Hunger Stalks Millions of Poor Americans blares the headline in the Financial Times of London. The article itself, however, turns out to be a combination of rank speculation and advocacy journalism for more welfare spending, triggered by pending congressional consideration of the farm bill.

The real story behind the farm bill, of course, is this astonishing observation by Ronald Bailey:

The amount of food being burned because of government mandates and subsidies for biofuels would feed nearly 450 million people. [My paraphrase]

That’s right, folks. We could feed every person on the entire North American continent with the food we burn because of well-intentioned but foolish government intervention in agricultural markets.

Over at National Review Online, Deroy Murdock notes the resulting Global Food Riots: Made in Washington, DC occurring in such places as Haiti, Mexico, Egypt, Pakistan and the Ivory Coast. His excellent article pulls together a wide range of relevant factual information on the biofuels mess, linked to the sources.

Contrast the opening sentences of the FT story:

An escalating global food crisis could bring the problem of hunger home to the US and other developed countries. Millions of poor Americans risk going hungry if food prices continue to rise and food agencies struggle to cope with rising costs, dwindling resources and a huge increase in demand. Already more and more poor people in the US are turning to charity and government assistance as they struggle with rising food costs and soaring fuel bills.

The only factual information here is that the US has a social safety net, consisting of a variety of government programs and private charities that help poor people with food, fuel bills and similar problems. Food prices are up, and the social safety net appears to be doing what it is supposed to do. The rest is speculation.

All of the remainder of the FT article consists of quotes from “campaigners” who seek “to broaden eligibility for food stamps and increase emergency food provision”: the California Women Infants and Children Program Association, the Food Research and Action Center, the Cleveland Food Bank, the Greater Chicago Food Depository, America’s Second Harvest, and Martha’s Table.

It is neither news nor interesting analyis that such organizations want more of our tax dollars devoted to their government rent-seeking activities.

We used to subscribe to the Financial Times, the Economist, Scientific American and National Geographic, all of which once consistently published excellent material with analysis based on well-sourced facts. We watched with dismay as each began to devote more and more of their limited resources to shallow advocacy pieces like this. We canceled our subscriptions, one by one, with regret.

Labels: economics, Energy, food, Media

Tyler Cowen notes that Italy's largest electric utility is converting a power plant from oil to coal, in spite of Europe's stated intentions on reducing greenhouse gases. I forwarded that post to a student of mine in the energy industry, who notes:

I believe it was last year the German government passed a law decommissioning all nuclear facilities by 2020. As of today, roughly 30% of the German grid is supplied by nuclear generation. The other alternative to coal is natural gas but the problem there is the Germans, and virtually all of Europe, doesn’t feel comfortable becoming more dependable to the only supplier of gas in the region. That being Mother Russia herself. With the EU ETS getting over its honeymoon phase with serious haircutting to carbon allocations, this should cause some volatility in the carbon and power markets. Exciting times…

He's right about Germany. And decommissioning is expensive.

Labels: economics, Energy

The European Union's greenhouse-gas emissions from key industries rose 1.1% last year, despite its antipollution policies, demonstrating the difficulty in meeting international commitments to fight climate change.

Carbon-dioxide emissions reached 1.914 billion metric tons last year in the sectors covered by Europe's Emission Trading Scheme, according to an analysis of data by Oslo-based Point Carbon, a carbon market-research and consulting firm. The data released Wednesday aren't complete, because some companies' results are still trickling in, but it represents about 93% of the total, according to the EU Web site.

For the past three years, Europe has been trying to reduce emissions by imposing a market-based cap-and-trade system. Industries such as power generators, steel, cement and aluminum are supposed to cap the amount of carbon dioxide they spew. If they can't make their targets, they must buy permits to emit carbon on the open market.

By forcing companies to buy and sell the right to pollute, Europe's system is supposed to give them a financial incentive to clean up their acts. It is also supposed to provide European countries with a way to meet their commitments to the Kyoto Protocol, the United Nations accord that set emissions-cutting targets for the 175 nations that ratified it for the period between this year and 2012.

