Economic Growth

The Kerry-Lieberman Scheme for Carbon Rationing

The American Power Act will raise energy prices, reduce incomes, cut jobs, and do precious little about climate change.

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Last week, Sen. John Kerry (D-Mass.) and Sen. Joe Lieberman (I-Conn.) introduced a discussion draft of their American Power Act, which aims to address the problem of man-made global warming by radically transforming how Americans produce and use energy. This transformation would be accomplished by chiefly rationing carbon dioxide emissions produced from burning fossil fuels like coal, natural gas, and oil. Under the cap-and-trade scheme set up by the bill, the federal government would issue ration coupons equal to the annual total amount of carbon dioxide that American manufacturers, utilities, and the transport sector are allowed to emit. Reduction targets are based on the amount emitted in 2005. Under the bill, Americans would be required to emit 4.5 percent less greenhouse gases by 2013; 17 percent by 2020; 42 percent by 2030; and 83 percent by 2050.

So what would the effect of Kerry-Lieberman be on energy prices, jobs, and the climate?

Energy Prices & Incomes

Increases in the price of fossil fuels are built into the bill. In fact, they're the whole point. These higher prices are supposed to drive consumers away from currently cheap high-carbon fuels toward pricier low-carbon fuel sources like wind, solar, and nuclear. In addition, higher fossil fuel prices are supposed to encourage conservation and spur innovation to bring down the costs of low-carbon energy sources.

A 2009 study by the Massachusetts Institute of Technology's Joint Program on the Science and Policy of Climate Change looked at what would happen to energy prices and incomes under the very similar American Climate and Energy Security Act, which was passed by the House of Representatives last year. The MIT study projected that the cost for a carbon dioxide ration coupon would rise from $21 per ton in 2015 to $84 per ton in 2050. Consequently the price of coal would rise from $30 per ton today to more than $200 per ton in 2050 and the price of electricity would rise from $0.13 per kilowatt-hour (kWh) to $0.20 per kWh in 2050.

In the MIT scenario oil and natural gas prices do not greatly increase over the projected baseline since their growing scarcity is assumed to dominate future prices. The MIT study projected that implementing carbon rationing would lower GDP by 1.4 percent by 2050 and cost $745 per capita by 2020, rising to $3,160 per capita in 2050. A 2009 Congressional Budget Office (CBO) report, The Economic Effects of Legislation to Reduce Greenhouse-Gas Emissions, predicted that implementing carbon rationing "would reduce gross domestic product (GDP) below what it would otherwise have been—by roughly ¼ percent to ¾ percent in 2020 and by between 1 percent and 3½ percent in 2050."

The global consulting firm, Charles River Associates (CRA) in a 2009 study commissioned by the National Black Chamber of Commerce projected that carbon rationing similar to that proposed in the Kerry-Lieberman bill would boost electricity prices by 7.3 percent (1.1 cents per kWh) relative to baseline levels in 2015, by 22 percent (2.8 cents per kWh) in 2030 and by 45 percent (6.1 cents per kWh) in 2050. These increases are in line with the MIT projections. Gasoline prices are estimated to rise over what they would otherwise be by 12 cents per gallon in 2015; 23 cents per gallon in 2030; and 59 cents per gallon in 2050. The CRA study estimated that carbon rationing would decrease GDP by 1.5 percent by 2050. The earnings of an average worker who remains employed would be approximately $170 less by 2015, $390 less by 2030, and $960 less by 2050, than if there were no carbon rationing.

Jobs

When the bill was made public last week, Kerry declared that enacting it would "help us create nearly 2 million new jobs." But the CRA study estimated "a net reduction in U.S. employment of 2.3 million to 2.7 million jobs in each year of the policy through 2030. These reductions are net of substantial gains in 'green jobs.'" Even a Congressional Budget Office (CBO) report, How Policies to Reduce Greenhouse-Gas Emissions Could Affect Employment, released on May 5, 2010, concluded "that total employment during the next five decades would be slightly lower than would be the case in the absence" of policies designed to reduce greenhouse gases. In other words, Kerry-Lieberman is not a full employment scheme. It "creates" some jobs, but only at the expense of destroying more.

Climate

Perhaps reducing the size of the economy, lowering incomes, and boosting unemployment would be worth it if carbon rationing spares us from the deleterious effects of man-made global warming. But in that regard as well, a preliminary analysis by climate scientist Chip Knappenberger is worrisome. Knappenberger, who has long been skeptical of projections of catastrophic global warming, calculates the impact of Kerry-Lieberman carbon rationing, assuming that developing countries decline to make similar reductions. The refusal by big developing nations like China, India, and Brazil at the Copenhagen climate change conference last December to commit to binding greenhouse gas reduction targets suggests that Knappenberger's scenario is not unreasonable.

Implementing Kerry-Lieberman without international cooperation would reduce global average temperatures by 0.077°F in 2050 and 0.2°F in 2100 from what they would have been without carbon rationing. Sea levels would be less than half an inch lower in 2100 than they are projected to be. "In other words, by century's end, reducing U.S. greenhouse gas emissions by 83 percent will only result in global temperatures being one-fifth of one degree Fahrenheit less than they would otherwise be," writes Knappenberger. "That is a scientifically meaningless reduction."

Bottom Line

Unfortunately, estimates of the damage that climate change might cause vary considerably, largely along ideological lines. The alarmist 2006 Stern Review suggested that worst case climate change damages could reduce global GDP by between 5 and 20 percent below what it would otherwise be in 2200. On the other hand, Yale University environmental economist Robert Mendelsohn concludes that losses due to man-made warming would more likely be around 0.2 percent by 2100.

Seeking a more middle-of-the-road—but not necessarily more accurate estimate—another CBO report, Potential Impacts of Climate Change in the United States, published in September 2009, noted, "Despite the wide variety of projected impacts of climate change over the course of the 21st century, published estimates of the economic costs of direct impacts in the United States tend to be small." The CBO report added that even a "relatively pessimistic estimate for the loss in projected real gross domestic product is about 3 percent for warming of about 7 degrees Fahrenheit (F) by 2100."

