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Category: environment

Published on Leave a comment on First, Let’s Get the Prices Right

The Boston Globe ran a story on Friday about NStar's decision to "pay double the cost of conventional energy for Cape Wind power."  The quote is the headline, and the "cost" self-evidently does not include all of the externalities associated with burning fossil fuels.  I don't know if those external costs of transporting and burning natural gas would double the price, but that's the key piece of information required to make sense of the information presented. 

If you read the article, you will see that much of the public disagreement is about whether paying the extra amount for the cleaner energy is worth the environmental benefits.  If you want to make better policy, a wiser course of action would be to resolve what those benefits are and put a price on them.  With that price established, the decisions about whether a given project is worth the cost don't have to play out in public -- private companies can make those decisions and then come to market or not with power to sell.

The article also notes that this source of power would "add about $1 to customers' monthly bills in the first year" (presumably because this is only 2 percent of the load).  It seems like a sensible way to start off with renewable energy in the Northeast.

Published on Leave a comment on I Will Not Be Running a Benefit

For the ethanol producers (based on the first paragraph), but I'll stop short of declaring the Renewable Fuels Association a microeconomics-free zone (based on the second paragraph).  As Robert Pear reports in Sunday's edition of The New York Times:

“We may be the only industry in U.S. history that voluntarily let a subsidy expire,” said Matthew A. Hartwig, a spokesman for the Renewable Fuels Association, a trade group for ethanol producers. “The marketplace has evolved. The tax incentive is less necessary now than it was just two years ago. Ethanol is 10 percent of the nation’s gasoline supply.”

In response to a question about how the loss of the subsidy might affect prices and supply, Mr. Hartwig said: “We don’t expect the price of corn to fall or rise just because the tax incentive goes away. We will produce the same amount of ethanol in 2012 as in 2011, or more.”

Representative Jeff Flake, Republican of Arizona, said, “With record deficits and a ballooning national debt, it was ludicrous to expect taxpayers to pay billions to prop up a mature industry that should be able to fend for itself.”

I would still prefer a carbon tax on nonrenewable fuels, but this is a step in the right direction.  Let's hope the subsidy doesn't "unexpire" with election-year politics.

Published on Leave a comment on Gridlock on Electric Highways

When I suggested the need for a capital budget, these were the sort of problems I wanted to avoid (this one in my own backyard):

CONCORD, N.H.—Northern New England is turning to the sun, wind and waste wood for clean, renewable power, but there's a serious problem: the threat of gridlock on electricity "highways."

A prime example is New Hampshire's northern Coos County, where there are proposals to build renewable energy plants with roughly 460 megawatts of capacity -- two-thirds of the proposed renewable projects in the state -- to run over a transmission line that can only handle 100 megawatts.

The bottleneck is in Whitefield, the end of a transmission loop that runs through Berlin and Lost Nation.

Projects are approved on a first-come, first-served basis, and the first in line, Noble Environmental Power, stands ready to claim the entire 100 megawatts in 2009 for a wind park. That will leave the other proposals to wither and die if investors, electricity consumers or the government don't spend $200 million to upgrade 100 miles of line.

Even if the money were available now, the upgrade could take six years to complete, presenting investors with another hurdle -- time.

Last month, backers of a proposed 70-megawatt biomass plant in Groveton announced they had had enough, at least for now. Joshua Levine, project developer for Tamarack Energy, a partner in North Country Renewable Energy's plant, said the project is on hold despite the $1 million already spent on it.

The plant would burn wood chips, low-grade wood from logging operations and other clean wood readily available in the economically stressed region.

If we intend to bring new sources on line, we need to upgrade capacity. It's crazy to have $150 billion for economic stimulus on things we don't need and yet be cash starved on projects for which we've articulated a need.

Published on Leave a comment on The Skeptical Pacificst, The Enthusiastic Environmentalist

I was not aware that one could be awarded the Nobel Peace Prize for environmental advocacy. Outsourced to New Hampshire's own Eagle Times:

There's no shortage of potential Nobel Peace Prize winners who might have more closely reflected Alfred Nobel's intent than Al Gore. What of the student protesters in Iran who dare to challenge the repressive theocracy led by Mahmoud Ahmadinejad? What of the Buddhist monks recently slaughtered by the repressive government of Myanmar? What of the Lebanese political leaders seeking to end Syrian domination of their country? Other nominees this year included a former Finnish president who worked for peace in a region of Indonesia and a Vietnamese monk who leads pro-democracy efforts.

Okay, on to a more constructive note.

I've seen two very interesting things this past week about climate change. The first was Bjorn Lomborg's op-ed in the Washington Post last Sunday. As Lomborg stresses, regardless of your views about each element of the climate change debate, there ought to be some consistency in your proposals about reform. To an economist, the consistency comes from being explicit about the problem to be addressed, the costs and benefits involved for each possible solution to that problem, and committing to the possible solutions that have the highest projected benefits relative to costs. Here's a good example from the op-ed:

The Kyoto Protocol, with its drastic emissions cuts, is not a sensible way to stop people from dying in future heat waves. At a much lower cost, urban designers and politicians could lower temperatures more effectively by planting trees, adding water features and reducing the amount of asphalt in at-risk cities. Estimates show that this could reduce the peak temperatures in cities by more than 20 degrees Fahrenheit.

