Topic: Energy and Environment

Venezuela’s Plunging Petroleum Production

A hallmark of socialism and interventionism is failure. Venezuela is compelling proof of this, having spent the past half century going down the tubes. Indeed, in the 1950’s, it was one of Latin America’s most well off countries. No more. Now it is a basket case – a failed state that’s descending into chaos.

How could this be? After all, Venezuela’s combined reserves of oil and gas are second only to Iran’s. Well, it might have reserves, but thanks to the wrongheaded policies of President Hugo Chavez, Venezuela is the only major energy producer that has seen its production fall over the past quarter of a century. The following chart tells that dismal tale:

Saving Rustbelt Cities

What should be done about the nation’s rustbelt cities–or, as they are being repackaged by marketers, “Legacy Cities”? The populations of at least a dozen major cities declined by more than 10 percent between 2000 and 2010, including Buffalo, Cincinnati, Cleveland, and of course Detroit and New Orleans (whose population decline has little to do with the rest of them). In many cases, such as Pittsburgh and St. Louis (which declined between 8 and 9 percent in the 2000s), recent declines are merely a continuation of trends since 1950.

Click image to download the report (7.6 MB)

A new report from the Lincoln Land Institute offers a set of prescriptions for these cities. While they may sound good at first glance, close scrutiny reveals that they are the same tired policies that have been trotted out by urban planners for decades.

These policies include:

  1. Urban renewal, funded with tax-increment financing and other subsidies, to “leverage assets” in the city;
  2. Regional government “to better distribute the burdens of urban infrastructure and other costs,” i.e., make the suburbs pay for the central cities’ mismanagement;
  3. “New urban forms,” meaning high-density, mixed-use developments;
  4. “Re-establishing the central role of the city,” meaning demands that employers move to cities rather than suburbs; and
  5. “New governance structures,” meaning “economic development corporations” that can “leverage assets” (use tax dollars) to benefit selected developers in selected neighborhoods with little public scrutiny.

The report gives examples of cities that are doing some of these things, but fails to show that any of them have actually succeeded at attracting new people and jobs. In fact, the higher taxes and increased regulation called for by this report is more likely a recipe for accelerated disaster.

Here’s a completely different set of recommendations that I suggest is more likely to succeed:

  1. Improve schools, probably by using a voucher system to create a competitive environment for both public and private schools;
  2. If the city has a large African-American underclass, make absolutely sure that all elementary students have caught up to their middle-class peers by the time they reach high school, and gather private funding to insure that all high-school students who graduate with decent grades know they will get scholarships to a major university, thus giving them an economic path out of poverty;
  3. Eliminate cronyism and corruption in city government, problems never mentioned in the Lincoln Land Institute report but which could actually be exacerbated by the report’s recommendations. Cities are the creation of state legislatures, and if cities can’t reform themselves, the legislatures should take action by rechartering the city governments;
  4. Reduce crime by doing things like changing the gridded city streets that planners love into cul de sacs so that criminals have fewer escape routes;
  5. Reduce taxes by eliminating all but the most essential urban services–this means no government-funded convention centers, sports stadiums, hotels, streetcar lines, or other things that ought to be privately funded, if they are needed at all;
  6. Reduce regulation, including zoning rules, so property owners can engage in urban renewal without government subsidies or top-down planning. Historic preservation ordinances may sound cool, but they are one of the biggest obstructions to private redevelopment;
  7. Fix city pension and health care funds, even if it means going bankrupt to allow cities to renegotiate unsustainable contracts with public employee unions;
  8. If it hasn’t been done already, legalize the sale of beer from the same premises in which it is made. As I’ve argued elsewhere (see page 6), the micro brewpub revolution has done more to revitalize cities than rail transit, urban renewal, and the other expensive programs planners and city officials love.

In short, rather than adding to the layers of taxes and regulation that already hinder city growth, government should get out of the way.

Hyping Billions in Taxpayer Spending

In today’s issue of Nature, scientists from the National Ignition Facility (NIF) in California are trumpeting their advance in achieving fusion ignition. However, the National Ignition Facility is just like so many other projects from the Department of Energy. It’s behind schedule and over budget.

Approved by Congress in 1993, the lab did not officially open until 2009 after numerous delays. According to a report in 2000 by the Government Accountability Office, “NIF’s cost increases and schedule delays were caused by poor Lawrence Livermore management and inadequate DOE oversight.”