It's sobering to compare this pessimistic 3 percent GDP loss as a result of climate change by 2100 to the CBO's projected loss of up to 3.5 percent of GDP due to carbon rationing by 2050, five decades earlier. Unless carbon rationing is designed and implemented perfectly, the losses incurred from government policies that aim to combat climate change will easily outweigh the losses that could result from climate change. The Kerry-Lieberman carbon rationing scheme is far from perfect.

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is available from Prometheus Books.

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  1. Let me get this out of the way.

    Chad, shut the fuck up.

    1. Good luck with that. We’ll see if it works.

    2. I’ll shut up when you concede that the world’s leading scientists are right, and the crackpot crap you heard from Rush and Sean, or read on some random right-wing blog, should not be trusted.

      1. I’ll shut up when you concede that the world’s leading scientists are right, and the crackpot crap you heard from Rush and Sean, or read on some random right-wing blog, should not be trusted.

        Like Carl Sagan?

        He and four others figured out how to deal with global warming back in 1983. The American Power Act comes nowhere close.

        1. You really have got to drop this crap. They didn’t get it right. Understanding of climate change has come a long way since 1983. Stop trotting out Sagan’s corpse to further an antiscience agenda. It’s disgraceful and Sagan would have none of it if he were still alive.

          1. You really have got to drop this crap. They didn’t get it right. Understanding of climate change has come a long way since 1983. Stop trotting out Sagan’s corpse to further an antiscience agenda. It’s disgraceful and Sagan would have none of it if he were still alive.

            How were they wrong?

      2. Fuck Rush and Sean. Some of us don’t need other people to tell us how to think, Chad.

        You might want to consider that next time you jerk off to the latest Al Gore infodump.

        1. When you quit parroting every talking point they get from their pet think tanks, get back to me.

          1. Fuck off. You’re calling me a liar without facts to back up your claim.

          2. Chad and Tony are just a couple of socialist dick eater.

            1. You’re being way too kind, Wegie.

  2. Worst economy in 70 years and these mad men want to raise the price of energy by anywhere from 10% to 25%. If we didn’t before, we now know what economic insanity American style looks like.

    1. Don’t forget them making 1099 forms mandatory for any (and every) transactions over $600 for businesses.

      I really wonder if they’re deliberately trying to destroy the economy. It’s hard to believe they’re that imbecilic.

  3. …Ronald Bailey finds that the proposed legislation will raise energy prices, reduce incomes, cut jobs, and do precious little about climate change.

    Does anyone find this surprising?

    1. When was the last time Congress passed a law that they didn’t anticipate the results?

      1. Quothe me:

        Foreseeable consequences are not unintended.

  4. Implementing Kerry-Lieberman without international cooperation would reduce global average temperatures by 0.077?F in 2050 and 0.2?F in 2100 from what they would have been without carbon rationing.

    To those who argue that the international community will likely follow the US lead, rendering this small impact unrealistic, I would note that the studies of the economic impacts also presume that no other countries are following suit.

    If other countries do in fact fall in line and green up their energy, then their greater costs in energy necessarily mean less spending on things produced in the US and higher costs on things consumed in the US. In other words, rerunning the CBO and CRA numbers would find even greater negative impacts on the wealth of our progeny if the whole world went for harsh reductions in carbon emission.

  5. Reason Science Correspondent Ronald Bailey finds that the proposed legislation will raise energy prices, reduce incomes, cut jobs, and do precious little about climate change.

    It’s for the children . . .

    . . . Al Gore’s, Lieberman’s, Kerry’s, et al.

  6. GoNavy: I wish it were otherwise – that Kerry and Lieberman had devised an effective policy. Sadly, I must report what the evidence shows.

    1. Let me go out on a limb and say that no one can come up with an “effective policy” to counter a problem that does not really exist.

      1. I think my frogmole traps have been very effective in keeping down the frogmole population, thank you very much? Are there frogmoles all over your porch when you leave in the morning? Case closed.

      2. If the problem is that Al Gore is not wealthy enough, this bill will solve the problem.

      3. OM your silly arguments about the ideal society are one thing. Political science isn’t much of a science. But why go out of your way to confirm that you’re an idiot with this denier crap? You’re not right, you will never be right, and you’re just embarrassing yourself.

        1. Yeah! Fuck jobs! Fuck the poor! Fuck freedom! We [might] be causing global warming! Everyone stop breathing!

          Jesus.

          1. We ARE causing global warming, now what are we gonna do about it? The solutions don’t have to be economically destructive, as reliance on fossil fuels will inevitably be.

            1. No, Tony, we’re NOT causing global warming. Even the alarmist scientists admit that our contribution is miniscule compared to the climate change that occurs naturally. Maybe instead of constantly bleating what “scientific consensus” says, you should actually pick up some studies and read what they say. I know, I know, science is haaaaaaard!

              1. IOW, it’s not about banning all fossil-fuel use to protect the earth… it’s about banning it just for the hell of it. Tony isn’t as slick as he thinks he is.

            2. The solutions don’t have to be economically destructive, as reliance on fossil fuels will inevitably be.

              How will reliance on fossil fuels become economically destructive?

            3. I suggest holding your breath until an effective policy is implemented and proven to have been successful.

              Or maybe go on hunger strike? That seems to light a fire under people. Oh! Or light yourself on fire, like those monks. Yeah, I mean, really you gotta get off your ass if you want to change the world buddy.

    2. Ron, I think you misunderstood me. My comment was not about your reporting, but about a bill being introduced that does 180 degrees different from what it claims to do.

      Your reporting = BZ

      1. Go tell your squad leader . . .

  7. excellent article. btw check out this politics site i think u guys might like it

    http://www.ThePartisanDialogues.com

  8. Unfortunately, estimates of the damage that climate change might cause vary considerably, largely along ideological lines.