Global warming will claim lives in another way: by increasing the number of people at risk of catching malaria by about 3 percent over this century. According to scientific models, implementing the Kyoto Protocol for the rest of this century would reduce the malaria risk by just 0.2 percent.

On the other hand, we could spend $3 billion annually -- 2 percent of the protocol's cost -- on mosquito nets and medication and cut malaria incidence almost in half within a decade. Malaria death rates are rising in sub-Saharan Africa, but this has nothing to do with climate change and everything to do with poverty: Poor and corrupt governments find it hard to implement and fund the spraying and the provision of mosquito nets that would help eradicate the disease. Yet for every dollar we spend saving one person through policies like the Kyoto Protocol, we could save 36,000 through direct intervention.

I'm not enough of an expert to know if the magnitudes check out, but this reasoning should be welcome in the debate over reform, as long as there remains a commitment to by all parties to getting the best reforms done. (It echoes other sensible voices here and here, though coming to different conclusions in some cases. I've made analogous points about reforms to Social Security here.)

The second thing was a presentation by Dan Reicher, a member of the Rockefeller Center's Board of Visitors, and now the Director of Climate Change and Energy Initiatives at Google.org. It's "RechargeIt.org" initiative is one of the coolest approaches to reshaping energy use and distribution that I've ever seen. Listen to Dan's podcast here.

Published on Leave a comment on Dynamic Scoring in Unusual Places

It may not yet be a staple of federal budget policy, but dynamic scoring has come to the New Hampshire/Massachusetts border. From Friday's Associated Press:

The long-planned expansion of Interstate 93 has been pushed a little further down the road. A federal judge ruled yesterday that before they can move ahead with the project, state and federal highway officials must do more work to study the population growth that would be spurred by the widening itself.

The ruling was a victory for environmentalists who argue that widening the road to four lanes between Manchester and the Massachusetts border would itself cause population growth that will lessen the usefulness of the widening, congest secondary roads and cause air pollution.

Of course, it is only a partial equilibrium analysis. Where does the additional population come from? Does their relocating to southern New Hampshire alleviate traffic problems elsewhere, and should that benefit be considered as well?

On the substance of the case, the Conservation Law Foundation is arguing that the resolution of the traffic problems ought to include commuter rail options. I'm sympathetic to the point. It has always been a bit of a surprise that there is no rail link between Boston and Concord, New Hampshire, given the proximity and the number of commuters who now go by car.

Published on Leave a comment on Biofuels, Meet Opportunity Cost

Posted Thursday at New Scientist is a report of this article in Science magazine. Here's the intro:

It sounds counterintuitive, but burning oil and planting forests to compensate is more environmentally friendly than burning biofuel. So say scientists who have calculated the difference in net emissions between using land to produce biofuel and the alternative: fuelling cars with gasoline and replanting forests on the land instead.

They recommend governments steer away from biofuel and focus on reforestation and maximising the efficiency of fossil fuels instead.

The reason is that producing biofuel is not a "green process". It requires tractors and fertilisers and land, all of which means burning fossil fuels to make "green" fuel.

The ultimate irony would be chopping down forest land to plant biofuel crops. Consider the following:

The researchers also compared how much carbon would be stored by replanting forests with how much is saved by burning biofuel grown on the land instead of gasoline.

They found that reforestation would sequester between two and nine times as much carbon over 30 years than would be saved by burning biofuels instead of gasoline (see bar chart, right). "You get far more carbon sequestered by planting forests than you avoid emissions by producing biofuels on the same land," says Righelato.

He and Spracklen conclude that if the point of biofuels policies is to limit global warming, "policy makers may be better advised in the short term to focus on increasing the efficiency of fossil fuel use, to conserve existing forests and savannahs, and to restore natural forest and grassland habitats on cropland that is not needed for food."

They do admit, however, that biofuels made from woody materials such as prairie grasses may have an advantage over reforestation – although it is difficult to say for now as such fuels are still in development.

Putting energy reform in the hands of domestic agricultural producers seems like no better an idea than putting it in the hands of domestic petroleum producers.

Published on Leave a comment on Global Climate Change

Catching up on my reading after some recent travels, I notice an excellent symposium on "Global Climate Change" in the latest Economists' Voice, with contributions from Joseph Stiglitz, Sheila Olmstead and Robert Stavins, Kenneth Arrow, and Thomas Schelling. The first and the last were particularly interesting.

From Stiglitz, arguing for a global environmental tax on emissions:

The big advantage of taxation over the Kyoto approach is that it avoids most of the distributional debate. Under Kyoto, getting the right to pollute more is, in effect, receiving an enormous gift. (Now that pollution rights are tradeable, we can even put a market value on them.) The United States might claim that because it is a larger country, it "needs" more pollution rights. Norway might claim that because it uses hydroelectric power, the scope for reducing emissions is lower. France might claim that because it has already made the effort to go into nuclear energy, it should not be forced to reduce more. Under the common tax approach, these debates are sidestepped. All that is asked is that everyone pay the social cost of their emissions, and that the tax be set high enough that the reductions in emissions is large enough to meet the required targets.

