A few weeks ago I ridiculed one of the arguments raised against Keystone XL: Namely, that oil transported on the pipeline will be exported. I pointed out that this is idiocy. The very purpose of the pipeline is to transport it to the very complex refineries at the Gulf of Mexico. These refineries are clearly able to outbid anyone for oil sands crude transported on Keystone XL, and they will. Moreover, export through the Gulf to Asia, is far more costly than export to Asia via Canada’s west coast.
You can just see TransCanada CEO Russ Girling’s frustration at having to deal with such economic inanity:
Russ Girling, head of pipeline builder TransCanada Corp. (TRP) issued a lengthy statement saying it doesn’t make any sense to export the oil once it reaches the U.S. coast of the Gulf of Mexico, home to the world’s biggest concentration of refineries.
But TransCanada has concluded that this argument, inane as it is, is politically effective:
Girling said the company’s internal polling shows the export issue raises the most concern for Americans. In an interview last month with Bloomberg News, Girling acknowledged that critics found a “nerve that resonates” in that argument.
So much for the influence of economic reasoning on political debate.
I mentioned the Twidiots earlier. There’s something interesting here, and clearly illustrates a pattern. Specifically, that there are no coincidences, comrade. Especially in social media. Or to put it differently, there are too many coincidences for them to be coincidences.
The Twitter storm of the Keystone export meme coincided closely in time with Obama making the same point, and led into the Democratic leadership making this argument the center of their anti-Keystone campaign. In combination with other such “coincidences” strongly suggests manipulation of social media to support political strategies, and in particular administration political strategies. The Twitter storm that broke out in support of the (equally inane) administration free community college initiative over the last few days is another example.
Meaning that pushing back on Twitter stupidity may not be a waste of time. For such stupidity is often merely the handmaiden of some asinine political agenda.
Hard on the heels of Putin’s press conference, Obama held one of his own. Blessedly, it was shorter. That’s the only good thing I can say about it.
At least Putin’s pressers offer some entertainment, some of it intentional, some of it accidental. Obama’s appearances are as entertaining as a root canal performed to the accompaniment of fingernails on a blackboard.
“There is very little impact – nominal impact – on U.S. gas prices, what the average American consumer cares about,” Obama told reporters during an end-of-year press conference.
. . . .
“It’s good for the Canadian oil industry, but its not going to be a huge benefit to us consumers,” he said.
Obama stressed that the issue at hand for Keystone is “not American oil, it is Canadian oil.”
“That oil currently is being shipped out through rail or trucks and it would save Canadian oil companies, and the Canadian oil industry enormous amounts of money if they could simply pipe it all the way down to the Gulf,” Obama said during his final press conference of 2014.
“It’s very good for Canadian oil companies, and it’s good for the Canadian oil industry but it’s not going to be a huge benefit to U.S. consumers, it’s not even going to be a nominal benefit to U.S. consumers,” Obama said.
Where to begin?
What the hell did the Canadians ever do to him? Does he hate them because they are members of the British Commonwealth? (And we know he loathes Britain.) It is truly astounding to see a president who is so solicitous of many thuggish regimes be so dismissive of a longtime friend and ally. Speaking about Keystone, Obama turns into an American Firster nativist, rather than his usual pose as Citoyen du Monde.
Last time I checked, the oil would be refined-and value added to it-in American refineries. That would benefit American oil companies, American workers, and the owners and employees of companies that supply the refineries. The money savings would be split between American and Canadian companies. But maybe because the refineries are located in Texas and Louisiana, which have repudiated Obama massively, that’s a bug not a feature. Or maybe Obama doesn’t understand that oil doesn’t magically transform itself into gasoline, diesel, etc.
Or maybe Obama persists in the delusion that the oil will be exported, disregarding basic economics, common sense, and the analysis of his own State Department.