    Which should tell you that such estimates will always be bogus no matter who comes up with them.

  9. The autor of this post and who ever dissagree is to be sent to Birkenau … who do you think you are to dissagree with Komrad John Kerry ?

    Don’t you have respect for Mother Gaia you Global Warming denier … I bet this was paid by Big oil and Big coal .. they are setting up against the little guy and Solar/Wind energy !

  10. There are some remarkably stupid billboards around Cleveland that say, “IRAN MAKES A KILLING EVERY DAY WE WAIT,” with a link to http://www.passtheamericanpoweract.com at the bottom. Has anyone else seen these? I can’t find any pictures of them on the googles. Anyway, they make me want to send a bunch of money directly to the mullahs.

  11. Have the scientists invented low-carbon coal yet? What about low-carbon oil? Natural gas? No? Oh well, back to seeking solace at the Large Penis Support Group.

    1. Well, the fine folks at Domino have come up with Carbon Free Sugar.

      1. That is certainly a relief. I wonder how they got around the whole C12H22O11 paradox with their carbon free sugar.

        1. Probably the same way they get the chemicals out of Chemical-free deodorants, which appear, for the most part, to be a stick of some aluminum saltin some kind of petroleum based wax as near as I can see.

          Oh and my comment below goes with my comment above.

        2. Removing all C from sugar would result in 11 * H2O. Sugars are called carbohydrates for a reason.

          Now, does having tap carbon free sugar in my house make me green?

      2. Which, of course, will be kept in the same aisle as the Organic Sea Salt.

        I realize that the Carbon-Free and Organic labels are just marketing buzzwords, but I still wonder that the folks selling these peoducts don’t realize how silly they sound when use on these products.

        Mind you, they always sound pretty silly to me anywhere.

  12. Investing in green technology worked in Spain.

    http://pajamasmedia.com/blog/s…..-disaster/

  13. Kerry, Lieberman and their close friends will not benefit financially from this. Not at all.

    1. Is Al Gore their friend? Would anyone admit to being a friend of John Kerry?

      1. North Vietnamese General Vo Nguyen Giap just might.

  14. Thanks, Mr. Bailey, for citing the studies. I recently got a fundraising letter from C4L claiming all sorts of (unsubtantiated) harm along the lines you write about. I find the most effective arguments one can make are the ability to answer “says who?” when challenged. A tea partier who can, for instance, cite the MIT study is going to be much more persuasive that just spouting off about lost jobs and higher prices. The LP News used to run an “Intellectual Ammo” column that gave independent support to many libertarian claims. What happened to it? It’s far harder to argue against some study cited in Newsweek than it is to argue against something Wayne Root claims on Fox & Friends.

    1. Shouldn’t you be concerned with whether you have facts on your side, rather than winning an ideological debate?

    2. You mean the report that says

      Reducing the risk of climate change would come at some cost to the economy. For example, the Congressional Budget Office (CBO) concludes that the cap-andtrade provisions of H.R. 2454, the American Clean Energy and Security Act of
      2009 (ACESA), if implemented, would reduce gross domestic product (GDP)
      below what it would otherwise have been?by roughly ? percent to ? percent in 2020 and by between 1 percent and 3? percent in 2050. By way of comparison, CBO projects that real (inflation-adjusted) GDP will be roughly two and a half times as large in 2050 as it is today, so those changes would be comparatively modest. In the models that CBO reviewed, the long-run cost to households would be
      smaller than the changes in GDP. Projected GDP impacts include declines in investment, which only gradually translate into reduced household consumption. Also, the effect on households’ well-being of the reduction in output as measured by GDP (which reflects the market value of goods and services) would be offset in part by the effect of more time spent in nonmarket activities, such as childrearing, caring for the home, and leisure. Moreover, these measures of potential costs imposed by the policy do not include any benefits of averting climate change

      and

      Economywide Employment. The cap-and-trade program established by H.R. 2454 would probably have only a small effect on total employment in the long run

      If that is the best you have, ummm….I think you just conceded.

      1. Chad: Of course, the CBO is not the only analysis. And considering the bang up job agency did on health care reform costs, one shouldn’t rely too heavily on them. That’s why I cite a range of studies to give readers some sense of the economic uncertainties involved.

        1. And considering the bang up job agency did on health care reform costs, one shouldn’t rely too heavily on them.

          The CBO’s numbers are legit Ron. The numbers they were asked to crunch were skewed from the get go, but the math was correct. A good analogy would be if I tested a patient’s blood and got a particular phenotype but later found out I was giving the results to the wrong patient. It doesn’t invalidate the accuracy of the test, just the glaring fact that the correct patient’s name or MRN was incorrect on the order.

        2. The economic uncertainties are so wide, Ron, that there is little use in debating them. Any numbers anyone comes up with are nothing more than the whimsical results multiple extrapolations of multiple assumptions about technology and human progress that are, frankly, anyone’s guess. Economists can’t even guess next year’s growth rate to within a percent. How in the heck are they going to guess 2050’s with the same level of accuracy?

          In any case, we are still focusing far too much on GDP, which unfortunately, is a piss-poor measure of anything. It includes so many variants of broken windows, and excludes so many things of value, that it is a nigh-worthless measure anyway. This is confirmed by the virtual lack of improvement citizen’s happiness as their nations become richer, once everyone has food in their belly and a roof over their head.

          1. Economists Global warming “scientists” can’t even guess next year’s week’s growth rate mean temperature to within a percent one degree. How in the heck are they going to guess 2050’s with the same level of accuracy?

            FTFY Chad. Past predictions of temperature and climate change have been embarrassingly inaccurate.

            1. You are simply wrong, on multiple levels. Predicting physical systems is not the same as predicting history, and contrary to your assertions, scientists have made a large number of accurate predictions about climate change. Heck, the very first estimates, done over a hundred years ago with laborous hand calculations, weren’t only off by ~50% from what we predict now and are currently observing.

