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Thursday, March 30, 2017

Jevons paradox bust by new emissions fee mechanism.

Posted by steve on June 20, 2012

Many inventors’ eyes glaze over in wonder at the thought of having the opportunity to invent clean, more efficient,  technology.

If only there were a market for it, the most wondrous machines could be manufactured and sold at a huge profit, they reason. And pollution would stop.

But more effective solutions actually, according to the  famous Jevon’s paradox, encourage more consumption. Famously, refrigerators are far more efficient that they were 40 years ago. On the other hand, the total energy used by refrigerators is still increasing, as more people are buying larger refrigerators – because they are relatively cheaper.

Read a general account of the paradox on wikipedia here.

(http://en.wikipedia.org/wiki/Jevons_paradox)

So the challenge that Jevons lays down is to find a way to encourage more efficient uses of resources in a way that will, at the same time, reduce demand for them. As illustrated in the refrigerator example above,   making things more energy efficient merely increases their use and energy use goes up.

Extremely efficient cars would make them cheaper to run and encourage more people to buy them and to use them more thus pushing energy consumption up.

One researcher may have just found a way to bust the paradox. Anders Höglund, an engine efficiency expert who turned to exploring ways to apply advance control engineering to the economy, proposes a fee placed upstream of the energy source. For example, oil could be taxed when imported to the country, or when it leaves the refineries as petrol or diesel. The tax woudl be raised at regular intervals until the market responded by reducing demand.

If we are to understand Jevons, this would mean that more and more efficient uses would appear and a cat and mouse game with raised levies could go on for a long time: inventors would find ways to increase efficiency, demand would fall, the levy would fall, but then demand would rise again as the use of the fuel would be cheaper. Levies would be raised, demand would fall off, but innovators would be back on track for more efficiency gains. And so on.

But this cycle of increases efficiency then fee, then demand and efficiency again can be broken. Enter the next part of Höglund’s proposal: paying money collected back into tax payer’s accounts as a tax rebate.

Höglunds ideas have been explored in a report by the Nordic Council of Ministers. The report focused on putting a price on pollution. It reasoned that a flexible fee, levied high upstream (in the case of oil, at the harbor) could be made progressively higher until the market behaved to introduce renewable – based alternatives.

This progressive increase of fee acts like a price discovery mechanism: the price of pollution is the cost to not pollute.

– “But would this not just encourage more effective uses which would encourage the same or more consumption ,“ argued detractors.
“It would”, replied the inventor, Anders Höglund, “if it were not for the return of the fee income back into the economy”.

The mechanism investigated includes a general return of collected fees, possibly as a tax rebate.

Says Höglund “the more fossil fuel that is introduced into a country, and the longer it is used, the higher the fees and the more money collected”.

This money goes into the economy for consumers to spend. But fossil-fuel based solutions will be more expensive. So there will be an incentive for consumers to choose the alternatives. In this way we beat the Jevons paradox.
Read the full report here.

Community finance briefing #2: defining community

Posted by steve on June 15, 2012

The second edition of the community finance briefing is now out!” These briefings come from previews of the new handbook slated to be published in the Autumn of 2012.
In this edition

To sign up to be notified of when the Book is due click here.

Community finance briefing #1: A permaculture approach to organisation

Posted by steve on June 13, 2012

The first edition of the community finance briefing is now out!” These briefings come from previews of the new handbook slated to be published in the Autumn of 2012.
In this edition

  • What founder Bill Mollison says about finance
  • Why a community is not a company
  • What communities should deliver

DOWNLOAD HERE newsletterfp#1_mollison

The community finance canvas handbook

Posted by steve on June 10, 2012

Community Finance Design Handbook
This  handbook is for social economy innovators, community builders, and sustainable developers. It helps you develop communities that demonstrate people care, planet care in a way that provides the basic needs of community members.
This handbook  written by Stephen Hinton, acts as an introduction to thinking financially about community initiatives and covers how  create a basic draft of your organisational idea, analyse capital needs and match them to people who will be in the community and those who will support it. It take you through the basics of choosing the appropriate legal structure and how to feed figures into a business plan.

Use this handbook to bring your community members together to see how they can make their dreams in to reality.

Still in production and slated for release in the Autumn of 2012, you can get sections of the book in advance by signing up for our free  COMMUNITY FINANCE BRIEFINGS and get the opportunity to buy one of the first set of discounted copies.
The whole methodology is being tested with various groups, as part of the training in using the canvas methodology.
Learn more about this training here.

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Suppose capitalism mimicked the way nature works.

Posted by steve on June 6, 2012

Article updated June 6 after consideration of all the recent comments

We are stuck. On the one hand you have people who talk about economic growth as being the objective of policy – necessary to be able to pay back debts and achieve prosperity. On the other hand, you have the sustainable camp that claims infinite growth is impossible and therefore the whole economic system is bound to fail as it relies on it. You have people who claim we need GOOD growth as opposed to BAD growth. Bad growth would be the increased economic activity due to storms, break-ins and failures of products. Either way, the term capitalism comes up as if it were a system. Perhaps if we explored the idea of developing our thinking about capital we might find some ways forward.

My aim here is to clarify the idea of using capital as a central social planning approach, using the idea of settlement  maturity. This is the idea that settlements, and the societies in them, like an eco-system, can mature.  If society can mature, then maybe its  capital profile will mature too.To be able to take this analytical line we need to understand first what ecological maturity is.

Let us look, then, at how nature grows and see if we can find some insights into how capital can grow, and what economic growth would look like through the eyes of sustainability.

Growth =net increase in mass

Growth (rapid increase in biomass)is a stage the ecosystems go through on their way to ecological maturity

There is still growth in mature eco-systems. Trees still grow, albeit slower. However, for the system as a whole there is little net increase in biomass.

