The Myth of Affordable Energy – Interview with Ed Dolan

by James Stafford of Oilprice.com

We were fortunate enough to speak with the well known economist Ed Dolan on various energy and economic issues.

In the interview Ed talks about the following:

  • Why cheap energy is not vital to economic growth
  • Why high oil prices aren’t necessarily a bad thing
  • Why the U.S. Oil and gas boom is hurting Russia’s global influence
  • Why Obama’s desire to cut oil industry tax breaks could be a great idea
  • Why energy policy needs to be completely reformed
  • Why Russia’s Arctic Exploration could cause the worst environmental disaster to date
  • Why renewable energy investors should be very worried about the Natural gas boom
  • Why the EU was flawed from the start
  • Why subsidies for renewables are just plain wrong.
  • Why we should give QE3 a chance
  • Why abundant natural resources can bring a curse of riches

Ed writes the popular economics blog Ed Dolan’s Econ Blog and has just recently released a book: TANSTAAFL (There Ain’t No Such Thing As A Free Lunch) – A Libertarian Perspective on Environmental Policy, which you can find out more about here

Interview by James Stafford of Oilprice.com

Oilprice.com: Access to cheap energy is vital to economic growth. What do you see happening with the economy over the coming years as the time of cheap oil comes to an end?

Ed Dolan: In my view it is a myth that cheap energy – “affordable energy” as many people like to say is vital to growth. The idea that there is a lockstep relationship between growth of GDP and use of energy is widespread, but the data simply does not bear it out. Instead, what they show is that the world’s best-performing economies have become dramatically more energy efficient over time.

The World Bank uses constant-dollar GDP per kg of oil equivalent as an energy efficiency metric. From 1980 to 2010, the high-income countries in the OECD have increased their average energy efficiency by 55 percent. The United States has done a little better than that, increasing its energy efficiency by 81 percent over that period. That’s pretty remarkable, considering that we haven’t really had a policy environment that is supportive of efficiency.

Think what we could do if we did.

Even after the efficiency gains in efficiency we have made, we still have a long way to go. The US economy is still 15 percent less energy efficient than the average for high-income OECD countries, giving it plenty of room to improve. Switzerland is almost twice as energy-efficient as the US, and the UK is 68 percent more efficient.

Some people say that the only reason the United States has been able to grow while using less energy is the deindustrialization of its economy, outsourcing heavy industry to China. However, compare the US with Germany. Germany is an export powerhouse and Europe’s best-performing economy, yet its energy efficiency has increased at almost the same rate over the last 30 years as the United States, an 80 percent gain in efficiency compared to 81 percent. Furthermore, despite being proportionately more industrialized than the US and a major exporter, Germany squeezes out 41 percent more GDP from each kg of oil equivalent.

In short, we don’t have to hypothesize about the possibility of someday breaking the lockstep relationship of growth and energy use—we and most of the rest of the advanced world are already doing it.

Oilprice.com: What effect can you see America’s Oil & Gas boom having on foreign policy?

Ed Dolan: On the whole, I see it as beneficial. Energy dependence has led us to buy a lot of oil from countries that are unstable and/or unfriendly to us. Anything we can do to reduce that dependence gives our foreign policy more room to maneuver. The beneficial effects reach beyond our actual imports and exports. The US gas revolution is having repercussions all the way to Russia, where Gazprom is seeing its market power undermined, and Russia, as a result, is losing some of the geopolitical leverage its pipeline network has given it.

Oilprice.com: From Siberia and Poland to China and Qatar – the shale revolution has politicians salivating at the thought of a cheap and abundant source of energy. But can the results seen in the U.S. be easily replicated in other parts of the world?

Ed Dolan: I think you’re going to have to ask someone with more engineering background for the technical details, but from what I read, the answer is that it won’t always be easy. It is my understanding that some countries where shale seemed just recently to have great promise have already encountered disappointments in practical exploratory work. Poland I think is an example. Furthermore, the environmentalist opposition to fracking seems even stronger in many European countries than in the United States.

Related Article: Forget Renewables, We Need Cheap Oil – An Interview with Gail Tverberg

Still, I am hoping that the shale revolution will pan out in at least some countries. Think how much difference it would make, say, to Ukraine’s foreign policy if they were able to break their dependence on Russian gas.

Oilprice.com: Gail Tverberg has written a recent article suggesting the world is suffering from high-priced fuel syndrome, which has the following symptoms:

•         Slow economic growth, or contraction
•         People in discretionary industries laid off from work
•         High unemployment rates
•         Debt defaults (or huge government intervention to prevent debt defaults)
•         Governments in increasingly poor financial condition
•         Declining home and business property values
•         Rising food prices
•         Lower tolerance for immigrants
•         Huge difficulty in funding retirement programs, programs for disabled, and regular pension plans
•         Rising international tensions related to energy supply

Do you think this is too convenient and an oversimplification of the problems facing world economies at the moment? What would you blame for the plethora of economic woes being experienced at the moment?

Ed Dolan: I don’t buy the argument at all. Yes, when countries are hit by unexpected upward shocks in fuel prices, we do see short-run results like slower growth and layoffs, but those are short-term problems. When the proper structural adjustments are made, countries with high fuel prices manage to achieve strong growth and full employment.

Where are fuel prices lowest? If you look up the data and rank countries by retail fuel prices, you find the low-price end of the rankings crowded with countries like Egypt, Cambodia, Iran, Pakistan—not exactly economies we would like to emulate.

We’ve got big economic problems, but a lot of them don’t have much to do with energy.

What about a healthcare system that delivers mediocre results at the world’s highest cost?

Health care isn’t all that much energy driven. What about our steady move down the international rankings in education—are you going to blame that on the high cost of heating classrooms? Hardly.

Oilprice.com: Oil prices have been near to the $100 a barrel mark for some time now, and don’t look likely to drop back to previous low levels. What effect could this increased price have on oil importing economies compared to oil exporting economies?

Ed Dolan: Clearly, any oil price increase has the short-term effect of transferring wealth from using countries to producing countries. However, the long-run effects are what matter.

In the long run, high prices just accelerate the trend for using countries to become more efficient and less dependent. Meanwhile, the producing countries often don’t manage their oil riches well. They fall victim to the “curse of riches.” The curse takes the form partly of a loss of competitiveness in their non-energy sectors (the so-called “Dutch disease”). Partly it takes the form of corruption of their political systems. Russia is a poster child for both aspects of the curse of riches.

Related Article: Which Biofuels Hold the Most Promise for the Future – Interview with Jim Lane

Oilprice.com: Renewable energy is more expensive than fossil fuels, so how can people be persuaded to choose the less economical option of renewables over the likes of coal and natural gas?

Ed Dolan: There is only one right way to promote renewables, and that is to introduce full-cost pricing of all forms of energy. Full-cost pricing is a two-part program.

First, it means pricing that covers the full production costs for every form of fuel. No subsidies for anyone—not for oil, not for ethanol, not for wind or solar.

The second half of full-cost pricing is to include all of the nonmarket costs, what economists call the “external costs” or “externalities.” The most publicized of these are pollution costs, whether those take the form of local smog, oil spills, climate change, or bird kills. Some people, I am one of them, would like to count in something for the national security costs of dependence on unfriendly and unstable foreign sources of energy supply.

Full-cost pricing accomplishes two things. First, it levels the playing field so that each form of energy competes on its economic merits, not whether corn-growing states have early primaries or oil companies have big SuperPacs. Second, by raising prices to consumers to a realistic level, it accelerates the trend toward energy efficiency that is already underway.

Subsidies for renewables are just plain wrong, even if you look at them from a hard-core environmentalist point of view. With a subsidy, on the one hand, you say, “produce more green energy” and other the other hand, you turn around and tell the consumer, “waste more green energy.” We don’t want to waste energy from wind or solar any more than we want to waste oil and gas. We shouldn’t forget that even the greenest renewables can have significant environmental impacts.

The whole “affordable energy” idea is based on the myth that if we don’t include those external costs in the price—the pollution costs, the national security costs—they just go away. They don’t. Keeping prices artificially low just transfers those costs to someone else, someone unlucky enough to live downwind, someone who owns beachfront property that gets eroded away as the sea level rises, someone who has to go off to fight a war to keep the shipping routes open. There are two things wrong that. First, it’s immoral. If we believe in the market economy, the rule of law, and all that, we have to respect people’s property rights and their human rights. Second, it’s inefficient. It doesn’t strengthen our economy, it weakens it. If there’s one thing we can’t afford, it’s “affordable energy.”

Oilprice.com: Obama has made clear his desires to cut the $4 billion a year tax breaks given to oil companies. What affect do you believe this would this have on the US economy and the US oil industry?

Ed Dolan: If it is done as part of a comprehensive move toward full-cost pricing, it could only strengthen the US economy. The oil industry would whine, but if we cut subsidies and tax breaks for competing energy sources at the same time, oil will remain a competitive part of the energy mix for many years to come.

Oilprice.com: The oil industry has enjoyed decades of subsidies and grants, so do you think it is unreasonable to already start cutting the subsidies to renewable energies and expect them to survive on their own?

Ed Dolan: As I explained above, the answer is yes, provided it is done as part of a package that reforms our energy policy as a whole in the direction of full-cost pricing.

Oilprice.com: Economic growth is generally dependent on the access to energy. As the supply of energy grows, so too does the economy (more or less). Global oil supplies are pretty much stagnant, so do you predict that only nations that successfully convert to a renewable energy mix with an abundant supply of cheap energy will be able to experience continued economic growth at a similar level experienced by the developed countries of recent years?

Ed Dolan: Again, I just don’t buy the doctrine that growth is dependent on ever-increasing energy use. For sure, those countries that pursue sound policies, like full-cost pricing to rationalize their energy mix and promote efficiency, are the ones that are going to keep growing.

Related Article: Can Syria’s Rebels Overthrow Assad? An Interview with Jellyfish Operations

Oilprice.com: As the arctic ice melts at a rapid pace the world’s superpowers are jockeying for position to exploit the region’s vast oil & gas & mineral deposits. Environmental groups are rightly concerned, but is this a resource that we cannot afford to ignore?

Ed Dolan: Arctic oil, like any other source of energy, should pay full freight for any environmental impacts it has. If it can bear those costs and still be competitive, I think it should be in the mix. I am worried about Russia, though. It has a dangerous combination of an environment-be-damned attitude and low technical competence that could lead to headline-grabbing disaster worse than the Gulf blowout or Exxon Valdez.

Oilprice.com: What effect do you see the shale revolution having on investments in renewable energy?

Ed Dolan: If I were trying to make money by generating electricity with wind or solar, I’d be worried about gas. I don’t have all the relevant numbers at my disposal, but my gut feeling is that even if you price in full environmental costs for wind, solar, and gas—including environmental costs associated with fracking—gas is still going to be pretty competitive.

Oilprice.com: What are your views on Ben Bernanke’s QE3?

Ed Dolan: I’ve written repeatedly about QE over at Economonitor, so I am on record as saying we should try it. The trouble is, QE is not a magic bullet. Properly executed and properly communicated, it can help support the recovery, but it can’t do it alone.

That is one point where I agree 110 percent with Ben Bernanke Here is what he said in a speech at the Fed’s Jackson Hole conference at the end of the summer:

“It is critical that fiscal policymakers put in place a credible plan that sets the federal budget on a sustainable trajectory in the medium and longer runs. . . Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve.”http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm

Oilprice.com: How do you see the EU solving its debt crisis?

Ed Dolan: I’m afraid I’m a euro pessimist. The US debt situation is hard enough to resolve, but Europe’s is worse. At the same time, whatever you say about gridlock in Washington, our political decision making is a model of streamlined efficiency compared with the EU.

Oilprice.com: Do you think the EU was doomed to fail from the start with the format that it has? Could more success be seen in a split EU, with the northern/richer nations using one currency, and the southern/poorer nations using a different currency?

Ed Dolan: Doomed, I don’t know, but flawed, certainly. Just recently, I was looking back at what economists were writing about the prospects for the euro back in the early 1990s, when it was still just a project. They were telling us, for one thing, that Europe is too diverse to be ideal for a currency union—and that was when there were only 15 EU countries. Second, they said that you can’t run a monetary union without a central government, a fiscal union, and a banking union. You still don’t have any of those.

I am not sold on the idea of a northern euro and a southern euro. If the currency union doesn’t work, it doesn’t work. Break it up. Sure, some countries will find it works for their special circumstances to tie their currencies to a large, stable neighbour. I could see the Danes or the Latvians keeping a link to the German currency, for example, and I’m sure the Vatican will continue to use whatever currency Italy uses. But a formal, north-south divide doesn’t make much sense to me.

Oilprice.com: In terms of tackling the current economic situation in the US, of the two main presidential candidates, who do you suggest is the best man, and why?

Ed Dolan: I do not think we can tackle the current economic situation without a thorough-going fiscal policy reform that includes three key elements: Spending cuts, revenue increases, and a rewrite of the whole tax system to eliminate loopholes and cut marginal rates. Furthermore, the package can’t be heavily front-loaded like George Osborne’s austerity program in the UK, which has sent their economy back into recession. Ours should be back-loaded, with an element of stimulus now and an ironclad commitment to move the budget toward surplus as the economy improves. It’s a lot to ask for.

We are not going to get good budget policy out of the GOP unless members of that party make a clean break with mantra that they will not accept a dime of new revenue, not even if it comes from eliminating the most loathsome tax loopholes. Personally, I am never going to vote for a candidate for President, the Senate, the House, or any office who has signed that nonsensical Grover Norquist tax pledge.

At the same time, I have been very disappointed at the lukewarm support Obama has given to the kind of program I would like to see. During the first debate, Romney said that when Obama didn’t “grab” Simpson-Bowles—that was his word, and a good one—it was a failure of leadership. That was one point where I agreed with Mitt.

Then, you also have to take into account the vote for Congress. I’m afraid there is going to be continued gridlock as long as the GOP controls the House. In the Senate, there are at least a few people in both parties who are willing to meet behind the scenes and talk compromise, but not in the House, not right now, anyway. Maybe what we need in the White House is someone who is a real politician, a negotiator and dealmaker in the mould of a Clinton or an LBJ. Instead, we have the choice between a manager and a law professor. I’m not optimistic that either of them will be able to do what needs to be done.

Source: http://oilprice.com/Interviews/The-Myth-of-Affordable-Energy-Interview-with-Ed-Dolan.html

JC comment:  James Stafford emailed me, offering this post to be reposted at Climate Etc.   Climate Etc. has previously coordinated with oilprice.com on posts.

329 responses to “The Myth of Affordable Energy – Interview with Ed Dolan

  1. The World Bank uses constant-dollar GDP per kg of oil equivalent as an energy efficiency metric. From 1980 to 2010, the high-income countries in the OECD have increased their average energy efficiency by 55 percent. The United States has done a little better than that, increasing its energy efficiency by 81 percent over that period. That’s pretty remarkable, considering that we haven’t really had a policy environment that is supportive of efficiency.

    There seems to be an implication here that past efficiency gains can be extrapolated forward. I disagree. It is my opinion that yes, there was a great deal of waste earlier on when an economy is first developing. This is because more efficiency is more expensive and these places are poorer and can’t afford it. It is much cheaper to build a 1960’s style mechanical automotive engine than a 2000’s style electronically controlled engine.

    There is a problem of diminishing return where the low-hanging fruit is obtained easily in increasing efficiency but once you get there, to obtain additional efficiency becomes impossible or only a minor amount of efficiency is possible. For example, it takes a certain amount of energy to do a given amount of work. You can never get more efficient than 100%. If I am at 100% efficiency in energy use, I still need to increase my energy consumption to increase my production. It takes a given amount of energy to transport 10 tons of goods from Atlanta to Chicago. If I want to double that production, I will need to ship twice as much. But my primary point is that we are reaching the limit of efficiency that can be obtained. We are likely to see only relatively minor improvements compared to what we have already obtained and at much greater expense.

    The net impact of expensive energy is to move production to places where energy is cheaper. It takes a lot of energy to run an electric arc steel mill and you can’t do that with windmills and solar panels. If I can’t obtain the energy here, I will simply move production someplace where I can. I will move my steel mill to Brazil and fire it with their coal or move it to China and use their nuclear electricity which they are building at a prodigious rate.

    This is all camouflage for a process of “global redistribution of wealth” where rhetoric such as this is used to rationalize high energy costs in order to force industry to places where it is cheaper. It has become practically impossible to open a new steel mill in the US. We aren’t building new nuclear except for a couple of plants in Georgia, we are taking coal plants off line, and you can not use wind/solar for an operation like that because they are unreliable and fragile. One hurricane can take out 100% of the wind and solar power in an entire region that would have to be completely replaced.

    There is a finite amount of energy required to produce and ship goods. The amount consumed is directly proportional to the amount produced and shipped. Yes, there are gains to be made by efficiency, but we are there. If you look at the curve from 1980 to 2010, I am willing to bet a cheeseburger and a coke that that curve flattens after about 1995 and is nearly flat after 2000. Any additional efficiency is going to come at very great expense. This will simply drive production to cheaper energy where they will get the benefit of BOTH cheap, abundant energy and efficient use while we see economic stagnation with an economy throttled by needless energy regulations.

    • crosspatch –

      There is a problem of diminishing return where the low-hanging fruit is obtained easily in increasing efficiency but once you get there, to obtain additional efficiency becomes impossible or only a minor amount of efficiency is possible.

      Do you have any data to show diminishing returns in that regard? Is this trend that you’re predicting going forward supported by what has transpired in the past? For example, my sense is that the benefits of increased efficiency have grown relative to the overall trend of increased use of energy.

      Of course, if such data don’t exist it wouldn’t necessarily disprove your theory, but it would make your specific application of the law of diminishing returns to be possibly the product of a confirmation bias.

      • Joshua, the problem of diminishing returns is a physical fact. There is an exponential cost or difficulty as one approaches the maximum practical limit. New technologies can change this limit, but that just deflects the curve temporarily. You can’t get 110% from a correctly measured efficiency.

      • John –

        My point was that establishing the point at which returns begin to diminish is dicey. What do the data tell us? Have we reached the turn-around point yet? Has the rate of increase even started to diminish yet?

        Let’s speculate about where that turn-around point might be (and whether we’ve reached it) rather than appeal to the “authority” of laws.

        How can we factor in support for efficiency – be it “top down” “statist” “government intervention” or something that people of a certain political persuasion might selectively find more palatable – such as a centralized energy policy that will carve out protections and support for nuclear energy?

        And as you point out, the development of new technologies also dramatically complicates this question.

      • Joshua, for many of our biggest energy users, steel, electricity generarion, concrete production, large efficiency improvements were made decades ago. An increase of 5% for a boiler would be tremendous and would casue many to consider buying such a unit for economic reasons which we saw when we bought a new state of the art boiler. But that leaves a prorated 95% energy or fossil fuel emission for the same output.

        The economic efficiecy used is somewhat misleading. As pointed out by crosspatch, one can make great strides in this measurement of efficiency and still be “polluting” more. It is a bad metric to discuss CO2 reduction per se.

      • John –

        I’m asking questions here – not asserting answers. Only a Wikipedia link – but just sayin.’

        Lovins’ Rocky Mountain Institute points out that in industrial settings, “there are abundant opportunities to save 70% to 90% of the energy and cost for lighting, fan, and pump systems; 50% for electric motors; and 60% in areas such as heating, cooling, office equipment, and appliances.” In general, up to 75% of the electricity used in the U.S. today could be saved with efficiency measures that cost less than the electricity itself. The same holds true for home-owners, leaky ducts have remained an invisible energy culprit for years. In fact, researchers at the US Department of Energy and their consortium, Residential Energy Efficient Distribution Systems (REEDS) have found that duct efficiency may be as low as 50-70%. The US Department of Energy has stated that there is potential for energy saving in the magnitude of 90 Billion kWh by increasing home energy efficiency.

        It is a bad metric to discuss CO2 reduction per se.

        I’m not sure why you say that – as I think it is neither good nor bad but instead relevant – but we aren’t discussing it in the CO2 reduction context here – we’re discussing it as an issue in the relationship between access to energy, the price of energy, and economic growth.

        crosspatch is implying that we are at, or are approaching, the point at which there is a diminishing economic return from increased energy efficiency.

        He is directly stating that:

        We are likely to see only relatively minor improvements compared to what we have already obtained and at much greater expense.

        What do the data say? Have the benefits gained from increased efficiency started to diminish? If my furnaces die tomorrow and I compare the heating systems I have to choose from now in relation to those I’d have to replace, I’d say that the improvements are far from minor. In fact, my HVAC guy keeps trying to tell me that I’d make my money back from installing (expensive, high-end) new systems even though the current systems still work. If we multiply my situation by tens of millions of other American households, what do the economics tell us?

      • We tens of millions of households not acting, and guess why? Look close to home.
        ======

      • We tens of millions of households not acting, and guess why? Look close to home.

        More work of a “skeptic.” Why haven’t I replaced my systems with more efficient ones? A skeptic would have that answer before making assumptions.

