A free-market energy blog
Random header image... Refresh for more!

Posts from — November 2009

James Hansen on Cap-and-Trade & Copenhagen

“The fraudulence of the Copenhagen approach – ‘goals’ for emission reductions, ‘offsets’ that render even iron-clad goals almost meaningless, an ineffectual ‘cap-and-trade’ mechanism – must be exposed. We must rebel against such politics-as-usual.”

- James Hansen, “Never-Give-Up Fighting Spirit,” November 30, 2009

There is a civil war on the Left against cap-and-trade as the centerpiece of a U.S. climate bill. Among the leading critics is NASA scientist and Al Gore mentor James Hansen, who reiterated his opposition in Sunday’s The Observer with Copenhagen’s climate summit in mind:

“Cap and trade with offsets … is astoundingly ineffective. Global emissions rose rapidly in response to Kyoto, as expected, because fossil fuels remained the cheapest energy.

Cap and trade is an inefficient compromise, paying off numerous special interests. It must be replaced with an honest approach, raising the price of carbon emissions and leaving the dirtiest fossil fuels in the ground.”

Hansen also stated earlier this month:

“Cap-and-trade is a hidden regressive tax, benefiting the select few who have managed to get themselves written into the 2000-page bill…. Think revolving door between the government and Wall Street.  Think revolving door between Congress and lobbyists.”

Hansen’s earlier criticisms of HR 2454, the American Clean Energy and Security Act of 2009 (Waxman-Markey climate bill), apply to the current Senate companion, Clean Energy Jobs and American Power Act of 2009 (Kerry-Boxer climate bill).

Hansen’s bottom line on Waxman-Markey was as follows:

“The truth is, the climate course set by Waxman-Markey is a disaster course. It is an exceedingly inefficient way to get a small reduction of emissions. It is less than worthless….”

-James Hansen, “Strategies to Address Global Warming,” July 13, 2009.

During debate on the original version of HR 2454, Hansen complained:

“Governments are retreating to feckless ‘cap-and-trade,’ a minor tweak to business-as-usual….

“Why is this cap-and-trade temple of doom worshipped?  The 648-page cap-and-trade monstrosity that is being foisted on the U.S. Congress provides the answer.  Not a single Congressperson has read it.  They don’t need to – they just need to add more paragraphs to support their own special interests.  By the way, the Congress people do not write most of those paragraphs—they are ‘suggested’ by people in alligator shoes.”

And Hansen spanked harder on the final version: [Read more →]

November 30, 2009   13 Comments

A Death Spiral for Climate Alarmism, Redux?

Editor Note: In our ‘best of MasterResource’ weekend series, we are pleased to reprint the September 30th post by Ken Green in light of the stalemate of U.S. climate legislation for 2009. Obviously, the onset of Climategate will only reinforce a worst-case scenario for climate alarmism politics.

Desperation is setting in among climate alarmists who by their own math can see that the window is rapidly closing on “saving the planet.”

James Hansen, for instance, said three years ago in the New York Review of Books: “We have at most ten years—not ten years to decide upon action, but ten years to alter fundamentally the trajectory of global greenhouse emissions.” That was also Al Gore’s estimate in “An Inconvenient Truth.” But the time has been ticking away, and it’s increasingly obvious that the Gore/Hansen “wrenching transformation” of the U.S. energy system is simply not going to happen.

Perhaps Copenhagen will make it official.

U.S. cap-and-trade has become a big political liability, in particular, as polls show voters are relatively unconcerned about climate change, and are deeply averse to higher energy prices. That has led Senator John Kerry, for example, to try to hide the ball by changing the name of scheme to “pollution reduction” in order to obscure the reality that it’s basically a massive energy tax. Other Left-leaning politicians (the latest being Houston Mayor Bill White, who is running for the U.S. Senate) are announcing their opposition to cap-and-trade. (1)

Renewable energy is also getting more scrutiny than ever before, awakening not only cost-conscious middle America but grass-roots environmentalists concerned about negative local impacts and big-business intrusion.

Anti-Alarmist Momentum

Here is the death spiral that I believe the the Climate Crisis Industry fears (and is probably right to fear) consciously or subconsciously:

1. U.S. rejects cap-and-trade in 2009, leaving a climate bill in serious trouble for election-year 2010 and beyond.

2. Copenhagen flounders without any U.S. commitment and from developing country opposition, among other things. The failed Kyoto Protocol creeps toward its 2012 expiration date with an all pain, no gain tag.

