happen.

Continued demonization of coal and rising favoritism of variable renewables like wind-solar would mean more expensive electricity, more unstable grid, and darker streets at night. Dark streets would mean more road accidents, more robbery, more abduction and rapes, more murders as criminals benefit from anonymity provided by darkness.

Energy irrationality can kill more people today, not 40 or 100 years from now. The irrationality and insensitivity of rising government taxes should be restricted and limited.

Five myths of solar-wind energy

* This is my article in BusinessWorld on March 20, 2017

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Variable renewable energy (RE) like wind and solar are far out from giving humanity sufficient, stable, and cheap electricity to sustain growth and fight poverty. For the simple reasons that they are very intermittent and expensive. Below are five of the common myths that we hear and read about wind and solar.

  1. Solar, wind, biomass, and other REs will replace fossil fuels as major global energy sources in the near future.

Wrong. From the projections by the two of the world’s biggest oil and gas companies, these REs, which may also include geothermal, will produce only 8.5% of global energy demand (Exxon Mobil data) or 6% (British Petroleum data) by 2025.

  1. The share of coal, gas, and nuclear will further decline as the world moves towards implementing the Paris Agreement of 2015.

Wrong. From both EM and BP projections, there is no let up in global use and demand for fossil fuel and nuclear sources in the near future. This is for the simple reason that people anywhere dislike power interruption even for one minute, much more frequent and involuntary outages lasting many hours, daily or weekly.

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  1. Solar and wind are cheaper than coal now, their overall costs will keep falling.

Wrong. The feed-in-tariff (FiT) rates or guaranteed price for 20 years for solar-wind keep rising, not declining. For first group of solar entrants, their FiT rates in Pesos/kWh were 9.68 in 2015, 9.91 in 2016, and 10.26 in 2017. For second group of solar entrants, their FiT rates were 8.69 in 2016 and 8.89 in 2017.

For wind power first group of entrants, their FiT rates in Pesos/kWh were 8.53 in 2015, 8.90, in 2016 and 9.19 in 2017. For second group of wind entrants, their FiT rates were 7.40 in 2016 and 7.72 in 2017. Only the sun and wind are free but the panels, switchyards, cables, wind turbines, towers, access roads, etc. are not.

Current power prices in Mindanao are only around P2.80/kwh as many new huge coal plants compete with each other along with hydro and geothermal plants. No additional charges.

  1. Solar and wind have no social cost (SC) while the SC of coal is very high.

Wrong. Solar and wind are very land-intensive and, as a result, more areas for food, commercial, and forest production are diverted to accommodate more solar and wind farms. To have 1 MW of installed solar power, one will need about 1.5 hectare of land. So to have a 300 MW solar plant, one will need about 450 hectares of land; San Miguel power has a 300-MW coal plant in Mindanao sitting on only 30 hectares of land, or hectare/MW ratio of only 0.1 for coal vs. 1.5 for solar.

Since solar has a low capacity factor, only 18% of its installed capacity — from 450 hectares of land with installed power of 300 MW — can actually produce only around 54 MW.

Majestic solar, 66.3 MW in CEZA, Rosario, Cavite is not included here because it is a rooftop facility and hence, does not occupy extra land area.

  1. Carbon dioxide (CO2) pollution and emission from coal power plants will further warm the planet.

Wrong. CO2 is not a pollutant or evil gas. It is a useful gas, the gas that we humans and our animals exhale, the gas that our rice, corn, flowers, trees and other plants use to produce their own food via photosynthesis. More CO2 means more plant growth, more food production, more trees regenerating naturally, which have cooling effect on land surface.

The above five myths were among the topics discussed during the World Wildlife Fund (WWF) and Institute for Climate and Sustainable Cities (ICSC) “Roundtable on Philippine Energy Security and Competitiveness” last Friday, March 17 at UPSE in Diliman, Quezon City. The main speaker was Dr. Majah Ravago of UPSE and EPDP and she presented the main EPDP paper, Filipino 2040 Energy. The five reactors included Jose “Viking” Logarta of the ICSC and Dr. Christoph Menke of Trier University of Applied Sciences in Germany. Dr. Menke discussed the GIZ paper criticizing the EPDP paper.

201703201e1b5Governments should not create regulations that distort the energy market away from real competition. Insisting on dishonest claims like “carbon pollution” and “renewables to save the planet” only lead to more expensive and unstable energy supply, wasteful use of land and other natural resources.