Coyote Blog

Kudos to Kevin Drum for his obvious skepticism about California high speed rail.  Too often the left accepts high speed rail projects credulously, despite their backbreaking costs and little proven impacts on energy use or greenhouse gas production.

I have had back and fort over rail projects with supporters for years, and I am always particularly amazed at how supporters treat me like some kind of neanderthal  (e.g. "the debate is over!" and "rail is settled policy.")  I finally figured out the other day how to characterize rail supporters arguments.

They are like kids who might say, "why wouldn't you want Santa Clause to bring you an Xbox for Christmas?"  They treat rail like it is a birthday present, and that I am some sort of schlub for turning down such a shiny new present.  But of course it is not a present, and costs matter.  The problem with rail is not that I don't like riding on trains, the problem is that I don't like draining resources by force from millions of people so that a few thousand middle class commuters can ride on trains to work.

As I have written a number of times, reserves numbers for oil are not based on the total oil though to be under the ground, but the total oil thought to be under the ground that is economically recoverable at expected prices.  Changes in technology and/or oil price expectations change the amount of reserves, even without the discovery of a single new field.

Oil companies have known about the formation, and the oil trapped in it, since at least the 1950s. But they couldn't get more than a trickle of oil from the dense, nonporous rock.

That began to change in the early 2000s, when companies in Texas began using new drilling techniques in a similar formation near Fort Worth known as the Barnett Shale. They would drill down thousands of feet and then turn and go horizontally through the gas-bearing rock"”allowing a single well to reach more gas. Then they would blast huge volumes of water down the well to crack open the rocks and free the gas trapped inside.

The real shift has come in the past two years as companies honed drilling techniques, leading to bigger wells, faster drilling and lower costs. Marathon, for example, last year took an average of 24 days to drill a well, down from 56 days in 2006."

So apparently, oil production in North Dakota may soon pass that of Alaska, though this is more due to the fact that production can be ramped up in North Dakota without an act of Congress, which is not the case in Alaska.

The largest threat to oil prices and production remains not peak oil, but the fact that most of the world's best reserves rest in the hands of state-run oil companies whose competence and willingness to invest for the long-term is sometimes in question.

Bloom Energy is introducing what looks like a 200kW fuel cell that runs on natural gas for about $700,000.  That compares pretty favorably with the current cost of at least $2,000 per KW to build a coal plant, especially when one factors in reduced distribution and pollution costs.  We have gobs of natural gas and are finding more all the time, and (unlike something like hydrogen) the distribution and storage infrastructure is already in place.  Hope it works.

I often critique new energy technologies here, and that critique is often confused with a hostility to new technologies.  This is far from the case.  Living here in Phoenix, I would love to have cheap solar cells to spread over my roof like carpet.  What I am opposed to is government subsidies for technologies that are not even close to economic compared to current alternatives.   I don't know the Bloom business model  (I am suspicious they have a large rent-seeking component if KP is funding them) but if they can make these work subsidy free, that's great.

I have written about it before, but here is Matt Parker:

I have just purchased a packet of Boots-brand 84 arnica homeopathic 30C Pills for £5.09, which Boots proudly claim is only 6.1p per pill. Their in-store advice tells me that arnica is good for treating "bruising and injuries", which gives the impression that this is a very cost-effective health-care option.

Unlike most medication, it didn't list the actual dose of the active ingredient that each pill contains, so I checked the British Homeopathic Association website. On their website it nonchalantly states that to make a homeopathic remedy, they start with the active ingredient and then proceed to dilute it to 1 per cent concentration. Then they dilute that new solution again, so there is now only 0.01 per cent of the original ingredients. For my 30C pills this diluting is repeated thirty times, which means that the arnica is one part in a million billion billion billion billion billion billion.

The arnica is diluted so much that there is only one molecule of it per 7 million billion billion billion billion pills.

It's hard to comprehend numbers that large. If you were to buy that many pills from Boots, it would cost more than the gross domestic product of the UK. It's more than the gross domestic product of the entire world. Since the dawn of civilisation. If every human being since the beginning of time had saved every last penny, denarius and sea-shell, we would still have not saved-up enough to purchase a single arnica molecule from Boots.

The amazing thing to me is that the folks lining up to be fleeced by this industry, and who will vociferously defend that they are not being fleeced, are the types of folks who are typically the first to throw up the barricades in the street when gas prices rise by 5 cents.

By the way, Arizona has a state board of homeopathic examiners to check ... what, exactly?  To guarantee no active ingredient made its way into the product?

