Topic: Energy and Environment

House Testimony on Energy Subsidies

I testified to a House committee today on Department of Energy (DOE) loan programs. These were the Bush/Obama-era subsidies to Solyndra and other renewable energy businesses.

I discussed five reasons why the loan programs should be repealed:

1. Four Decades Is Enough. The federal government has been subsidizing solar and wind power since the 1970s. These are no longer the sort of “infant industries” that some economists claim need government help. Solar and wind are large and mature industries, and they already receive subsidies from state governments, particularly in the form of utility purchase mandates, which are in place in 29 states.

2. Failures and Boondoggles. The DOE claims that Solyndra’s bankruptcy was the exception, and that the agency’s overall loss rate on loans is low. But as an economist, I’m more concerned with whether the overall benefits of projects outweigh the costs, and that appears not to be the case for numerous projects. The Ivanpah solar project in California, for example, is producing less electricity and consuming more natural gas than promised, and its cost per kwh is at least three times more than for natural gas plants.

3. Corporate Welfare and Cronyism. The Washington Post found that “Obama’s green-technology program was infused with politics at every level.” Public opinion polls have shown plunging support for both politicians and big businesses over the years, and one of the reasons is such cronyism. Businesses and policymakers would gain more public respect if they cut ties to each other by ending corporate welfare.

4. Private Sector Can Fund Renewable Energy. Most DOE loan guarantees have gone to projects backed by wealthy investors and large corporations, such as Warren Buffett and General Electric. Such individuals and companies are fully capable of pursuing energy projects with their own money. Buffett’s Berkshire Hathaway has invested $17 billion in renewable energy since 2004. With that kind of private cash available for renewables, we do not need the DOE handing out subsidies.

5. Subsidies Distort Decisionmaking. Federal energy subsidies create counterproductive incentives in the economy. For example, subsidized firms tend to become slow and spendthrift, thus subsidies undermine productivity. Also, because subsidies are not driven by consumer demands, they can induce firms to invest in activities that will not succeed in the marketplace in the long term.

You can watch the full hearing here. My testimony is here. More background on energy subsidies is here.

Time to Repeal Ethanol Subsidies

The federal government provides an array of subsidies to increase the consumption of biofuels such as corn ethanol. The subsidies include tax breaks, grants, loans, and loan guarantees. The government also imposes a mandate to blend biofuels into gasoline and diesel fuels.

A new study at describes the damage caused by these policies. Subsidies and the Renewable Fuel Standard (RFS) harm taxpayers, motorists, consumers, and the environment.

The study by Nicolas Loris argues that Congress should end its intervention in the biofuels industry. It should terminate subsidies and repeal the RFS. Individuals and markets can make more efficient and environmentally sound decisions regarding biofuels without subsidies and mandates.

Investor Carl Icahn said that the RFS has created a bureaucratic market in tradable credits full of “manipulation, speculation and fraud” with the potential to “destroy America’s oil refineries, send gasoline prices skyward and devastate the U.S. economy.”

That language is probably too strong, but federal ethanol policies really are stupid. President Trump says that he wants to cut unneeded regulations and wasteful subsidies. The RFS and biofuel hand-outs would be good policies to target.

So for an interesting read illustrating the craziness of special-interest policies in Washington, check out “Ethanol and Biofuel Policies.” The next time you are at the gas station and see that “E10” sticker on the pump, remember that a tag team of D.C. politicians and corn farmers are picking your pocket. 

Why Trains in Europe Function So Badly

Over at KiwiReport, a writer named Serena Carsley-Mann asks a good question: “Why do trains in America function so different from trains in Europe?” Unfortunately, she mistakenly thinks the problem is that “trains in America function so badly.”

In fact, America has the most efficient rail system in the world. It is European trains that function badly. I’ve discussed this before in my blog, but since writers like Carsley-Mann continue to get it wrong, it is worth repeating.

According to a Pew study, freight shipped by truck uses about ten times as much energy, and emits far more greenhouse gases, per ton-mile than freight shipped by rail (see page 2). Because rail cars weigh more, per passenger, than automobiles, rail’s comparative advantages for passengers are much smaller, and unlike trucks it will be very easy for cars to close the gap: a Prius with a average of 1.67 occupants, for example, is more energy efficient than almost any Amtrak train. Thus, to save energy, it is better to dedicate rail lines to freight rather than to passengers.

This is what the United States has done, but it is exactly the opposite of what Europe has done. According to a report from the European Union, 46 percent of EU-27 freight goes by highway while only 10 percent goes by rail, while in the U.S. 43 percent goes by rail and only 30 percent by road. Thus, we’re using our rail system far more effectively than Europe. This is not just from an energy view but also from a consumer-cost view, as rails cost less than trucks for freight but more than cars for passengers.

Bias in Climate Science

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

There is a new paper out in the journal Climatic Change that takes a look into the issue of publication bias in the climate change literature. This is something that we have previously looked into ourselves. The results of our initial investigation (from back in 2010) were written up and published in the paper “Evidence for ‘Publication bias’ concerning global warming in Science and Nature” in which we concluded that there was an overwhelming propensity for Nature and Science—considered among the world’s leading scientific journals—to publish findings that concluded climate change was “worse than expected.” We noted the implications:

This has considerable implications for the popular perception of global warming science, for the nature of “compendia” of climate change research, such as the reports of the United Nations’ Intergovernmental Panel on Climate Change, and for the political process that uses those compendia as the basis for policy…

The consequent synergy between [publication bias], public perception, scientific “consensus” and policy is very disturbing. If the results shown for Science and Nature are in fact a general character of the scientific literature concerning global warming, our policies are based upon a unidirectionally biased stream of new information, rather than one that has a roughly equiprobable distribution of altering existing forecasts or implications of climate change in a positive or negative direction. This bias exists despite the stated belief of the climate research community that it does not.

