Energy (Part 3: Carbon Taxes)
TLDR: Most of the energy in Utopia comes from renewables, but nuclear energy is present as a baseline, source of redundancy, and as an area of active research. Fossil fuels are disincentivized through worldwide conditional bond carbon taxes and costly local pollution permits.
Prerequisites: Part 1 and Part 2
Atmospheric pollution comes in approximately two forms: greenhouse gasses and particulates. Greenhouse gasses are responsible for climate change on a global level, while particulate pollution causes acute health problems such as asthma and cancer, and can travel anywhere from kilometers to a thousand kilometers, depending on particle size.
Energy production isn’t the only source of air pollution, but it’s a major one, especially if we include gasoline burned in cars. Other sources of air pollution include fires (both campfires and wildfires), construction, and manufacturing.
Pollution is a classic example of a negative externality, and as such, the standard economic solution is to introduce a Pigouvian tax. By artificially raising the price of something (air pollution in this case), we can put more of the costs of that thing onto the shoulders of the people who produce it. In other words, if air pollution is taxed, with that money being redistributed to those impacted by the pollution, then it ceases to have a negative externality and can be balanced by economic forces to a social optimal level.
One wrinkle in this is that the costs of pollution are not entirely produced by the polluter. Consider an island where Alice lives alone. Alice likes bright lights at night, and installs floodlights everywhere. Now imagine that Bob moves to her island, and complains about the light pollution. Does Alice need to start paying fees to Bob as compensation for ruining his experience of the night’s sky? The general form of this is called the reciprocal cost problem.
My take on the reciprocal cost problem is that it only really applies to local pollution. If we’re dealing with a global issue like climate change, we can’t say to people “If you don’t like it, leave.” For local issues, it seems to me that Pigouvian taxes should be enforced on marginal increases of pollution, but not marginal increases in population for a fixed (or shrinking) level of pollution. In our example, Alice would not need to pay any taxes/fees on her light pollution once Bob moves to the island because that’s a marginal increase in population, but once Bob is there she would need to pay fees commensurate to the increase in damage for marginally more lights.
There’s one last wrinkle to deal with: what is the damage of one marginal ton of CO₂? It depends a lot on what happens to the environment! Let’s say that one year after the greenhouse gasses are released into the atmosphere (and any potential taxes are paid) a new technology is developed that efficiently removes CO₂ from the atmosphere, solving global warming forever. The CO₂ released then has essentially no impact on anyone, and the taxes were unjustified (at least insofar as the technology could have been anticipated).
Here’s another example: a community of fishers live around a lake. Given the rate at which they catch fish, everything is sustainable and there are no negative externalities to their actions (aside from killing the fish). Now imagine that another person moves to the community with a big boat and a large appetite for fish. Now if everyone caught fish as usual, the fish population in the lake would wither and eventually die off entirely. Some kind of increased price on fishing needs to be instituted to protect the lake, but who should bear the cost? If we impose all costs on newcomers, we set up institutions that are likely to unfairly redistribute wealth away from the poor and towards the rich. Consider that if the community grows substantially, the price of fish will go up quite a lot, and the cost of fishing will be high for everyone except for the initial settlers. Better would be to privatize the lake and have the owner pay taxes on the land. But in the case of the atmosphere, this isn’t really possible.
Utopian Energy
At last we turn to Utopia. It seems to me that in Utopia, the vast majority of energy needs are provided by solar, wind, hydro, geothermal, and nuclear power. Different areas of the globe use difference balances of these sources, but the plurality of global energy is produced by solar farms, followed by wind farms, hydroelectric dams, nuclear power plants, and lastly, geothermal plants.
Most buildings in Utopia have solar panels on their roofs, sometimes embedded in the roof itself, depending on local styles. Most farms that grow crops in areas with notable wind also have turbines on their property. This is because land in Utopia is relatively expensive, and so an emphasis is placed on augmenting existing land with additional uses, as opposed to taking up natural spaces.
Likewise, most buildings in Utopia have large batteries that power the building in the case of a grid failure. These batteries (and the solar panels they’re attached to) also communicate with the grid, buying and selling electricity dynamically to get the best price. Batteries tend to charge when it’s sunny and electricity is cheap, and discharge when it’s dark and electricity is expensive.
Most (but not all) vehicles in Utopia are electric, and some EV owners opt to connect their vehicle battery to their building when charging, to make use of a chunk of its battery capacity.
Energy is also stored by pumped-hydro plants and hydrogen stations, which compete with each other (and with the various batteries) to store energy for winter months.
To pick up the slack during the darkest, least windy parts of the year, nuclear power plants exist all across the world. These plants are constantly monitored by inspectors and auditors that represent the people of the world in order to prevent weaponization of nuclear materials or improper handling of nuclear waste.
Research into cutting-edge technologies like advanced fission reactors, better batteries, other clean sources of energy, and fusion power is subsidized largely through prizes.
Burning fossil fuels is still permitted and done in many places, especially during winter months where other power sources have failed to provide for the entire demand. A combination of auditors and prediction markets surveil the burning of fuel, as well as other sources of air-pollution. At regular intervals, all polluters must report their activity to the government and pay for the costs they’ve imposed.
The first of these payments comes from needing a permit to release particulates into the air. Permits cover a certain quantity of pollution in a certain area for a certain amount of time, and can be arbitrarily re-sold and divided on a free market. Recently expired permits can be refreshed for the same cost as they were originally purchased for, scaled up only slightly to account for an inflationary money supply. New permits are also sold as-needed, to allow for increased demand. The price of new permits is set according to the expected damage to those affected, and all money raised through permitting is redistributed to people in the region as basic income.
The second payment that polluters have to make is based on the quantity (and severity) of greenhouse gasses released. For each equivalent of a ton of atmospheric CO₂ released, polluters must buy a set of conditional bonds. Each bond is essentially a loan to the government that is paid back to the polluter after a certain amount of time if and only if the global temperature is below a certain threshold. Bonds can, like any other form of property, be re-sold on the market. Revenue from conditional bonds is re-invested in the world citizenship through basic income.
For instance, let’s say Alice releases X tons of CO₂ into the atmosphere. She would then be forced to buy a bond that pays off in 16.32 years, as well as ones for 33, 49, 65, 81, and 98 years, if the average global temperature at that point in time is less than 1 degree higher than the current average. Another set of bonds would be for 2 degrees higher, 3 degrees higher, up to some arbitrary point. The price of the bonds would be set as some multiple of X, so that the collective cost of global temperature rise is captured by the bond-holders, and the total payout would be what a comparable low-risk government bond would pay for a similar time period.
These bonds align the interests of polluters and the general populace. If new technologies can be developed to curb the effect of greenhouse gasses, the effective cost of fossil fuels drops dramatically. As a result, fossil fuel companies invest heavily in carbon capture and other solutions for climate change.