Here is a funny related video:

From a reader:

One contentious comma inserted two years ago into the United Nations road map for a new deal to fight global warming is again causing squabbles among delegates from the 193 nations in Copenhagen devising the pact.The comma was inserted on the first page, section 1 b (ii), of the so-called Bali Action Plan at the meeting on the Indonesian island in 2007 at the insistence of the U.S. It caused a debate that ran for two hours as the punctuation mark left open to interpretation the responsibilities of rich and poor nations to cut greenhouse-gas emissions....

Delegates from the U.S. argued for the comma to be inserted so that "actions" by developing countries and not just support from industrialized nations, would be measurable, reportable and verifiable, or MRV in UN jargon.

"It took almost two hours to debate the comma," Quamrul Chowdhury, a Bangladeshi envoy who's negotiated climate issues since before the Rio Earth summit in 1992, said in an interview in Copenhagen. "One comma creates a lot of trouble."

Even with the comma, the clause is still argued over....

"The comma is a manifestation of a massive area of disagreement still among the parties," Havercamp of the Environmental Defense Fund said.

I often conclude my presentations on climate that conservationists will likely look back in 10-20 years on the global warming hysteria as the worst thing that has ever happened to the environmental movement.  While we focus 110% of our attention on a trace, naturally occurring atmospheric gas that our bodies exhale and plants need to live, here is what we are not focusing on.

All the problems in these pictures are ones we demonstrably know how to solve while still allowing for the economic growth that is pulling a billion Asians our of poverty.  The same cannot be said for our current ability to eliminate CO2, and therefore most combustion, without imploding our economy.

The Thin Green Line writes:

But other problems have such a straightforward solution the only question is, why haven't we implemented it already?So it is with the phone charger (H/T Mother Jones). How many old ones do you have kicking around in a drawer? If you're loyal to a particular phone, you may even have several identical chargers. Because they're electronic, you're also burdened with disposing of them properly lest they leach their toxins into some poor, unsuspecting landfill.

Not only that but chargers use a good bit more electricity than they need to and are vampires"”meaning they continue to draw power even when they're not, you know, charging.

Now imagine a world where not only did phone chargers use less energy, but they were universal, meaning any charger fit any phone. That would mean about 600 million fewer chargers each year stashed in drawers around the world and reduce greenhouse gas emissions by 15 to 24 million tons a year"”not even to mention e-waste.

The UN's International Telecommunication Union has approved this universal dreamboat of a charger. It will use half as much energy on standby. Samsung, Nokia and Motorola have already agreed to use it. Of course, they're hemorrhaging business to BlackBerry and Apple...no word yet from those guys.

I wrote:

There are at least two problems with this.  The first is that consumers are all different.   A lot of cell phones (and other devices like my kindle) are standardizing on a mini-USB connection.  Should I use the UN's solution, which is likely inferior?  Why?  Most of the time I don't even travel with a charger, I plug the mini-USB into my computer to charge.  That way I only have 1 charger on the road, for my computer.  You want me to carry 2, in the name of having fewer chargers?   You might say, "well, I hadn't thought of this situation," and I would say, "that's the point - you can't, there are 6 billion of us individuals out there."

The second problem is innovation.  Who says that innovation won't demand a different type of connection in 2 years?  Do you really want your technology gated to some working group at the UN?  Go back in time and imagine the government locking in a standard on something.  We still would have 801.11a wireless only, or cars would still all have crank starts (but they would all turn the same direction!) or cars would all have the same size wheels.  If the UN had invented something 3 years ago, it would have been power only and not data.  Today, most cell phones have power connections and connectors that double as data ports.

There is always a technocratic urge in messy changing technology markets to swoop in and mandate a standard from above, even while the technology is still evolving.  The problem is that neither you nor anyone else knows everything.  Hayek described this information problem well but you make it abundantly clear on this site you have no familiarity with Hayek.  You extrapolate what seems to be a good solution from your narrow knowledge, but cause many of us to sub-optimize because you did not anticipate how I use my charger or what technology some cell phone manufacturer today may be developing that requires a different kind of charger standard.

I had wanted to dig into the costs of a Florida solar facility that Obama recently visited.  Fortunately Ronald Bailey does it for us:

Now let's do a rough calculation of the costs of DeSoto Solar versus conventional power sources. According to the Electric Power Research Insitute, a modern 1,000 megawatt coal plant without carbon capture technology would cost about $2.8 billion to build. Adding carbon capture would boost the cost to as much as $4.7 billion.

The 25 megawatt DeSoto facility cost $150 million. Scaling it up to 1,000 megawatts would cost $6 billion. But coal power plants operate 90 percent of the time snd solar only 30 percent, so in order to get the equivalent amount of electricity out of solar plant would mean tripling the capital cost for a total of about $18 billion. In other words, building a solar power plant costs between 4- and 6-times more than conventional, or even carbon capture, power. Even worse, a scaled up DeSoto-style plant costs 18-times more than a natural gas plant.