3. EPA action is delayed by court action and public/political opposition, negating implementation for years and effective implementation for longer. Congressional action to de-authorize EPA becomes more and more likely as businesses, and electric utilities in particular, demand certainty to meet growing U.S. electricity demand coming out of a recession. [Read more →]

November 27, 2009   6 Comments

The True Meaning of Thanksgiving: Private Enterprise in America

[Editor’s Note: Richard Ebeling, a noted classical liberal scholar, teaches economics at Northwood University in Midland, Michigan. This post is reprinted with his permission from Northwood's blogsite, In Defense of Capitalism & Human Progress.]

This time of the year, whether in good economic times or bad, is when Americans gather with their families and friends and enjoy a Thanksgiving meal together. It marks a remembrance of those early Pilgrim Fathers who crossed the uncharted ocean from Europe to make a new start in Plymouth, Massachusetts. What is less appreciated is that Thanksgiving also is a celebration of the birth of free enterprise in America.

The English Puritans, who left Great Britain and sailed across the Atlantic on the Mayflower in 1620, were not only escaping from religious persecution in their homeland. They also wanted to turn their back on what they viewed as the materialistic and greedy corruption of the Old World.

In the New World, they wanted to erect a New Jerusalem that would not only be religiously devout, but be built on a new foundation of communal sharing and social altruism. Their goal was the communism of Plato’s Republic, in which all would work and share in common, knowing neither private property nor self-interested acquisitiveness.

What resulted is recorded in the diary of Governor William Bradford, the head of the colony. The colonists collectively cleared and worked land, but they brought forth neither the bountiful harvest they hoped for, nor did it create a spirit of shared and cheerful brotherhood.

The less industrious members of the colony came late to their work in the fields, and were slow and easy in their labors. Knowing that they and their families were to receive an equal share of whatever the group produced, they saw little reason to be more diligent in their efforts. The harder working among the colonists became resentful that their efforts would be redistributed to the more malingering members of the colony. Soon they, too, were coming late to work and were less energetic in the fields.

As Governor Bradford explained in his old English (though with the spelling modernized): [Read more →]

November 26, 2009   4 Comments

Climate Politics: Running Scared in the EU (even before Climategate)

The European Union is very concerned about climate.

But its concern is not principally about the scares emanating from the assumption-driven (Malthus in/Malthus out) studies regarding man-made climate change. The EU’s leaders fear that the Old Continent’s self-declared “leadership” in the “world war against climate change” might not be joined–and thus will be rendered ineffective in the global context. And the politicians know that all-pain/no-gain climate policy will increasingly trouble the voters, who must be placated.

This is a bitter pill given that the U.S. presidential elections brought into office the environmentally oriented Barack Obama and the alarmist dream team (Carol Browner, John Holdren, etc.). Europe felt like its efforts to curb emissions would enter a new phase, where the rest of the world would have progressively joined forces and leveled the playing field on pricing carbon emissions. For Europe, that would have meant shrinking the competitiveness gap that is created by its higher energy prices, as well as gaining a competitive advantage in the newly formed carbon markets. (The EU Emissions Trading Scheme, which has been active since January 2005, is the largest functioning carbon market in the world).

The Asian-Pacific Economic Cooperation (APEC) meeting last week, though, [Read more →]

November 25, 2009   6 Comments

Global Nuclear Plant Construction Moves Forward, Except in the U.S. (Politics and market conditions make it tough for a large-scale rival to carbon-based energy)

July 17, 1955, was the first time electricity generated by a U.S. nuclear power plant flowed into a utility grid. In what then was an experiment, Utah Power & Light plugged in the Argonne National Laboratory experimental boiler water reactor, BORAX-III.

The plant produced merely 2 megawatts for more than an hour, as planned. Since then, the U.S. nuclear industry has steadily improved their ability to effectively manage the operations and maintenance of nuclear power plants. Now,  more than 50 years after that first nuclear power supply, America lags far behind even developing nations in new construction. New roadblocks threaten to further erode progress in the U.S. Whether this is good or not I will leave to the reader, but here is a snap-shot of the situation facing the U.S.

