Submission to ACT Government on Community Centred Government

The following was submitted to the ACT government following this request.

http://www.cmd.act.gov.au/__data/assets/pdf_file/0004/2659/citizen_centred_governance.pdf


Citizen Centred Governance is broadly defined as involving citizens in a constructive way in the governance of their own community. In a democracy citizens are indirectly involved in their communities through their elected representatives and through the public service which is paid to carry out the wishes of the elected representatives and, by implication, the wishes of the community. This approach works well but there are areas where it can be improved. These have been identified in the CM (Chief Minister) paper as:

  • Direction Setting and Accountability
  • Trust, citizen engagement and experience of government services
  • Access to information

The CM paper concludes with a recommendation that to better involve citizens and to meet the future the government needs to build up the capacity and capabilities of the public service.

This last recommendation and almost all the others in the paper, while worthy, illustrate the problem with the current approach to citizen involvement. The CM paper assumes that the way to achieve involvement is to make the government more responsive. This submission says we can leverage these government initiatives by using mechanisms that reduce the separation of citizens and the government. That is, to involve citizens we do not need to leave the whole burden on the government or ask them to do more with less. What we can do is to give citizens the tools, the information, and the resources to become part of the process so that they can help the government and the public service to do their job. Rather than the government only thinking of how to be more responsive we can find ways for citizens to be able to better assist the government.
Involving citizens means that citizens must be able to communicate both with each other and with the government efficiently and effectively. To engage in citizen-to-government transactions requires that we improve our use of enabling communications technologies such as the Internet and advanced telephony. It also requires trust and openness.

This is possible and could be achieved with a simple system comprised of:

  • Anonymous Electronic Identification
  • Voluntary participation
  • Making information held by the government on a citizen available to the citizen
  • Making other public information, such as land titles or this submission, easily available anonymously to citizens who have a right to know.

To achieve “Citizen Centred Governance” we have to first provide the tools to the citizens that will enable them to participate and they will do the rest. This submission outlines these points and then illustrates what might happen. What will happen is unknown and need not be “planned” because it will emerge from giving people the ability to become better involved.
Fundamentally these recommendations enable better communication at a transactional level. They enable systems to emerge that will solve the basic dilemma of all societies. One that is called “The Tragedy of the Commons”. https://cscoxk.wordpress.com/2008/06/08/a-solution-to-the-tragedy-of-the-commons-chapter-1/ That is, one of the main purposes of institutions such as governments and the public service is to resolve the issue that what is good for the community as a whole may not be best for an individual in isolation.

Implementing these tools permits the implementation of what we have called the Rewards approach to community participation. This approach is based on the idea present in all societies of reciprocity or git giving. This approach is based on the idea that we should Reward people who act in the community interest. That is, when a gift is given, such as the payment of taxes, then the giver expects the recipient to return the gift in some manner. Rewards institutionalises this idea anonymously across the delivery of government services.
Rewards do not have to be monetary but they have to some form of acknowledgement of the contribution we each make. The underlying reason why this works is that in our day-to-day transactions we are genetically tuned to share with others and to cooperate. Human society is not based on tooth and nail but is based on giving and receiving. Rewards provides a framework within which we can both give and receive. Modern society has taken away much of the pleasure of our day to day transactions by separating giving and receiving. We pay our taxes one day and receive a benefit another day. Rewards helps bring back the mutuality of transactions that literally gives us pleasure. http://www.abc.net.au/rn/counterpoint/stories/2008/2282697.htm Human societies have reciprocity at the core of social interations http://people.umass.edu/gintis/ACS.html. Citizen Centred Governance needs to enable reciprocity.

Anonymous Electronic Identification

The key piece of infrastructure required to involve both government employed and non-government employed citizens is a reliable, secure, private method for individuals to be able to identify themselves and to be able to electronically communicate anonymously but responsibly with both government and other citizens. That is, a common means of electronic communication is required for all citizens. Infrastructure of this type is a first step to citizen involvement. Anonymity with responsibility is important for fostering transactions as we need to communicate to reciprocate but there are too many citizens in a modern society for us to be able to handle all the trust relationships that are needed for reciprocity to work. We need technology to help us handle these interactions. In the same way that we invented anonymous money to make trading or the exchange of value a trusted activity we need a technology to assist us in our community transactions.