This post at Dr. Helen's site is dead on.  She posts a number of comments from Don Surber's site, starting with this one:

Commenter Sean says:

Businesses aren't hiring because no one knows what in the hell our economic system is going to look like 5 years, or even 5 months, from now.

Will "Cap and Trade" get implemented as the Democrats hope?

How much of an upheaval will "Healthcare Reform" end up being?

Is the administration and Congress done overhauling regulation of the Financial Industry?

No prudent investor is going to bet their money (i.e., invest in growth) when it is conceivable that the government is going to radically alter how 50% of this nation's economy functions.

This is exactly where I am right now.   The business I own has been growing at about 10% a year for the last five years.  In each of the last 3 years, we have invested an average of a half million dollars in new facilities.  In the past five years I have added over a hundred new positions in the company.

This year we will add ZERO.

It is not for lack of opportunity.  Because we are on the low-cost end of recreation, we have had a record year.  And because I am in the business of privatizing public recreation, my phone has been ringing off the hook.  All over the country, desperate public recreation authorities are calling me to say that they are out of money, their parks are about to shut down, and can I do something to keep them open.

To the extent we find opportunities to grow with limited investment, we are pursuing those.  But I just cannot put up any more capital in this environment.  If I make an investment, how much will the government let me keep?  How much are taxes going up (because they certainly are going up)?   Inflation simply must be around the corner given the monetary policy this country is pursuing -- so will my business be able to raise prices fast enough to keep up with inflation in my inputs?

The legislative risks we face are tremendous.   My two highest costs are labor (50% of revenues) and fuel and electricity (about 10% of revenues).  Thus, nearly 2/3 of my costs are going to be increased by the current health care bill and cap-and-trade bill.  The only question is how much.   If forced to guess, I would estimate that my labor costs are going up 8% and my fuel costs by 20%,which when you compute these by their percentage shares, says that my costs will likely increase by at least 6% of revenues.  My current profit margin before tax is between 6 and 8 percent of revenues.  I may be able to raise prices fast enough to cover this, or I may not.  In a business with thin profit margins, there just isn't much, uh, margin for uncertainty.

And none of this takes into account the proposed new paperwork load that will likely make my business less enjoyable to run (example of current mess).  From having to track and report our company's greenhouse gas emissions to keep track of the health insurance choices made by every employee, it is sure to be ridiculously burdensome.

So I am going to wait it out for a while.

From the comments of this post, which wondered why Americans are so opposed to the climate bill when Europeans seem to want even more regulation.  Leaving out the difference in subservience to authority between Europeans and Americans, I wrote this in the comments:

I will just say:   Because it's a bad bill. And not because it is unnecessary, though I would tend to argue that way, but for the same reason that people don't like the health care bill - its a big freaking expensive mess that doesn't even clearly solve the problem it sets out to attack. Somehow, on climate change, the House has crafted a bill that both is expensive, cumbersome, and does little to really reduce CO2 emissions. All it does successfully is subsidize a bunch of questionable schemes whose investors have good lobbyists.

If you really want to pass a bill, toss the mess in the House out. Do this:

1. Implement a carbon tax on fuels. It would need to be high, probably in the range of dollars and not cents per gallon of gas to achieve kinds of reductions that global warming alarmists think are necessary. This is made palatable by the next step....
2. Cut payroll taxes by an amount to offset the revenue from #1. Make the whole plan revenue neutral.
3. Reevaluate tax levels every 4 years, and increase if necessary to hit scientifically determined targets for CO2 production.

Done. Advantages:

1. no loopholes, no exceptions, no lobbyists, no pork. Keep the legislation under a hundred pages.
2. Congress lets individuals decide how best to reduce Co2 by steadily increasing the price of carbon. Price signals rather than command and control or bureaucrats do the work. Most liberty-conserving solution
3. Progressives are happy - one regressive tax increase is offset by reduction of another regressive tax
4. Unemployed are happy - the cost of employing people goes down
5. Conservatives are happy - no net tax increase
6. Climate skeptics are mostly happy -- the cost of the insurance policy against climate change that we suspect is unnecessary is never-the-less made very cheap. I would be willing to accept it on that basis.
7. You lose the good feelings of having hard CO2 targets, but if there is anything European cap-and-trade experiments have taught, good feelings is all you get. Hard limits are an illusion. Raise the price of carbon based fuels, people will conserve more and seek substitutes.
8. People will freak at higher gas prices, but if cap and trade is going to work, gas prices must rise by an equal amount. Legislators need to develop a spine and stop trying to hide the tax.
9. Much, much easier to administer. Already is infrastructure in place to collect fuel excise taxes. The cap and trade bureaucracy would be huge, not to mention the cost to individuals and businesses of a lot of stupid new reporting requirements.
10. Gore used to back this, before he took on the job of managing billions of investments in carbon trading firms whose net worth depends on a complex and politically manipulable cap and trade and offset schemes rather than a simple carbon tax.