Significant Global Growth

Today, 436 nuclear power plants are in operation in 30 countries with a total capacity of 370 GW, according to the International Atomic Energy Agency (IAEA). The U.S. operates 104 of those plants, totaling a bit over 100 GW of installed capacity. France is runner-up with 59 operating plants and one new plant under construction.

As with picking stocks, the U.S. nuclear industry’s past performance may not be a predictor of future performance. According to IAEA, 53 reactors, rated at just over 47 GW, are under construction around the world today (here). In the U.S., the only “new” nuclear plant is Watts Bar Unit 2. Construction of that unit was stopped in 1985 but restarted two years ago. When completed in 2013, Watts Bar Unit 2 will add almost 1.2 GW to the Tennessee Valley Authority grid (Figure 1). 

<strong>Figure 1</strong>.  The number of reactors under construction worldwide. Source: IAEA
Figure 1. The number of reactors under construction worldwide. Source: IAEA

[

November 24, 2009   6 Comments

Simple Model Leaves Expensive Climate Models Cold

[Editor’s note: J. Scott Armstrong and Kesten C. Green, first time guest posters, are leading researchers in the field of forecasting. Scott Armstrong is a Professor at the Wharton School of the University of Pennsylvania and Kesten Green is a Senior Research Fellow at the Business and Economic Forecasting Unit at Monash University]

We have recently proposed a model that provides forecasts that are over seven times more accurate than forecasts from the procedures used by the United Nations Intergovernmental Panel on Climate Change (IPCC).

This important finding, which we report in an article titled “Validity of climate change forecasting for public policy decision making” in the latest issue of the International Journal of Forecasting, is the result of a collaboration between climate scientist Willie Soon of the Harvard-Smithsonian Center for Astrophysics, and ourselves.

In an earlier paper, we found that the IPCC’s approach to forecasting climate violated 72 principles of forecasting. To put this in context, would you put your children on a trans-Atlantic flight if you knew that the plane had failed engineering checks for 72 out of 127 relevant items on the checklist?

The IPCC violations of forecasting principles were partly due to their use of models that were too complex for the situation. Contrary to everyday thinking, complex models provide forecasts that are less accurate than forecasts from simple models when the situation is complex and uncertain.

Confident that a forecasting model that followed scientific forecasting principles would provide forecasts that were more accurate than those provided by the IPCC, we asked Willie Soon to join us in developing a model that was more consistent with forecasting principles and knowledge about climate.

The forecasting model we chose was the so-called “naïve” model. The naïve model assumes that things will remain the same. It is such a simple model that people are generally not aware of its power. In contrast to the IPCC’s central forecast that global mean temperatures will rise by 3?C over a century, our naïve model simply forecasts that temperatures next year and for each of 100 years into the future would remain the same as the last years’.

The naïve model approach is confusing to non-forecasters who are aware that temperatures have always varied. Moreover, much has been made of the observation that the temperature series that the IPCC use shows a broadly upward trend since 1850 and that this is coincident with increasing industrialization and associated increases in manmade carbon dioxide gas emissions.

In order to test the naïve model, we simulated making annual forecasts from one to 100 years in the future starting with 1850’s global average temperature as our forecast for the years 1851 to 1950. Then we repeated this process updating for each year up through 2007. This produced 10,750 annual average temperature forecasts for all horizons. It was the first time that the IPCC’s forecasting procedures had been subject to a large-scale test of the accuracy of the forecasts that they produce.

Over all the forecasts, the IPCC error was 7.7 times larger than the error from the naïve model. [Read more →]

November 23, 2009   7 Comments

Dear Tom Friedman: Don’t Want You to Die Off … Just Get Well!

In the New York Times editorial page’s latest excursion into shrill climate alarmism, foreign affairs correspondent Thomas Friedman accuses those opposing the current cap-and-tax bill as wanting a few people, say 2.5 billion to die off.  And us bad guys are just grasping at straws. “. . . you will notice that the drill-baby-drill opponents of this legislation are now making two claims,” he says. “One is that the globe has been cooling lately, not warming, and the other is that America simply can’t afford any kind of cap-and-trade/carbon tax.”

Gosh, Tom, I suppose that the pace of global warming has accelerated in the last decade, and hurricanes are getting more frequent and stronger too. And those emails from the alarmist in-crowd that the climate world (and general public!) are reading about right now–those are the good guys, the real disinterested scholars at work.