      • Heh, I know the answer for ‘tens of millions of households’. You, heh, perhaps an outlier, gee, I dunno.
        =============

      • Joshua from your source, RMI, on the project they admit was the only one with numbers that one can use, IMO, as to not be asserting an untruth. It is the Empire State Building. The project that led to such a large reduction in energy use will pay for itself in 125 years at the rate listed by RMI. I have looked at their work before. All that I have seen, which has been limited to certain energy questions I was interested in, for the few that numbers are available, are of three categories. 1. The technology does not yet exist to make it work as our society is currently constructed, such that a dismantling is required with associated external costs not accountable. 2. It is like the ESB, the payback is suspect, because the ESB may not be still up, or in a stable condition such that the changes still work in 125 years, that the savings will or can ever occur. 3. Like the ESB, the work is so uneconomic based on typical discount values, it makes no sense for businesses nor homeowners to do it. Maximum payback period for businesses are in the 2 to 5 year range, homes 10 to 20 year range. All in all, it fits crosspatch’s diminishing return scenario.

      • Joshua

        It is a plain fact of life that everyone looks at “return on investment” when making a decision to invest money (or time) in any venture or activity.

        In the case of adding insulation and replacing windows to his/her home, the amount of the investment is usually fairly simple to estimate.

        The “return” is a bit more difficult.

        Let’s take a case where the home is heated by heating oil.

        If the investment is X.

        And the calculated annual savings in heating oil from adding insulation and replacing windows is X/10, we have a 10-year payback.

        It gets more complicated if you figure a “time value of money” (or a discount rate). With a 5% discounted cash flow rate, you end up with a 14.5 year payback, without taking into account any depreciation rates and taxes..

        But, in many countries there are government funded “incentives” to encourage home-owners to invest in energy saving investments: either through accelerated depreciation rates, cash grants or tax breaks.

        Generally speaking, an older homeowner will be less likely to make the investment than a younger one, for obvious reasons.

        Then, for some people, it becomes a “green” issue (“save the trees, save the bees…”). These individuals might make the investment more as a “feel good” investment, rather than an economically justified one.

        Then there is the “tragedy of the commons” logic, which tells us that we must stop “over-exploitation” of natural resources not for individual economic reasons, but for ethical or global economic reasons (Wiki):

        In economics, the tragedy of the commons is the depletion of a shared resource by individuals, acting independently and rationally according to each one’s self-interest, despite their understanding that depleting the common resource is contrary to their long-term best interests.

        As Wiki tells us, some economists argue that more government regulation or privatizing the “commons” properly is required, others have concluded that this would do more harm than good.

        So there are a lot of individual factors at play.

        Max

      • Thanks, Max; basically it’s don’t think the ROI is worth it, or lack the capital. J’s case, whoa, I couldn’t guess.
        =======

      • Robert Austin

        One also has to consider that not only do the new more efficient technologies cost more initially but the future maintenance costs are likely higher than the older and simpler technology. Faced with replacing the hot water boiler for heating my house, I had to decide between a simple, bulletproof and less expensive 85% efficiency model versus a more complex, expensive, condensing, power draft, 95% efficient model. For me, the old reliable was an easy choice.

      • “Robert Austin” says….. “reliable vs. ”

        I can confirm your concern about “some new more efficient technologies having future maintenance costs that are higher the older simpler technology.” Last year my 10.1 year old 95% efficient furnace, which uses propane as it’s fuel, burned a few holes in the back plate of it’s “condensing” heat exchanger. Lucky for me I didn’t have to replace the entire system (as that would of cost me about $4500) as one of the companies I had quote to diagnose my problem had experienced a similar failure a month earlier. They were able to get the manufacturer to replace the heat exchanger for free. I did have to pick up the $1200. in R&R costs for the heat exchanger and exhaust fan. The failure of the energy efficient part of my furnace occurred at about half the expected life of a 80 to 85% fuel efficient unit.

      • The folks responsible for implementing energy efficiency efforts in Palo Alto, CA are a tad concerned that the wrong cost effectiveness price is being used as noted here-

        “Comments on the Draft Staff Report “Achieving Cost-Effective Energy Efficiency for California 2011-2020” (Docket number 11-IEP-1F)
        City of Palo Alto Utilities (CPAU) appreciates the opportunity to comment on the CEC Draft Staff Report “Achieving Cost-Effective Energy Efficiency for California 2011-2010”

        (July 2011). Specially, CPAU would like to comment on the following three areas:

        (i) Cost of energy efficiency (EE) has steadily increased in the past few years.

        (ii) The question of whether to adopt net EE goals versus total market gross goals needs to be addressed within the next six months prior to the next round of EE target setting for POUs.

        (iii) Assistance to POUs on the use of the selected EE potential model for the next round of EE target setting.

        At the August 11 workshop, NRDC repeatedly quoted the cost of EE at 2¢/kWh. This is a misleading number. Based on the SB 1037 reports submitted by CPAU in the past three years, the levelized cost of EE, as expressed by the total utility cost divided by
        present value of net lifecycle EE savings, has increased steadily, from 2.9¢/kWh in 2008 to 6.4¢/kWh in 2010. Looking forward, as new lighting standards take effect and other low-cost efficiency measures reach saturation, the cost of EE will continue to increase.

        While CPAU expects EE to remain a cost-effective alternative compared to other supplyside resources, it is no longer the case that EE only costs 2¢/kWh.”

      • Heh, I know the answer for ‘tens of millions of households’.

        OK. So now you’ve backtracked from your facile assumption. That’s progress.

        Next step, please show me some of the data you use to “know the answer” for tens of millions of households.

      • See jfp @ 11:14 right back where you just came from.
        ===========

    • The current mileage of the average US vehicle is one third the mileage of similarly priced, similarly featured internal combustion (ie not hybrid or electric) vehicles available on the market today.

      So what if there is a limit. We’re nowhere close to it.

    • Yes, you are right. If only one country charges the full cost of energy, some demand will work its way to other countries. Similarly–If I don’t steal apples from the Safeway, someone else might steal them. So we have both a moral and an economic issue here. If someone else does something wrong (wastes energy) does that excuse me? But of course, you are right, if every country used full-cost pricing, it would work better than if some did and some did not.

      • We also have a pollution issue. The last range of pollution indexes I read for China was 10% to 1000% increase in pollution by taking the industry from EU or US with good emission rules, and transporting to to China. So there is an added cost for using economies such as China for production. This shows some of the difficulties in claiming a moral responsibility. In this case the good of China progressing so that its citizens enjoy a better life, and the cost to our ecosystem. This is further compounded by the general dcrease in manufacturing in the EU and the US, and the resultant problems from market inefficiencies that affect individual families. It is not so easy to see just who is stealing from whom, or even whether an acceptable full cost price could be defined. Agreement of that definition by the different groups of our world society is even more unlikely. To date, China and others have stated their present goal is economic prosperity first. From that prospective, it would pay for them to “cheat.”

      • Ed Dolan | October 22, 2012 at 10:45 am |

        Some call this a problem of leakage; I tend to regard it as a form of poaching in international trade.

        International trade law allows for measures to rebuke poaching.

        Moreover, what I believe is the strongest capitalist measure to realize full cost of energy (or, more to the point in this case, full cost of the carbon cycle) is a fee and dividend system with price set by maximum returns to dividends.

        How is a nation by any but the most tyrannical means going to avoid enforcing standards and practices in its energy markets that deliver such dividends, once its citizens see these payments to neighboring nationals?

        In British Columbia, for example, even the low fixed-price Revenue Neutral Carbon Tax delivers hundreds of dollars a year in dividends to citizens. That’s hundreds of dollars of your money you’re not getting because your government isn’t enforcing the full price of energy.

        If the price were allowed to float until maximum revenue, that would be thousands of dollars every working US citizen is being deprived of by the US government’s choice to refuse to privatize the carbon cycle. How long will Americans suffer such inequity, to benefit a few foot-dragging anti-innovation privately-held politicial-influencing fossils?

    • Affordable TRANSPORT FUEL – not “energy”
      The critical issue is NOT “affordable energy” but the subset of transport fuel, especially gasoline and diesel to feed our current fleet. There is plenty of “energy” around, especially coal. However Lloyds of London has warned of a growing scarcity of transport fuel in the 2012 – 2015 time frame. See: Lloyd’s of London and Chatham House, 2010. Sustainable energy security — strategic risks and opportunities for business.
      For a review with further reports etc. see: Global Oil Risks in the Early 21st Century. <a href=>See Jeff Brown showing very rapid declining available oil exports available for oil importing countries outside China and India.

      Actuary Gail Tverberg at OurFiniteWorld.com makes a lot more sense to me as being on top of the the critical data and trends, while Ed Dolan appears tp superficially advocate “economics will fix it”. Companies hire actuaries to make sure they get the essential facts and trends right – NOT economists.
      Dolan appears to have little understanding of the very serious underlying trends in oil well depletion rates and the major mining, engineering, and chemical engineering difficulty in developing alternative fuels from coal, bitumen (aka oil sands) or oil shale (kerogen), natural gas, or from solar thermal fuel systems – with the massive investment required. Economic theories developed during the period of easy oil expansion will crash and burn in the coming decades of declining conventional oil and forced transition to alternative fossil and renewable fuels.

      To add “externalities” you have to quantify them. The greatest uncertainty regarding catastrophic anthropogenic global warming (or by equivocation “climate change) is the magnitude of the climate sensitivity with published values varing by an order of magnitude. The next is whether there will be major benefits or costs involved. Dolan appears to just assume the IPCC’s models of major costs with little understanding of these issues.

      Investment magnitude and rate needed
      At $100,000/bbl/day, replacing the world’s current 90 million bbl/day alone will require $9 trillion. This MUST be developed within about 25 years, especially to supply oil importing countries. See Jeff Brown above. That needs 900 plants at 100,000 bbl/day at ~4 per month (or 9000 plants at 10,000 bbl/day at ~40 per month.)
      Instead Obama and environmentalists have been raising all possible barriers to such conversion. Romney has at the best grasp of the subject that I have heard and the only close to realistic plan to deal with it.
      Obama has already loaded our children down with $5 trillion more debt or nominally $50,000 each. Another term will drive the US that much faster into bankruptcy.
      Vote for your job, your retirement, and for your children and their future.

  2. ‘Full cost pricing’ sounds like a reasonable idea until you contemplate all the value judgements needed for ‘full cost’.
    ===============

    • +1/-1. We should be well beyond this. It’s true, but what is the other alternative? There are extremely obvious external costs (automobiles + traffic fatalities). No (credible) one is arguing that the external cost of traffic fatalities vitiates the benefits of transport. Enumerate the costs and the uncertainty (monsters) and put it to a plebiscite.

      • BillC | October 22, 2012 at 9:48 am |

        To a Capitalist, the Fair Market is the host to the universal plebiscite.

        Every individual buying-selling decision in the Market is the exercise of the democracy of the dollar.

        Distortions of the Market are a form of electoral fraud.

        Where the value judgements are so questionable that no practical mechanism for pricing them to reflect the values at the point of the individual buying/selling transaction, perhaps there is a case for such anti-Capitalist, anti-democratic intrusions as you promote (Pigouvian taxes, nationalization/shared commons, subsidies, failure to enforce owners rights).. but where the case is clear, there is no excuse.

        All there is, is lobbying by vested interests and Free Riders.

      • Er…just to be clear, I’m not promoting any of these things in my statement above, but I agree about lobbying by vested interests and Free Riders (viz. Joseph Stieglitz, Corporate Rent-Seeking). But what I am trying to say, obliquely, is that if the scientists/economists can’t outconvince the radical preachers and celebrity docs, and it comes to a vote, was that a Market Distortion or just an instance of “life’s not fair”?

    • Again we find normative vs. positive econ.

    • how about a +10.

      • Heh, thanks. It’s taken 10+ comments to fill out that nightmarish insight, and I better stop now, because as an economist, I am dismal.
        =============

      • I’ve always thought being dismal is a prerequisite for being an economist, at least when it comes to predictions.

        I thought your comment did an outstanding job of summarizing in one sentence the fatal flaw in Ed’s argument.

      • timg56 | October 22, 2012 at 7:37 pm |

        Except the flaw is not in Dr. Dolan’s argument.

        It’s in the failed imaginations of people who can see no way the Market might achieve these ends without intervention.

        Which makes it a straw man, and kim guilty of yet another fallacy.. or as we say here, just more kim.

        Let the government uphold fair market standards and practices, no different from its role in printing currency or enforcing weights and measures or ensuring payment by debtors, and all the rest follows without intervention by any party external to individual exchanges at free market price to make any value judgement.

    • kim | October 22, 2012 at 2:34 am |

      Fortunately, for the case of the carbon cycle, we can place all those value judgements into the hands of buyers and sellers in the Market, removing them forever from the talons of Free Riders in back rooms.

    • Nutshell, meet kim – although perhaps you’ve already met?

  3. Why should GDP be included in any equation related to energy efficiency?

    Government requiring an energy supplier to purchase carbon credits increases supplier costs. The supplier then increases the market price for energy and that higher price is used in calculating GDP when that energy is sold. This adds to GDP more than it would without credits, but has nothing to do with energy efficiency.

    • Bob Koss

      GDP and energy efficiency can be linked.

      The best indicator IMO is the “carbon efficiency” of a nation (or group of nations), i.e. the GDP generated per ton of CO2 emitted.

      Of course, this indicator favors nations that rely heavily on non fossil fuel energy sources, such as France (nuclear) and Switzerland (hydroelectric and nuclear) and less those who have a low population density (and, hence, high fuel needs for transportation, for example) such as the USA, Canada and Australia.

      But the real value of this indicator is not for comparing one nation with another, but for comparing the efficiency over time for each nation. This has gone up considerably over time in the industrialized world (in constant dollars), as a result of energy efficiency improvements.

      The developing (BRIC) nations (and the OPEC nations) are still way behind the industrialized nations in carbon efficiency. But there is no doubt in my mind that they will also increase their carbon efficiencies over time (another denizen posted an article which tells us that even Saudi Arabia is considering “renewables”).

      So, while there is no direct correlation between GDP and energy efficiency, there is a meaningful indicator of energy efficiency, which combines the two.

      Max

      • Hey! That’s two posts you got right! In the same month!

        Keep up the good work.

      • Bart R

        I guess that’s 2:0 compared to you, right?

        Max

      • manacker | October 22, 2012 at 11:19 am |

        If it’s 2:0, then it’s 2:1, as 2 would be right.

        If it’s 2:1, then 2:0 is wrong, hence it would be 3:1.

        After that, which only proves you’re not even capable of being right on first order logic within your own claims, we’d need to look at your actual posts — which is such a waste of time — to get an accurate estimate.

      • Bonus points for figuring out the Persian flaw. ;)

    • Bob Koss: Not an accurate representation of how GDP is calculated. First, it is real GDP, not nominal that we watch, so price increases by themselves have no effect. Second, GDP measures value added. Taxes are not counted in value added

  4. John DeFayette

    The basis of Mr. Dolan’s energy efficiency thesis is, in my opinion, flawed.

    The assumption is that a “policy environment that is supportive of efficiency” would cause great strides in energy efficiency gains. In the interview he does not state what is meant by this policy environment, but clearly he is referring to government intervention of an economic sort–taxes or regulations I suppose. Maybe I misunderstood: the whole twisted argument for policies that foist inefficient energy sources like wind and solar on the public could be construed on Fantasy Island as a plan for augmenting efficiency. He does explain how the developed world has made great strides in raising efficiency in the absence of the mentioned policy environment; he also mentions that the more inefficient economies have the more interventionist government policies. Surprised, anyone?

    There is an implied message that Switzerland and Germany possess some sort of policy environment that the US does not, but since the Mr. Dolan makes no mention of any such policy environment, and I am not aware of anything that falls into that category, I can only assume he’s comparing the results of different states under equal conditions.

    Does it never occur to the folks in the ivory tower that they are simply analyzing a phenomenon that occurs without policy interventions of any sort? I find the implication amusing that we even need new policies, especially when numbers are presented that show a steady result without them.

    Businesses that build things spend a good deal of time implementing innovations into their products, not because of policy environments, but because of market environments. The “better mousetrap” has a lot to do with efficiency–we are always looking for ways to catch more mice with fewer materials, or making more widgets in a smaller space, or using less energy. That’s part of what drives competition.

    I can’t think of a single product development I have been involved with in 25 years that didn’t involve a more efficient process–either lowering the amount of energy needed to make widgets, or making them faster or making them with fewer errors and therefore less waste. That’s how we sell our widgets. In all cases but one I can remember no “policy environment” and no outside intervention that influenced in the least any decision in product development. The one case where a government did have an influence was when a company I was working for was born just to take advantage of free government money. The industrial plants that were profitably built using this government giveaway would have been built anyway, since they were the best choice economically at the time.

    There is a reason that economic growth goes hand in hand with increasing efficiency, and it has nothing to do with Mr. Dolan’s policy cause and effect (which even he admits is not even implemented). The law of unintended consequences teaches us that messing with the policy environment is probably not the best policy.

    • John DeFayette

      Excellent analysis.

      Indeed, Dolan has got it wrong with his “top down” approach of raising energy prices (i.e. imposing a “carbon tax”) to force people and industries to be “more energy efficient”.

      Politicians in Germany and Switzerland talk about an “Energiewende”, without having any notion what this means (beyond a vague notion of phasing out nuclear and replacing it with “renewables”).

      In Switzerland there are already voices that warn us that an “Energiewende” as visualized by the government will mean power shortages and outages plus much higher costs for everyone.

      So far, the politicians are still bowing to pressures from the “green” side, but I believe that it is only a matter of time until reality sinks in.

      And, what the hell, in the meantime there is always France across the Rhine with unlimited (nuclear) power to keep the lights from going out.

      Max

      • manacker | October 22, 2012 at 7:14 am |

        Oh well.. It’s not like 2 was much of a streak.

        Since when has anyone in the world considered the opinions of Swiss alarmists?

        And John DeFayette | October 22, 2012 at 5:07 am | you act as if the whole world has a uniform energy efficiency policy. That’s not even true limited to just the USA, considering California’s Western Climate Initiative.

        Your ‘probably’ is mere handwaving of the worst sort. We see that where the government enforces even a small percentage of the price signal of CO2E’s effect on the carbon cycle, economic performance only improves and people choose to become more energy efficient by every objective measure — not just to use less, or to conserve, but to get the same results with less.

    • Exactly, and since when has gov’t (i mean “policy environment”) involvement in a market produced efficiency?

    • ” He does explain how the developed world has made great strides in raising efficiency in the absence of the mentioned policy environment”

      You are not the only one to raise this point. I wrote this followup post to deal with it: http://www.economonitor.com/dolanecon/2012/10/19/why-do-we-need-government-to-tell-business-to-be-energy-efficient/

      • “For example, if market prices signal that plastic is cheap and steel is expensive…”
        Hasn’t the energy market been signaling toward rising prices for years now, especially with regards to the future. Exactly what business is saying: we’re expecting dramatically lowered price of energy to offset any potential savings through efficiency?

      • John DeFayette

        Thanks for the follow up, although I still find the reasoning unconvincing; it even lends support to the contrary thesis.

        In your reply to our question you reaffirm your contention that government needs to be practicing price controls in the marketplace–very dangerous territory indeed. In your first supporting example you then cite the poster child for modern price support disasters: ethanol subsidies! Your example shows, even by your own admission, that government price control schemes are the very problem. So, while you argue the good Progressive argument that government intervention is not the problem, it is the solution when done right, your reflection goes to the heart of why government cannot do it right. Unfortunately your legislator will never listen solely to the wisest voices out there. There’s just too much noise in the halls of government, and kompromise is king.

        Second, you address the externalities of resource use. I agree with you that there is a place for authoritative protection of the public good in this sense. Yeah, dog owners need to keep their messes out of the public realm and polluters need to keep their nasty stuff out of our air and water. And there oughta be a law to help us meet those goals where there is little interest on the part of the polluter. As a society we can expend resources and a part of our wealth to these ends.

        However, we disagree completely on the classification of some substances as pollutants–that’s the crux of the CO2 matter. To me it is plant food, to you it is going to turn the world into a burning hell. I will not stand for my government choking off the engines of modern society in order to control the conversion of rocks to plant food and animal breath. That stance will change radically as soon as someone can demonstrate in a convincing way (and how about without using SimEarth!) that there is real harm being done through this process.

        In the meantime, I will applaud all of the progress that we make toward converting our primary energy sources to the purest of combustion, where the only by-products are water and plant food without all of the nasty airborne or waterborne toxins.

  5. Steve Milesworthy

    There is an implied message that Switzerland and Germany possess some sort of policy environment that the US does not, but since the Mr. Dolan makes no mention of any such policy environment, and I am not aware of anything that falls into that category, I can only assume he’s comparing the results of different states under equal conditions.

    Policies I can think of in the UK (of which some I know are used in the rest of Europe) would be: insulation standards for buildings, emissions standards for vehicles and heating systems, lower taxes for more efficient cars, higher taxes on fuel, more strict consumer regulation (consumers can buy products advertised to be more efficient with confidence), energy labels on home appliances, subsidies for home energy efficiency (insulation, CFLs).

    Because consumers have more collective power in Europe (I think) this puts businesses under pressure to appear efficient users of resources – reduced packaging, requirement to offer recycling facilities, requirement for products to last much longer than the warranty period, consumer campaigns to make appliances on standby use less electricity. There is also the high cost of landfill that encourages minimising waste.

