Showing posts with label carbon tax. Show all posts
Showing posts with label carbon tax. Show all posts

Saturday, December 27, 2008

Living well with less energy - lessons from tobacco

If we had the right price signals, we could live well with far less energy that we use now.

Consider the passively heated home. It's a marvel of efficient engineering and, in some climates, can operate without a dedicated furnace.

Of course we can't rebuild all our homes this way, but it's easy to imagine that, over the next twenty-five years, per capita US energy consumption could fall by 3-5% a year even as GDP rises.

Of course that won't happen with oil company ads urging energy conservation. Those remind me of tobacco ads urging health lifestyles. You know, the ads the tobacco companies ran when they were trying to fend off cigarette taxes.

The tobacco taxes came, and, shock, twenty years later public smoking is rare in Minnesota.

It's very hard to stop smoking, but people did it. It's easier never to start smoking, and people did that too. The campaign against smoking is a blueprint for transforming America's energy habit.

The campaign needs to start with price signals. Without them we're just pretending. Regulations are a feeble substitute for a serious carbon tax.

Today the NYT Editorial page called for a gasoline tax offset by other tax reductions. This is only the beginning of what will be a long and terrible political process that will need support from every friend of reason.

If we're lucky carbon and gas taxes will be a core campaign issue in 2008. It will be a tough campaign of course, we know the GOP will continue their war against civilization and reason, we know the GOP will do everything possible to leave the human world a smoldering ruin*.

I hope you've enjoyed your pre-inaugural rest, but that's over now.

* Which makes the GOP, ironically, a sort of Green party -- but that's another story.

12/28/08: Uh-Oh. Friedman agrees. Which reminds me that gasoline and carbon taxes are quite different. A gasoline tax that leads to electric cards powered by coal-fueled plants would be an absolute disaster. The primary argument for a gasoline tax is to reduce dependency on Saudi Arabia, but I suspect that's a misguided mission. The carbon tax is what we need; a gasoline tax is secondary.

Wednesday, December 03, 2008

The GM bail out: fund it with a carbon tax, a break-up, and new fuel efficiency standards

Robert Reich is on fire. He's got one great Keynes mini-bio post, and another on why it's absurd to make fuel-efficient car manfacture a GM bailout condition.

Happily, my tyrannic rule is no longer needed in the blessed reign of Obama. If I were tyrant, however, these would be my bail-out conditions:
  1. Bail and break: Too big to fail means too big to live. Make breaking up GM a condition of the bail-out
  2. Per Reich: industry must sign-on to new fuel efficiency standards.
  3. Account for the bail-out monies through a carbon tax (not a gas tax directly).
  4. Offset the carbon tax (the Great Recession is the wrong time to increase next taxes) with a large investment in public transit development and universal wireless internet access to diversify commuting-free employment.
The same terms would, of course, need to be offered to every automotive manufacturer, not just GM.

Thursday, October 16, 2008

Peak Oil? Hell, yes.

The cost of oil is cratering.

Oil Below $70, a Price Last Seen in June 2007 - NYTimes.com

… Oil prices plummeted on Thursday, falling below $70 a barrel for the first time in 16 months, and prompting the OPEC cartel to call for an emergency meeting next week…

… Oil prices have dropped sharply in recent weeks amid the economic crisis and lower consumption in developed nations. In New York, oil futures fell as much as 8 percent to $68.57 a barrel on Thursday, their lowest since June 2007. Oil has lost half its value since hitting a record closing price of $145.29 a barrel in July…

So do I stand by my Peak Oil call of August 2008?

I say Peak oil is here.

I say that despite, in my 1979 chemical engineering class, being told that peak oil was coming in the late 1980s (I think we reviewed the 1957 Rickover speech back then). I say this despite remembering Jimmy Carter's peak oil prediction in the 1970s.

Of course I'm really talking about Peak sweet light oil, and I don't mean "Peak" in absolute, or even demand > supply, I mean Peak in terms of rational market expectation of a > 70% probability that demand > supply within 5-8 years.

Basically I'm claiming that the price increases of this past year were due to praiseworthy speculation on the fundamentals rather than salacious speculation on psychology.

This means I'm expecting oil to go to Dyer's $200/bbl limit at least once in the next five years, though it may transiently fall back to $80 along the way. After 5-8 years it will be very apparent that oil will be a shrinking percentage of our energy supply, and that in the absence of a severe carbon tax (or the equivalent) we'll be baking the plane with burning coal and burning tar sands.

It also means that it's now rational to invest in conservation, and to expect real estate prices to reflect increased commuting costs.

More on Peak Oil later, but I was overdue to make my promised call. (It's been a busy month!)