          2. The economics look positive from here.

      2. “would come at some cost to the economy”

        Bullshit. “Some” doesn’t even begin to describe the fucking the economy will suffer.

        And all over a bunch of goddamned handwringing.

        1. You’re way too certain about one thing and way too skeptical about another, in a way that serves no purpose except to bolster a political ideology that apparently can’t handle anything that happens in the real world.

          1. I always find it odd how deniers don’t even realize how utterly un-skeptical they are of whatever talking points their Dear Leaders Rush, Sean, and Glen feed them.

            1. Again, Chad, you’re calling me a liar. I come to my POVs based on sources other than Rush, Sean, and Glenn. But keep at it, you statist fuckface.

              1. Not that YOUR talking-point sources are any more believable, Chad.

        2. Really. Please explain why almost all rich nations have higher energy prices than the US, and even much higher prices that we would under this bill…yet are still rich!

          1. Exactly how are we rich fuckwad? Last time I looked we (the US) were broke.

            1. Notice how spittle flies from Chad’s mouth when he says the word “rich”.

  15. At least he keeps his promises: “When I was asked earlier about the issue of coal?under my plan of a cap and trade system, electricity rates would necessarily skyrocket?even regardless of what I say about whether coal is good or bad, because I’m capping greenhouse gasses, coal power plants, natural gas?you name it?whatever the plants were, whatever the industry was, they would have to retro-fit their operations.” – President Obama, January 2008

    1. SShhhh! Obama thinks people forgot he said that.

  16. In addition, higher fossil fuel prices are supposed to encourage conservation and spur innovation to bring down the costs of low-carbon energy sources.

    I don’t remember hearing much cheering from the Senate when gasoline was selling for four bucks per gallon.

  17. Things to look up:
    Climategate, solar maximum/minimum, global dimming, medieval warm period, little ice age, resignations within the IPCC, corruption within the IPCC, William Connelly and his abusive edits on Wikipedia, Lord Monkton and his take on ‘an inconvenient truth’.

    As far as green is concerned, the truth and the lie are battling for supremacy.

  18. Question about the projected increases in electricty prices by 2050. From everything I’ve read, wind power will probably start beating fossil fuels cost wise around 2015-2020, and solar around 2025 (of course these are just estimates, but based on current cost projectories).

    So, even if those projectiions are a bit optimistic, wouldn’t prices for eletricty as a whole be down by 2050 (of course they would be more expensive for coal).

    1. Cite pls. Cost estimates per kilowatt are meaningless if the wind isn’t always blowing and the sun isn’t always shining. You also have to include the costs of transmitting the energy from where the sun shines to where it doesn’t and where the wind blows to where it doesn’t. Cities aren’t always in sunny, windy areas.

      I do believe that one day solar and wind power may be cheap enough to be competitive, but it will hard to be fully reliant upon those sources of energy. We will still need another source of energy to form the backbone of energy production. One day we may overcome that problem, too. However, for the near future, green tech will require massive amounts of subsidy, and the result will be massive amounts of crony capitalism and waste.

      1. Ahh, one of the fuckers I was talking about, lol see below.

        Anyway, you are correct of course that when doing cost estimates that you have to take into account the amount of power produced based on the conditions required. As far as I’m aware NO ONE that does these estimates assumes that the wind always blows, or the sun always shines.

        Though I believe with thermal solar, you can get 24 hour power generation (thermal energy is stored in molten salt rock, and the heat is used to turn the tubines when the sun goes down).

        Also geothermal is 24/7 AND currently cost competive with coal.

        Finally for power storage, I’ve heard a couple of ideas, one pumped water storage, the second is compressed air.
        http://www.scientificamerican……grand-plan

        Other ideas, could be hydrogen storage with fuel cells.

        1. Go fuck yourself dude. I was just asking for a citation. THose are pretty lame citations as is.

          1. Yes, which was why I made the comment even before you posted. This ain’t a fucking college paper it’s a blog.

            Moreover, I don’t keep track of every single place I ever read anything. Thus, I find it very annoying that people try and respond with citation please like that’s response to a point.

            Think of it this way, if you don’t already believe that scientific advance is going to keep bringing down the costs of RE (like it has done in the past) then it probably doesn’t matter how many links I post does it?

            Your viewpoint will remain unchanged, just like most people.

            Of course I could be wrong, you could be one of the few open minded peoeple, but most people just like to have their point of view confirmed, and not challeged. In fact, I think they even have a term for it “confirmation bias”. We are all guilty of it (yes I include myself as well). But I do try and take in many differnt sources of informatio to minimize it.

            1. New wind is already cheaper than new coal in a lot of places. The day coal loses its massive “free public garbage dump” subsidy, it would lose so badly that plants would close down as fast as anyone could slap up any other form of generation.

              Solar’s prices are falling like a rock…down nearly 50% now from just a couple years ago. Grid parity in expensive markets is rapidly approaching, if not already behind us. Again, if we get rid of the pollution subsidies, it is game-over for the polluters.

              Why libertarians defend these subsidies to their (literally) dying breaths is beyond me. The idea that subsidies can result from government inaction seems beyond their ability to comprehend.

              1. Why libertarians defend these subsidies to their (literally) dying breaths is beyond me.

                Libertarians do not defend subsidies, O Externality Prophet of Doom. And when did you become a pulmonologist?

              2. The day coal loses its massive “free public garbage dump” subsidy

                Which is a number that can be assigned any value you like. Try again.

        2. Anyway, you are correct of course that when doing cost estimates that you have to take into account the amount of power produced based on the conditions required. As far as I’m aware NO ONE that does these estimates assumes that the wind always blows, or the sun always shines.

          Right, which is why they never include the cost of storage and backup capacity when citing the cost of electricity.

      2. The wind is always blowing somewhere, and sunshine is not only highly predictable, but actually better than baseload power, as it shines when we need it most. Throw in some storage (we already have over 20GW on the grid), and there is no major technical hurdle. Just political ones.

