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Tue, 06 May 2008 15:20:00 EDT

Science columnist Ronald Bailey does the math and exposes the Clinton (McCain) gas tax holiday fraud. Then he asks: Are voters stupid enough to fall for it?

Read all about it here.

Are Voters Stupid Enough to Sell Their Votes for Just $27 and Change?

rbailey@reason.com (Ronald Bailey) — Tue, 06 May 2008 15:00:00 EDT

During the 1992 Democratic presidential primaries, former Massachusetts Sen. Paul Tsongas denounced rival Gov. Bill Clinton (D-Ark.) as a "pander bear" who "will say anything, do anything to get votes." Sen. Hillary Clinton (D-N.Y.) is clearly following in her husband's electoral footsteps by proposing a "gas tax holiday" for the summer driving season. When primary votes are at stake, who needs to heed the laws of economics or even good sense?

Clinton's idea, which is also endorsed by Republican presidential hopeful Sen. John McCain (R-Ariz.), is to suspend the 18.4 cents per gallon federal gas tax for three months in order to give cash-strapped motorists relief at the pump. Assuming that dropping the tax would actually lower the price per gallon by the full 18.4 cents, how much would this actually save the average family?

Let's make a rough calculation, using an average commute of 20 miles per day in an automobile with a 15 gallon tank getting the corporate average fuel economy (CAFE) mileage of 27.5. A commuter would then fill up every 20 days. There are 98 days between Memorial Day and Labor Day, so that means five fill-ups over the summer. Five 15 gallon fill-ups at 18.4 cents per gallon less would mean that motorists would save a total of $13.80 for the summer. Let's double that for vacation driving and shopping and that comes to a grand total of $27.60 in savings. About enough to buy five Big Mac Combos.

But would prices actually go down by 18.4 cents? Not likely. As the Tax Foundation reports, most economists assume "that a temporary gas tax holiday would merely increase the profits of the oil industry due to the inability of domestic supply to respond to increased demand in the short run."

In addition, if the federal gas tax is dropped for the summer, the highway trust fund that pays for the upkeep of our crumbling roads and bridges will be short $10 billion. Not to worry, says Sen. Clinton: We'll make up for that fiscal shortfall by taxing the excess profits of Big Oil.

Clinton clearly hopes that primary voters will want to stick it to the greedy oil companies. After all, Exxon Mobil just announced $10.9 billion in profits for the final quarter of 2007. So Sen. Clinton says she'll take away some of those profits to pay for her gas tax holiday. And Clinton's not alone. Her Democratic rival, Sen. Barack Obama (D-Ill.) is also calling for a windfall profits tax on oil companies. But will it work?

The last time the United States imposed a windfall profits tax on oil companies was in 1980 and it lasted until 1988. The result, according to a 1990 Congressional Research Service analysis, was that the tax on oil company profits decreased domestic production by 3 percent to 6 percent and increased dependence on foreign oil by 8 percent to 16 percent. Keep in mind that the big private oil companies actually control only about 6 percent of the world's known oil reserves—the rest are owned by gigantic foreign national oil companies. And just where do private oil companies get the billions they invest in projects to increase supplies? That's right; their profits. In other words, Clinton actually ends up sticking it to consumers when she tries to stick it to Big Oil.

Sen. Clinton may be feeling the pain of motorists right now, but once she's in the White House, she plans to inflict more pain at the pump. In fact, all three presidential hopefuls plan to do this. Why? Because Clinton champions "the most aggressive approach to reducing global warming out there." She wants to cut the emissions of greenhouse gases that warm the planet by 80 percent by 2050. To do this she favors a cap-and-trade market on carbon dioxide emissions. The Progressive Policy Institute has calculated that a relatively modest $15 per ton price for carbon dioxide emissions would boost the price of gasoline by 15 cents per gallon. But Sen. Clinton is counting on voters failing to connect the dots between gasoline prices and her global warming policies.

This past weekend, on ABC News' Sunday talk show, "This Week," Sen. Clinton was asked by host (and former Bill Clinton aide) George Stephanopoulos, "Can you name one economist, a credible economist who supports the suspension?" Sen. Clinton replied, "I'm not going to put my lot in with economists." For their part, economists are certainly not putting their lot in with Clinton. According to Bloomberg News, 200 prominent economists, including four Nobelists, have signed a petition denouncing Clinton's gas tax holiday as a "bad idea." Even the New York Times' Clinton votary economist Paul Krugman grumbled that her ploy is "pointless, and disappointing."

We will find out soon if Democratic Party primary voters are really stupid enough buy into this cynical Clinton pander.

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

Farm Bill Follies

rbailey@reason.com (Ronald Bailey) — Wed, 30 Apr 2008 12:00:00 EDT

The $300 billion farm bill is being cobbled together by Congress this week. As Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) noted, "It's not just a farm bill. This is a farm and a food and an energy bill."

As Otto von Bismarck quipped, "Laws are like sausage. It's better not to see them being made." Let's take a look at these three aspects of this unappetizing piece of sausage.

First, what do the farmers get? Answer: A lot. Last year, net farm income reached a record level of nearly $89 billion due to high crop prices. Farm household income averaged $84,000 in 2007, according to the Environmental Working Group (the 2006 average for all U.S. households was $66,000). Despite such good times, the federal government showered $5 billion in direct payments on 1.4 million farmers.

These direct payments have nothing to do with crop productivity or a safety net in case of low prices—they are basically gifts to farmers just because they are farmers. In fact, farmers with gross incomes up to $2.5 million have been eligible for these payments. President Bush wants to cap that at $200,000 in income, but the House is considering a cap of $500,000, and the Senate voted to cap the payments at $750,000 per year in income. Overall, Congress shaved just 2 percent off of the direct payments of $5 billion per year over the next four years. While this is a barely discernible improvement, one would think record high farm incomes combined with a world food crisis would make this a good time for Congress to scrap farming subsidies altogether.

It is true that about two-thirds of farm-bill spending funds nutrition programs such as school lunches and food stamps. Lawmakers added $10 billion to the food stamp program to help lower-income Americans address higher food prices. But why are food prices higher in the first place? Part of the reason is the federal government's subsidies and its mandate to turn food into fuel—which brings us to the legislation's energy policy madness.

In December, Congress passed and President Bush signed the Energy Independence and Security Act, which mandated that the U.S. produce 9 billion gallons of conventional biofuels this year. The Act requires that 15 billion gallons of conventional biofuels be produced by 2015 and that 36 billion gallons of conventional and "advanced" biofuels be produced by 2022. How does this affect food prices?

Higher corn prices result from biofuel mandates and subsidies, which encourage farmers to plant fewer acres of wheat and soybeans—which in turn raises their prices. In addition, corn is the chief feed grain for which producers of beef, poultry, and pork must pay higher prices which they will eventually pass along to consumers. In 2006, a bushel of corn sold for just under $2; today it sells for nearly $6.

Currently, most biofuels are produced by turning corn into ethanol. The U.S. Department of Agriculture estimates that the 2008 corn crop will be 14.6 billion bushels, of which 3.2 billion[*] bushels will be fermented into ethanol. In other words, about 22 percent of our corn crop will be floating out the tailpipes of our automobiles next year.

The new farm bill contains a small gesture in the direction of sanity by reducing bioethanol subsidies from 51 cents per gallon to 45 cents per gallon. This should reduce the price of a bushel of corn by about 3 cents, according to the Des Moines Register. On the other hand, Congress is trying get around the unintended consequences of its biofuels policy by offering $1.01 per gallon subsidy for so-called cellulosic ethanol. Large-scale production of cellulosic ethanol has yet to take off, so the farm bill also disperses $400 million in tax credits in the hope of jumpstarting such production. In addition, the bill extends the tariff on imported ethanol until 2012.

The biofuel mandate is not the only reason for higher food prices—higher oil and fertilizer prices as well as commodity speculation also contribute substantially.

But there's no excuse for Congress to make matters worse with this farm bill. As Rep. Ron Kind (D-Wis.) declared, "Negotiators managed to avoid every opportunity to reform wasteful, outdated subsidies while piling on additional layers of unnecessary spending." As a consequence, Americans can look forward to thinner wallets as they struggle to fuel their cars and feed their kids.

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

[*]: Due to an editing error, this originally read million.

Power From the People

bdoherty@reason.com (Brian Doherty) — Mon, 28 Apr 2008 15:00:00 EDT

Here’s one way to get electricity: First, find two old metal tanks, of varying widths and heights—the kind used to contain compressed gases will do. You might have a few lying around, at least if you hang out in junkyards or machine shops chockablock with working metal sculptors.

Then take your angle grinder—you’ve got an angle grinder, right?—and smooth down the surface of the smaller tank, slicing off any protruding pieces with its palm-sized circular saw. The grinder will get them—just put a little muscle behind it. It’d be good to have a box of replacement discs around, as they wear out quickly.

Now put a different blade on the grinder and cut around the entire circumference of both tanks to get yourself cylinders of the desired height. Really, anyone can do it. I’m no trained metal worker, but I was able to perform the grinding and slicing OK when I had to. It was even sort of fun.

My circumference cut was uneven, though; if you’re an amateur, get someone with a better eye and steadier hand to even it out for you so you can get something close to a seal when you put a lid on top of the wider one. Nestle the smaller cut tank inside the other, attach a grate to its bottom, then funnel carbon-based waste into the top. It can be wood, paper, walnut shells, even coffee grounds. All that matters is that it has some carbon bonds that can break down to make heat and burnable gases.

Get a fire going inside the first cylinder to heat that carbon-based waste, without quite burning it. What you want is to start a process called pyrolysis, in which the carbon-based stuff gets warmed up in an oxygen-poor environment, releasing volatile gases that aren’t fully incinerated. The carbon then becomes char.

Keep heating those released volatiles over the char until you’ve reduced the output gas to mostly carbon monoxide and hydrogen; that gas will “live” in the space between the inner and outer cylinder, and can ultimately be sucked out via a hole in the top, through tubes, to run into a generator engine, which will burn them like it burns any other fuel to operate. The byproducts will be carbon dioxide and water.