Definitely. Note I said it may transiently fall to $80 along the way.

Ok, one caveat.

I predicted $200/bbl at least once before 2013, and I thought we’d stay above $80.

That was before we entered the Great Global Recession of 2008.

Hey, I’m not Cassandra. (Who was always right, the curse was not that her predictions were wrong, it was that no-one would believe them.)

GGR  pushes things out a few years.

So $200/bbl at least once before 2016.

This would have been a fantastic time to have had a carbon tax in place, one that kept the cost of oil above $100 a barrel. Alas, that kind of intelligence depends on having a superb President, and we are still months away from even a dream of excellence.

Since we don’t have smart leadership, we have see the Saudi’s can stabilize the price of oil – though not too quickly. That $70/bbl price could shorten the Recession by a few months. [1]

[1] So why would I want a Carbon tax now? Because if it stabilized oil at $100 a barrel we could turn the huge revenue stream into tax cuts and other economic stimulants that would do a better job than low cost oil at shortening the Great Global Recession.

Sunday, August 10, 2008

My Peak Oil Call

On 3/10/08 I wrote:
Gordon's Notes: Oil price speculation: is it rational investment or a bubble?

...So here's my proposal for deciding if Peak Oil is on the way.

If the price of oil craters ($65) in the next 6 months then we're living in an energy bubble today and Peak Oil is more than 10-15 years away.

If the price of oil is above $105 a barrel in August of 2008 then Peak Oil is on the sooner rather than later, and the world I grew up in is shuffling away -- sooner than I'd expected....
Today a barrel of oil costs $115 or so.

I believe that's above $105/bbl. True, the price is falling, but that doesn't matter. I'll stick to my criteria.

I say Peak oil is here.

I say that despite, in my 1979 chemical engineering class, being told that peak oil was coming in the late 1980s (I think we reviewed the 1957 Rickover speech back then). I say this despite remembering Jimmy Carter's peak oil prediction in the 1970s.

Of course I'm really talking about Peak sweet light oil, and I don't mean "Peak" in absolute, or even demand > supply, I mean Peak in terms of rational market expectation of a > 70% probability that demand > supply within 5-8 years.

Basically I'm claiming that the price increases of this past year were due to praiseworthy speculation on the fundamentals rather than salacious speculation on psychology.

This means I'm expecting oil to go to Dyer's $200/bbl limit at least once in the next five years, though may transiently fall back to $80 along the way. After 5-8 years it will be very apparent that oil will be a shrinking percentage of our energy supply, and that in the absence of a severe carbon tax (or the equivalent) we'll be baking the plane with burning coal and burning tar sands.

It also means that it's now rational to invest in conservation, and to expect real estate prices to reflect increased commuting costs.

More on Peak Oil later, but I was overdue to make my promised call. (It's been a busy month!)

Friday, July 18, 2008

Power boosted bikes for low cost, low carbon, commuting

Sci Am has a nice review of a $2,000 50lb LiOn battery power assist bicycle.

Recharge times are six hours. It's a pure assist system, there's no power regeneration. A computer controlled transmission system adjusts energy input.

I like this idea. It's not hard to imagine a $1,000 version in a few years better optimized for higher speeds (drop bars, recumbent design, etc.). A recumbent tricycle version with some shielding could make rain or snow conditions tolerable for the average reasonably fit person.

Development is active in Europe and China; but if our gas prices go to $8 a gallon we'll be doing development here too.

Giant has a web site view.

The core of Al Gore's energy proposal is a carbon tax

When even John McCain tries to sound like he's agreeing with Al Gore, you wonder if my favorite ex-politician isn't on to something.

In the middle of his energy speech is the key proposal:
The (Annotated) Gore Energy Speech - Dot Earth - Climate Change and Sustainability - New York Times Blog

...I have long supported a sharp reduction in payroll taxes with the difference made up in CO2 taxes. We should tax what we burn, not what we earn...
Yep, that's the ticket.

It means gas prices don't go down though, and the price of electricity goes way up.

This is going to take a culture change comparable to what we need to reform America's lousy human development score.

If you have to tear off the top floor to add a new bathroom, you might as well add a new bedroom too. We need to do both changes together.

Tuesday, July 15, 2008

Britain leads on the post-oil economy - and positive feedback loop on corn prices

Britain's Prime Minister Gordon Brown is persuaded that we're entering the post-oil world.

