can we please have a balanced playing field?

Technology-specific subsidies (like the loan guarantees for nuke plants and wind energy tax credits) are extremely effective at preventing innovation and encouraging permanent industrial reliance on government funding.

Subsidies are necessary to bring new tech concepts to commercialization and that is where they should stop. Subsidizing mature commercial products of any variety - coal, nuke, wind, or solar - is socialist and inefficient.

CO2 is a problem, coal plants themselves are neutral. Reducing CO2 production is a good thing, wind farms themselves are neutral. The incentive process should reflect this. Instead, the current incentives encourage coal plants and encourage wind farms more.

If we want to reduce CO2 in the atmosphere, all we have to do is remove all subsidies of mature technologies and establish a carbon market that makes CO2 production expensive and CO2 removal from the atmosphere profitable. This must be done in as simple and transparent a way as possible and must be a worldwide effort.

Since a worldwide effort is obviously impossible today, a CO2 tax/subsidy could be established for any product entering or leaving the country. This tax/subsidy would tax any imported product based on the estimated CO2 emissions of production and would refund the CO2 taxes charged against any product exported. This would prevent companies from moving production overseas to avoid CO2 costs.

#1 problem with this idea: it combines the Republican love of markets with the Democratic insistence that CO2 emissions matter.

#2 problem with this idea: all mature industries that are currently subsidized for shortsighted historical reasons would oppose a balanced playing field. Unfortunately, this list includes wind energy, so neither Coal-State Republicans nor Renewable-Mandate Democrats could support it.

a simple explanation of the bill failure

The first iteration of the $700B bailout bill failed today, with the majority of Republican representatives voting against it.

A quick glance at political maps reveals that virtually none of the red states experienced bubbly house prices (hint: bubbly prices in the past are shown as plummeting prices today), while nearly all of the blue states did (the exceptions appear to be Florida and Nevada, which both had price bubbles and are swing states), since Republicans overwhelmingly represent the rural parts of the country while the house price bubble occurred almost exclusively in Urban areas.

From this perspective, the bailout bill is a mechanism for taking money from those that didn’t participate in the foolishness of the last decade (rural populations which tend to be Republican) and bailing out those that did (urban populations which tend to be Democratic). From this perspective, it is understandable that the Republicans killed the bill.

My story is that rural representatives killed the bill and rural representatives just happen to mostly be Republican. I do not claim that there is anything especially Republican about killing this bailout deal. The modern Republican party can make few claims to the fiscal conservatism they used to represent that would impel them to oppose this sort of bill on political grounds.

For reference, I think the whole US Political system is screwed and I have no intention in taking sides (R vs D) in this post, just making simple observations.

thanks to:

zillow map

cnn map

time to buy furniture

this is what Russians (who have watched their currency turn into confetti more than once) do when they think things are about to get much much worse.

the big difference between Russians and USAians, though, is that they have a positive savings rate while we have ever-increasing debt at all levels of society. so, they have cash to exchange for furniture, while we have a total debt burden that is many many times larger than our annual income.

World Depression I parallels

If the world runs in cycles and if what we are seeing is the end of an 80 year credit cycle and we are looking at World Depression II, then it is interesting to look at parallels.

Considering that it is election season, presidential comparisons are most entertaining:

Bush compared to Hoover (commonly held at least partially responsible for turning a recession into a depression because of his tax policies)

Obama compared to FDR (responsible for the New Deal, a nationwide infrastructure construction project that helped end World Depression I. Obama's New Deal involves national renewable energy infrastructure.)

I don't agree with either comparison 100%, but they are certainly worth a read.

Greenie Joe?

I'm not a big fan of the Federal Renewable Energy (RE) Production Credit because it is tax-based and makes it more difficult for public entities to compete in the renewable energy industry, as I wrote about yesterday.

So, what would be better? One quick thought:

Federal Loan Guarantees - they do this for Nuclear Plants and it is quite effective. Just like Nuclear, most RE projects have front-heavy costs and most of them are paid for with long term loans, so they are very sensitive to interest rates. Just like the housing market, affordability is determined more by interest rates than any other factor. Today, the Federal Government borrows money for 30 years at 4.3%, whereas a small business loan today costs 8%. By giving access to cheap funding, the Federal Government could balance the RE playing field for all parties. Small entities would benefit the most because they have to pay the highest interest rates. This would make it easier for towns, co-ops, and small businesses to invest in RE projects. In practice, it would be very similar to what the invention of Fannie Mae and Freddie Mac did for the housing market during the Great Depression. It greatly reduced the cost of borrowing money without costing the government hardly anything at all.

Just like Fannie Mae and Freddie Mac started with real names that eventually got shortened for the sake of convenience, I'd expect this sort of loan program to do the same. Thus the title for this post.

old hydro vs new wind, public vs private

Why is it that the nation's rivers (and the power from them) are national resources, but the nation's wind resources are being developed almost exclusively by private entities?



In order to end the Great Depression (funny thing: there was a time when WWI was called the Great War), provide cheap renewable energy, flood control, and irrigation water most of the nation's large dams were built in the 1930s - by entities created and run by the Federal government: the Tennessee Valley Authority, the Bonneville Power Administration, and the Bureau of Reclamation to name a few. These entities have defined regional power systems and have run flawlessly since the 1930s. They are excellent examples of how effective public power can be.

Public Power on a day-to-day basis serves the public. When a decision is being made, these organizations actually ask themselves "is this what is best for our customers?" Private Power ultimately serves shareholders. A complicated set of regulations prevents them from excessively abusing their customers, but at the end of the day they ask themselves: "how will this decision impact our stock value?"

Why is it, then that the Federal Renewable Energy Production Incentive is tax-based? This effectively excludes public entities from the renewable energy game. Public entities don't pay taxes, so giving them tax credits is pretty worthless.

It is a worthwhile time to consider this perverse bias, since the Federal Renewable Energy Incentive is expected to be renewed during this session of Congress.

re: hogwash economics and environmentalism

last week, i mentioned how the fields of economics and environmentalism ignore each other when making their predictions.

this was specifically in reference to a flat out silly claim that air travel will be prohibitively expensive in the future because of fuel shortages. a bit of news today reinforced my argument:

An algae-to-jet-fuel process from Arizona State U is being moved from research to commercialization.

also, a factoid i ran across in a car mag this morning reinforced the point i made about humanity's willingness to convert coal to liquids when the situation demands it:

Coal-to-Liquids process used to fuel Axis armies during World War II.

i'm not saying these are good or bad technologies. i have no special desire to fly using nazi fuel, or hippy gas. all i'm saying is that some parts of popular environmentalism are almost farcical in how they obstinately ignore economics and technology in order to come up with their dire predictions.

and this makes me a bit mad, because i am an environmentalist. but the practical kind of environmentalist that finds the modern extremist anti-humanity face of environmentalism so ridiculous that i am frequently ashamed to associate myself with any part of the movement.