There would be no impact on gas prices only if the supply of Canadian crude is completely inelastic: in this case, the quantity of oil produced and refined would be the same, regardless of how costly it is to transport it to market. If supply is somewhat elastic, lowering transportation costs increases output, which lowers product prices; moreover, holding output fixed, reducing transportation costs reduces the final product price. And perhaps most importantly, the alleged justification for stopping Keystone is the environmental damage Canadian heavy crude inflicts. But if supply is perfectly inelastic, there is no environmental benefit of raising transportation cost, because this will not affect the amount of oil produced, and hence will not affect the amount of CO2 it produces. (Not to mention that pipelines are a safer, more environmentally sound way of transporting this oil.) So if Obama is right about gas prices he is wrong about environmental benefits, and vice versa.
Come to think of it, I think that Obama’s real reason for opposing Keystone XL is that the Venezuelans would be the biggest losers. I am pretty sure he has much more of an affinity with Chavistas than Canucks.
Which brings me to the other issue: Cuba.
I am ambivalent about the embargo, or the lack of diplomatic recognition. I can argue either side. But there are many things about this initiative that make me uneasy.
For one thing, Cuba is in dire straits. This is where Venezuela comes in. The Bolivarian paradise has been carrying the Castros’ shambolic regime for years, but is now itself on the verge of economic collapse. Default is imminent, and at the current level of oil prices economic collapse is a real possibility. Venezuela is already cutting back support to the Cuban regime, and will cut it back further. Given that, the Castros are desperate, and Obama could have extracted a much better deal. A deal that would have given some benefit to the Cuban people, rather than bailing out the regime and allowing to continue its repression and depredations.
Obama’s rhetoric was also offensive, and at times historically ignorant. He characterized the embargo as a “failed policy.” Pretty rich for a serial failure to insult 9 previous presidents and 26 Congresses. He could have made an affirmative case for a new policy, and recognized the reasons for the previous policy, without such condescension.
Moreover, he made mention of the need to move beyond “the legacy of colonialism and communism.” Communism isn’t a legacy in Cuba: it is a daily reality. Insofar as colonialism is concerned, is Obama referring to Spain? Because he sure as hell can’t be referring to the US: Cuba was never an American colony. The Teller Amendment to the declaration of war against Spain in 1898 forbade the US from annexing Cuba. It was under US administration for four years, but achieved full independence in 1902. (Obama made the colonialism/communism remark in a discussion of Latin America generally, but this doesn’t really save him. Cuba is the only longstanding Communist country in Latin America; colonialism ended in Latin America in the 1820s; the US-via the Monroe Doctrine-kept out colonial powers in the 19th century; and colonialism is the least of Latin America’s problems, which tend to be very much home grown. In mentioning colonialism, Obama was just regurgitating a standard prog trope.)
Obama also engaged in his self-indulgent habit of making history all about him. He noted that Fidel Castro assumed power two years before Obama’s birth, and the Bay of Pigs invasion occurred soon before he was born. (Interesting that he uses the “I” word to refer to Bay of Pigs, but not Ukraine.) Who cares? What does this have to do with anything? Does he have to bring himself into everything?
I’ve therefore decided that I will hereafter designate all dates by BO and AO: Before Obama and After Obama. Castro assumed power in 2BO. Bay of Pigs occurred in Year Zero. Obama elected in 47 AO.
The means by which Obama pursued this policy was also typically high handed, and failed to include or consult with anyone in Congress. And no, I don’t include corrupt tax scofflaw Charlie Rangel, who was photographed lounging like a beached whale in the Cuban sun after helping in the negotiations.
The means and the outcome of the Cuban opening also make me uneasy about deals with Iran.
I could go on, but I’ll close with one point. People have compared this to Nixon’s opening of China. Superficially, this is plausible. But there is a major difference.
Nixon could go to China because his stalwart anti-Communist credentials (which had won him the intense enmity of the left) made it credible that Nixon was acting in the interests of the US, rather than indulging his ideological preferences: if a McGovern or a Henry Wallace had attempted the same there would have been justifiable suspicions of their motives and the benefits to the US. In contrast, Che is worshipped has a hero rather than condemned as a psychopathic murderer in Obama’s political circles. His administration has taken a very benign approach to leftist Latin American regimes, including Venezuela and Nicaragua. This raises doubts about what his Cuba initiative will entail, and whether it will advance American interests or benefit the long-suffering and repressed Cuban people.