Payroll taxes are basically a sales tax on labor.  I am fairly indifferent in substituting one sales tax for another, and would support this shift, particularly if it heads of much more expensive and dangerous legislation.

Update: Left out plan plank #4:  Streamline regulatory approval process for nuclear reactors.

Update #2: Readers of TJIC wonder if this is effective, calling it just a rebate of the tax.  I answered in the comments as follows:

I think "rebate" is the wrong way to think of it. Of COURSE if you paid a higher price and then had the exactly that amount rebated to you, then it would not be a very powerful incentive. But that is not what is being proposed.

I think things are easier if you consider payroll taxes to be a sales tax on labor, which they are in effect. So we have a sales tax regime, with differing tax levels on different types of products. If we raise taxes on one item, but drop taxes on the others, then sales of that one item are certainly going to suffer. Its price just went up relative to all the other things we buy. Let's imagine a simplified world where we can buy any of 10 items (call them A, B, C, etc), each priced at $10, and we have $100 in income. Now imagine the same world tilted such that we have $105 of income and all items are $10 except "A" which now costs $20 each. On average, most people will buy less "A" and more of other stuff.

I'm a libertarian, so I grit my teeth at such games. I don't like the taxes in the first place. I don't like the government playing outcomes games with taxes. But my point is that if we are going to insist on doing something to limit CO2, then shifting the sales tax burden so that total taxes are the same but taxes on fuels are higher while taxes on labor are lower strikes me as a substantially lower cost solution than any of the other alternatives being suggested.

As an update on my rail subsidy post, I saw a relevant post from the Thin Green Line yesterday.  At least, I suppose, transit supporters are honest:

When I talked to Dave Snyder earlier this month about a fix for mass transit in the Bay Area, he told me, "Somehow or another we've got to get more money from driving."

However, I thought this was a hilarious lack of perspective:

...one side effect of the green revolution has been a growing awareness of how much roads cost. I imagine you'd be surprised to learn that building a road"”not maintaining it, just building it"”costs more than $16 per square foot.

I have no doubt that this person, who is a strong light rail supporter, honestly thinks this is a lot of money.  But I did the math in my comments on his post:

$16 per square foot for highway should be considered a bargain. This means that a twenty foot wide two-lane highway is $320 per linear foot.

The Phoenix light rail system cost $1.4 billion (thats building it, not maintaining it) for 20 miles, which at 34,000 boardings per week day is carrying somewhat less traffic than the capacity of a two lane highway. However, it cost $13,258 per linear foot, or 41 times your highway numbers. Which is why highway users easily pay the full cost of their transportation infrastructure through their gas taxes, but transit users don't even come close.

In Phoenix, light rail fare revenues cover only 7% of its operating and capital costs. Which always has me scratching my head when people say light rail is somehow more "sustainable." If running trains requires, as you suggest, draining resources from millions of people just to move thousands, how is it sustainable?

One of the justifications for diverting highway money to ridiculously expensive light rail systems is that light rail supposedly reduces energy consumption.  Really?  This is via the most recent report from the DOE's Transportation Energy Book, as highlighted by the Anti-Planner (click to enlarge):

The figures for cars are from tables 2.12 and 2.13 of the same report.  Even the best light rail systems are not substantially more efficient than cars, and this gap will likely continue to close, as it has for years, as cars get more efficient.

A Note on Freight: By the way, passenger rail promoters in the US always point to the Europeans as having a better rail system.  But while the Europeans put more of their passengers on rail than does the US, they put less of their freight there.  I would argue that the US system is much more "green", as the differences in energy use between a ton mile of freight on road vs. rail is much larger than the difference in energy use of a passenger mile on road vs. rail.  And besides, from a lifestyle standpoint, would you really want more freight on the roads?  (This is a real tradeoff -- unless one spends the absurd amount of money to build two separate systems, a rail network can be optimized for freight or passengers -- the two do not coexist very well on the same tracks).

Postscript: Just to head off the obvious rhetorical battles -- the incremental energy efficiency of moving one driver to a light rail rider of an existing system is very high.  The car consumption goes away and the train does not incrementally increase its energy use much with one more passenger.  So at the margin, it is correct when someone tells you that it saves energy to shift your commuting to an existing light rail line.  However, it does not make sense, from an energy perspective, to build a light rail line in the first place.  The investment is too high, the energy savings are negligible or non-existent, and the operating cost are so high that light rail tends to crowd out bus operations that help the poor.  As I have written before, for every light rail system I have checked, the cost to build the system is enough to buy every daily rider a Prius and the operating deficit enough to keep every one of these Prius's filled with gas.

