Ahead of the Curve

Jane Galt has a post commenting on the following post at Reality Based Community by Michael O'Hare. She asks, "Why is US energy policy so wrongheaded?" There are a lot of very interesting comments on the Jane Galt post. There are far fewer comments with the O’Hare post, but here are some selections of what I liked:

… You say you're worried about global warming. Well, leaving aside any debate over whether your fears are well-founded, the fastest and cheapest way we could reduce our greenhouse gas emissions would be to substitute nuclear-power electric generation for coal-fired generation. ALL energy-related US greenhouse emissions, expressed in equivalent million- metric- tonnes (MMT) of CO2, total to 5,868 MMT CO2/year (2004 numbers, trend is slowly upward). Electric power generation produced on the order of 2,293 million metric tonnes (MMT) of CO2 in 2004. About 82% of that came from burning coal (see a DOE report called Emissions of Greenhouse Gasses in the US 2004 in file 057304.pdf). We could replace virtually all coal-fired generation with nuclear (no new tech or distribution infrastructure [see hydrogen, problems with!] needed) to save about 1,880 MMT of CO2 yearly. (That would be a third of all energy-related emissions, 5,868 MMT CO2/year.) No feasible reduction of motor fuel consumption could compare. … -- Mark Seecof

… As far as the suburban lifestyle issue goes, I understand that lots of people think they would really hate to live in a dense city and that some of them correctly perceive their preferences. But simply saying that what people do is what they want to do seems quite naïve. We've been eating lots of trans fat because it made things taste good, but didn't know it was bad for us until recently. That diet choice didn't prove we wanted to risk our health for potato chips. It's also quite difficult to make some choices by private action; you can buy a house on a small lot, or an apartment, but until society provides the transit that makes it work, you still have to have a car. But the discussion of urban density and housing choices is a big one, for another post or three. People are quite commonly mistaken about what they will like or not like (see Schwarz'recent book, The Paradox of Choice, on this). My main point was that it actually doesn't matter much what we want; the real cost of motor fuel is going to go up and the price should follow it (no matter whether we make it from coal or corn or trees), and that will make a lot of habits and life decisions look different to people. Playing tricks to make gas look cheap by this or that hidden subsidy is simply a case of government lying to its citizens, with predictable bad consequences of many kinds. … -- Michael O'Hare

… If your real goal is changing lifestyles, with reducing greenhouse emissions just your excuse, go after transportation fuel use. But if your real goal is reducing greenhouse gas emissions, why plump for unpopular lifestyle changes? Go for the easy win--stop burning coal. Also, note that current US government policy is to *reduce* fuel consumption. Our government *increases* the price of fuel by taxing it and restricting supply. I don't mind the "highway user fee" aspect of fuel taxes, but the ethanol mandate adds between 8 and 20 cents/gallon (depending on weather and distance from Iowa, and considering tax-funded production subsidies) to no public purpose, and around 20% of Federal automobile-fuel taxes are diverted to mass-transit spending[1]. Gasoline-formulation rules drive up gas prices (as much as 20 cents/gallon in California) by restricting competition among refiners. …

… Historically our politicians have been more interested in taxing fuel consumption (remember the 4.3 cent/gallon "deficit reduction" refined-fuels tax from 1990 to 2005? Of course, we're still paying that tax, but now the money is laundered through the Highway Trust Fund (mainly) instead of going straight to the General Fund). (Before you bring it up, I realize that European governments tax fuel a lot more heavily than we do, and spend the receipts on trains and so-forth. However, even Europeans have increasing sprawl (source EU gov't: google "sprawl 1na3.pdf"), so you would likely need a tax-and-regulate regime tougher even than Europe's to force serious lifestyle changes here.) … -- Mark Seecof

Seecof, though he resists the global warming scenario, seems to be of my own mind on most of this. The one thing that I would add is that it would be better public policy to actually forcefuel prices higher before the natural working of the market does so. Transitions require time and planning. If we tax carbon now, strongly and reliably, then the transition technology will be mature when it is most needed. We will have steadily rising prices rather than riding a destructive roller coaster of price gyrations. The economic implications of oil prices, in particular, are such that the tax should be under the control of an organization similar to the Federal Reserve Board. The purpose of the Carbon Tax Control Board would be to balance the somewhat antithetical goals of controlling inflation, encouraging alternative energy supplies, and above all, reducing our use of oil well ahead of the natural depletion curve.

Coal of course can continue to be burned for hundreds of years, but if you believe, as I do, that the CO2 could destroy us, it should also be taxed heavily, using the income to fund a nuclear power buildup.

Now, how much tax is enough to encourage economic substitution? I believe it’s going to be a lot. It's also going to be unpopular because it's visible. If the President backs it though, convinces people of its necessity, it can be done. The most painless way to do it, at least at first, would be to prevent the prices from going down. When the market price surges, let it happen. When the price begins to fall, increase taxes to the degree necessary to maintain something close to the maximum. The psychological benefit would be that businesses can plan for future costs knowing that the basic market price will never fall.

It has been pointed out by several pundits, George Will among them, that gas prices are not high anyway. What do we mean by high? If you look at real dollars the current price is not out of line with historical data. If you compare gas prices as a portion of average income, the numbers are still lower. Let’s look at gas prices as a portion of your automobile investment. In the US we typically spend less than $1,000 per year per car on gasoline ($3.00/gallon X 10,000 miles / 30 mpg = $1,000), and yet many people will spend twice that on repairs and maintenance. More than a few will buy a new car every three years at $25,000 or higher. Say, allowing for a trade-in,that’s around $5,000 a year, ballpark. Are you in that ballpark? Then maybe as little as say 10% of your transportation cost is in fuel. Please feel free to argue with my estimates, but my point is that we are flinching before we’re struck.

I know people that spend hours every day commuting on expressways. Maybe they’re entitled to complain about prices. Let me be clear that I think such behavior is bizarre. I also know people that commute a couple of hours on their bicycles each weekday. Society is not constructed for such people, and I’m not willing emulate them, but let me tell you that the latter are in better shape than the former, and a lot happier to boot.

5/10/2006 6:53 PM