The completed lab has cost taxpayers $5 billion, up from the initial estimates of $2.1 billion. It costs an additional $330 million to operate annually.

In 2009, scientists proclaimed that the NIF would achieve fusion within three years. Unsurprisingly for a government-funded project, NIF announced in 2012 that it failed to meet its goal. The New York Times said “the output of the experiments consistently fell short of what was predicted, suggesting that the scientists’ understanding of fusion was incomplete.”

NIF announced that it would spend the next three years trying to evaluate why it hadn’t achieved it. But in a moment of honesty in its report to Congress, NIF conceded “it is too early to assess whether or not ignition can be achieved at the National Ignition Facility.”

So while some news reports herald the advance at NIF as bringing it closer to achieving a sun-like power source, the project is still years away from its goal and billions over budget. 

Say What!?

While the social cost of carbon (SCC) is still being mulled over by the Office of Management and Budget, other federal agencies continue to push ahead with using the SCC to help justify their many regulations.

The way this works is that for every ton of carbon dioxide (CO2) that any new regulation is supposed to keep from being emitted into the atmosphere, the proposing agency gets about $32 credit to use to offset the costs that the new regulation will generate. This way, new regulations seem less costly—an attractive quality when trying to gain acceptance.

The idea is that the damage resulting from future climate changes will be decreased by $32 for every ton of carbon dioxide that is not emitted.

There is so much wrong with the way the government arrives at this number that we have argued that the SCC should be tossed out and barred from use in all federal rulemaking. It is far better not to include any value for the SCC cost/benefit analyses, than to include one which is knowingly improper, inaccurate and misleading.

Further, that the federal regulations limiting carbon dioxide emission will have any detectable impact on future climate change is highly debatable. To see for yourself, try out our global warming calculator that lets you select the magnitude of future carbon dioxide emissions reductions as well as which countries participate in your plan. The best that the U.S. can do—even if it were to halt all CO2 emissions now and forever—is to knock off about 0.1°C from the total climate model-projected global temperature rise by the year 2100.  In other words, U.S. actions are not very effective in limiting future climate change.

Apparently, the feds, too, agree that their plethora of proposed regulations will have little impact on carbon dioxide emissions and future climate change. But that doesn’t stop them from issuing them.

The passage below is from the proposed rulemaking from the Department of Energy to alter the Energy Conservation Standards for Commercial and Industrial Electric Motors  (this is only one of many proposed regulations making this claim):

The purpose of the SCC estimates presented here is to allow agencies to incorporate the monetized social benefits of reducing CO2 emissions into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on cumulative global emissions.

In other words, DoE’s regulations won’t have any real impact on global CO2 emissions (and, in that manner, climate change), but nevertheless they’ll take a monetary credit for reduced damages that supposedly will result from the non-effective regulations.

(I wonder if can try that on my taxes)

It seems a bit, uh, cheeky, to take credit for something that you admit won’t happen.

But that’s the logic of the federal government for you!

VMT Fees Yes — V2V No

The National Highway Traffic Safety Administration (NHTSA) says it wants to require auto makers to include vehicle-to-vehicle (V2V) communications systems in all new cars. Calling V2V “the next generation of auto safety improvements,” the agency says such devices would “improve safety by allowing vehicles to “talk” to each other and ultimately avoid many crashes altogether by exchanging basic safety data, such as speed and position, ten times per second.”

The government wants every vehicle on the road to transmit its location to every other nearby vehicle–as well as any other receivers that happen to be in range.

Supposedly, “the system as contemplated contains several layers of security and privacy protection.” However, privacy advocates should be far more suspicious of V2V than of electronic vehicle-mile fee systems. The big difference between them is that V2V by definition incorporates both a receiver and a transmitter, while it is possible to design vehicle-mile fee systems that do not include wireless transmitters. No transmitter means no invasion of privacy is possible; on the other hand, despite whatever privacy protection is included in V2V, a transmitter necessarily allows someone to receive the signal.

Perhaps the biggest argument against V2V is that it will soon be obsolete as a safety device, so mandating that it be included in cars adds an unnecessary expense to auto buyers. According to the NHTSA, V2V will “provide warnings to drivers so that they can prevent imminent collisions” but “not automatically operate any vehicle systems, such as braking or steering.” Yet many cars on the market today, such as the Ford Fusion shown above, do this and more solely with built-in radar or other sensors rather than V2V transmitters. Moreover, the occupants of such cars are safer even if no other car on the road has those sensors, which isn’t true of a V2V system.

