Posts from — July 2009
The Commodity Futures Trading Commission (CFTC) plans to issue a “revised” report on the role of speculation in the recently concluded oil price boom, reversing last year’s conclusion that such betting was not a major factor relative to underlying physical fundamentals. The CFTC’s interim report concluded last year that ”current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors.”
The reversal is said to reflect better data on who was actually in the market, including evidence that some traders had massive positions. But clearly the political bent of the leadership has changed as well, especially after the credit derivatives fiasco last year.
Political Risk As a Fundamental
Without question, commodity indices and other similar funds have allowed a lot of capital to flow into the market, and the fundamentals would not seem to justify prices reaching $147 per barrel. Still, it is hard to make the case that the market didn’t work or that new regulations will prevent future price spikes. [Read more →]
July 31, 2009 1 Comment
The American Clean Energy and Security Act, better known as the Waxman-Markey Climate Bill, has been shown to be completely ineffective at slowing the rise in global temperature that is projected by climate models to accompany mankind’s continued reliance on fossil fuels for energy production. And this, despite the bill’s mandated cut-back of U.S. greenhouse gases emissions by a whopping 83% below 2005’s levels by the year 2050. As the primary purpose of the bill is to mitigate “global warming” and any follow-on impacts, Waxman-Markey, on its own, would seem an abject failure.
If you need any more proof, consider the bill’s effect on projected sea level rise. Recall that the specter of rapid sea level rise is one of the pillars of alarmist claims for impending climate catastrophe and calls for immediate action. But even a full implementation Waxman-Markey would do virtually nothing to slow the projected rate of rise. Using a middle-of-the-road future emissions scenario as a baseline, the emissions reductions that would be mandated in the U.S. under the provisions of the Waxman-Markey bill would result in reducing the sea level rise by mid-century by less than 0.1 inches, and the reduction would still be less than 0.5 inches by century’s end.
The Waxman-Markey Climate Bill is equally as ineffective in slowing the projected rate of global sea level rise as it is in slowing the rate of projected global temperature rise.
Waxman-Markey simply is not a climate bill.
July 30, 2009 5 Comments
[Editor note: Michael Giberson , an instructor and research associate at the Center for Energy Commerce at Texas Tech University's Rawls College of Business, blogs on energy economics (including wind power) and other topics at Knowledge Problem.]
Market-oriented policy analysts have not been shy about cataloguing the problems surrounding windpower development. But in the enthusiasm to oppose the government interventions accompanying wind generation, market-based analysts sometimes have strayed beyond principled defense of markets and unwittingly offered support to anti-market NIMBYism and other meddlesome sentiments. Policy analysts examining wind power issues should consider more carefully which issues ought to be pursued through the policy process.
Wind power has two images. In one view, wind power is glamorous, hi-tech, future oriented and almost sexy. Advertisements for products from automobiles to watches to banking services casually feature tall, slowly spinning wind turbines in the background, hoping to suggest that the advertised product, too, is glamorous, hi-tech, and future oriented, and maybe a bit sexy.
A second view shows wind power in a much less favorable light: the product of misguided environmentalism twisted into government-funded corporate welfare. No hi-tech glamour in this view. Instead, destruction and waste becomes emblematic of a windpower industry, which has blighted farm and ranch lands with industrial towers and power lines, killed bats and birds, raised the cost of electricity, and squandered tax dollars.
The second view dominates among policy analysts with a libertarian or conservative policy bent. Market-oriented policy shops have produced several critiques of wind power: the Cato Institute, Heritage Foundation, Competitive Enterprise Institute, Reason magazine, the Heartland Institute. Each has issued policy papers or published editorials or articles about wind power. The details vary, but the overwhelming verdict is negative: wind is more costly than conventional power even with subsidies, it wastes land, the turbines are ugly, the power output is unreliable and requires fossil-fuel backup generation, it produces the most power when it is least needed, the spinning blades are dangerous to both wildlife and human health, and construction damages the local environment.