    Some make more sense than others, and some are silly (I have a more than a lifetime’s supply of free or almost free CFLs in my cupboard), so I don’t want to start an argument about individual ones.

    Are there similar policies for any of this in the US?

    • Steve Milesworthy

      Sorry, the above was supposed to be a reply to John DeFayette.

    • Steve Milesworthy

      You discuss “policies” in Germany and Switzerland that result in higher “energy efficiencies” there.

      In January 2008 Switzerland introduced a “CO2-Abgabe” (CO2 tax) on all fossil fuels except those used for transportation (gasoline, diesel). This was tied to the Kyoto Protocol, whereby Switzerland committed to the reduction of CO2 emissions to 92% of the 1990 values by 2012.

      This was tied to a direct tax advantage for “bio fuels”.

      The tax was originally CHF 12 per ton of CO2; this was tripled in 2011 to CHF 36 per ton.

      Did it work?

      As a result of its high use of hydroelectric and nuclear power (together essentially all of the total) Switzerland has one of the highest overall carbon efficiencies (GDP generated per ton of CO2 emitted) compared to other nations: $8,000 compared to around $5,000 for nuclear-driven France, $3,000 for Japan and the EU, around $2,000 for the USA, Canada and Australia, and much lower values of between $600 and $800 for the developing “BRIC” nations (and a global “average” of around $1,400).

      And Switzerland is a small nation, with just barely 8 million inhabitants, so it has essentially zero impact on global climate. Eliminating Switzerland’s CO2 emissions entirely today would result in around 0.3 ppmv lower CO2 by 2100, with a theoretical temperature impact (using the IPCC 2xCO2 mean climate sensitivity of 3.2°C) of -0.002°C.

      In 1990 Switzerland generated 43.5 million tons of CO2. To meet its goal for 2012, it should have reduced this to 40.0 million tons.

      In actual fact the 2011 value was 48.8 million tons or 12% OVER the 1990 value instead (and 22% over its stated goal).

      So it can be said that (so far) it did NOT work. (And it is doubtful that it will in the future, either, IMO.)

      Max

      • Here is a link to the chart showing “carbon efficiency” for various nations (with links to sources for data):

      • Even assuming your specific argument about a specific policy to be true, you haven’t addressed the larger argument unless you are limited to a binary mindset.

        Which is a distinct possibility.

      • Joshua

        First, another blogger posted a reference to “policies” in “Switzerland and Germany”.

        Second, I live in Switzerland and know what the “policy initiatives” to reduce CO2 have been.

        I can also see the stated Kyoto goal to “reduce CO2 emissions” was not reached – but there has been improvement in overall energy efficiency occurring mostly before the “initiatives”, with no real change since the “initiatives” were implemented.

        So the “initiatives” achieved nothing but normal common sense actions of reducing energy waste (and cost) have had an impact.

        IOW let the economy work – keep the government out of it as much as possible.

        Otherwise you get “corn ethanol” disasters or a bunch of costly Solyndras.

        Max

      • Steve Milesworthy

        Citation would be useful. Latest data I could find was that Switzerland was, in 2007, below its 1990 levels. I would argue that a 4 year old measure is not useful evidence, though.

  6. David Springer

    Ed Dolan reveals himself as an imbecile from the bullet item list. It’s a waste of time reading further. So I didn’t.

  7. Joe's World(progressive evolution)

    Judith,

    I agree that subsidies are NOT a good thing for the power industry.
    It has generated a false boom to bad technology that is protected and in many cases has generated multi-year contracts that must keep infusing money to keep it afloat and NOT be competitive to new technological changes.

  8. Joe's World(progressive evolution)

    Judith,

    The technology of fraking…It has me a little worried when you destabilize the rock foundation.
    It then can generate all sorts of future problems.
    From unstable structures in quake prone areas to destabilizing structures for mining…hmmmmm.

  9. Judith Curry

    My thoughts on “Dolan versus Tverberg”

    Ed Dolan states:

    In my view it is a myth that cheap energy – “affordable energy” as many people like to say is vital to growth.

    Reliable and affordable energy is arguably a key factor that has resulted in the dramatic growth in the standard of living, quality of life and life expectancy over the past 100 years.

    Even at today’s unit costs, energy costs represent a major cost factor for most industries – and families (directly and indirectly).

    Energy efficiency has increased dramatically (as Nolan states). These improvements occurred without artificially boosting energy costs and without what Dolan calls a top-down “policy environment that is supportive of efficiency” (by which he means a steep tax on energy).

    To argue that it requires drastically higher energy costs for people (and industries) to improve energy efficiency is the same logic as arguing to dramatically increase food prices, in order to reduce obesity in the USA. This policy would only hurt the poorest of us, as would dramatically higher energy costs.

    Anyone who has worked in a modern, cost-conscious company knows that reducing overall energy costs is a key initiative. The same goes for a family. All it requires is awareness.

    Increasing oil prices would be a good thing for coal, gas or oil companies or OPEC members, but a bad thing for everyone else. It would be especially bad for the inhabitants of the poorest nations, who need a reliable, low-cost supply of energy to pull themselves out of poverty (as we did in the industrially developed world).

    As we saw immediately after the first OPEC-driven oil shock, growth slowed down before picking up again.

    So there is no evidence that higher energy prices would enhance growth rates and some evidence to the contrary.

    Gail Tverberg’s analysis makes more sense to me. Phasing out nuclear (Germany, Japan, etc.) is a political move, but does not make much sense economically. What does “make sense” is improving nuclear fission technology to take care of the spent fuel “problem” (solutions already exist) and making sure that auxiliary emergency and standby systems are designed and constructed properly (the problem at Fukushima).

    Renewables as they exist today are too costly and unreliable and will not be able to make much of an overall change. Governments should not be supporting corn ethanol or such ventures as Solyndra, which are doomed to fail.

    Tverberg’s “high priced fuel syndrome” directly contradicts Dolan’s premise (i.e. higher energy prices DO reduce growth rates).

    I’d say the evidence out there tells me that Tverberg has got it right – Dolan doesn’t.

    Max

    • Steve Milesworthy

      To argue that it requires drastically higher energy costs for people …

      Nobody is arguing that.

    • manacker | October 22, 2012 at 6:56 am | says (in part):

      To argue that it requires drastically higher energy costs for people (and industries) to improve energy efficiency is the same logic as arguing to dramatically increase food prices, in order to reduce obesity in the USA.

      This point is far more important than you’ve explained. Thirty years ago, people noted that the poor seemed to have obesity problems than the rich. A partial explanation offered was that diets of the poor included larger proportions of starchy foods — rice and potatoes — than more expensive fruits and green vegetables. The poor are always affected by the costs of living and energy costs are a large part of living costs.

      Today, people who can’t afford electric power use candles and other fire risky sources of light. In some truly poor societies people spent large efforts to gather wood (and denude the countryside) to cook meals. Making energy more expensive drives us toward these practices.

      While no one will argue against efficiencies, government mandates for them are really mandates for capital investments. If you believe government is the wisest source for capital allocations, then Cuba, China, and the Soviet Union are the places for you.

      • Steve Milesworthy

        “The poor” in many countries manage to buy enough nutritional food to stay healthy and to not get fat. A substantial reason for obesity increase in some countries is due to the ubiquity of high-calorie fast food and the high level of processed sugar in food.

        So a dramatic reduction in sugar subsidies, and a dramatic reduction in subsidies for cattle feed would help solve the problem. And the analogy with energy prices doesn’t work.

        If you were dumped on a desert island along with a large crate of corned beef, would you measure your success by the rate you ate the corn beef and its low “cost” of extraction. Or would you look to preserve the beef while developing renewable but more expensive (harder work) food supplies?

        The cost of extracting fossil fuels is not a good measure of its value. A well-run (capitalist) economy certainly seeks to use resources efficiently, but it must also allocate resources well. Cheap fossil fuels do not solve the latter problem.

      • You haven’t grown up in 1950’s Mississippi or you might have a different view of obesity among the poor — fast foods contribute today to obesity among those who are not so poor and sugar is a contributor to obesity to rich and poor alike because it is cheap (for the poor) and tasty (for all).

        If you look at the poor in third world countries you’ll find that many perform manual labor and stay thin despite a starchy diet for that reason. The correlation between inexpensive quality food and good health may not be complete only because of wide spread ignorance about the diet. The correlation between low cost energy and a society’s prosperity (and general health) is complete.

  10. Joe's World(progressive evolution)

    Judith,

    This sort of makes a good example of how complexity evolves over time…
    Society and economics 100 years ago to today…

  11. Saudi Arabia’s Ambitious Renewable Energy Plans

    Prince Turki Al Faisal Al Saud, one of Saudi Arabia’s top spokesmen, has confirmed that Saudi Arabia has plans to generate 100% of its power from renewable sources, and low carbon forms of energy.

    http://oilprice.com/Latest-Energy-News/World-News/Saudi-Arabias-Ambitious-Renewable-Energy-Plans.html

    • brent

      Saudi Arabia (together with its price-fixing cartel. OPEC) has made so many trillions by gouging the inhabitants of industrially developed nations, that it can afford to talk of “plans of going to 100% renewables”).

      But, hey, these are just “plans” (i.e. just “talk”).

      Let’s wait until they can show “results” before we get too enthusiastic.

      And the Prince better hope that the rest of the world does NOT “go 100% renewable” (= bye-bye billions).

      Max

      • Max,
        There were some earlier articles, not very well considered in my opinion, that the growth in domestic consumption in Saudi Arabian could tend to eliminate Saudi as an exporter.

        “If power demand were to grow as predicted and there were no change to the electricity fuel supply mix, “we estimate Saudi Arabia would be a net importer of oil by 2030,” she wrote. ”

        http://tinyurl.com/932ptlx

        Saudis have big incentives to free up supplies for export because they underprice domestic fuel usage. The leaders also have significant need for revenue to balance the budget and buy off their population.
        all the best
        brent

      • brent

        Agree that Saudi Arabia has unique challenges.

        It has transformed from a sleepy desert “backwater” to a modern industrialized nation in only a couple of generations.

        It has done this (along with its fellow OPEC members) by forming a price-fixing cartel to gouge the very nations that helped it build up its crude oil production and processing capacity in the first place.

        And, as you write, they practically give away their refinery products to their inhabitants for fee.

        And their government (like all governments) has expanded its spending and needs more money.

        And some of its leaders see that this particular boom cannot continue indefinitely as domestic energy needs have skyrocketed and customer nations have improved energy efficiency and looked at their own domestic resources to get out from under the OPEC yoke.

        So, yes, I agree that it makes sense for them to look at renewables (in particular solar, because they have lots of sunshine).

        But “100% renewable sources”?

        If you include “nuclear” in “renewables”, maybe. http://www.wnd.com/2012/04/saudi-arabia-looks-to-develop-own-nuclear-power/

        Otherwise, not very likely IMO.

        Max

  12. The powerful Force field extending from the core of the Sun to the edge of the Solar System, ~120 AU away, supplies Earth with an abundant energy.

    The basic problem is that selfishness prevents most world leaders from aligning their will and their policies with the Force.

    More later, . . .

  13. Dolan’s whole point of view seems to align with Bart R’s philosophy, which is to have consumers pay for all the externalities of resource usage. This seems to vindicate Bart, and I am sure he will correct me if I am wrong.

    “Ed Dolan: I think you’re going to have to ask someone with more engineering background for the technical details, but from what I read, the answer is that it won’t always be easy. “

    In regards to shale, one has to remember that shale is only being exploited because the conventional crude has become so scarce, and therefore expensive. The expense of crude oil extraction has allowed room for “bottom-of-the-barrel” fossil-fuel resources such as shale and tar sands.

    So what Dolan is referring to is the fact that fossil fuel resources are nowhere a given, and technical analysts can predict how much will be available based on current knowledge. There is no doubt about this, as the peaks in production were roughly predicted in the 1950’s, and that advances in analytical techniques will be able to predict future declines.

    Dolan is right and Tverberg is right. The shift in energy usage is real, but will not kill us if we mitigate and adapt. We mitigate by evaluating alternative technologies while we have the resources, and we adapt by adjusting to a more efficient fuel usage scenario. This has benefits to the climate situation as well, making it a win-win solution.

    • John DeFayette

      Sorry, WHT, but I am missing a few pieces of your analysis.

      First, I don’t think a new voice in the choir “vindicates” any of the other voices that have been singing all along. It merely lends more support to the possibly terribly flawed philosophy. Also, see kim’s succinct but effective description above of the difficulties in working out the “technical details.”

      Second, shale is being exploited simply because experts have found a way of exploiting it in an economical way. That’s what markets do: they drive people to invest in ways of getting new resources to where they can be traded. Coal has been exploited since it became economical to do so, and wind was used when it was an economically viable source of power, back when the Dutch and the Spanish were still ruling the seas. In the future we will find a way of using energy from nuclear fusion in an economical way, and that may become a dominating force for our (great- great-?) grandchildren. Who knows what’s in store? I know I don’t.

      Shale gas and shale oil are going after source rock, which is a far cry from your bottom-of-the-barrel view; it’s more akin to: traditional drilling has only scratched the surface of exploitable hydrocarbon fuels. Which brings us to the third point: where are the predictions of the 1950’s that show us when world oil and gas production will peak? In fact, it would be interesting to see just when you expect these peaks to occur, since they haven’t to date. The same sources are forecasting doom in the future when they haven’t been able to get a single doom scenario right in the past.

      Finally, I don’t see how evaluating anything will ever equate to mitigation. That can only come about when there is a full scale implementation. Problem is, there are too many folks who would force a full replacement of wealth-generating technologies with un-evaluated losers. I can agree that our public resources go to testing and research, but I would also appreciate that the evaluations be used to throw out the uneconomical options (wind and solar, for example) once the evidence shows them to be wasteful and anti-economical. That’s a further task of the markets.

      • DeFayette does not know.

        The fracturing reveals small amounts in the substrate. Not much there, other than multiplying by a large surface acreage.

        The flow of oil from a typical Bakken well is diffusive with a fast decline on production, a far cry from conventional crude.

        DeFayette does not know because he has not analyzed the data.

      • John DeFayette

        Great reply!

        Doesn’t address what I said, but who’s checking? Just noise on the line.

      • Right, shale oil is just noise. It’s bottom of the barrel stuff, just as I said.

    • WebHubTelescope | October 22, 2012 at 8:36 am |

      Let’s be a bit fair to Dr. Dolan.

      While our views broadly reflect influences of the same schools of thought, and I’ve said some things here that largely are supported by E.G. Dolan’s writings and in particular in the interview above, there’s little point burdening him with vindicating my ideas.

      I did enjoy reading http://www.cato.org/pubs/journal/cj26n3/cj26n3-3.pdf and both admit to its influences and wish I had half the clarity when expressing my own thoughts.

  14. I don’t see how anyone can make much progress on these issues without first acknowledging the fundamental importance of a full-cost accounting.

    W/r/t to the larger issue of the relationship between energy cost and growth, I think that without considering the very real influence of democracy and freedom as a moderator or mediator in the relationship between energy and growth, or considering the causality behind the relationship between freedom and growth, people are doing little other than confirming biases. Please read Amartya Sen, I recommend “Development as Freedom.”

    What Nolan leaves out, IMO, is the potential role of funding research, as a form of subsidy, to study alternative energy resources. Not all subsides are equal, and I think that evaluating the economic viability of subsidies requires more specificity.

    • Paragraph 1. Absolutely agree.

      Paragraph 2. Probably true about the bias confirmation. If in the future both China and India are “successful” what will that have taught us?

      Paragraph 3. Fine, as long as “alternative” is broadly defined to mean “anything new” including new fossil.

    • I don’t see how anyone can make much progress on these issues without first acknowledging the fundamental importance of a full-cost accounting.

      The fundamental problem with full cost accounting is that the numbers are incredibly easy to manipulate or a subject of personal preferences, I.E. Are windmills beautiful or an eyesore? Is the whoosh sound they produce music to my ears or an irritating noise?

      We already see how EPA does ‘full cost accounting’ when regulating things like mercury. You need a pregnant mother eating a diet of fish,fish and more fish to get anywhere near the health impacts described by EPA from power-plant mercury emissions…but on the flip side…we strongly encourage the use of mercury laden florescent light-bulbs completely ignoring that fact that young children ‘rough house’ inside their homes and invariably end up knocking over a lamp and breaking light bulbs.

      • harry –

        The fundamental problem with full cost accounting is that the numbers are incredibly easy to manipulate or a subject of personal preferences, I.E. Are windmills beautiful or an eyesore? Is the whoosh sound they produce music to my ears or an irritating noise?

        I don’t disagree with that. But: (1) the fact that it is difficult does not mean that it isn’t worthwhile. Ruling out the effort on the basis of known complications amounts to binary thinking. Do you have evidence that focusing on full-cost accounting would be counterproductive? (2) A lack of full-cost accounting does not prevent people from asserting broad conclusions about the benefits of cheap energy that run in the other direction. How often have we seen the simplistic assertion that cheap energy = fewer starving people (e.g., economic growth). In fact, if you make that assertion, you are assuming a determination w/r/t a full-cost accounting. Therefore, you can’t logically make that claim and say that full-cost accounting isn’t a fundamental issue to examine.

        If you’re saying that careful attention needs to be made when we select the accountants, I fully agree. But the first step in selecting an accountant, IMO, is to ask them to expand on their potential biases. In that regard, I would dismiss “skeptics” and look for skeptics.

      • Josh,

        I generally agree with what you’ve stated here. My concern is that is the US at least, we already know who the accountants will be – the EPA. Which means we already know that the possibility of the books being cooked is a valid and already demonstrated issue to be concerned about.

        kim was able to summarize the best response to Ed Dolan’s comments in a single sentence above. “Leveling the playing field” more often than not resembles a mob contractor being assured of being given the job.

  15. Let me get onto my hobby-horse of cellulose ethanol (CE), which Dolan does not seem to mention. IMHO, it is the only viable renewable energy source that has any hope of being cost/effective. If anyone wants more information, Google Project Liberty and Poet. DOE tried to get CE into production, and Range Fuels got a grant of $300 million. The technology did not work, and DOE ended up with $5 million of assets. So CE has a bad reputation.

    There are two firms who have pilot plants producing CE; Iogen of Canada, and Poet in the USA. Shell bought out Iogen, what for Shell was a small amount of money, but Iogen made a nice profit. Shell has the technology in it’s back pocket if it ever decides to exploit it.

    Poet is the largest producer of corn ethanol in the world. They have teamed up with DSM of The Netherlands, and are building a production plant capable of producing about 30 million gallons of CE per year. This is being built with $300 million of private money. They estimate it will make a profit if the wholesale price of gas is over $2 US per gallon. This price is currently around $3 US per gallon.

    Will the new plant be successful? The jury is still out. We should know by 2014.

  16. randomengineer

    Energy dependence has led us to buy a lot of oil from countries that are unstable and/or unfriendly to us. Anything we can do to reduce that dependence gives our foreign policy more room to maneuver.

    This is wrong. e.g. even to make electric/hybrid vehicles for the US in the necessary quantities to make an impact requires raw materials (e.g. neodynium) that tend to be concentrated in countries that aren’t friendly, aren’t stable, or otherwise capable of extortion.

    It’s helpful when economists who pontificate about that which is technology related actually have a clue about technology.

    I am comfortable with the notion that the rest of what he has to say is just as incorrect; I don’t have time to parse it.

    • According to wikipedia: “The main mining areas [of neodymium are in China, the United States, Brazil, India, Sri Lanka, and Australia.”

      Those places “aren’t friendly, aren’t stable, or otherwise capable of extortion.”?

      I am comfortable with the notion that the rest of what you have to say is just as incorrect.

      • Like your own link says: “None of the minerals is likely to physically run out, but it can take 10 years for countries to open new mines.”

        It just isn’t true that the raw materials are only found in countries that “aren’t friendly, aren’t stable, or otherwise capable of extortion.”.

      • randomengineer

        lolwot nobody ever claimed that the _only_ place strategic materials were found is hostile countries. The ones needed for creating hybrid vehicles in mass seem to be however. I said these “tend to be concentrated in” not “the only.” Big difference for those of us who speak English or not creating strawmen.

        And since the point zoomed by your pointed head I’ll reiterate — materials needed for any technology marked ‘X’ are just as likely to be located in a place that doesn’t like us, hence the notion that merely replacing oil with ‘X’ will result in unicorns because we’re not paying hostile regimes big $ for oil is simply wrong. Regardless of what ‘X’ is, much of it will tend to be in places that don’t like us or will extort.

        And now using a big honkin’ crayon we’ll sum up for you — the same resource problem currently attributed to oil will ALWAYS exist regardless of what that resource is, so this argument being applied to oil as if it’s unique is something that only the congenitally stupid can buy into.

        And you bought into it. Surprised, I am.

      • They aren’t concentrated in hostile countries full stop. It’s nothing like oil. If we abandon fossil fuels and that requires a higher demand for rare earths there’s no evidence the situation with them will be just as precarious as sourcing fossil fuels is already.

        I notice you seem to be regarding China as a “hostile country” for one thing.