This technique can also run the engine in your car, which is what the one I helped build in an Oakland metal-worker warehouse last August was intended to do.

As with any biofuel, this process is in essence carbon-neutral, since it only releases back into the atmosphere the carbon that had been taken out by the raw-material plants as they grew. Had that bio-waste not been burned, it would have eventually released the carbon back into the atmosphere through decomposition anyway. Burning fossil fuels, by contrast, introduces new carbon into the atmosphere that was previously sequestered underground.

The chemical and technical realities behind this fuel generation have been very much simplified in the above description, but a workable machine to manufacture usable, carbon-neutral energy really can be constructed in a single afternoon. What you have just built is a jury-rigged version of a “gasifier.” While gasifiers haven’t been widely used in America for decades, it’s not a new technology. In Europe during World War II, when liquid fuel was hard to come by, these generators were adopted as an impromptu way to get many thousands of cars moving.

Most of us, thankfully, have other ways to acquire energy. To light your living room, you can flick a switch on your wall, completing a flow of electrons that began at a giant (usually coal-powered) plant hundreds of miles away. To start your car, you can drive to a station likely within a few miles of wherever you live and pump in a dense, energy-rich, ready-made liquid fuel.

Even in this era of rising energy prices, the costs of electricity and gasoline are still manageable. It requires around 15 cents a mile to move at typical gas prices and mileage, so you can travel more than 35 miles for one hour at minimum wage. In Los Angeles, it costs me about 50 cents a day to illuminate every room, keep a stereo and a computer running pretty much all day, charge iPods and cell phones, run a refrigerator, and keep a microwave oven, toaster, and George Foreman grill all at the ready.

Lately, however, concerns about depleting oil supplies and global warming have convinced many Americans that the easy, nearly free energy ride is over. From Oscar-winning movies to the Nobel Peace Prize, from government to industry, anxiety over climate change has unleashed a lot of heavy thinking about devising new systems to power our lives. Even giants in the energy industry are beginning to reconsider the top-down broadcast model that has dominated the provision of power for most of the past century. Under that legacy system, faraway plants burning coal or natural gas zip electrons out to all of us at the end point of the network, losing nearly 70 percent of the energy in the process through waste heat and line loss.

Many of the policy ideas being generated amount to wealth-reducing restrictions, such as higher taxes on fossil fuels and mandatory caps on emissions. But a growing number of venture capitalists, small businesses, and government regulators are asking a provocative question: What kind of efficiencies could be realized if power was created by, or at least much nearer, the end user instead?

Experiments in such “distributed generation”—where power is produced by multiple sources through multiple methods, much closer to the point of final use—are happening on industrial scales, via such means as combined heat and power (CHP) and solar. But they are also possible on a smaller scale, as part of a burgeoning “people power” movement. Lots of distributed generation thinking is based on the already old-fashioned solar panel model. But in Berkeley, California, a group of artists and gearheads is exploring more complicated ways to turn the old electricity model upside down without a single dollar in subsidies or a giant power plant.

Their trials, tribulations, and occasional flashes of glory make a compelling case study of how something as emblematic of the machine age as energy production can become intimate and personal. These innovators imagine a transformation similar to the evolution of computers over the past 40 years: from a mainframe model in which consumer interaction was both unwanted and enormously difficult, to a networked personal laptop model where both hardware and software are widely accessible and, for those interested, adjustable to your personal and creative choices, circumstances, and whims—remaining all the while deeply intertwined with an industrial mass-production system.

Their experiences also indicate that industrial creativity has a hard time co-existing with current urban regulations—and that the old model of generating and distributing electricity, with all its flaws, is unlikely to be knocked off its perch any time soon.

The Shipyard vs. the State
During the summer of 2007, I was introduced to a new way of thinking about personalized power as I watched a group of bohemian machine-artists grapple with gasification, trying to master it, teach it, and ultimately transform it into a huge art project.

The effort was spearheaded by Jim Mason, a Berkeley artist I knew through Burning Man, an annual festival held in Nevada’s Black Rock desert. Mason was forced to think about self-generated power by the city of Berkeley, which cut off his electricity during a dispute over building code violations.

In 2001 Mason rented a couple of buildings on a big lot in a mixed-used, quasi-industrial part of town to start what he called the Shipyard, an artists’ workshop. It officially covered two addresses on two streets, filling about a third of a block. It had lots of outdoor space for art projects and parties. For storage and more indoor work space, Mason championed what he thought was a quintessentially Berkeleyesque solution: repurposed, recycled shipping containers that he scrounged from Bay Area ports, stacked two high.

Mason and his collaborators threw elaborate art parties. One, celebrating Ernest Shackleton’s disaster-plagued Antarctic expedition of a century ago, featured meals of faux penguin served on ice plates to dozens of guests crammed into a shipping container kept below freezing, with fire effects pumping up through columns of ice all around them. A “How to Destroy the Universe Festival” combined extreme industrial noise acts with fire (and meat) art. The Shipyard artists were self-consciously bohemian, charmingly aware of their own absurdity. During one of my interviews with Mason, I noted a dry-erase board in their shop on which someone had scrawled a list of “tools needed,” starting with “14" chopsaw blade” and “pile of money.” The crew created self-mythologizing slogans: “Shipyard: When Overkill Isn’t Enough,” “Shipyard: When Biblically Huge Machines Have to Be There Overnight.” The artists genuinely believed they were providing a service to Berkeley, a city with a reputation for liberalism and creativity.

But Berkeley Deputy Fire Chief David Orth didn’t see it that way, especially after receiving unexpected calls about 40-foot propane fire jets (typical Shipyard entertainment) in the air over his city. Joan MacQuarrie, the woman in charge of building inspection at the city’s planning department, found nearly everything about the situation troublesome. “No use permit,” she recalls. “They moved cargo containers onto the lot, which constitutes building, without any building permits. There were other safety violations. The cargo containers, some of them were occupied or appeared to be occupied. Fire hazard issues. Exiting issues.”

Mason thought Berkeley was flouting its heritage by being so picayune about his attempts at innovative recycled living. “All the issues came down to trying to solve liability problems,” he says. “Their first thought always seemed to be ‘We must act to cover our ass’ so no one can come back to them over injuries. There was this inordinately high valuation of a culture of safety, even in a city whose reputation is founded on experimentation, creativity, and innovation.”

Filled shipping containers stay stacked, often nine high, on rolling ships; institutions ranging from traveling art shows to specialized communities in Europe had been using them for housing for years. But the containers didn’t fall under any existing building codes and thus there was no standard way to certify them as safe building materials, especially in a city that is seismically active.

The containers could eventually be folded into an existing code, says Orth (who has resigned since being interviewed), but they probably would have to be encased in frames or transformed in some other way to qualify as buildings, thus eliminating the whole point of the Shipyard’s experiment in cheap recycling. “They know they need structural engineering,” Orth says. “It’s not going to be inexpensive to create buildings out of these containers. It’s gonna cost as much as it takes to build a building.”

That New-Car Smell
Regulatory problems soon led to electrical problems. In March 2002 the city government decided that one way to deal with these stubborn artists was to cut off their power. Power generation suddenly became more than just an intellectual curiosity for Mason. Looking around at the existing world of people trying to live without plugging into the existing power grid, he was disappointed, seeing mostly the sort of 1960s mentality that figured if you had solar panels on the roof to heat your herbal tea, you were living a properly low-impact life.

“I wanted to take up power not from a Luddite ‘the world is being destroyed’ mentality that we should all do nothing, sit in a corner, and not consume at all, or since we can’t, just do a little and feel guilty anyway,” Mason says. “I wanted to take it up as a culture of potential abundance, of doing and engagement.”

So he and some of his pals experimented with living large off the grid. Tea, shmea; they needed to operate three-phase industrial power tools. So they scrounged transformers and off-the-shelf generators from junkyards, bought inverter arrays on eBay, assembled solar panels and switching stations. It took them many months and many failures along the way, but they ended up cobbling together a system that successfully supplied their workshop with electricity, controlled by a snazzy computer program that made it possible to trace all operations online. Though it tended to trip out at least once a day, Mason hopes eventually to offer a version of the power system bundled together in one shipping container as a “powertainer” for off-grid use in the Third World and elsewhere.

Hearing Mason explain it all, the Shipyard’s multiyear experimental electricity generation project sounds absurdly Fitzcarraldan—nothing that any normal person would confuse for a suitable replacement for flicking a switch. While the power system he developed for the Shipyard was ultimately a jumble of solar, batteries, and biodiesel generators, while immersing himself in interesting ways to self-generate power, he did stumble upon a simple old technology—gasifier engines—that, he imagined, could help people rethink energy at a profound level, especially when it came to moving vehicles.

Mason and friends built their first gasifier, similar to the one described at the beginning of this article, in one day. Feeling evangelical about this weird old tech, they installed the engine in the bed of a truck owned by the San Francisco artist and 2007 mayoral candidate Chicken John Rinaldi. The gases produced by the contraption were sucked into the engine on its downstroke via old vacuum-cleaner hoses. Rinaldi began preaching the wonders of gasification on city streets and in the parking lots of Silicon Valley tech conferences, explaining how a car could run on coffee grounds. They dubbed the vehicle the Café Racer.

For Mason, gasification demonstrated the potentially wide range of individual choice in power. He began imagining eco-power stores where you could choose what you burned in your gasifier based on the scent you wanted in the exhaust. At the same time you’d be solving an environmental problem by burning for fuel what would otherwise be waste. Thinking further, Mason figured out a way to link gasification to one of the decade’s biggest concerns: carbon footprints.

The Mechabolic Hypothesis
The key in making a 21st century environmentally friendly process out of an old 20th century machine is the char left over after gasification. In the Amazon rain forest, scientifically mysterious processes create a charcoal known as terra preta (“black earth”) or “agri-char,” which has been used for thousands of years to enrich the soil and boost agricultural productivity. More recently, it got a glowing write-up in Scientific American in May 2007 and made Wired’s “JargonWatch” this March.

