GHG Science – Uncertainty and Bias

Posted on July 24, 2009 by John

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I have had an inclining to get up to speed on GHG science and the actual debate about GHG’s affect on global warming for some time now. I recall a friend of mine in a environmental policy class stating that its hard, as a student, with little specific knowledge of the science to understand the details behind GHG science in a manner that allows him to judged if its true or not.

Just take a quick look at a website devoted to the science of temperature monitoring and temperature data analysis. (http://www.climateaudit.org/) This stuff gets complicated very quickly. That’s why we tend, as a society to look at the experts, to try to ascertain what the consensus is about a certain subject.

With GHG it appears to be fairly straightforward. There are tons of scientist, politicians, and personalities telling us that humans are killing our planet quickly and that if something isn’t done there will be massive societal problems. For me its hard to weight the evidence. Some of the arguments I have heard form the various perspectives are compelling. For now I haven’t come to a decisive decision, as I hope to read more on the subject, but it seems that there is some contention on to what degree the changes in temperature are atmospheric versus land, man-made or natural cycles, and the degree that temperature changes will negatively affect our livelihood. There is much more uncertainty in the professional climate studies subculture than leaders, politicians, and personalities want us to think.

I do think that an effective GHG cap-and-trade program will increase costs in the U.S. suppressing manufacturing even further and negatively affecting our disposable income and thus most peoples standard of living (at least perceived standard of living, which is all that matters). This is my professional economist perspective, from reading several studies and analysis by various economist and think-tanks. So I suggest we weigh some of the uncertainties about GHG science with some of the known costs of reducing emissions. The conversation is too often heated with groups and individuals biases and ignores the uncertainty of the science and risks of limiting emissions.

I did find an interesting petition, signed by 31,478 American scientists, including 9,029 with PhDs, stating that the science which backs the claims of greenhouse gas legislation is flawed. (See for yourself)

My buddy Kenny pointed me to a good link on the discussion surrounding global warming. Still a lot of opinion (he mentioned that climataudit.org, “is a crap pseudoscience blog. It’s use is only to reaffirm what people want to believe, using the guise of doubt.”)

ARS Technica

A good quote from the discussion:

[Global Warming trends is] not an easy demonstration to make, at least in the forward looking sense (the backward looking version is just a bunch of dull, daily temperature readings, albeit lots of them in lots of places — the forward predictions are models). I’d say demonstrating evolution is actually easier. There’s hard rock geology behind it. Most of those who aren’t persuaded don’t want to be.

Global warming, however, is all about extracting a pretty small signal (the increasing average temperature) out of a whole bunch of noise (day to day fluctuations, actual natural changes that are always going on, etc.).

Unless you’re a specialist reading the literature, you’re basically going to end up taking this one on trust.

What’s Wrong with Consumption Apparently Everything

Posted on July 16, 2009 by John

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I came across this NY Times article which covered a video that is “about the effects of human consumption.” Well, more accurately it reflects the negatives of human consumption.

The video was created by Annie Leonard, a former Greenpeace employee and an independent lecturer who paints a picture of how American habits result in forests being felled, mountaintops being destroyed, water being polluted and people and animals being poisoned.

Apparently the video quickly spread among teachers who,

recommended it to one another as a brief, provocative way of drawing students into a dialogue about how buying a cellphone or jeans could contribute to environmental devastation.

Here is a quote from the short 20-minute video.

We’ll start with extraction, which is a fancy word for natural resource exploitation, which is a fancy word for trashing the planet. What this looks like is we chop down the trees, we blow up mountains to get the metals inside, we use up all the water and we wipe out the animals.

I think it is good to express some of the negatives about negative externalities associated with consumption , but to con a small child into believing that having stuff makes them bad isn’t helpful for the long term health of our environment. Further the political, moral, and economic knowledge needed to fully understand this issue takes more than 20 minutes to digest. I spent a few years studying and thinking about it all.