So to summarize Obama’s last press conference: he slammed a long-time ally and sucked up to a long-time enemy. Which pretty much summarizes his foreign policy, generally.
When he said that oil shipped from Canada to the Gulf Coast would be “sent everywhere”, Obama was regurgitating a mantra of the enviro left and mainstream media outlets (but I repeat myself). Remarkably, his own government disagrees.
The State Department’s very detailed analysis of KXL addressed this specific issue in the market analysis chapter of the Environment Impact Statement. The relevant section, on page 1.4-140 specifically notes that it had received comments throughout the review process claiming that KXL-shipped oil would be exported, and that it felt obliged to respond to these claims. It did so, and delivered a smackdown:
However, such an option appears unlikely to be economically justified for any significant durable trade given transport costs and market conditions.
. . . .
In short, while it is possible that some cargos of heavy WSCB crude could be exported, it is unlikely for a range of economic factors that any such trade flows would be significant or durable in the long run
The supporting analysis basically repeats and supports the arguments I made in my Keystone posts. This analysis is based on an exhaustive review of available data and a firm grasp of refining and transportation economics. Unlike Obama’s, in other words. The analysis states that two alternative models, including one from the EIA (another part of the government) predict no appreciable exports of Canadian heavy crude piped to the US via Keystone, and that this conclusion is robust to various assumptions about available transportation options.
As an aside, a bill to authorize KXL went down in the Senate yesterday, delivering a likely final blow to the dead parrot candidacy of Louisiana’s Mary Landrieu. Her soon to be erstwhile colleagues preferred to kick her to the curb, rather than force Obama to veto KXL. Now, anyways, because the Republicans will almost surely pass the bill in January, after Mary has moved back to Louisiana, that is if she can bear to leave her DC mansion.
The best part of the day was that a group of Rosebud Sioux (you read about them here first!) interrupted the session with protest chants while Elizabeth Warren was presiding. Senator Warren was not amused. Perhaps if they’d chanted in Cherokee she would have been more sympathetic.
Tweeting my post about Obama’s Keystone mendacity unleashed a vortex of leftist idiocy that was stunning even by Twitter standards. Between a visceral and unthinking hatred of Keystone, and the need to rally to the defense of their cult leader (who also has a visceral and unthinking hatred of Keystone), the lunatics felt compelled to swarm from the hive.
One idée fixe was that Obama was right, and the oil is just going to travel down Keystone (spilling huge quantities all the way!), be put on tankers, and sail on its merry way to furriners abroad, especially the Chinese. The fact that the terminus to KXL is located at the heart of the largest concentration of refineries in the US, and refineries tailored to refine heavy crude to boot, could not shake them from their conviction. Apparently refiners in Texas are just going to stand by the Houston Ship Channel and wave as tanker after tanker of oil that they could be refining passes them by on its way to distant markets with much less efficient refineries. It’s rather amusing that some people believe (I won’t say think) that 830kbd is somehow supposed to sneak past the world’s largest concentration of sophisticated refineries tailor-made to process it, and end up in China.
Nor could they be budged by the fact that large quantities of Canadian crude, including oil sands, are already being shipped (via rail, barge, and rail then pipeline) to PADD 3 refineries and refined here. (Canadian oil sands already represent the largest single source of crude imported to, and refined in, the US.) Nor could geography sway them: if you want to ship oil from northwestern Canada to China, going via the Gulf would be a pretty stupid way to do it. Far better to pipe it to Canada’s Pacific coast: indeed, Canada has suggested that’s what it will do if KXL is blocked, which indicates that even that is the 2d best alternative, the best being to refine it in the US. If heavy oil is to go to China, it’s cheaper to substitute Canadian oil for Venezuelan, and have the Bolivarians ship it to the Maoists. (One Einstein said that the expansion of the Panama Canal proves that the oil is destined for China. Er, no. Even after expansion, the Canal can handle only ships with about 1/2 to 1/3 of the capacity of a VLCC that is the most efficient way to ship crude long distances.)