Update:  I further understand that cars in the city likely have lower gas mileages than these averages, particularly for commutes that might be substituted by light rail.  But light rail is sold as if it is substantially more energy efficient, and it really would have to be orders of magnitude more efficient to justify the capital costs that are so much higher than for an equivalent capacity of roadway.  The efficiency is just not there.

I had read a couple of articles positing that by destroying low value cars in the "cash for clunkers program,"  the government was hurting the poor by removing the supply of sub-$5000 used cars from the market.  But what I did not realize is that this program further requires that the engines themselves be rendered useless, so that they cannot be used for parts or rebuilt replacement engines.

The automotive death sentences are meant to ensure that gas-guzzling old models make no return to the road. As sodium silicate disables an entire generation of junkyard-bound cars, the price of used engines will likely skyrocket, predicts Michael Wilson, executive vice president of the Automotive Recyclers Association. "It's the law of supply and demand."

Good plan.  The Journal has a good article about how this sodium silicate process was selected to destroy cars.  I am left wondering if engine parts can even be recycled economically for their metal after the treatment.

Previously, I used 1970s gas price lines as an example of a situation where the government, as Uwe Reinhardt puts it, "reduce[d] rationing on the basis of price and ability to pay."

Here is another example:  The Pruitt Igoe housing project in St. Louis, which was abused so badly by its occupants it had to be torn down less than 20 years after it was built.

I will remind you of my earlier comparison of universal health care to public housing:

Lyndon Johnson wants to embark on a futile attempt to try to provide public housing to the poor?  Our taxes go up, a lot of really bad housing is built, but at least my housing did not get any worse.  Ditto food programs "” the poor might get some moldy cheese from a warehouse, but my food did not get worse.  Ditto welfare.  Ditto social security, unemployment insurance,and work programs.

But health care is different.  The author above is probably correct that some crappy level of terribly run state health care will probably be an improvement for some of the poor.  But what is different about many of the health care proposals on the table is that everyone, not just the poor, will get this same crappy level of treatment.  It would be like a public housing program where everyone's house is torn down and every single person must move into public housing. That is universal state-run health care. Ten percent of America gets pulled up, 90% of America gets pulled down, possibly way down.

It is not at all surprising that an Ivy League University professor does not recognize a difference between rationing by individual choice based on price signals and rationing based on government mandate.  What is surprising to me is that I remember this particular professor, Uwe Reinhardt, as the only person who would ever take the free market side of campus debates.  Kind of depressing.  I guess he must have seemed free market just by contrast, or else he has evolved a bit.  Is it ironic to anyone else that radicalism of the 1960s, which purported to be based on individualism and freedom, has led to campuses where it is normal not to even consider individual liberty as part of a public policy equation?  It just reinforced my sense that no one really wants to get rid of "the man," they just want to be "the man" themselves.

In particular he writes:

As I read it, the main thrust of the health care reforms espoused by President Obama and his allies in Congress is first of all to reduce rationing on the basis of price and ability to pay in our health system

We actually have plenty of examples of the government ending rationing by price and ability to pay.  Gas price controls in the 1970s are one very good example.  Anyone remember the result?

Or more recently in China, where gas prices were controlled well below world market levels:

We substituted gas rationing by willingness to pay the posted price with gas price rationing by ability to waste four hours of one's day sitting in lines. (I had never thought of this before, but there must be some interesting economic implications of preferentially routing fuel to those least likely to have a full-time job).

Perhaps worse, Reinhardt equates criticism of the current health care system ( and particularly its productivity) with support for socialization of the system.  Really?  There are perfectly valid free market reasons to criticize health care, where any number of government policy decisions over the years have disrupted the efficacy of price signals and created terrible incentives.

More here from Doug Bandow of Cato

Postscript: Farther left?  Further left?  Sorry, I try, but your scribe is an engineer at heart and sometimes struggles with the native tongue.  When I was in fourth grade, I remember doing a battery of achievement tests, and getting 99+ percentile scores on every test but spelling, where I got something like a 25th percentile.   I think this score put me down mostly with kids for whom English is a second language  (or maybe even worse, with Russian kids for whom ours is a second alphabet).  Only technology in the form of spell-checkers has bailed me out of my personal handicap.

From Randal O'Toole (of course). I usually try not to over-excerpt other folks work but I just can't resist in this case.  I like Mr. O'Toole's work on transit because he does not just focus on the cost-benefit issues, but the personal liberty aspects as well:

My testimony focused on two points. First, despite increasing transit subsidies by 1250 percent (adjusted for inflation) since 1970, transit travel has declined from 49 to 45 trips per urban resident and transit's share of urban travel has declined from 4.0% to 1.6%. Second, even if we could get more people to ride transit, transit uses as much energy, and emits nearly as much greenhouse gases, as cars; and the trends suggest that cars will be more environmentally friendly than any transit system in the country by 2025.