      • David Springer

        randomengineer

        Don’t expect loltwat to exercise any due diligence. You, as have I, have already done our due diligence on problems associated with an electric-powered ground transporation fleet in the U.S. Most of the issues are covered here:

        http://www.fas.org/sgp/crs/natsec/R41347.pdf

        One of those problems is that neodymium needed for efficient wheel-motor (and wind-turbine generator) magnets is in short supply, China controls what supply there is, and it isn’t found in high enough concentration in many other places to make it economically recoverable. Just as bad, rare earths and recovery byproducts are extremely toxic. China controls the supply because China doesn’t give a fig about pollution and created a giant toxic lake

        http://www.guardian.co.uk/environment/2012/aug/07/china-rare-earth-village-pollution

        Safe disposal of mining/refining byproducts in other countries makes the cost of the products too high to compete with China.

        China has 50% of the world’s reserves of neodymium. The US has 13% and it’s located in California and Nevada in the Mountain Pass region on interstate highway 15 straddling the border 75 miles southeast of Vegas and just outside the border of the Mojave National Preserve. I suppose we could mine the sh!t out of the area economically if the expression “What happens Vegas stays in Vegas” applies to toxic pollutants as well. Unfortunately the Colorado River runs through that area and it won’t be easy keeping the toxic crap out of it.

        http://www.elissaresources.com/s/Thor_REE.asp

      • lolwot, are you so naive as to not understand that the corruption of wikipedia over climate science is pervasive and its corruption over climate policy is only less so?
        ===============

      • wikipedia is generally quite accurate

      • I don’t dispute that; I point where it ain’t.
        =============

  17. I think those countries that embrace shale gas will thrive and those that don’t are doomed.

    100s of billions of new investment in the petrochemical industry are moving to the US to be near shale gas fields. Much of that would have been invested elsewhere except for cheap gas.

    And that price point is only a few years old.

    10 years from now the level of new investment will overwhelm the non-shale gas countries and their economies will suffer a massive flight of energy intensive industries.

    The shale-gas shunning countries are run by idiots.

    • ” sunshinehours1 | October 22, 2012 at 10:40 am | Reply

      I think those countries that embrace shale gas will thrive and those that don’t are doomed.”

      Quite the clueless doomer comment. Individual countries have to deal with the real estate they were initially allocated. Certain regions on the earth are devoid of fossil fuel reserves under their soil. So its not a question of a nation surviving based on embracing shale gas, they just have to make do in other ways

      • The insane green left in conjunction with the Oil Dumbers have shut down shale exploration in countries where it could help save their economy.

        http://www.reuters.com/article/2012/09/17/omv-shale-austria-idUSL5E8KHHDG20120917

      • It is so easy to use easily found facts to beat these fossilized neo-Cornucopians over the head with.

        “The insane green left in conjunction with the Oil Dumbers have shut down shale exploration in countries where it could help save their economy.”

        There was barely any oil in Austria to start with. The peak there was maybe 20 million barrels a year and that occurred before 1960. By comparison, the USA uses up 20 million barrels in a day.

        Trying to hydraulically fracture from a meager base will lead to even more meager returns.

  18. I became interested in the relationship between renewable energy production and emissions. Looked up info on Norway and Iceland, which both produce 100% of their electricity either with hydro or geothermal energy. Additionally, Icelanders heat 85% of their houses with geothermal energy which goes a long way to negate the energy cost of their cold climate.

    One would think that their per capita emissions would be low but Norway emits about 10 tons and Iceland 7 tons per capita CO2. Both countries have gasoline prices around 8 US$ per gallon.

    If these countries (both signed Kyoto Protocol) can’t cut their emissions lower than EU average, how likely are the others to achieve it?

    • Jarmo –

      If they are using less emission-intensive energy sources, then why is their per-capita emissions not lower than the EU average? I can think of one possible answer – but was wondering if you might have some suggestions?

      • Joshua – Norwegians drill oil so they flare gas some. But that should not make such a big difference. They have very little gas power and coal only on Svalbard.

        So basically 100% renewable electricity in both countries and high gasoline prices.

      • I don’t get how you answered my question.

      • Iceland has the second highest per capita energy consumption of all countries after Qatar and above United Arab Emirates. That allows for sizable emissions even with very much renewable energy. Norway is not quite as extreme but similar enough. The high energy consumption is in both cases mainly due to energy intensive industries and cold climate. (Finland is not very different from Norway although the share of electrical energy is lower.)

      • jarmo –

        Pekka answered my question.

        The missing part of your analysis was per-capita consumption.

      • Oh, cold climate increase the need for energy? I’m shocked.
        ==============

      • Sorry about the lack of transparency of my previous answer – meant that I don’t undestand it either. Transportation and industry are the only candidates. Norway actually stopped building of gas power a couple of times because of emission concerns.

  19. Oilprice.com: cut the $4 billion a year tax breaks given to oil companies.

    “Subsidies to oil companies” is a charge that gets bandied about to quickly without people knowing what it really is. Back on Aug 17-18, there was a 10-comment thread in The Energy Subsidy Tally, WSJ Aug. 17, 2012 where I and several other readers dissected that value.

    When the government tallies up “oil industry subsidies” in their own reports, THIS is what is included:

    1. about 65% of it is the ethanol blending subsidy to refiners to PAY them to blend ethanol into gasoline. Come on people, is “ethanol blending” a) an oil company subsidy or b) an agri-business subsidy, or c) a green energy subsidy?

    2. about 30% of the total subsidies is in the form of “difference between percentage and cost depletion.” This blog has covered that issue many times. I cite a thread from May 26-27, 2012 Copenhagen Concensus 2012 as an example. Percentage depletion was eliminated in 1976 for all except small fry. So calling it an “oil INDUSTRY” subsidy is once again not false but designed to lead to the wrong impression. Yes, get rid of percentage depletion, it ain’t worth the political trouble.

    However, I quibble that eliminating percentage depletion will see that 30% “subsidy” magically come to the Treasury. Percentage Depletion is a short form calculation to use instead of a more complicated Cost Depletion. It is to pay the owner of the resource for the decline in value of the asset as it is extracted and used up. If you eliminate Percentage Depletion, then those people “A” who use percentage because their costs of ownership were very low, will simply sell their mineral rights to Corporation B. “B” now has mineral rights acquisition costs at market value and an accounting department to do the cost depletion work. “B” will take Cost depletion instead of “A” taking percentage depletion. The Treasury might see less revenue than before the change. There are more people pushing paper, adding to expenses, taking their cut out of profits. TANSTAAFL!

    3. About 1% went to “passive tax loss carry forward.”
    4. The balance of 4% of the subsidies went to Department of Energy research programs.

    So, when people spout “oil company subsidies” there is a lot less to the story than meets the eye.

  20. Mr. Dolan’s definition of GDP energy efficiency is funky. Growth in GDP is occurring in less energy intensive sectors. But the underlying needs for things like transportation fuels remain, and continue to grow in absolute terms.
    He does not address future fuel production limitations imposed by geophysics. Those are covered in many recent books and papers, including Gaia’s Limits. The question is whether policy steps will be taken to price in future fossil fuel scarcity before it becomes a real physical problem. In some countries, yes. For example Italy. In most, probably not. In either case, none of the SRES scenarios are remotely possible, so in addition to incomplete climate models and sensitivity uncertainty, there will be substantially less CO2 to worry about.
    Pricing fuels beyond full present cost will be needed to drive the true efficiency changes needed to prevent an enegy crash landing within present lifetimes. Biofuels cannot save the situation. Nor do techically ecoverable reserves of tight oil and gas. That is shown clearly and simply in Gaia’s Limits.

    • future fuel production limitations imposed by geophysics. Those are covered in many recent books and papers,

      You mean books like “Limits to Growth” by the Club of Rome? Yea, it’s a 40 year old book. But it is an excellent example of yesterday’s limits are today’s opportunities and tomorrow’s bread-and-butter.

      There are no “limitations imposed by geophysics.” There aren’t even limitations imposed by petroleum engineering, although those constraints are more tangible. The only real limits are influenced by economics which are heavily by political regulations.

      Geologically and Geophysically, there is a finite number of Billion Barrel Oil In Place hydrocarbon accumulations. There are many times more hydrocarbon accumulations that are > 500 MMBO in place. Many times more that are > 250 MMBO in place. There is an exponential growth the the amount of hydrocarbons available as the economic threshold size of the pool decreases as the price goes up and as technology drives the costs down. The limits are not found in the rocks but in our imagination.

      “Oil is found in the Minds of Men.” – Wallace Pratt (petroleum geologist)

  21. I can just image the politics of “full cost pricing”. With the government involved, it would just be taxation under another name. Then try to image coming up with a number. The Left would claim at least half the DOD budget, the cost to move Manhattan and Long Island to upstate New York, Miami and the rest of Florida into the Carolinas and the entire Gulf Coast 100 miles inland. That would just be just appetizer. One can just imagine what the main meal would look like. With all that incremental money going into government coffers to be politically allocated, what would be left to the private economy to allocate? Not much I fear.

    As for Romney versus Obama, Romney did a pretty good job in Massachusetts, a very blue state, to clean up their $3 billion deficit. This indicates to me Romney can work with members of the opposite party, something Bob Woodward in his book “Price of Politics” indicates pretty clearly Obama cannot do.

    • I agree. Let’s allow paranoid fantasies to dissuade us from a more careful analysis.

      Instead, let’s just promote facile conclusions – that cheap energy is what leads to economic growth – a conclusion that actually assumes a full accounting for the cost of cheap energy despite that those promoting that conclusion say that such an analysis can’t be done.

      Makes total sense when you look at it from a “skeptical” perspective.

      And BTW – I also agree that Romney did a great job in Massachusetts. That should be obvious since Obama isn’t even bothering to contest in that state.

      Oh. Wait.

      Sorry.

      • “Let’s allow paranoid fantasies to dissuade us from a more careful analysis.”

        Joshua, thank you for the succinct explanation why the loony green left hates of shale gas.

    • For a disquieting moment, I found myself in agreement with Joshua! Then I realized he was being 100% sarcastic. I felt much better.

      • It’s hard to say whether that comment slams Joshua or the people of Massachusetts worse.

        However, I’ve got a little more faith in the people of Massachusetts than Joshua.
        =======

  22. Oh, geez! OilPrice.com: As the arctic ice melts at a rapid pace the world’s superpowers are jockeying for position to exploit the region’s vast oil & gas & mineral deposits.

    Compare economic activity above the Arctic Circle in the 1970’s to today. The assumptions behind the question are false on many counts. I don’t know anything about “OilPrice.com”, but this particular interviewer is swimming in the green koolaid. That reflects badly on the enter site.

  23. Changes in the ratio of energy use to GDP are not in full due to improvements in energy efficiency of any activity. They are to a very large degree due to unrelated changes in consumption patterns. The share of services in GDP has increased for long and many of the services require very little energy. In U.S. the share of services is as high as 80% according to one way of classifying.

    At more detailed level health care represents about 12%, financial services 5% and government expenditure 20% of GDP. Total private consumption of goods (including energy goods) is 24% of GDP according to GDP statistics published by BEA.

    The share of energy intensive sectors is decreasing irrespectively on the emphasis given for energy efficiency, but they remain important and shortage or very high price of energy would burden the economy.

    In low-income countries the situation is different. Their use of commercial energy is likely to increase rapidly if not hindered by high prices or outright shortage.

    • Their standard of living is likely to increase rapidly if not hindered by artificially high energy prices, or created shortages.
      ==============

    • Pekka –

      They are to a very large degree due to unrelated changes in consumption patterns.

      How do you tease out changes in consumption patterns from the factor of energy efficiency – to the point where you can determine that they are “unrelated?”

      Off the top of my head, we send manufacturing to China because of labor costs, but energy efficiency directly reflects that equation; the cost of long-distance transportation, for example, and changes in energy efficiency in manufacturing countries is also relevant.

      • Here I don’t understand your point Joshua. If energy is cheap, we would send manufacturing to China for the labor cost savings, perhaps in return increasing the total energy consumption by some large percentage, only some fraction of which would be allocated to us (US/EU/OECD whatever) under normal accounting rules. IMO Pekka’s correct here; and I suspect you can do a very good job of separating the effects of efficiency increases vs. consumption patterns, by looking at detailed data by sector and geography.

      • Getting the numbers out of that is certainly difficult, but it’s obvious that more and more of the consumption goes to services that by their nature require very little energy. That’s due to saturation in material consumption, development of new industries and to the change of relative cost of services, many of which do not allow for major improvements in productivity.

        All these changes happen mainly for reasons that have nothing to do with the availability and price of energy.

    • “shortage or very high price of energy would burden the economy.”
      Hear! Hear!
      How someone can say otherwisw is beyond my comprehension.
      War is peace, Black is white! Expensive energy is progress!

    • Pekka,

      CYNTHIA MITCHELL, et al wrote a paper entitled- “Power Measurements- Stabilizing CA Demand- The real reasons behind the state’s energy savings” that evaluates EE’s role in the rather stable kwh/capita measurement for the state of CA.

      http://www.fortnightly.com/uploads/Stabilizing.pdf

      • Kakatoa,

        The message of that paper is similar to what I wrote although they look most at different changes in society. They discuss increasing energy price which is a direct incentive to save energy, but most of the changes that they discuss have happened for reasons that have little or nothing to do with availability or price of energy.

        Another difference is that they discuss specifically electrical power, not all energy. The general trend in most countries is that the share of electricity is growing, often to the extent that the overall energy use is declining while the consumption of electrical energy is still growing.

  24. Cheap energy is maybe not “vital to growth”, but cheap anything is better that expensive “anything”.
    Cheap food is better that expensive food, cheap iphones better that expensive ones, cheap crap better that expensive crap. It leaves more free income for other things.
    That is something everyone should understand, even economists.
    Giving up cheap energy for expensive one doesn’t make us richer, no matter what World Bank statistics try to say, or what point Dolan tries to make.

    • It’s a madness. Of the Crowd.
      ========

    • Jacob says “Giving up cheap energy for expensive one doesn’t make us richer”. True. However, I am not for “giving up cheap energy.” I am for pricing energy at its true cost. Pretending it is “cheap” when you are just shifting costs to someone else is fooling yourself.

      Abraham Lincoln had a favorite riddle: “How many legs does a dog have if you call a tail a ‘leg’? Answer: Four. Calling a tail a leg doesn’t make it a leg. Similarly, calling energy ‘cheap’ or ‘affordable’ just because you are pricing it below cost doesn’t make it cheap.

      • Heh, ‘true cost’. Determined by the ‘truly knowledgable’ I suppose.
        =========

      • Ed

        Imo, you are advocating a completely unrealistic approach in seeking to include adding all the nonmarket costs of energy production to the cost of any delivered energy.

      • Ed Dolan said:

        “I am not for “giving up cheap energy.” I am for pricing energy at its true cost. Pretending it is “cheap” when you are just shifting costs to someone else is fooling yourself.”
        ____
        I agree completely. Eliminate all subsidies for everyone, so that the true cost of energy can be “experienced” by the consumer. Conservation and energy efficiency then take care of themselves. However, hand in hand with this must be a regulatory environment that does everything possible to encourage innovation and making sure that there is a level playing field for new entrants that don’t have the same access to government (via lobbyists) that the long-term big energy conglomerates have. We all know the way that Washington works, where money buys policy, and the smaller companies, regardlesss of technology, can be blocked effectively from entering the marketplace. So, if you remove subisidies, you need to make absolutely certain to break the grip that the larger and better financed companies have on the policymakers in Washington.

      • You guys do know how energy conservation programs work, don’t you?

        All those “free” light bulbs? (Which my employer has handed out millions of.) They are not exactly free. The cost gets added into the rate base.

        Think about why a gas or utility company would be inclined to convince people to use less of its product. It makes sense so long as they are guarenteed the same revenue levels by other means. That is not to say that rate payers automatically lose out. If we have to spend $1 billion on a new generation asset to meet demand, it goes into the rate base. The customers eventually see it in their monthly bill. If we remove the need for the plant through conservation programs, we still get to charge for the revenue we forego. One could say we don’t use the resources that a new plant would entail. That is a savings in one sense.

      • The Skeptical Warmist (aka R. Gates)

        Timg56,

        One thing that it would be great to get Ed’s opinion on is smart-grid technology, where there can be lot’s of different energy producers supplying energy to the same grid, and those who can do it at the lowest cost per kwh make the most money. I’ve never particularly liked the cozy relationship between the Public Utilities and Government. Most the time consumers don’t have a choice in providers as of course you’ve only often got one power line coming into your house (similar to cable providers for many areas today). With a smart-grid (where the grid is owned by “the commons”, different power suppliers would be able to transmit power to the grid, with a common payment divided among all of them based on the total kwh they contribute to the grid. Those who can produce electricity at the lowest cost per kwh make the most profit. Now, getting the Public Service companies to move to this kind of thinking is a big step. They have tremendous political power, controlling most public utility commissions in their regions. They will only give up control and move to a “commons” smart-grid approach if forced to, and the only way they will be forced to is by the consumer demanding it from their elected officials. Do people have the backbone for such a fight? I wonder…

      • R Gates,

        I am not sure I understand your concept of smart grid making the transmission and distribution grids a “commons”.

        As I understand it, one – of many – potential applications is to help monitor usage (load) with supply (generation). Current remote or automatic meter reading networks are one way. The meter talks to the collector points which feed back to the system by the phone circuits. The system can’t reply back to the meter. Using M2M technology, future smart grid systems will allow the system to talk to the meter and the meter to talk to devices in the home or office, giving the ability to match load to generation. Other applications have to do with switching and network monitoring. For example, today, if lines go down due to a storm, the utility does not automatically know where the faults are or which customers are out of service. We depend on the customer calling in and telling us. Smart grid will allow utilities to better pinpoint problems in the system, allowing for faster restoration.

        The commons you describe sounds a lot like what Enron was pushing. As someone who saw ~ $125,000 in retirement 401k disappear (they bought the utility I work for at the time), it is not a model I will readily endorse. Regulated monopolies work pretty well when it comes to electric and gas service.

        One area where smart grid may prove useful is in helping to manage distributed generation. Right now trying to integrate a large number of customers who at times may be net producers into the system is difficult, all due to basic electrical principles of load and supply having to match.

      • The Skeptical Warmist (aka R. Gates)

        timg56,

        The smart-grid is exactly as you describe, but it is not just the output or load side that can be “smart” but the input side as well. You can have multiple inputs (i.e. many different separate companies) all generating power, with equal access to the smart gird and each being paid by the consumer exactly the same per kwh. Thus, those who have the most efficient technologies will make the most per kwh, with the added benefit being that the small start-ups will not be at any disadvantage and can grow as their profits dictate. The only way this works however is if the regulated power monopoly no longer controls access to the grid because they no longer own it, but are just one of hundreds of suppliers, each with exactly the same opportunity for access.

        And BTW, I don’t know where you got your information on ENRON, and sorry for your financial loss, but such as smart grid, with equal access by large and small companies would be exactly what a company like ENRON would not have wanted.

      • mike, I think Dr Dolan should get some credit (in more way than one) for his efforts to solve the energy problems. He could just sit at home like the rest of us and debate it online, but he’s put in a more proactive effort.

        If the cost of that is a few hot meals and showers and parties at Rio it’s a small price to pay. I am not sure why you are so annoyed about it anyway, it’s not like you paid for Rio; the government paid for it.

      • lolwot gives himself away: ‘The government pays for it’.
        ==================

      • Yea, lolwot really gives himself away … roll my eyes..
        Look at how many of the world’s oil companies are nationalized.

        Only about 7% of the world’s quoted oil and gas reserves occur in countries that allow private companies free rein. And of the 7% rest, how many are international, that could care less about national boundaries?

        The point is that each country has to become as competitive as a business if it wants to stay in the game. If my country decides to fund some long-term energy strategy, I figure it is a laudable goal.

      • It’s a magical Jack in the DC Box. Everytime you close the lid it pops open again, arms full of golden goose eggs.
        =================

      • Ed,

        I am with you – up to the “pricing at its true cost”. How does that get done? Who determines the externality costs of CO2 produced? How is that cost even defined? To date there is no evidence for an external cost that can be assoiciated with CO2. Not one. Yet there are a lot of people telling us we have to include it as an external cost and even willing to provide numbers.

      • Unless you are god, you cannot price eneregy at its true cost. You cannot account for or know the degree of every externality. And, it seems unlikely that you will include positive externalities in your pricing. Even shifting a job to China has a positive impact on someone in China. If energy is to be priced with consideration for externalities, then every product should be priced that way. Televisions, iphones, smart cars and heads of lettuce should all be given “true” prices. I do not believe that you are a Libertarian.

      • Tamara | October 22, 2012 at 4:38 pm |

        Even if you are god, you cannot price energy — or anything — at its true cost.

        Sure, a god might be able to account for or know the degree of every externality, but that would not help arrive at its true cost.

        You might even capture, were you a tyrannical god who could deem for people what was or was not a benefit without their consent, positive externalities. After all, a god did that for a girl named Mary. But in general, procreation without consent is not deemed a benefit by modern society. Nor is any other supposed positive externality.

        You say you want true prices for all things; so far as possible, I believe this is exactly the stance Dr. Dolan advocates; if he doesn’t, I certainly do.

        But a Libertarian (or as he reminds us, “classic liberal”) believes the Fair Market — not god, nor any committee of experts (politburo or otherwise), nor single tyrannical actor of any sort, nor government — sets the price by the Law of Supply and Demand. Without knowing the accurate — or nearly true — price, you cannot know the accurate or nearly true cost.