So, Tom, you claim that cap and tax opponents are calling forth a mass plague–a modern Black Death–that will wipe out 2.5 billion people sometime between now and 2050. (Well, I guess this simply extrapolates what John Holdren is postulating by 2020–a possible billion deaths!)  In your world that is an inevitable result of modern living using hydrocarbon fuels.

Unlike his imaginative colleague Maureen Dowd, what Tom Friedman writes actually matters.  Many people believe that he is proficient about energy and climate. So I must again call this charlatan to task. [Read more →]

November 21, 2009   6 Comments

The Decline of Climate Alarmism (Will the Left rethink an increasingly futile crusade?)

My ‘Left’ friends are mad at me now that the climate debate/ discussion has shifted, at least temporarily, from Save the World to Why Did We Fail? Here is what a former Enron executive (his name will remain confidential) emailed me a few days ago:

Rob- shame on you. The [Breakthrough Institute] article [Apocalypse Fatigue: Losing the Public on Climate Change] names only 3 reasons why the U.S. will not address climate mitigation: far off threat, greed, and telling them what they don’t want to hear. It ignores the real reason: the constant effort from people like yourself to undermine the case for action with its ancillary affect of dividing the country and paralyzing the system.

Then the sarcasm comes in:

I am not being facetious: you should pat yourself on that back for helping create an atmosphere that will prevent any meaningful action on the false threat of climate change from happening in this country. It is a proud moment and credit to your hard work. I tip my hat.

Now, there are a lot of people who would love to take credit for helping to derail any piece of all pain-no gain legislation. But Waxman-Markey probably would not pass the House today if a re-vote were taken, and even some Democratic Senators know that being Democrat includes not needlessly increasing energy prices for their constituents.

Still, I took some offense at this email and wrote back in all seriousness:

I am surprised …. I thought you were having second doubts about the increasingly false alarm of high-sensitivity warming. And to me the lessons of Enron include the fake green stuff we were doing–and the fake stuff that [our old colleague Jim] Rogers [of Duke Energy] is doing at the expense of his customers and broader society.

[Texas A&M Distinguished Professor of Atmospheric Sciences and Oceanography] Jerry North told me just last week that he is more convinced than ever that the warming is at the very bottom of the IPCC range, which some top climate economists say makes CO2 a positive externality, not a negative one. We have peer-reviewed articles on how feedback effects are not the big amplifiers that the models (must) assume. [Read more →]

November 20, 2009   17 Comments

High Capital Costs Plague Solar (RPS mandates, cost dilution via energy mixing required) Part III

Solar power has one major advantage over its more ubiquitous cousin wind power: electricity that is  generated during peak demand hours (hot, sunny, air conditioned afternoons). Such makes solar attractive to utilities that value such capacity for peak shaving, cost aside.

The problem of wind is shown by this example. The Electric Reliability Council of Texas (ERCOT) leads the nation with more than 8,000 MW of installed wind capacity, yet their resource planning–tasked with keeping the lights on–“counts 8.7 percent of wind nameplate capacity as dependable capacity at peak.”

The limited usefulness of wind and solar is reflected by their low system capacity factors. For example, the capacity factor of a typical utility-scale photovoltaic (PV) or concentrating solar project (CSP) is still limited to about 25% compared to the average for U.S. nuclear power plants of 91.5% in 2008, with many nuclear plants operating at or above 100%.

Also, given the lower capacity factors, the amortized cost of transmission per unit of energy carried is almost four times as high given the wide difference in capacity factors. We explored this systematic problem earlier.

The physics of solar energy production, without subsidy, will continue to conspire to keep the first cost and operating costs of the solar option higher than conventional approaches to producing electricity, especially when the cost of transmission is included in the equation. The capital cost of all the solar technologies are about $6,000/kW and higher (sharp-eyed readers will note that I’ve increased this number from the $5,000/kW estimate provided in earlier posts—the reason is discussed shortly) and projects are moving forward only in particular regions within the U.S. with tough RPS requirements and large subsidies from states and the federal government.