Greg Mankiw has previously confirmed Stiglitz' entry into his Pigou Club. From Schelling, a good discussion of how to appreciate the uncertainty of projections of climate change:

In some public discourse, and in sentiments emanating from the Bush Administration, it appears to be accepted that uncertainty regarding global warming is a legitimate basis for postponement of any action until more is known. The action to be postponed is usually identified as “costly.” (Little attention is paid to actions that have been identified as of little or no serious cost.) It is interesting that this idea that costly actions are unwarranted if the dangers are uncertain is almost unique to climate. In other areas of policy, such as terrorism, nuclear proliferation, inflation, or vaccination, some “insurance” principle seems to prevail: if there is a sufficient likelihood of sufficient damage we take some measured anticipatory action.

At the opposite extreme is the notion, often called the “precautionary principle” now popular in the European Union, that until something is guaranteed safe it must be indefinitely postponed despite substantial expected benefits. Genetically modified foods and feedstuffs are current targets. (One critic has expressed it as, “never do anything for the first time.”) In this country the principle says that until a drug has proven absolutely safe it must be deferred indefinitely.

Neither of the two extreme principles—do nothing until we are absolutely sure it’s safe; do nothing until we are absolutely sure the alternative is dangerous—makes economic sense, or any other kind. Weigh the costs, the benefits, and the probabilities as best all three are known, and don’t be obsessed with either extreme tail of the distribution.

Kudos to Lawrence Goulder for putting this together as special editor.

Published on Leave a comment on More CO2 Emission Comparisons

It seems like I'm not the only one making comparisons of greenhouse gas emissions from alternative processes. From our friends at the AFP, via TerraDaily in the aptly named "Eat a Steak, Warm the Planet:"

A kilogram (2.2 pounds) of beef causes more greenhouse-gas and other pollution than driving for three hours while leaving all the lights on back home, according to a Japanese study. A team led by Akifumi Ogino of the National Institute of Livestock and Grassland Science in Tsukuba, calculated the environmental cost of raising cattle through conventional farming, slaughtering the animal and distributing the meat, New Scientist reports in next Saturday's issue.

Producing a kilo (2.2 pounds) of beef causes the equivalent of 36.4 kilos (80.08 pounds) in carbon dioxide (CO2), the principal greenhouse gas, Ogino found.

Most of these greenhouse-gas emissions take the form of methane, released from the cow's digestive system.

That one kilo (2.2 pounds) of beef also requires energy equivalent to lighting a 100-watt bulb for nearly 20 days. The energy is needed to produce and transport the animals' feed.

A Swedish study in 2003 suggested that organic beef emits 40 percent less greenhouse gases and consumes 85 percent less energy because the animal is raised on grass rather than concentrated feed.

The study appears in full in a specialist publication, Animal Science Journal.

The full paper is here, if your library subscribes.

Comparing this to other sources of CO2 emissions, the 80 pounds of CO2 emitted is equivalent to that emitted by 4 gallons of motor fuel. It seems like we need to expand our systems of tradable permits to include enteric methane, or cut back on the product.

Published on Leave a comment on Getting There Was More than Half the …

For my second to last post about our trip to Hawaii, I wanted to point out something about energy consumption and CO2 emissions that I had not previously appreciated.

We flew from Boston to San Francisco (2704 miles) and then San Francisco to Honolulu (2398 miles), for a total of 5102 miles each way or 10204 miles total. How much fuel did we use (assigning us our per capita share for the plane as a whole)?

This page cites an FAA estimate of 48 miles-per-gallon-per-seat and notes that a gallon of jet fuel and a gallon of gasoline create about the same amount of CO2 emissions. This means that as a family, our share of the fuel used was about 4 x 10204 / 48 = 850 gallons. Let's compare that to two other fuel numbers around the Samwick household.

First, I estimate that we drive our cars no more than 1000 miles a month on average and get at least 20 miles per gallon on average, resulting in gasoline consumption of no more than (12 x 1000 / 20) = 600 gallons per year.

Second, we have used about 1100 gallons of #2 fuel oil to heat our home in each of the past few years. (What can I say, we like to be comfortable?) This page shows the CO2 emissions by fuel type, putting the fuel oil on a par with jet fuel, which are both a bit higher than gasoline.

One (glorious) trip to Hawaii used 75% of the fuel we use to heat our home or 140% of the fuel we use to power our cars, with corresponding amounts of CO2 emitted.

As it pertains to energy and environmental policy, this example shows how important it is to be comprehensive in our attempts to reduce oil demand. The most straightforward way to do that is to levy a tax on all fuel products derived from petroleum. It allows abatement to occur at every possible margin--by flying, driving, or heating less or by using technologies that are more fuel efficient.