By taking the leftover carbon char and plowing it back into the ground, gasification might do more than the mostly carbon-neutral act of burning biofuel. The process is potentially carbon-negative, keeping most of the carbon in the ground rather than the atmosphere while helping plants grow faster, which takes still more carbon out of the atmosphere.

At the 2007 Burning Man gathering, for which the art theme was “green man,” Mason planned to unveil a huge sculpture illustrating the potential of gasification and its terra preta byproduct. He called it the “Mechabolic,” after what he had started to call the Mechabolic Hypothesis.

“Whether food or fuel, animals or engines, it is the same chemical process, partaking of the same inputs, exhaling the same exhausts,” he says. “Fuel, machines, and fire are the synthetic forms of food, body and respiration.” All involve putting together and breaking apart carbon, hydrogen, and oxygen. It’s important to be mindful of the complicated interconnections of it all; the carbon in anything is going to remain in the entire bio-economy in some form, whether burnt or composted or eaten. But some ways of transforming it, such as gasification, are better in terms of greenhouse gases than others. Plain composting, for example—an environmentalist favorite—if done without proper aeration during the process, produces methane, a particularly heinous greenhouse gas, worse than carbon dioxide.

The 120-foot-long Mechabolic was meant to resemble a huge mechanical slug, with a “mouth” that mulched waste and a “stomach” that gasified it. The gas would be used to run an old dragster engine that would propel the sculpture, as well as flame effects. The excretion would be terra preta, which would be fed to edible plants attached to the sides of the moving sculpture. When the Mechabolic was little more than an idea, it was already gaining respectful attention in The New York Times, Business 2.0, and other prominent publications.

Around the time those stories started to appear, in May 2007, Berkeley officials decided enough was enough. The city gave the Shipyard a three-day order to vacate, citing 32 code violations and threatening fines of $2,500 a day. Mason began a counterattack through blogs and the press, ginning up dozens of emails and calls to city officials in his defense.

The tone of some of them is captured well in an email the Shipyard artist Ryon Gesink circulated among friends. Gesink wrote movingly about having to remove huge containers and several years’ worth of art, of seeing his dream of a space to create and innovate squashed. The headline on his account: “Small communist California city to shed 1,000,000 pounds of excessively interesting culture in days; City leaders ensure self righteousness, boredom to be restored shortly.”

While pressuring city officials to back down through mockery and public jousting, Mason also did attempt to address some of their concerns. He disconnected the shipping-container power system. (The system had alarmed Orth, the fire chief, because of the non-professional wiring and all the batteries, and potentially flammable battery acids.) Mason hired an architect to negotiate with the city a way to bring the shipping-container structures up to code, and in the meantime he removed most of them from the lot.

Although the artists were not legally permitted to do anything at the Shipyard, the Mechabolic and other gasifier-powered art vehicles were nonetheless constructed on the site throughout that summer. As late as November 2007, Berkeley Mayor Tom Bates was bringing people by the facility to show off the ingenuity happening in his city, even though it was illegal.

In January 2008 city officials began meeting again with Mason and his team. MacQuarrie, the building inspector, said in January that she was pleased with the signs of cooperation she had seen thus far and that she hoped the innovative art space and its power experiments can maintain a happy home in her city. Just as long as Mason and his friends obtain the proper permits and meet all use, zoning, building, and safety regulations. In February, the Shipyard officially received a use permit and legal power at one of its two addresses, and is on track to make the other legal as well.

Still, Mason feels crushed by the conflict—and radicalized. While others on his team are more optimistic that it will all work out, he thinks experimental living in a highly regulated context might ultimately be hopeless. Never any kind of libertarian, he was shocked to discover that “giving someone the right to shut down a physical site is no less a significant power than giving someone the power to arrest me. The lives of 30 people have been stopped, and there is no immediate review of that decision.

“I live life in economies based on what is interesting,” he adds. “I’ve found no matter what the rules or processes, in the end the thing that’s interesting somehow gets chosen. But getting beat down, I realized that is completely irrelevant. They will not listen or make consideration for interest in anything. They only care, what does the letter of the code say, and does that completely encapsulate the conditions they determine are sitting in front of them? It’s an impossible set-up in which to engage the messy flux of the world.”

Local Power
Mason is inspired by the cultures of hot-rodding and hacking, areas where control over one’s machines, life, and pleasure is small, personal, and imaginative. He’s not out to replace one big power system with another, or to convince the world that we all need to run our cars on wood chips.

But every time John Rinaldi would take the gasified Café Racer out to demonstrate how gasification could turn trash to fuel with techniques anyone could potentially execute in an afternoon, something would happen, he says. After a few seconds of interested delight, someone would ask: How does this scale up?

The questioner would seem a bit disappointed when he’d say, it’s not meant to scale up. It’s supposed to change your whole view of how power can be generated and distributed: not top-down but bottom-up, not adding unpleasant waste to the world but eliminating it.

Colorful experiments like the Café Racer are below the radar of the larger distributed generation community. A growing number of policy intellectuals, activists, and entrepreneurs see systematic, not merely personal, benefits from relying less on big power plants. A 2006 monograph by the environmentalist Avory Lovins, called Small Is Profitable, neatly sums up the arguments for distributed generation, from efficiencies of scale to lower greenhouse emissions to an energy infrastructure more resistant to terrorist attacks. The journal Distributed Energy exudes a worldview far removed from Mason’s unregulated, do-it-yourself mentality. It’s a world enmeshed in, and seeking help from, either government or the existing big utility system at every turn, from subsidies to changing local regulations that delimit or complicate pumping self-generated power back to the grid.

Some people excited about the Mason model think it can become something bigger than a passion for hobbyists. Charlie Sellers, a member of Mason’s Mechabolic crew, brings gasification-based cooking and heating technologies to off-the-grid areas of the Third World.

Tom Price is a 20-year veteran of environmental policy wonkery who worked for Burning Man this year as their liaison to the environmental and energy communities. He helped organize a corporate gift of desert-based solar panels that after the event began supplying free solar power to nearby Nevada communities. He has spun that project off into a company called Black Rock Solar, looking to repeat the experiment in other high desert locales. He’s been talking up the Mechabolic project to people in the enviro-tech community, and says “the consensus opinion is Jim Mason is six months ahead of the curve.”

When Price and Rinaldi took the Café Racer to the CleanTech 2007 convention in Santa Clara, California, last May and “explained how we were making hydrogen out of junk, we ended up surrounded by CEOs and [venture capitalists] who were flabbergasted. I’ve been working on environmental issues for 20 years on the policy side, and I had always assumed like many people that the best solutions came from large institutions set up specifically for this purpose.

“We have in this country both a tradition of independence and a tradition of machines bringing ever increasing levels of comfort. And the latter has been in the ascendant. But there is in our cultural DNA this idea that we can provide for ourselves without any outside help.” When it comes to the potential of gasification, Price says, “only a few hundred or a few thousand technically understand what we are talking about today. But I suspect the number will increase exponentially in very short order.”

The Ride of the Mechabolic
Maybe. But Americans who are not convinced for reasons of ideology or identity that the top-down, flick-a-switch, pull-up-to-the-pump model of power distribution is passé might contemplate the travails of the Mechabolic project and decide there’s no reason to rush into any big changes.

Constructing the monstrous slug involved months of legal fighting, last-minute entreaties for cash injections from the far-flung Burning Man community, and weeks of all-nighters. Then everything had to be taken apart and moved in shipping containers and trucks to the Black Rock Desert, where the crew reassembling it faced a punishing sun, toppling and blinding windstorms, and the sinking morale that comes from realizing you’ve bitten off much more than you can comfortably chew.

Through the week of Burning Man, Mechabolic remained a work in progress. The curious sight of the 120-foot-long metal skids topped with mulchers, shiny engines, gasifier hoppers, and vegetable and spice plants, including radishes, zucchini, and sage, with fewer than half of the ribs that were meant to give the sculpture the shape of a slug, made people stop and ask what was up. Thus Mason got to do what he liked most: explain the potential of gasification and terra preta for humanizing and diversifying our relationship with power while reducing our carbon footprint.

Shortly after sunrise on Sunday, September 2—the next-to-last day of the event—it came together. I was around through sheer luck. I had been up all night, Burning Man–style, listening to a singer playing banjo and ukulele, and I wandered by the Mechabolic work site to find Mason finally turning over the engine. Some other up-all-nighters and I helped to get the machine moving by pushing it, and the loudly throoming engine barreled the monster through the playa dust that had built up around its wheels. It was moving! And shaking! Bottles of homemade wine passed from person to person crouching on the beast’s skids, grinning and whooping. The air was thick with the joy of the improbable and absurd achieved.

About a minute later, with a ferocious cough of transmission fluid all over Mason, the Mechabolic groaned to a halt. It had moved about 68 feet—nearly one for every $1,000 spent on the project, Mason mordantly noted with a smeared smile.

I had assumed, at that moment of triumph, that the Mechabolic was running off pyrolized waste matter. I was mistaken. It turns out the gasification system was only providing gas to burn for fire effects, and powering a generator for lights. When you’re trying to get a car to run via gasification, it works best to start it off with a standard fuel and then ease it over to the gasified junk. So for that minute of motion, the Mechabolic actually was running on off-the-shelf motor fuel. The dream still had some bugs.

The Homebrew Power Club
The costs in time and sanity borne by Mason and his crew were apparent. They were also far beyond what most of the non-art-obsessed will want to pay. But so were the innovations that arose from, say, the Homebrew Computer Club of Silicon Valley, that mid-’70s gang of PC enthusiasts—including a young Steve Jobs and Steve Wozniak—dedicated to DIY computer making. Yet from the homebrewers’ irrational enthusiasms arose the modern world of personal computing.

We haven’t reached the point where flicking a switch for coal-fired power from far away seems as inadequate as the five-mainframes-for-the-nation computer vision that the proto-hackers of the ’70s were rebelling against. But Mason notes that all sorts of human endeavors, from our computing to our food to our transportation, have evolved away from bare resource economizing. They’ve become instead arenas for play and assertions of identity—or, as Mason likes to think of it, areas in which there is at least some opportunity to impress girls.