A few grudgingly conceded that it would be refined in the US, but that wouldn’t benefit Americans, because then the refined products would be snapped up by the voracious Chinese. That there is EIA data showing that 80 percent of US refinery output is consumed domestically, and that less than 4 percent of US refinery exports (and hence less than 1 percent of refinery output) goes to China (and most of that from PADD 5 on the West Coast) made not a dent. And irony is apparently lost on some people: Canada is the 2d largest importer of US refined products. Meaning that a gallon of Keystone crude is far more likely to wind up in a Canuck gas tank than a Chinese one.
One genius Tweeted a Guardian article saying that most of Keystone oil would be exported. Obama is right! QED! Except that the article clearly meant that it would be exported from Canada. Or would that be Cana-duh?
Nor did the fact that transport of oil by rail is much more dangerous, and poses far greater environmental hazards have the slightest impact on those who are allegedly so sensitive to the fraught state of the planet.
“The House has now signed our death warrants and the death warrants of our children and grandchildren. The Rosebud Sioux Tribe will not allow this pipeline through our lands,” said President Scott of the Rosebud Sioux Tribe. “We are outraged at the lack of intergovernmental cooperation. We are a sovereign nation and we are not being treated as such. We will close our reservation borders to Keystone XL. Authorizing Keystone XL is an act of war against our people.”
In February of this year, the Rosebud Sioux Tribe and other members of the Great Sioux Nation adopted Tribal resolutions opposing the Keystone XL project.
“The Lakota people have always been stewards of this land,” added President Scott. “We feel it is imperative that we provide safe and responsible alternative energy resources not only to Tribal members but to non-Tribal members as well. We need to stop focusing and investing in risky fossil fuel projects like TransCanada’s Keystone XL pipeline. We need to start remembering that the earth is our mother and stop polluting her and start taking steps to preserve the land, water, and our grandchildren’s future.”
It is also bizarre that Keystone turns prog Citizens of the World into ranting America Firster nationalists. Keystone just helps the Canadians! The Chinese! Apparently, the Chinese get the oil, the Canadians get the money, and ‘Mericans get the pollution. When @libertylynx pointed out that some good ol’ made in the USA Bakken oil would be shipped on Keystone (a true fact, as there will be a Bakken MarketLink on-ramp that will pump US oil into KXL), someone responded, YOU LIE!!! (yes, complete with caps and exclamation marks). Some people just can’t handle the truth.
And yes, of course I was accused of being a Fox News watching (not), Tea Party (not), Koch Brothers shill (not). And a racist by implication.
I was almost tempted to see if I could make things truly nuts by figuring out some way to bring gold bugs into the conversation. I decided against it, figuring that it would risk creating a singularity of stupidity that could destroy the universe. (I will tempt fate, probably tomorrow, by writing a post on recent Russian gold purchases, which will bring out the gold bugs and the Russian trolls.)
I have very low expectations on the level of debate on Twitter. Subterranean expectations, in fact. But even given that, I was stunned at the level of insanity, stupidity, ignorance, and venom that the topic of Keystone unleashed. I guess it represents a convergence of prog bugbears (oil, capitalism, “climate change”, criticism of Obama), compounded by the trauma of a rout at the polls.
This may seem like a small thing, but I regretfully conclude that it is a harbinger of something bigger. Obama will spend the next two years dog whistling and throwing red meat to his rabid progressive pack as a part of his post-election, lame duck (or would that be lame loon?) guerrilla campaign. Since he can no longer play Moses, he will become Sampson. Keystone is just one of the columns that he will use to pull down the temple around our ears.
It is going to be ugly, ugly, ugly. And Elizabeth Warren is waiting in the wings.
*This is weird, since this is apparently an Ojibwe (Chippewa for you old timers) word for warrior, and not a Lakota word. The Ojibwe are/were a helluva long way from the Great Plains generally, and Nebraska or the Dakotas specifically. Indeed, it gets better! The Ojibwe and the Lakotas were inveterate enemies. (I am always amused at the romanticization of Indians by prog peaceniks: just who the hell were those warriors and braves fighting before the arrival of Europeans? Other tribes, of course.) The Ojibwe got firearms before the Lakota, and drove the Sioux into the Dakotas.
“Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas prices,” Mr. Obama said, evidently frustrated with questions about the Canadian-backed project while he was standing alongside Myanmarese opposition leader Aung San Suu Kyi.
(Using a human rights champion-whom he is going to toss aside-as a prop is a great touch.)
Like a good leftist, Obama apparently aspires to become Lillian Hellman, for every word in that statement is a lie, including “and” and “the”.
Where would Canadian heavy crude pumped through Keystone go? The US Gulf.
Now think hard, people. What is located on the Gulf Coast? Think, think, think.
Got it yet? Of course you do: Refineries! You know, those things that turn crude gunk into stuff we can actually use. I know that even idiot leftists know that there are refineries in Texas, because each of the 4 times a Bush ran for president, they told us ad nauseum about the pollution in Houston/Texas from the eeeeeevvvvillll refineries.
So the “it goes everywhere else” line is a total crock. It comes here, is refined, and fuels our cars, and airliners and homes, and is sold overseas so that we can buy other things foreigners produce that we like to consume.
The only question is: What is worse? That Obama actually believes this crock, or he doesn’t but is willing to say anything to defend an indefensible position?
Obama poses as a great environmentalist. Pray tell, how does relying on riskier forms of transport (tankers from Venezuela and Mexico, barges down the US inland waterways, and rail) rather than pipelines help the environment?
And I am sure it is a total coincidence that Obama booster Warren Buffett, he of the BNSF and Union Tank Car Company, is a major beneficiary of the stonewalling of Keystone.
The mendacity is not all that’s appalling about this statement. One of Obama’s worst habits has been giving allies the back of his hand, while he sucks up to sworn enemies. Canada is a close ally, and has been for decades. Indeed, even now Canada is actually contributing military force to Obama’s otherwise farcical anti-ISIS coalition.
Fat lot of good that it does them. Who needs friends like Canada when you have Iran? Can Canada help Obama build a legacy? No! So what good are they? (Please ignore the fact that the legacy will really be a nuclear arms race in the other Gulf: the Arab/Persian one.)
The sad thing is that we are in for two years of this mendacity. It will be all Alinsky, all the time. Non-stop demagoguery in the service of progressive causes. He lost, but we’ll pay.
So we will have to update Twain. No longer should you say “lies, damn lies, and statistics.” The version that will describe the next two years is: “lies, damn lies, and Obamaisms.”
I avoid the immigration issue like the plague-or Ebola, to update the meme-because (a) I can’t say that I can bring any special knowledge to the subject, and (b) it’s one that inevitably generates more fury than thought, reaction rather than reflection. I make an exception now because of an article that speaks to the Science! debate.
But if you read Munro’s piece, you will find a shocking lack of interest among scientists to test this particular hypothesis. Indeed, the scientists interviewed recoil in fear at the very thought. What’s more, he shows pretty convincingly that this unscientific lack of curiosity is due to the fact that this subject is politically radioactive, and if the hypothesis were not rejected, it would be very, very politically damaging to Señor Obama. So scientists, who exist in a state of abject dependency on Federal funding, would probably rather inject EV-D68 into their eyeballs with a square needle than investigate seriously such a politically explosive hypothesis.
The correlation between Science! and politics demonstrates that the invocation of Science! by politicians and the politically active is inherently untrustworthy. And of course, this is not limited to Ebola and EV-D68. Global warming or climate change or whatever the label de jour is a particularly prominent example.
I find it sickly ironic that the administration and its defenders invoke Science! as a magic incantation to ward off rational debate. The translation of Science!, when used by an administration hack or flack is “Shut up, you bloody peasant! Defer to your betters, regardless of how asinine they are. Do not question the Great and Powerful Oz.” It has come to the point that an invocation of Science! immediately discredits the sincerity of the invoker. It is especially ironic when the bearer of this message is a liberal arts or J-school grad (or both!) who probably exerted considerable effort to avoid taking a serious science class during their entire education.
Another institution corroded by the acid of politics, especially in recent years. (Another is civilian-military relations: I will address that dreary story in a future post.)