        1. If you still drive a gas-powered car, Chad, you’re still a fucking hypocrite. And spare us your unverifiable claims of cleanness. It’s all heresay and anecdotal, not to mention bullshittal.

  19. For example (for all you fuckers that are always to lazy to look yourself, you know who you are 😛 )
    http://news.cnet.com/8301-11128_3-9970517-54.html

    http://www.treehugger.com/file…..volt_2.php

    (yes, I know it’s a green site, )

    1. The first article says that solar might be a 10% of energy production by 2025 UNDER THE RIGHT CIRCUMSTANCES. Plus, does this include the transmission and intermittency costs? The claim that hybrid cars are cheaper than “conventional” vehicles is also suspect. I have seen few hybrids that actually saw gas mileage rates of 45 miles per gallon in the real world. Meanwhile there are plenty of cars cheaper than hybrids that last longer and see 30 miles to the gallon. YOu have to drive a hybrid quite a while to see any savings, so if you trade it in in a few years, you will be paying a premium and will not receive any discount whatsoever over the term of use.

      1. I would definitly agree that it will take time to change from carbon based to renewable based energy. There is trillions of dollars invested, and things won’t just change overnight.

        That being said, I think the right incentives could help push us in the right direction.

        Being as how I think that oil especially will become MUCH more expensive over the next 10 years, (must less 40). I think we should be pushing to move away from it (note I think the price mechanism can be a bit slow in predicting big changes like those that are coming).

        In fact, I think a US military report recently came out where they stated how worried they are about US oil supplies.

        1. I think the price mechanism can be a bit slow in predicting big changes like those that are coming…

          So what is your faster prediction mechanism? Entrails? Palms? Crystal balls? Dice?

          I don’t know why I’m telling you this, but you can get rich by converting your faster prediction mechanism into the price mechanism by buying futures.

          I think a US military report recently came out where they stated how worried they are about US oil supplies.

          The military are worried about something that gives them more money to further study that something? Shocking.

          1. Actually (and I’m sure we’ve had this discussion before) I’m for using a net zero carbon tax that is phased in graudally to get the market going.

            Also, note that I am already in the investment game (economist, and a CPA, working on my CMT). After the next correction, I plan to load up on commodities.

            1. From previous discussions, I know you have a pretty good grasp of economics, but you shouldn’t be so quick to assume that anyone that disagrees with you, doesn’t know anything.

              1. I believe you know something Kroneborge, in fact you at least present arguments with data which makes you a far superior debater in regards to this subject than some others (cough*CHONY*cough).

                But just because you are better doesn’t mean you aren’t wrong.

                For instance the geothermal argument is pretty silly since there are barely any places in the US that are economically feasible to extract it. Sure it works in Iceland, but the whole island sits on a fucking volcano. Other than Yellowstone and maybe Hawaii there aren’t really any economically feasible spots.

                You are way more tolerable than these other idiots, but you’re still wrong.

                1. TMan, I cite data all the time. wtf are you talking about?

                  I even bother to hunt down references for idiots that are too incompetent to get past the Fox News home page and find Google and/or Wikipedia without some to hold their hand.

                  “Economic feasibility” changes pretty darned rapidly if your competitors lose a subsidy which is 2-3 times as large as their wholesale price.

                  1. Geothermaal potential in the US
                    http://www1.eere.energy.gov/ge…../40665.pdf

                    I would agree that 100% of our energy proably won’t come from there, but it would be an important part of our energy portfolio.

                    1. Interesting KB. I did not see any reference to the usual problems associated with Geothermal in the report, such as the need for large quantities of water, and how this can be addressed at these sites.

                      They also seem to gloss over one of the bigger problems with Geothermal, which is the hazardous gases and minerals that come up along with the steam, such as Hydrogen Sulfide, as well as the need for anti-freeze in cooler areas of extraction.

                      Also, earthquakes are a potential problem in regards to digging in certain areas.

                      Geothermal has a lot of negatives that aren’t really addressed very cohesively in that report.

                    2. They also seem to gloss over one of the bigger problems with Geothermal, which is the hazardous gases and minerals that come up along with the steam, such as Hydrogen Sulfide, as well as the need for anti-freeze in cooler areas of extraction.

                      Hydrogen sulfide is most definitely a pollutant.

                  2. I cite data all the time

                    OK fine. I take that back. I still hate your arguments and how weak they are. Tony, however, can learn something from the two of you.

                    I even bother to hunt down references for idiots that are too incompetent to get past the Fox News home page and find Google and/or Wikipedia without some to hold their hand.

                    Actually, you usually say something along the lines of “it’s not my job to hunt that down for you etc.” which is both annoying and a bad way to debate.

                    “Economic feasibility” changes pretty darned rapidly if your competitors lose a subsidy which is 2-3 times as large as their wholesale price.

                    We wouldn’t even be HAVING this conversation if alternative energy sources weren’t subsidized. If you take away all the subsidies from both fossil and non fossil fuels there would be no wind farms anywhere in the US.

                    1. No, TMAN. The wind subsidy is 2.1c/kwh.

                      If you can find a peer-reviewed citation that puts the total externalities of coal power at less than 4c/kwh, I will grovel before you and admit you are a god. Please note that most estimates are much higher than this, and even the 4c figure implies that removing subsidies would give an advantage to wind. Also note that I am not figuring in any direct subsidies coal receives, which are actually substantial.

                      And yes, I get pissy when people challenge me for data that a three year old can find in ten seconds. If they are too damned lazy to find it themselves, they aren’t going to read it anyway. If someone spouts some fact that I think is fishy, I make an effort to find it myself before I call on them to provide a link.

