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in local politics I hear about plans to buy out large polluters (here we have coal-powered electricity generation). they're usually variations on: 1. a big pi

by shoo 11y ago

in local politics I hear about plans to buy out large polluters (here we have coal-powered electricity generation). they're usually variations on: 1. a big pile of (typically public) money is given to the most polluting companies 2. in return those companies exit the industry i don't think such policies are a great idea, but they might be an example of action that would (i) be actually progressive re: greenhouse emissions, and (ii) might make the share price of such a company go up, supposing the pay out were large enough. this little thought experiment aside, the heuristic of following the change in the market is probably a reasonable one.

danieltillett 11y ago
It is probably the most fair approach since why should the owners of fossil fuel assets pay most of the cost when the benefits flows to everyone. It would also remove the cause behind all the FUD being spread by the fossil fuel industry. The way to do this on the cheap is to buy the rights to shut down the assets at some point in the future. Buying an option to shut down all fossil fuel production 30 years in the future is relatively cheap. Take for example Exxon. It has $252 billion is physical assets [1] and its cost of capital is 9.11% [2] The present value of these assets if we were to scrap the lot in 30 years time is only $18.4 billion (252 / 1.0911^30). We could pay them something above this level today and it would be financially rational for them to sell us the option. 1. https://finance.yahoo.com/q/bs?s=XOM+Balance+Sheet&annual https://finance.yahoo.com/q/bs?s=XOM+Balance+Sheet&annual 2. http://www.gurufocus.com/term/wacc/XOM/Weighted%2BAverage%2BCost%2BOf%2BCapital%2B%2528WACC%2529/Exxon%2BMobil%2BCorporation http://www.gurufocus.com/term/wacc/XOM/Weighted%2BAverage%2B...
- shoo 11y ago
  Interesting. There's perhaps still the open question of exactly who should pay the owners of fossil fuel assets. A few academics over here (in Australia) recently proposed that the most polluting energy generators be forced to exit the market, and that they would be paid compensation by their competitors, as their competitors stood to profit from the reduction in competition. That was a pretty interesting argument. In the long run, I believe the public still ends up paying for everything (due to increased energy prices), but perhaps it would be a more politically acceptable way to wind down some of the more polluting companies. Personally I think this kind of approach is far more complicated, and far less efficient than an appropriately priced carbon tax, but we don't have one of those.
  - danieltillett 11y ago
    The people who should pay are the people who are going to benefit - future generations including the people who are not even born yet. Luckily we have a magic mechanism for doing this - the long term zero coupon bond [1]. We just issue zero coupon bonds and use the money to buy up fossil fuel assets and build replacements. The cost gets shifted onto the people in the future who will benefit from not living in a world 5˚C hotter. I actually gave a talk about this years ago - I will try and find my slides and put them up somewhere Edit. I posted the slides to my blog [2]. 1. https://en.wikipedia.org/wiki/Zero-coupon_bond https://en.wikipedia.org/wiki/Zero-coupon_bond 2. http://www.tillett.info/2015/12/13/preventing-global-climate-collapse/ http://www.tillett.info/2015/12/13/preventing-global-climate...

by shoo 11y ago

danieltillett 11y ago

It is probably the most fair approach since why should the owners of fossil fuel assets pay most of the cost when the benefits flows to everyone. It would also remove the cause behind all the FUD being spread by the fossil fuel industry. The way to do this on the cheap is to buy the rights to shut down the assets at some point in the future. Buying an option to shut down all fossil fuel production 30 years in the future is relatively cheap. Take for example Exxon. It has $252 billion is physical assets [1] and its cost of capital is 9.11% [2] The present value of these assets if we were to scrap the lot in 30 years time is only $18.4 billion (252 / 1.0911^30). We could pay them something above this level today and it would be financially rational for them to sell us the option. 1. https://finance.yahoo.com/q/bs?s=XOM+Balance+Sheet&annual https://finance.yahoo.com/q/bs?s=XOM+Balance+Sheet&annual 2. http://www.gurufocus.com/term/wacc/XOM/Weighted%2BAverage%2BCost%2BOf%2BCapital%2B%2528WACC%2529/Exxon%2BMobil%2BCorporation http://www.gurufocus.com/term/wacc/XOM/Weighted%2BAverage%2B...

shoo 11y ago
Interesting. There's perhaps still the open question of exactly who should pay the owners of fossil fuel assets. A few academics over here (in Australia) recently proposed that the most polluting energy generators be forced to exit the market, and that they would be paid compensation by their competitors, as their competitors stood to profit from the reduction in competition. That was a pretty interesting argument. In the long run, I believe the public still ends up paying for everything (due to increased energy prices), but perhaps it would be a more politically acceptable way to wind down some of the more polluting companies. Personally I think this kind of approach is far more complicated, and far less efficient than an appropriately priced carbon tax, but we don't have one of those.
- danieltillett 11y ago
  The people who should pay are the people who are going to benefit - future generations including the people who are not even born yet. Luckily we have a magic mechanism for doing this - the long term zero coupon bond [1]. We just issue zero coupon bonds and use the money to buy up fossil fuel assets and build replacements. The cost gets shifted onto the people in the future who will benefit from not living in a world 5˚C hotter. I actually gave a talk about this years ago - I will try and find my slides and put them up somewhere Edit. I posted the slides to my blog [2]. 1. https://en.wikipedia.org/wiki/Zero-coupon_bond https://en.wikipedia.org/wiki/Zero-coupon_bond 2. http://www.tillett.info/2015/12/13/preventing-global-climate-collapse/ http://www.tillett.info/2015/12/13/preventing-global-climate...