        There are, unsurprisingly, many mechanisms for allowing the Fair Market to find the accurate price that do not depend on anyone in government determining what level to set. The general term for this set of mechanisms is privatization. This worked for mobile telecommunications by auctioning bandwidth. It wasn’t a perfect solution, given the monopolistic predatory practices that have since emerged in that market, but it led to a world of innovation and service unimagined before the first auction.

        Privatize the carbon cycle using the pre-existing infrastructure of the retail and payroll tax systems to collect fees and disburse all dividends to all citizens with a paycheck per capita and (aside from ending unemployment in the USA faster than you can spell malingerer) at a price set by maximizing returns to shareholders (that is, every citizen with a job per capita). You’ll see the true price, and the true cost, reflected within a very few business cycles.

      • Bart R,
        I read your treatise. Slapping the word privatization on it doesn’t change what it is – global governance, market control and redistribution of wealth. How many people do you fool with that stuff? Supposedly, your purpose is to lower the emission of carbon. The way to do this is to make activities that emit carbon painful, so that people avoid/cut back on them. Yet, you try to lure us in with the promise of all the money that the Free Riders are stealing from us. This is magical thinking that is bordering on the sociopathic. If it works, it hurts. Everyone, not just the rich guys. Every now and then someone comes along who chisels away at my faith in humanity. Congrats on being the one, today.

      • lolwot,

        Yr: “…the government paid for it…”

        lolwot did it ever occur to you that the government pays for things with our hard-earned dollars that we pay out in taxes? Either that or the government pays for “it” by thrusting debt on the public that will burden our children’s children and then some.

        And to the extent institutions of higher learning privately “pay” for their carbon-piggie, tenured hypocrites to attend eco-confab, good-deal boondoggles then the kids (not their kids, of course) attending their university are stuck with the tab in the form of higher tuition and other “true costs” of education that will burden them for decades.

        I’ll tell you what I’ll give Dr. Dolan, and all his enabler, toady-pals, busy working up ever more clever variations on the CAGW scam, credit for:

        -Disassociating themselves from the carbon-swill perks and other benefits provided by their scheming money-bags, make-a-buck/make-a-gulag betters.

        -Practicing what their preach.

        -Exhibiting leadership from the front and by personal example when it comes to carbon austerity.

        -Calling out their betters and sell-out colleagues for their carbon-glutton, pig-out life-styles,

        And, oh by the way, lolwot you might add to your laundry list of sacrifices that might be made such little numbers as rambling, beach-front bachelor-pads; private-jet travel; limousines; yachts; and a jet-set carbon-spew lifestyle to go with their frequent-flyer, private-jet jaunts. Unless, of course, such inclusions might bring down on your head your betters’ wrath and cost you that nice, good-little-greenshirt trough they provide for your low-stress, goof-off services rendered. .

      • lolwot,

        I have to thank you for the chuckle.

        This line was classic: “I am not sure why you are so annoyed about it anyway, it’s not like you paid for Rio; the government paid for it.”

        Is it too much of a stretch to think that you saw nothing wrong about the President’s comment regarding small business folks and entrepanuers?

      • David Springer

        He was joking, right?

        Poe’s Law… can’t be sure.

      • David Springer

        Ah looks like threading is messed up again.

        To Manacker:

        I don’t know if loltwat was joking about environmentalist whacko (like Dolan) trips to Rio climate conferences being paid for by the government so we shouldn’t worry about the cost.

        Poe’s Law… it’s difficult to distinguish between a sincere radical and a parody of a sincere radical absent a /sarc tag to mark the parody.

      • lolwot,

        I’ll give Dr. Dolan credit for:

        -Practicing what he preaches

        -Setting the example, personally and from the front, in matters of carbon-austerity

        -Calling out the carbon-hypocrite pig-out lifestyles of his betters and colleagues

        And, lolwot, those eco-confabs that you say are paid for by the government–you mean with our taxes and/or by means of a public-debt burden thrust on us and our future generations as far as the eye can see?

        Of course, some of the “true cost” of these carbon-spew gabfests is privately funded–with the kids attending this, that, or another institution of higher learning picking up the tab in the form of higher tuition costs and other fees and college-loan debts that will burden them for decades.

        And, oh by the way, lolwot, just when are we going to see the IPCC and other such institutions hold their carbon-reduction enviro-conferences by means of low-carbon video-conferencing? I mean, like, didn’t you tell me once that “that’s not how the world works”?

      • lolwot,

        Sorry for two replies, I thought my first had gotten “whacked” by the moderator. Hence my second, sorta nicey-nicey reply.

      • Pekka Pirilä

        We may in many cases be certain that the external costs are not zero but really costs. Thus we may know that disregarding the external costs is suboptimal in a known direction. That*s, however, of little help unless we can tell more about the size of the external costs – and in very many cases we can’t tell much.

        If we know only the sign we err by the size of the actual cost, when we disregard it, but we may err much more to the other direction if we try to guess the right value. Furthermore the damage in erring is usually not far from linear, i.e. erring by the same amount in either direction is roughly as bad. Taking all this into account the best solution can be to disregard the external costs. Applying a low enough charge (Pigovian tax) to guarantee that we don’t overshoot too much may mean that the charge would be too low to warrant the cost of collection.

    • +1

  25. In my view it is a myth that cheap energy – “affordable energy” as many people like to say is vital to growth.

    This comment affords us a glimpse into a big error in thinking. It is an error that underlies all Leftist Stonkernomics.

    Energy is an example of a resource. It is of course involved in providing all of the goods and services that people want.

    As resources become scarce the price for them goes up. Anytime there are changes in the price of resources the use of all other resources will be affected and the use of them to provide the same or substitute goods and service will be rearranged.

    The setting of prices of resources by market forces has proven to be the most efficient means of allocating resources. Of most importance, however, is the efficient allocation of resources. Meddling with market forces for political purposes will result in a diminished level of wealth creation. Downward effects of market interference are especially destructive to wealth when the prices of scarce resources are manipulated and especially such changes unnatural, episodic, unpredictable and unrelated to market forces at work elsewhere in the world.

    In economic terms the finance function is the maximization of net present wealth. Capital is an important factor in the creation of wealth.

    Capital is essentially stored labor. Accordingly, the interest rate is important (for example, we learn from Irving Fisher that if money was free a railroad would be justified in borrowing enough money to finance the flattening every railroad in the country because the fuel savings in perpetuity would eventually pay off any amount of investment).

    Politically dictating the interest rate has the same effect as politically increasing the cost of a single resource. Such meddling changes everything and leads to the misallocation of all factors of production, creates artificial scarcities, decreases the level of net present wealth. By extension the standard of living of a society will suffer and there will be more misery, poverty and death as a result and in the same way that a blight caused the Irish Potato Famine.

  26. Facts are Facts and Some Just Don’t Care

    Truth is some Scientists don’t care…

    ■For 150 years cosmic radiation was decreasing; and,

    ■That caused global warming.
    During the time the Earth was warming there was a 9 per cent decrease in cosmic ray intensity. (Refer to U.R. Rao, below)

    Why? Nominally, it’s the Sun, stupid. It is the continuous increase in solar activity over the last 150 years that shielded the Earth from cosmic rays.

    An active Sun decreased cosmic ray intensity. It is charged particles that causes clouds (that was demonstrated in scientific experiments). And, less cosmic ray intensity results in less cloud cover.

    Less cloud cover reduces the Earth’s albedo. The effect of that is less solar radiation being reflected away, back into the space.

    And, that causes the temperature of the Earth’s surface to rise. Consequently, more heat is stored in the oceans, lakes and in clays below the surface.

    Eventually, all of the stored heat is given back to the atmosphere when the climate changes and swings back to a global cooling trend, as we have now. The Sun has been anomalously quiet so there has been an increase in cosmic radiation, causing more low clouds, leading to an increase in the Earth’s albedo, and reflecting away more solar radiation. Consequently, the oceans are now giving up their heat and have been cooling for years.

    More? (http://evilincandescentbulb.wordpress.com/2012/04/07/truth-is-facts-are-facts-and-some-dont-care/)

  27. The article had some accurate and relevant points and also some that are imo completely without merit and will never be implemented in the USA.
    Examples:
    1. The question- What about a healthcare system (in the USA) that delivers mediocre results at the world’s highest cost? This is a completely valid point that politicians tend to choose to not address.

    2. There is only one right way to promote renewables, and that is to introduce full-cost pricing of all forms of energy.
    a. First, it means pricing that covers the full production costs for every form of fuel. No subsidies for anyone—not for oil, not for ethanol, not for wind or solar. This part of the “plan” makes some sense. However,

    b. The second half of full-cost pricing is to include all of the nonmarket costs, what economists call the “external costs” or “externalities.”- The 2nd part is absurd and would lead to a myriad of additional problems.

  28. “Obama has made clear his desires to cut the $4 billion a year tax breaks given to oil companies.”

    4 billion ? Why’ the “green enrgy” sector has received 90 billion from the stymulus package alone, and uncountable more subsidies . And the European green-sector is receiving hundreds of billions euros each year.

    Cut all subsidies and all tax breaks, to all companies (energy or not, agriculture, for example). By all means.
    Obama desires to cut only oil subsidies only. He doesn’t hate subsidies, he hates oil.

  29. “Renewable energy is more expensive than fossil fuels”
    Wrong.
    Renewable is unreliable. When you try to rely on renewables you get blackouts.
    It’s not a question of price (though renewable is also fabulously expensive), it’s a question of having or not having. It’s a question of “does it work or not?”
    Renewables are what Jim Hansen said: “Toot fairy and easter bunny”.

    • Jacob

      Sorry, but you are simply looking at the issue incorrectly. It is an issue of cost. If a single form of renewable is not reliable then another form can and should be used as a back up. The issue is that it will cost more to have the same degree of reliability

      • Wrong.
        The current technology (wind and solar) is utterly incapable of delivering reliable energy. Sure, if you maintain 100% fossil fuel generation available for backup, then renewables become “reliable”.

      • You two are saying the same thing. For once we have agreement, so don’t make it look like dissension. Such a habit we’ve fallen into.
        ==========

  30. A fan of *MORE* discourse

    Pekka Pirilä posted “I didn’t remember that particular history paper [The AIP survey "Discovery of Global Warming"] although I have seen it before.”

    “Cherry picking direct references is one of the most common ways of providing misleading information (second only to misleading graphs).”

    Pekka Pirilä makes a good point … and yet cherry-picking and misleading graphs are only #3 and #4 on the list of demagogic techniques for conveying misleading information.

    Fortunately, Ed Dolan’s essay provides a master class in techniques #1 and #2!

    • Misdirection Method #1: Focus on too-short time-scales 

    Dilbert shows us plainly what Dolan ignores utterly: market failure originating in too-short time-scales (Oct 20, 2012).

    • Misdirection Method #2: Ask the wrong questions 

    In the long-run, the most economically significant advance in climate-change science in recent weeks has been Sun et al Lethally Hot Temperatures During the Early Triassic Greenhouse.

    Ed Dolan’s style of economics utterly fails to grapple with the long-term economic implications of Hansen-style super-CAGW scenarios, eh?   :eek:   :shock:   :oops:

    • Misdirection Method #3: Cherry-pick the data 

    See below.

    • Misdirection Method #4: Draw misleading pictures 

    See below.

    Conclusion  The embrace of (primary) Misdirection Methods #1-#2 frees economic neodenialists to deploy (secondary) Misdirection Methods #3-#4 to their hearts’ content … secure in the knowledge that their selfishly short-sighted willfully ignorant economic ideology is impervious to rational scientific criticism!   :eek:   :shock:   :oops:   :eek:   :shock:   :oops:

  31. About “to include all of the nonmarket costs”. There is no way to calculate “non market costs”, it’s an oxymoron. Costs is what the market determines.
    This is a code-word used by those who wish to ban some product or activity. Example in case: EPA proposed ban on coal plants.

    • Choice of Iron Hand or Invisible Hand, in the Velvet Glove.
      ===============

    • Jacobress says: “Costs is (sic) what the market determines.”

      Yeah, cost is what the market determines. For example, the ‘market’ determines that a stolen flat-screen TV fenced by a burglar sells for a lot less than one bought in a legit store. I guess that means it “costs” less, huh? The market price is meaningless unless it is based on a production process that respects property rights. Polluters do not respect property rights. Polluting is looting (as Ayn Rand might have put it).

      Jacobress also says: “There is no way to calculate “non market costs”, it’s an oxymoron.” True, it is hard to measure nonmarket costs, but the fact that something is hard to measure does not mean its value is zero. Take education, for example. It is notoriously hard to measure the value of an education, but that does not keep us from building schools, because we know the value is not zero.

      • Strawman: No one says its value is zero; it’s indeterminable. In your scholastic exemplar, it is easy to determine that the value is greater than zero rather than less than zero.

        Well, I guess that depends on the nature of the school. I could name some with negative external costs.
        ===============

      • How is it easy to determine that the value is greater than zero rather than less that zero?

        I suppose it’s a logical extension of libertarianism to shut down all the public schools. Anyone wants an education they just have to pay for it themselves.

      • er, maybe I mean ‘positive’ external costs.

        I’m reminded of the wit who spoke of the man who knew the cost of everything and the value of nothing, and conversely of the man who knew the value of everything and the cost of nothing.
        ==============

      • lolwot, we presume an educated person is more valuable than one not.
        =================

      • Well, you are on to an entirely different discussion, now. Are you happy with public education in the US, and its core direction?
        ==================

      • By the way, was this lolwot misdirection just crabbiness or do you have a point you are trying to make?
        ============

      • I suppose it’s a logical extension of libertarianism to shut down all the public schools.

        No need to suppose. I’ve read libertarians make exactly that argument. The didn’t want their money (stolen from them via taxation) to go for educating someone else’s children – in particular the children of lazy parents who wouldn’t just make the effort necessary to lift themselves out of poverty. And yes, they also argued against any attempt to assign a value to investment in education, because understanding externalities is just too dang difficult.

        For example, they don’t like responding to this study.

        http://www.ncsl.org/issues-research/human-services/new-research-early-education-as-economic-investme.aspx

      • Well, you are on to an entirely different discussion, now. Are you happy with public education in the US, and its core direction?

        Ah yes. The ol’ binary mentality monster raises its ugly head once again.
        That dude certainly thrives in the threads of Climate Etc. – sustaining much nourishment from the comments of kim and friends.

      • Poor Joshua doesn’t even have the excuse of crabbiness.
        ==============

      • Joshua

        You seem to be very prejudical regarding the concept of a libertarian. There may be a very small number of libertarians that believe in virtually no government services, but the vast majority support having as small and efficient of a government as is possible to perform the duties the population has assigned to it. You seem to overly negatively generalize what those h=who describe themselves as libertarian support.

      • Josh,

        I could be considered Libertarian on a lot of topics and issues and I’ve never advocated for nor would support the elimination of public schools.

        I will tell you what, as a Libertarian I do support

        – funding and control of schools at the local level, with state input primarily being that of ensuring all school districts meet certainn levels of service.

        – personal support of education through contributions of time or money. (Want to match time working with students – on an unpaid basis?)

        – providing parents with options for educating their children.

        We have a measure on the ballot in WA to allow for charter schools, which currently are not allowed by state law. Why would anyone be against opening up the system for charter schools? Why would they be against use of vouchers to allow parents to pick the schools they send their kids to?

        Teachers fill quite a few slots on my list of people I admire most. But that does not change the fact that the biggest factor in a student staying in school and performing well is the involvement and interest of the parents. You can have the best teachers in the world and the most advance technology in the classroom and it will make a difference for only a small percentage of kids with parents who won’t or can’t take responsibility for ensuring their kid puts in the effort to succeed.

        Anyone who believes the Federal government can make a difference is a fool or has something to gain financially from such involvement.

      • tim and Rob –

        You both make a legitimate point. I should have been more careful. I never intended to imply that all libertarians hold the beliefs that I described – only that I have more than once run into libertarians who hold such beliefs. But I can see how what I wrote would be interpreted as you both interpreted it.

        My personal belief system overlaps in many ways with fundamental libertarian ideology. The problem, as I see it, is when libertarianism becomes an extremist ideology – and I have seen this not only with libertarians at the extreme end of the range. For example, Ron and Rand Paul are probably the most prominent libertarians on the American scene, and they hold some very extreme views, IMO.

        As for this comment:

        Why would anyone be against opening up the system for charter schools? Why would they be against use of vouchers to allow parents to pick the schools they send their kids to?

        I’m going to assume that you’re aware of the counterarguments. If you’re not, ask, and I’ll lay them out (I’d suggest that you start by reading Diane Ravitch – whose arc of development on the issue is quite interesting). If you are aware of them but simply dismiss them out of incredulity, then there’s nothing for us to talk about there.

        I understand the arguments in favor of charter schools, and I don’t dismiss those arguments out of hand. I have been asked to be on the board of a charter school and I am serious considering it despite my reservations about the charter school movement.

        Just a couple of quick points: charter schools on average return no better results than traditional public school son average, and I have personally watched a rigged process of for-profit schools getting contracts only to flat-out fail on a fairly large scale here in Philly.

        Your seem to be making some mistaken assumptions about my beliefs on the role of parents in education. As an educator for over 30 years, I disagree quite strongly with your assertion that the federal government can play no role in affecting the influence of parents within educational processes. Please look at that study I linked about the returns gained from early childhood education. It speaks directly to that issue.

      • . As an educator for over 30 years,…

        Amazingly enough, I woke up this morning to find myself a couple of years younger; I’ve only been an educator for 28 years.

      • David Springer

        Joshua | October 23, 2012 at 8:45 am |

        “Amazingly enough, I woke up this morning to find myself a couple of years younger; I’ve only been an educator for 28 years.”

        Thanks. That’s not surprising given the educational system has been in decline for about 28 years.

      • Dodging lolwot, I’ll try again. It is foolish to counter with your argument about the value not being zero. That isn’t the point; the point is that value judgements smear the whole process around in a way that ensures that ‘true costs’ can’t be objectively delineated. And then we enter the realm of magic. Better simply to not be so agoraphobic.
        ========

      • Ed Dolan:

        Much of this is being done via waste discharge permits for air and water pollution. The permits require monitoring, targets, best available technology and fees to cover oversight costs. In addition, auto pollution standards have also become more stringent. As a result, in the US, air and water quality has drastically improved since 1970. Of course, some of these gains are at the expense of increased pollution in the developing world due to offshoring industry.

        Perhaps more externalities need to be paid for by the waste discharger, I don’t know. However, these costs and should be at least offset by the benefits that polluting processes create. It’s a balance between the externalities of pollution the value to food security, human longevity, childhood mortality rates, etc.

        Would you agree that strangling the developed world’s economy in taxes, fees and red tape to the point of a totalitarian economy would have an enormous social and environmental cost? I think that is one large source of opposition to your views.

      • He believes the ‘truly knowledgable’ can find the ‘true costs’, and also believes those should then be imposed.

        It’s an old model. Greeks pondered it, and every tyrant ever. Sic semper Tyrannis.
        ============

      • Howard asks: “Would you agree that strangling the developed world’s economy in taxes, fees and red tape to the point of a totalitarian economy would have an enormous social and environmental cost?”

        I do agree with this. That is why I emphasize the simplicity of pursuing environmental goals via the price system and property rights when possible rather than red tape. You mention auto emission standards. A perfect example of a back-door, red-tape-heavy approach to energy efficiency that has many unintended consequences–more driving, more suburban sprawl, more road congestion, etc. See a longer discussion here of why raising the price of gasoline is a simpler, less intrusive, less “totalitarian,” if you will, and much more effective policy than CAFE standards. http://www.economonitor.com/dolanecon/2011/07/15/is-a-56-2-mpg-fuel-economy-standard-really-a-good-idea/

      • David Springer

        Ed Dolan | October 22, 2012 at 11:01 pm |

        “See a longer discussion here of why raising the price of gasoline is a simpler, less intrusive, less “totalitarian,” if you will, and much more effective policy than CAFE standards.”

        Does doing neither ever occur to control freaks like Edwin G. Dolan?

      • David Springer

        CO2 isn’t a pollutant except by fiat. Anthropogenic emission has no demonstrable hidden cost just some imagined cost decades in the future under modeled responses from models which have so far badly failed in predictive skill. Meanwhile the known beneficial effects of CO2 including accelerated plant growth using less fresh water and (possibly) longer growing seasons and fewer killer frosts in higher latitudes are ignored by agenda-blinded fruitloops like Edwin G. Dolan.

      • Dirty carbon emissions are indeed pollution as they overstress the world’s carbon cycle knocking the Earth’s natural CO2 balance out of control and also alter the hydrological cycle.

      • ‘dirty’, ‘overstress’, ‘pollution’, ‘knocking’, and ‘out of control’. You know none of these, but do seem to understand rhetoric and propaganda.
        ===========

      • David Springer

        Absolute rubbish. The carbon cycle is enhanced by anthropognic CO2 and the biosphere benefits from it.

