One observation from my recent experience with climate policy in California is that businesses – even energy intensive ones – are uncertain how to engage in the public debate. Climate policy is a messy space with many competing options, and it’s hard to know what to wish for. With that in mind, here’s a quick survey of what various business groups are saying.
Every year or two the “gas out” email arrives in my inbox. This year, it’s May 15th when “all internet users are to not go to a gas station in protest of high gas prices.” Wait – am I supposed to avoid gas stations, or protesting at gas stations? I’m amazed at the durability of this internet chain letter, which now claims a ten-year history: “In April 1997, there was a “gas out” conducted nationwide in protest of gas prices. Gasoline prices dropped 30 cents a gallon overnight.” A Monty Python tune from The Meaning of Life jumps to mind:
So remember when you’re feeling very small and insecure
How amazingly unlikely is your birth
And pray that there’s intelligent life somewhere up in space
Because there’s bugger all down here on earth.
The NYT reports that a switch to efficient cars is underway, as evidenced by, among other things, an increase in market share for small cars from an eighth of the market at the height of SUV-mania to a fifth today, together with a sharp drop in large truck and SUV sales.
If sustained, such a shift would signal a very significant sensitivity of vehicle efficiency purchasing habits to fuel prices – perhaps much larger than the low short run price elasticity of gasoline demand. However, I think there is reason to interpret these recent events cautiously, lest they prove a little less astonishing in the long run. Continue reading “The Switch to Small Cars – Not So Fast”
DeSmogBlog documents scientists’ outrage at inclusion on Dennis Avery’s list of 500 Scientists with Documented Doubts of Man-Made Global Warming Scares. Amusingly, the scientists concerned, a few of whom are deceased, are listed as “Co-Authors”. I’m going to put this new “open coauthoring” concept to work – I’m already working on abstracts. First, I think I’ll lower my Erdős number – Paul, dude, you can be my second. Next, I think I’ll team up with Einstein and Bohr to finish up quantum gravity.
The NYT reports that Hillary Clinton and John McCain have lined up to suspend federal excise taxes on fuel:
Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.
Mrs. Clinton would replace that money with the new tax on oil company profits, an idea that has been kicking around Congress for several years but has not been enacted into law. Mr. McCain would divert tax revenue from other sources to make the highway trust fund whole.
On April 22, EIA data put WTI crude at $119/bbl, which is $2.83/gal before accounting for refinery losses. Spot gasoline was at $2.90 to $3.14 (depending on geography and type), which is about what you’d expect with total taxes near $0.50 and retail gasoline at $3.55/gal. With refinery yields typically at something like 85%, you’d actually expect spot gasoline to be at about $3.30, so other, more-expensive products (diesel, jet fuel, heating oil) or cheaper feedstocks must be making up the difference. The price breaks down roughly as follows:
Today ScienceDaily brought the troubling news that, “There was a steady increase in mortality inequality across the US counties between 1983 and 1999, resulting from stagnation or increase in mortality among the worst-off segment of the population.” The full article is PLoS Medicine Vol. 5, No. 4, e66 doi:10.1371/journal.pmed.0050066. ScienceDaily quotes the authors,
Ezzati said, “The finding that 4% of the male population and 19% of the female population experienced either decline or stagnation in mortality is a major public health concern.” Christopher Murray, Director of the Institute for Health Metrics and Evaluation at the University of Washington and co-author of the study, added that “life expectancy decline is something that has traditionally been considered a sign that the health and social systems have failed, as has been the case in parts of Africa and Eastern Europe. The fact that is happening to a large number of Americans should be a sign that the U.S. health system needs serious rethinking.”
I question whether it’s just the health system that requires rethinking. Health is part of a complex system of income and wealth, education, and lifestyle choices:
A pair of papers in Science this week refines the understanding of the acceleration of glacier flow from lubrication by meltwater. The bottom line:
Now a two-pronged study–both broader and more focused than the one that sounded the alarm–has confirmed that meltwater reaches the ice sheet’s base and does indeed speed the ice’s seaward flow. The good news is that the process is more leisurely than many climate scientists had feared. “Is it, ‘Run for the hills, the ice sheet is falling in the ocean’?” asks glaciologist Richard Alley of Pennsylvania State University in State College. “No. It matters, but it’s not huge.” The finding should ease concerns that Greenland ice could raise sea level a disastrous meter or more by the end of the century. Experts remain concerned, however, because meltwater doesn’t explain why Greenland’s rivers of ice have recently surged forward.
