Good. Now We Have It On The Table

I am happy to see that Barack Obama is not entirely in reality-avoidance mode with his climate policy:

You know, when I was asked earlier about the issue of coal, uh, you know "” Under my plan of a cap and trade system, electricity rates would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I'm capping greenhouse gases, coal power plants, you know, natural gas, you name it "” whatever the plants were, whatever the industry was, uh, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers.

To folks with any kind of background in economics, this has to be the case.  Reducing the total output of current power plants, and thereby obsoleting all that investment and squeezing supply, at least in the medium term until new capacity of other types can be built, can only lead to a) rationing through blackouts or b) higher prices to ration the shorter supply.  The cost of option a is so high that price is going to have to be the rationing mechanism.  Skyrocket is actually pretty close to what would happen to rates if Obama sticks by his plan of limiting greenhouse gasses to 1990 or earlier levels.  (His explanation is actually pretty poor for the mechanism - pass-through of retrofit costs would likely be minor to the supply / demand balancing effect of shaving 20/30% off supply in a short period of time.

I think a frank discussion of the dangers of a "pollutant" vs. the cost of abatement is a fair one.  I personally think the threat of CO2 is wildly exaggerated, and the cost of doubling or tripling electricity costs will hurt Americans far worse than a few tenths of a degree of warming.

But don't get too excited.  Obama is still living in economic never-never land on other related issues:

yes, there is going to be some increase in electricity rates on the front end, but that over the long term, because of combinations of more efficient energy usage, changing lightbulbs and more efficient appliance, but also technology improving how we can produce clean energy, the economy would benefit.

Sorry, but this is way wrong.  Obsoleting perfectly good infrastructure and wholesale replacing it with trillions of dollars of new infrastructure does not help the economy any more than if a massive earthquake had destroyed the plants.  This is the broken windows fallacy on steroids.  The only benefit from all this cost will be whatever climate benefit we accrue from the CO2 reduction.  For there to be such a benefit, one must assume a) substantial future warming and b) that the current temperature happens to be the best possible temperature we could ever be at.  But that, as they say, is a whole other blog.


  1. ElamBend:

    I think most people, politicians in particular, just don't realize just how much our electricity comes from coal.

    Obama's outline plan from the video reminds me of the old Gary Larson FarSide cartoon where the professor has a bunch of calculations followed by a 'Miracle Occurs Here' followed by more calculations.

    To say that we are going to completely jack up energy prices and act like alternatives would appear over-night just boggles the mind. Forget about the effect it would have on the economy.

  2. rxc:

    The replacement infrastructure, whether it is wind or solar or nuclear, cannot be built fast enough to replace what would be shutdown under the caps, so the US is bound to start to see rolling blackouts. I predict that after a few weeks of this, the screams will get so loud that the caps will be rolled back. Remember what happened in California the last time some politicians tried to implement a "fair" electrical price system that also favored the their preferred power source.

  3. Corky Boyd:

    The flight of industry will dwarf the effects of connsumers paying higher bills. Electricity intensive industries such as aluminum smelting and steel mini-mills (scrap to product) will go offshore and if that is banned simply shut down.

    You simply can not be competitve with 30 or 40 cent electricity if the Chinese are producing aluminum with 5 cent electricity. All aluminum refining will go to China and thier coal plants. Nuclear could be competitive, but unless there is legislation to consolidate lawsuits, no utility will allow itself to be bankrupted like Lilco from endless litigation and obstruction from the state of New York over the Shoreham plant.

    The EU has just discoverd the aluminum problem (what took them so long?) and are delaying their cap and trade tagets. The sheer idiocy of liberals and their lack of understanding for basic economics boggles the mind.

  4. Mike:

    January 2008: Obama Vows to Bankrupt Anyone Building a New Coal Plant

  5. Mike:

    September 2008: Biden Says ‘No Coal Plants Here in America’

    I consider myself an independent. In all honesty, I don't care too much for McCain. But I know if I vote for "the third guy", that would be one more vote for Obama. I have to vote for McCain to cancel someone else's vote for Obama.

    Obama is a dangerous man. With the likeliness of a Democrat controlled Congress, there will be no limit to the damage that can be done.

    Can Napolitano's all day kindergarten ever be reversed without disrupting or upsetting families across the state? Can Social Security be reformed?

    Once Obama damages our economy, and has coal plants shut down, or sets up a government health care system, can the run-a-way train be stopped?

    At least with McCain, we know he goes against his party on several occasions! Can we be sure of that with Obama? Or will Obama simply "rubber stamp" anything that comes out of the Democrats?

    Obama couldn't even vote "Yay" or "Nay" on some of the most important legislation. He took the third route: "Present".

  6. tomw:

    One day out, and I still harbor the smidgen of hope that there are enough adults that will vote using their brain rather than their feelings. Just a smidgen, that the quiet majority will reject 'the music man' telling us the seas will recede and the earth will be healed starting with his election.
    My my, but he has an opinion of himself. Smug bastid.


  7. eddie:

    You should (unfortunately) probably get used to spelling his name correctly: "Barack". You've been consistently spelling it with two r's, which is a different word entirely.

  8. Xmas:


    Iceland is hoping for skyrocketing electricity prices. They're trying to lure aluminum smelting to their country with the lure of cheap, geothermal electricyt.

  9. xpatUSA:

    The Obama plan will never happen. Big Electricity will speak to it's lobbyists. The lobbyists will speak beneficially to their Goode & faithful Servants, also known as Representatives. Congress will fail to pass anything remotely resembling the Plan. Another Kyoto, anyone?

    Let the CO2 clouds roll.

    Well, actually, coal is better known for it's SO2 emissions when burned. SO2 + H20 = H2S03 = sulfurous acid = acid rain.

    Happy Voting,