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Decommissioning of Carbon Dividend

I understand the political benefits of the decommissioning provisions but
how about the economics and energy use side?  
1 If the price on Carbon goes back to zero, won’t we start reverting back to
fossil fuels?  I imagine wind, solar, renewables being far more cost effective
by then but there will still be many fossil fuel uses that will expand again. 
2 There will be huge amounts of CCUS which will go away if there is no
rebate.  While the plant and equipment will be there it costs money to run
and the economics will drive companies to stop Sequestering Carbon. 
Don’t we need to keep the price on Carbon but decommission the Dividend
and transition to a Price and Sequestration system?

_______, This is a very perceptive question. First thing, note that the
program doesn't end until two requirements are fulfilled. The covered
emissions have to drop by 90% and the monthly adult dividend has to be
$20 or less for 3 consecutive years. But according to the mandated
emissions schedule for hitting 90% reduction by 2050, the carbon fee in
that year would be $315 and the adult dividend would still be $57.
Assuming the annual emissions reduction target would still remain at 2.5%
(from 2016 levels) as specified in the text, the dividend would not drop
below $20 until you exceeded 97% emissions reduction. 
In my mind, this is so far in the future, and there are so many massive
changes in our energy infrastructure and behavior that would have taken
place, it's impossible to predict much of anything this far ahead. Would it
even be possible to reduce emissions by an annual 2.5% if they are

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already down by 90%, or would further decline take place more gradually
as the fee kept going up? What other policies might be enacted over 30
years? What new technologies? 
Looking that far ahead, it seems to me that the 90% reduction + $20 for 3
years requirement is so stringent that it's hard to believe old-style fossil fuel
operations would come roaring back. 

_______: I believe you are entirely correct that the carbon fee mechanism
must remain in place to prevent backsliding.   We might write into the bill a
halt in the rise in fees at some level, and then hold the level constant and
continue collecting the fees.    
I suggest, however, that we separate the fee level issue from the dividend
distribution issue.      
____:  You provided some good data re the value of dividends.  They will
be significant for a long time for the dividend recipients.  But there is an
administrative cost for allocating and distributing them. 
I suggest that dividend distribution be discontinued when the administrative
cost for this part of the CFD program is higher than the amount of revenue
being distributed.

Thanks ____, the numbers help as I had not gone through those in as
much detail. I agree our energy systems will be so different from today that
predicting them at this point has huge variability. I’d also HOPE that there

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would be more universal acceptance of the need to control CO2 emissions.
I’d also expect that we will have modified our emission schedules several
times by the 2050+ timeframe as we understand the consequences,
impacts and costs better. 
While I still think there is potential for back sliding on energy, the bigger
issue for  current legislation is CCUS. We’re expecting huge investments
in CCUS that I think we want to keep operating past the time when we
achieve our emissions reduction targets. While the amount of CCUS on
energy emissions will probably go down, there’s lots of other emissions that
could be stored if there’s an economic incentive. If there’s no incentive it’ll
 get vented.  I think we need to give industry the confidence that these
investments are very long term. 
Ending the Dividend makes good sense to avoid that administrative cost
but I think we need to maintain a price on Carbon emmisions. The price
maybe capped, it may even be reduced, but the legislation should not say
that the price goes to zero. 

_______: You write in your last post:  “I’d also expect that we will have
modified our emission schedules several times by the 2050+ timeframe as
we understand the consequences, impacts and costs better.”  I agree. 
I will also note that H-7173 makes no provision for regular in depth reviews
of CFD program outcomes [except for GHG  emission reductions] and no
provision for an efficient mechanism for carbon fee schedule adjustments
[both up and down] if these are appropriate.
This is a critical omission.  I propose a fix in the Forum Policy topic “Carbon
fee schedule and real time adjustments” and also on this web page: 
<https://www.jerseygrandpa.com/?p=6254>   


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Doug Grandt
I support _______’s (aka Jersey Grandpa) suggestion for Real time
Adjustments, and would even go so far as to include the option during each
annual emission assessment that is already provided in the context of a
$5/tCO2 increment if targets are not met.
It will be incumbent upon the folks who will manage the CFD program to be
on top of the effectiveness of the initially intended trajectory of the fee so as
to respond quickly to get emissions on track if reductions are not in line with
what is demanded. 
My suggestion elsewhere is to assure reductions are kept on track by
imposing a declining cap on production of all hydrocarbons in line with
1.5°C or, better yet, 280ppm pre-industrial #HealthyClimate. If a hard cap
causes a market response to a supply-demand gap and raises prices, that
would be the de facto 'effective' carbon price. 
Either way, we need to assure emissions reductions stay on track, and that
parallel drawdown at gigaton scale is funded by sufficiently high carbon
prices to achieve the required reduction of atmospheric and oceanic carbon
concentrations.

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