If a system was in place that enabled people to vote anonymously from their homes or over their telephone, but that also assured the government that the person was both eligible to vote and only voted once, and if the government was unable to ascertain how any individual had voted, then the government and the citizens would be able to communicate accountable but anonymously for any other purpose. If we have a system that is good enough for electronic anonymous voting, it means we have a system that is good enough for most other citizen communications.

The local company Edentiti offers what we believe is the world’s first truly commercial user-centric identification system. In the following either it or a similar system is assumed to be available and used for communication. That is, the citizenry can communicate with the government in a manner in which the citizen remains in control of their identity. The system is structured so that the citizen is accountable for their use of their electronic identity and so that the government cannot abuse the system – for example by finding out how individual people voted or commented on situations, without the person first providing consent. A description of the model is found as an appendix.

Voluntary participation

The right of citizens NOT to participate must be respected. Not everyone will want to and they should not be compelled to. They should be encouraged and can be rewarded for participation but they must not be penalised for not participating. The reason for this is that as social beings we cooperate best when we are not coerced. This impact of this principle will become apparent later in this submission

Make Government information held on citizens readily available to the citizen concerned

The right of a citizen to know what information is kept about them is part of the Federal Government Privacy Law and the Freedom of Information Act. However, in reality it is difficult for a citizen to obtain all records about themselves. The government could easily allow no-cost access to the electronic information it holds, if it allowed a citizen to enquire about themselves from the government records. The ability to do this is important because it builds trust in the citizen in that they know what information the government is using when the government communicates and transacts with them.

Make Public Government information readily available

Once a person can find information about themselves it is a small step for the citizen to obtain other public and private information anonymously but with authorisation. That is, some information should not be seen by everyone. Each citizen wants to keep their own information to themselves but they do not mind if government officials see part of the information about them that is relevant to the official’s task. However, citizens want to know if others access their information and for what purpose.
There is much other information collected by governments that is available to citizens if they have a need to know. For example if a person wishes to purchase a property they need to know that the seller holds the title to the property. They do not necessarily need to know the identity of the seller. Other information, such as the name of student’s teacher, should be available to parents but not necessarily to others.
If I wish to make a submission to the government on a public matter then often a person has a right to know other information about the matter provided I have a legitimate reason for seeing the information. For example, if someone has parked their car in my driveway I should be able to find who owns the car.
Similarly a citizen should be able to register a complaint without revealing who their identity is if the complaint is legitimate. If the complaint is mischevious then the identity of the person making the complaint should be revealed but only in the case of abuse of the privilege.
Some information, once it has been used, should never be kept. A person’s vote is an example. Once a vote is counted it should be destroyed so that even the voter cannot see it. However other information should be readily and easily available if requested. In summary the Privacy Principles outlined by the Privacy Commissioner should be adhered to by the government.

Possible Emergent Systems

If the government adopts and implements the above there will be an impact on all government systems – some more dramatic than others. A few illustrations of what could emerge from giving citizens the ability to participate in a meaningful practical way are:

  • An up-to-date directory of public facilities
  • Reduced cost of identification and maintenance of records about citizens
  • A well used suggestion and complaints register
  • Less peak hour traffic and increased use of public transport
  • No water restrictions
  • Reduced greenhouse emissions
  • Continuously updated and reliable wellbeing measures
  • More efficient and better utilised health services

The important point is that whichever of the above will occur is a political decision but with a citizen-centric approach many things become possible with little cost or effort on the part of the government. It is expected that the techniques suggested can be used for almost any government function, from garbage collection to planning. The ones selected are ideas on which we have been working for some time.

An up-to-date directory of public facilities

The government has the addresses of public facilities. The government can use Google Maps to show these facilities and information about them on these maps. However, this is a significant burden on the government. Rather than leave this entirely up to the government, invite citizens to put up information and to help keep the information up-to-date. Make it easy for people to report inaccuracies or ommissions. With the above functionality suggested for identification those people who abuse the system by putting up incorrect information or misleading information are simply banned from putting up future information. The government can also make the information available to others who might provide ways to display the information on mobile phones for a charge or think of other innovative ways to displaying and sharing the information.