There were two interesting responses to my testimony. First, another witness said (and I'm quoting from memory), "All he did was divide total greenhouse gas emissions by passenger miles." A reporter told me later that it sounded like he was questioning my methods, but his real argument was that more money spent on transit in combination with smart-growth land-use planning would lead to reduced auto driving.

I don't believe that is true (and said so), but even if it were true: can you imaging AT&T (back when all phones were land lines) telling Congress, "We want you to restrict property rights, drive up housing prices, and prevent people from living in their preferred lifestyles so that we don't have to extend our lines so far?" Or FedEx or UPS saying the same thing today? Why is transit so special that everyone else in the country has to completely rearrange their lives just for it?

You can say the answer is "climate change," but transit agencies and smart-growth planners wanted to do all these things before climate was an issue. The truth is that transit is a declining but politically powerful industry, and part of its power comes from the fact that it is publicly owned and so elected officials have a vested interest in keeping it going.

In a very real sense, transit is just like the British coal, rail, and other nationalized industries in the 1960s: its main purpose is no longer transportation but to meet other political goals such as keeping transit workers employed and construction contracts going to transit builders. If transit were private, no one would argue that we have to make the world less convenient and more expensive for the 95 percent of people who travel by car so that it will be more convenient for the 1 or 2 percent who travel by transit.

Since 1972, oil company executives have, like clockwork, been dragged up to Washington every five years to defend themselves against charges that they have cartelized the oil industry with the express purpose of limiting supply and driving up prices to consumers.  Over the last 10 years, and particularly post-Katrina, scrutiny has fallen heavily on US refiners to justify refined product supply shortfalls and resulting price spikes.

So, after years of demagoguing oil companies for purposefully limiting refining capacity and output to drive up gasoline prices, Democrats in Congress are on the verge of passing Waxman-Markey, which will have the very focused and predictable result of... limiting US refining output and driving up gas prices.  In fact, the only possible way it will achieve its goals of limiting CO2 output is if it is wildly successful in reducing gasoline supply and driving up gas prices.  Amazing.

Yet more proor that what is never OK for the [private] goose is always OK for the [public] gander.

The whole point of cap-and-trade (or a carbon tax) is to set broad costs of emissions or broad tradeable limits, and then let millions of individual consumers and industries figure out the most effective way for each of them to meet these costs or limits.  For example, if I were to have a personal cap, changes in my car's MPG would be meaningless, because my work is 1.9 miles from my house.  I would probably start with putting the film coating on my windows of my house I have been considering.  They guy in New Jersey who drives 45 miles to work and has a small house might have a different solution.

But this whole philosophy of letting individuals drive the bus flies in the face of everything Congress believes in.  They believe they are smarter than you or I, and thus they should pick the solutions, not us.  And allowing for individual action doesn't generate campaign contributions like picking winners does.

So despite being a cap-and-trade bill, Waxman-Markey essentially picks winners.  One way is through targeted investments of taxpayer money in technologies whose owners have lobbied hard before Congress.  Another is this:

The legislation will drive up individual and commercial consumer's fuel prices because it inequitably distributes free emissions "allowances" to various sectors.  Electricity suppliers are responsible for about 40% of the emissions covered by the bill and receive approximately 44% of the allowances "“ specifically to protect power consumers from price increases.  However the bill holds refiners responsible for their own emissions plus the emissions from the use of petroleum products.  In total refiners are responsible for 44% of all covered emissions, yet the legislation grants them only 2% of the free allowances.

This means that Congress has decided to extract all of the CO2 reduction from transportation and other refined fuel users, rather than from electrical power generation.  Is this because they have some study in hand that shows the best bang for the buck in reducing CO2 comes from transportation?  Of course not, and even if they did, it would be hard to believe given the number of large coal plants in this country that generate far more CO2 than even a fleet of Escalades.

No, the reason for this is purely political -- every representative has an electric utility in their district lobbying and paying campaign contributions, but few have organized lobbies of automobile drivers.   And so, rather than pushing for fuel shifts from coal to gas or nuclear in power generation, this bill will primarily achieve its meager results from making it more expensive for people to drive.

The Antiplanner observes, in the context of the Washington metro crash, that governments are happy to appropriate funds for expensive new facilities, but almost never want to appropriate funds for capital replacement and refurbishment of such facilities 20-30 years later.  Such refurbishment is nearly always necessary.  Private businesses plan for it -- for example, oil companies plan and budget on the assumption that all of their gas stations will need to be torn down and rebuilt every 20-25 years.

