A Free-Market Energy Blog

“Julian Simon and the Triumph of Energy Sustainability” Revisited: Part II

By Sandy Liddy Bourne -- November 27, 2013

“Greater energy consumption, higher economic growth, and more people are not increasing air pollution but reducing it in the world’s leading capitalist societies. More people mean more solutions …. What appears to be a paradox is really a Simon truism.”

– Robert Bradley, Julian Simon and the Triumph of Energy Sustainability, p. 85.

This concludes a two-part (Part I yesterday) look-back at the major points made in Rob Bradley’s 2000 primer on energy sustainability inspired by the worldview of Julian Simon.

Energy Affordability

“In terms of work-time pricing, conventional energy has become dramatically more affordable throughout this century … for electricity. The average U.S. worker needed over 20 minutes of labor to purchase a gallon of gasoline in the 1920s. In the 1990s a less polluting, higher performing, and more taxed gallon of gasoline cost a worker close to 6 minutes on average. The work time price of 100 kilowatt hours of electricity (approximately the power needed to run today’s average home for three days) dropped from over ten hours in the 1920s and 1930s to under a half hour in the 1990s.”

Robert Bradley Jr., Julian Simon and the Triumph of Energy Sustainability, p. 50.

“There is little reason to believe that natural resource prices behave differently than a basket of other (non-depletable) goods over long time periods. And even if real prices increase in certain periods, work-time prices can be expected to fall in a growing economy.”

Ibid. p. 53.

Energy Intensity

“Energy intensity (measured as energy used per unit of Gross Domestic Product) dropped by one-third in the U.S. between the 1950s and the 1990s. Yet energy consumption per person has increased almost 50 percent in the same period.”

Ibid., p. 54.

“Next generation gas-fired turbines will crack the 60 percent efficiency threshold—called the ‘four minute mile’ of turbine efficiency—compared to existing aged gas and coal units that average around 40 percent efficiency.”

Ibid., p. 55.

New Market Institutions

“Oil shortages and price spikes in the 1970s inspired the formation of futures markets in heating oil (1978), unleaded gasoline (1981), and light sweet crude oil (1983) to manage risk. U.S. exchange-traded energy contracts expanded from oil to five natural gas delivery points (1990, 1995-97) and nine electricity delivery points (1996-98).”

Ibid., p. 57.

“Energy-risk management complements the growing globalization and interdependence of world oil supply. The development of spot markets in a global network has diminished the ability of any oil exporting country to target an importing country such as what occurred to the United States with the Arab oil embargo of 1973/74.”

Ibid., p. 60.

“Computer-aided mixing and matching of supply and demand offers, coupled with transportation scheduling, has brought mass customization or optionality to buyers of gas and electricity. A natural gas or electricity consumer today can contract for fixed prices for one month or as long as twenty years. Prices can be indexed to general prices, interest rates, or another commodity that itself has a liquid forward market to control risk.”

Ibid., pp. 71-72.

Market Conservation

“Critics of free-market energy demand have long complained that businesses lack incentives to economize on energy or are ignorant of the latest energy-saving technologies. Whether or not this was true in the past, energy service companies are now performing energy audits and offering guaranteed savings in long-term contracts where the commodity, maintenance, information, demand-side management, and transmission functions are bundled together. Internet connectivity, through which an energy service company can manage the energy consumption of hundreds of remote sites from a central location, will introduce new economies of scale.”

Ibid., p. 72.

Natural Environmental Progress

“’Antiseptic’ automobile and truck traffic combated ‘horse emissions,’ a major environmental distraction and health problem in urban America through the turn of the century. Each horse that transported goods and people excreted on average 12,000 pounds of manure and 400 gallons of urine per year, creating not only stench but also disease from air and water pollution. The agricultural burden of feeding 1.4 million horses was another environmental issue.”

Ibid., pp. 77-78.

“The displacement of fuel wood by fuel oil, natural gas, and electricity was an environmental step forward in terms of reducing air pollution and deforestation. The hydrocarbon age was environmentally productive at its inception.”