The road to hell is paved with good intentions. A couple of examples from environmentalist attempts to mitigate climate change.
The first relates to ethanol. In its infinite wisdom, in 2010 Congress mandated the use of renewable fuels with lower CO2 content than corn ethanol to meet the renewable fuel standard it created in 2005. Sugar ethanol from Brazil fits the bill. But given the blend wall and other limits on ethanol usage, this created an excess of corn ethanol in the US, and created an incentive to export excess corn ethanol from the US to Brazil, and import sugar ethanol from Brazil.
As a result, since the start of 2011, the United States and Brazil have shipped over 1 billion gallons of ethanol back and forth – more than 500 million gallons each way. The emissions generated by the shipping have worsened the carbon footprint of both fuels.
Thomson Reuters Foundation found that this overseas trade has produced more than 312,000 tonnes of carbon dioxide (CO2) since the start of 2011, based on an industry method used to calculate greenhouse gas emissions from shipping. This equals a ratio of one tonne of CO2 emitted for every 10 tonnes of ethanol transported between the two countries.
Not to mention its just wasteful and stupid to expend real resources-fuel, labor, capital-to swap ethanol between hemispheres.
Not to mention that corn-based ethanol is a monstrosity.
The second example: electric cars. Yes: No noxious fumes or CO2 come out of the (nonexistent tailpipe) of an electric vehicle. But if you take into account emissions over the lifetime of the vehicle-including the CO2 emitted to generate the electricity that charges the batteries of electric cars-and the other environmental impacts of their construction-including battery disposal and the environmental costs of mining rare earth metals, etc.-it’s likely that electric cars have as bad or worse environmental effects as fossil-fuel powered ones.
Government policies have substantially encouraged the use of renewable fuels, and the development of electric cars, for the purpose of improving the environment. But the actual effects of these policies often fall far short of the intended effects, and quite frequently have the exact opposite effect, or unintended consequences that are more costly than the intended environmental benefits.
This illustrates several points. First, policies frequently create perverse incentives that induce market participants to undertake actions contrary to the intent of the policy: this is what is going on in the ethanol trade. Second, we live in a second best world. The theory of the second best implies that when there are multiple “market failures” (i.e., multiple unpriced harms), mitigating one of them (e.g., reducing CO2 emissions) is not necessarily a good thing, because it can exacerbate the other market failures. That’s the lesson in the case of electric vehicles.
It’s my sense that these problems are most likely to occur when legislators and regulators attempt to dictate technologies, rather than affect incentives through taxes on harms (e.g., CO2 taxes). That seems to be particularly true of the first problem. It’s less clear that’s true of the second problem. For instance, a monomaniacal focus on CO2, whether implemented through taxes or cap and trade or dictating technology, tends to have substantial perverse effects because there are other unpriced harms and benefits. The encouragement of wind power, for example, results in environmental damage in the form of massive bird kills and abandoned wind turbines.
Economics is sometimes called the dismal science, originally because of the Malthusian connection. But the name has stuck long after economists have left Malthus far behind. And for good reason. We’re killjoys, with a habit of pointing out that things people do with the best of intentions often fail to realize those goals, or worse, are actually counterproductive.
There’s lots of angst in Euroland over the plunging price of European Union CO2 Allowances. Trading activity has crashed along with prices. And the Eurocrats are casting about ways to “fix” the “problem.” And Eurocrats being Eurocrats, their mooted fixes are interventionist monstrosities that make a mockery of the idea of a “market” for CO2.
The reason for the price decline is blindingly obvious. The European economy is sputtering, and lower industrial activity translates into lower output of CO2, and hence lower demand for emissions allowances.
In other words, the Europeans wanted to reduce CO2 emissions, and they got their wish. Just not the way they intended: a bad economy accomplished their mission for them. If they’re so intent on reducing CO2, you’d think they’d be happy.
But no, of course, they’re not. They were hoping that economic activity would be robust, and that the resulting demand for allowances would keep the price high, thereby making powering this activity by fossil fuels more expensive. This, in turn, would lead to greater reliance on no-carbon renewables like wind and solar. In this version of Euro Disneyland, where wishes come true, windmills and solar panels would be powering a thriving economy: they would have their low carbon cake, and their economic growth ice cream too.
