The other day, The Wall Street Journal provided a public service by lambasting Newt Gingrich for his absurd speech to the ethanol lobby in Des Moines last month (money line:  ”Obviously big urban newspapers want to kill it because it’s working, and you wonder, ‘What are their values?’”).  Today, Gingrich and fellow ethanol-maven James Woolsey struck back in those very same pages.  In doing so, Gingrich provided yet more evidence that he’s intellectually unfit for office.

“It is in this country’s long-term best interest,” he said, ”to stop the flow of $1 billion a day overseas.”  Really?  So money sent overseas is gone forever.  News to me.  The only thing you can buy with dollars earned from oil sales to the U.S. is to buy things denominated in dollars or to exchange them so that someone else can.  And we sell a lot of stuff to foreigners that are denominated in dollars (treasury bills for one) and that money comes right back to the good old U.S. of A.

But put that aside.  If Gingrich really believes this, then why not just ban all imports all together?  Is that what the GOP is about these days – rank gooberism on trade?

And one other thing; the U.S. does not spend $1 billion a day on foreign oil.  It spends about half that; $530 million a day (in 2009 anyway).

Gingrich & Woolsey on Energy is a post from Cato @ Liberty - Cato Institute Blog

A conversation with documentarian Robert Stone regarding Earth Day is featured today in The New York Times’s “Dot Earth” online column.  In the course of his conversation with the Times’s Andrew Revkin, Mr. Stone — who is quite alarmed about our reliance on foreign oil — asks:  “How many Americans know that we send about $800 billion to the Middle East every year for oil?”

Hopefully, not many. According to the U.S. Department of Commerce, the U.S. spent $95.4 billion on crude oil imports from OPEC sources in 2009.  But not all OPEC members are from the Middle East.  That $95.4 billion includes dollars spent on oil originating from Algeria ($6.3 billion), Angola ($9 billion), Ecuador ($3.4 billion), Nigeria ($17.7 billion), and Venezuela ($23.4 billion) – none of which are in the Middle East.  Subtract out that oil and we arrive at $35.6 billion spent on Middle Eastern crude oil (a figure rounded from the original nominal counts.  I have used the customs value – that is, the estimated value — of the oil being imported rather than the figures that include additional costs for insurance and transportation because money being spent on insurance and shipping goes to third parties that are not for the most part located in the Middle East.  But if one wants to use those slightly higher figures, it won’t change the numbers very much at all).

For what it’s worth, the total amount of dollars Americans sent abroad for crude oil from all sources was $188.5 billion last year.

Even if the figure were $800 billion, so what?  No one is forcing refineries to buy crude oil from foreign suppliers.  They presumably believe that the oil at issue is more valuable than the money that must be offered to secure said oil and that oil from other sources is more expensive than oil from the Middle East. Hence, they buy. This is by definition a wealth creating transaction for American business enterprises. Foreign trade, Mr. Stone, is a good thing.

The implicit claim, of course, is that there are negative externalities associated with foreign oil consumption. This, however, is faith masquerading as fact (an argument also well made by Cato adjunct scholar Richard Gordon).

Regardless, Mr. Stone overstates the alleged problem by orders of magnitude.

Oil Import Make Believe is a post from Cato @ Liberty - Cato Institute Blog

Last week I was on John Stossel’s (most excellent) new show on Fox Business News to discuss energy policy — in particular, popular myths that Republicans have about energy markets.  One of the topics I touched upon was nuclear power.  My argument was the same that I have offered in print: Nuclear power is a swell technology but, given the high construction costs associated with building nuclear reactors, it’s a technology that cannot compete in free markets without a massive amount of government support.  If one believes in free markets, then one should look askance at such policies. 

As expected, the atomic cult has taken offense. 

Now, it is reasonable to argue that excessive regulatory oversight has driven up the cost of nuclear power and that a “better” regulatory regime would reduce costs.  Perhaps.  But I have yet to see any concrete accounting of exactly which regulations are “bad” along with associated price tags for the same.  If anyone out there in Internet-land has access to a good, credible accounting like that, please, send it my way.  But until I see something tangible, what we have here is assertion masquerading as fact.

Most of those who consider themselves “pro-nuke” are unaware of the fact that the current federal regulatory regime was thoroughly reformed in the late 1990s to comport with the industry’s model of what a “good” federal regulatory regime would look like.  As Oliver Kingsley Jr., the President of Exelon Nuclear, put it in Senate testimony back in 2001:

The current regulatory environment has become more stable, timely, and predictable, and is an important contributor to improved performance of nuclear plants in the United States.  This means that operators can focus more on achieving operational efficiencies and regulators can focus more on issues of safety significance.  It is important to note that safety is being maintained and, in fact enhanced, as these benefits of regulatory reform are being realized.  The Nuclear Regulatory Commission — and this Subcommittee — can claim a number of successes in their efforts to improve the nuclear regulatory environment.  These include successful implementation of the NRC Reactor Oversight Process, the timely extension of operating licenses at Calvert Cliffs and Oconee, the establishment of a one-step licensing process for advanced reactors, the streamlining of the license transfer process, and the increased efficiency in processing licensing actions.

It’s certainly possible that the industry left some desirable reforms undone, but it seems relevant to me that the Nuclear Energy Institute — the trade association for the nuclear energy industry and a fervent supporter of all these government assistance programs — does not complain that they’re being unfairly hammered by costly red-tape.

For the most part, however, the push-back against the arguments I offered last week has little to do with this.  It has to do with bias.  According to a post by Rod Adams over at “Atomic Insights Blog,” I am guilty of ignoring subsidies doled-out to nuclear’s biggest competitor — natural gas — and because Cato gets money from Koch Industries, it’s clear that my convenient neglect of that matter is part of a corporate-funded attack on nuclear power.  Indeed, Mr. Adams claims that he has unearthed a “smoking gun” with this observation.

Normally, I would ignore attacks like this.  This particular post, however, offers the proverbial “teachable moment” that should not be allowed to go to waste.

First, let’s look at the substance of the argument.  Did I “give natural gas a pass” as Mr. Adams contends? Well, yes and no; the show was about the cost of nuclear power, not the cost of natural gas.  I did note that natural gas-fired electricity was more attractive in this economic environment than nuclear power, something that happens to be true.  Had John Stossel asked me about whether gas’ economic advantage was due to subsidy, I would have told him that I am against natural gas subsidies as well — a position I have staked-out time and time again in other venues (while there are plenty of examples, this piece I co-authored with Daniel Becker — then of the Sierra Club — for The Los Angeles Times represents my thinking on energy subsidies across the board.  A blog post a while back about the Democratic assault on oil and gas subsidies found me arguing that the D’s should actually go further!  Dozens of other similar arguments against fossil fuel subsidies can be found on my publications page).  So let’s dispose of Mr. Adams’ implicit suggestion that I am some sort of tool for the oil and gas industry, arguing against subsidies here but not against subsidies there.