Reduced cost of identification and maintenance of records about citizens

Once a citizen can access their own records such as their driver’s license, births deaths and marriages, land title records, electoral enrolments, school and education records, it becomes a trivial task for them to identify themselves to anyone who needs to know who they are. At the same time the citizen can become responsible for updating their own personal information in government records which will reduce costs and increase the currency of the government data. People will be responsible for their own electronic biometrics such as voice prints, digital photographs, iris scans and can use them where needed and where appropriate.

A well used suggestion and complaints system

One of the major deterrents to people putting in suggestions and complaints is that people do not wish to be identified as the ones making the suggestions and complaints. The reasons are that people think there might be other unintended consequences of making the complaint public. You may want to object to a neighbour’s activities but you do not want to jeopadise the rest of your relationship with the neighbour. The system can be constructed so that people who make mischievous, or untrue statements can be banned from making complaints.

Less peak hour traffic and increased use of public transport

One method of reducing peak hour traffic is to pay people to car pool during peak traffic time. Car pooling is an inconvenience and people should be rewarded for pooling beyond the cost of the saving in fuel and wear on their cars. The money people receive for riding in car pooled vehicles can only be spent on public transport travel or it could be sold to people who then use it on public transport. The money to pay for car pooling comes from the existing bus subsidy. The implementation of this system will improve the utilisation of roads by giving a double benefit to the bus subsidy diverted through car pooling.

No water restrictions

Water restrictions can be removed immediately if we charge people more for water in times of short supply. Unfortunately this has social consequences of some people not being able to afford water. However, this can be overcome by using the extra money collected from higher water prices to Reward or provide incentives to the people who consume less per head. This reward money in turn must be spent on ways of further reducing water consumption or can be sold for unconstrained cash. This type of system requires self reporting of number of people in households and requires ways of keeping track of how money is spent. Both these need to be anonymous but accountable which is only practical with a reliable form of electronic identification.

Reduced greenhouse emissions

In a similar manner to removing water restrictions we can reduce the amount of green house emissions. A surcharge is put on all energy consumption but this surcharge is then distributed back to consumers of energy. The returned money must be spent or invested in infrastructure to reduce greenhouse emissions. The rate at which we wish to reduce emissions will be determined by the surcharge we put on energy. There are different ways to distribute Energy Rewards and they could be related to behavioural changes such as reduced consumption, taking public transport, cycling to work etc

Continuously updated and reliable Wellbeing measures

The ability to anonymously and reliably report transactions means we can ask people to supply their details of everyday transactions plus other demographic information about themselves. This will enable accurate longitudinal studies to be performed and it will enable the effect of particular policy approaches to be immediately measured.

More efficient and better utilised health services

By being able to easily identify people anonymously we can give people money to spend on health services rather than supplying regular non critical health services. This is embodied in the idea of MediSave as a change in the way MediCare funds are distributed.

Strategy for moving towards a Citizen Centric Governance

It is suggested that the move towards the goal of a more Citizen Centric Government be a gradual one which is driven by the community but facilitated by the government. It should only move in this direction if it is seen to bring true benefit to Society in the broadest sense and in ways that the community accepts. For example, addressing intractible problems like domestic violence will cost the community money in some form, but the fact that there is a direct immediate cost should not stop experimentation and trials.
One of the positive things about the approach is that it is based on people volunteering to participate but being Rewarded in some way if they do. Anyone can volunteer. We will know if different proposals are worthwhile when people agree to participate. If they don’t, the schemes will fail.
As identification and building trust are crucial to the whole process, it is recommended that giving people who ask for it access to their personal information be the first step in the process. If it is done by opening up the database to approved identity providers who deliver a service to citizens it will give a return on investment within a few weeks through the government getting up-to-date contact records and by citizens themselves correcting and maintaining their own online information. Edentiti can provide these services for no cost to the government. The government will have to participate in secure communications with the identity providers but with today’s technology that is a low cost.
Once an anonymous but responsible identification system is established, it is suggested that schemes such as the above be canvased and citizens invited to offer their own suggestions. The community will be able to debate the pros and cons along with any other ideas that come from citizens (both within and outside government employment).
It may even be that one of the systems introduced is a voting approach where people can “vote” if they want to see something initiated and give their priorities if they want several things to proceed.
Involving citizens more in the governance of a community based around the new Internet technologies is different to our current approaches and needs to be considered in an evolutionary manner. That is, it demands that we first set in place a framework. Set the parameters and let citizens choose between different ways of doing things. The government sets the broad agenda but where possible lets the citizens – both as individuals and as corporate entities – determine the specific details by using open markets of ideas and money to allow people to help choose the resource allocation