In addition, wind power development often requires substantial investment in electric transmission lines, which consumes more land and adds to the expense. The Texas Public Policy Foundation has produced a fairly comprehensive critique of wind power development that touches on all of these points and a few more (see links below). [Read more →]
July 29, 2009 10 Comments
Secretary of the Interior Ken Salazar, speaking in Atlantic City in April, added more hot air to the discussion about offshore wind when he stated that windmills off the East Coast could generate enough electricity to replace most, if not all, of the coal-fired power plants in the U.S.
Yet such would require offshore wind turbines stacked almost a hundred miles deep from Maine to Florida. I’m disappointed Salazar didn’t take a few minutes for fact-checking and back-of-the-envelope ciphering before his speech or he would have discovered that his estimates are pure bluster.
I am reminded of all this as I read of Germany’s plan to get offshore wind in the mix, forcing power-grid operators to build sea cables at their expense and requiring buyers to pay $0.21/kWh for the power. And all this for an inferior product–intermittent power. [Read more →]
July 28, 2009 6 Comments
“The current rush for large scale onshore wind developments, connected by a hugely centralized grid system, shows a poverty of imagination and thinking rooted in the early 20th Century. If attention continues to be focused on increasing renewable energy targets, without any requirement to demonstrate what each development will achieve in greenhouse gas emissions reductions (including all aspects of the generation and transmission), we face a possible worst case scenario, where we achieve renewable energy targets through inappropriate developments and at great cost to important environments — only to discover that our greenhouse gas emissions are up, along with our energy consumption, and our energy supply is not secure.”
- The John Muir Trust, at http://www.jmt.org/what-we-think.asp
As a physicist and environmental advocate, I have been asked to elaborate a bit on my position regarding the Global Warming Theory (GWT), and how it relates to wind energy. This is a very legitimate — and important — question.
Although I am not a climatologist, as a scientist I know how to do objective research. As such I have read some hundred reports and studies on the climate issue. True scientists also have a healthy degree of skepticism.
After digesting these studies and reports is very clear to me that GWT is still a scientifically unresolved matter. [Read more →]
July 27, 2009 6 Comments
MasterResource, the world’s premier free-market energy blog, began the day after Christmas and is seven months old. Views of 50,000 in our first quarter have been followed by 100,000 in the second quarter. Viewership near one thousand per day is not bad for a scholarly start-up–and much growth potential remains.
We are a group blog on the very important and wide topic of energy, including climate change, which is all about energy. Our bloggers come from a variety of institutions, nonprofit and for-profit. We have backgrounds in political economy, economics, environmental studies, philosophy, and engineering. We are thinker-doers who are open-minded and part of a challenge culture. No smartest-guys-in-the-room problem here.
In the increasingly crowded blogosphere, there will be a flight to quality to group blogs that have a clear theme. [Read more →]
July 25, 2009 1 Comment
Is the Climate Science Debate Over? No, It’s Just Getting Very Interesting (with welcome news for mankind)
How many times have you been told that the debate on the science of climate change is “over”? Probably almost as many times as Al Gore has traveled in private jets and limousines to urge audiences to repent of their fuelish ways.
Although tirelessly intoned by politicians, major media, advocacy groups, academics, and even some Kyoto critics, the “debate is over” mantra is just plain false. The core issues of climate-change attribution, climate sensitivity, and even anthropogenic detection remain very much in play.
The world has warmed overall during the past 130 years, as evidenced by melting glaciers, longer growing seasons, and both proxy and instrumental data. However, the main era of “anthropogenic” global warming supposedly began in the mid-1970s, and ongoing research by retired meteorologist Anthony Watts leaves no doubt that in recent decades, the U.S. surface temperature record–reputed to be the best in the world–is unreliable and riddled with false warming biases.
Watts and a team of more than 650 volunteers have visually inspected and photographically documented 1003, or 82%, of the 1,221 climate monitoring stations overseen by the U.S. Weather Service. In a report summarizing an earlier phase of the team’s investigation (a survey of 860+ stations), Watts says, “We were shocked by what we found.” He continues:
We found stations located next to exhaust fans of air conditioning units, surrounded by asphalt parking lots and roads, on blistering-hot rooftops, and near sidewalks and buildings that absorb and radiate heat. We found 68 stations located at wastewater treatment plants, where the process of waste digestion causes temperatures to be higher than in surrounding areas.
