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Posts from — December 2011

Anatomy of a Debate: Rejecting Renewable Energy at THE ECONOMIST (Part II)

“This house believes that subsidizing renewable energy is a good way to wean the world off fossil fuels.”

- ECONOMIST magazine, Online debate, November 8–18, 2011

Yesterday we reviewed the surprising rebuke of renewable energy–and the underlying premise that fossil fuels were inherently unsustainable–by an international voting audience.

Today we revisit the essential question: Can renewable energy really help ‘wean the world off fossil fuels’?

Although the affirmative’s Matthias Fripp, moderator James Astill, and their colleagues evaded this fundamental question, here is a sampling of oft-heard rationales, most if not all of which were implicit in Astill’s comments and final announcement. Windpower (providing more than 75% of any politically correct renewable portfolio), we are told, helps to:

(a) Reduce reliance on foreign oil;

(b) Substitute for coal;

(c) Complement the fuels used in our electricity generation portfolios;

(d) Provide a fair return to wind investors while making them feel good about helping save the world;

(e) Spawn discretionary revenues to help bootstrap our economic doldrums;

f) Create new jobs;

(g) Establish leadership credentials to encourage the rest of the world to follow our example; and

(h) Serve as a bridge to newer, better technologies in some more enlightened future.

All of the rationales are severely lacking. Even if one believes that fossil fuel usage is greatly harming the earth and its inhabitants, renewables, used extensively, can only make that problem worse. [Read more →]

December 14, 2011   5 Comments

Anatomy of a Debate: Rejecting Renewable Energy at ECONOMIST Magazine (Part I)

“Arguments have no chance against petrified training; they wear it as little as the waves wear a cliff.”

A Connecticut Yankee in King Arthur’s Court

Last month, The Economist magazine conducted a two-week Oxford style online debate over the proposition “that subsidizing renewable energy is a good way to wean the world off fossil fuels.”

“Renewable” in the case is really politically correct renewables: basically wind power, with some solar and a bit of of biofuel/geothermal thrown in.

Matthias Fripp, a research fellow for the Environmental Change Institute and Oxford’s Exeter College, defended the motion, while Robert L. Bradley Jr., founder and CEO of the Institute for Energy Research, argued against. Three comments by Jeremy Carl , Travis Bradford , and Ben Goldsmith each played to the premise that government energy policy had to displace fossil fuels.

The Economist’s James Astill, the magazine’s energy and environmental editor, and a decided climate alarmist/energy transformationist, moderated the discussion.

On November 18, Astill (reluctantly) announced the winner: the opposition (Bradley) with 52% of the vote. Turnout was high, with the total votes more than doubling the pre-debate estimate of 6,000.

An Upset Victory

Readers can follow the to-ing and fro-ing of the debate, while perusing the various comments from people around the world and drawing their own conclusions about the merits of the argument. However, the wording of Astill’s brief announcement, barnacled with non-sequiturs and the audacity of hope, barely disguised his disappointment over the outcome.

The Economist, indeed, has been promoting renewables for many years. The magazine cheered Enron’s ecopork, particularly when this company became a founding member of the Pew Center on Global Climate Change’s Business Environmental Leadership Council.

The Economist has been handwringing over global warming even as the sloganeering shifted to Climate Change. Moderator Astill distilled the magazine’s supercilious editorial stance that a surfeit of CO2 from fossil-fuel dependence is turning the world into a too-hellish place.

It is a tribute to Bradley and discerning voters, and not to mention many perceptive comments (of the 450 in all), that the opposition prevailed if the face of the home bias. [Read more →]

December 13, 2011   4 Comments

“THIS AGREEMENT WILL BE GOOD FOR ENRON STOCK!!” (Enron’s infamous Kyoto memo 14 years ago)

It is perhaps the most revealing ‘crony capitalism’ memo in American history–at least that is in the public domain. (I ask others to submit nominations for this (dis)honor to see if this memo does not take the prize.)

It was written from Kyoto, Japan in the afterglow of the Kyoto Protocol agreement by Enron lobbyist John Palmisano. The global green planners were euphoric that, somehow, the world had embarked on an irreversible course of climate control (and thus industrial and land-use control). Palmisano’s memo reflects that as well as the specific benefits for first-mover ‘green’ Enron.