Feeling that we are inherently unable to take care of ourselves, that what we do and how we consume is wrong creates a fundamental doubt in humans. This doubt may result in development of a person who thinks that humans are bad, that their actions are wrong, which may at best create self-loathing problems, and at the worst create a person who doesn’t think humans can do good things. Its essential for survival to consume, so if its bad, then me pursuing what is in my interest, surviving, is bad. That’s a bit mixed up.

Short videos used as propaganda, propagates a reactionary mind, which isn’t beneficial to the conversation of taking care of our environment. Jerk-knee reactions, like “plastics are bad because they are from oil” is determinant. What about plastics that save lives like IV bags?

Find out more about the video at http://www.storyofstuff.com/.

American Clean Energy and Security Act

Posted on June 26, 2009 by John

Today the House will be voting on the American Clean Energy and Security Act (Waxman Markey Bill).

See my last post on my view of GHG legislation. This post is reserved to express the concept of certainty.

Vote Yes, For Certainty

I work in the energy industry and part of my work involves helping utilities make decisions. Over the last few years it is increasingly difficult for energy industry professionals to make decisions. This isn’t because of a change in culture or increasingly complicated decision making tools, but rather due to threat of drastic changes in energy legislation; most notably, the creation of a greenhouse gas cap-and-trade program.

Energy industry professionals do not know when or how the government will change the rules. They are unsure about how much their coal fired power plants will be worth, or how much additional money they may receive from a nuclear plant. This complicates and distorts their ability to decide how to run their companies. So I urge congress to pass the American Clean Energy and Security Act of 2009, for the sake of certainty, so we can start making informed decisions again.

I realize the bill will increase the cost of doing business in the U.S., likely resulting in the loss of industries and jobs to other countries (think the production of anything energy intensive, like information infrastructure). I realize that households will have to pay more for their energy, resulting in an immediate lose in standard of living. I realize the bill is full of problems, loopholes, and special interest provisions. But for the sake of certainty, vote yes.

As a first mate to the energy industries ship I beg for the government to stop threatening us with plans on drilling massive holes in our hull. We would prefer the holes to drilled now, so we can quickly assess the damage and start making repairs. I do have one qualifier; put a provision in the bill that limits how often the law can be distorted. I prefer one set of holes be drilled.

Subsidizing Greenhouse Gas Production

Posted on June 25, 2009 by John

The House of Representatives is planning on voting this week on the week Waxman-Markey cap-and-trade bill. This bill requires entities to hold one allowance for any fuel whose combustion would emit one ton of greenhouse gas. The below image shows the Heritage foundations estimation of the costs of this program.

There has been push back from environmentalist for the lack of stringency of the bill (see this op-ed), whereas conservatives criticize the bill for the negative consequences to the economy and increased costs to households (see this report).

For me it is fairly simple. If we increase the cost of doing business in the U.S., then companies will move to other countries to produce goods and services (internet searches are energy and carbon intensive). This decreases the economic activity in our country while moving carbon intensive industries to countries with no carbon limitations, resulting in the same or even more likely a larger carbon footprint for the world and reduced economic activity in the U.S.

If the goal of the government was to move to a green economy to reduce our carbon footprint than they should stop subsidizing the production of carbon intensive fuels and uses for those fuels.

A cap-and-trade program simply attempts to increase the costs of using carbon based fuels, by requiring an emitting entity to hold an allowance, which costs money (similar to a tax). There is another way to reduce carbon, among others, by increasing the cost of producing carbon based fuels. An interesting aspect of this approach is that the cost of producing carbon based fuels is lower due to government subsidies.

The US government subsidizes the production of carbon based fuels, most notable oil, coal, and natural gas, through numerous programs and incentives.

Here are a couple of methods of subsidizing oil (from GreenPeace article)

Tax Breaks for Domestic Oil Exploration and Production.
Defense of Persian Gulf Oil Supplies.
Provision of the Strategic Petroleum Reserve.
Support for Oil-related Exports and Foreign Production.

Also, the subsidization of royalties (from NY Times article).