But no such luck. The sluggish economies, and the resulting low price of CO2, have delivered a body blow to the economics of renewables.
And that’s where much of the angst is coming from. If it was all about reduced CO2 output, it shouldn’t really matter how you get there. But of course investors in wind, solar, etc., want to support those investments, and the cratering of the CO2 price is very bad news for them.
So the angst is about protecting investments in renewables.
How are they going to go about this? There have been proposals to delay the issuance of some new allowances for a couple of years to support the price, but these were shot down in the European parliament. That delay-“backloading”-was considered by many to be prelude to canceling them altogether.
Such interventions make a mockery of the idea of a carbon market. The man-made “supply” of allowances is subject to change at political whim, and becomes contingent on price, and how that price affects political constituencies. This adds a huge element of risk to trading in this market. It also adds a huge element of risk to any investment that depends on the price of CO2. This can include not just wind and solar, but conventional power plants, and any other investment (e.g., refining or chemical manufacturing) that emits CO2. And once the EU allows the economic interests of industries to drive supply decisions so as to affect price, all these affected parties have an incentive to influence the process. That consumes real resources, and given the unpredictable and shifting nature of political equilibria, adds to the uncertainty over future supply.
In other words, these man-made carbon markets are not time consistent. Unless the EU can commit not to change supply in the future, the “market” will largely involve speculation on future policy, with a huge degree of feedback. Speculations about policy will affect prices, and prices will affect policy, which will affect prices, and on and on. (Example: the price of CO2 allowances fell by 50 percent when the Euro Parliament rejected backloading.)
Which is wickedly ironic, given Euro attitudes about speculation.
That’s no way to make a market. And come to think about it, any “market” that is a completely political construction is almost a contradiction in terms. It can be at best a simulacrum of a market, at most a form of “market socialism”, but not the idealized market socialism of years past, but a market socialism buffeted by special interest politics and political economy considerations.
FWIW, I am one of the “experts” on the WSJ’s new “The Experts: Energy” feature. The first installment was a week ago. The next one, about renewables, runs next Monday-tax day! Yay!
The question was: “What is the most promising renewable?” My first instinct was to respond with the punch line from the very non-PC joke Ty Cobb told to a journalist who interviewed him late in life: “I feel like the country boy whose Mama told him to say something nice to his prom date, and he told her: ‘you don’t sweat too much for a fat girl.'” But I resisted the temptation to say that on the WSJ: here, not so much resistance. But you’ll just have to wait a week to see what I said. Snarky, but not quite so snarky as that.
It wouldn’t be quite so hard to answer the question: “What is your least favorite renewable?” Here, we have to have separate categories for electricity generation and motor fuel.
With respect to electricity, the runaway winner is wind. Economically: a turkey. Environmentally: it kills turkeys. Well, maybe not turkeys, but it does slaughter countless winged creatures. Not that enviros will tell you that. Rather, they are willing participants in a conspiracy of silence to cover-up the avian and chiropterian holocaust.
First, the economics. Really. I don’t have to go find these things. They find me.
I could go on and on, but let me just point you to Germany. Germany has made a huge bet on wind. Huge. And it is becoming a huge economic albatross (speaking of birds) around Merkel’s neck. Two articles this weekend point that out, both from sources that are usually pretty enviro-friendly.
With consumer power bills increasing and Merkel facing elections in September, Germany’s energy policy is rising on the political agenda. The cost of developing wind farms in the North Sea has surged following construction glitches and delays in linking turbines to the grid.
“The entire energy switch has derailed,” Marc Nettelbeck, an analyst at DZ Bank AG, said this week by phone from Frankfurt. “The difficulties connecting offshore wind farms to the power grid reduces their profitability and renders the original investment calculations of utilities invalid.”
Merkel has sought to spur development of wind farms at sea — where gusts are typically strong enough to keep turbines generating around the clock — because most renewable sources can’t provide constant, or baseload, power like nuclear plants.
The connection setbacks are “problematic for baseload power capacity and can lead to the failure or delay of the energy switch,” Nettelbeck said.