Second, let’s consider the implicit assertion that Mr. Adams makes — that natural gas-fired electricity is more attractive than nuclear power primarily because of subsidy.  The most recent and thorough assessment of this matter comes from Prof. Gilbert Metcalf, an economist at Tufts University.  Prof. Metcalf agrees with a 2004 report from the Energy Information Administration which contended that preferences for natural gas production in the tax code do little to increase natural gas production and thus do little to make natural gas less expensive than it might otherwise be.  They are wealth transfers for sure, but they do not do much to change natural gas supply or demand curves and thus do not affect consumer prices.  Prof. Metcalf argues that if we had truly level regulatory playing field without any tax distortions, natural gas-fired electricity would actually go down, not up!  Government intervention in energy markets does indeed distort gas-fired electricity prices.  It makes those prices higher than they otherwise would be!

The Energy Information Administration (EIA) identified five natural gas subsidies in 2007 that were relevant to the electricity sector (table 5).  Only two are of particular consequence.  They are:

• Expensing of Exploration and Development Costs – Gas producers are allowed to expense exploration and development expenditures rather than capitalize and depreciate those costs over time.  Oil and gas producers (combined) took advantage of this tax break to the tune of $860 million per year.  How much goes to gas production rather than to oil production is unclear.
• Excess of Percentage over Cost Depletion Deferral – Under cost depletion, producers are allowed to make an annual deduction equal to the non-recovered cost of acquisition and development of the resource times the proportion of the resource removed that year.  Under percentage depletion, producers deduct a percentage of gross income from resource production.  Oil and gas producers (combined) take advantage of this tax break to the tune of $790 million per year.  How much goes to gas production rather than to oil production is unclear. 

Even if we put aside the fact that these subsidies don’t impact final consumer prices in any significant manner, it’s useful to keep in mind the fact that the subsidy per unit of gas-fired electricity production — as calculated by EIA — works out to 25 cents per megawatt hour (table 35).  Subsidy per unit of nuclear-fired electricity production works out to $1.59 per megawatt hour.  Hence, the argument that nuclear subsidies are relatively small in comparison with natural gas subsidies is simply incorrect.

Some would argue that the Foreign Tax Credit — a generally applicable credit available to corporations doing business overseas that allows firms to treat royalty payments to foreign governments as a tax that can be deducted from domestic corporate income taxes — should likewise be on the subsidy list.  The Environmental Law Institute calculates that this credit saves the fossil fuel industry an additional $15.3 billion.  There is room for debate about the wisdom of that credit, but regardless, it doesn’t appear as if the Foreign Tax Credit affects domestic U.S. prices for gas-fired electricity.     

The bigger point is that without government help, few doubt that the natural gas industry would still be humming and electricity would still be produced in large quantities from gas-fired generators.  But without government production subsidies, without loan guarantees, and without liability protection via the Price-Anderson Act, even the nuclear power industry concedes that they would disappear.

Now, to be fair, Prof. Metcalf reports that nuclear power is cheaper than gas-fired power under both current law and under a no-subsidy, no-tax regime.  His calculations, however, were made at a time when natural gas prices were at near historic highs that were thought to be the new norm in energy markets and were governed by fairly optimistic assumptions about nuclear power plant construction costs.  Those assumptions have not held-up well with time.  For a more recent assessment, see my review of this issue in Reasonalong with this study from MIT, which warns that if more government help isn’t forthcoming, “nuclear power will diminish as a practical and timely option for deployment at a scale that would constitute a material contribution to climate change risk mitigation.”

Third, Mr. Adams argues that federal nuclear loan guarantee program is a self-evidently good deal and implies that only an anti-industry agitprop specialist (like me) could possibly refuse to see that.  “That program, with its carefully designed and implemented due diligence requirements for project viability, should actually produce revenue for the government.”  Funny, but when private investors perform those due diligence exercises, they come to a very different conclusion … which is why we have a federal loan guarantee program in the first place. 

Who do you trust to watch over your money — investment bankers or Uncle Sam?  The former don’t have the best track record in the world these days, but note that the popular indictment of that crowd is that investment banks weren’t tight fisted enough when it came to lending.  If even these guys were saying no to nuclear power — and at a time when money was flowing free and easy — what makes Mr. Adams think that a bunch of politicians are right about the glorious promise of nuclear power, particularly given the “too cheap to meter” rhetoric we’ve heard from the political world now for the better part of five decades? 

Anyway, for what it’s worth, the Congressional Budget Office has taken a close look at this alleged bonanza for the taxpayer and judged the risk of default on these loan guarantees to be around 50 percent.  They may be wrong of course, but the risks are there, something Moody’s acknowledged last year in a published analysis warning that they were likely to downgrade the credit-worthiness of nuclear power plant construction loans.

Fourth and finally, Mr. Adams cites Cato’s skepticism about “end-is-near” climate alarmism as yet more evidence that we are on the take from the fossil fuels industry.  I don’t know if Mr. Adams has been following current events lately, but I would think that we’re looking pretty good right now on that front.  Der Spiegel — no hot-bed of “Big Oil” agitprop — sums up the state of the debate rather nicely in the wake of the ongoing collapse of IPCC credibility.  Matt Ridley — another former devotee of climate alarmism — likewise sifts through the rubble that is now the infamous Michael Mann “hockey stick” analysis (which allegedly demonstrated an unprecedented degree of warming in the 20th Century) and finds thorough and total rot at the heart of the alarmist argument.  Mr. Adams is perhaps unaware that our own Pat Michaels has been making these arguments for years and Cato has no apologies to make on that score. 

Regardless, ad hominem is the sign of a man running out of arguments.  There aren’t many here to rebut, but the form of the complaints offered by Mr. Adams speaks volumes about how little the pro-nuclear camp has to offer right now in defense of nuclear power subsidies.

I have no animus towards nuclear power per se.  If nuclear power could compete without government help, I would be as happy as Mr. Adams or the next MIT nuclear engineer.  But I am no more “pro” nuclear power than I am “pro” any power.  It is not for me to pick winners in the market place.  That’s the invisible hand’s job.  If there is bad regulation out there harming the industry, then by all means, let’s see a list of said bad regulations and amend them accordingly.  But once those regulations are amended (if there are indeed any that need amending), nuclear power should still be subject to an unbiased market test.  Unlike Mr. Adams, I don’t want to see that test rigged.