In the United States, the federal government’s take — royalties as well as corporate taxes — is about 40 percent of revenue from oil and gas produced on federal property, according to Van Meurs Associates, an industry consulting firm that compares the taxes of all oil-producing countries. By contrast, according to Van Meurs, the worldwide average “government take” is about 60 to 65 percent. And that figure, of course, excludes countries that do not allow any private ownership in oil production.

Last fall, the Interior Department agency that collects oil and gas royalties has been caught up in a wide-ranging ethics scandal — including financial self-dealing, accepting gifts from energy companies, cocaine use and sexual misconduct. Maybe this is why we have some of the lowest royalties in the world. (See NY Times article, and Colorado Independent Article)

So, let’s stop subsidizing the production of carbon based fuels, and do this by first increasing royalties and increasing the transparency and oversight of the Interior Department. Allowing the cost of carbon based fuels to reflect their true market costs will create an incentive for green development, while reducing government intervention and manipulation. Win win situation between the greens and libertarian/conservatives. And increasing government royalties could allow us to pay for all the other government services, so the liberals win as well, albeit to the detriment of the libertarians.

See the End Oil Aid website for further information on ridding our market of harmful oil subsidies.

The War on Drugs Doesn’t Work

Posted on June 15, 2009 by John

The War on Drugs was started by President Nixon 40 years ago and a recent Op-Ed in the NY Times explains how it has failed.

Nicholas Kristof describes three ill-effects of the War on Drugs:

1. Increased incarceration.

The United States now incarcerates people at a rate nearly five times the world average. In part, that’s because the number of people in prison for drug offenses rose roughly from 41,000 in 1980 to 500,000 today. Until the war on drugs, our incarceration rate was roughly the same as that of other countries.

2. Increased the price and subsequently the profits of drug lords.

One reason many prominent economists have favored easing drug laws is that interdiction raises prices, which increases profit margins for everyone, from the Latin drug cartels to the Taliban.

3. Wasted resources.

Jeffrey Miron, a Harvard economist, found that federal, state and local governments spend $44.1 billion annually enforcing drug prohibitions. We spend seven times as much on drug interdiction, policing and imprisonment as on treatment.

I also just watched a documentary on MS 13 (World’s Most Dangerous Gang) which connected the gang’s power with drug sales.

One simple point I hope my readers can ponder. When was the last time you saw a gas station owner get in a gun fight with another gas station for the rights to sell beer in a neighborhood.

Also check out what the group Law Enforcement Against Prohibition, or LEAP, is doing to support a sound drug policy. This is an organization of police officers, prosecutors, judges and citizens who favor a dramatic liberalization of American drug laws.

Soft Paternalism – Because You Are Dumb

Posted on June 8, 2009 by John

I came across a good article on Soft Paternalism on NPR, Using Psychology to Save You from Yourself.

The basic concept of Soft Paternalism, or so its supports claim, is derived from Behavioral Economics, which is,

a school of economic thought greatly influenced by psychological research — which argues that the human animal is hard-wired to make errors when it comes to decision-making, and therefore people need a little “nudge” to make decisions that are in their own best interests. And that is exactly what Obama administration officials plan to do: By taking account of human psychology, they hope to save you from yourself.

The argument against Soft Paternalism is often along the lines of government also being made up of error prone individuals, so that the government should remain out of the business of making decisions for individuals.

“Just understanding that human beings don’t make perfect decisions does not make the case for government by any stretch of the imagination,” Glaeser says. “After all, governments are made up of people, too. They are subject to the same foibles and weakness as the rest of us.”

The retort provided by one of the article’s subjects brings up an example of Soft Paternalism in Britain.

Any American who goes to London realizes that they are endangering their lives every time they try to cross the street, because the traffic comes from the wrong direction. Our instinct is to look left, but if you look left, you’ll get run over by a double-decker bus. To help us, Thaler says, someone in the British government decided to write on the sidewalks of busy intersections filled with American tourists the words “look right.”

The problem I have with this is not that government officials are error prone, although I realize they are error prone (on top of incentives that are not aligned with my well being), but that this type of intervention in individuals lives can lead to a lazy populice, which can become even more error prone.