Privacy and Electronic Identification

Privacy and Electronic Identification

Electronic identification is of great advantage to organisations and individuals. There are also many benefits to individuals in having a national ID card and being able to access the information on the card electronically.

To date Australia has not introduced a national identification system because it has the potential to compromise an individual’s privacy. The fundamental concern with a National Identification Scheme is the ID number. If we each had our own ID number and if that number was used to identify records in different databases then it becomes very easy for the holders of our information to combine data from disparate databases without our knowledge or our consent.

This is a problem for the following reasons:

  • Information in some databases may be incorrect and that incorrect information can soon spread to other organisations. For example you may have a speeding ticket that you successfully defend in court. The fact that you have a speeding ticket might be spread to your credit history database but your appeal might not.
  • It is not in your interests for the person from whom you purchase groceries to know your health records as it serves no purpose.

While we can put in place rules to say that incorrect information must be corrected and forbidding organisations from sharing data, these are a second best solution when compared to a system that prevents this happening in the first place.

The rules for a system to prevent breaches of privacy are:

  1. A person is never identified by the same number in more than one database. For example, your credit card number only identifies you to the bank issuing the credit card;
  2. A person is entitled to look at any records of personal involvement with any organisation and has the ability to challenge the veracity of the data;
  3. Whenever information is passed from one organisation to another the person approves or is informed of the transfer;
  4. A person need only provide the minimum information required to complete a transaction.

The characteristics of such a system means that breaches of privacy are less likely to occur.

Identity systems based around electronic identity providers such as Edentiti enable these rules to be implemented because we use the person to identify themselves rather than an artifact (such as a number or a card). With an Edentiti system:

  1. A person is identified by their individual edentiti and has a different ID number for each relationship;
  2. A person can access their own information via their edentiti;
  3. A person’s edentiti can be told of the transfers of information;
  4. Only the minimum information needs to be transfered for any transaction.

What this means is that a national identification system can be implemented provided a person is only ever identified via an identity provider. Privacy is maintained because breaches cannot occur if the rules are followed.

Comment in the Economist

Comment in the Economist

http://www.economist.com/daily/news/displaystory.cfm?story_id=11901591

Traders did what comes naturally given the commodity they were trading. The problem is not with traders and the solution is not to be found in their operations. The problem is in the system where all asset classes use the same money. That is the traders trade money not assets. Money is not an asset it is a measure. Loans are assets but the money that is created is not an asset. There is a solution to be found by adjusting the system so that money and the asset against which it backed becomes linked.

The key phrase in the article is:

“As risk managers we should have insisted that all structured tranches, not just the non-investment-grade ones, be sold.”

Because we have made money highly fungible and increasingly so with the bundling of money this then means that all money is now the same level of risk because the underlying reason for its existence (the asset against which it takes its value) no longer applies.

Hence when an asset suddenly drops in value then all the money that was created against the asset should now drop but because it is no longer attached to the asset that means all money has to drop in value. This does not matter too much when there are assets also increasing in value but when we get whole asset classes being over priced and people being willing to create loans against them then we have a real problem because all money has less value.

The traditional solution is to let inflation reduce the value of all money but that is not a good outcome.