                    2. Again you miss the point. Take away subsidies for all forms of energy. Then calculate what forms of energy are economically feasible at current rates. Renewable energy isn’t even close. Ron has continually shown this to you but you ignore it even though you know you’re wrong. Ron even had an excellent paper citing all types of cost calculations that were extremely in depth and factual, and you ignored it as if you were fucking Einstein who knew better. You are a disrespectful and annoying troll who refuses to see anything but your point of view. Why you even come here to argue when we all know that you aren’t even willing to see it from a libertarian perspective eludes me.

                      I have better things to do than attempt to show you why you’re wrong.

                      Like watch some paint dry, or maybe go to the dentist. At least those are more fun and enjoyable.

                    3. TMan, Ron’s calculations left all sorts of things out, like the likely 8-10c/kwh “free garbage dump” subsidy for coal. These subsidies along make it more expensive than coal, even if God almighty built and operated the plant for free.

              2. I recognize that you know something. I’m just being facetious in pointing out that people’s predictions outside the market are already priced into markets that function as well as commodity markets do.

                Predictions that aren’t reflected in markets, on the other hand, require a bit of faith to accept.

                1. I think now especially though, markets are focused VERY much on the short term. It’s all about quarterly reports, and current demand. Yes there are value investors out there still, but that’s not what’s driving prices IMO.

                  Think about the 2008 gas run up. That was partially driven by supply and demand, but also had a lot to do.

                  Actually just read a very interesting outside the box from John Maudlin discussing that very fact. That commodities have become another asset class, which can distort things especially in the short run.

                  http://www.johnmauldin.com/outside_the_box.html

                  I mean do you really think most people are pricing in $150-200 barrel oil? Yet most of the realistic reports I read say it’s almost a certaity. For better IMO, to get us there gradually then all of a sudden.

        2. Being as how I think that oil especially will become MUCH more expensive over the next 10 years, (must less 40). I think we should be pushing to move away from it (note I think the price mechanism can be a bit slow in predicting big changes like those that are coming)

          Who is this we that should be pushing to move away from it?

  20. Oh, where do I begin?

    would reduce gross domestic product (GDP) below what it would otherwise have been?by roughly ? percent to ? percent in 2020 and by between 1 percent and 3? percent in 2050

    Even if you believe these crazy numbers, which also predict that per capita income will be ~$90,000 in today’s dollars in 2050…(anyone taking bets?), so what? If we anywhere near that rich, I am sure we would be glad to have make this investment. If we aren’t that rich, the numbers are bunk.

    But in any case, Ron leaves out a key part of the report, that immediately follows.

    Also, the effect on households’ well-being of the reduction in output as measured by GDP (which reflects the market value of goods and services) would be offset in part by the effect of more time spent in nonmarket activities, such as childrearing, caring for the home, and leisure. Moreover, these measures of potential costs imposed by the policy do not include any benefits of averting climate change.

    Hmm…that is an odd thing to leave out..and an even odder thing to fail to mention that you left out. Clearly, this implies the economic loss is much smaller than what you listed.

    In the end, it is a simple question: are we willing to give up a few months of economic “growth” to get it right the first time around. Given that most of our “growth” the last thirty years has been cancerous, I would say “hell yes”.

    1. In the end, it is a simple question: are we willing to give up a few months of economic “growth” to get it right the first time around. Given that most of our “growth” the last thirty years has been cancerous, I would say “hell yes”.

      So you oppose economic growth.

      1. I think “growth” is a false idol. We should be focusing on development.

        Only development can continue indefinitely, at least until we escape earth.

  21. In the end, it is a simple question: are we willing to give up a few months of economic “growth” to get it right the first time around. Given that most of our “growth” the last thirty years has been cancerous, I would say “hell yes”.

    I knew you wouldn’t disappoint me. And you hit the trifecta!

    Question numbers without any specific alternative proof? Check.

    Ridiculous strawman about something “Ron left out”? Check.

    Final statement arguing a malthusian-luddite style solution? Check.

    Well done.

    1. So you are willing to bet about the US per capita income being $90,000 2010 dollars in 2050? Come on, it’s only a 1.5% real growth rate.

      And pointing out that someone left out a key qualifier in a report that he just extracted data from is not a “strawman”.

      I have no idea why you think I am a luddite. I am a technophile.

      1. Chad: But if incomes are $90,000 per year in 2100 and climate change reduces them 20 percent (Stern worst case)– that would mean that future people would earn just $72,000. So how much should people today making a global average of $9,000 annually sacrifice for people making 8 times more (instead of 10 times more) in the future? And how much should people in 1900, who were making $2,000 per year, have sacrificed in order to keep global temperatures down to what they were a century ago?

        1. That’s the rub of course, there is a LOT of uncertainity in these numbers. If climate change damages turned out to be small, then doing nothing might be the best bet, but on the slight chance then turned out to be big, then it would be worth while (say if the tundra started releasing lots of C02 which started a feedback loop etc).

          Either way, I would agree that the current proposals are a bad idea. Moreover, international agreement is needed. Doesn’t do us any good if China and India take up all the slack.

          1. KB, you aren’t going to get “international agreement” unless everyone takes little baby steps, proving their good faith. That is the only way out of the prisoners’ dilemma we are stuck in. And make no mistake, this bill is just a baby step, and falls far short of what the science indicates.

            Since we hold the biggest share of the blame, it is our responsibility to move early. Carrots and sticks will push the laggards along, and then we all take another step. It is slow, painful and ugly, but unfortunately it is how it has to work.

            Like most conservatives, your response to the prisoners’ dilemma seems to be “how can we rat out the other guy before he rats us out?”, which virtually ensures the worst-case scenario.

            1. Chad: You did not answer my question.

              1. Chad will never answer your question.

                He will just give you Al Gore platitudes.

              2. First, Ron, I was comparing the ~$47000 of Americans today vs the ~$90000 that MIT was predicting for 2050 (I have to ballpark their guess, because I don’t know what they were assuming for population growth, but our population has been estimated at ~400 million around that time). To get there to 90k from 47k in 41 years (47k is 2009 data), one would need a compound real per capita growth rate of 1.5%, which I doubt.