Atomic Dreams is a post from Cato @ Liberty - Cato Institute Blog

President Obama should be credited—albeit cautiously—for his announcement yesterday that he will open some U.S. coastal waters to offshore oil drilling.  The fact that this is an interesting political reversal on Obama’s part has been treated extensively elsewhere.  But what of the substance of the president’s drilling proposal?

I and other free-market advocates have spoken for years of the potential energy benefits of allowing this drilling, so I won’t devote too much space to repeating myself.  The best encapsulation of my own thinking on the subject is this piece I wrote for the LA Times in 2008.

A few points worth adding:

Obama’s press conference at Andrews Air Force Base yesterday did indicate a welcome new direction for U.S. energy policy.  But in an absolutely perfect world, the government would not be in the business of allocating scarce resources—in this case, the offshore oil fields—to competing user groups. The market would play that role.

Hence, the best policy would be to divest this land via auction and allow environmentalists, recreationalists and preservationists to compete with oil and gas companies for the rights to those resources.

It is not at all inconceivable to me that those opposed to drilling, whatever their reasons, might well out-bid extraction industries for rights to some of these fields. Unfortunately, there seems to be limited political support for privatization, so President Obama’s initiative is probably better than the status quo.

We need to remember, however, that if governments could intelligently allocate scarce resources across the economy without recourse to market information or institutions, then the North Korean economy would work swimmingly.

Obama Knows the Drill is a post from Cato @ Liberty - Cato Institute Blog

A good default proposition regarding the government’s role in the economy would state that the government should not loan money to an enterprise if the enterprise in question cannot find one single market actor anywhere in the universe to loan said enterprise a single red cent.  It might suggest – I don’t know – that the investment is rather … dubious.

Alas, like all good propositions regarding the government’s role in the economy, this one is being left by the roadside by the Obama administration.  Unfortunately, the only complaint being made by a not insubstantial segment of the political Right – frequently, the political crowd that is busy decrying “Bailout Nation” – is that the loan guarantees are not fat enough.

I write, of course, about the $8.3 billion federal loan guarantee announced by President Obama this week for Southern Company to build two new nuclear power plants.  The money will be used to guarantee the loans being made by the federal government (via the Federal Financing Bank) to partially cover the cost of Southern’s projected $14 billion nuclear construction project at their Vogtle plant near Waynesboro, Georgia.  The loan guarantees were authorized by Congress in the 2005 Energy Policy Act and, we are told, are the first installment on a total package of $54 billion that the President would like to hand out to facilitate the construction of 7-10 new nuclear power plants (Congress, however, has only authorized $18.5 billion to this point).

The claim being made by some – that the loan guarantees are necessary to jump-start investor interest in new nuclear power plant construction – is not quite correct.  Even these lavish loan guarantees aren’t enough to do that.  In a letter to the U.S. Department of Energy dated July 2, 2007, six of Wall Street’s s then-largest investment banks – Citigroup, Credit Suisse, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley – informed the administration that, contrary to the government’s expectations, anything short of a 100 percent unconditional guarantee would be insufficient to induce private lending.

Why is it risky to build nuclear power plants?  Because new nuclear projects tie up more capital for longer periods of time than its main competitor, natural-gas fired generation.  Nuclear power makes economic sense only if natural gas prices are very high.  Then, over time, the high initial costs of nuclear power would be offset by nuclear power’s lower fuel costs.  Moreover, as noted by Moody’s in an analysis published in July of last year, there is uncertainty associated with construction costs, regulatory oversight, technological developments that might reduce the cost of rival facilities, and the ability of utilities to recover costs and make a profit over the lifetime of the plant – a risk tied up in the economic prospects of the region being served by the plant.  And those risks have been increasing, not decreasing, as time has gone on.

In short, even during the go-go days prior to the September 2008 crash – a time when Wall Street was allegedly throwing around money left and right to all sorts of dubious borrowers – the banks that stand accused of recklessly endangering their shareholders on other fronts were telling utility companies that they would not loan them anything for new nuclear power plant construction unless the feds unconditionally guaranteed every last penny of those loans.  That’s how risky market actors think it is to build nuclear power plants.

And it’s not as if the federal government disagrees completely.  The Congressional Budget Office pegs the chance of default (program-wide) at 50 percent or better and the Government Accountability Office likewise thinks that default risks are quite high.  Energy Secretary Stephen Chu says that he thinks the chance of default is much lower.  We can only speculate about who’s right given that no one has tried to build a nuclear power plant in the United States for over 30 years.

Regardless of what the risk actually is, the loan guarantees do not reduce that risk.  They simply transfer the risk from the bank to taxpayer.  In this particular case, however, the loan guarantee transfers risk from one arm of the state to the other, so it doesn’t really count.  But if such loan guarantees  ever were to induce actual private lending for plant construction, that’s how it would work.

Plenty of arguments have been offered to justify these loan guarantees.  Most of them are flimsy on their face.

For instance, we’re often told that we “need” new power plants.  But with electricity demand declining over the past couple of years, it is unclear when that need might arise.

Regardless, when the market “needs” more electricity, that need will be manifested in price signals that will carry with them profit opportunities.  Profit-hungry investors will be willing and able to meet that need without the help of government.  Of course, if market conditions don’t radically change, those needs will be met with gas-fired power plants, but hey, if that bothers you, take it up with someone else.

Others argue that we need the jobs that will be produced by new nuclear power plants.  Well, building big new reactors will certainly employ a lot of (largely unionized) construction workers.  But that’s one reason why building a nuclear power plant is not very economic compared to building gas-fired generators.  If creating jobs is the idea whether the project makes any economic sense or not, then let’s just ban food imports and farm equipment and put everyone to work with hand plows and scythes.

Two somewhat more serious arguments have been offered to justify these loan guarantees.  Neither of them stands up to much scrutiny either.

The first argument – the argument most often heard from the nuclear power industry and some segments of the political Left – is that we need nuclear power to reduce greenhouse gas emissions.  Of course, the best (that is, most efficient) way to reduce greenhouse gas emissions is to internalize the cost of greenhouse gas emissions in the retail price of electricity and then allow market actors to adjust their production and consumption decisions accordingly.  That price internalization exercise, however (whether directly through a carbon tax or indirectly through a cap-and-trade program), does not appear to be in the cards in the foreseeable future.  Hence, the loan guarantees are advanced as a “second-best” solution, one that will get us the technology and economic efficiency that would be delivered by a properly crafted carbon tax or cap-and-trade program without the retail price increases associated with either.

One of several problems with this argument is that it would take one hell of a carbon tax – or one hell of an onerous cap-and-trade program – to get anyone interested in building nuclear power plants.  If natural gas prices remained roughly where they are at present (that is, if they were to remain at historical norms) then it would take a $90 per ton carbon tax or a cap-and-trade program that delivered carbon emission credits at $90 per ton on the open market to induce investment in nuclear power plants.  Few economists who study climate policy believe that a carbon tax of that size is defensible given what we know about climate change.