The reason we are taught to walk across the street safely, is so that we can become independent adults, pursuing what makes us happy in our own way. If we no longer need to be taught to walk across the street, or how to choose a doctor, or what to do with our money, then we are no longer individuals pursuing our own happiness. We are merely mechanisms of a society which has robbed us of our path to empowerment and self fulfillment, the maturity to take responsibility for our actions. I would prefer to live with people who feel responsible for thier own actions and felt empowered and esteemed for being able to do things like, walk across the street.

Google Wave

Posted on June 5, 2009 by John

I came across a presentation of Google’s new product, well its not quite out yet, and its not quite a product in the traditional sense of having to be bought. Regardless, this made me excited about the possibilities of the internet, which I think we as a society are only beginning to appreciate. I am spending time lately thinking about using wikis as collaboration tools for companies as well as microblogging. Check out the first 20 minutes and/or skip around for screen shots of Google Wave (minute 12 is a good start).

Banks are Raising Capital – Yeah Right

Posted on June 3, 2009 by John

I came across this NY Times article a few weeks ago describing Treasury Secretary Timothy Geithner statement that banks are now able to raise capital.

The country’s biggest banks have made moves to bolster their balance sheets by about $56 billion since the government disclosed the results of its financial “stress tests” two weeks ago, Treasury Secretary Timothy F. Geithner said Wednesday.

So the question that came to my mind after reading the article is, “Where is all this money coming from?’

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That’s right. The Federal Reserve has been expanding the money supply so quickly that banks that only a few months ago couldn’t raise capital and were looking at a qquick demise are now able to raise $56 billion.

It is har dto measure precisely the amount of monetary expansion occurring as a result of numerous actions by the Federal Reserve. This analysis has it pegged at close to $1,100 billion. Another shows the increase at closer to $700 billion.

So what’s the problem with such a quick and extensive expansion of the money supply. This is the debated questions, or rather more specifically the debate is two parts (1) is the monetary expansion needed and (2) will the long term consequences be worth the debated short term gains.

Simply put, excessive monetary expansion creates inflationary pressure which devalues the US dollar making it less attractive to foreign investors and creates uncertainty and instability. The argument is that the benefit of monetary expansion is to stimulate the economy in the short run. There is little to no empirical evidence that this is true and economist do not agree on this being true.

During Federal Reserve Chairman Bernanke’s December 1, 2008 remarks he states,

Expanding the provision of liquidity leads also to further expansion of the balance sheet of the Federal Reserve. To avoid inflation in the long run and to allow short-term interest rates ultimately to return to normal levels, the Fed’s balance sheet will eventually have to be brought back to a more sustainable level. The FOMC will ensure that that is done in a timely way. However, that is an issue for the future; for now, the goal of policy must be to support financial markets and the economy.

Obviously in Bernanke’s mind, this is something to think about in the future, or in economist’s jargon, in the long run. Keynes was a proponent and some say the creator of monetary expansion policy and a critic of Keynes, Ludwig von Mises, stated in response to Keynes arguments for monetary expansion,

…we have out lived the short run and are suffering from the long run consequences of [Keynesian] policies.

In response Keynes simply states,

In the long run we are all dead.

Well in the long run for the current monetary expansion, we may not be all dead, I will be alive, Bernanke will likely still be alive, albeit likely no longer the Federal Reserve Chairman. What I think is the more realistic retort to the reasonable criticism of von Mises is “In the long run, people tend to forget what caused the mess.” They might not be dead, but the problem is dead as people tend to only think of things statically and don’t see connections between past behaviour and decisions and current unfavorable predicaments. When the long run comes, they’ll likely blame something that is occuring in the short run.

Just as the current economics crisis is thought to be a result of short term speculation rather than the long term consequences of government intervention in the economy, and most notably the housing market (see article on the relationship between the economic crisis and government policy). I’m excited to see how people perceive the future inflation and devaluation of our currency.