The Oil Drum includes his speech and a summary of key points:
The Oil Drum | The post-oil energy economies of the future - by Gordon Brown:

* Expansion of nuclear
* Expansion of renewables, possibly including Severn barrage
* Discussion of solar energy with Mediterranean states
* Tax breaks for energy efficiency measures
* Electric vehicles are placed on the agenda
There's no reference, however, to a Carbon Tax or Carbon permit trading; this is speech about energy, not global climate change.

That's one heck of an omission. We have vast reserves of coal and tar sands to burn; if we switch to electric cars without a massive carbon tax on coal we're slitting our throats.

So this is impressive because of what it says about our energy future, but it's only the easy part of the policy debate.

In a related vein, isn't there a positive feedback loop emerging from the use of corn to produce energy? Biofuel corn is an energy intensive crop with a minimally positive return on energy inputs, so, after other costs are accounted, isn't it as though we're burning 10 barrels or oil to create nine barrels of oil? This can only happen because of twisted bipartisan governmental subsidies, but it means the price of corn will keep spiraling upwards as long as the subsidies last.

At some point the corn biofuel program will then consume the entire economic output of the US. Hmm. Maybe China will support it?

Since we get the government we deserve, what does that say about how bad we Americans have been?

Update 7/16/08: Great comment pointing out that Gordon Brown doesn't need to speak about Carbon credit trading since his listeners know the UK and EU have a fully operational program. I knew that, so this reminds me how tricky it is to interpret international statements -- there's always context I might know but haven't really integrated.

Sunday, July 06, 2008

The three meanings of peak light sweet oil and praise for rational speculation

I'm sticking with my March declaration that I'd make my call on "peak sweet" August 1st.

It's still too soon for a non-insider to judge. We can only distinguish psychological speculation (a bubble) from concrete speculation (expectation of demand/supply constraint) by how long it lasts.

Still, Peak Oil of one sort or another is an increasingly popular meme. So I thought it might be worth pointing out that, even if we speak only of "sweet crude", that there are three sorts of Peak:

  1. Absolute: someday, even with magical technologies, we will have extracted more than 50% of the "sweet crude" on earth. This is kind of irrelevant, since before then we might be using vacuum energy (joke) rather than oil. Or we might be huddling in caves, and not need much oil. Or we might be extinct. So this is uninteresting.
  2. Market: Demand exceeds supply until prices rise to increase supply and reduce demand.
  3. Market predictive: Rational expectation that #2 will occur within a meaningful timeline (5-10 years).
Speculation about the timing of #2 is the foundation for "market predictive peak sweet". This kind of speculation is the brains of the market; eliminating it would be like using a frontal lobotomy to simplify a difficult decision.

Eliminating the "psychological speculation" (bubble) would be like getting a alcoholic on the wagon. That would be a good thing, but hard to do.

My August call will be about whether we're in the "Market predictive" variety of Peak Sweet Oil.

PS. It always bears repeating that Peak Sweet is a disaster for global climate, since in the absence of a wicked carbon tax we'll burn coal like there's no tomorrow. Which there might not be, at least for our civilization.

Monday, June 23, 2008

Global warming: what you can do ...

Technically, it's not worth bothering with wall warts and light bulbs. If you buy a new car it makes sense to get something like a Honda Civic.

Otherwise ...
Ask Pablo, Global warming | Salon Life

... So to recap: Pester your local, state and federal politicians, eat less meat and make your home more energy efficient...
Of these, the first is most important.

Which brings me to where I disagree with Charlie's Diary. Yes, technically the light bulb and wall wart fuss is a waste of time better spent opposing GOP candidates, but humans aren't technical animals. Fussing about florescents fosters a culture that can support about a carbon tax, and it helps make global warming something a politician can campaign on.

So don't mock the the folks who worry about "vampire" appliances. They are making it possible to elect and support the politicians who will make the real changes.

Tuesday, May 27, 2008

European nuclear plants and Google's data centers

A resurgence in nuclear plant development has three justifications:

  1. Expectation that oil costs will continue to rise over the next fifty years (plants take 20 years to come online).
  2. Expectation that limitations on CO2 emissions will limit use of coal, tar sands, and other "easy" substitutes for sweet crude
  3. Expectation that supply chains and suppliers will become increasingly vulnerable and unpredictable, so local ownership of power production will become increasingly important.

All three seem plausible, so Italy and other European nations are building "fourth-generation" reactors...

Italy's nuclear move triggers chain reaction - Scotland on Sunday

... Once the most-scorned form of energy, the rehabilitation of nuclear power was underscored in January when John Hutton, Labour's Minister for Business, grouped it with "other low-carbon sources of energy" like biofuels....