And that’s if construction costs are as low as advertised.  Were they to double (as they did from 2003 to 2009) – either because of endogenous increases in the cost of capital, labor, or construction-related resources or because of cost overruns – then it would take at least a $150 per ton carbon tax (or a cap-and-trade program that delivered $150 carbon credits to the market) to induce investment.

You might ask yourself what the historical relationship is between final (inflation-adjusted) nuclear power plant construction costs in the United States and construction costs as projected at the onset of the project.  Happily, the CBO has done your homework for you.  They found that final construction costs averaged 207 percent of projected costs.  Hence, a doubling of construction costs is probably more likely than not once a project is underway … if past is prologue.

The upshot is that there are many more efficient ways to respond to greenhouse gas emission constraints than to go on a nuclear power bender.  This observation is heresy on the Right, but almost every credible analysis of the matter backs up that observation.

The second argument one hears to justify federal loan guarantees is that they are necessary to counter-balance the excessive regulatory costs associated with new plant construction.  Now, put aside the fact that the Nuclear Energy Institute – the trade association of the nuclear power industry – has often expressed near-total satisfaction with the current federal regulatory regime.  If the regulatory regime is truly “bad” and, accordingly, is imposing steep and unnecessary costs on the industry, then the correct remedy is to improve said regulatory regime, not to subsidize the industry.

The counter-complaint that positive regulatory reforms are impossible is difficult to swallow.  After all, if there is sufficient political will to bestow tens of billions of dollars worth of tax money on this industry, then surely there is enough political will to reform the bad and unnecessarily costly regulations allegedly bedeviling the object of those very same legislative affections.

I will confess to being skeptical about the argument that high construction costs are largely the fault of regulators.  Building a light water breeder reactor is a technologically challenging and costly undertaking whether regulators are on the scene or not.  Moreover, it is not obvious to me that the regulations that are in place are a priori objectionable from a libertarian perspective.

One rarely, if ever, hears of particulars in this bill of complaint offered about nuclear regulation.  But if a persuasive bill of complaints is ever presented, then the appropriate response is regulatory reform and then to leave the decision to build or not to build to markets.

In the course of announcing these loan guarantees, President Obama said this week that “The fact is, changing the ways we produce and use energy requires us to think anew. It requires us to act anew.”  Well, there’s nothing new about throwing subsidies at nuclear power.  Economist Douglas Koplow calculates that federal nuclear subsidies have totaled $178 billion from 1947-1999.  The promise of a nuclear economy with rates too cheap to meter has been made for over half a century.  What would be new would be a policy of “just saying no” to industries with their hands out in Washington.

[Cross-posted at MasterResource]

Radioactive Corporate Welfare is a post from Cato @ Liberty - Cato Institute Blog

I had an op-ed yesterday in USA Today about President Obama’s proposed new fuel-economy standards. Don’t like ‘em. Unfortunately, an editing snafu over at the newspaper inadvertently left out the fact that there are four models at present that meet the proposed new standard — the 2010 Honda Insight (41 mpg) and the 2010 Ford Fusion Hybrid (39 mpg) were left off the list.

Space prohibited me from making an additional point. Even if there is no rebound effect, my colleague Pat Michaels finds that global temperatures will only be reduced by 0.005 degrees Celsius by 2050 and 0.0078 degrees Celsius by 2100 once you plug those emissions reductions into the computer models used by the IPCC. Of course, proponents contend that U.S. action on fuel efficiency will lead to like action abroad. Well, good luck with that. But even if all of the signatories to the Kyoto Protocol adopted Obama’s proposed fuel-economy standards, global temperatures would be reduced by only 0.038 degrees Celsius by 2050 and 0.071 degrees Celsius by 2100. If you tried to monetarize those benefits, you would be hard pressed to come up with an defensible number of consequence.

So what should be done instead? Nothing. At the risk of sounding politically irrelevant, there is no good case for the government to reduce U.S. gasoline consumption via fuel economy standards or fuel taxes; an argument I made at length in a study I co-authored almost two years ago with my colleague Peter Van Doren.

[Cross-posted at The Corner]

The President’s New Cars is a post from Cato @ Liberty - Cato Institute Blog

Well, sort of.  The Obama administration signaled last week their belief that it would be better to have one national fuel efficiency standard than a multiplicity of different state fuel efficiency standards.  Now, we have long maintained that fuel efficiency standards — federal or state — are a bad idea.  Consumers should be free to buy whatever sort of car they want without government economic coercion.  But if we must do violence to consumer sovereignty, better to do so via one national standard rather than via a hodge-podge of differing state standards.

This is the very argument I made late in January over at The New York Times when asked about California’s petition to establish its own fuel efficiency standard as a means of addressing greenhouse gas emissions.  Alas, I was pilloried on the NYT comments board at that time for all sorts of sins against man and nature.  Now it appears that President Obama has come over to the dark side.  Welcome to my world, Mr. President.

Obama Administration Agrees with Cato on Auto Fuel Efficiency is a post from Cato @ Liberty - Cato Institute Blog

After carefully transcribing and then posting the nearly indecipherable argument forwarded yesterday on NPR’s All Things Considered by David Brooks, I thought, well, even the smartest people in the world can make a verbal hash of things when put on the spot with a live radio or television interview.  I had a nagging feeling that there must have been a well-thought-ought perspective knocking around in those words somewhere.  Was I being unfair to the man?  

And this morning — what do you know! — I open up Friday’s New York Times (I didn’t get to it yesterday) and see an op-ed length treatment of the very argument Brooks tried to make on NPR.  Alas, even when Brooks had a couple of days to think about each and every word, he still managed to be only a smidge less opaque than on NPR.

David Brooks — An Update is a post from Cato @ Liberty - Cato Institute Blog

David Brooks: Thumbs Up for the Housing Bailout is a post from Cato @ Liberty - Cato Institute Blog

In the Washington Post today, staff writer Steven Mufson gets space on the front page to tell us about how the oil price collapse is playing out for oil producers, rival energy generators, and, ultimately, for consumers. Much of what follows is obvious — prices are declining because the economic collapse is hammering demand — but other aspects of the narrative offered by Mufson are on shakier ground.

Ed Morse — managing director and chief economist of LCM Research and a favorite “go-to” guy for print reporters — says, “The last five years saw the rebirth of the use of oil as a critical instrument of foreign policy by key resource countries, Iran, Russia, and Venezuela in particular. With oil and natural gas prices having collapsed, the power of their weapons has been waning rapidly…” Really? When, exactly, have oil-producing states used oil as a weapon in foreign policy over the course of the 2004-2008 price spiral? Have there been embargoes I’ve missed? Strategic production cutbacks tied to the Israeli occupation of the West Bank? Or substantive threats about the same that have been used as an effective lever in international relations? Not that I know of.