In Part I, we reviewed the enormous scale and capital cost considerations of PV projects and then introduced the standard taxonomy of central solar power generating plants. By far the favored technology for utility-scale projects is the CSP option that either produces thermal energy used to produce electricity in the familiar steam turbine process or by concentrating the sun’s thermal energy on an air heat exchanger to produce electricity via an air turbine. In Part II, we reviewed a sampling of recent solar projects.

This final post explores the latest cost solar project cost data and then rising interest in hybrid projects that combines these two solar energy conversion technologies with conventional fossil-fueled technologies. Hybrid projects offer the opportunity for utilities to reduce fuel costs, while simultaneously helping utilities cope with onerous renewable portfolio mandates.

Creative Electricity Accounting

Renewable energy does generate a larger portion of the world’s electricity each year but the reported numbers are misleading. The Solar Energy Industries Association (SEIA, a trade organization that promotes solar energy technologies) recently released its 2008 Year in Review report wherein the organization estimated the solar industry growth over the past year. According to SEIA’s number, the total capacity of the solar industry grew by 1,265 MW in 2008, up from 1,159 MW installed in 2007, a modest increase. However, since my first post in early October where I first referenced this report, a closer look at the numbers reveal much creative accounting in SEIA’s numbers. Their mistake, and it’s a doozie, is they sum the electrical production of a photovoltaic (PV) and concentrating solar power (CSP) systems that produce electricity with the thermal energy production of solar water heating. No can do. [Read more →]

November 19, 2009   4 Comments

Origins of the Gasoline Tax (Part II of “Political Capitalism: Understanding the Beast that Broke the Cage”)

“I see no force in modern society which can cope with the power of capital handled by talent, and I cannot doubt that the greatest force will control the other forces.”

- William Graham Sumner. “Economics and Politics” [1905]. In Earth-Hunger and Other Essays. 1913. Edited by Albert Galloway Keller. Reprint. New Brunswick, NJ: Transaction, 1980, p. 329.

“It is precisely the fact that the market does not respect vested interests that makes the people concerned ask for government interference.”

      – Ludwig von Mises, Human Action (4th Edition), p. 337.

Jim Rogers (Duke Energy), Aubrey McClendon (Chesapeake Energy), John Rowe (Exelon), T. Boone Pickens, Matt Simmons…  The list goes on of the political capitalists (aka “rent seekers”) who, in the tradition of Ken Lay and Enron, are politicizing the energy market for momentary advantage–but all in the name of saving the planet.

Try to name some counterweights, some prominent free-market capitalists.  I can think of one in the energy sector who does not want the publicity (Charles Koch, Koch Industries) and one in banking (John Allison, BB&T). Any others of note (please add a comment if so)? They are few and far between.

Rent-seeking political capitalists are hardly new. The New Deal featured a variety of business leaders wanting special government favors at the expense of taxpayers, consumers, and/or competitors. And in the decades before FDR’s power grab, leading voices from the public utility industries championed entry-and-rate regulation by government, fearing market “raiders” more than mandated rate maximums (this story comes later in the series).

Energy Favors

The history of the U.S. energy industry is replete with examples of government intervention originating within the industry. As documented in Oil, Gas, and Government: The U.S. Experience (1996), there is government intervention sponsored by “Big Oil” and many more instances of intervention stemming from “little oil”–or nonintegrated independents who were particularly vulnerable to shifts in the marketplace.

Mom-and-pops with good political connections or working through trade associations could and did wield the political ax against bigger competitors and/or unorganized consumers, I found in my study.

One of the most interesting examples of the industry at political work concerns the first state motor fuel tax, passed in Oregon in 1919 at, you guessed it, $0.01 cents per gallon.

Was this tax the work of a far sighted reformer? Or was it a confluence of private and public interests creating a demand for and supply of government favor?  It was the latter.

Specifically, “Big Oil” was behind the Oregon gas tax. The major oil companies via their trade association calculated that the demand for gasoline and thus the price of gasoline would rise more from tax-financed new road construction than demand for the same would fall from the tax.

Oregon’s beginning led to road taxes in all 48 states within a decade to fund road construction.

Problem was that gas tax revenue started to be diverted to other uses to the chagrin of the American Petroleum Institute (API). “Phantom roads” became an issue. Government intervention giveth and taketh away.

Here is the story of the first motor fuel tax reproduced from Oil, Gas, and Government (pp. 1375–76). [Read more →]

November 18, 2009   3 Comments