      • And warmer sustains more total life and more diversity of life. They(who is they?) got this thing entirely backwards, and the Gods are laughing at them(who?) from the clouds.
        ============

      • (whom?), sorry, Ma.
        =======

      • We have met them, and they are we.
        ================

      • lolwot,

        I am still holding out hope that one of these days you will be able to provide examples of how CO2 production is overstressing the world’s carbon cycle, knocking the Earth’s natural CO2 balance out of control and altering the hydrological cycle – at least in a manner that we should be concerned about.

        As the old pickup sports phrase goes – “no harm, no foul”. If you can’t identify where the harm is, there is no foul to call and we keep on playing.

      • “at least in a manner that we should be concerned about.”

        that’s the caveat isn’t it? I can supply evidence that human CO2 emissions “overstress the world’s carbon cycle knocking the Earth’s natural CO2 balance out of control and also alter the hydrological cycle.”

        but you’d just say you aren’t concerned and use that to claim it isn’t happening?

        Fact is human emissions have overstressed the world’s carbon cycle and as a result atmospheric CO2 levels are rising at historically unprecedented rates. The hydrological cycle is affected by cloud and temperature changes forced by the CO2 climate driver.

      • Ed,
        what percentage of the flat screen tv market is represented by stolen sets?

        I agree with the concept that certain external costs should be included in any market pricing scheme. But they need to be costs that leave no doubt as being part of the process. Disposing of toxic chemicals into drinking water systems would be an example. Creation of “acid rain” would not. The difference? One can be documented, with clear, undisputed relationships of cause and effect. The other cannot.

  32. Some carbon tax (justified by “externalities”) makes sense, preferable “revenue neutral” (i.e. – lower income tax rates).
    But don’t delude yourself, no amount of carbon tax will produce a rabbit out of it’s hat and bring to a transition to renewables.

    • Sure it will. If renewables are cheaper people will pay for it.

      • “If renewables are cheaper” – something that doesn’t work can’t be cheaper, that is – it doesn’t matter if it is (and it isn’t cheaper).
        No carbon tax can produce the technological breakthrough needed for renewables to be a viable and reliable source of energy, in the vast quantities needed.

      • wrong.

  33. David L. Hagen

    Available Net Exports
    Ed Dolan ignores the urgently pressing issue of available oil to import to keep transportation going. This will cause a critical forced immediate decline in the economy if not addressed. See presentations and papers by Jeff Brown, aka westexas eg. at TheOilDrum Oct 21, 2012

    The GNE/CNI Data
    I frequently refer to the ratio of Global Net Exports of oil (GNE*) to Chindia’s Net Imports (CNI), or GNE/CNI. We have nine years of post-2002 annual GNE/CNI data. I have shown the declines in the ratio in three year increments, and I have shown when GNE would equal CNI for a given decline rate, when the Chindia region alone would theoretically consume 100% of Global Net Exports of oil, i.e., when the GNE/CNI ratio would be 1.0.

    2002 to 2005:
    Ratio fell from 11.0 to 8.9, a rate of change of -7.1%/year. At this rate of change, the ratio would approach 1.0 around the year 2036, i.e., in 34 years after 2002.

    2005 to 2008:
    Ratio fell from 8.9 to 7.0, a rate of change of -8.0%/year. At this rate of change, the ratio would approach 1.0 around the year 2033, i.e, in 31 years after 2002.

    2008 to 2011:
    Ratio fell from 7.0 to 5.3, a rate of change of -9.2%/year. At this rate of change, the ratio would approach 1.0 around the year 2030, i.e., in 28 years after 2002.

    As the saying goes, making predictions, especially about the future, is difficult, but note that the rate of decline in the ratio has accelerated, at least through 2011. A key but massively overlooked consequence of this declining ratio is what I estimate is a monstrous rate of depletion in post-2005 Available Cumulative Net Exports (Available CNE), i.e., the total estimated post-2005 supply of global net exports of oil that will be available to importers other than China & India.

    Based on the current data, through 2011, I estimate that globally we have already consumed, in only six years, roughly half of the total post-2005 cumulative supply of net exported oil that will be available to importers other than China & India.

    The following chart shows global public debt versus the GNE/CNI ratio for 2002 to 2011:

    My premise is that the oil importing OECD countries are trying to keep their “Wants” based economies going, in the face of constrained supplies of Global Net Exports of oil, via massive deficit spending–financed by real creditors and by accommodative central banks–as the 2002 to 2011 decline in the GNE/CNI ratio strongly contributed to an average 17%/year rate of increase in annual Brent crude oil prices from 2002 to 2011 (with one year over year decline, in 2009).

    *GNE = Top 33 net oil exporters in 2005, BP + minor EIA data, total petroleum liquids

    • Well, so what? (about peak oil). If there won’t be any oil left, we won’t burn oil. If we’ll have better alternatives, we won’t burn oil.
      Peak oil (which is false) isn’t an argument for banning oil now.

      • David L. Hagen

        jacobress
        First engage brain!
        Gail Tverberg shows that employment is very closely related to energy use (r^2=0.98.) See “The Close Tie Between Energy Consumption, Employment, and Recession.”
        In simple terms, if you cut available transport fuel by 5%/year, unemployment will increase by 5%/year EVERY YEAR until other sources of fuel are developed. That means YOUR job will be gone. First do your homework by reading world expert Robert Hirsch, The Impending World Energy Mess. and studying his presentations.. He has worked hard to make these issues easily understandable.

        Cave men did not run cars on diesel or gasoline, nor run ambulances to hospitals, nor fire trucks to put out fires, nor transport goods by truck, nor provide squad cars to cops, nor power tractors for agriculture. You are welcome to go back to your cave. I will seek to develop other fuels and keep our societies going.
        Having provided no evidence that peak oil is false, you authoritarian statement is false. “Banning oil now” is just a red herring of Democratic political correctness run amok.
        Try applying the scientific method and sound engineering next time.

      • David Springer

        I’m not sure which is cause and effect but I’d lean towards higher unemployment as a cause of lower transporation fuel consumption not a consequence of it.

      • David L. Hagen | October 22, 2012 at 8:58 pm |

        Could you remind us again of your position in the tar and oil industry, the organizations affiliated with those lucrative enterprises to which you belong, and the funding these groups receive from Koch and other like-minded private businessses?

      • I’ve studied the issue of “peak oil”. It is false. There is an almost unlimitted supply of oil and gas and coal, and methane, down, deep within the earth crust and in the oceans. What we are running out of are the easy accesible reservoirs. New technology has made deeper and undersea reservoirs accessible. Prices are now higher, because extraction costs have risen. Technology advances, more and more reservoirs become accessible, the prices of extraction also drop. Oil will get cheaper within a few years.
        Besides – transportation fuel can be manufactures from coal and gas. There is no shortage of these resources, not even an apparent one.
        Peak oil alarmists are just scaremongers, not unlike climate alarmists.
        Your references are one-sided, you need to diversify.
        (Jacob = jacobress)

      • ” Jacob | October 23, 2012 at 6:23 am |

        I’ve studied the issue of “peak oil”. It is false. There is an almost unlimitted supply of oil and gas and coal, and methane, down, deep within the earth crust and in the oceans. “

        Even though the amount of crackpottery to be found in fossil fuel circles is miniscule compared to that in climate science (see http://tinyurl.com/ClimateClows), the wackos that believe in infinite oil are just as loony.

        Abiotic oil is the easiest theory to debunk. Oil exists in a narrow depth window of the crust and in isolated spatial regions. Too shallow and there is not enough pressure to create a dense energy source, too deep and the oil will crack into useless by-products due to the high temperature.

      • David L. Hagen

        Jacob
        “What we are running out of are the easy accessible reservoirs.”
        There is yet hope.
        You just affirmed the key concept of “Peak Oil”, that production of:
        an oil well increases and then declines;
        of a region increases and then declines;
        of a nation increases and then declines;
        of all nations increases and then declines.
        The heart of “peak oil” is a given geological resource in a given region with a given technology and price regime will first increase and then decline, with an inevitable “peak” of maximum production between them.
        The overall production curve is a summation of individual “peaks”. i.e., see “multi-Hubbert” models.
        See Tad Patzek etc.

        “Prices are now higher, because extraction costs have risen.”
        Bravo. Prices have risen ~1000% from 1998 (~$10/bbl) to 2005 (~$100/bbl). Adam Smith informs us that such price rises are NOT due to an abundance of oil. The International Energy Agency projects no increase in crude oil production (down from major increased projections earlier.)

        Yes coal can be converted to fuel. China has already constructed enough coal to methanol plants with total capacity to provide more than half its fuel usage. See:
        China’s growing methanol economy and its implications for energy and the environment

        US environmentalists are collectively driving the USA rapidly off a cliff of insufficient transport fuel.

        Re: “You need to diversify”!

        I agree. I am working to enhance oil recovery and make solar thermal fuel!
        ——————————-
        David Springer
        Re: “which is cause and effect”
        Check the situation and the phase of the very tight association between fuel and employment. Generally I agree that transportation fuel use declines with higher unemployment. See James Hamilton on oil shocks driving recessions and unemployment.

        Historical Oil Shocks. This paper surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Although oil was used much differently and was substantially less important economically in the nineteenth century than it is today, there are interesting parallels between events in that era and more recent developments. Key post-World-War-II oil shocks reviewed include the Suez Crisis of 1956-57, the OPEC oil embargo of 1973-1974, the Iranian revolution of 1978-1979, the Iran-Iraq War initiated in 1980, the first Persian Gulf War in 1990-91, and the oil price spike of 2007-2008. Other more minor disturbances are also discussed, as are the economic downturns that followed each of the major postwar oil shocks.

        However the converse is also true. Explore the North Korean Famine 1994-1998 that followed the breakup of the USSR in 1991 with consequent loss of subsidized diesel fuel and tractor parts. That led to major breakdown in agriculture and loss of diesel powered transport of coal to fertilizer factories. That compounded with natural disasters resulted in major drop of food production with consequent famine.
        Robert Hirsch on the impending energy mess predicts about a 1:1 decline in GDP with declining fuel availability, until we can develop sufficient alternatives.
        ————————–
        Bart R
        You win today’s prize for insinuation and smear.
        Try studying the scientific method for a change.

      • David L. Hagen | October 22, 2012 at 8:58 pm |

        Do you have a link to the scientific method handy?

        I tend to start with http://plato.stanford.edu/entries/newton-principia/ — but apparently Isaac Newton isn’t good enough for you.

        Also, what is wrong with asking full disclosure of advocates in dialogues?

        We know Dr. Dolan’s credentials, and it’s easy to look up his publication record. David Springer went and did that for insinuation and smear. Why don’t you volunteer yours, rather than insinuate and smear?

        Aren’t you proud of your work and your ties?

        Why hide them?

      • David L. Hagen

        Bart R
        Professional scientists address the evidence. They do not attack the person. See:

        The Royal Society’s motto ‘Nullius in verba’ roughly translates as ‘take nobody’s word for it’. It is an expression of the determination of Fellows to withstand the domination of authority and to verify all statements by an appeal to facts determined by experiment.

        I see you are still hiding behind an anonymous name while making insinuations while I use my name. If you would but read, I summarized my background for Climate Etc. and have my professional overview posted on Linkedin.. Will you step up and do likewise?

      • Bart R, the skeptics are all about Newton’s rule one for reasoning from Principa. You are not really supporting your argument. I doubt you have ever read it or you would know that.

      • David L. Hagen

        Jacob et al.
        For those seriously seeking to understand the issues, I recommend carefully reading Lloyds of London “Sustainable Energy Security”

        Business can not rely on traditional energy sources
        Surging energy consumption, constraint on conventional fuel production and international recognition of the impact of carbon dioxide on the climate means businesses need to adapt to a new low carbon world.

        Growing role of China and Asian economies
        The importance of these markets to global energy security is growing. Their economic development is the engine of demand growth for energy. Their energy security policies are also driving investment in clean energy technologies.

        Global oil supply crunch
        International oil prices are likely to rise in the short to mid-term due to the costs of producing additional barrels from difficult environments.

        Those who specialize in evaluating and managing risk are the most concerned about availability of fuel, (NOT “energy”).
        Take warning and prepare!

    • David Springer

      David,

      I’m well aware of oil price and recessions going hand in glove all through the 20th century after WWII. In fact I’ve posted before that OPEC just raises oil price until it triggers a recession which then decreases demand for oil because of idled industry then they drop the price long enough to get demand going again. Every time the US does something along the lines of alternatives to foreign oil, efforts which greatly accelerate when fuel is expensive, OPEC drops the price long enough so those efforts are abandoned because the alternatives become too costly to compete.

      So I’d say the cause and effect isn’t quite as simple and there’s a fair amount of pressure to use less fuel generated in a recession and prices aren’t really fair market prices but are rather controlled by illegal price fixing by the OPEC cartel. In any other market OPEC would be prosecuted for breaking internation trade laws banning collusion but for some reason no one has the nads to go after them. I suspect that reason may be a Catch-22 situation where going after them would disrupt supply and create an intolerable situation of not having enough oil to keep the trains running on time, so to speak. I would dearly love to see how global politics would change if the US became energy independent. Europe would probably leave NATO and become an Arab colonial possession. What delicious irony that would be. I suspect they’re headed towards Sharia rule in any case…

      • David L. Hagen

        David Springer
        Re: “abandoned because the alternatives become too costly to compete.”
        So we need to develop alternatives so cheap that OPEC cannot drop the price far enough to compete!
        The impending global challenge is now that OPEC and NonOPEC together will not be able to keep up with demand. “Saudi production is flat out. Where you send it is a matter of where you make the best profit.”
        US Reliance on Saudi Arabia is growing.
        See: Oil: The 75 Dollar Floor

        The basics of world oil have changed, even in the 4 years since 2008: neither further price growth beyond $125 a barrel for West Texas Intermediate (WTI), nor a crash below about $60 to $75 a barrel for WTI are realistically possible . . .
        in the US, natural gas is now priced around $20 per barrel equivalent; the cheapest coal in the US is priced at $1.60 per barrel equivalent;

        Oil Nations’ Budgets to Put Floor Under Oil Price

        Rising government spending in many of these countries means they can’t afford for prices to slip much below $100 a barrel, analysts say.

        At least until other supplies are developed sufficient to break through these political “floors”.

        There is little to “fear” from very high growth rate climate scenarios – until abundant transport fuels are developed.

  34. Isn’t Oilprice.com a home to peak oil nutters? And the guy being interviewed wants the government to set prices for all energy according to ‘external costs?’ Good God! That’s just what we need – the end of the market economy, and the rule of the bureaucrats.

    • Who denies peak oil anymore?

      • lolwot

        It’s not a matter of “denying peak oil”.

        With complete interchangeability between oil, coal and natural gas based on currently available technologies, it is a matter of denying peak oil’s relevance”.

        There are enough optimistically estimated fossil fuel resources on our planet to last us around 300 years at present consumption rates, or 150+ years at anticipated future rates.

        WEC 2010 estimates this to be around 85% of ALL the fossil fuel resources that were EVER on our planet (i.e. we have “used up” 15% of the total to date).

        You can relax, lolwot.

        No point being a “scaredy-cat”.

        Max

      • Yea Max, Switzerland has so much fossil fuel to exploit. For every mountain peak in the Alps, I am certain that we can remove it and find a lode of coal to gather.

      • David L. Hagen

        manacker
        Please study the RATES of:
        oil depletion ~ 4-5% ( ~ 3% to 10%);
        transition to alternative fuels;
        transition to efficient and/or electric vehicles.
        See research by Mikael Hook on Depletion and Decline Curve Analysis in Crude Oil Production.
        The critical issue is ARE we developing alternative fuels etc. sufficient to avoid major declines in fuel and consequently in our economies. Robert Hirsch’s carefully reasoned evidence and models show that we are not. Consequently we will experience major declines ~ 40% in economies before being able to transition.
        Please study carefully this vitally important issue of RATES of transition.

    • David Springer

      Maybe. He might even know what a non-descript economist he’s become since joining the environmentalist whackos 20-some years ago.

    • David L. Hagen

      MarkB
      Re: “peak oil nutters”
      By geology, physics, and logic, production from a finite resource must peak and then decline in production. Please study the historical evidence shown by economist James Hamilton etc. See:

      Oil Prices, Exhaustible Resources, and Economic Growth. This paper explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed. I document that a key feature of the growth in production has been exploitation of new geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. The economic dislocations that historically followed temporary oil supply disruptions are reviewed, and the possible implications of that experience for what the transition era could look like are explored.

      PS You earned an F for ad hom.

      • David L. Hagen

        One of the most prevalent “new sources” for motor fuel and petrochemical feedstocks (naphtha, etc,) is coal (actually not “new” at all).

        South Africa (SASOL) has been using this process for decades.

        And there is a lot of coal still out there.

        Max

      • Chief Hydrologist

        It was based on a process developed by Nazi scientists in WWII.

      • “And there is a lot of coal still out there”

        Yes, just as long as there are mountain-tops to remove in West Virginia, there is plenty of coal left to exploit.

        And Switzerland has got so much coal, it makes you want to cry.

      • Chief and Webby

        Actually, the Fischer-Tropsch process was discovered and developed prior to Nazi Germany (see Wiki):

        http://en.wikipedia.org/wiki/Fischer%E2%80%93Tropsch_process#Sasol

        Since the invention of the original process by Franz Fischer and Hans Tropsch, working at the Kaiser-Wilhelm-Institut for Chemistry in the 1920s, many refinements and adjustments have been made. The term “Fischer–Tropsch” now applies to a wide variety of similar processes (Fischer–Tropsch synthesis or Fischer–Tropsch chemistry). Fischer and Tropsch filed a number of patents, e.g., U.S. Patent 1,746,464, applied 1926, published 1930. It was commercialized by Brabag in Germany in 1936. Being petroleum-poor but coal-rich, Germany used the Fischer–Tropsch process during World War II to produce ersatz fuels. Fischer–Tropsch production accounted for an estimated 9% of German war production of fuels and 25% of the automobile fuel.

        Today SASOL in South Africa uses it extensively (also from Wiki):

        The largest scale implementation of Fischer–Tropsch technology are in a series of plants operated by Sasol in South Africa, a country with large coal reserves, but little oil. The first commercial plant opening in 1952, 40 miles south of Johannesburg. Sasol uses coal and now natural gas as feedstocks and produces a variety of synthetic petroleum products, including most of the country’s diesel fuel.

        And, Webby, Switzerland DOES have some (very limited) coal reserves. These are old low-grade mines that were reactivated during WWII, when Switzerland was totally surrounded by Nazi Germany/Austria , Nazi ally Italy and Nazi occupied France. But these were shut down in 1947. Switzerland hardly uses any coal today.

        Just to clear things up.

        Max

      • Chief Hydrologist

        We don’t got mountains in central Queensland – but we sure as heck got coal out of the kazoo.

        Does he think it clever? What a moron.

        You can have ome of our coal Max – no problemo. We are gearing up to double coal exports in the next ten years. As well as to increase gas export 5 fold.

      • “And, Webby, Switzerland DOES have some (very limited) coal reserves.”

        Just like Switzerland has salt mines, but so what? Eventually every country will have to deal with being a massive net importer of fossil fuel (leading with liquids) until the last country is standing.

      • Chief

        You’re right. Keep those coal mines booming. The world needs your energy (especially energy-hungry China).

        [Just keep the politicians out of the act - if you can.]

        Webby

        For some reason I’m not panicking after your last dire warning. I’m more worried about politicians causing power shortages and blackouts with misguided policy decisions than I am of running out of fossil fuels any time in the foreseeable future.

        But in Switzerland we always have the comfort of knowing that the French (across the Rhine and Jura Mountains) are merrily expanding their nuclear power generation, while nations all around France are frozen in post-Fukushima hysteria or Kyoto-inspired panic.

        Max

      • And Japan seems to have gotten over its Fukushima fright. They were distilling pine trees for Zero fuel by the end of WWII. No coal, no oil, what they gonna do?

        Besides try to build a Greater Co-Prosperity Sphere?
        ===========

      • kim said:

        “And Japan seems to have gotten over its Fukushima fright. They were distilling pine trees … “

        Yea, those bonzai trees are veritable gushers aren’t they?

        What a sap.

      • Allemagne’s error echoing Bonaparte’s was all about Caucasian fossils.
        ====================

      • Those who do not understand Peak Pine Tree and doomed to repeat it.
        ===========

      • Either we run out of fossil fuels or the Earth literally burns.

      • lolwot

        When you write such silly stuff as the earth will “literally burn” how do you think others view your thoughts?

      • They obviously want to suppress them from being mentioned. So in the spirit of debate I’ve taken to making them more and stronger.

  35. What Mr Dolan fails to mention and that all to few understand is that the so called $4 billion/yr subsidy is a tax law provision that allows producers of extractable resources to treat depletion in the same manner as businesses depreciate physical assets over their useful lives. This depletion allowance is available to extractors of minerals, oil and gas, and timber resources.

    The idea that the depletion allowance is a subsidy is a myth promoted by environmentalists and green energy promotors who cannot exist without massive subsidies and grants.

    Oil companies are probably the most highly taxed industry in the US, both in terms of tax rates and dollars paid. Their profits are massive in terms of dollars earned, but rarely exceed 10% of net profits. The reason for this is easily understood. Oil discovery, extraction, marketing and conversion into useful products is the most capital intensive business on our planet. Moreover, the business risks assumed by oil businesses are second to none.