The only example I am aware of that Morse might cite to back up his claim is Russia’s ongoing dispute with Ukraine over natural gas prices. But gas producers have leverage in markets that oil producers don’t have, given the much higher transaction costs associated with changing buyer-seller relationships.

In short, Morse’s first claim — that oil producers have been using oil as an effective foreign policy weapon during the boom — is utterly without foundation. His second claim conflates natural gas with oil markets in a manner that muddies the issue. Belief in the “oil weapon” is like belief in UFOs; lots of people claim to have seen such things — and some continue to fear such things — but every attempt at verifying existence has come up empty. The reality is that embargoes can’t deny oil to consuming states given the fungible nature of the international oil market and severe production cutbacks will do far more harm to producers than consumers — which is why we never see those sustained production cutbacks play out.

Next, Mufson implies that energy secretary Steven Chu made some sort of gaffe when he told reporters on Tuesday that OPEC was “not in my domain.” Now, it may be correct that, politically speaking, OPEC is in his “domain,” but the reality is that American pressure on OPEC never has and probably never will have an effect on decisions made by the cartel. OPEC’s aim, after all, is to maximize revenue. Can the U.S. talk OPEC into decisions that will cost OPEC money? Chu’s right to suggest that no mere U.S. energy secretary is capable of such a thing and probably shouldn’t waste much time laboring for such an unlikely end. Bully for Chu — for a few moments at least, he had the courage to say what almost no energy secretary before him has ever dared to say.

Unfortunately, Chu quickly spends his intellectual capital with me in the very next paragraph when he warns that oil prices will likely rise over time. Well, they may, but there is no statistically significant trend toward higher oil prices if we examine quarterly data from 1970 forward. Oil prices move around a lot, but they have always migrated back toward an equilibrium price in the inflation-adjusted mid-$20 range. The belief that oil prices march ever higher over time is widely shared, but has no historical basis.

Chu’s worries about higher prices dovetail with the related warning (this time, from OPEC president Chakib Khelil) that the price respite is only temporary. Soon enough (two years, Khelil says), demand will pick up again and then where will we be? Low oil prices mean cuts in upstream investment which means that, down the road, we’ll get even higher prices than we would have had, had the price collapse never occurred.

Now, it is true that the oil market always has and probably always will move in boom and bust cycles with price spirals and price collapses feeding off one another. But historically, those cycles take a lot longer to play out than a couple of years. We heard the same warning against complacency in 1986 when oil prices went through their last bust cycle — but it wasn’t until 18 years later (2004) that prices recovered and moved into boom cycle once again. And that experience is fairly typical. The time between peaks and valleys in global oil prices run about 20 years apart and have been doing so for over 100 years.

Producers love to warn against low oil prices because, well, they hate them. But the idea that low prices are bad for consumers is one of those things that is so obviously at odds with the reality that one should take such warnings with a heavy block of salt. Domestically, those warnings have been used to justify producer subsidies that fail to pass any reasonable economic test.

Do low oil prices “make it harder for more expensive wind and solar projects to compete,” as Mufson asserts? No. Wind and solar energy does not compete with oil because only a tiny amount of electricity is generated by oil in the United States. Low coal and natural gas prices make it hard for wind and solar to compete. True, fossil fuel prices tend to move roughly in tandem over time, but precision is everything here. Low oil prices do not “cause” natural gas and coal prices to fall and thus do not directly undercut wind and solar.

Finally, what about the dog that’s not barking — that is, what about the claim heard ad infinitum from people like Thomas Friedman and James Woolsey that oil profits are military steroids for Islamic terrorists and that eliminating the same would cut Islamic terrorism off at the knees? So far, we find little evidence that al Qaeda or related groups have been particularly harmed by low oil prices. That shouldn’t surprise — there is no historical correlation between oil prices and Islamic terrorism — whether we’re looking at number of terrorist attacks or fatalities from the same.

[Cross-posted at NRO's The Corner]

Oil Price Collapse — Bad News? is a post from Cato @ Liberty - Cato Institute Blog

In one of the most “you’ve got to be kidding me!” stories that I’ve come across in a while, The New York Times reports that New York City wants to spend $45 million to retrain laid-off Wall Street financiers.  This is so incredibly offensive that I don’t know where to begin.  But I’ll give it a try nonetheless. 

First, just because they are laid-off does not mean that they are poor.  Won’t a lot of this taxmoney be going to, well, rich people who don’t really need it?  Second, even if they now find themselves with nothing, why should the taxpayers come to the rescue?  If they didn’t manage to sock away anything for a rainy day, then tough.  Third, exactly what is New York going to retrain these masters of the universe to do?  This ought to be well worth watching.  Fourth, if they’re smart enough and savvy enough to be the master of the universe, they are smart enough and savvy enough to get back on their own two feet without the hard earned cash pinched from some cabbie somewhere. 

It’s as if The New York Times has become The Onion.

Masters of the Universe – On the Dole is a post from Cato @ Liberty - Cato Institute Blog

I was invited to comment yesterday over at the New York Times on President Obama’s memorandum to the EPA to reconsider its earlier denial of a waiver requested by the state of California; a waiver that would allow that state to impose its own fuel efficiency standards for passenger vehicles and light trucks so as to reduce that state’s greenhouse gas emissions. The simple point I wanted to make at the Times is that allowing this waiver to go through would largely allow that state to dictate fuel efficiency standards for the nation as a whole. I argued that this is probably a bad thing — state action that imposes significant policy changes on the nation as a whole ought to be enjoined and those decisions ought to be left to Congress.

For those of you interested — and who have a strong stomach — read the comments on the board that follows. You might think that there is nothing particularly radical or even ideological in the argument I made. Apparently, you would be wrong.

This morning, I had a chance to reprise that discussion as a guest on the Diane Rehm Show. With me in the studio was David Shepardson, the Washington bureau chief of the Detroit News and Phyllis Cuttino, the director of the Pew Environment Group’s U.S. Global Warming Campaign. You can listen to the show online if you like, but in case you don’t have the time, here are the highlights:

Both Mr. Shepardson and Ms. Cuttino were nearly breathless about the bold, historic step allegedly taken by President Obama this week. Yet is seems to me that telling the EPA to rethink a decision made some months ago — with no stipulation that it actually reverse course — is something short of a political earthquake.  “Bold action” would be legislative proposal to increase federal fuel efficiency standards, impose a federal carbon tax, institute an ambitious cap & trade program, etc. I’m not saying I support that sort of “bold” action, but please — let’s keep things in perspective.