... There is now a determination to tackle the issue head on throughout the continent. With nuclear plants taking up to 20 years from conception to becoming operational, European nations are now having to answer some very difficult questions. The dilemma of Italy, as the biggest importer of oil and gas, are the most pressing: there is no chance of reactivating sites or building new ones within the next five years.

... Enel, Italy's leading energy provider, announced this year that it would close its oil-fired power plants because the fuel had become too costly. Italians pay the highest energy prices in Europe. Enel has been building coal plants to fill the void left by oil. Coal plants are cheaper but create relatively high levels of carbon emissions.

Enel, which operates power plants in several European countries, already has at least one nuclear plant, in Bulgaria, and has been researching so-called fourth-generation nuclear reactors, which are intended to be safer and to minimise waste and the use of natural resources...

It makes sense to build more nuclear plants. It is unfortunate, however, that they're being built in very crowded nations. If we casually disregard technical issues with transporting power (ship metallic hydrogen? superconducting power lines?), and exclude the desire for national control, it would seem to make more sense to build them in remote areas of northern Canada, possible on the sites of existing Hydro facilities or together with large data centers.

Nuclear plants and data centers, after all, have a few things in common:

  1. Power production/consumption is critical.
  2. Cooling is essential.
  3. Security is paramount.
  4. There's not much need for human attendance. Almost everything can be managed with a few people on staff and remote robotic control*.

In addition there are many good reasons to keep nuclear plants far from human habitation. Canada is an obvious location given its relative political stability, proximity the US market, enormous swaths of minimally populated land, and technological capabilities. Heck, compared to the Alberta tar sand environmental holocaust nuclear power plants in the North are positively benign.

So will Google and Microsoft go into the nuclear power business? Will Canada's native peoples become the Saudis of the 21st century?

This should be interesting.

* Be fun to build that secure channel, eh?

Friday, May 16, 2008

Dyer: Peak Oil means Peak Sweet Crude only

I'm impressed by Dyer's reasoning.

Peak Oil, he tells us, is only the end of the good stuff. There's lots of CO2 producing bad stuff, even if we bake and tear the planet to get to it.

Dyer, prections ...

... the recession is likely to drive the demand for oil down far enough to bring the price back down to $100 before long, or even to $85-90. Then in 2009-2010, as the "old rich" economies recover, it will go back up, probably to the $130-$150 range....

...the price of oil will probably stay well about $100 for most of the time in 2010-2015. But it won't hit $200, because there will be a steep rise in the supply of non-conventional oil from tar sands, oil shales, and other sources of "heavy oil."...

...In the still longer run -- the 2030s and beyond -- the demand for oil will probably fall even further, and with it the price. How do we know that? Because if it hasn't fallen due to a deliberate switch away from fossil fuels, then global warming will gain such momentum that entire countries are falling into chaos instead. There is more than one way to cut demand...

This would mean that, contrary to my post of May 12, oil and gasoline prices aren't necessarily going to keep rising at 10-15% per year. There's a natural ceiling of $200 out around 2015. Beyond that we probably melt Greenland, and the ensuing global chaos drops the price of oil.

Hmm. I'm glad I'm waiting for August before I make my "official" prediction!

Monday, May 12, 2008

Peak Oil now? Does Krugman really think so?

In March of this year I wondered if the rise in oil prices were rational speculation or speculative bubble. I decided that six months would be reasonable time to watch for bubble signs ...
Gordon's Notes: Oil price speculation: is it rational investment or a bubble?

... here's my proposal for deciding if Peak Oil is on the way.

If the price of oil craters ($65) in the next 6 months then we're living in an energy bubble today and Peak Oil is more than 10-15 years away.

If the price of oil is above $105 a barrel in August of 2008 then Peak Oil is on the sooner rather than later, and the world I grew up in is shuffling away -- sooner than I'd expected....
I've been thinking that the first onset of true "peak oil" would be due around 2013 to 2018. Since markets think about 5-10 years ahead, peak oil before 2018 would lead to rational speculation. On the other hand, irrational speculation can happen at any time.

What do I mean by rational speculation? I mean not investing in refining capability, since demand constraints might limit return on investment. I mean leaving oil in the ground, since its value will appreciate faster than other forms of investment. I mean looking for new oil, but not drilling new wells. Why drill now, when oil may appreciate in value by 10-14% a year? Oil in the ground, by this reasoning, is worth far more than money in the bank.

Heck, anyone with oil in the ground can just take out low interest loans against the oil, and make money on leveraged investing. No need to drill the messy stuff.

So I figured if Peak Oil is really 5-10 years away we'd see price signals now -- due to rational speculation. If prices stayed up from March to August 2008, that would be a sign that we were seeing rational speculation, thus $300/gallon oil would be on the 5-10 year horizon, and I should make sure my next car gets 50 miles to the gallon.