In their investigation into publication bias, the authors of the new paper, Christian Harlos, Tim C. Edgell, and Johan Hollander, looked more broadly across scientific journals (including articles from 31 different journals), but a bit more narrowly at the field of climate change, limiting themselves to a sub-set of articles that dealt with a marine response to climate change (they selected, via random sampling, 120 articles in total).

Harlos et al. were primarily interested in looking into whether or not there was a bias in these articles resulting from an under-reporting of non-significant results. This bias type is known as the “file drawer” problem—in which research findings that aren’t statistically significant are rarely published (and therefore sit in a “file drawer).  This leads to an over- (and non-robust) estimate of the number of truly significant results. The “file drawer” problem has received a lot of attention in recent years (see here for example) and it continues to be an active research area.

You Ought to Have a Look: On Fixing Science

You Ought to Have a Look is a regular feature from the Center for the Study of Science. While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic. Here we post a few of the best in recent days, along with our color commentary.

This week we focus on an in-depth article in Slate authored by Sam Apple that profiles John Arnold, “one of the least known billionaires in the U.S.” Turns out Mr. Arnold is very interested in “fixing” science. His foundation, the Arnold Foundation, has provided a good deal of funding to various research efforts across the country and across disciplines aimed at investigating how the scientific incentive structure results in biased (aka “bad”) science. His foundation has supported several high-profile science-finding replication efforts, such as those being run by Stanford’s John Ioannidis (whose work we are very fond of) and University of Virginia’s Brian Nosek who runs a venture called the “Reproducibility Project” (and who pioneered the badge system of rewards for open science that we previously discussed). The Arnold Foundation has also provided support for the re-examining of nutritional science, an effort lead by Gary Taubes (also a favorite of ours), as well as investigations into the scientific review process behind the U.S. government’s dietary guidelines, spearheaded by journalist Nina Teicholz.

Apple writes that:

In my conversations with Arnold and his grantees, the word incentives seems to come up more than any other. The problem, they claim, isn’t that scientists don’t want to do the right thing. On the contrary, Arnold says he believes that most researchers go into their work with the best of intentions, only to be led astray by a system that rewards the wrong behaviors.

This is something that we, too, repeatedly highlight at the Center for the Study of Science and investigating its impact is what we are built around.

Apple continues:

[S]cience, itself, through its systems of publication, funding, and advancement—had become biased toward generating a certain kind of finding: novel, attention grabbing, but ultimately unreliable…

“As a general rule, the incentives related to quantitative research are very different in the social sciences and in financial practice,” says James Owen Weatherall, author of The Physics of Wall Street. “In the sciences, one is mostly incentivized to publish journal articles, and especially to publish the sorts of attention-grabbing and controversial articles that get widely cited and picked up by the popular media. The articles have to appear methodologically sound, but this is generally a lower standard than being completely convincing. In finance, meanwhile, at least when one is trading with one’s own money, there are strong incentives to work to that stronger standard. One is literally betting on one’s research.”

Confusion over Infrastructure

The Christian Science Monitor thinks that the Democrats wrote their infrastructure plan as a “political bridge to President Trump.” Fox News thinks that Trump might “get on board” the Democrats’ plan. Statements like these show that many reporters–and by extension members of the public–haven’t yet figured out the real issues behind the infrastructure debate.

As Business Insider points out, there’s a bigger difference between the two sides over “how it’s paid for” than “what gets built.” The Democrats want the federal government to spend a trillion dollars, money it would have to borrow. Trump wants private investors to spend their own money. Never the twain shall meet. 

But Business Insider doesn’t understand how Trump’s idea will work. If Trump is going to rely on the private sector, it says, then only projects that generate revenue will be built because “projects that don’t generate revenue for the private sector generally don’t get financed.” But there are two kinds of public-private partnerships. The kind that Business Insider is writing about is called demand risk because the private partner takes the risk that tolls, fares, or other user fees won’t repay the cost.

The second kind is called availability payments because the government agrees to pay the private partner the cost of the project over time, whether or not anyone pays user fees or even uses it at all. In this kind, the public takes the risk. While I much prefer the demand-risk form because I think nearly all infrastructure ought to be paid for out of user fees, Trump may be happy to go with availability payments so long as state or local governments are making the payments, not the feds. Democrats in Congress don’t like either one because they short-circuit their ability to appear to give gifts to their constituents.

You Ought to Have a Look: Interview with Will Happer

You Ought to Have a Look is a regular feature from the Center for the Study of Science.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

In a bit of a departure from our typical YOTHAL recipe, where we highlight three or four items from around the web that we found worthy of recommending to you for additional scrutiny, this week we highlight just a single, albeit somewhat lengthy, article that we feel is worth dedicating your time to. The article takes the form of an in-depth interview with Dr. William Happer, emeritus Department of Physics professor at Princeton University (and Cato Adjunct Scholar). It was conducted by as part of their “Focused Civil Dialogues” series, with the topic being global warming. Although the interview was conducted last summer, it has received renewed attention lately as Happer’s name has come up as a good choice for President Trump’s science advisor. It is therefore a good example of the kind of tone that the incoming Administration could set on the topic of human-caused climate change.

During the interview, TheBestSchools and Happer work through the flow chart below, from top to bottom. Each step along the way, including the introduction featuring Happer’s personal history and accomplishments, is an interesting read featuring numerous anecdotes to back his well-thought out and thorough reasoning on why carbon dioxide emissions should not be vilified or regulated (at the same time being an ardent supporter of government actions to restrict/reduce real forms of pollution). The interview exudes history, including historical examples of the dangers and downfalls of political intervention in science and restrictions placed on scientific inquiry.