Parenthetically, I was lucky to have received this memo back at Enron to share it with posterity. Palmisano had me in the “To” list but but purposefully did not email it to me (we were foes on ‘green’ energy issues). My free-market colleague at Enron, Jim O’Neill (now with the Thiel Foundation) called me in amazement for my reaction to Palmisano’s work of art, and he sent me a copy when I told him I did not receive it.

The memo was shared with the Washington Post soon after Enron’s demise, which resulted in the piece, “[Enron]  Chairman Pushed Firm’s Agenda With Clinton White House” (Dan Morgan: January 13, 2002).

Where is Palmisano now? Like a number of Enron refugees tied to climate alarmism, he has bounced around with ‘green’ groups such as the now-defunct Evolution Markets and Carbon Positive (see the end of the post).

Here is the entire memo, ten years old today!

—————————————————-

To: Terry Thorn, Joe Hillings, Cynthia Sandherr, Jeff Keeler, Fiona Grant, Hap Boyd, Bill Shoff, Dan Badger, Tom Kearney, Lynda Clemmons, Bruce Stram, Mike Terraso, Rob Bradley, Jim O’Neill, John Hardy

From: John Palmisano

Date: December 12, 1997

Subject: Implications of the Climate Change Agreement in Kyoto & What Transpired

This memo summarizes the implications of the agreement reached in Kyoto and also describes what I was doing and provides some observations.

Implications

If implemented, this agreement will do more to promote Enron’s business than will almost any other regulatory initiative outside of restructuring of the energy and natural gas industries in Europe and the United States. The potential to add incremental gas sales, and additional demand for renewable technology is enormous. In addition, a carbon emissions trading system will be developed. While the trading system will be implemented by 2008, I am sure that reductions will begin to trade with 1-2 years. Finally, Enron has immediate business opportunities which derive directly from this agreement. [Read more →]

December 12, 2011   6 Comments

The Perils of the Mixed Economy: Rejecting ‘Starter Regulation’

[This exploration into the theory of regulation was inspired by the role of the mixed economy in the rise and fall of Enron. The analysis applies to many current issues, such as the negative environmental effects of the supply/demand for used batteries, the lead story in today's New York Times.] 

Political economists have long recognized the challenge of getting regulation right in a mixed economy.

“A scheme of state interference for the attainment of some social or economic benefit,” stated Hubert Smith back in 1887, “will in general succeed or fail according as it is able or unable to cause a change in the nature, habits, and disposition of those whom it affects.”

A century later, regulatory economist Sanford Ikeda reached a like conclusion:

Interventionism is really a process of entrepreneurial adjustments in both the private and public sectors, where these adjustments tend to be both unanticipated and undesirable (from the viewpoint of the interveners) owing to radical ignorance, complexity, and dispersed information.

Some historians have noted the same. The Progressive Era’s “stunningly rapid bureaucratic triumph,” Richard McCormick wrote in the American Historical Review, resulted in “open-ended and unpredictable” state and federal regulation. “Consequences are often unexpected, outcomes surprising when matched against origins.”

‘Simple Rules for a Complex World’

Even business ethicists dismissive of simple-rules (free-market) capitalism have acknowledged the limits of government fiat. For example, Duane Windsor states: “It is infeasible fully to regulate a complex economy.” The alternative, in this view, is that Social Capitalist Man must be classroom-coached before entering the thicket of the mixed economy, where an estimated 300,000 potential federal offenses lie in waiting. [Read more →]

December 9, 2011   1 Comment

U.S. Rejection of CO2 Emission Cuts: Just Do the Math (16% and falling ….)

“[T]he impact that emissions reduction efforts in the U.S. will have on global emissions totals–and by extension, global climate–is quickly diminishing.”

The just-released numbers for last year’s carbon dioxide emissions (not including land-use changes) show why forcing large cuts in carbon dioxide (CO2) emissions is not very high on the priority list of the U.S. powers-that-be (including voters).