Ibid., p. 78.

“Greater energy consumption, higher economic growth, and more people are not increasing air pollution but reducing it in the world’s leading capitalist societies. More people mean more solutions through better technology and increased wealth. More wealth results in greater societal pressure for and the means to achieve cleaner air. What appears to be a paradox is really a Simon truism.”

Ibid., p. 85.

Climate Change

“There is little agreement between [climate] models on changes in storminess that might occur in a warmer world. Conclusions regarding extreme events are obviously even more uncertain.”

Ibid., p. 108.

“Instances of extreme weather should not be extrapolated to support a global finding of increasing weather extremes. Political figures and interest groups have dramatized local weather extremes as ‘what global warming will bring,’ which is a manipulation of current scientific understanding.”

Ibid., pp. 109-110.

“It is estimated that a 60–80 percent reduction in worldwide CO2 emissions will be necessary to stabilize atmospheric concentrations at 1990 levels, compared to a 5.2 percent reduction from 1990 levels—for developed countries only—in the Kyoto Protocol. Wigley has estimated the number of needed Kyotos at ten, while Jerry Mahlman of Princeton’s Geophysical Fluid Dynamics Laboratory, a noted alarmist, has estimated thirty to cancel out the human influence on climate.

With imperfect Kyotos, this range would widen. The Kyoto Protocol, in short, is a climatic non-event, leaving its sponsors with symbolism in the short run and the need for multiple Kyotos over the medium and long terms. Such regulation gets an interventionist train out of the station, opening a Pandora’s box of regulation and international trade restrictions that promises to distort the energy market for many years, indeed decades, to come.”

Ibid., p. 117.

“Today’s global warming alarmism is based on a double non sequitur. The first is that a finding of “discernible” human influence on climate indicates a major potential crisis. As Julian Simon suspected, the current state of knowledge at the intersection of science and economics, the balance of evidence, points toward either a benign or a positive outcome from the anthropogenic influence on climate.

The second non sequitur is that the alarm necessitates government activism to rapidly push the energy economy away from hydrocarbons to mass conservation and to certain politically favored renewables. Even if the balance of evidence pointed toward a negative anthropogenic influence on climate, adaptation could be the most prudent use of societal resources given the supply limitations of favored renewables and the limits on economic energy conservation.”

Ibid., p. 118.

Intermittent Energy Sources

“Digital equipment has transformed the need for energy reliability. Whereas 99.9 percent reliability is acceptable for traditional energy hardware such as lighting, electric motors, and air conditioning systems (the old economy), digital equipment is very different. The ‘three nines’ of reliability, equating to around 8 hours of outages per year, can crash networks and spoil data. Many more ‘nines’ are necessary for information-quality power.”

Ibid., pp. 69-70.

“Intermittent, site-sensitive, and costly technologies for generating electricity—such as solar power and wind power—cannot drive a modern economy. They can serve only as appendages to conventional cost-effective electric generation sources.”

Ibid., p. 119.

Perils of Government Intervention

“Only major government intervention in energy markets can turn transitional problems into a macroeconomic crisis like the gasoline and natural gas shortages of the 1970s.”

Ibid., p. 34.

Energy Holocaust?

The sudden disappearance of hydrocarbons—for example following a ten-year forced phase-out as urged by a popular book sounding the global warming alarm—could … snap the support system maintaining current population levels and force a return to ecologically inferior primitive biomass. It would not be energy sustainability but energy holocaust.”

Ibid., pp. 27–28.

Free Market Energy

“A market approach can be summarized in two steps. First, property rights should be established wherever possible to create stewardship in place of the “tragedy of the commons” whereby no individual owner has the incentive to take care of the resource (the clean air, water, etc.). Second, when private-property titles are not feasible, regulation should be based on reasonable cost/benefit analysis, employ market mechanisms in place of command-and-control, and be decentralized to use as much on-the-spot knowledge as possible.”

Ibid., p. 86.

Leave a Reply