Ms. Cuttino argued at every turn that energy efficiency equals emissions reductions. But it does not. Energy intensity in the United States declined by 34% from 1980 through 2000, but energy consumption increased by 26% over that same period. More ambitious gains in energy efficiency promise no better. For instance, energy intensity in China declined by 70% over that same period while energy consumption increased by 80%.

The only way to reduce greenhouse gas emissions is to increase the marginal price of fossil fuels OR to strictly ration their availability. Everything else is a dodge. Reducing the marginal cost of energy or energy-related services — which is exactly what energy efficiency standards do — will not, in aggregate, reduce energy consumption.

Alas, Ms. Cuttino refused to acknowledge historic reality. When asked by guest-host Susan Page why the environmental community opposes a carbon tax in lieu of energy efficiency standards, she said that such a tax would be regressive. Well, that’s true. But so is a fuel efficiency standard, which imposes a tax on vehicles at the point of purchase. Unfortunately, I did not have the opportunity to jump in with that observation.

Still, Ms. Cuttino does not speak for the environmental community on this. No less than Al Gore is an enthusiastic supporter of (steep) carbon taxes (to be offset with corresponding tax cuts elsewhere).

Ms. Cuttino kept making the point that higher fuel efficiency standards are a free lunch. They will save motorists money, save U.S. automakers from bankruptcy, and rescue jobs in the auto sector. “Who doesn’t want better fuel efficiency?” she asked. Well, apparently, most people who buy cars don’t — not if they have to pay higher sticker prices for that fuel efficiency or give up other amenities. If it were otherwise, then there would be no need for a federal requirement, now would there?

Of course, polls tell a different story. Sure, if you asked me whether I wanted my car to get more miles per gallon, I would say “yes.” But fuel efficiency is not a free good that drops from the sky. There are trade-offs; higher sticker prices (as even California acknowledges in its petition for a waiver), smaller cabins, lighter weight (a safety concern for some) and reduced performance in some areas. Should decisions about how many and what kind of trade-offs to accept in return for fuel efficiency be made individually by consumers or collectively by politicians? I never found time to make that point, but that’s the nub of the issue.

On several occasions, Ms. Cuttino tried to dismiss my criticisms by saying, well, industry always says that the technology doesn’t exist to meet federal standards or that it would prove to costly, but — what do you know? — people like me were wrong then and I’m wrong now. Of course, I never made either of those arguments. I simply noted that there are no free lunches and that fuel efficiency comes at a cost. Heresy!

Ms. Cuttino’s repeated attempts to conflate “Jerry Taylor” with “industry” were particularly annoying. She is the one in favor of bailing out the auto industry. I am the one who is trying to protect the federal till from their political piracy. It’s a curious world when someone who wishes that bankruptcy would be allowed to take its course over at GM is somehow painted as an industry apologist.

National security externalities were also briefly touched on. Ms. Cuttino argued — as do many — that our consumption of oil strengthens anti-American actors abroad by lining their pockets with petrodollars. I pointed out that there is zero statistical correlation between oil profits and terrorism or oil profits and hostility from state oil producing regimes. Sure, it’s better for Iran to have less money than more, but the conceit that reducing oil consumption reduces problems abroad is completely without foundation.

There was, of course, the usual tripe about how how a strong plurality of Americans want this or want that and that a majority of Americans believe this or believe that. I countered with a hardy ”So what?” A plurality of Americans also believe that evolution is an atheistic fiction, so the fact that a majority of Americans think X does not mean that X is true or that X ought to be the law of the land. Unfortunately, a listener in the second hour complained that this sort of response was so snarky that it didn’t warrant anyone’s time. But why?

At the end of the show, I made the point that a couple of the callers seem to be under the impression that I favor a carbon tax. Not so — I said, look, if we have to reduce greenhouse gas emission then a carbon tax makes a lot more sense than an automotive fuel efficiency standard … but I am not there yet. Ms. Cuttino replied, in a rather annoyed voice, that it is impossible to argue with someone who doesn’t believe in climate science or global warming. But when did I say that? I don’t believe that ”climate science” is a figment of the imagination or that the world isn’t warming. I simply believe that the costs of doing something about that warming by reducing greenhouse gas emissions are greater than the benefits — an entirely different matter.

Obama’s ‘Bold’ Action on Climate Change is a post from Cato @ Liberty - Cato Institute Blog

A lot more than we used to think … or so we are told.  Turns out that the economists who study this matter are not so convinced.  Those interested in what the most recent literature review has to say on this topic should go here: http://www.cato.org/pub_display.php?pub_id=9850.  Short answer: If you believe the scientific narrative offered by the IPCC, we’re probably looking at the low-end of $3-$24 per ton of carbon emissions.

How Much Will Global Warming Cost Us? is a post from Cato @ Liberty - Cato Institute Blog

In the course of making his argument that Cato frequently makes counterproductive alliances of convenience (from a strict libertarian perspective, anyway) with corporate special interests, Matthew Yglesias writes at Cato Unbound:

The free-market case for a revenue-neutral carbon pricing scheme seems fairly impeccable to me. But instead of organizing its climate change efforts around seeking to ensure that any future carbon pricing plan be as close to revenue neutral as possible, Cato prefers to steadfastly defend the rights of industry to unload air pollution unimpeded.

I’m not sure how one might define a “free market case” for a revenue-neutral carbon pricing scheme, but the economic case for it would require evidence that (1) the benefits of the tax shift would exceed the costs, and (2) that the proposed tax shift is a less expensive means of addressing climate change harms than other possible remedies.

Regarding (1), the argument is intuitively plausible but is, in fact, quite problematic.  And you don’t need to be a Cato libertarian to come to this conclusion.  You will find great skepticism about the claim that a tax shift would on balance prove economically positive from economist Lawrence Goulder (a supporter of carbon taxes, by the way).  This seminal piece from economists A. Lans Bovenberg and Ruud de Mooij is also good.  As energy economist Stephen Smith observes after surveying the relevant economic literature on eco-tax shifts:

Ecotaxes are likely to involve distortionary costs at least as high as those involved in raising equivalent revenues through existing taxes. If the question is posed whether we would choose to use energy taxes, in preference for existing taxes on labour and other bases, in the absence of any environmental benefits, then the answer is almost certainly that we would not. Energy taxes would be likely to involve just as much distortion of the labour market as income taxes, and at the same time distort the commodity market. Only if there are expected to be environmental gains can the use of environmental taxes be justified, and the case for ecotax reform must be made primarily on the basis of the environmental gains that would result.

Read that last sentence again.