EON, the country’s biggest utility, said last month it will lower clean-energy investments to less than 1 billion euros in 2015 from 1.79 billion euros last year. RWE will cut annual renewables spending in half to about 500 million euros in the next two years.
The EU’s biggest economy has long been a champion of renewable power, a haven investors could depend on.
This made it a green leader well before it decided to phase out nuclear power after the 2011 Fukushima disaster in Japan, and drive its renewable generation up even further.
Though it is not very sunny nor even that windy, Germany now accounts for nearly half of Europe’s solar power capacity and 30 per cent of its wind power.
Renewable power – mostly wind, solar and biomass – made up a formidable 22 per cent of Germany’s electricity generation last year.
But, with the levy added to German power bills to help pay for this growth nearly doubling to €0.053 per kWh – and an election looming in September – environment minister Peter Altmaier has unveiled plans to freeze renewable subsidies for two years. He has also said future rises would be limited to 2.5 per cent a year after that.
Other proposals to reduce costs include a requirement for renewable generators to sell their electricity to buyers under long- term power purchasing agreements – a far less attractive option than the current system of selling power to the grid and getting paid a set tariff.
These new measures are supposed to take effect from August, but face so much political opposition that nothing may happen before the election.
Still, the consequences have been swift. One big municipal utility with substantial renewable investments, Munich’s Stadtwerke München, has already suspended new clean power projects.
Wind is a diffuse energy source. Wind production is greatest at night, and smallest when it’s hot. Meaning that it is there when you don’t need it and isn’t when you do. Load tends not to be located in windy places, meaning that it requires a substantial investment in transmission. And wouldn’t you know (a) this is expensive, and (b) people don’t like transmission lines. Wind is also intermittent, and requires backup traditional generation (fossil fuel or nuclear).
Other than that, it’s great.
But it’s so environmentally friendly, right? Aren’t these small prices to pay?
Why don’t you go ask your fine feathered friends that question?
Wind turbines A/K/A bird cuisinarts, bat blenders.
MasterResource and Watts Up With That? provide chapter and verse about the number of flying creatures killed every year by wind turbines. The numbers are in the 10s of millions in the US alone, not to mention Europe. Each turbine kills several hundred birds per year. In some locations, bats are major contributors to the body count.
Moreover, ethanol burned in an engine produces more than twice as much ozone as the equivalent amount of petrol. Ground-level ozone is a big cause of smog. And, while good at boosting a fuel’s octane rating, ethanol packs only two-thirds the energy per gallon of petrol. As a result, motorists get fewer miles per gallon using fuel blended with ethanol than with undiluted petrol. So, even if blended fuel is cheaper per gallon than petrol (thanks to ethanol’s subsidies), the overall cost of using it tends to be higher
Not to mention (which the Economist does) that ethanol mandates are screwing up the gasoline market, and inflating the price of motor fuel in the US.
And definitely not to mention (which the Economist does not, at least in this article), that the subsidy- and mandate-driven demand for ethanol has increased the demand for corn, thereby increasing corn prices, and food prices generally. The biggest victims of this? The poor, notably in developing countries, who spend a very large fraction of their income on food.
Wind and ethanol are monstrosities. Moreover, governments-through subsidies and mandates-are the Frankensteins who created these monsters. (At least the original Dr. Frankenstein created only one monster.)
To the extent that fossil fuels create externalities, it is best to provide incentives to reduce their consumption, and to encourage the production of substitutes, through taxes (taking into account the heavy tax burden that fossil fuel consumption already incurs). Then let market participants determine the most efficient way to mitigate these externalities. Instead, for decades governments have attempted to pick winners, and constructed an elaborate system of subsidies and mandates that have been driven by politics and politicking, and which have led to the massive stimulation of the worst of the non-fossil fuel technologies: wind and (corn-based) ethanol. In so doing, they have picked total losers.
What’s more, the subsidization of inefficient technologies, actually suppresses the incentive to develop more efficient technologies (where efficiency includes the environmental costs). This unseen impact is arguably as devastating as the seen effects-and those are bad indeed.