In 2010, the total global CO2 emissions were the highest on record, ~9.1 PgC (33,400 million metric tons). The U.S. contribution was ~1.50PgC, about 16% of the global total—percentage-wise the lowest on record (since 1959) and falling rapidly.

Unilateral U.S. CO2 mitigation strategies, in other words, are doomed to increasing irrelevance–and even unintended consequences should carbon rationing at home result in industrial transfers to less regulated areas. [Read more →]

December 8, 2011   7 Comments

North America’s Incredibly Expanding Resources (New study puts ‘peak’ oil, gas, and coal in some future century)

“Human beings create more than they destroy.”

- Julian Simon, The Ultimate Resource 2 (Princeton, N.Y.: Princeton University Press, 1996), p. 580.

“People have since antiquity worried about running out of natural resources–flint, game animals, what-have-you. Yet, amazingly, all the historical evidence shows that raw materials–all of them–have become less scarce rather than more….  And there is no reason why this trend should not continue forever.”

- Julian Simon, “The State of Humanity: Steadily Improving,” Cato Policy Report, September/October 1995.

There is only one thing that is going up more than government subsidies for uneconomic wind and solar power: oil, gas, and coal reserves and resources in the United States, according to a new study released yesterday by the Institute for Energy Research (IER) assessing total North American inventory.

The U.S. is the world’s most endowed energy country, followed by Russia, Saudi Arabia, and China. At current consumption rates, we have hundreds of years of domestic oil and gas, and thousands of years of coal.

Stephen Hayward explains this and more in this video: [Read more →]

December 7, 2011   5 Comments

T. M. L. Wigley (NCAR): ‘Personality Failure’ to ‘Intellectual Failure’?

“You may be interesting [sic] in this snippet of information about Pat Michaels. Perhaps the University of Wisconsin ought to open up a public comment period to decide whether Pat Michaels, [sic] PhD needs re-assessing?”

- Tom Wigley to ‘Folks’, October 14, 2009.

“I consider this to be an extremely serious matter. [The actions and climate views of] Mr. Bradley … may further damage both my personal and your company’s reputation.”

- Tom Wigley to Kenneth L. Lay (Enron), August 26, 1999.

“We sent [our paper] to Journal of Climate. I sent out about 10 copies–one to Wigley. But I requested that he not be used as a referee ‘because of an inexplicable hostility towards us (and possibly everyone else)’.”

- Gerald North to Robert Bradley (Enron), September 1999.

Climate scientist Patrick Michaels is mad–plenty mad (see his letter to Roger Wakimoto, Director, National Center for Atmospheric Research below). Among the Climategate 2.0 email sewage is a blatant attempt by Thomas Wigley, senior scientist at the National Center for Atmospheric Research (NCAR),  to undercut Michaels’s academic base by challenging the latter’s doctoral dissertation as inaccurate and deceitful.

If Michaels’s dissertation was purposely deceitful, not only flawed, then Wigley would have his ground. But if not, what does this say about the accuser in the highly politicized climate-change debate?

Climate scientist Judith Curry weighted in as follows: [Read more →]

December 6, 2011   3 Comments

Section 1603 Grant Extension: Just Say No (Good money after bad–is the end near?)

There’s desperation on the Hill by the taxpayer  parasites. The wind industry is once again pressing Congress for a last minute extension of the Section 1603 subsidy.

And why not? ‘Tis the season for giving, and the approach of “Ask and ye shall receive” has worked pretty well for the industry so far, especially with a contingent of members happy to be led around by any entity cloaking itself in ‘green’. Who better to do the leading than the American Wind Energy Association (‘AWEA’), the trade group increasingly dominated by wind turbine manufacturers — most of whom are headquartered in Europe and Asia.

Any reasonable assessment of the 1603 grant program would be lost entirely on this crowd but there are facts that make any discussion of an extension foolhardy.

High Cost: The treasury reports it’s already distributed $9.6 billion in cash grants during the period from 2009 to October 31, 2011. Of this, 80% ($7.6 billion) was handed to wind developers representing 12,272 megawatts of installed capacity. Since the money does not transfer to project owners until a wind facility is in service, the public has NO idea of the total cost of 1603. And we won’t know until 2013 or after.