I work with public recreation a lot and can say that the exact same problem exists -- politicians love funding a new park or visitor center or museum expansion, particularly if they can get their name on it, but consistently refuse to fund capital replacements decades later when these are needed.  I guess they are unsexy.

The Thin Green Line passes on an editorial from today's SF Chronicle:

California should continue to lead the way in the fight against climate change by requiring cleaner-burning fuels in this state.

The state Air Resources Board is scheduled to vote today on whether to force refiners and distributors to reduce the "carbon intensity" of the transportation fuels they sell, starting in 2011. The so-called Low Carbon Fuel Standard represents a critical step toward this state's commitment to reduce overall emissions of heat-trapping gases by a third by 2020.
Passage of a California cleaner-fuels standard would intensify the pressure on Congress to make a national commitment to promote lower-carbon options to gasoline and diesel.

Holy moly, I never thought of this?  It's brilliant!  Let's just legislate that hydrocarbons should have less carbon!  And tell the refiners to figure it out.

In all seriousness, assuming this is not just insane (which may be a poor assumption in CA) I presume they have something in mind here.  Does anyone know what opportunity they see, because I sure don't.  Here is why I am confused:

Basically transportation fuels are made up various hydrocarbon chains.  The shortest is methane, CH4, then C2H6, then C3H8, etc.  As the chains get longer, the molecule gets heavier  (for example, CH4 is a gas at room temperatures; C3H8 is propane, which is a gas but a liquid under pressure in our BBQ tanks; C8H18 is octane and liquid at normal car operating temperatures.)

Motor fuel is a careful blend of many different molecules, and is actually frighteningly complex (the above just discusses straight chain forms, there are also rings and other shaped hydrocarbon molecules).  There are literally hundreds of specs it has to meet, and several present difficult tradeoffs that must be carefully balanced.  Trying to make one spec can easily put one out of another spec.  So this is an optimization equation with a lot of constraints.

All things being equal, decreasing the carbon intensity of fuel basically means making it lighter, with shorter molecules.  Why?  Well, look at the molecular equations.  Basically a straight chain hydrocarbon is C(x)H(2x+2).  Shorter molecules get a higher ratio of their BTU's from combustion of hydrogen vs. larger molecules get a higher ratio of their BTU's from carbon.

So, it is correct that burning propane in a car vs. currently formulated gasoline will be less carbon intensive, with only the teeny tiny problem that most cars today cannot burn propane.  Modern engines are carefully built to run most efficiently (valve design, cylinder pressure and size, air mixtures, fuel injection)  on a certain range of gasoline, and that range is moderately narrow.  And, besides the pure physics of engine design, lightening up motor fuels will create a variety of secondary problems -- for example, lighter fuels tend to have higher vapor pressures and volatility that can cause vapor lock in engines on warm days.  Another way to reduce carbon intensity is to go from ring molecules (e.g. benzine) to straight chains of the same size, but this creates other problems, for example in maintaining octane numbers.

And speaking of unintended consequences, my understanding is that environmentalists like diesel engines, because the best diesel technologies today are far more efficient than gasoline engines.  But diesel is a heavier, more "carbon intensive" fuel than gasoline.  So is the carbon dioxide emissions from a heavier fuel in an engine that is more efficient less or more than a typical gasoline engine?  Who knows, and the answer is probably "it depends" anyway.

Update: I think I have figured it out.  The California legislature is going to mandate changing the size of the 2p valance shell, allowing more hydrogen molecules per given carbon molecule.

Via Jim Kingsdale:

Since PHEV's [plugin hybrid electric vehicles] can have so much impact on both the energy investment outlook and national security, I follow with some interest the news about their likely availability.  Recently a picture is starting to emerge.  It is not positive for American car companies, of which G.M.'s Volt is the poster child.  This is not totally surprising given G.M.'s proven history of incompetence.

We know that the Volt's battery is so expensive that G.M. proposes to sell the car for $40,000 - a price that would eliminate most buyers.  And even with such a high price G.M. promises they would lose money on every vehicle.  So, as I've previously written, the Volt may well be more of a political strategy for G.M. than a likely transportation solution.   Now a new study by Carnegie Mellon University says the design of the Volt's propulsion system is inherently sub-optimal and uneconomical - "not cost effective in any scenario" in the words of the study.

The reason is quite obvious once you think about it.  G.M. designed the Volt battery to go 40 miles on a charge because, they "reasoned", some 90% of all drivers go no more than 40 miles in a day.  What Carnegie Mellon points out is that the average driver goes less than 20 miles in a day.  Therefore the Volt's battery is twice as large as necessary for some 50% of drivers .  Since battery weight and cost are the prime determinants of a PHEV's cost-effectiveness, the Volt battery is about twice as large as is economically practical for most drivers.