Incidentally, I assume this is obvious, but I'll mention it anyway. If Peak Oil is really 5-10 years away, then rational speculation and today's price rises are extremely positive developments. We will be far better off with a gradual and prolonged rise, accompanied by relatively gradual behavioral and lifestyle changes, than with a sudden crash.

Rational speculation is the IQ of the market place. Now if rational speculation would only price the externalities of coal appropriately ...

So that's where I stood in March of 2008. I didn't speculate that we might be already seeing a true demand/supply constraint -- the first Peak of the Peak Oil Range.

Paul Krugman, however, seems to be saying exactly that today:
The Oil Nonbubble - Paul Krugman - New York Times

...all through the period of the alleged bubble, inventories have remained at more or less normal levels. This tells us that the rise in oil prices isn’t the result of runaway speculation; it’s the result of fundamental factors, mainly the growing difficulty of finding oil and the rapid growth of emerging economies like China. The rise in oil prices these past few years had to happen to keep demand growth from exceeding supply growth....

...I wouldn’t be shocked if oil prices dip in the near future — although I also take seriously Goldman’s recent warning that the price could go to $200. But let’s drop all the talk about an oil bubble...
I think Krugman has gone too far -- he seems not to consider the possibility that holders of oil and refining capacity might be rationally constraining supply in appropriate anticipation of prolonged 10-20% annual returns on oil reserves.

Even so, it's unsettling to consider that we might be already seeing true demand/supply peaks -- even if they are likely to be wax and wane as we head for Oil-Everest.

I'll stick with my original plan for now. I'll make my own Peak Oil call in August. I will, however, add a third possibility to my original two - rational speculation, speculative bubble, and Peak Oil Now.

Update 5/13/2008: Paul K features a Sydney Herald graphic suggesting other adaptations to consider. I recall hearing (NPR) of one real estate speculator who felt the final straw in his collapse came from rising gas prices reducing interest in a his distant suburban development. Seven years ago I thought terrorism would drive home owners to the suburbs, but that hasn't happened (yet). I guess there's hope for the (now depressed) value of our ideally located St Paul home.

Saturday, May 03, 2008

McCain's hole in Sweden

I like Gail Collins.
Indiana Holiday - New York Times

This all started with John McCain, who proposed suspending the 18.4-cent-per-gallon federal gas tax from Memorial Day to Labor Day in order to give regular hard-working Americans “a little relief.” In terms of rational policy-making, this is a little bit like announcing that you want to reduce tensions in the Middle East by drilling an enormous hole in Sweden...
I'm increasingly thinking of McCain as a duller and more craven version of George Bush.

Update: McCain was born in 1936. He's almost 72 years old now. Between his "gas holiday", his "healthcare plan" (walk 30 minutes a day), his "pay for tax cuts by cutting waste", his Sunni/Shiite/Al Qaeda confusions and his forgetting his opposition to torture he's shown that he needs a full neuropsych evaluation as soon as possible.

Reagan was 69 when first elected, and was showing early signs of his dementia by the time he was 73 (the official Alzheimer's diagnosis was announced when he was 83).

We don't need another president with early dementia. McCain should be evaluated now.

Sunday, April 20, 2008

Who's paying for the "Global Climate Scam" billboards?

There's a large billboard near my Saint Paul home advertising "GlobalClimateScam.com".

The url resolves to a typical denialist site -- all bluster and delusion. There's nothing unusual about the whacky website, but I was curious who's paying for the billboard, and what they want.

It turns out that "Minnesota Majority", a local right wing organization, displays the same content and is probably paying for the billboards. I haven't been able to discover where their money is coming from, and why they're suddenly keen to spend it on climate change denial.

Companies that have invested heavily in coal would be the obvious suspects. If we really have hit Peak Oil (I'm deferring judgment until August) then oil companies ought to be buying up coal reserves. The primary challenge to that strategy would be a carbon tax, or the regulatory equivalent. Coal produces so much carbon dioxide that any carbon-tax equivalent could do real damage to a coal-centric investment strategy.

It would be logical for these companies, assuming they are blithering idiots, to do everything possible to maximize their coal reserve value -- including climate change deniers.

So if I were a real journalist, I'd be looking for an Exxon connection to Minnesota Majority's new found fascination with climate change. I'd also look to see whether Exxon is putting its money into oil exploration or into coal reserve ownership.

Saturday, April 19, 2008

Marvelous Gail Collins editorial on Bush's greenhouse 2025 goal

Gail Collins channels the spirit of Molly Ivins...