Another solution is to restrict the fungibility of money. We do not need to do it all the time or to everything but we do it with those asset classes that are subject to price bubbles like real estate or asset classes where we have a large amount of money loaned against the value of the assets in the class. When we create a loan against an asset class (a dwelling class) then we create tagged money. This money can now only be used for assets in that class – to buy a dwelling or to build a dwelling. You can of course sell your money to someone who wants to buy a house and the value of the tagged money will reflect the price inflation of the asset class. When someone uses the tagged money to build a new dwelling then the money they receive looses its tag because the asset class has increased in value. This system will work immediately it was introduced. That is, the US sub prime crisis would be restricted to the USA house and dwelling asset class and liquidity for the rest of the world would not “dry up”.

Another slower solution but perhaps a better one for the world is to increase the value of the assets under pinning the money. This of course is the theory on why we make money fungible but of course if people think that the value of their money is higher than the value of the assets they can buy then no one will spend their money until they see that inflation is going to take away its value. What if we now took some of the money that is used to purchase energy and we tagged it and required it to be spent on renewable energy infrastructure?

If we ignore finance charges a renewable energy power plant produces power more cheaply than fossil fuel burning plants because we do not have to purchase the fuel. So once a renewable energy plant is built you can always compete and sell your power so these power plants have increased the asset base.

Of course if we did both things at the same time then the financial systems of the world would stop gyrating and we would reduce greenhouse emissions – not a bad outcome.

Chapter 4 – Energy Rewards


The Energy Problem

The psychology of carbon pricing – Bottom level transactions – Conducting transactions –
The surcharge on energy – Can we achieve economic efficiency? – Simplicity and Fairness-
Emergent properties of the system

The Psychology of putting a price on Carbon

Conventional wisdom says that if we put a price on greenhouse emissions from fossil fuel energy plants, then energy from these plants will become more expensive. This will encourage investment in alternate ways to satisfy the need for energy. In other words price signals will encourage people to invest in clean energy. This approach is the “penalty” approach to changing behaviour and while it works it is remarkably difficult to implement and has limited effect.

One important reason is that people (and countries) see any penalty price increase as fundamentally unfair and will do everything they can to circumvent the penalty.

The debate surrounding the introduction of an emissions permits trading system in Australia shows all the ways that people use to bypass the penalty by finding reasons why they are a special case. This is quite understandable because the approach of increasing prices to get investment elsewhere is fundamentally unfair and people instinctively know it.

The fact is that there is plenty of money available from the sale of scarce goods – like oil and coal – and if it was invested in renewables we could solve the problem. When we trade any goods we know the trade is fair if the price we have to pay reflects the cost of producing the goods plus a reasonable profit margin.

Unfortunately for the fairness test, energy production costs are way below the cost to the energy consumer. It is well-recognised that there are enormous profits being made because of reasons other than the effort of producing the goods. So when a government tries to increase the price of a very profitable product through taxes (or permits), people instinctively and rationally decide that the penalty they are being asked to agree to is unfair unless everyone suffers the same pain. Trying to work out how everyone can suffer the same pain is an impossible task.

This means that no matter how hard we try, emissions permits trading will not give us the investment needed. In a perverse way it is likely to increase the attraction of producing polluting energy. A clever energy producer will be able to achieve an increase in price for polluting energy through effective lobbying so that they will not have to pay for emissions permits. This will cause them to try to produce even more energy in polluting ways because it is more profitable. People who consume little energy will resent the fact that they have to pay more for groceries because they believe they are not the cause of the problem. Motorists who have seen the price of fuel skyrocket with no visible increase in the availability of renewables will believe that an extra increase in price is not going to make a difference and will question why fuel should be included.

To solve the problem we have to leave the price of energy to be set by the market but we must require that some of the profits and taxes from the sale of coal, oil and electricity be used to invest in the market place in ways to produce green energy or in ways to save energy. This is fair to all – both the producers, the buyers and the community. This chapter describes the mechanics of how this can be done and gives an indication of how quickly it will work, whether there is enough green energy available, and how quickly it can be developed. The beauty of this approach is that it will not impact on the economy of any country that embraces it and make the country richer.