    Disclaimer, I am a retired lawyer and my only connection with oil companies has been as a shareholder from time to time.

    • I will gladly trade the 4 billion oil “tax breaks” for the hundreds of billions spent on useless renewables. Let’s, by all means, abolish both.

      • jacobdress

        An even better idea than your suggestion of just gouging the oil and gas companies by eliminating “depletion allowances” would be to roll this out to all industries: i.e. do away with “depreciation” write-offs (same as oil company “depletion allowances”) across the board.

        Just think of the tax revenues that would flow in – at least until all the companies (with their millions of direct and indirect jobs for Americans) left the USA.

        But I do agree with you on eliminating the billions of taxpayer dollars being thrown away on such “renewable” losers as mandated corn-ethanol or Solyndra, etc.

        Max

      • “But I do agree with you on eliminating the billions of taxpayer dollars being thrown away on such “renewable” losers as mandated corn-ethanol or Solyndra, etc.

        Max”

        I didn’t realize that the Swiss pay taxes and can vote in the USA. Who knew?

        BTW, ethanol is a side-effect of the liquid fuels crisis that the world faces. Until this shakes out and we establish a set of robust renewable and alternative energy sources to draw from, we will predictably misfire on occasion. That’s the way that R&D and innovation has always worked.

  36. Besides, we already have carbon taxes, so, probably, the externalities are already paid for.
    In the US there is a gasoline tax; I don’t know what other carbon taxes exist there.
    In Europe there are gasoline taxes above 100% – gas is 8-10 $/gallon in most countries. There probably are also coal and gas taxes.
    There is also the new specific carbon tax (tradeable carbon permits) in Europe, not that it has any effect.
    No amount of carbon taxes will satisfy the geenies, unless all coal, oil and gas is totally banned.
    Externalities are just a pretext, expressed in fancy economic jargon.

    • Jacob

      Yes.

      Unfortunately, many European countries have implemented a “carbon tax” – usually on all fossil fuels, except for those used for transportation (gasoline diesel, etc.), which already have a very high fuel tax (originally intended as a “road tax”).

      In Switzerland, this is currently CHF36/ton of CO2 (0.92CHF = 1 USD).

      Max

  37. Externalities !
    What about the externalities of wind mills? What about bird chopping ? Killing protected birds is a crime, why aren’t windmill operators prosecuted?
    What about landscape visual and audio pollution? Who pays?
    What about roads cut through virgin forests and hill tops for wind mills? What about windmills polluting national parks (at least in Denmark)?
    Or the environmental impact of thousands of miles of transmission lines, if they are ever erected?
    I’m glad Mr Dolan mentioned externalities.

    • “What about roads cut through virgin forests and hill tops for wind mills? “

      There aren’t any hill tops left, buddy. Didn’t you know that they were all removed to get at the coal?
      Get over it.

      • Webby

        No “hill tops”?

        Huh?

        You ever been to West Virginia?

        It’s got so many hills that if you flattened it out with a rolling pin, it would be bigger than Texas.

        Mountain top mining in USA represents 10% of total coal. Big deal.

        http://www.reuters.com/article/2010/01/07/energy-coal-mountaintop-idUSN0719066720100107

        If voters want this stopped, all they have to do is let their elected representatives know.

        Otherwise, if the voters want to keep it, that’s the way democratic societies work.

        You got a better idea?

        Max

      • Webby

        Speaking of the “green, rolling hills of West Virginia”:

      • Ever wonder why this is so? Because high quality, easily accessible coal is becoming a scarce resource. People will go through extraordinary means to exploit it.

        As a taxpayer, I wouldn’t mind placing wind turbines in the Alps. It’s not as if they can’t be removed. But start lopping the peaks off for short-term gain? That is some deranged thinking.

        Alas that is the current status until we come up with alternatives.

        It is fun watching Max Manacker struggle to get out of his trick-box. The unctuous liar uses fossil fuel depletion numbers on the one hand to argue against unrestrained global warming, but then flips his hand and says that we have no issues with a resource constrained energy economy. That is a trick-box and Max is stuck in no-man’s land with only lies to carry on the FUD.

      • Webby, me boy

        You have got it all ass-backward again. There’s no “trick box” (it’s a figment of your over-active imagination).

        Let’s ignore your juvenile use of ad hom expressions and silly analogies.

        And then, let’s get some fact straight that you apparently missed out on

        First, fossil fuel resources ARE finite. WEC 2010 tells us we have used up 15% of ALL the fossil fuel resources that were EVER on our planet (leaving 85% still to go). Other estimates are less optimistic, but let’s stick with the WEC estimates.

        The first 15% got us from 280 to 392 ppmv CO2 in the atmosphere, so the remaining 85% will get us to around 1.000 ppmv.

        That’s it, Webby – “ain’t no’ mo’” out there.

        That is the absolute, asymptotical, maximum-ever-possible, “resource restrained” CO2 level from human emissions. (More pessimistic estimates of remaining reserves would result is a lower figure, of course.)

        At current consumption rates, the remaining fossil fuels would last us 300 years. But the consumption rate will probably increase as population and car ownership does, but then level off as fossil fuels gradually get replaced for low added-value end uses (electrical power and transportation) by something new. But nobody knows how this will develop.

        Second, a “resource restrained energy economy” is what we already have globally, Webby. I do not deny this at all. ALL finite resources in this world (including energy sources) are eventually “restrained”, locally, regionally or globally. But new ones seem to keep coming up (nuclear fission, improved nuclear fast-breeder technology using thorium, nuclear fusion?, etc.)

        Unlike you, Webby, I am convinced that human ingenuity and entrepreneurship will continue to surprise us with new technologies we haven’t even dreamed of today, to keep the “lights from going out” some day in the far distant future when fossil fuel reserves start to peter out..

        Max

      • Unlike you Manacker, I do have a published record of suggesting that human ingenuity and entrepreneurship will get us out of this mess. All you have to do is scan through the second half of The Oil Conundrum.

        What you have OTOH, in your neo-Cornucopian outlook, is a trick-box with fossil fuel resource constraints on every end. I will watch as you continue to wriggle and dance to get out of the box.

      • Chief Hydrologist

        Publishing on a loser blog that no one reads except one other nut job blogging as the professor?

        He is a total wack job with the credibility of an attack smurf.

        ‘Someone who is crazy and/or has lost their mind and acts like a damn lunatic. Someone you should avoid at all costs as they may be a harm to yourself or others.

        Let’s cross the street. We don’t want to walk next to that wack job on the corner who’s walking in circles and talking to himself.’ Urban Dictionary

        Is this an example of the best the AGW space cadets can do? You would think it would be an embarrassment to anyone who had any sense or understanding at all.

        Did you know for instance that the radiative imbalance at TOA is caused by molecules absorbing energy in the infrared and emitting photons ‘smeared’ across the frequency spectrum? No? I’m not surprised.

        His power laws for carbon and temperature are just monstrous idiocies. The carbon cycle has only one process did you know? Diffusion from the atmosphere to the oceans? No? I’m not surprised. Energy moves from the atmosphere to the oceans by diffusion? Energy is then transported to the deep ocean by ‘effective diffusion’? The latter is a process that stands in for convection and turbulent mixing and we can graph it with a power law. You don’t think so? I’m not surprised.

        And yet somehow we are opposed to science and technology because – well I have yet to figure out why. I have linked to technologies from General Atomics to Carbon Engineering and Eric Lerner. I have actually invested in – and lost money on – alternative energy. C’est le vie.

        In any sense of contributing meaningfully to the discourse the guy is a wack job. Just yesterday he quoted a sentence from Kyle Swanson at realclimate that numbnut had brought into the discussion – and used it as rationale to dismiss both the lack of current warming and the absence of dynamical complexity in climate. The subject of the post of course was a paper called ‘Has the climate recently shifted?’ It followed from a paper called ‘A new dynamical mechanism for major climate shifts.’ So these papers and the post were saying precisely the opposite of what he claimed. He had not only not read the papers – he doesn’t read or reference anything at all ever – he had not even read the post before waxing lyrically stupid. The depth of ignorance is astonishing.

      • “ChiefH : Is this an example of the best the AGW space cadets can do?”

        In case you haven’t noticed, this discussion is not about AGW.

        BTW, since you have never done any real research in your life, it looks like you can’t figure out that creating abstractions and working out models of varying complexity is a standard scientific approach to advancing knowledge and understanding.

      • Chief Hydrologist

        I was responding your comment. What don’t care to be reminded of just how stupid you are? Just how spectacularly misguided you are?

        You have brought up this nonsense before – I do real models that have some physical veracity. I run models every day. You do moronic nonsense. That’s the difference.

      • Chief Hydrologist

        You mean as in you are at the simple minded end? Supid little power laws that have not a ghost of a chance to be even remotely correct? It is all such idiocy. It is no surprise at all that no one rational defends you. You can’t even get the AGW meme right. Face it – you are a total wack job and an embarrassment to the AGW cause.

      • Chief, You have never shown any alacrity with models. The fact that you claim to do this in your regular work is a worthless claim. You may have heard the phrase that, “On the net, everyone is a dog”.

        So until you can show otherwise you are a dingo. It doesn’t matter what you say about me, because I have shown what I can do, and other people use my stuff and have applied it.

        So keep on getting huffy, as it doesn’t bother me one iota.

        “You can’t even get the AGW meme right”

        I am sorry, I am not an insider to the village. What is the “AGW meme”?

      • Chief Hydrologist

        I use physically realistic models for rainfall and runoff, hydrogeology, water quality and hydraulics and river modelling. Every day. Not silly little power rules for ocean heat and carbon that are intrinsically unverifiable, conceptually inadequate and poorly framed.

        That you dismiss my abilities as something to do with dogs on the internet is of no interest. What counts is being intellectually honest, reading widely, creatively understanding. Not repeating nonsense and insulting everyone. You are a failure on any count that matters.

      • Chief, You are not doing research, you are doing civil engineering.

      • Chief Hydrologist

        webnutcolonoscope – you are not doing climate research – you are doing moronic power rules and making comments that are at the same time absurd, opinionated and abusive. I will keep calling you to account. I will also keep calling you a moron while you continue with your abusive and absurd ways. If you ever change your spots – I will keep my opinions to myself.

        Reversion to the mean? The children of tall parents are likely to be shorter. So what? If the temperature was higher yesterday if is likely to be lower tomorrow? Quite likely in some sense – but overall not a meme that can tell you very much. Maximum entropy? Not applicable in a system that is not in equilibrium. Statistical mechanics equivalent to gas diffusion or het diffusion? There is no single climate state that emerges after a long enough period. If you read enough you would realise that there are multiple equilibria. Overall. F-

      • Chief believes that much of the warming of AGW has to do with the high flame temperature of the fossil fuel when it is combusted.

        I kid you not.

        I know enough to not put effort into analyzing noisy time series statistics, yet Chief only needs to survey the data to assert the world will cool for possibly three decades.

        Just Google this site and you can find over 30 links to Chief asserting this 3 decade cooling prediction.

        Some scientist, Chief is more like a fortune teller.

      • Chief Hydrologist

        ‘Natural, large-scale climate patterns like the PDO and El Niño-La Niña are superimposed on global warming caused by increasing concentrations of greenhouse gases and landscape changes like deforestation. According to Josh Willis, JPL oceanographer and climate scientist, “These natural climate phenomena can sometimes hide global warming caused by human activities. Or they can have the opposite effect of accentuating it.” http://earthobservatory.nasa.gov/IOTD/view.php?id=8703

        You confuse as well the difference between initial conditions and ongoing changes in the mean free photons parh in the atmosphere.

        You are a liar, a fraud and a fool.

    • David Springer

      Heh. What about the toxic wasteland in China from the rare earth mining there which are needed for permanent magnets that go into high efficiency electric motors in cars and high efficiency generators in wind turbines? Who pays for the cleanup in China? Who pays for the pollution generated by Chinese and Indian dirty coal plants where industry is increasingly moving becaues the cost of doing energy-itensive business in western nations is too high but demand for the products of those businesses in the west just keeps rising?

      The adverse unintended consquences of environmentalist whackos like Edwin Dolan are legion. Unfortunately we can’t jail them for crimes against humanity in undeveloped countries all we can do is expose them for the imbeciles they are.

  38. The author deems himself a libertarian? But then he seeks to factor into the cost oil any battle that may be fought with a country with oil reserves.

    How about YouTube? What about the riots and violence that arose from videos posted? Should advertisers on YouTube need to pay extra to compensate victims?

    It’s no longer a price mechanism whenever the Public has the ability to make claims on the transaction that have a tangential connection. You, my neighbor, buying a car, means more noise for me, more chances you may runover or accidentally poison my dog, etc.

    What does society do: derive expectations on each possible contingency, tax and redistribute?? No – we learn how to plot our neighborhoods to take into account our automobiles, we build sidewalks for the dog to walk on, etc.

    Like speech, more activity dilutes the harm from negative activity. The folly is in thinking there is some authority can accurately factor the cost to society for all goods, or that anyone would consider this the “fair” price.

    • Those riots and violence were a planned anniversary al-Qaeda operation. A posted video was simply one executive’s ponied up excuse for the abject failure of his foreign policy. I suspect ‘free speech’ was an innocent casualty of his droning on with the lies. I mean, I hope it was.

      Two weeks after he had to know that the attacks were pre-planned it’s ‘The future must not belong to those who exercise their right of free speech’.(paraphrased)
      ===============

  39. The bottom line is: Mr Dolan is right.
    End now all tax breaks, all subsidies, all mandates.
    Good luck with that.

  40. MattStat/MatthewRMarler

    If there’s one thing we can’t afford, it’s “affordable energy.”

    One of the things that we don’t know now is how much solar, wind and biofuels will cost to manufacture 20 years from now. I am big on what we don’t know now that we will know much better 20 years from now. In recent years, multiple technologies have been developed, and overall costs of production have been reduced. If the costs of production are made to decline sufficiently, then the costs of the products will be driven by competitive bidding, not just by the cost of production, as with fossil fuels.

    There was a time when he might have said: if there is one thing we can’t afford, it’s for everyone to have a personal computer. It was true at the time. Or, if there’s one thing we can’t afford, it’s to put jet engines on all our aircraft. That was true at the time.

    Energy won’t ever be “cheap”: it will be priced by the market. However, it can with diverse investment be cheaper than what it is now. The Bush Administration appropriately (in my opinion) expanded oil and gas development; they also expanded support of solar, wind and biofuels R&D, and that was appropriate as well. The Obama administration went overboard, but that isn’t proof that the level of support provided by Bush was wrong. I doubt that the exactly optimal amount of support is known, but continued development of the alternatives looks worthwhile to me.

    I track the cost of PV power in my neighborhood. Now, at the unsubsidized price, if I wanted to air-condition my home then PV panels would be a less-costly alternative than electricity from the grid — this is CA were other poor policies have driven up the cost of electricity, but the cost of PV panels is declining, and it seems that this calculation works some places in AZ as well. A few schools in CA and AZ have installed roof-mounted PV panels to reduce the cost of their electricity. This is a rather specialized application in a unique environment, but I expect that solar power will expand out of its niche in the future.

    • Matt,

      Just want to say thank you. If it wasn’t for California buying wind power we generate at premium rates, we might not have made it to being the 2nd biggest generator among utility companies in the country.

      • MattStat/MatthewRMarler

        timg56, don’t thank me, thank the Californians who disagree with me. I think we should develop our oil and gas and scrap AB32. However, I respect the possibility that electricity from wind may eventually be competitive without subsidies: best wishes.

      • Matt

        I think the future low-cost source of energy will be neither wind nor solar – but will be something new that “comes out of left field” (a “black swan”).

        Solar will continue to be a local solution for domestic use (but will not become a major factor). Nor will wind.

        Both have inherent limitations that even improved new technology cannot change = they only operate 20-30% of the time.

        The only “black swan” that could overcome this basic limitation of both wind and solar would be a cheap and efficient method to store electrical energy.

        Stay tuned…

        Max

      • I was being facious.

        I remember someone from LA Water & Power speaking at a conference last year about the impact of the new mandates. Basically it was going to cost the utility to replace exisiting generation sources at a higher cost. In other words, they had sufficient generation capacity, but would have to acquire more just to meet the mandate. All of the PUDS up in Washington are facing the same problem. They have sufficient, inexpensive hydro to meet both current and future forecasted demand, but the renewables law is requiring them to replace a portion of that supply with far more expensive wind power. Now there is the brilliance of government at work.

      • MattStat/MatthewRMarler

        manacker: The only “black swan” that could overcome this basic limitation of both wind and solar would be a cheap and efficient method to store electrical energy.

        Hence the liquid fuel from hydrolysis option, and all the battery work.

      • MattStat/MatthewRMarler

        timg56: Now there is the brilliance of government at work.

        In this case, the “government” is the “people”, as we had an initiative to repeal AB32 and AB32 was not repealed. Those mandates, the “renewable portfolio standard”, are popular. When the electricity rates rise, Californians will blame Texas, the utilities, and the fossil fuel industries.

        As the rest of the US develops its natural gas and other fossil fuels, and as California electricity rates rise faster than everywhere else, I hope that the voters there look at CA as an example not to follow.

    • David Springer

      I haven’t priced anything in a couple of years re solar power. Grid-tie and net-metering is the only practical way to go unless I want to be the proud owner and maintainer of dozens of lead-acid batteries (no thanks) but my electric co-op only buys juice at a third the price they sell it for and the cost of the equipment, including the panels, makes it a money losing proposition unless I’m paying about $0.25/kWh from the co-op. I can probably produce my own including amortization of equipment for about $0.20/kWh. I can buy all I want off the grid for $0.11/kWh. South Central Texas is an ideal location for solar too. Lots of sunshine year round.

      • MattStat/MatthewRMarler

        I think I’ll live long enough to see the cost of generating electricity fall to under $0.02/kwh. In a number of large installations that I read about recently the cost was between $0.06 and $0.09; but that ignored maintenance costs, which won’t be known until a lot of these installations have been running for a decade or so.

      • Matt,

        I haven’t checked out the current utility scale PV prices per kwh that our ISO’s are signing recently, but if your interested in what Southern California Edison’s customers paid for the PV I do have some data for 2012:

        As an FYI a 5.22 Kw AC rated system will generate about 9400 kwh during a normal year in Northern CA when the panels are south facing with a 20 degree tilt. The $/Ac watt noted below is before any rebates or tax credits.

        A) Residential Market for PV
        SCE territory 2012 (Host ownership)
        (per Watt AC rating) n=1272 applications-
        Size $/watt
        1Kw = 10.11
        2Kw = 8.45
        3Kw = 7.74
        4Kw = 6.86
        5Kw = 6.43
        6Kw = 5.89
        7Kw = 6.12
        8Kw = 6.18
        10Kw = 6.30
        Data from –

        http://www.californiasolarstatistics.ca.gov/reports/cost_vs_system_size/

        A coveat is noted for third party installations-
        1Costs for systems owned by third parties versus host customers ($/watt) cannot be directly compared. See the FAQ page for details.
        “Reported System Costs ($/watt)

        The current $/watt data available for California Solar Initiative projects present difficulties when comparing host customer-owned and third-party-owned systems (e.g. leases or power purchase agreements (PPAs)). The reported costs for host customer-owned systems are simple, as they reflect the purchase price inclusive of parts, labor, permitting fees, overhead, and profit. Third-party-owned systems, on the other hand, are reported in a variety of ways, and may also capture costs for additional services.

        There are at least three different ways third-party owners are reporting their system costs: …..”

        Given the cavat noted above this is what the data looks for for SCE for Third Party installations this year-

        B) SCE territory 2012- “Third Party” system ownership
        (per Watt AC rating) n=3687 applications
        Size $/watt
        1Kw = 7.61
        2Kw = 7.44
        3Kw = 6.42
        4Kw = 6.35
        5Kw = 6.47
        6Kw = 6.50
        7Kw = 6.39
        8Kw = 6.33
        10Kw = 6.29

      • MattStat/MatthewRMarler

        kakatoa, thanks for the post.

  41. MattStat/MatthewRMarler

    I’m afraid there is going to be continued gridlock as long as the GOP controls the House. In the Senate, there are at least a few people in both parties who are willing to meet behind the scenes and talk compromise, but not in the House, not right now, anyway.

    I disagree with that. If the Republicans hold the House and take the Senate, and if Romney is elected president, then I think it likely that many restrictions, subsidies and mandates on energy development will be removed, and that alone will be a net gain for the US.

    On the whole, I thought that it was worthwhile to read the interview. Thank you again Prof. Curry.

  42. Climate Weenie

    Probably missed in the macro measures of efficiency is personal consumption.

    The US is a large country, but also wealthy.

    When we travel to see grandma ( or Vegas, or a presidential flight to catch a broadway musical ) we use energy not to produce, but because we can afford it for pleasure or entertainment.

    When we jack up the AC or play interminable hours of video games, we use the energy because we can afford to, not for productive gains.

    Business efficiency is probably higher than noted.

    Personal energy use because we have a large country with a continental climate is a big factor.

  43. Coming next to a climate blog near you:

    The Myth of Affordable Renewable Energy

    Ehhh…probably not. There’s no way to get government funding for your research from taxing other people’s income in it.