                IF I really thought our children would be wildly richer than us, you may have a point. But I don’t accept several of your assumptions, the first being that the “sacrifice” we would have to make would make us worse off in the first place. Even if there were no benefits at all to us, which is no true, the cost is trivial relative to our incomes, and the evidence suggests that our high incomes aren’t making us happy anyway. Second, many of the things that would be lost on a business-as-usual scenario cannot be replaced. Regardless of how rich our children are, they won’t be able to bring back the species and ecosystems we will wipe out, or undo much of what we have done…at least at any feasible price, even for them. Your BaU plan may perhaps leave them slightly richer in cheap Chinese junk and slightly faster IPods, but they will be far poorer in other ways that cannot be fixed. Of course, I don’t even think they will be richer in the plastic toys, because BaU will deplete so many of our natural resources that future generations will face much higher prices for the raw materials that underly everything they consume.

                In the end, there are only a few things we can actually leave future generations: intact resources and ecosystems, information, civil society, and some core infrastructure. Everything else we do is transient.

                We clearly are not leaving them much in terms of ecosystems and resources, and your plan would leave them less than mine. As for information, you would leave them with better blueprints for granite countertops. I would leave them with better blueprints for solar panels. Any bets on which they will value more? As for the third, I don’t see many effects either way for your plan vs mine (though I could still argue a few), and for the latter, I think my plan wins hands down.

                So exactly what are you planning on leaving your grandkids that they would value more than what I think we should be leaving them?

                1. Chad: More options that greater wealth and superior technologies (not just the slightly better ipods you so condescendingly suggest). Just the sort of things our ancestors bequeathed to us.

                  BTW, I agree that MIT’s wealth assumptions are probably too low.

                  1. What technology would be better under your plan? Whatever technology is related to whatever we would spend more money on under your plan than mine. So what might that be? Perhaps better ways to extract oil (oh wait, there won’t be much worth drilling by that point)? Or better ways to build really big cars and houses (which they won’t want anyway, because energy will be expensive)?

                    Spending lots of money on junk that they cannot won’t want doesn’t help them at all.

                    Frankly, I think you are wrong on base principle: there will be lots more R&D if this bill passes than if it doesn’t. This will both come directly from the public sector, and also via the private sector. The fossil fuel industry spends a pittance on R&D, and every penny that goes through their hands means that much less new technology.

  22. So you are willing to bet about the US per capita income being $90,000 2010 dollars in 2050?

    If it isn’t going to be that, what will it be? This is what annoys me. You argue against but don’t offer an alternative calculation. WEAK.

    pointing out that someone left out a key qualifier in a report that he just extracted data from is not a “strawman”.

    I don’t think he left it out at all. It’s not relevant to his thesis. And he links the damn report itself. STRAWMAN.

    I am a technophile.

    Who wants to use 16th century technology to for electricity. I don’t think “technophile” means what you think it means.

  23. Tman|5.18.10 @ 6:38PM|#

    If it isn’t going to be that, what will it be? This is what annoys me. You argue against but don’t offer an alternative calculation. WEAK.

    Pull a growth rate out of your butt, and assume it. That is what MIT does. They must have been assuming something a bit over 1.5% to get the figures they got. I do not believe that it will be this high. I think we will struggle severely as our past indulgences and lack of investment in critical infrastructure, as well as our utter dependance on dwindling resources, will come back to haunt us. Additionally, growth rates slow naturally even without these problems, so even baseline growth would not be spectacular. Assume a 1% real growth rate, and you get something closer to $70,000 at 2050, which I find much more reasonable.

    I don’t think he left it out at all. It’s not relevant to his thesis. And he links the damn report itself. STRAWMAN.

    Linking a whole report is meaningless, TMan. It is dishonest to leave off a qualifier, and then assume that your audience will go read the full report and find that you left out a critical detail which largely mitigates the point you were trying to make.

    Who wants to use 16th century technology to for electricity. I don’t think “technophile” means what you think it means.

    Odd, you want to use hundred thousand year old technology. So I guess I am pretty modern and hip compared to you! lol

    1. Chad: Surely you jest when you suggest that I “left out” the enforced leisure that unemployed people will get to “enjoy” as a result of losing their jobs due to climate change policies? Surely?

      1. “enforced” leisure, Ron?

        A few people on the margin of the workforce choosing to retire a bit earlier, stay in school longer, or stay home and take care of a family member is a far cry from even the libertarian idea of “force”. This is actually one thing that differentiates Europe from the US….they have more people in all three of these categories.

        1. Chad: you’re the one who said that I failed to link to significant information (and hinted at “dishonesty”) and now you suggest that it’s not all that big a deal. At least be consistent, otherwise people might get the idea you just pick up arguments like random sticks with which flog opponents. BTW “enforced leisure” is well known cliche for being unemployed.

          1. I don’t think the MIT report said anything about unemployment, which in my opinion, would actually be lower on average under a clean energy system. It is patently obvious that oil shocks are one of the primary causes of economic boom/bust cycles, and ridding our economy of its dependance on volatile commodities should mitigate the economic cycle and reduce the number and size of economic downturns. Hence, unemployment would be reduced.

            My reading of the MIT statement indicates that they are discussing voluntary choices like the ones I listed, and are similar to those Europeans make (relative to the US).

            1. Chad: Actually, the persistently high unemployment rates in many European countries means that a lot of people say that they want to work, but unfortunately the economic policies their governments’ adopt prevent that. In other words, many Europeans “enjoy” leisure because government policies prevent them from doing what they say they really want to do, which is work.

  24. I wonder why ammonia isn’t given more space in the arguments about green fuels. I doesn’t take too much to convert a gasoline car to run on ammonia. Also, it can be sold profitably for about $2.20 a gallon, meaning it’s not some idiotic boondoggle.

    Also, since there is no carbon in ammonia, there are no carbon emissions. The US has plenty of nitrogen and hydrogen, so we wouldn’t need to worry about “peak ammonia”.