“We can turn power into something experiential, expressive, personal,” he says. “Not a problem to be solved but an opportunity to be explored, like the cultural movement in food from a thing you eat for raw energy to food as an idiom of pleasure, creativity, and expression, an excuse for gathering friends and family.

“Computing had a similar transformation. It wasn’t until the computer became an idiom of personal expression that it exploded into something ubiquitous as clothes on our body.

“So much of our energy dialogue is still about how big corporate players can do better things, or forcing carmakers to do more reasonable things by taxing the bejesus out of oil so the government can smartly fund new research.…There isn’t enough faith that things can come up meaningfully from the bottom, that through a culture of hacking and play there could be broad, self-realized solutions.”

Senior Editor Brian Doherty is the author of This Is Burning Man (BenBella) and Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement
(PublicAffairs).

Are You Stomping the Environment Flat?

rbailey@reason.com (Ronald Bailey) — Tue, 22 Apr 2008 15:00:00 EDT

Are you an ecological bigfoot? Various environmental groups now offer websites where you can supposedly find out. The site provided by the folks at Redefining Progress informs me that if everyone on the planet lived my lifestyle, we would need the resources of 6.5 Earths to supply everyone. I took the test again, this time selecting all the ecological choices, including living a 500-square-foot apartment filled with second-hand furniture in a large apartment building heated with biomass, using electricity generated by solar panels, equipped with low flow toilets and showers, buying all my food at farmers markets, planting my own garden fertilized by compost from my food scraps, eating a vegan diet, recycling all my paper, plastic, aluminum, glass and electronics, owning no car, never flying and traveling no more than 2,000 miles by bus or rail each year. If everyone lived like that we would only need 0.93 earths to accommodate everyone.

What happens if I choose a slightly less-ascetic lifestyle? For example, what if I decided to drive my hybrid car 10,000 miles per year, added occasional dairy products to my diet, and did not grow a garden? Redefining Progress calculates that the planet would be on its way to destruction because we would need 1.10 earths to provide that same lifestyle for everyone.

The Global Footprint Network (GFN) offers an Earth Day Footprint quiz which appears to be a version of the Redefining Progress quiz. Here I scored even worse—it would take 8.7 Earths for everyone to enjoy my lifestyle. My ecological footprint takes up 39 acres, whereas the American average is only 24 acres. The GFN claims that there are only 4.5 biologically productive acres per person worldwide.

Then there's the Eco-Footprint site by Conservation International. Answering the questions honestly, I scored a 22, making me an "eco-novice" which is much nicer than calling me an eco-criminal. At the end of the quiz, participants are offered a chance to pledge to "recycle, reuse and repair so I use fewer materials and reduce pollution and to make my home energy efficient by using compact fluorescent light bulbs and high-efficiency appliances." By selecting all of the ecological choices I achieved a score of 83, making me an "eco-warrior."

Next, I clicked over to the Carbon Footprint site. Its calculator estimated that my wife and my lifestyle fueled 39 metric tons of carbon dioxide annually. The site informed me that this is almost double the American average of 20.4 tons. But since I included my wife in the calculations, it means that we are typical Americans with regard to our per capita carbon dioxide emissions. My chief carbon sin is air travel, which emits more than 15 tons of carbon dioxide per year. The site informs visitors that the average footprint of people living in industrialized nations is 11 tons and the world average is 4 tons.

So in a quest to lower my impact on the environment, I calculated our carbon footprint if we cut our use of electricity and natural gas in half, switched our two cars for a single Toyota Prius and reduced our annual mileage by half, tripled our train travel, and never took an airplane. Furthermore, what if we became vegetarians, ate only local organic food in season, bought only second-hand clothes, furniture and appliances, never went to movies, bars or restaurants, and recycled or composted all our waste? Even then our combined carbon footprint would be 7.3 tons per year, but that would get us just below the world average of 4 tons per capita annually.

The Carbon Footprint site obligingly links to projects promising to offset my annual carbon overindulgence. For example, the site suggests that a check for $600 to fund verified clean energy projects—such as a wind energy project in India or burning biomass in Africa—instead of fossil fuels would offset the 39 tons of carbon dioxide my current lifestyle requires. Or I can buy offsets by funding a reforestation project in Kenya for $800, or pay to plant trees in Britain for $1300.

The bad news, according to the folks at Carbon Footprint, is that "to combat climate change the worldwide average needs to reduce to 2 tons." In other words, the average American must reduce his or her carbon emissions by 90 percent. Where in the world do people currently emit less than 2 tons of carbon dioxide per capita annually? Answer: Places like Togo, Nigeria, Bangladesh, Ethiopia, Uganda and Mali.

That brings me to the Global Footprint Network's sustainability calculations. According to the GFN's Living Planet Report (2006), the minimum criteria for sustainability is measured by using the United Nations Development Program's Human Development Index (HDI) as an indicator of well-being, and its ecological footprint calculations as a measure of demand on the biosphere. "We only found one country that meets both minimum criteria, which doesn't mean that they are necessarily sustainable but they are providing long lives and high education and minimum income without using more than what is available globally worldwide per person. And this country is called Cuba," explained GFN executive director, Mathis Wackernagel on National Public Radio's Living On Earth show last November. Wackernagel added, "If we say Cuba meets the sustainable development criteria, we don't say that's the nirvana, the most beautiful life you could imagine." Indeed not.

Comparing the HDIs of the United States and Cuba, one finds that the U.S. ranks 12th out of 177countries measured while Cuba ranks 51st. In the three primary dimensions, the U.S. is 31st in life expectancy, 19th in educational achievement, and 2nd in per capita income. By contrast, Cuba ranks 32nd in life expectancy, 35th in education, and 94th in income—and that's assuming that Castro's government is truthful in its statistics. According to the U.N.'s HDI report, Cuba's per capita carbon dioxide emissions dropped from 3 tons per capita in 1990 and 2.3 tons in 2004. "If all countries in the world were to emit CO₂ at levels similar to Cuba's, we would exceed our sustainable carbon budget by approximately 3 percent," says the HDI report.

And where do countries that emit less than 2 tons of carbon dioxide per capita annually rank on the HDI? Out of 177 countries and territories ranked, Togo is 152;Nigeria, 158; Bangladesh, 140; Ethiopia, 169; Uganda, 154; and Mali, 173.

As noted above, the creators of Carbon Footprint claim that everyone in the world must eventually emit no more than 2 tons of carbon dioxide per year. When did Americans last emit so little carbon dioxide? Around 1870. Taking historical U.S. carbon emissions and multiplying them by a factor of 3.67 in order to derive total carbon dioxide emissions and then dividing that amount by the number of people living in the country, we find that Americans emitted per person roughly 2.5 tons of carbon dioxide annually back in 1870. In those days, per capita GDP was $194 per year which would be equivalent to about $2,500 today.

It is true that many of us in the rich countries could cut back a bit on our use of energy and other resources without too much pain. But 1.6 billion people around the world still lack access to electricity and 1.1 billion live on less than $1 per day. These poor people desperately need access to cheap sources of energy to improve their lives.

Assuming that these ecological footprint calculations have some merit, the upshot is that if one does not want to "redefine progress" as a return to 19th-century poverty (and surely no one does), then accelerated technological innovation aimed at finding low-carbon sources of cheap energy is crucial. How to achieve that goal is what the real environmental debate should be on this 38th Earth Day.

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

Arnold Among the Lilliputians

kmw@reason.com (Katherine Mangu-Ward) — Tue, 22 Apr 2008 07:00:00 EDT

It was the perfect day for a conference on climate change at Yale University last Friday. In New Haven, Connecticut, the crocuses were peeking out from the soil. A group of state governors emerged from their winter stupor and milled around on unsteady feet, climbing in and out of zero-emission busses. A couple of Canadian legislators were present, perhaps stopping over on their return migration to the north. Ah, spring.

"I would not recommend that you have a public relations campaign on global warming in January and February in Manitoba," said Manitoba Premier Gary Doer. Ne'er have truer words been spoken.

The governors were in town to sign the Governors' Declaration on Climate Change—a soft and fuzzy document "recognizing new threats" and "recommitting to the effort to stop global warming"—but pretty much everyone else was just there to see Republican Gov. Arnold Schwarzenegger, delegate from the land of perpetual sun, California.

In the morning sessions, the participants uttered the usual soundbites. The governors cheerfully rejected any suggestion that government-mandated reductions in carbon output might have economic costs. Gov. Jon Corzine (D-N.J) got a round of applause for saying that higher prices on energy and restrictions on use would be "an economic opportunity, not an economic burden." Gov. Jodi Rell (R-Conn.) crowed about "green collar jobs."

But a surprising new message was on display as well: States' right are back in fashion, and this time it's liberals singing the praises of federalism.

"States' rights, particularly in the last century, were regarded as the most regressive kind of policies," said Gov. Kathleen Sebelius (D-Kansas). "The federal government would set a high bar on civil rights, or safety net issues. And states' rights was going to drag that back, to claim the opportunity to have a lower bar at the states. I want to suggest that in the 21st century this has been flipped." She expanded on that theme in an interview: "When I was young, states' rights was a pejorative term. But the federal government has been very laissez-faire in all sort of areas, so states are stepping up to fill the void." Gov. Corzine noted "a vacuum in Washington with regard to leadership on the issue of climate change," and apparently New Jersey, like nature, abhors a vacuum, since Corzine has been on the forefront of state-based carbon regulation.

Currently, 18 states have signed the Governors' Climate Change Declaration, but 36 states have enacted some kind of greenhouse-gas plan.

Why hundreds of Yalies crowded into a poorly ventilated auditorium on the first really warm, beautiful day of spring became clear when Schwarzenegger swept in at the last moment for a signing ceremony and a speech. He looked sleek in a green tie and a flawlessly uniform tan.

Schwarzenegger, a Republican, was the only one of the governors to acknowledge that states will have to make tradeoffs, mostly economic, if they are serious about reducing carbon emissions.