The Fat Bush Theory - New York Times

...Suppose that two years after taking office, George W. Bush discovered that because of the stress of his job, he had gained 40 pounds and was tipping the scales at 220.

The real-world Bush would immediately barricade himself in the White House gym, refusing all human contact or nourishment until the issue was resolved. But imagine that he regarded getting fat as seriously as he regards melting glaciers, rising oceans and drought and starvation around the planet. In that case, he would set a serious, management-type goal — of, say, an 18 percent reduction in the rate at which he was gaining weight, to be reached within the next decade...

Gail reminds us that Bush's 2002 "goal" was a voluntary 18% reduction in the growth of greenhouse gas emissions by 2012 (we won't achieve this). His 2008 "goal" is a voluntary 100% reduction in the growth of greenhouse gas emissions by 2025. This "goal" is not to achieved by “raise taxes, duplicate mandates or demand sudden and drastic emissions cuts.”

So Bush's reach goal is that the US stabilize greenhouse gas emissions at an level consistent with the complete melting of Greenland's ice cap. This goal will be achieved by technology alone. (Bush does not rule out tax reductions to support technology development.)

John McCain would be not any better.

Monday, April 14, 2008

Lester Brown, Julian Simon, the UNFPA, Malthus, and, again, the Food

I heard Lester Brown on NPR this morning.

That took me back 27 years. Bear with me, there's a reason to start then.

Once upon a time I was a covert intern at the UNFPA officers in what was then Bangkok.

In those days we thought of the "FP" in "UNFPA" as "family planning", though I think it stood for "Fund and Population". The UNFPA was all about changing fertility behaviors and accelerating the transition in family size from agrarian to industrial norms. Thailand, Taiwan, and Bangladesh were success stories. Rwanda was a worrisome failure. Afghanistan was on the map because of its ecological collapse.

In those days Lester Brown, the Worldwatch Institute, and Malthus were in the ascendancy. My UNFPA mentor and I leaned towards Malthus, and so I wrote essays for him attacking the optimistic economist Julian Simon, whose views were well summarized in his NYT obit:

... The essence of Mr. Simon's view of man and the future is contained in two predictions for the next century and any century thereafter that are in ''The State of Humanity,'' a book he edited for the Cato Institute.

''First,'' he wrote, ''humanity's condition will improve in just about every material way. Second, humans will continue to sit around complaining about everything getting worse.''

He argued that mankind would rise to any challenges and problems by devising new technologies to not only cope, but thrive. ''Whatever the rate of population growth is, historically it has been that the food supply increases at least as fast, if not faster,'' he said in a profile published in Wired magazine last year.

Mr. Simon's views were widely contested by a large coterie of the academic and scientific community, many of whose members believe that more people create more problems, straining the earth and its resources in the process.

''Most biologists and ecologists look at population growth in terms of the carrying capacity of natural systems,'' said Lester R. Brown, president of the Worldwatch Institute in Washington. ''Julian was not handicapped by being either. As an economist, he could see population growth in a much more optimistic light.''...

It's generally assumed now that Simon was right, but a pessimist would say it's too soon to tell. As DeLong and Krugman have pointed out, most of the human race was in a Malthusian trap from 6000 BCE until the time of Malthus himself. Rwanda, as feared in 1982, did experience a classic Malthusian collapse, though its subsequent recovery is much faster than the pre-industrial record. Afghanistan's fragile ecology collapsed in the 20th century, and we know how that story turned out.

Many things have happened since those days in Bangkok. Outside of Africa most of the world, especially China and India, followed the predictions of Simon rather than Malthus. On the other hand, world population growth has also followed the more optimistic projections of the 1982 UNFPA.

Given my historic roots, it's not surprising then that I would call the Simon vs. Brown battle a draw. On the one hand the Green Revolution worked, cheap energy meant cheap food, and worldwide trade combined with the kind of worldwide productivity growth Simon expected. On the other hand there were also near optimal changes in fertility behavior across many nations. The net effect was that a year or two ago we though that obesity might become a bigger public health problem problem than malnutrition in many once poor nations.

During this time the UNFPA, like all great bureaucracies, evolved to fill new niches. Now it's the "United Nations Population Fund - UNFPA" and all the links on the public page are about reproductive health and fighting HIV. The words "family planning" do appear, though they are a bit hidden.

Twenty-six years later, though, the wheel may have turned again. Simon died young at 65, but Lester Brown is still alive, and again on NPR. The reason, of course, is that classic collapse factors are again in play ...

Grains Gone Wild - Paul Krugman - New York Times

... Over the past few years the prices of wheat, corn, rice and other basic foodstuffs have doubled or tripled, with much of the increase taking place just in the last few months...