Ecologists describe how all eco-systems strive to become mature.  You probably have the idea somewhere in the back of your mind, how smaller animals give way to large predators, small plants become forests, rushing water becomes a swamp, etc.

One well-known description of maturity comes from the ecologist Odum,(ref 1)  (table below)

Let’s take it bit by bit:

  • Gross production. This means the total amount of biomass that accumulates in the system. Note that as a system matures, the slower biomass increases. For example, young trees grow very fast, older trees grow much slower.
  • Biomass supported. As the system matures, more biomass is in the system – more trees grow, more animals and plants more in, and they are larger.
  • Total organic matter. As above, the more mature the system, the more in the eco-system.
  • Size of organism. In immature systems, the organisms are small. As the system matures, and there is more for predators to eat, for example, the more and larger the organisms become.
  • Niche specialism. As the system matures so does diversity. More specialized organisms move in.Mineral cycles. Eco systems need minerals to cycle in them in order to function, so to have more biomass they must retain nutrients.
  • Nutrient exchange rate organisms <> environment . Immature systems “leak” both heat and nutrients to other eco-systems.Role of detritus in nutrient cycling. As the system matures, detritus is more and more important as a source of minerals and energy for the organisms in it.Nutrient conservation. Mature systems conserve minerals and do not leak them to other systems.

We now need to explore the idea of capital.

The diagram below breaks down the categories of capital often used.
The categories should be  be self evident. But from the point of view of accounting, human capital and social capital are not normally put on the books.
Financial capital is divided into that owned by the organisation and that borrowed. In English the terms foreign capital is used for  money lent and equity is the money put into the company by its owners.

Now let us apply the idea of maturity using the idea of the built environment; a settlement.

An immature settlement might be a few tents that settlers might bring with them. They have no agriculture, there is no infrastructure, but they are surrounded by the bounty of nature and can begin to convert, for example, trees to buildings.We can envision an immature settlement, but can we envision a mature one? Surely our cities act like immature settlements: nutrients are lost to surrounding environment, metals and minerals end up in tips, and even our building reflect heat rather than gather the energy from the sun. The list below is an attempt to bring together ideas of what a more eco-mimicking city or settlement might look like.

GROSS PRODUCTION. Here we would see the production of buildings and transport infrastructure as complete, only repair and upgrade would be needed. Most production activity would be turned to food and heating and lighting.

BIOMASS SUPPORTED. The mature settlement would have a high level of biomass supported in the form of tree, and food -producing facilities.

TOTAL ORGANIC MATTER Total organic matter would be higher, to provide eco-system services like shade, energy capturing, building and clothing materials etc. A field does not represent this vision, we would expect more organic matter intensive methods, like forest agriculture, food forestry, would be used.

SIZE OF ORGANISM. It can be imagined that in this case, for a society organism means body, like an organization. As society matures, more specialized and larger organizations can provide efficiency of scale and specialization.

NICHE SPECIALIZATION. People could have more specialized jobs as society matures. Early settlers might need to master a broad range of tasks without being able to go too deeply. In the specialized society everyone could master subjects deeper.

MINERAL CYCLES. It makes sense that an immature society digs up iron and other materials to get started. But after a while, the extraction of these substances can become polluting and maybe lead to scarcity. In this case, minerals already extracted should be recycled ad not released in to the biosphere. This approach is being pioneered by the natural step and Cradle to Cradle. The mature settlement is a mineral recycling society

NUTRIENT EXCHANGE RATE WITH ENVIRONMENT. The same here as for minerals. The mature society will retain nutrients for recycling, and do the surrounding environment a favour by not putting this burden onto it, as well as minimizing the work needed to obtain nutrients. These building blocks of life can stay within the settlement. More are only needed for growth.

ROLE OF DETRITUS Early settlers could make waste without it creating a problem or being seen as a loss of valuable resources as there probably were not much of them. Not so for the mature settlement, where the amount of biomass is high. Detritus is a resource and in the mature society there may be much of it. It can also accumulate and be a pollutant. So it needs recycling. This will mean a soil to soil perceptive for food systems – from soil to plate back to soil.

NUTRIENT CONSERVATION. Gathering nutrients requires a lot of work in an immature settlement. Mature settlements recognize the energy and effort needed in obtaining nutrients is far greater than the effort and work required to cycle them.

What we are describing, then, is that the concept of economic growth is not an end in itself but the process by which economic maturity is reached. At this point, capital is accumulated, analogous to the build up of bio-mass in the mature eco-system.

The effect on capital.The diagram below illustrates how capital is converted and increased in the maturing society.

Natural capital to man-made capital (A) : For example, minerals and nutrients would be used to create housing and machines. At the same time, man-made capital should be in place to promote development of natural capital(B).  Man-made capital cannot increase at the expense of natural capital, the two must grow together. Otherwise, the services that natural systems provide (like building materials, food, clean water, etc) will be unavailable.

Conversion of human capital to man-made and natural capital(C): human capital conversion works uniquely. Taking knowledge and applying it to solve the problem of creating man-made capital and natural capital can, if applied right, increase human capital through learning.This knowledge could be institutionalized in social capital in organizations and information systems.

Social capital, the development of organizations (D), would in turn be needed to run, organize, and develop the man-made capital (E) and natural capital(B).

The role of Financial Capital. In this diagram, money represents an accounting system that has significance in that the value of the whole increases over time. (If all forms of capital can be valued using the same system of measurements.)  As the system matures it will accumulate biomass and minerals for recycling and organizations that accumulate knowledge. An accounting system could be developed that calculated in this way. Growth would slow down as the settlements matured-  I leave it to later articles to explore how such an accounting system might work.

REFERENCES

1) Odum, E. P. 1969. The strategy of ecosystem development. Science, 104:262-270.