So, are the benefits that might flow from a carbon tax (defined at the monetarized value of the temperature reductions that might follow) greater than the costs of the same?  Energy economist Richard Tol’s review of the published economic literature suggests that the monetarized damages that follow from a ton of carbon emissions at the margin (if mean estimates of future climate change from the IPCC are to be believed) likely works out to about $2.  Hence, if a carbon tax is set above $2 dollars, it will may very well deliver more social costs than benefits.

Regarding (2), Indur Goklany makes a strong case that adapting to climate change and applying targeted public policy initiatives to directly address subsequent harms is much cheaper – and much more effective – than a policy of reducing greenhouse gas emissions.  Moreover, Goklany points out that this conclusion holds even if we accept the worse-case scenarios spun-out in the Stern Review on the economics of climate change.

Of course, Matthew Yglesias is free to disagree with the above.  But the case for a revenue-neutral carbon pricing scheme is not “fairly impeccable” … from an economic perspective, anyway.  There are ample grounds for disagreement … and that’s true even if we ignore the debate about the underlying science.

The “Fairly Impeccable” Case for (Revenue Neutral) Carbon Taxes is a post from Cato @ Liberty - Cato Institute Blog

This week, the Los Angeles Times has invited me to participate in a daily on-line debate (a regular feature they sponsor called “Dust-Up”) with V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies.  Monday, we debated off-shore drilling.  Today, we debated the T. Boone Pickens’ energy plan.  Tomorrow, we’ll debate nuclear energy.  Thursday, the issue is the future of the automobile.  Friday, the topic is what America’s energy economy will and/or should look like in a generation.  While our exchanges won’t be in the newspaper’s print edition, I’ll take the on-line exposure.

So far, I don’t think John has laid a glove on me.  In the off-shore drilling discussion, John has a hard time differentiating between electricity markets and transportation markets.  To say that we should rely on wind, solar, or whatever — and not oil — is to say that we should rely on batteries to run our automotive fleet.  Well, that would be great, but until some pretty big-time breakthroughs occur in battery technology, that’s not going to happen.  Regarding T. Boone Pickens’ energy agenda, I’m still waiting for a concrete argument about why markets “fail” to produce all the investment dollars that this supposedly worthy industry needs.

Tomorrow’s debate will likely produce few sparks.  I’m against nuclear energy subsidies and don’t think the industry would survive without them.  Thursday and Friday, however, will be more interesting.  I don’t have the faintest idea what sort of personal automobiles will be on the market in, say, 2030, and even less idea what the energy economy of the next generation will look like.  I suspect, however, that John thinks it’s all rather obvious where energy markets and technologies are heading and that he has the perfect master plan to most efficiently accelerate all the big-time changes that history has in store for us.

Saying “I don’t know” to questions like these is never that good of an idea if you want to dazzle people with your wisdom and insight.  On the other hand, it’s hard to marshall the argument that “the oil age is over and the age of genetically modified gerbils on treadmills is coming” (or whatever) and then say that the government needs to do something to get us there.  Well, if its so inevitable, then why must government act at all?  We’ll find out if John can manage to resolve that tension in what will likely be his argument.

Energy Dust-Up in LA is a post from Cato @ Liberty - Cato Institute Blog

Last Monday, the Los Angeles Times published an op-ed written by Indur Goklany and me about gasoline prices.  Yesterday, it ran in the Minneapolis Star Tribune Today, that same piece has been posted at the Christian Science Monitor and it will appear in their print edition tomorrow.  Our argument: Once you adjust gasoline prices in 1960 for both inflation and changes in per capita disposable income, you find that gasoline prices today are actually more affordable than they were back then.  Faithful Cato@Liberty readers might well recognize this argument given that it was first offered in a blog post here a few days back by Indur Goklany.

While the predictable grousing on the newspaper comment boards followed (hell hath no fury like a motorist who thinks he was told to stop whining about pump prices), some commenters raised a legitimate issue: Would the picture change if we used median per capita income rather than mean per capita income in our analysis?  Well, yes.  But not by that much.  Let’s walk through the numbers.

First some background.  Income data come from two very different sources.  Disposable income data are produced by the Bureau of Economic Analysis (BEA), an arm of the U.S. Department of Commerce, as part of its effort to estimate the gross domestic product (GDP).  Data on family and household income come from surveys conducted by the Census Bureau.

Disposable income per capita or mean disposable income is simply total disposable income divided by the population of the United States.  Median disposable income data, however, are not available because the GDP data do not come from household surveys.  Only surveys allow us to rank order all the households (or families) and find the number that divides the bottom 50 percent from the top 50 — the definition of the median.

Median income estimates from Census data (the Current Population Survey or CPS) are available only for households and families.  Data regarding median household income are only available from 1967 to the present, so the only measure available to us for longer term analysis is median family income.  But BEA and CPS definitions of income differ.  In 2001 for example, BEA personal income totaled $8.678 trillion while CPS money income totaled $6.446 trillion.   The two income time series differ in important ways.  For example, BEA data include property income and adjustments for underreporting of proprietor’s income.  

With that out of the way, let’s get to the numbers.

(Leaded) Gasoline prices in 1960 averaged 31.1 cents per gallon.  Median family income in 1960 was $5,620.  In 2006 (the most recent year for which we have reliable data), median family income stood at $58,407.  If the price per gallon were the same percent of median family income in 2006 as in 1960, the 1960 price would translate into $3.23 in 2006.  Unfortunately, the (median family income) data aren’t yet available for calculations applying to 2007 or 2008.

A complete history of fuel prices for 1949-2006, adjusted for changes in median family income, can be seen in the figure below.

Offsetting the fact that the price of gasoline as a function of median family income is probably (somewhat) higher today than it was in 1960 is the important fact that vehicle fuel economy is better today than it was then.  The gasoline consumed by passenger cars in 1960 was 14.26 miles per gallon.   By 2006, it was 22.4 mpg.   Even the mileage for all other 2-axle 4-tire vehicles (lights trucks, etc.) in 2006 was 18.0 mpg — higher than the fuel efficiency of cars in 1960.  Hence, the cost of the fuel necessary to drive a mile might well be less today that it was in 1960 if we’re adjusting for changes in median family income.  Again, I say “might” because 2007 and 2008 data are not yet available to provide concrete numbers.

On the other hand, it is certainly true that people have responded to higher incomes and better fuel efficiency by driving more.  Vehicle miles per capita in 1960 were 3,249; in 2006, it had increased to 9,171 (the numbers are author calculations based on vehicle miles traveled data from National Transportation Statistics table 1-32 and population data from Statistical Abstract of the United States Table 1. The 2006 VMT figures includes passenger cars and other 2-axle 4 wheeled vehicles).   Vehicle miles traveled is a function of individual decisions about where to live, where to shop, and how to spend discretionary income.  Many people, of course, made decisions about those things when fuel prices were at their historic lows (the late 1990s) and now find that those decisions are now more costly.  Adjustments are and will continue to occur on this front.