The biggest applause line of the day came when the seven-time Mr. Olympia turned the tables on political conventional wisdom about who is hurting the environment and who is helping. "It's not always Republicans" or big corporations, he said, that slow environmental progress. Several companies want to build solar power plants in the Mojave Desert. However, the place where they want to build may be the kind of territory that a particular kind of endangered squirrel would prefer to frequent. Efforts by the California Department of Fish and Game ("my own agency, that I'm supposed to be the head of and the boss of!") to protect "this little creature" have thwarted plans to build planet-saving solar arrays. "If we can't put a solar power plant in the Mojave Desert," Schwarzenegger thundered, "I don't know where the hell we can put it!"

Schwarzenegger has also pushed back, with lawsuits and a P.R. campaign, against the strongly worded suggestion from the Environmental Protection Agency that states are forbidden to go beyond federal standards for carbon emissions and set stricter standards of their own.

Of course, with his global fame and private jet, Schwarzenegger has taken advantage of this new states' rights doctrine more than most. Article 10 of the Constitution states that "no State shall enter into any Treaty, Alliance, or Confederation," and also looks down on states that "enter into any Agreement or Compact with another State, or with a foreign Power." But between rallying governors for carbon limits and hobnobbing with Kyoto protocol signatories, Schwarzenegger has probably already breached that dam when it comes to environmental issues. Last October, for instance, California and a coalition of European Union countries, U.S. states, Canadian provinces, Norway, and New Zealand formed the world's first International Carbon Action Partnership.

One of Schwarzenegger's applause lines: "We don't wait for Washington, because I've always said Washington is asleep at the wheel." This newfound pride in federalism has its definite limits. For every states' rights rah rah, there was a wistful plea for more federal regulation on carbon production. Even states' rights revisionist Gov. Sebelius said she hoped that "the roles will be reversed in the next administration." A proposed cap and trade plan, Gov. Jon Corzine said, is something he'd "love to see globally, love to see nationally, but unfortunately narrowed to regional efforts."

All of the governors present, including Schwarzenegger, agreed that no matter who took office in January, he or she would be "better on the global warming" than the Bush administration—meaning that some sort of national cap and trade or carbon tax was almost inevitable, whether under President McCain, President Obama, or President Clinton, and stricter federal regulations would again become the gold standard of environmental controls.

Even in this moment of states' rights redemption, the newly empowered governors restated their longing to return to the old way, when their marching orders come from Washington. This is understandable, since a uniform national policy will be easier on companies that do business in more than one state, and will send a clearer message to other countries about the United States' position on the issue. Plus, governors won't have to take the blame when their constituents object to higher prices at the pump, at the register, and at the car dealership.

Still, it is a little sad to see that even the Governator would cede power to Washington so gladly. In the meantime, he's making his own dubiously constitutional way in the enviromental future, winning the hearts and minds of Yalies, and making the other governors seem like girlie men.

Katherine Mangu-Ward is a reason associate editor.

Springtime for Stupid Ideas

schapman@tribune.com (Steve Chapman) — Thu, 17 Apr 2008 07:00:00 EDT

In the realm of energy policy, there are a great many bad ideas and a very few good ones. The usual practice of presidential candidates is to 1) sift through all these proposals, 2) separate the wheat from the chaff, and 3) keep the chaff.

This year, the two parties are competing to show who is most eager to discard sound economics and long-term prudence in favor of appeasing aggrieved motorists. Barack Obama and Hillary Clinton are pandering with a proposal to punish oil companies with a windfall profits tax. John McCain has targeted the same group by urging a federal gas tax holiday from Memorial Day to Labor Day.

What motivates them is high pump prices, which are at odds with the popular view of cheap gasoline as a national birthright. One common defect of the candidates' measures, though, is that they would not actually reduce prices.

The Democratic option rests on the unshakable belief that Big Oil is guilty of chronic profiteering at public expense. In fact, from 1987 through 2006, oil and gas companies did worse than other industrial companies on return on investment in all but four years.

When the price of gasoline is high, drivers notice. But when it's low, as it has been for most of the period since 1982, everyone takes it for granted.

No idea can be definitively judged until it has been tried, which makes the Obama-Clinton approach particularly hard to defend. Congress, you see, enacted a windfall profits tax on oil back during the Carter administration. You would think Democrats would not want to remind voters of that president or embrace his errors, but you would be wrong.

By almost any standard, the last windfall profits tax was self-defeating. According to a 2006 study by the Congressional Research Service, it generated less than one-fourth of the revenues that were expected. Worse yet, it reduced domestic oil production by as much as 8 percent.

Obama has yet to provide details of his plan. Under Clinton's version, if a company's profits rose above a specified level, the government would take 50 percent of the "windfall"—in addition to what it reaps from the existing corporate income tax, which tops out at 35 percent.

The expropriation would deter investment in exploration and drilling by reducing the potential payoff. It would depress the supply of oil over the long run, which would push prices up, not down. Punishing Big Oil would mean hurting ourselves.

McCain avoids this error in favor of a different one. He wants to stop collecting federal gas taxes for three months, which he says "will be an immediate economic stimulus—taking a few dollars off the price of a tank of gas." It sounds like a simple, sure remedy, and it is simple and sure. It's just not a remedy.

As energy analyst Jerry Taylor of the Cato Institute points out, prices are now at the level required to balance supply and demand. Cut prices by the amount of the gas tax, and consumption will rise, pushing prices back up. So drivers would get no holiday, and the economy would get no stimulus.

About the only effect would be to "transfer money from the federal government to the oil companies," says Taylor. If the oil companies don't deserve a windfall profits tax, neither do they deserve an additional windfall. The gas tax hiatus would also enlarge the federal deficit, since McCain would take general revenues to make up the loss to the highway trust fund—and at the moment, there aren't any extra revenues waiting to be spent.

Besides proposing useless or damaging ideas, the candidates have also passed up the single best idea for energy policy: a carbon tax that would curb use of fuels that release greenhouse gases, while encouraging development of clean alternatives. Better yet would be a carbon tax whose revenues go to cut payroll taxes for Social Security and Medicare, rewarding work without raising the deficit.

It's a win-win concept with wide support among economists, but almost none among politicians. That's the nature of energy policy in an election year: Any bad idea may be adopted, while the good ones remain orphans.

COPYRIGHT 2008 CREATORS SYNDICATE, INC.

The Biofuel Brew Ha-Ha

info@reason.com (Peter Suderman) — Wed, 09 Apr 2008 17:00:00 EDT

In Germany, they call it "liquid bread." Here in the U.S., frat boys and hipsters cultivating an ironic air call them brewskies. Most of us just refer to it as "beer." But whatever your name for the stuff, there's little point in denying that people in both countries love their beer.

The difference right now, however, is that while we Americans can continue to toss 'em back as we always have, German beer prices are skyrocketing. Who or what is the culprit? Corporate greed, perhaps, or an alcohol tax designed to push German beer drinkers to kick their six-pack habit?

It's something far less spectacular, but potentially more insidious: biofuel subsidies that are pushing more farmers to ditch their barley crops—which are necessary to make beer*—in favor of crops that earn them lucrative subsidies from regulators trying to fight global warming. Topping the list of these subsidized crops are rapeseed and corn, ingredient which are used in the creation of biodiesel and ethanol-gasoline fuel blends which supposedly reduce the greenhouse gasses that cause global warming.

Thanks to these crop shifts, the price of barley has doubled in the past two years, an increase that eventually gets passed along to consumers. Some brewers have raised their prices already, and many others are planning on raising them soon. German beer drinkers are already feeling the hit on beers like Erdmann's Ayinger, which raised its price from 6.10 euros to 6.40 euros over the last year. That's roughly fifty cents a beer for Germans who consume an average of more than 30 gallons of beer person each year.

But that seems like a fairly small price to pay for such a worthy cause, right? After all, if, as scientists like NASA climatologist James Hansen say, global warming threatens humanity with imminent catastrophe from climactic shifts and sea level rise, then biofuels might be a little more important than brew prices.

Problem is, it turns out that even if you consider climate change a serious threat, biofuels are hardly an effective means of preventing it. In fact, they just might exacerbate the problem. These days, anyone saying otherwise—like, for example, European regulators—must be sloshed.

Two studies published in the journal Science at the beginning of February indicate that, rather than producing less carbon emissions than regular fuels, biofuels, once the full production costs are taken into account, probably produce greater overall emissions than their traditional counterparts. And the difference isn't tiny, either. According to one of the studies, "converting rainforests, peatlands, savannas, or grasslands to produce biofuels in Brazil, Southeast Asia, and the United States creates a ‘biofuel carbon debt' by releasing 17 to 420 times more carbon dioxide than the fossil fuels they replace." As Joe Fargione, a scientist at the Nature Conservancy and author of one of the studies, has explained, "carbon debt" is what results from the additional land clearing, beyond food production, needed to grow biofuel crops. Clearing land releases natural stores of carbon into the atmosphere; so greater reliance on biofuels means increasing our carbon debt.

But it's not just carbon emissions that pose a potential problem, and it's not just Europe that's feeling a biofuel-induced hangover. The United States, for example, spends close to $11 billion a year on ethanol subsidies. By encouraging the planting of biofuels at the expense of other crops, these subsidies pose a serious risk to the world food supply.

According to a report by the Hudson Institute's Dennis Avery, a former Senior Agricultural Analyst for the State Department, worldwide food demand is expected to double by 2050. So replacing millions of acres of cropland with row upon row of biological fuel wells is a dicey prospect at best. When biofuel crops replace food crops, we are, as Avery puts it, effectively "burning food as auto fuel"—giving all sorts of potential new meaning to those fast food-gas station hybrids that currently litter our interstates.

Adding to the problem is that most biofuels are not as efficient as gasoline. For example, according to a report by the Energy Information Administration, biodiesel actually reduces fuel economy, putting out about 11 percent less energy per gallon than petroleum diesel. Meanwhile, a gallon of fuel ethanol is reported to be equal to only .67 gallons of conventional gasoline.