But based on projects now under construction, we estimate the outlay for wind alone to be closer to $20 billion. This is without an extension. If Congress agrees to extend 1603 by 1 year, this figure would be much larger. Remember, we are borrowing 40 cents on every dollar to pay for this program. [Read more →]

December 5, 2011   24 Comments

Remembering ‘Green’ Enron (Part II: Corporate Social Responsibility)

[Ed. note: This week marks the 10th anniversary of Enron's bankruptcy filing (December 2, 2001). Enron's view of energy sustainability drives the Obama Administration today. Yesterday, this series looked at Enron's Kyoto moment.]

 In the fall of 2001, Ken Lay set the tone for what would be Enron’s last Environmental, Health, and Safety Management Conference:

We believe that incorporating environmental and social considerations into the way we manage risk, govern our projects, and develop products and services will help us maintain our competitive advantage. As we move forward, we will leverage our intellectual capital and innovative capabilities to promote sustainable business practices around the world.

At this meeting, Enron’s Corporate Social Responsibility (CSR) task force listed its “Accomplishments to Date,” which were:

  • Secured board oversight of social/environmental performance
  • Expressed support for Universal Declaration of Human Rights
  • Completed corporate responsibility task force
  • Developed and pilot-tested human rights audit
  • Developed security and human rights guidelines
  • Established formal partnerships with WBCSD [World Business Council on Sustainable Development], IBLF [International Business Leaders Forum], and CI [Conservation International]
  • Identified language to strengthen code of ethics
  • Providing project support—Calypso, Transredes, Dabhol and Cuiabá
  • Responding to stakeholder concerns on an ongoing basis

The goals for 2002 included:

  • Formally adopt CERES Principles
  • Complete indigenous peoples’ policy
  • Specify social/environmental expectations in formal relationships with vendors and contractors
  • Review results of stakeholder survey and develop strategy to address outcome
  • Create awareness of social/environmental trends among [Enron’s] origination and investment groups
  • Add corporate responsibility performance attribute to PRC [Performance Review Committee] process
  • Present task force recommendations to Dr. Lay and senior management

Make no mistake—Enron was trying to practice CSR, so that it could monetize its “green” energy model. This had been Lay’s strategy for a decade with natural gas, as well as internationally, as with Enron Global Affairs’s 1999 launch of the Social and Environmental Responsibility Program. [Read more →]

December 2, 2011   2 Comments

Remembering ‘Green’ Enron (Part I: The Kyoto Moment)

[Ed. note: This week marks the 10th anniversary of Enron's bankruptcy filing (December 2, 2001). Enron's view of energy sustainability drives the Obama Administration's "green 'dream' team" today, so such a look back at Enron's crony capitalism is merited.]

Beginning in the late 1980s, global warming became a bread-and-butter issue for Ken Lay, Enron’s leader and up-and-coming industry visionary. Enron in the 1990s became a full-fledged “green” company, practicing “energy sustainability” with its investments in solar power, wind power, energy-efficiency services, and environmental services.

No U.S.-based company sounded the tocsin over climate change more than Enron. What John Browne did as head of the international energy major BP, Ken Lay did in the United States, working with interest groups and political leaders to push the energy industry and public toward carbon dioxide (CO2) regulation.

Lay had his reasons—seven in terms of company profit centers, all of which stood to gain from government restrictions on carbon emissions. They involved:

· Natural gas production (relative to oil and coal),

· Natural gas transmission (relative to oil and coal),

· Natural gas-fired electric generation (relative to oil and coal),

· Energy outsourcing (a/k/a energy efficiency) services,

· Renewable energy generation (wind and solar),

· CO2 emissions trading (joining company trading in sulfur dioxide and nitrogen oxide), and

· Environmental outsourcing (a/k/a environmental services).

Of these, Enron’s natural gas activities were core, profitable activities (and “win, win” economically and environmentally, in their important applications). But the last four areas were problematic from the start and never profitable, even with special government favor. In retrospect, almost no amount of government subsidy would have been enough for these nascent businesses. [Read more →]

December 1, 2011   18 Comments