Wednesday, September 2, 2009

An energy policy for the 21st century

Communist Energy Policy

One of the disappointments of the 2001 - 2009 Communist government has been its failure to put in place an adequate energy strategy. Moldova remains hopelessly dependent on fossil fuels imported from ultimately unreliable suppliers, be it gas from Russia, oil from the Gulf or electricity from the gas-fired power station at Cuciurgan in Transnistria.

It's not that the communist government was inactive; just that what they did was either negligible (e.g. opening a couple of village straw-burners) or counter-productive (e.g. making Moldova even more reliant on Russian gas by extending reticulation networks).

What is needed now is a true 21st century energy policy, aimed at replacing fossil fuels with renewables and at replacing imported energy with the home-grown variety.

Moldova's Options

At first glance Moldova has little in the way of energy resources; just a couple of very small oil fields in the south of the country, and not much else.

But think a bit more laterally. The country has significant potential for generating energy from wind, especially in the south. Solar panels are becoming more efficient all the time, and could represent a significant source of power in summer at any rate. Sunflower oil is the main ingredient in the manufacture of bio-diesel. Finland could provide technical assistance to enable Moldova to construct small, modern and safeish nuclear power plants (or alternatively the country could take a stake in Romania's Chernovoda facility).

What it will take to make some or all of this happen is a bit of facilitation by government. Build-Own-Operate-Transfer (BOOT) infrastructure projects should be developed to channel private sector investment into:

1. A redesign of Moldova's power grid, such that it would allow a myriad of small generation stations (e.g. wind turbines) to put power into the network (this would need to be accompanied by a law forcing power companies to buy the power at a market rate)

2. The establishment of at least one biodiesel plant and at least one bioethanol plant

3. The development of factories to make solar panels, efficient woodburners, small scale windmills, fuel pellets etc., and the development of a chain of stores to distribute them

4. The construction of combined cycle waste burners to provide both heat and electricity to apartments and office blocks.

Incentivising the right behaviours

The other 'out there' idea which I am a fond proponent of is Al Gore's notion of taxing what we burn rather than what we earn. If you think about it, it makes perfect sense - why discourage the earning of income by taxing it? The earning of income is a good thing and should be encouraged! Instead, what we should tax is the usage of the Earth's limited natural resources, as this will encourage their conservation and re-use and allow the full real cost of an economic activity to be understood.

The way I see this happening is a ten-year phase out of income taxes accompanied by a ten-year phase-in of taxes on resources (most notably on fossil fuels). The phase-in period would allow the tax system to be recalibrated as time goes by to ensure that taxes collected are sufficent to both fund the government and repair environmental damage.

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