None of this should exactly come as a surprise. Free-market think tanks have been issuing warnings about the efficacy and true costs of biofuels for years. Yet only now are mainstream media figuring it out. Time has run three stories on the issue over the last few months, including a cover story titled "The Clean Energy Scam." The New York Times hyped the Science studies with a lengthy write-up that leapt onto the website's most-read list. Rolling Stone recently ran an expose on the harmful effects of U.S. ethanol policy, and now even liberal Times columnist Paul Krugman's gotten into the act.

Part of the reason for all the attention is that it's becoming increasingly clear that biofuel subsidies, in addition to destroying crops and potentially accelerating anthropogenic global warming, seem to be indirectly fueling the destruction of the rainforest. As farmers switch away from soy beans toward subsidized biofuels and soy bean prices rise as supply goes down, South American farmers have expanded their land-clearing efforts in an effort to pick up the slack. When forests in the Amazon start burning, environmentalists start paying attention.

Better late than never, though it's worth making sure that environmentalists fully appreciate the law of unintended consequences here: Policies designed to increase use of biofuels contribute to global warming, reduce the planetary food supply, destroy the rainforests—and, oh yes, drive up beer prices. And yet both the U.S. and Europe are spending tens of billions a year on subsidies. Maybe we should grab a drink, while we can still afford one.

Peter Suderman is a writer and policy analyst at FreedomWorks. He blogs at www.FreedomTalks.org.

*The original version of this article referred to barley as necessary for "making hops." The mistake has been corrected.

The New New Thing

info@reason.com (Shikha Dalmia) — Mon, 24 Mar 2008 15:00:00 EDT

Every year, there is a new green technology that triggers eager predictions that the days of gasoline-powered engines are numbered. Last year, it was lithium-ion batteries. The year before that, it was hydrogen fuel cells.

This year's buzz generator—a new biofuel developed by a small Illinois company called Coskata—holds genuine promise to become a cleaner and cheaper alternative to gasoline. But the fuel's efforts to achieve commercial viability will be hurt, not helped, if its well connected investors succeed in convincing the federal government to mandate a distribution infrastructure for it.

Coskata's backers include General Motors CEO Rick Wagoner and Sun Microsystem co-founder and venture capitalist extraordinaire Vinod Khosla. They want every gas station in the country to replace half of their gas pumps with special units known as E-85 pumps. E-85 is a blend that contains 85 percent ethanol and 15 percent gasoline. Like diesel, it must be pumped through a different system than conventional gasoline.

Most ethanol in the United States is produced from corn, but Coskata says that it has found a way to generate ethanol from woodchips and other biomass at potentially half the cost of gas and a third the cost of corn-based ethanol. What's more, it has done so without any research subsidies that many other alternative fuel ventures get. This is especially impressive since such "cellulosic ethanol" has to date been more expensive than corn-derived ethanol. That's because the sugar in corn is relatively easy to extract, while that in wood chips and other raw materials for cellulosic ethanol is hard to reach because it is protected by a rigid cell wall. Breaking down this cell wall has been prohibitively expensive. Until now, that is.

Coskata's breakthrough involves a new thermal process that gasifies biomass (and, in the future, potentially even rubber tires and petroleum coke) to produce something called syngas, a mixture of carbon monoxide and hydrogen. This gas is then fed to Coskata's patented cocktail of five bacteria that turn it into ethanol. Using this method, Coskata says, it can generate more ethanol from less feed and water than corn-based techniques.

Coskata's fuel has a number of other advantages over corn-based ethanol. Since corn doesn't grow everywhere, corn-generated ethanol generated has to be transported. Given ethanol's corrosive and volatile nature, this can't be done through existing oil pipelines. So it has to be hauled in trucks, which adds to its costs (not to mention related greenhouse gas emissions). This is one of the main reasons why the energy-adjusted average price of E-85, whose main ingredient is corn-based ethanol, is currently around $3.53 per gallon-despite a 50-cent per gallon federal tax subsidy for producers. This is still 20-30 cents higher than the price of gas right now when it is at a record high.

What's more, diverting corn for fuel has the undesirable effect of raising food prices. Higher corn prices lure farmers to grow corn over other produce, bumping up prices of fruits and vegetables. Meat-eaters are effected, too, since corn is a major component of livestock feed. Because Coskata's fuel can be produced anywhere, from any sort of plant, it avoids these drawbacks.

Impressive though Coskata's technology is, its market success will ultimately depend on offering pump prices that are about 25 percent lower than gas, since ethanol contains 25 percent less energy than gas. Coskata is confident the pump price of its fuel will be somewhere between 50 cents to $1.00 lower.

But that range spans the difference between market success and failure. Assuming average annual gas prices of $3.00 per gallon, a 50-cent saving won't be enough to compensate consumers for the lower energy content of ethanol-much less offset the $20,000 to $200,000 that gas station owners would have to spend to install ethanol tanks and pumps. Savings of $1.00 might do the trick, but that will require Coskata, which plans to produce 40,000 gallons of fuel by the end of the year, to develop a highly efficient production process.

But its incentive to do so will be vastly diminished if the federal government delivers it a ready market by forcing ethanol on gas stations. This might allow Coskata to capture some market share now, but over the long run its fuel will have a harder time becoming a sustainable alternative to gas, especially if gas prices drop. It will also be less able to compete with foreign ethanol if the federal government slashes tariffs on the stuff. That's a real possiblity, despite the powerful farm lobby, given the interest in promoting greener alternatives to traditional gasoline.

Khosla—an IT revolutionary turned ethanol evangelist—is fully capable of understanding such market realities. He told CNN Money some years ago that he believes in making only small investments in startup companies because too much cash breeds over-confidence and thwarts experimentation. "The right way to build a company is to experiment in lots of small ways, so that you have plenty of room to make mistakes and change strategies," he noted. That's precisely what a guaranteed market for Coskata will prevent it from doing.

It's widely recognized that the government is inept in directing subsidies to market winners. Consider three quick examples: In the 1970s, the federal government pumped hundreds of millions of dollars to develop thermal solar technologies as an alternative to the photovoltic cell. Three decades later, there is nothing even close to being commercially viable. The government also pumped billions of dollars into developing liquid fuel from coal to cut down on our consumption of Middle Eastern oil—another total bust commercially. More recently, in 2003, George W. Bush pumped $1.3 billion into a "Freedom Car" that would run on hydrogen-powered fuel cells. Four years later, the Freedom Car is not even close to being commercially viable and the enthusiasm for those fuel cells has considerably waned.

Ethanol's backers maintain that a government mandate to convert half of all pumps to ethanol is necessary because the major oil companies won't let gas stations install E-85 pumps. But this is a bogus claim. Federal laws, including the most recent energy legislation, prohibit gas station owners and oil companies from discriminating against ethanol. The real reason why stations don't carry ethanol is that it simply does not currently offer the returns to offset the thousands of dollars needed to make them ethanol-ready—much less make up the losses from oil sales.

There's no question that government intervention through taxes, regulations, and subsidies has distorted energy markets and provided oil companies with an unfair advantage. So it is not surprising that even a self-made billionaire such as Khosla with a promising new fuel on his hands should think it's right to demand government help. (Actually, he does this quite often, including last year when he attempted unsuccessfully to convince California voters to impose new taxes on oil to fund research into alternative fuels.) However, mandating a distribution infrastructure for ethanol would take government intervention in energy markets to a whole new level. Worst of all, it will make even promising new companies such as Coskata less able to innovate in a real, ultimately self-sustaining way.

If Coskata's fuel can make it without market-distorting subsidies, it will. The best thing that Washington can do for the company—and, more important, for consumers—is to ignore GM and Khosla's demands.

Shikha Dalmia is a senior analyst at Reason Foundation, a Los Angeles-based, free market think tank.

Oil Price Bubble?

rbailey@reason.com (Ronald Bailey) — Wed, 12 Mar 2008 12:00:00 EDT

Oil prices climbed to their highest level ever, reaching over $108 per barrel this week. And Americans are feeling this price spike at the pump, with gasoline averaging $3.22 per gallon. An analysis released by the investment firm Goldman Sachs suggested that oil prices might soar to $200 per barrel. Does this make sense?

Not really. Although U.S. crude oil inventories have fallen, gasoline inventories are at their highest since March, 1993, notes Tim Evans, an energy futures analyst at Citigroup's Futures Perspective. World oil production was up 2.5 percent in the first quarter of 2008 over the same period in 2007 while world oil consumption rose by just 2 percent. In fact, world production is projected to be 3.3 percent higher in the second quarter and 4.1 percent higher in the third quarter than the same periods a year ago. On the other hand, world demand is projected to rise by just 1.6 percent over the next six months.

In fact, demand is falling in some countries. According to economist John Kemp at the commodities firm Sempra Metals, the U.S. consumed 4 percent less petroleum in January 2008 than it did the year before. Evans agrees, noting that the U.S. demand for petroleum products began falling off last July. Interestingly, this drop in U.S. oil consumption began before crude prices turned vertical and before we began to see weakness in the broader economy. Even China's thirst for oil is abating somewhat. Its demand for oil, which once rose at 10 percent per year, has now dropped to 6 percent per year. In addition, world surplus oil production capacity has gone from a very tight 1.5 million barrels per day a couple of years ago to more than 3 million barrels today, says petroleum economist Michael Lynch.

So supply is up; relative demand is down and yet, the price of oil is soaring. What's going on? Last week, Exxon Mobil CEO Rex Tillerson blamed a third of the recent run up in oil prices on the weak dollar, another third on geopolitical uncertainty, and the rest on market speculation.

Let's start with geopolitical uncertainties. Last year, oil consumers watched warily as unrest in Nigeria's oil fields, the possibility of war between the U.S. and Iran, and the antics of Venezuela's Hugo Chavez threatened to disrupt oil supplies. That analysis may have once made sense, but most of those tensions have abated in recent months. Nevertheless, it remains true that most of the world's oil is produced in volatile regions and by erratic governments, so the price of crude must still include some kind of political risk premium.