The Ford Fusion is a mid-priced car that has numerous built-in radar sensors that can detect and warn drivers of potential collisions, even braking if necessary to avoid accidents–all without V2V transmissions.

Moreover, as contemplated by the NHTSA, V2V will not be mandated in cars before 2018 at the earliest. Yet the kind of self-driving cars that Nissan and other companies expect to have on the market by 2020 will use radar, infrared, lasers, or other means to detect all other vehicles on the road without transmitting any signals themselves. They would get no benefit from a wireless V2V system.

If systems that are already being included in more and more new cars work as well, if not better, than V2V, then why have V2V at all? It is worth noting that self-driving cars are coming from the private sector, while the National Highway Traffic Safety Administration has expressed a go-slow attitude. Meanwhile, the push to mandate V2V comes from government agencies, both here and in Europe. I suspect governments are more interested in technologies that centralize transportation and communications, while private manufacturers are supporting technologies that promote decentralization.

In any case, it will be interesting to see if privacy groups protest this plan as loudly as they do proposals for vehicle-mile fees. Those who don’t may be using privacy concerns to cover their reluctance to paying the full cost of the roads they use. But, where VMT fees are an important step to using markets, rather than politics, to manage transportation systems, V2V is both a potential invasion of privacy and a waste of money.

Keystone XL Pipeline Given High Marks in State Department’s Final Environmental Impact Statement

Recall this passage from President Obama’s Georgetown speech last summer announcing his Climate Action Plan:

Now, I know there’s been, for example, a lot of controversy surrounding the proposal to build a pipeline, the Keystone pipeline, that would carry oil from Canadian tar sands down to refineries in the Gulf. And the State Department is going through the final stages of evaluating the proposal. That’s how it’s always been done. But I do want to be clear:  Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward. It’s relevant.

This basically should have green-lighted the pipeline, because, as I pointed out in congressional testimony last year, regardless of how you figure the carbon dioxide emissions from the pipeline’s oil, the resulting climate impact will be so small as to assuredly put the president’s mind at ease.

The just-released Final Environmental Impact Statement from the State Department concluded about the same thing as the Draft Environmental Impacts Statement from the State Department, which is in complete agreement with my findings regarding carbon dioxide emissions from the pipeline’s oil and climate change. The net global warming impact from the pipeline oil amounts to somewhat less than 1/100th of a degree Celsius over the next 100 years.

So if the president wants to kill the Keystone XL pipeline (clearly he does, because he has had ample opportunity to approve it), he’ll have to find a reason to do so other than a climate one. Unfortunately for him, trying to kill it for other reasons would be equally ill-founded.

Senate Prepares to Roll Back Flood Insurance Reforms

A funny thing happened in 2012, Congress actually passed a bill that intentionally cut subsidies.  In this case subsidies given to homeowners under the National Flood Insurance Program (NFIP).  The Biggert-Waters Act of 2012, if fully implemented, would eliminate almost half of the annual billion in estimated subsidies under the NFIP.  Now before your opinion of Congress suddenly improves, its important to remember that subsidies reductions were done only because the NFIP had expired and some responsible members objected to extending the program without reform.  Now that the program is up and running again, beach front homeowners and their friends in the real estate industry want their subsidies back.

The Senate is currently moving towards that goal.  Not even wanting to bother with the normal process of hearings and a Committee vote, Senate Majority Leader Harry Reid has brought S.1926 directly to the floor for a vote, likely to occur this week.  S.1926 would indefinitely delay the premium increases passed in Waters-Biggert, effectively hitting the taxpayer for $100s of millions annually.  But hey there’s a close Senate race going on it Louisiana, so regular order can wait.

Now I have every sympathy for households facing rate increases under NFIP.  They’ve been getting a subsidy for years and have grown used to it.  Given the sometimes high cost of NFIP, it might not even feel like a subsidy.  But then part of that is because almost a third of the premium income is pocketed by the insurance companies (at no risk to them I might add).  The solution is to let those households either get out of NFIP altogether or to purchase private insurance, that would likely be cheaper given the inefficiencies of the NFIP.  If one feels that maintaining flood coverage is vital for these households, yet they cannot bear the higher raters, another option would be a significantly higher deductible.  Rolling back the premium reforms in Biggert-Waters is simply short-sighted and irresponsible, but then that’s nothing new for Washington.