Some 11,500 factories, oil refineries, steel mills and other installations are covered by the EU scheme, accounting for about half of Europe's total emissions. There is still no limit on the other half, produced by everything from cars and planes to buildings and retail outlets.

But the caps that the EU set for different industries turned out to be too high. As a result, instead of shrinking, as was originally envisioned, emissions in these industries have crept up by about 1% each year since the program began.

Source. Like you couldn't have seen this one coming. The fight over how much now to reduce caps will be political, not scientific.

Labels: economics, Energy, global warming

Increasingly politicians are using new media to communicate with their constituents and other supporters. Rep. Michele Bachmann has put up a blog on the Republican Study Committee's site to explain her position on CF lights. It's interesting because it turns the precautionary principle on its head. Rather than prevent a new product coming onto the market until one could absolutely prove its safety, it requires the GAO to show that a ban on the incandescent light bulb would

1.) Lead to lower costs for consumers

2.) Lead to a reduced carbon footprint

3.) Not lead to a health risk for consumers, particularly those in vulnerable populations, like those in nursing homes, day care centers, hospitals, and schools.

We've written about the issue here before, in terms of its warping of peak demand, and the Minnesota Free Market Institute re-released an editorial from May 2007 about health effects of the mercury inside them.

But, I would argue the Bachmann bill does not go far enough. As Mike Moffatt noted a year ago, prohibitions have a lousy history. If somehow the price of electricity is wrong such that the incandescent light isn't paying the true cost of energy it consumes, the answer is to change the price. Rather than allow a ban to go forward if GAO gives the right answers to her questions, Bachmann should have it construct the right Pigovian tax. Mike has an idea for that, too.

Meanwhile, Congress could save some energy use by just getting rid of daylight savings time. And make farmers happier at the same time.

Labels: economics, Energy

I was thinking about Captain Ed's post about the new policy toward nuclear policy in the UK. The intention is to reduce emission of greenhouse gases from power plants. Yet that seems quite unlikely on a global scale. The Financial Times reports recently (h/t: PSD blog) that Africa's consumption of oil is such that the price increases in oil since 2004 have cost these countries roughly 3% of their GDP. When the British stopping using oil (or coal, or gas, or ...) to use nuclear, do we think those resources just stay in the ground, and their gases not escape, or do they go instead to Africa, China and India?

Labels: economics, Energy

Via Greg Mankiw, an article on what cars Harvard professors drive. I am reminded of this conversation on EconTalk where Mike Munger tells of a meeting of Duke department chairs. Everyone has a Prius or other hybrid. Next to last comes up the chair of chemistry, who argues that hybrid cars may use more energy (though less fuel) than gas vehicles. (Here's one report explaining why that might be so.) The chemist is then asked what he drives. "Oh, I drive a Prius, but that's just because you have to if you're gonna be a faculty member."

At Harvard, one environmental studies professor drives a '96 Suburban, arguing that he reduced his carbon footprint at home. But eight of 18 economists who answered the survey said they owned luxury cars. Most popular across the campus? The Subaru Forester.

(h/t: Greg Mankiw, proud owner of a BMW 330xi)

Labels: Energy, higher education

The cover story of this week's Business Week is titled Little Green Lies, about the on-the-job education of one Auden Schendler. After a few years of trying to get his company to make investments directly in reducing energy consumption, he was finally able to get them to make a commitment to purchase renewable wind energy credits. (They tout this on their environment page.) This gave the company a leadership position but Schendler a queasy feeling, because it wasn't really changing energy consumption, just buying a green plaque.

Any student of economics could have told you this would be true once they read the economics of these credits as described in the article.