What effect does the falling dollar have on the price of crude? Most oil price contracts are denominated in dollars. The dollar has fallen in value by more than 30 percent against a Federal Reserve index of major currencies since 2002. This means that the price of imports, including oil, have gone up. To some extent, the chief of the Organization of Petroleum Exporting Countries (OPEC) Chakib Khelil was correct when he said earlier this week, "What's happening in the oil market is due to the mismanagement of the U.S. economy." Continuing U.S. trade and fiscal deficits along with lower interest rates are stoking inflationary fears.

That brings us to speculation. Evans observes that since September 2003, the total number of open crude oil futures and options contracts rose by 364 percent. Meanwhile the global demand for petroleum rose by just 8.2 percent. "So the futures and options market has become more important than the physical supplies in driving the price," concludes Evans. "We are seeing investment flows into the oil market that don't have anything to do with the demand and supply of oil."

Investors are treating oil as a hedge against inflation and a falling dollar. Oil markets are part of a ~~negative~~ positive feedback loop in which higher oil prices contribute to higher inflation, which in turn lowers the value of the dollar, which boosts oil prices, and so forth. In other words, the oil market is coming to resemble the gold market (which has also been soaring). Evans notes that most gold traders don't even ask the question of how much gold was mined last year or how much spare gold mining capacity there is.

In the short run, oil prices are very inelastic: A large change in price produces only a small change in demand. If the price of gas goes up a dollar per gallon overnight, you still have to fill your tank to get to work. However, over the long run, consumers and producers respond to higher oil prices. For example, Americans are driving less and have switched to buying more fuel efficient cars.

Higher prices also encourage innovation. Economist Richard Rahn from the Institute for Global Economic Growth believes battery technologies are improving so rapidly that the majority of cars sold in 10 years will be all-electric. This would certainly help drive down the price of oil. Supply is also inelastic—it takes a long time to do the exploration, drilling, and refining necessary to boost production in response to higher prices. This inelasticity of demand and supply means that petroleum prices are very sensitive to relatively small changes in either. This means that prices can fall as steeply has they rose.

Whenever you begin to hear market gurus decree that "this time it's different," as we did during the dot-com bubble and the housing bubble, that's a sure sign of danger in the market. Naturally, proponents of the peak oil theory claim that the recent run up in prices is evidence that the end is nigh. Evans responds, "Fears of peak oil are what this market has in common with the 1980s, not what is different." Recall that during the "oil crisis" of the 1970s when oil prices were as high as they are today, U.S. oil consumption declined by 13 percent between 1973 and 1983. The higher prices of the 1970s led eventually to an oil glut and prices fell to about $10 a barrel by 1986.

So what will happen to oil prices over the next few years? No one is predicting $10 per barrel oil. However, once the current bubble bursts, both Evans and Lynch believe that the price of crude will settle at around $60 to $70 per barrel in the next couple of years. "It's very hard to pinpoint just how long a bubble can expand before it breaks. Getting the timing right is not an easy matter," says Evans. But he adds, "I think that this is the riskiest time to be long in crude oil since 1980."

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

Two Books Worth Reading

gillespie@reason.com (Nick Gillespie) — Fri, 07 Mar 2008 15:11:00 EST

From Alan Vanneman, film critic and blogger extraordiniare, and frequent Hit & Run commenter:

The NYT publishes a nice review of "Gusher of Lies," a book by Robert Bryce attacking the notion of alternative energy sources. A particularly nice factoid is that ethanol allows Detroit to inflate the milage of their cars, since only gasoline is counted as "fuel." http://www.nytimes.com/2008/03/07/books/07book.html
A heavier read, and well worth it, is "Power and Plenty," a history of international trade over the past millennium, part of the Princeton Economic History series, which also published "War, Wine, and Taxes". http://press.princeton.edu/titles/8493.html

reason talked Robert Bryce here. And with War, Wine, and Taxes author John Nye here. And here's reason.tv video of John Nye.

Fueling Fuel Inflation

jwalker@reason.com (Jesse Walker) — Thu, 06 Mar 2008 09:27:00 EST

Jay Hancock blames the Fed for rising gas prices:

Lower interest rates have made things worse. Bernanke and the Federal Reserve have cut short-term rates by more than 2 percentage points since late summer to try to lower business costs and spur growth. That nudges investors to sell dollar-denominated paper and seek higher returns elsewhere.

Once the dollar was an automatic refuge, the first place international investors socked dough in uncertain times. Lately, however, the most popular safe harbor isn't the dollar, the Swiss franc or even the euro. It's energy.

People are piling into oil and gas futures, probably with money they raised by dumping dollar-denominated stocks and bonds. Oil investments are seen as protection against further dollar declines.

Bernanke's lower rates have fueled the trend by furnishing cheap funds for investors to spend on the New York Mercantile Exchange. So he's simultaneously hurting the greenback and driving up gas prices -- even though inventories are at a six-year high. That won't help the economy recover.

Energy may be the next bubble investment. Each time the Fed breathes life into the economy with lower rates, the extra money floods into some fad asset -- first Internet stocks, then housing, now oil?

The whole argument is here.

Reason #347 to Be Skeptical of Ethanol

kmw@reason.com (Katherine Mangu-Ward) — Mon, 03 Mar 2008 14:38:00 EST

Ethanol is a close cousin to the grain alcohol that's used to fuel various flaming beverages (e.g. the Forest Fire: 4/5 shot Everclear plus 1/5 shot Tabasco sauce--light and shoot). Perhaps unsurprisingly, ethanol fires are tricky. Water won't put them out, and neither will the foam that most fire departments have used since the 1960s.

Many fire departments around the country do not have the [ethanol-specific] foam, do not have enough of it, or are not well trained in how to apply it, firefighting specialists say. It is also more expensive than conventional foam.

While firefighters will eventually adapt, there have already been a few incidents:

In the last three months of 2007, three major fires highlighted the danger. In western Pennsylvania, nine ethanol tanker cars derailed and triggered a blaze that tied up a busy rail line.
In Missouri, a tanker truck carrying several thousand gallons of ethanol and gasoline crashed near the state Capitol, killing the driver.
And in Ohio, a train heading through the northeastern part of the state to Buffalo derailed and burned, forcing more than 1,000 people from their homes.

Just one more point for the "con" column on ethanol. For tons more skepticism about the great alcoholic hope, read reason articles on ethanol here.

Via Jacob Grier

The Impossible Dream of Energy Independence

bdoherty@reason.com (Brian Doherty) — Wed, 20 Feb 2008 15:00:00 EST

In his forthcoming book Gusher of Lies: The Dangerous Delusions of “Energy Independence” (PublicAffairs) Robert Bryce, managing editor of Energy Tribune and author of Pipe Dreams: Greed, Ego and the Death of Enron, grapples with what he detects as a growing belief, both among policy elites and the public, in “energy independence.”

That’s the notion that America should disengage from world energy markets and seek self-sufficiency in energy production. To Bryce, this is not only impossible, but dangerous to even attempt. As he writes in the book’s introduction, the quest for energy independence “means protectionism and isolationism, both of which are in opposition to America’s long-term interests.”

Some of the myths of energy independence Bryce takes aim at are summed up in this January Washington Post op-ed. They include the false belief that U.S. energy autarky can curb terrorism; that government investment in “alternative fuels” can end our use of foreign oil; that we can starve evil petro-regimes of money by refusing to buy their oil; and that less reliance on foreign energy sources can make our energy supply more secure.

Like any decision to isolate ourselves from the free international market, the search for energy independence would, Bryce demonstrates, lead us to waste our money and, yes, our energy doing things more expensively than they can be done by taking advantage of the international division of labor and flow of capital.

reason Senior Editor Brian Doherty, author of This is Burning Man and Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement (PublicAffairs), interviewed Bryce by phone last week.

reason: While “energy independence” has soared to fresh public prominence in this era of soaring gas prices and Mideast wars, it’s not a new idea, is it?

Robert Bryce: The first president to promote the idea was [Richard] Nixon in the wake of the oil embargo in 1973. In his State of the Union address in 1974, Nixon said that he was aiming for energy independence by the end of the decade. He hoped that by 1980 the U.S. would not be importing any oil. And every president since Nixon, in one way or another, has espoused a similar idea. But if you look back at the data, the U.S. was a net crude oil importer [as early as] 1913 and ever since we’ve been a net crude importer with a handful of years [as exceptions]. It’s remarkable how much the rhetoric about “energy independence” has had no connection with reality.

reason: What do its proponents think we can get out of energy independence?

Bryce: The main talking points for those who promote energy independence are, one, that if we were just more tech-savvy we can develop lots of new jobs, and that would be great—we can build windmills, solar panels, whatever nifty new whizbang tech is going to replace oil, and that will stimulate the economy.

Second, they love biofuels. We can just grow the fuels we need to replace imported oil and it will be great for farmers and the rural economy. Third, [energy independence proponents] conflate oil and terrorism. Those arguments really came to the fore since the 9/11 attacks. We buy imported oil, some of our suppliers are Islamic petro-states, some Islamic petro-states send some dollars to support radical Islam, therefore oil equals terrorism and “energy independence” is anti-terror.

The idea is that if we could isolate the oil-exporting countries that in theory support terror we’d cut off its lifeline. The connections of Saudi Arabia to the 9/11 terror attacks are real, I’m not denying that. But you cannot, given the complexity and enormous size and interconnectedness of the global crude oil market, separate one actor from another.

S. Fred Singer [of the Science and Environmental Policy Project] came up with the best analogy. He described the global oil market like a big bathtub. All the oil production is dumped into one bathtub and all consumers have straws sucking oil out. [For all economic purposes] it’s like we’re all sucking from the same common pool. To say you are not gonna buy Saudi oil, or Algerian oil—it’s crazy. For example, the U.S. hasn’t purchased a dime of Iranian oil—except for a small amount in the early ‘90s, but for the most part no Iranian oil since 1979. And that hasn’t stopped Iran from supporting Hezbollah.

reason: Can increased energy efficiency help us achieve the goal of “energy independence”?

Bryce: To answer that, you need to understand the “Jevons paradox.” In 1865 the economist William Stanley Jevons published a book, The Coal Question, which projected that Britain was on the precipice of disaster because it was running out of coal. Sound familiar? But it still hasn’t happened. Jevons’ discovery was that energy efficiency doesn’t decrease demand—it increases it.