There have already been food riots around the world. Food-supplying countries, from Ukraine to Argentina, have been limiting exports in an attempt to protect domestic consumers, leading to angry protests from farmers — and making things even worse in countries that need to import food.

... First, there’s the march of the meat-eating Chinese — that is, the growing number of people in emerging economies who are, for the first time, rich enough to start eating like Westerners. Since it takes about 700 calories’ worth of animal feed to produce a 100-calorie piece of beef, this change in diet increases the overall demand for grains...

Second, there’s the price of oil. Modern farming is highly energy-intensive...

Third, there has been a run of bad weather in key growing areas. In particular, Australia, normally the world’s second-largest wheat exporter, has been suffering from an epic drought....

... Where the effects of bad policy are clearest, however, is in the rise of demon ethanol and other biofuels...

We need to dial way back on the biofuels experiment -- it's not working. Unless we figure out how to process cellulose it's an energy negative process. It should be a research project, not a production enterprise. Biofuel production happened prematurely because of US domestic politics (including, most shamefully, the actions of Minnesota's senators including the sainted Paul Wellstone).

The other problems are far less tractable, they'll persist even if we eliminate biofuels and lessen the direct competition between our mobility desires and food production.

So the EU, US, China and India could be simultaneously enlightened and decide to eat less meat, drive less, institute a carbon tax to fund research into alternative energy sources, and forswear biofuels. Or we could discover a something like "cold fusion", except it would have to work. Or we could ...

I'm out of ideas right now. Any suggestions?

It is worth remembering, in case anyone needs motivation for new ideas, that any local Malthusian collapse is likely to lead to the vengeful use of inexpensive weapons of mass havoc.

So we all have "skin in the game" -- beyond mere compassion.

Sunday, March 23, 2008

What oil price will radically change American life?

When does the price of oil change what Americans do?

I wrote in July of 2007 that a significant number of people would start to make different decisions at $5 a gallon. On the other hand I've read realtors claiming that the bubble popped when gas hit $3 a gallon, and people started worrying the cost of exurban commutes.

It's not just the absolute costs of course, it's the trend line. So if gas goes from $3 a gallon now to $5 a gallon in 2011, then people will react as much to the trend line as to the absolute value. If the price hits $5 a gallon in 2010 then the reaction will be even stronger.

On the other hand someone who does this sort of thing for a living things the price will have to hit $13 or so to force a "radical restructuring":
FuturePundit: Peak Oil By 2012?:

.... Energy analyst Charles T. Maxwell thinks gasoline prices in the US will need to more than triple to force Americans into a radical restructuring of how they live.

Maxwell said it will take $12 to $15 a gallon to get Americans to let go of what he called the “precious freedom of mobility.” As much as Maxwell laments the loss, he sees no other way for the U.S. to impose enough conservation to deal with the growing imbalance between oil demand and supply that he sees developing around 2010 and getting worse in 2012 or 2013, as the world hits a “peak” in conventional oil production...
I was thinking in terms of "start to change" when I picked $5 a gallon, radical change is a few steps beyond that.

Maxwell is elsewhere quoted as predicting "peak oil" in 2012-2013 resulting in a steady "rise starting in 2010, reaching $180 a barrel in 2015 and $300 a barrel in 2020". Since we're about $100 a barrel now, we wouldn't hit his "radical change" date until after 2025 or so.

I'd love to see an economist make some predictions here based on the historical record, though I have a hard time thinking of a precedent in an industrial economy outside of wartime.

As I've written previously our confusing situation may become clear within the next six months:
...If the price of oil is above $105 a barrel in August of 2008 then Peak Oil is on the sooner rather than later, and the world I grew up in is shuffling away -- sooner than I'd expected...
If we are at or above $105 in August I think we'll see a gradual and continuous change rather than a radical disruption. The price signals will be relatively clear with smooth trendlines.

This isn't, of course, good news for the survival of human civilization. Unless we put a very large carbon-tax-equivalent on coal, humanity will start burning massive amounts of coal to power our electric cars and to create various fuel products. Our carbon dioxide output will skyrocket -- even as our mobility and our gasoline consumption start to plateau. We'll push past the ancient maxima for CO2 and bake much of our habitat.

We need a technologic miracle, but in the meantime we need a carbon-tax-equivalent on coal.

Tuesday, March 18, 2008

The Twin Cities is a great place to live: bike trail plans

I really hope we get one or more of these plans:
River bike trail gains traction in Bloomington:
...Imagine being able to hop on a bike at Fort Snelling and pedal for hours on a quiet trail along the Minnesota River, winding all the way to Le Sueur, 72 miles upriver...
I thought Le Sueur was downriver, but I only live by the Mississippi, I wasn't born here.