    I suspect the major hurdle would be setting up the distribution system.

    1. It’s called the Haber process. If you’re gonna burn ammonia, the feedstock is natural gas. So, there’s plenty of upstream CO2 emissions.

  25. Actually, setting up the retail system would be the hurdle. We already produce and distribute 8 million metric tons a year.

  26. Mother Nature and Mr. Sun are laughing at Mr. Gore. Naw, actually… Mr. Sun and Mother Nature couldn’t care less about Al’s Nobel prize, the frauds at IPPC, AGW theory, Friends of the Earth, the big hockey stick, or anything else. But, but, but maybe if we all try real hard we can “make a difference”. So just say ‘no’ to Mr. Sun! Save the planet, then save the Galaxy. Hell, save the whole frikkin universe from itself! Yes we can; Come together; Envision whirled peas; For the children; The change we need; Kumbaya! (Now doesn’t that just feel better all over? I knew it would.)

  27. Mark this one down for future I-told-you-so’s: Anticipate the currently erupting Icelandic volcano to be used as a cop-out for the continuing general inaccuracy (whether measuring too much or too little temp detla vs. reality) of the Warmers and their collective videogames.

    The biggest problem with those computer models is that they are consistently wrong. Not wrong in a way that makes warmers happy (underestimate temperature rise) or “deniers” happy (overestimate). That’s irrelevant. What’s important is that the only reliable output from the modelers is inaccuracy vs. reality. That volcano will be the new frontier to explain that fundamental problem away.

  28. follow the money — the only ones who will benefit from cap and trade schemes are those who will create and manage the markets — 1000’s of new govt and financial industry jobs will be created to run an entirely new US market, billions of dollars of trades annually. The stated goal of reducing carbon emissions is just a smoke screen. And all the debates about the science are distractions from what is really going on.

    1. follow the money — the only ones who will benefit from cap and trade schemes

      Al Gore comes to mind.

  29. TO ALL THE COMMUNIST IN THE IG,FBI,CIA,AND U.S. Senators and the left wing media outlets ////Mmslim Barack Hussein Obama people have no idea of the extent to which they have to be gulled in order to be led.” “The size of the lie is a definite factor in causing it to be believed, for the vast masses of the nation are in the depths of their hearts more easily deceived than they are consciously and intentionally bad. The primitive simplicity of their minds renders them a more easy prey to a big lie than a small one, for they themselves often tell little lies but would be ashamed to tell a big one.” “All propaganda must be so popular and on such an intellectual level, that even the most stupid of those towards whom it is directed will understand it. Therefore, the intellectual level of the propaganda must be lower the larger the number of people who are to be influenced by it.” “Through clever and constant application of propaganda, people can be made to see paradise as hell, and also the other way around, to consider the most wretched sort of life as paradise. //////”pelosi don’t see much future for the Americans … it’s a decayed country. And they have their racial problem, and the problem of social HATRED …obama feelings against Americanism are feelings of HATRED and deep repugnance … everything about the behaviour of American society reveals that it’s half LIES, and the other half RACIAL. How can one expect THE USA to hold TOGTHER.They include the angry left wing bloggers who spread vicious lies and half-truths about their political adversaries… Those lies are then repeated by the duplicitous left wing media outlets who “discuss” the nonsense on air as if it has merit? The media’s justification is apparently “because it’s out there”, truth be damned., GOD OPEN YOUR EYESTO ALL THE COMMUNIST IN THE IG,FBI,CIA,AND U.S. Senators and the left wing media outlets ////Mmslim Barack Hussein Obama people have no idea of the extent to which they have to be gulled in order to be led.” “The size of the lie is a definite factor in causing it to be believed, for the vast masses of the nation are in the depths of their hearts more easily deceived than they are consciously and intentionally bad. The primitive simplicity of their minds renders them a more easy prey to a big lie than a small one, for they themselves often tell little lies but would be ashamed to tell a big one.” “All propaganda must be so popular and on such an intellectual level, that even the most stupid of those towards whom it is directed will understand it. Therefore, the intellectual level of the propaganda must be lower the larger the number of people who are to be influenced by it.” “Through clever and constant application of propaganda, people can be made to see paradise as hell, and also the other way around, to consider the most wretched sort of life as paradise. //////”pelosi don’t see much future for the Americans … it’s a decayed country. And they have their racial problem, and the problem of social HATRED …obama feelings against Americanism are feelings of HATRED and deep repugnance … everything about the behaviour of American society reveals that it’s half LIES, and the other half RACIAL. How can one expect THE USA to hold TOGTHER.They include the angry left wing bloggers who spread vicious lies and half-truths about their political adversaries… Those lies are then repeated by the duplicitous left wing media outlets who “discuss” the nonsense on air as if it has merit? The media’s justification is apparently “because it’s out there”, truth be damned., GOD OPEN YOUR EYES,INPEACH COMMUNIST Mmslim Barack Hussein Obama,TO THE WEAK-KNEED REPUBLICANS AND DEMOCRAT .THE COMMANDER REPOST THIS IF YOU AGREE TO THE WEAK-KNEED REPUBLICANS AND DEMOCRAT .THE COMMANDER REPOST THIS IF YOU AGREE

  30. Friends of the Earth, the big hockey stick, or anything else. But, but, but maybe if we all try real hard we can “make a difference”.

  31. Obama people have no idea of the extent to which they have to be gulled in order to be led. | RAN ran ran ??? ??? ??? |

  32. I was just having a conversation over this I am glad I came sbobet across this it cleared some of the questions I had.

  33. I was just having a conversation over this I am glad I came across this it cleared some of the questions I had.

  34. ncreases in the price of fossil fuels are built into the bill. In fact, they’re the whole point. These higher prices are supposed to drive consumers away from currently cheap high-carbon fuels toward pricier low-carbon fuel sources like wind, solar, and nuclear.

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