We’re told that if we just push more efficient technologies like fluorescent light bulbs and drive Priuses that energy use will decline. It’s just not true. There’s a graphic in my book that shows the decline in the number of BTUs consumed per dollar of GDP [from 19,000 BTUs consumed per dollar of GDP in 1950, to a projected 9,000 BTUs in 2010], but energy consumption continued to grow.

Efficiency can be a great thing for its own sake. It can mean good things for the economy and for people, but it doesn’t mean we’ll use less energy overall. We’ll use more. And not just the U.S., but the Chinese, Vietnamese, Pakistanis.

One anecdote that illustrates the principle: I had a friend who bought a Prius tell me the other day how he used to take the train to New York to see the opera. But now they have a car that gets 40 miles per gallon, so they just drive. It becomes more efficient on a mile per gallon basis, but on a total BTUs consumed basis, no.

reason: How about domestic renewables as a solution to dependence on foreign oil?

Bryce: I’m not opposed to renewables. I have 3,000 watts of solar panels on the roof of my home. I understand the economics of renewables. But an incurable problem for both solar and wind is intermittency. The sun doesn’t shine at night. I like to have lights and TV at night. Unless we come up with some incredibly efficient method of storing large amounts of electricity, it’s not a viable source because we can’t store it.

It’s the same problem with wind. I consider wind the electric-sector equivalent of the ethanol hype. At a conference recently I asked a wind guy, “Without subsidies, how many projects now under way [regarding wind] would make economic sense?” He said maybe 30 percent.

reason: You sound skeptical about ethanol as well.

Bryce: The ethanol scam is the longest running robbery of taxpayers in American history. Some recent news reports, which I don’t discuss in the book, include a report showing [that] corn-based ethanol releases [more] greenhouse gases than fossil fuels. That’s just one indictment of the inefficiency of the whole process. It’s also fiscal insanity—providing 51 cent per gallon subsides for making fuel from what’s already the most subsidized crop.

In 2005 federal corn subsidies approached $9.4 billion, which is around the entire budget of the Department of Commerce, with 39,000 employees. It also takes orders of magnitude more water to make corn ethanol than [is used for] gasoline production. Given the problems in the West and Southwest with water, it’s insane to think we’re going to be able to produce sufficient ethanol to make a dent in gasoline use when the amount of water needed is so high.

reason: What about the promise of changes in foreign policy in the Mideast if we could wean ourselves off their oil?

Bryce: People like to think that if only we bought less oil we wouldn’t need to be in the Persian Gulf. It sounds appealing. The reality is the U.S. gets 11 percent [of its oil] from the Persian Gulf. From a strategic point of view it was a big mistake assuming militarism is better than markets. The key adjustment is to make markets trump militarism when it comes to the Persian Gulf. We’re not the most reliant [on Persian Gulf oil]—it’s the Japanese, the French, the rest of Europe, China. If we want to have stability in the Persian Gulf, it’s not just for the U.S. It’s good for the whole world, so the U.S. needs to understand that it shouldn’t be its burden alone.

reason: I thought what you had to say about Saudi Arabian energy independence was interesting.

Bryce: The Saudis in 2005 imported 83,000 barrels of gasoline per day. Here is a country with the single largest oil deposits on the planet and they are importing gasoline. Iran too is importing 40 percent of its gasoline, because it doesn’t have enough refining capacity. Iran has the second largest reserves of natural gas and is importing natural gas to northern Iran because its gas reserves are in the south. Do we need better examples of energy interdependence? If even Saudi Arabia and Iran are energy interdependent, why wouldn’t we be?

It isn’t like energy is the only vital thing we aren’t “independent” in. I have a chart in the book which shows, using data from the U.S. Geologic Survey, some mineral commodities. We import 100 percent of more than a dozen—fluorspar, yttrium, strontium, vanadium, arsenic among others. These are industrial commodities we need to power our economy—yttrium in televisions, microwaves, ceramics; strontium for nuclear fuel; manganese in steel and iron. These are things we have to have, and we import 100 percent of them.

The only energy source with zero carbon emissions in electric power is nuclear. And that’s another example of interdependence. We import 83 percent of our uranium. There are other countries like Kazakhstan with much larger reserves of uranium than the U.S. which can mine it more cheaply.

“Energy independence” would dictate that if we use nuclear power we must produce our own uranium to fire those reactors. Why would we wanna do that if someone else is a lower-cost producer? If we get to [obtain a resource] for less, why wouldn’t we do that? We do it with shoes, iPods, cell phones, watches, fresh flowers, you name it. We rely on global commercial markets for all kinds of things—what’s wrong with relying on it for uranium?

reason: What did you think of the recent energy bill in the context of your book’s concerns?

Bryce: If I could tell Congress one thing, I’d tell them to forget about doing anything for the energy business. They’ve done enough damage, don’t do any more. The bill is unfortunately named the “Energy Independence and Security Act of 2007.” It’s got 300 pages of blather about ethanol and biofuels that does nothing for energy independence or security. They mandate 36 billion gallons of biofuels for every year by 2022. It’s pure fantasy, the idea that we can hit that target.

Every presidential candidate has talked about energy independence and every one conflated oil and terrorism, except for Ron Paul. Paul as far as I can tell was the only presidential candidate who dared to say something to the effect of, when it comes to energy, we need to let the market work, that supply and demand and prices should make decisions about [how and from where we get energy].

reason: Do you think the current fears about “peak oil” feed into the craze for energy independence?

Bryce: Some time the world will reach a limit in the amount of oil [produced] per day and a decline will start. But the decline is likely to be shallow, not skiing down a steep decline. As we get closer [to peak oil], prices will rise, and as prices rise a pool [of oil] that’s previously unecononomical gets worth drilling.

I consider myself a liberal mugged by the laws of thermodynamics, but all [interest in my thesis] has so far come from the [free-market] right. The left doesn’t seem to care. They just hate fossil fuels. To me, I see we had huge government support for ethanol mandates, and how has that turned out? Modern leftists [who question the value of freer markets in energy] don’t seem to know, for example, the history of the Synfuel Corporation or how the prohibition on using natural gas for electricity worked, or how price controls made for gas lines. With all those government interventions, if the market had been allowed to work, the outcomes would have been a lot better.

Thermostats, Economy, and State

bdoherty@reason.com (Brian Doherty) — Thu, 17 Jan 2008 11:24:00 EST

Fans of electricity policy, sorry if you've felt neglected here of late. Take a look at this interesting post by Lynne Kiesling (with many useful links to continue your edification) on the dilemma market-loving electricity policy mavens feel toward recent moves on California's part to mandate the installation of "programmable communicating themostats." Which are?

a fully-enabled two-way digital communication device. It can receive data, be programmed to respond to data, and send data back about its actions. For example, a PCT can receive a price signal, be programmed with a set point and trigger prices at which to change the set point, and then it can change its settings on your behalf depending on how you've programmed it.

Lynne Kiesling, formerly with the Reason Foundation, sums up the conundrum that these devices present to those who love the idea of a more resposive market in energy, but hate government mandates:

In the current regulatory environment, we are stuck in a chicken-and-egg limbo. If we do not mandate the installation of PCTs to accelarate "fleet turnover" in building thermostats, the distribution utilities have no incentive to install them or offer them to customers. But if there are no PCTs, the demand for innovative retail products and services is less likely to develop. We can't have the retail innovation without the technology, but the parties who currently have the retail relationship have little incentive to engage in retail innovation, and they therefore do not value the technology. From a liberty and coercion perspective it's an imperfect policy in an imperfect world, but it's one that is likely to break the chicken-and-egg cycle and let the camel's nose of retail competition under the tent.

One part of California's thermostat proposal has already gotten some strongly negative press...the part where they say, hey, the government should be able to set your thermostat for you (Jimmy Carter, thou shouldst be living at this hour! Wait, you are? Never Mind.) Anyway, back to electricity policy, from Kiesling:

.....I find one specific piece of language in section 112(c) extremely troubling (and the links above indicate that I am not alone):
Emergency Events. Upon receiving an emergency signal, the PCT shall respond to commands contained in the emergency signal, including changing the setpoint by any number of degrees or to a specific temperature setpoint. The PCT shall not allow customer changes to thermostat settings during emergency events.
.....An emergency means a Stage 2 alert or worse; a Stage 2 alert occurs when supply reserves available to the system in an are only 5 percent larger than the anticipated demand in that hour (called an operating reserve shortfall). If the authors of the document were sensitive to the public's knowledge and interests they would have bothered to define the conditions under which a customer would receive an emergency signal.
Note also, though, that the California ISO annual report for 2006 indicates that even in the record-breaking heat wave in July 2006, there was only one Stage 2 alert (and no Stage 3 alerts). So these "emergency signals" are extremely infrequent, and are more likely to become even more infrequent as the price-responsive demand capabilities and retail choice enabled by the PCT reduce the strains on the system in peak hours.

That said, however, I disagree with this provision requiring mandatory, automated emergency response of all customers.

Read the whole thing, and all the links contained therein, for an electrifying morning.

Oil Prices: Must They Go Up Because Charlie Gibson Says So?

bdoherty@reason.com (Brian Doherty) — Wed, 09 Jan 2008 19:18:00 EST

Charlie Gibson stated at Saturday's GOP candidate debate that "intellectual honesty" required admitting oil prices can only go up. Cato's Jerry Taylor thinks the evidence suggests that those with most to gain or lose from accurately predicting oil price fluctuations seem to think the opposite:

Oil prices might indeed be on a rocket ship upwards for as far as the eye can see, but market actors don’t think so. At the New York Mercantile Exchange, oil for delivery from next month through December 2016 is showing a downward price trend. In short, the people with the most money on the line - who will live and die (economically speaking) by these assessments - aren’t buying Gibson’s assertion about the future.
More evidence can be found the behavior of oil inventory holders. At present, oil inventories are being released to the market –hardly what one would expect if inventory holders thought that oil prices will continue their long march upward.

Ron Bailey from our May 2006 issue on the "peak oil crisis."