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Category — Energy Externalities

Giberson: “Did the Federal Government Invent the Shale Gas Boom?” (December 20 post becomes part of a national debate)

One of the nation’s important energy analysts is Michael Giberson, an economist at the Center for Energy Commerce in the Rawls College of Business at Texas Tech University. Giberson, who has occasionally posted at MasterResource,  teaches energy courses at Tech such as U.S. Energy Policy and Regulation and Energy Economics.

Giberson is also a principal (with fellow energy expert Lynne Kiesling of Northwestern University) of the energy-centric Knowledge Problem, described as “Commentary on Economics, Information, and Human Action.”

A month ago, Giberson critically reviewed a study by the Breakthrough Institute that claimed, basically, that government energy activism crucially enabled the shale gas (and oil) revolution that is now sweeping much of the United States and many countries around the world.

“New Investigation Finds Decades of Government Funding Behind Shale Revolution,” announced Breakthrough on December 20, adding:

Breakthrough Institute research and interviews show the direct and sustained support federal agencies provided to the gas industry leading up to the modern natural gas revolution.

And virtually on the same day (Giberson was on holiday), a rebuttal came at Knowledge Problem (reprinted with separate comments at  Energy Collective) that is now part of the national debate.

On Tuesday night, the Breakthrough Institute trumpeted Obama’s mention under the headline “Obama’s Energy Revolution,” adding:

In his State of the Union, President Barack Obama referred to the findings of a Breakthrough Institute investigation, which found that 30 years of federal funding led to the shale gas revolution.

Given the high-stakes debate, MasterResource is pleased to repost, in its entirety, Giberson’s analysis–and his challenge for deeper research.  The debate is joined. [Read more →]

January 26, 2012   11 Comments

Energy Externality Pseudoscience: Unmasking Krugman’s Argument Against Fossil Fuels

Opponents of fossil fuels have long championed solar power and wind power as replacements. Unfortunately, there is no evidence that solar and wind can provide the cheap, plentiful, reliable energy that our standard of living requires. They have never come remotely close to competing economically on a free market. In fact, due to their low concentration and high intermittency, they have proven unable to provide substantial baseload power in any country, ever, even when exorbitantly subsidized.

When confronted with these facts, opponents of fossil fuels offer a seemingly scientific counterargument. Fossil fuels are only cheap, they say, because fossil fuel companies aren’t required to pay for the “hidden costs” or “negative externalities” of their product. These “hidden costs” are harms not reflected in the prices we pay–such as the presumed damage from future climate change. Companies should be required to pay these “hidden costs,” the argument goes, and if they were, solar and wind would actually be cheaper than fossil fuels.

In a recent column, “Here Comes the Sun,” Paul Krugman invokes this view to argue for major taxation on fracking (and, by implication, all other fossil fuel production). To believe otherwise, he says, is to be economically illiterate.

Fracking–injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels–is an impressive technology. But it’s also a technology that imposes large costs on the public…Economics 101 tells us that an industry imposing large costs on third parties should be required to “internalize” those costs — that is, to pay for the damage it inflicts, treating that damage as a cost of production.

Unfortunately, this analysis fails both Political Philosophy 101 and, surprisingly given Krugman’s credentials, Economics 101. [Read more →]

November 15, 2011   17 Comments

Fifteen Bad Things with Windpower–and Three Reasons Why

[Note: This article has been updated to Twenty Bad Things about Windpower — go here.]

Trying to pin down the arguments of wind promoters is a bit like trying to grab a greased balloon. Just when you think you’ve got a handle on it, it squirts away. Let’s take a quick highlight review of how things have evolved.

1 – Wind energy was abandoned well over a hundred years ago, as it was totally inconsistent with our burgeoning more modern needs of power, even in the late 1800s. When we throw the switch, we expect that the lights will go on — 100% of the time. It’s not possible for wind energy, by itself, to ever do this, which is one of the main reasons it was relegated to the dust bin of antiquated technologies (along with such other inadequate sources like horse power).

2 – Fast forward to several years ago. With politicians being convinced by lobbyists that Anthropological Global Warming (AGW) was an imminent threat, a campaign was begun to favor all things that would purportedly reduce CO2. Wind energy was thus resurrected, as its marketers pushed the fact that wind turbines did not produce CO2 in their generation of electricity.

3 – Of course, just that by itself is not significant, so the original wind development lobbyists then made the case for a quantum leap: that by adding wind turbines to the grid we could significantly reduce CO2 from fossil fuel electrical sources (especially coal). This argument became the basis for many states’ implementing a Renewable Energy Standard (RES) — which mandated that their utilities use an increased amount of wind energy.

4 – Why was a mandate necessary? Simply because the real world reality of integrating wind energy made it a very expensive option. As such, no utility company would likely do this on their own. They had to be forced to. [Read more →]

September 20, 2010   40 Comments