The bottom level transactions

The concept behind Energy Rewards is to make everyone pay a little more for the energy they use. Put this money into a pool of savings and distribute it as Rewards to those whose energy consumption produces the least amount of greenhouse gases. Those who receive Rewards agree to only spend their Rewards money on ways to either:

  • remove greenhouse emissions from the atmosphere,

  • reduce the amount of green house gases going into the atmosphere or

  • produce energy that will generate little or any greenhouse gases.

We can measure the success of the program by measuring the amount of energy produced (or saved) from the investments against the amount of greenhouse gas emissions produced. We keep the system operating until the amount of greenhouse gas in the atmosphere reaches the levels we desire.

Overview of how the transactions could be conducted

It is often said that a concept is the easy part. Making it work is the difficult bit. One way to make implementation easier is to make it as simple as possible and make it self-regulating.

How we collect the money for Rewards is largely irrelevant. It can be done by putting a price on carbon and using either a carbon tax or emissions permits. However, trading system is unnecessary and only creates systems that are difficult to police and open to abuse. They give rise to many regulations and require continuous agreement.

The simplest thing is to charge an amount on ALL energy produced and to put it into the Rewards fund. This can be collected at any appropriate time in the production chain and the simplest is at the point where the energy is last sold. The amount of the charge becomes a carbon price based on the energy being generated and is fairly easily calculated based on the profitable portion of energy generation – that which incurs charges over and above the cost to produce. To keep the equation fair and simple we can put this charge on the electricity that is sold to end consumers, on liquid fuel sold to end consumers and on solid fuels sold to end consumers.

The next step is to calculate to whom to give the Rewards. Viewed from the system’s objective of increasing investment in renewables, it does not matter who gets the Rewards as it all has to be spent on renewables. What matters is whether it is simple enough to encourage involvement and whether it is fair. What is seen as fair for electricity is likely to be different from “fair” for liquid and solid fuels. For transport fuels it is probably too complicated to implement anything other than simply giving money back to the people who paid for the Rewards in the first place – that is each litre of fuel will generate a Reward to the purchaser.

With electricity it is possible to use the same system as used with Water Rewards because it is relatively simple to measure how to give Rewards to low per head energy consumers. Rewards can be calculated on the basis of the amount of energy taken from the mains per person at their designated home address. How much each household pays is known. How many people live at a household can be reported. Rewards collected from the payment of electricity can be given in inverse proportion to the amount of electricity consumed by an individual in their designated place of residence. The system can be organised so that every individual who wishes to participate will get some Rewards.

An important point here is that most electricity is actually consumed and paid for by organisations. However these build the cost of expenses into their business model so that it is the end consumer who bears the brunt of any changes. Therefore, limiting Rewards to individuals is fair and works to increase the number of Rewards available for distribution to all households.

Compliance with the system is enforced by the system of Rewards being voluntary and as part of the signing up participants will have to agree to abide by the rules for the distribution of Rewards. If they disobey the rules then they are not given Rewards for some predetermined period of time.

The third part of the system is the spending of Rewards. This again is simple to organise; We just open up a market place where buyers can spend their Rewards. Suppliers who think they have a product or service that will help build infrastructure to reduce the level of greenhouse gases can volunteer to sell their products or services and at the same time they can say how they will reduce the level of greenhouse gases. When someone pays an approved supplier using Rewards, the supplier can then convert the Rewards into unrestricted money (i.e. general currency). The body running Rewards will agree to let suppliers sell in the market providing their claims on reduction of gases is achieved. If they do not obey the rules then they and any colluding buyers are banned from the system for a period of time.

The system must remain flexible so that over time, if it is deemed necessary, the value of Rewards can be adjusted to reflect the amount of greenhouse emissions saved per Reward spent.

A market in Rewards will arise, with people who feel they are unable to purchase anything in the sustainable energy market place offering to sell their Rewards to others. Selling a Reward does not change the need for the Reward to ultimately be spent in the market place for renewables and saving emissions. It is unknown what the market price of Rewards will be but we can confidently predict that it will be significantly less than the face value of the Rewards. If it isn’t, people will have no need for the Rewards as it will indicate that renewables are recognized as being as economically efficient as fossil fuel sources.