Credits purchased at $2 a megawatt hour, the price Aspen Skiing and many other corporations pay, logically can't have much effect. Wind developers receive about $51 per megawatt hour for the electricity they sell to utilities. They get another $20 in federal tax breaks, and the equivalent of up to $20 more in accelerated depreciation of their capital equipment. Even many wind-power developers that stand to profit from RECs concede that producers making $91 a megawatt hour aren't going to expand production for another $2. "At this price, they're not very meaningful for the developer," says John Calaway, chief development officer for U.S. wind power at Babcock & Brown, an investment bank that funds new wind projects. "It doesn't support building something that wouldn't otherwise be built."

So the change in the price of electricity caused by the increase in demand for green energy generated by wind is less than 2.2%; what would be the elasticity of supply? In the short run you would expect it to be very, very small. What about in the longer run? Could it be greater than one? What would this due to the production of wind power generators?

Labels: economics, Energy

To reinforce yesterday's point, we read Lisa Lerer's dispatch from Iowa.

There are four views of Iowa, at least according to a local joke: corn on the left and soybeans to the right; soybeans left and corn right; corn on both sides; soybeans on both sides.

The old joke needs an update, says Bill Sells, production manager at the Hawkeye Renewables ethanol plant in Iowa Falls. Twenty-eight ethanol plants now dot the Iowa landscape, sticking out like spaceships amid the cornfields.

...Three Republican presidential candidates, former Massachusetts Gov. Mitt Romney, former New York Mayor Rudy Giuliani and former Arkansas Gov. Mike Huckabee, all visited the Iowa Falls refinery, where they pledged further investment in alternative energy.

Over the past year, two other candidates, Sen. Hillary Rodham Clinton (D-N.Y.) and Sen. John McCain (R-Ariz.), went from strongly opposing the expansion of ethanol to endorsing it.

Backing ethanol is a political necessity in the state that is the traditionally the first to choose its presidential candidates. Iowa boasts the greatest number of ethanol plants in the country, producing about 30 percent of the U.S. supply. Ethanol is Iowa’s golden, corn-fed goose.

“It would be a mistake for a candidate to come to Iowa and not address renewable energy,” says Carrie Giddins, communications director for the Iowa Democratic Party.

With a presidential contest in Iowa and an energy bill in Congress, ethanol has become the panacea of all political problems. Pro-ethanol politicians offer the fuel as a cure for everything from dependence on foreign oil to global warming to outsourcing.

All of the major candidates bow at the ethanol altar in Iowa, supporting some form of increased subsidies or development.

If we did not have a caucus so early in Iowa, would we have this boondoggle? One suspects voters in, say, Maryland take a different view.

Labels: economics, Energy, politics

Local DFL leaders are still drinking the ethanol.

Calling today’s investment in ethanol production “feedstock,” U.S. Rep. Collin Peterson believes the nation can reach energy independence in 10 to 15 years.

“The bottom-line goal is for us to get off foreign oil,” Peterson, DFL-7th District, said Friday at an energy conference at Bemidji State University.

He was joined by U.S. Rep. Jim Oberstar, DFL-8th District, who said in his remarks that moving more Americans to public transit — or bicycling — can negate the need to import millions of barrels of foreign oil.

(Yes, I know, I laughed at the bicycle reference too!)

The biggest issue is that it won't. It turns out first of all that in terms of emissions, growing more for biofuels causes a greater net harm than burning more fossil fuels and planting trees with the land you didn't put into biofuel production. Prairie grass might be better, but that wouldn't be bragged about by Rep. Peterson.

Second, it might be nice for Minnesota agriculture to push up prices, but it really makes Hugo Chavez and the poor around the world unhappy. One of those is a good thing. The other is not. Think there's a connection between tortilla prices in Mexico and immigration? Of course, it also turns out increasing developing country wealth has also raised food prices ... but isn't that all the more reason to not divert crops to biofuels, to allow those countries to enjoy their newfound gains?

Corn-based ethanol is only a stepping stone to making ethanol from other sources, such as wood wastes or switch grass, Peterson said, adding that negative press has been “ginned up” by special interests who claim Third World countries are starving because they can’t get American corn, which is now used to make ethanol, a blend of gasoline and bio-fuel.