A comprehensive measure of how these various factors — higher fuel prices, higher incomes, better mileage, more miles traveled — work to affect the cost of driving is the percent of disposable personal income spent on gasoline and on all user-owned transportation expenditures over time.  And what do you know?  The percent of income we spend on transportation has been remarkably constant over time even though the distance we travel per capita has nearly tripled (The data for this calculation come from the GDP data available from the National Income and Product Accounts Table 2.5.5 line 69 (total user-owned transportation expenditures) and line 75 [gasoline and oil expenditures] and table 2.1 line 26 [disposable personal income]).

• In 1960, gasoline expenditures were 3.3% of disposable personal income.  In 2007, gasoline expenditures constituted 3.4% of disposable personal income.
• In 1960, total user-owned transportation expenditures were 10.8% of personal income.  In 2007, those costs constituted 10.5% of personal income.

So no matter how you slice the (available) data, it tells more or less the same story.  All things considered, the cost of driving is reasonably affordable today relative to what it has been in the past.

Update: Data links added.

Gasoline Affordability Reconsidered is a post from Cato @ Liberty - Cato Institute Blog

One of the oft-encountered talking points offered by the Left is the extent to which the Bush administration has alternatively ignored, intimidated, and done violence to the scientific community. The picture being painted is that of a know-nothing Christian fundamentalist in the thrall of corporate America waging unremitting war against the Enlightenment.

While there is enough truth to this charge to give it legs, the “science” lobby is scarcely blameless. For all the moral and ethical posturing surrounding the sanctity of “the scientific process” and the need to keep the same safe from assaults by power-hungry politicians and ignorant political mob action, climatologist James Hansen’s recent call to literally criminalize disagreement with him about climate change is a more radical assault on the the scientific process and the scientific method than anything forwarded by the Bush administration.

Now, James Hansen would probably argue that he’s not interested in criminalizing disagreement per se; he’s interested in criminalizing dangerous, life-threatening speech that the speaker knows is fraudulent. Perhaps. But exactly what is the nature of this special mind-reading power that allows James Hansen to determine that Rex Tillerson, head of ExxonMobil, believes X but says Y? Is it so beyond the realm of possiblity to think that Rex Tillerson actually believes what he says (pace, say, commentary by our own Pat Michaels on the subject)? Or does James Hansen presume to know Pat Michaels’ true and secret thoughts as well?

To the extent that James Hansen’s views are embraced by the self-appointed gendarmes of science, politicians are right to suspect that climate change alarmism is heavily influenced by the lust for power, the demands of ego, and the pursuit of political agendas that go far beyond a disinterested search for scientific truth. Moreover, one can’t help but wonder about the strength of an argument that requires the threat of force to silence critics.

Call me an idealogue, but criminalizing skepticism about scientific theories is probably not the best way to facilitate the quest for scientific truth.

Scientists Gone Wild is a post from Cato @ Liberty - Cato Institute Blog

For those of you not in the cultural “know,” Sim-City is a long-standing series of computer games which asks the player to essentially play the role of a Stalinist super-planner. What to build, where to build, and how people are to relate to all those buildings in your custom-designed city is up to you, the all-knowing, all-powerful uber-planner.

It’s all good fun in the privacy of your own home (I guess), but is this the sort of game we want the next President to play? I’m going to go out on a limb and say no. John McCain, however, seems to disagree.

Consider, for instance, John McCain’s call earlier this week for the United States to build 45 new nuclear power plants by 2030 and another 55 sometime after that. The first question that comes to mind is, why 45? Did the McCain brain trust engage in some high level economic computer modeling to discover that the optimum number of new nuclear power plants is not 42, 47, or some other number … but the nice, round number of 45? I’m going to guess that they did not. I’m going to surrender to my cynical alter-ego and posit that, if one were to ask the question, “Sen. McCain, how exactly did you come to the determination that the economically optimal number of new nuclear power plants is 45 new facilities over the next 22 years?” the answer you would get would likely be totally incomprehensible.

There are two ways we can go on energy policy. We can leave the decisions about what to build and when to build to market actors (disciplined as they are by hard costs and incentivized as they are by the pursuit of profit), or we can leave that task to political uber-planners who are not disciplined by either but are disciplined by campaign contributions, polling data, and periodic popularity contests. Call me a crazy ideologue, but I suspect that the economy would prove more efficient with the former rather than the latter approach.

Note: The reason we hear politicians like John McCain talk so much about the need for the federal government to promote nuclear power is because investors in the private sector take one look at the economics and run screaming for the hills. Investment banks tell utilities who want to borrow money to build these things that not one red cent will be coming their way unless and until the federal taxpayer guarrantees that the entire loan will be repaid in case of default. If nuclear power were such a good economic bet, those taxpayer guarantees would not be necessary.

John McCain’s SimCity Energy Plan is a post from Cato @ Liberty - Cato Institute Blog

One of my pricier trade newsletters, Greenwire, reports today that Honda is manufacturing a “zero emission” vehicle. Their source? A story in today’s New York Times which spills a great deal of ink on the environmental promise of these sorts of vehicles. Well, nonsense. The hydrogen has to come from somewhere, and the emissions associated with producing that hydrogen are far from zero. In fact, hydrogen-powered vehicles are, on balance, even dirtier than conventional internal combustion engines.

Next time you see Jamie Lee Curtis tooling around in one of these things, tell her to buy some carbon credits. A lot of them.

Hydrogen Car Hooey is a post from Cato @ Liberty - Cato Institute Blog

If you’re free Friday morning, you might want to hop on over to the Russell Senate Office Building to learn about the amazing, inexplicable, short-sighted market bias against straw-bale buildings and the need for the feds to do something about it. The Environmental & Energy Study Institute, the sponsor of this event,

Invites you to learn how the ‘new but old’ method of straw-bale construction can help address some of our most serious national policy challenges, such as record energy prices and unemployment, inadequate supply of affordable housing, the threat of climate change, and pressing needs in transportation and infrastructure funding. The modern building industry places heavy demands on the energy and transportation sectors. Straw is a locally-sourced, widely available, and renewable resource that builders, architects, engineers, and home owners are turning into affordable, safe, durable, and energy-efficient buildings in many climates. The following presenters will discuss the benefits of using this American invention, the regulatory barriers and institutional biases against straw-bale construction, and the role of the federal government in resolving these issues.

And that parable about the three little pigs? A PR smear spun by “Big Brick” no doubt.

Sustainable Architecture – A (Real Life) Straw Man? is a post from Cato @ Liberty - Cato Institute Blog