Here's how the report put it: "The Carnegie Mellon study, conducted by engineers from three different departments, constructed computer simulation models to determine the impact of additional batteries on fuel consumption and cost and greenhouse gas emissions over a range of charging frequencies.  It found that small-capacity plug-ins that get less than 20 miles per charge are more efficient than conventional hybrids. And it said that large capacity hybrids like the Volt that go 40 miles or further on a charge are never cost-effective, because the batteries cost and weigh too much.  A car with the Volt's range, according to the study, would also be extremely uneconomical traveling fewer miles as it hauls around battery capacity it doesn't need."

So much for the Volt.  Ciao - and lets hope the U.S. govt. is smart enough not to fall for the Volt's fools-gold as an excuse to keep G.M., a chronically mismanaged company, from enjoying the cleansing benefits of bankruptcy.  Among which benefits might be new management.

A:  Start with 10 million current jobs.

Kenneth Green argues that Obama's claim that obsoleting current infrastructure and requiring its replacement with new, greener infrastucture creates jobs is just the broken windows fallacy  (where have you heard anyone else say that?)

If Obama's energy promises rely on questionable science, they rely on even more questionable economics. We are to believe that replacing conventional energy sources (especially coal) with renewables (especially wind) will create 5 million new "green jobs." The hope is that armies of workers will be enlisted to build
tens of thousands of windmills; to manufacture and deploy solar-power installations; to harvest, transport, and process huge amounts of biofuel feedstock; and to string the power lines that will allow the U.S. power grid to incorporate a major expansion of intermittent energy.

Unfortunately, the idea of government "job creation" is a classic example of the broken window fallacy, which was explained by French economist Frédéric Bastiat way back in 1850. It is discouraging to think that nearly 160 years later, politicians still do not understand Bastiat's basic economic insight...

Now consider Obama's "green jobs" plan, which includes regulations, subsidies, and renewable-power mandates. The "broken windows" in this case would be lost jobs and lost capital in the coal, oil, gas, nuclear, and automobile industries. Currently, these industries directly employ more than 1 million people.
Conventional power plants would be closed, and massive amounts of energy infrastructure would be dismantled. After breaking these windows, the Obama plan would then create new jobs in the renewable
energy sector. The costs of replacing those windows would ultimately be passed on to taxpayers and energy consumers.

LOL, via Phil Miller:

Please join me in support for poor, beleaguered gas station owners, the victims of unconscionable price gouging by ruthless consumers who are taking advantage of market conditions to reduce their demand for gasoline,  riving down the price by nearly $2 per gallon over the last four months. Fortunately, governments are swinging into action. Georgia governor Sonny Perdue issued this statement:

"The financial crisis has disrupted the consumption of gasoline, which will have an effect on prices. However, we expect the prices that Georgian gasoline station owners receive at the pump to be in line with changes in consumers' incomes and the prices of substitutes and complements. We will not tolerate consumers taking advantage of Georgian business owners during a time of emergency."

I have gotten a lot of email on my posts about allowing GM to die.  Here are a few thoughts:

1. No matter what our mutual preferences, GM is not actually going to die.  It will go in to chapter 11 and reorganize, and, as that law intends, will continue to operate through that reorganization.  While Lehman and Enron liquidated, they were really special cases having more to do with financial than operating assets.  In the last 20 years, Texaco, PG&E, Worldcom, Delta, and UAL have all passed through chapter 11, and all operated their businesses through bankruptcy.  In fact, all of Enron's pipelines and other operating assets are running A-OK right now, just under new ownership.  Do you remember all those news stories about massive natural gas shortages because Enron's pipelines all stopped operating when it declared bankruptcy?  Yeah, neither did I.
2. You are welcome to write me about how I suck because your job at GM (or retirement, or health care, or all of the above) is important to you if that helps you psychologically to manage a terrible and stressful time.  But, to cause me to back off my opinion about GM and the bailout, you need to tell me why your job is more important than someone else's job.  Because, unlike private enterprise, the government does not create wealth, but can only move it around (with a leaky bucket, at that).  GM has wasted hundreds of billions of dollars of investment, so having the government invest money to save your job will likely cost >1 job somewhere else.  Just because we don't, and may never know, who that specific person is does not make this an ethical choice. 
3. I too, all things being equal, value having a healthy auto industry in the US  (which in fact we still have -- it just happens the headquarters of many of the companies that run the plants are over in Japan).  However, if you wish to argue that the bailout is necessary to save a US auto industry, you in fact need to argue that the current set of managers/contracts/systems/performance measures/organization/etc. of GM are better able to manage the employees and assets of GM than a different owner with different managers and approaches.  Because having GM fail does not make the assets or trained people disappear, it merely makes it more likely they will be managed by a different entity.  So all a bailout does is save the GM entity that manages these assets and people.

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.