In fact, we found that 89 percent of the stations–nearly 9 of every 10–fail to meet the National Weather Services’s own siting requirements that stations must be 30 meters (about 100 feet) or more away from an artificial heating or radiating/reflecting heat source. In other words, 9 or every 10 stations are likely reporting higher or rising temperatures because they are badly sited.
“It gets worse,” Watts continues: [Read more →]
July 24, 2009 17 Comments
Robert F. Kennedy Jr., president of Waterkeeper Alliance, posits in the Financial Times (July 19) that converting our fleet of coal-fired power plants to natural gas could be accomplished “practically overnight” and will have the effect of “jump-starting our economy….without the expense of building new power plants.” Thus did Kennedy express his new-found love of natural gas: It’s our “bridge fuel to the ‘new’ energy economy.” (Where have we heard that before–wasn’t that Enron’s tag line decade or two ago?)
Yet Kennedy’s proposal ignores the extremely high cost of fuel conversion (upwards of $100 million for a medium-size coal plant) and the added fuel cost to burn gas. He seriously mischaracterizes how an electricity market operates. And Joe Romm (Climate Progress) had added to the confusion by calling Kennedy’s proposal a “game changer.” For Romm plentiful gas means “damn easy and cheap” compliance with the Waxman-Markey climate bill (HR 2454).
Environmentalists looking to draft the natural gas industry in a forced conversion effort against coal do not know what the gas industry does: it is highly uneconomic and would overload the pipeline system that was not built with coal conversions in mind. [Read more →]
July 23, 2009 9 Comments
Some environmental leaders have said that I am naïve to think that there is an alternative to cap-and-trade, and they suggest that I should stick to climate modeling. Their contention is that it is better to pass any bill now and improve it later. Their belief that they, as opposed to the fossil interests, have more effect on the bill’s eventual shape seems to be the pinnacle of naïveté.
- James Hansen, “Strategies to Address Global Warming,” July 2009.
Welcome to the science of politics, Dr. Hansen–and welcome to a tradition in political economy that is more than a century old. “I see no force in modern society which can cope with the power of capital handled by talent,” stated William Graham Summer in 1905, “and I cannot doubt that the greatest force will control the other forces.” And said George Will in our time: “The world is divided between those who do and do not understand that activist, interventionist, regulating, subsidizing government is generally a servant of the strong and entrenched against the weak and aspiring.”
The political hijacking of climate legislation is why the Left is now embarrassingly split on the issue. And just maybe this is the opening wedge to get the Left to reconsider climate alarmism in its wider dimensions. After all, higher energy costs disproportionately affect the poor and slow the drive to mass-electrify the developing world. And the climate crusade is resurrecting (uneconomic) nuclear power–a Left no-no. And geoengineering–that too is an unwanted stepchild of climate exaggeration.
July 22, 2009 5 Comments
In this month’s article at EconLib, I provide an introduction to the economics of climate change, and discuss some of its major controversies. Follow the above link for the full story, but in a nutshell here are the main issues:
(1) The Discount Rate. Economists give wildly different estimates of the “social cost of carbon” and hence the “optimal” tax on an additional unit of emissions. These differences are not primarily due to the assumptions about climate systems or human vulnerabilities to warming. On the contrary, the main difference between, say, the policy recommendations of the Stern Review (very aggressive) and William Nordhaus’ DICE model (very moderate) is that Stern uses a very low discount rate, while Nordhaus plugs in an estimate of the market’s rate of return on capital.
Efforts to mitigate greenhouse gas emissions impose large, upfront costs on the economy (in terms of forfeited potential output of goods and services), while the benefits will not accrue until decades in the future (in the form of avoided climate change damage). Thus, the lower the interest rate used to evaluate present and future events, the greater the perceived net benefits of mitigating emissions.
(2) Modelling Uncertainty. One of the most popular lines of attack against the conventional carbon-pricing models concerns the treatment of uncertainty, or how they handle small-probability worst case scenarios. [Read more →]
July 21, 2009 7 Comments