The interest on Rewards money is used to run the system and any money left over is put back into the Rewards pool.

How much of a surcharge do we need to put on energy?

The surcharge placed on energy should equate to the estimated amount of money required to invest to generate all energy through renewable sources over a period of time.

Let’s start by setting a goal of generating all electrical energy through renewable sources within ten years.

At present the total electricity energy consumption of Australia is about 200,000 gigawatt hours per year or an energy generating capacity of 23000 megawatts at 100% capacity. This means we need to build 2300 megawatt hours of renewable energy capacity per year for 10 years to completely replace electricity from burning fossil fuel with renewable energy production.

We know that today we can build geothermal power stations and solar thermal power stations for a cost of $4.5 million per megawatt of continuous power. This means we need to invest about $10 billion per year at current prices to build the infrastructure that will allow Australia to generate one hundred percent of its electricity energy requirements through renewable sources within 10 years.

However, we also know that the cost of building systems such as power stations decreases by 15% each time the built capacity doubles. This means that over 10 years we will need to spend $76 billion or an average of $7.6 billion per year.

So, to become energy neutral within 10 years we would need to increase the price of energy by an average of 4 cents per kilowatt hour over the next 10 years. If we gave this increase back to consumers but required them to spend the money on investing in renewable infrastructure, the net cost to consumers would be close to zero.

Is it Economically Efficient?

How can we be sure that Rewards will achieve the objective of creating enough sustainable energy infrastructure to meet our needs and that it will achieve this at the least cost?

The answer is in the way that Rewards uses a free market; it’s a mechanism that is widely accepted as leading to the most efficient to allocation of resources. As explained earlier, a market place of many buyers and many sellers trading in a particular good will allocate the money to produce the system in the most economically efficient manner. This remains true regardless of the good which in this instance we have defined as energy infrastructure and greenhouse reducing technologies. Using Rewards we can create a self-regulating market place in ways to reduce greenhouse emissions, and the best and most economical ways to do this will be the outcome of the system.

Fundamentally the running costs of renewable energy is less expensive than burning fossil fuels because the cost of the fuel is zero. The reason it is seen as more expensive is that we have yet to build enough renewable infrastructure capacity while with fossil fuels we have low costs because we have invested in capacity over many years. The capital cost of infrastructure is dominated by the interest costs charged, which in financial terms is an opportunity cost and a charge caused because of expected inflation. Rewards breaks the investment interest problem by effectively removing the capital charges from investment. It is similar to patient equity investment where the returns are expected in years rather than months.

Simplicity and Fairness

The essential ideas in the detail of the system are simplicity and fairness. The scheme should be judged on whether it is seen to be fair and whether people can understand it. Without popular support any system is unlikely to obtain wide acceptance and it will be tempting for special interest groups to create a political divide.

The proposed system is likely to gain widespread support providing it is explained properly. Its benefits are appealing: it will work; it need not put any Australian Industries at a disadvantage; it will create a large number of jobs and investment opportunities in new technologies; and it will be socially equitable.

It will attract considerable voter support because it will lead to more wealth for the citizens of the country. For once it will be new wealth that is created, not money taken from existing well-to-do people. That is, the system will ensure that the distribution of new wealth is divided more evenly across the community. The community is asking for something different from our political system. One that increases the wealth of most citizens while at the same time solving the greenhouse emissions problem should be a relatively saleable proposition. The system can be introduced gradually with the first Rewards coming from existing excise and resource taxes which will illustrate the potency of the approach at no cost to the consumer or to industry.

The question of hurting export industries is an important one. There are arguments that any increases in input costs to Australian industries will make them less competitive. With Rewards the increase in energy costs will be relatively low in comparison to the existing variations in costs caused by the oil price shocks and by variations in the Australian dollar. It will also be much, much lower than the increases from emissions trading. As pointed out above, it can be introduced at no cost if the Rewards are taken from existing taxes. Most export industries are not energy intensive and those that are, such as aluminium smelting operations, should be among the first to move to renewable energy.