A remarkable excerpt:
The meltwater monitoring caught a 4-kilometer-long, 8-meter-deep lake disappearing into the ice in an hour and a half. As theorists had supposed, once the lake water was deep enough, its weight began to wedge open existing cracks, which only increased the weight of overlying water on the crack tip and accelerated cracking downward. Once the main crack reached the bottom of the ice, heat from churning water flow melted out parts of the fracture, and drainage took off. The lake disappeared in about 1.4 hours at an average rate of 8700 cubic meters per second, exceeding the average flow over Niagara Falls. That’s almost four Olympic pools a second.
Check it out (subscription required).
Naked Capitalism asks Why Companies Aren’t Fighting Climate Change, citing interesting new work by Karin Thorburn and Karen Fisher-Vanden, which indicates that firms lose value when undertaking (or at least signaling) greenhouse gas emissions reductions.
Specifically, we studied the stock market’s reaction when companies joined Climate Leaders, a voluntary government-industry partnership in which firms commit to a long-term reduction of their greenhouse gas emissions. Importantly, when the firms announced to the public that they were joining Climate Leaders their stock prices dropped significantly.
Naked Capitalism concludes that, “the stock market doesn’t get it.” Thorburn and Fisher-Vanden actually go a little further,
The negative market reaction for firms joining Climate Leaders reveals that the reduction of greenhouse gases is a negative net present value project for the company. That is, the capital expenditures required to cut the carbon footprint exceed the present value of the expected future benefits from these investments, such as lower energy costs and increased revenue associated with the green goodwill. Some may argue that the decline in stock price is simply evidence that the market is near-sighted and ignores the long-term benefits of the green investments. Notice, however, that the stock market generally values uncertain cash flows in a distant future despite large investments today: earlier work has shown that firms announcing major capital expenditure programs and investments in research and development tend to experience an increase in their stock price. Similarly, the stock market often assigns substantial value to growth companies with negative current earnings, but with potential profits in the future. In fact, only two percent of the publicly traded firms in the United States have joined the Climate Leaders program to date, supporting our observation that initiatives aimed at curbing greenhouse gas emissions largely are value decreasing.
I personally don’t drink enough of the economic Kool-aid to take it on faith that market perceptions are consistently right. For one thing, high oil prices haven’t been around for very long, which means that firms haven’t had a lot of time to take profitable actions. Markets haven’t had a lot of time to believe in the staying power of high oil prices or to separate the effects of firms’ energy and carbon efficiency initiatives from the noisy background. Expectations could easily be based on a bygone era. However, even if there are some $20 bills on the sidewalk at present, Thorburn and Fisher-Vanden are certainly correct in the long run: emissions reductions will entail real costs at some point. Continue reading “The Volunteers Have No Clothes”
Last Wednesday, President Bush called for the US to halt the growth of greenhouse gas emissions by 2025:
‘It is now time for the U.S. to look beyond 2012 and take the next step,’ Mr. Bush said, a reference to his previously stated national goal, announced in 2002, of an 18 percent reduction in the growth of emissions of heat-trapping gases relative to economic growth by 2012. Mr. Bush said the nation was on track to meeting that target. – NYT
Those who remember the 2002 commitment may recall that, at the time, emissions intensity had historically fallen by 1.3% per year on its own, so that the administration policy actually committed only to an additional 0.4% decline (assuming continuity with history). With GDP growth at about 3% per year, that would leave absolute emissions growing at about 1.7% per year. In fact, intensity has fallen about 2.5% per year since 2002, with much of that in 2006. Since it’s way too soon for investments in climate-related R&D to be having any effect, it’s likely that the savings are due to $100 oil. That is not an emissions reduction method that is likely to pass a cost-benefit test.
In the context of the long term,-2.5% over 4 years is still hard to separate from noise. Continue reading “Plus ça change, plus c’est la même chose”
As an experiment, I’ve created a wiki for dynamic models. I’m gradually migrating my existing model library into the wiki, in the hope that it will be easier to maintain and more useful for visitors. I’ve also created a public model library section so that users can submit new material. Check it out!