  44. I’m an optimist: I think any goods that are rivalrous, scarce and practicably excludable have a mechanism in the Market for individual exchanges between buyers and sellers to inform the true price level by the Law of Supply and Demand accurately.

    Not perhaps perfectly, as that would depend on perfect knowledge, no barriers to entry or exit, so many buyers and sellers that no one party could significantly influence price, and so on.. but accurately.

    If government has a role in the Market, it’s right role is to uphold the mechanisms that uphold the Fair and otherwise Free Market, for instance by standards of weights and measures, maintaining a ready currency, and ensuring practices that avoid evasion of payment.

    Only where rivalry, scarcity or excludability fail should we admit the Market is not the most fit means to efficiently allocate resources. And if they’re not scarce and rivalrous, why should we let the government meddle at all?

    • Bart R

      So your idea would be to make food “rivalrous, scarce and practicably excludable” in order to combat the wave of obesity in affluent nations, such as the USA.?

      (Lots of luck with that, Bart.)

      And how about the billions who are already at the edge of starvation?

      But wait! That’s no problem.

      The proceeds from the exorbitant UN-implemented “food tax” on the “rich nations” could be redistributed by the UN to the “poor nations” as food stamps.

      Let’s have a vote in the General Assembly on that!

      Max

      • manacker | October 23, 2012 at 7:42 am |

        Look, as you’re a European socialist, I get that there’s a lot about America you just don’t understand.

        Food is already rivalrous, scarce and practicably excludable in the Land of the Free; nobody “makes” it rivalrous — it’s simply a fact no two people can eat the same bite of apple pie; no one hopes for food to be scarce — there’s a limit to land available for agriculture and the number of fish in the sea is not infinite on any given day; if you think food isn’t practically excludable, you don’t understand what ‘No Trespassing’ signs and shotguns in the hands of farmers are for.

        Get off your socialist redistributionist confiscation jag; it is nothing like what I propose, and your narrowminded ongoing clinging to that framework only reveals how uninterested in understanding what’s being said you really are.

      • Bart R

        “European socialist”?

        Ha, ha!

        I do NOT believe in “social redistribution” at all.

        I think a carbon tax is silly (achieves nothing, as the Swiss example shows).

        Governments artificially making fossil fuels “expensive” in order to “stop global warming” is a ridiculous (socialistic) idea, which will not change our planet’s future climate one iota (as I demonstrated) and will harm the poorest nations and individuals the most.

        The same would hold true for food: a “calorie” tax to artificially make food expensive; this will not eliminate obesity in your country or mine, bur would only harm the poorest individuals, who already barely have enough to eat.

        Get it?

        Max

      • Bart,

        Where are getting a picture of food in the US being “rivalrous, scarce and practicably excludable” from?

        I can maybe see the rivalrous part, with government subsidized enthanol efforts competeing for grain supplies. Food is most certainly not scarce. (I have to admit not knowing what you mean by “excludable”.)

        Sure land that is available to support agriculture is not unlimited, in the theoritical sense. But from a practical standpoint we are taking land out of production, not looking to increase it here in the US.

        Whenever the discussion turns to world food supply, the first thing to remember is that ~ 50% of annual production is lost to spoilage. That is a statistic that makes it clear where one should start if they have supply concerns.

      • manacker | October 23, 2012 at 10:25 am |

        You’re in serious denial. An American can recognize a European socialist easily.

        Step 1) European? Check.
        Step 2) Demands something for nothing? Check.

        What the heck does anything Swiss have to do with the proposal on the table? Are all dividends of your Swiss example payed out to every Swiss shareholder per capita? No. It’s just another fuel tax. I call straw man.

        Governments artificially distorting the price in any way is just as disastrous. Any subsidy. Any favor. Any infrastructure bias. Any tax with unequal impact on the buying decision or unequal burden on some. Any failure to maintain so fair a market as practical.

        Well, the market sure ain’t anything like fair when it comes to using the carbon cycle, which is valuable and which you want to use without paying for it.

      • David L. Hagen

        Bart R
        Why are you still hiding in the shadows and avoiding public accountability? Come clean.
        See my response above to your unfounded accusations.

  45. Chief Hydrologist

    The sterility of a discussion on carbon taxes is the best reason to ignore the entire concept. Nowhere after more than 20 years are there costs for carbon that are more than window dressing for political posturing. Nowhere is it likely that costs will be imposed at all sufficient to force substitution of sources – other than is the fervid imaginings of the AGW space cadets.

    We would mcuh prefer pragmatic solutions.

    The old climate framework failed because it would have imposed substantial costs associated with climate mitigation policies on developed nations today in exchange for climate benefits far off in the future — benefits whose attributes, magnitude, timing, and distribution are not knowable with certainty. Since they risked slowing economic growth in many emerging economies, efforts to extend the Kyoto-style UNFCCC framework to developing nations predictably deadlocked as well.

    The new framework now emerging will succeed to the degree to which it prioritizes agreements that promise near-term economic, geopolitical, and environmental benefits to political economies around the world, while simultaneously reducing climate forcings, developing clean and affordable energy technologies, and improving societal resilience to climate impacts. This new approach recognizes that continually deadlocked international negotiations and failed domestic policy proposals bring no climate benefit at all. It accepts that only sustained effort to build momentum through politically feasible forms of action will lead to accelerated decarbonization.

    http://thebreakthrough.org/archive/climate_pragmatism_innovation

    As it happens – neglected decadal variability added to recent warming appeciably and demonstrably the planet is now experiencing a temperature hiatus likely to last another decade or three at least. Frankly – as a climate catastrophist in the sense of Rene Thom I think nothing is guaranteed after that. This puts the final nail in the coffin of Kyoto style efforts.

  46. Did anybody else watch the U.S. presidential debates and notice that not a single person, candidate, moderator or town hall questioner, said a word about globalclimatewarmingchange?

    • GaryM

      Obviously CAGW or global climate change was a taboo subject.

      Not a vote-getter in the USA this time, apparently.

      But, hey, they’re both talking about “drill, baby, drill” (but only one candidate really means it).

      Max

      • Tabu is right in a third rail sorta way, Max. The politicians have figured out that future direction of temperature is uncertain, and are simply avoiding committing themselves only to be made foolish, sooner or later.

        One sad thing, though, is that a prolonged break in either direction is likely to be seized upon in politically inappropriate ways. I’d much rather be describing the recent past, though, than the future. When will we ever learn?
        ==============

      • No Politician will ever favor rapid economic dislocation.
        Coal has taken a huge hit in the last 3 years in the US, substantially faster then any proposed climate legislation ever envisioned.

        If the ‘market’ is already achieving a preferred policy goal absent a policy then the argument for the need for a policy is fairly academic.

      • David Springer

        I don’t trust Romney to follow through. Talk is cheap. However I know from experience that Obama won’t fix the energy situation. There was only one Republican in the primary I trusted to fix the energy situation and that was Rick Perry. Rick knows politics, he knows how to unburden business from excessive cost, and he especially understands the oil industry. Romney and Obama are just parroting Perry and I’m afraid the parrots might literally be bird brains when it comes to energy policy.

      • MattStat/MatthewRMarler

        David Springer: There was only one Republican in the primary I trusted to fix the energy situation and that was Rick Perry.

        I prefer Romney as president and Perry as Secy of Energy (replacing Chu, whom I like) or Interior (replacing Salazar.) What Romney advocated in the debates was similar to what Bush carried out in his two terms. Obama and crew will almost certainly continue to try to choke off every form of fossil fuel in every way they can. As to “parrot”, humans can choose whom to parrot; in parroting Perry, Romney chose well. Thinking hypothetically, I can imagine Romney reading Perry’s speech back to him, and saying “That’s your assignment. Tell me what you need from me.”

    • Sure, fossil fuel depletion will hit everyone before climate change. That’s pretty obvious and why so much time was spent on energy prices and energy availability during the debates.

      You really ought to read Romney’s 2011 book where he describes peak oil over the course of a few pages.

  47. I would go with ending specific subsidies to fossil fuel (and anything else for that matter), but are there actually any? Most of what I’ve seen before described as fossil fuel subsidies are just general ones, that skewed enviros try and misrepresent as fossil ones.

    • What are your feelings on accelerated depletion and other tax expenditure scams that shift the tax burden from some specially favored few to the rest of us?

  48. Pingback: The Myth of Affordable Energy « pictocommunication

  49. Salby’s presentation I haven’t seen before:

  50. How about…

    The Myth of Affordable Food/Clothing/Housing/Transportation/Healthcare/etc.?

    Just more statist propaganda.

    Andrew

  51. From 1980 to 2010, the high-income countries in the OECD have increased their average energy efficiency by 55 percent. The United States has done a little better than that, increasing its energy efficiency by 81 percent over that period. That’s pretty remarkable, considering that we haven’t really had a policy environment that is supportive of efficiency.

    What I find “pretty remarkable” is that there’s absolutely no mention here of the energy star program. Perusing the Wiki page, I see in the first paragraph the following:

    Devices carrying the Energy Star service mark, such as computer products and peripherals, kitchen appliances, buildings and other products, generally use 20%–30% less energy than required by federal standards. [my bold]

    What standards? Is Wiki correct that there are federal standards for all these appliances? If so, I find it hard to reconcile this with “haven’t really had a policy environment that is supportive of efficiency.

    • Yes. Wiki is correct.

      The Energy Policy and Conservation Act of 1975 as amended.(Every few years it gets amended).

      Actual law here.

      http://www.law.cornell.edu/uscode/text/42/6295

      Some of the standards are low compared to what is generally available on the market today.

      Electricity costs money…people do look at the energy star label(all other things being equal) and manufacturer’s compete to have the best ratings.

      In addition the cheapest power plant is the one that doesn’t need to be built..so many utilities will offer incentives to replace less energy efficient appliances as a way to avoid having to build a new power plant.

      What we don’t have is some kind of ‘hard future standard’ that is beyond what is currently commercially available.

  52. Berényi Péter

    The second half of full-cost pricing is to include all of the nonmarket costs, what economists call the “external costs” or “externalities.”

    Now, that’s a can of worms. The first thing to note is that without a market there is no price and with no customers there is no market. Moreover, with no price there is no income, so no matter what your costs are, they can never be recovered. Such activity is called uneconomic and any kind of uneconomic activity is unsustainable in the long term (when credit finally runs out).

    To have customers you need a clear demand with purchasing power for the goods you bring to market. Therefore “nonmarket cost” is a contradictio in terminis and as such, should be forgotten fast.

    Purporting “externalities” as “external costs” in the absence of a well defined demand for said externality backed by sufficient purchasing power is plain silly.

    • A can of worms indeed. I would add that many of the people I see/read who bring up the topic of externalities also seem to have a pre-existing “environmentalist” political agenda. Put another way, they want their definitions of “externalities” to be the prevailing ones.

      It is, of course, their right to hold and express those opinions, but they so often tend to be shot through with subjective assessments which I find to be scientifically and economically illiterate, and frequently lacking in basic analytical numeracy.

      “Sustainability” arguments are often based on the assertion that economic growth is unsustainable because you cannot physically continue an exponential growth function indefinitely. Ignoring the point that exponential growth is possibly the single most important defining feature of Life itself, this falsely presupposes that per-capita consumption of physical resources must always increase with increasing “wealth”.

      Not so. For example, if a person is ‘wealthy’ enough to satisfy their needs, then they may well choose not to spend time and resources driving a car to work every day along an eight-lane highway. They might choose to read a book instead. Today, that book may no longer even physically exist because they can read books on the same device they use to watch TV or communicate with family&friends. I do not own a traditional TV, and I neither want, nor see the need to…

      I’m not an economist, but these kind of economic basics were taught to me in high school decades ago. Why are they so conspicuously lacking in arguments put forth by those with a “green” agenda.

      • You are describing the S-curve of technology life.

        http://en.wikipedia.org/wiki/Technology_life_cycle#S-curve.

      • But I understand the environmentalists are worried about the demands of the poor to consume as much as the rest of us, leading to increased demand for energy and resources. In effect all declining S-curves of the are replaced by new S-curves and the controlling factor is then population. Of course population is on an S-curve too. But then there is that increasing life expentancy to worry about….economists tell us that we need population to keep increasing in order for the young to pay for the ever increasing number of pensioners. The Japanese seem to be planning to avoid that by using robots :)

      • Michael Hart says: “I would add that many of the people I see/read who bring up the topic of externalities also seem to have a pre-existing “environmentalist” political agenda. Put another way, they want their definitions of “externalities” to be the prevailing ones.”

        Although this comment might to some degree to be aimed at me, I actually agree with it. It is certainly true, that as as a representative of that rare (but I hope not endangered) species “libertarian environmentalist” I see both sides of this. For example, it is clear that some people come to the debate with a socialist agenda, with the idea that we can only save the planet if we all live in cooperatives and share our toothbrushes, and so on. Others see the biggest externalities as harm to wildlife, harm to coral, harm to native cultures depending on which field they got their PhD in. We all have our biases.

        The same is very much true of the pre-existing biases of conservatives (whom I distinguish sharply from libertarians and classical liberals). They come to the table with an agenda that is mainly focused on preserving the existing order of things, whether that means defending the existing favorable policy environment for oil or automobiles or whatever against any attempts to impose full costs, or instead, defending existing social patterns, like the virtues of a suburban, auto-oriented culture. As a result, just as the left environmentalists are quick to exaggerate the economic importance of even the most subjective forms of externalities, the conservatives are dug in to deny everything–deny the science, and if you can’t do that, deny that there is any economic value to coral or bats or public health or whatever the left is worried about.

        To add to these value-laden biases, you are also right that there is a lot of pure economic and scientific illiteracy–monocausal claims that climate is entirely controlled by sunspots, or claims that we can extrapolate trends in energy consumption without regard to what happens to prices, and all that.

    • Externality is just a synonym for external costs. There’s nothing to “purport” in that. Claiming that those do not exist is naive beyond reason. Everybody can make a long list of cases where an economic activity causes damage to third parties without being compensated for. Often the number of those third parties is very large and each one of them suffers only a small damage while the total may still be large.

      External costs do most certainly exist and it’s most certainly a market failure when damage is caused to third parties without compensation paid by the one who has caused the damage.

      Having said all that it’s not always or perhaps even in most cases easy to correct this market failure in practice. While it’s usually easy to say that the damage is of some economic significance it may be very difficult to agree on the right valuation. Many different approaches have been used and they give often very different results. People may asked to tell how much they would be willing to pay to avoid the damage or comparisons may be made with similar situations where monetary transactions are really involved but, as stated above, the results diverge widely.

      The difficulty in determining the size of the external costs is often great even when the physical damage is well known. The situation is naturally even worse when the uncertainties or disagreements are large also concerning the physical damage caused.

      • David Springer

        If by external costs you mean like your worthless words here increase the bandwidth required to read this blog and thus drive up the cost of the internet for all readers of it then I agree.

      • David Springer

        Which of course plays directly to the point about one person’s external costs are another person’s external benefit. Pekka undoubtedly thinks his words are worth the external cost to others whereas I think his writing is intellectual pollution and he should be paying a special tax in compensation for making the rest of us spend the bandwidth on them.

        Granted this is a value judgement but it makes the point that these so-called external costs are mostly value judgements and there isn’t likely to be any consensus on those values.

        For instance the purchasers of electric vehicles indirectly contribute to horrific growing toxic wasteland in China where the rare earths in the wheel motor permanent magnets are mined and refined. Should those consumers be made to pay for that? That’s a value judgement. Another for instance is the giant trash pile floating around the Pacific which is all the junk that got washed into the ocean in the recent tsunami which hit Japan not to mention the radioactivity also in the ocean from the same Tsunami/earthquake that caused the breakdown of the Fukushima reactors. How do we measure the external cost of that and who should pay for it? Would there ever be any consensus? Are there any international laws which cover these situations?

        In the end these externalities which Edwin Dimbulb Dolan speaks of are manufactured in support of his environmentalist whacko agenda. Dolan offers nothing of merit and is immenently ignorable. Impact factor equals zero, in other words. Perhaps the blog owner should take that into consideration in the future.

      • Being allowed to cause damage to third parties without paying for that might be called a benefit, but that does not mean that the sum would be correct when third parties suffer losses without being compensated for. In such cases the overall economics is worse off than the markets tell.

      • Berényi Péter

        @Pekka Pirilä | October 25, 2012 at 8:48 am |
        “Being allowed to cause damage to third parties without paying for that might be called a benefit, but that does not mean that the sum would be correct when third parties suffer losses without being compensated for.”

        Muddy. First of all one should make a clear distinction between concepts of “external damage” and “external cost”. The first one can’t be converted into the second one until
        1. a clear, undisputed demand emerges to the entity being damaged
        2. with sufficient purchasing power to pay for preventing said damage
        3. a negotiation process is brought to its completion in which price is set

        For example. I can still remember the time when there were horses in use in my city to do part of the transportation work. That meant, of course, lots of horse manure all over the pavement which supported a huge urban sparrow population. When horse carts finally got phased out and were replaced by trucks completely, that did a terrible damage to said sparrow population, reducing it to a small fraction of its previous size. Was there a demand to maintain horse manure supply? One can say, there was, at least from sparrows, and a noisy demand at that, until mass starvation took them. Did sparrows have purhasing power for the goods just denied to them? Absolutely not.

        Now, in fact there was no movement among human inhabitants of this city to “save the sparrows”, but one can imagine an alternative history, in which such a mass movement emerges (and is tolerated, even supported by the communist administration of the time). A negotiation process would have followed, in which possible alternative ways to save the sparrows could have been weighted, like subsidies for horse cart transportation (which became absolutely uneconomic by that time), or buckets of horse manure purchesed by the city put all along sidewalks or starting an R+D process to develop an alternative bird food and the like.

        Any and all of these solutions would have cost money, presumably to be payed by the general public. Which could have given rise to articulation of other interest groups, opposed to rising costs, sparrow droppings all over, early mornig chatter in the trees, etc.

        To be sure, a complex negotiation process would have followed, even under an authoritarian government, because the division could have penetrated into the governing bodies themselves.

        But one thing is indisputable. No price tag could have been attached to the damage done to sparrows by driving horses out of the city until this negotiation process would have been brought to its completion.

        Therefore there is a clerarcut difference between “external damage” and “external cost” indeed.

      • Pekka

        You write- “External costs do most certainly exist and it’s most certainly a market failure when damage is caused to third parties without compensation paid by the one who has caused the damage.”

        You are most certainly incorrect to determine that it is a market failure. The market has often determined that it is more important to keep the cost of the item being produced lower for the benefit of the using audience than it is to modify the condition in question. You may view it as a failure from your perspective but that does not mean it is a market failure.

      • My statement is, again, true by definition of the concepts. Just check what “market failure” means.

      • Pekka

        There is not a single accepted definition of market failure. It depends upon ones perspective in looking at the market(s). In reality, government (local and beyond) are a part of the market and could require that remediation be performed to correct conditions that were determined to be unfavorable. The fact that this has not been done does not mean it is a failure of the market, but that the market put priority on other factors. It could be that if the requirement had been levied that it would have made the enterprise economically non viable and would have resulted in less employment, or unacceptably higher prices for consumers. Sorry, but you are wrong, it is not a market failure. it is that the market may not be working as you wish.

      • Externalities that are not internalized are one type of market failure. That’s true with all definitions of market failure that I have seen. That does not mean that we could not live with some market failures or that we should always react to them.

      • This type of muddled thinking on economics is exactly why progressives are trying desperately to avoid traditional law on the issue of compensating for damages.

        It is one thing to pontificate on a blog that “externalities” are obvious, that failure to make the “producer” pay for those externalities means they are not “internalized” and are therefore a market failure. It all sounds so very sophisticated, and is certainly sufficient for progressives to justify whatever government policy they might choose. The problem is that it is gibberish designed to avoid the need to actually…you know…prove anything.

        Now if you tried to accomplish the same thing through traditional law, you would have to prove that the “externality” actually existed; that it imposed a cost on a particular plaintiff, and that it was caused by a particular defendant.

        It is so much easier to assume the harm, assume the causation, and assume everyone you want to control is a proper defendant. You get to skip the whole need to prove the C in CAGW; the need to prove attribution of actual damage caused by climate change; and the need to prove that that damage resulted from the emission of CO2 by the parties sought to be taxed out of business.

        All the power to control others, with none of that irritating burden of proving anything.

        Add the precautionary principle, and your inability to prove anything becomes a virtue rather than a vice.

        It’s an idiotic way to formulate public policy. But it certainly sounds impressive.

  53. Some seem to misunderstand the externalities. The apparent price we pay at the point of sale is not the full cost of what we are paying for the energy. His pricing model would eg increase the price at the pump if the supply is insecure rather than the consumer paying through taxes for the extra soldiering to ensure security of supply. We’d also pay upfront for nuclear decommisioning. I’m afraid though that much of these costs are incalculable.

    • The last I checked, setting aside reserves for decommissioning of nuclear power plants is standard operating procedure in the US. One could argue the reserves may or may not be adequate, but they exist.

      • John DeFayette

        True, but where is the NIMBY reserve to pay for 35 years of political nonsense in the federal government’s indecision on how to get rid of our high level nuclear waste? Playing that pea game is an externality that would break any bank. One may wonder who pays for the externality of government inefficiency?

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