This trail would have to get through a really big obstacle -- the old Air Force land south of the MSP airport. That few hundred meters of land has been the bane of bicyclists for eons.

There are several great projects listed in the article. As noted in a local paper:
Minneapolis—the nation’s No. 2 cycling city after Portland, Ore., according to the U.S. Census Bureau—Olson is among as many as 3,000 people who commute through the cold months, according to the City of Minneapolis Bicycle Program, a division of the Public Works Department.
When choosing great places to live, I'm a firm advocate of ignoring everything except the bicycle trail network. Trust me on this -- if you just look for great bike trails you won't go wrong.

Monday, March 10, 2008

Oil price speculation: is it rational investment or a bubble?

I've read recently that oil prices "now" are driven by "speculation" rather than "fundamentals". In other words, based on near term supply and demand curves, including our current recession, prices should be stable or dropping, not rising.

Yet rise they do.

In August of 2007 I'd thought that, absent any surprises, gas would hit $5/gallon in the midwest around 2011:

2011: The year American life changes (Aug 2007)

When will energy costs in general, and gasoline costs in particular, fundamentally change the way middle-class Americans live and work? We know gasoline prices will rise until something changes, even if the US never implements a carbon tax...

...I think a reasonable marker is the year that the baseline gasoline price hits $5 a gallon...

So when does it happen? I'll pull a number out of the air, extrapolating from my amateur chart and the Copernican Principle, and guess, even without a carbon tax or the complete collapse of Iraq, that it's 2011.

I'm in California today, and it's $4/gallon here in early 2008. My 2011 prediction for a change in American life is looking conservative.

So, is today's oil price rational speculation or bubbly speculation?

Well, I haven't read any good discussions of this lately, so I'll say something and hope Brad DeLong decides to clear things up

One way this speculation could be rational is of the people who are paid to know believe that peak oil is coming any time in the next 10-15 years -- especially given the current bleak options for alternative investments. For non-economist readers, here's why:

Gordon's Notes: Gasoline and the rule of 72 (May 2007)

... There's some smaller rate of return that would make retaining rather than selling petroleum products the right way to invest. This is what all the "peak oil" crowd get excited about; but the term is a bit misleading. It's not that oil production needs to peak, it's simply that demand has to persistently outstrip supply. Prices, of course, don't wait for demand to outstrip supply, they begin rising as soon as a demand/supply gap can be reasonably anticipated within the time frame of investment decisions (10 years roughly).

This, by the way, is a very good thing. It means that prices rise long before we run out of oil, giving everyone time to adapt and adjust.

I do wonder what the sober experts calculate. They can look at supply curves and demand curves and the available substitutions within the next decade. Do they see a significant supply/demand gap opening up? If the price of gas will be $7/gallon in six years (well within the lifespan of your next Ford F-250), is that enough of rate of return to justify holding products now?...

So here's my proposal for deciding if Peak Oil is on the way.

If the price of oil craters ($65) in the next 6 months then we're living in an energy bubble today and Peak Oil is more than 10-15 years away.

If the price of oil is above $105 a barrel in August of 2008 then Peak Oil is on the sooner rather than later, and the world I grew up in is shuffling away -- sooner than I'd expected.

So American Life may change in 2008 - not 2011.

Friday, December 28, 2007

A real problem with CO2 controls

This occurred to me some time ago, but now it's made it into the popular press (emphases mine):
FT.com | Clive Crook's blog: Trade and climate

...Suppose the US adopts a cap-and-trade regime for carbon, as promised by Hillary Clinton, or as envisaged by the Lieberman-Warner Climate Security Act (yes, make this a security issue, why not) currently before Congress. Also suppose that China does nothing to curb its carbon emissions. Then Chinese imports, it will be argued, will have an unfair cost advantage in US markets...
Shame on Crook for not correcting the "unfair cost advantage" error. Trade theory tells us there's no such thing as unfair cost advantage in the naive mercantilist sense. On the other hand, if we were to create a set of carbon tariffs to offset this "cost advantage" then we'd amplify the negative economic effects of necessary carbon emission controls.

The legitimate issue, however, is one of relative socio-economic power. If a President Edwards were to ask Al Gore to lead a US-European world saving CO2 emissions initiative, the US and Europe would sacrifice a certain measure of economic productivity compared to non-compliant nations. That productivity hit translates to a power shift, with all the usual implications.

I think the rich nations will probably have to take the hit and live with it, but we need to recognize it's going to have an effect.