“There’s a lot of stuff being ginned up out there by some of these people saying that we’re going to starve people in Africa because we’re making all this corn into fuel, which I think is a bunch of baloney,” he said.

“This ethanol, and some extent biodiesel, opportunity has repriced agriculture,” he said. “And it was about time, because we have been selling corn for the last 10, 15 years below the cost of production. We were using the government to finance that benefit, going to the big grain traders to feed and livestock producers, big dairy producers.”

Now with higher corn prices due to ethanol, the government can step out, he said. “One of the positive things is that we’re now seeing a price in the marketplace for corn and soybeans where you can make money without government help, and that’s good.”

Do you think that will come back to us in tax cuts? I wouldn't bet on this. Politics relies on being able to favor one's special interests. Witness two local legislators:

While federal lawmakers talked about pending legislation, Minnesota state legislators talked about three bills they passed and Gov. Tim Pawlenty signed earlier this year.

“We have passed the most forward-looking renewable energy legislation in the country,” Assistant Senate Majority Leader Tarryl Clark, DFL-St. Cloud, told the 200 people attending the energy summit.

Rep. Bill Hilty, DFL-Finlayson, said the three new laws require an increase in renewable energy sources such as wind, while providing loans and grants to meet the goal of producing 25 percent of electric energy from renewable sources by 2025.

They produce cheaper energy, they say, and use the savings to fund loans and grants to produce more renewable energy. We will not see the savings.

They are not interested in energy independence; politicians of both stripes only want to divert dollars spent on a key good to their favored interests. If you want people to be energy independent, just let prices rise and have people learn to conserve as best they can. But then, that doesn't allow the rent-seeking.

FMI: WSJ, Energy Independence, A Dry Hole?

Labels: economics, Energy, Minnesota, politics

The basic problem facing engineers was that there was no technology yet devised that could deal with permafrost, bitterly cold temperatures and the extreme terrain that comprises AK. In addition, environmental and Native groups all lined up to add their concerns to the known environmental concerns.

Eventually all were addressed. The Arab oil embargo of 1973-74 drove home the fact that the United States’ dependence on foreign oil was an exposure we did not need. Alaskan native claims were resolved with the 1971 Alaska Native Claims Settlement Act. The Trans Alaska Pipeline Authority At was passed in November of 1973. It cleared the way for construction to begin.

Alaska’s permafrost underlays nearly 600 miles of the pipeline route. Oil comes out of the ground between 156-178 degrees F. Known methods of burying pipeline would have resulted in thawed permafrost which in turn would surround the buried pipe with a soupy silt/water mess. The solution: Move the pipeline above ground with H-shaped vertical supports (see photo at top of this post). On top of these H structures, you will notice aluminum fins. The fins act as a cooling system that pulls excess heat from the permafrost layer and radiates it into the air. This complex yet complete solution represented the first time a pipeline had been built above ground.

The H supports went in slowly, in fact so slowly the pipeline completion date was expected to last until 2010. However, again ingenuity raised its head. By changing the type of materials and processes used, the construction and installation of the supports rapidly increased. Eventually 78,000 supports were placed into service and the 2010 completion date was no longer an issue. These supports hold 420 miles of pipe above ground.

Photos often show the zigzag configuration of the pipeline. This unique design accommodates seismic activity (earthquakes) and the extreme temperature changes along the pipeline route. In addition, in the middle of the H supports, just above the cross-section of the H, is an approximately 4' bar that can move from one side of the H to the other. This horixontal flexibility also lets the pipe flex during an earthquake. Hence, damage is minimized.

A total of 380 miles of pipeline was buried underground. The depth ranged from 3-12 feet, depending on soil conditions. For pipeline buried in avalanche-prone areas, the underground components were refrigerated to protect the permafrost.

Labels: Energy