One of the potential opponents of the scheme is existing power generators. It is unfair that their assets will become worthless and so they should be Rewarded if they close down fossil burning power stations. The amount of the Reward could be the replacement cost of the fossil burning power plant. They will have to spend their Rewards on other ways of producing energy. Given this scenario it is likely that existing power generators could become the chief supporters of the system.

Another argument put forward by those wary of Australia starting first in the renewables market is that it is unfair if Australia reduces greenhouse emissions while the rest of the world (those who make up most of the emissions) does little. Their view is that we should wait until there is a global agreement in place before doing anything. This however will only result in further delays to the inevitable changes that Australian industry must begin to make.

The alternative perspective is that Rewards and global emissions offer a once in a generation opportunity for Australia to increase its wealth and prosperity. Rather than causing a reduction in living standards it is much more likely that Australia will experience an unprecedented increase in wealth as resources are diverted towards long term investments where climate and land forms give us a competitive advantage. Commonsense tells us that money diverted to investment in infrastructure to produce massive amounts of new energy at less than half the running costs of existing methods must increase total wealth.

Emergent Properties of the System

The goal of the system is to reduce greenhouse gases. We know that will happen with Rewards. We also know that the country can afford to divert $76 billion of investment over ten years.

For those who want to sell their Rewards rather than directly invest them, it is expected that the Rewards will initially trade for around 75 percent of their face value. This reduces the inflationary impact of the system and reduces the amount of money in the system which in turn increases the value of the underlying assets. In other words the excess money that has been created from the minerals boom and from inflated house prices will be removed from the system through investment in productive assets. It is expected that it will lead to a reduction in house price and to an increase in exports as Australia ships more energy and associated technology overseas.

At the end of ten years Australia will have an energy-producing infrastructure that will last at least 100 years; whose base energy running costs are half the cost of current fossil energy running costs because the fuel is “free”. The whole process can be speeded up and Australia could become the energy provider for most of Asia. Once the capital infrastructure is in place the cost of producing sustainable energy is of the order of one cent per kilowatt hour. This could lead to an unprecedented expansion of wealth across the globe because energy is the driving force of economic development.

Australia can export renewable energy to Asia in various ways. Indonesia and South East Asia can be supplied from direct current power lines from the north west of Australia. Energy intensive industries such as steel or aluminium production, and generation of liquid fuels can all be based close to renewable energy plants. Similarly industries such as computer server farms to power Google searches are best located next to power sources because it is cheap to export information compared to exporting energy.

The coal industry would be encouraged to find alternative markets such as becoming a supplier for the production of synthetic materials. Work is already underway in this area and there is a real possibility for coal to find a new role that will make it a more valuable commodity than it is today.

Another emergent property of the system will be the widespread ownership of new energy resources by the bulk of the population. One of the products that will attract Rewards money will be solar and geothermal power plant investments. Companies wishing to finance these ventures will look for ways to convince Rewards holders to become part owners in the plants in return for the Rewards. with the result that we will see many people holding shares in power generators to fund their superannuation.

Community-based renewable power schemes for suburbs or even whole new industries combining energy, water and greenhouse gases are other potential outcomes. However, these are only possibilities. What will emerge will probably be quite different from anything we can envisage right now. What is certain is that the future will be an energy sustainable one with greater wealth created for all.

Emergent Properties for the world as a whole

The same principles of Energy Rewards can be applied across countries. The details will vary but the principle will remain the same. Countries whose population creates few greenhouse emissions per head of population will be Rewarded but they must use the Rewards to build renewable energy plants which in turn will return a dividend to the Reward giving countries. That is, everyone benefits and the world is a richer place.

Summary

This chapter has outlined a framework for the development of a sustainable energy economy. The exact details will change from the initial guesstimates but the overall principles will remain the same. That is, we create simple day to day transactions that lead towards a goal of energy sustainability with no green house gas emissions. If the system does not work the way we expect, we can change the day to day transactions in small ways to get the desired outcomes. Rather than planning a journey into the unknown we build a system that can adjust itself and adapt to the inevitable changes to the environment that will be created because the system itself exists.