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Prius C vs. Chevy Volt: A Tale of Two Cars

There could hardly be a more stark contrast between the ability of the free market to provide effective environmental solutions and the failure of politically dictated efforts than the difference between the Toyota Prius C and the Chevy Volt.

As is well known by now, the Chevy Volt production line has been halted for at least five weeks because GM is “matching our production levels with demand and building to market.” The market hasn’t been very kind to the Volt and GM is reducing production to reflect that. The Volt has a long history, but it is clearly the darling of some politicians with Obama promising to buy one when he is out of office. Despite that political support, the Volt has not been a market success.

Contrast that with the new Prius C, a smaller version of the Toyota Prius. The recently released version is so popular, it comes with a significant markup. Green Car Reports notes that some dealers are charging as much as $7,000 extra for what they call a “Market Value Adjustment.” Demand is so high for the Prius C, the cars are now fetching a higher price than the standard Prius hatchback. The Prius C is also rated for 50 mpg, like the Volt. Popular Mechanics, however, found in an actual road test that the Volt averages around 33 mpg.

The contrast between these two cars provides clear evidence that individual freedom and creativity in a free market are far more powerful forces for the environment than politically motivated strategies. Unfortunately, many who call themselves environmentalists will continue to favor the failed top-down approach that costs so much and yields so little.

Mar 21, 2012 | 1 comment | by

How The Lorax Learned to Love Foresters

Tomorrow, the motion picture version of Dr. Seuss’s book “The Lorax” will hit the big screen and the reviews indicate it sticks to the original 1971 storyline. In “The Lorax,” a businessman, the “Once-ler,” moves into town, cuts down all the trees and destroys the forest, air and water in the process. A furry creature, the Lorax, appears and proclaims, “I speak for the trees” and scolds the Once-ler for being “crazed with greed.”

The story is a product of its times, when people like Paul Ehrlich were claiming that the planet’s time was short and that pollution and resource scarcity would soon overwhelm mankind. Time has not been kind to Ehrlich, demonstrating that his predictions and those of other early-1970s environmentalists, were not based in sound economics or science.

Forty years later, The Lorax also shows its age. Since it was published, a different story has been written in forests across the globe. Rather than being at odds, the Once-ler and the Lorax have found a common interest in making sure forests grow and expand – and many of the world’s forests have benefited. Three things stand out.

  • Last year was the International Year of the Forest, and the United Nations offered some good news. For the last two decades, total land area covered by forest in the Northern Hemisphere – where forestry is particularly active – has increased.
  • Wood is increasingly recognized as one of the most environmentally friendly building materials. At the University of Washington, researchers compared the environmental impact of building with either wood, concrete or steel. The hands-down winner for lower energy use, less waste and less water use was wood. While concrete and steel can only be mined once, trees are constantly replacing themselves.
  • In “The Lorax,” the Once-ler’s business collapses when all the trees are gone. Foresters understand this. Destroying a forest by cutting down every last tree makes no sense, so there are more trees in American forests today than there were just a few decades ago. Replanting isn’t just good for the environment, it’s good for business.

Forty years after he sprung from the imagination of Dr. Seuss, the Lorax would be happy to see that, far from disappearing, many forests today are thriving. They are there because the real story of the forests has not been about an unending battle between the fictional Lorax and the hard-hearted Once-ler, but of a friendship that understands that both benefit from healthy forests future generations can enjoy.

 

 

Mar 01, 2012 | 1 comment | by

Failed Green Jobs Promises Leave Taxpayers and Students Holding the Bag

One of the centerpieces of President Obama’s effort to “stimulate” the economy has been a focus on creating “green” jobs. The President even named a Green Jobs Czar to focus the effort. Three years later, however, that effort is falling apart according to a new study and local program directors.

An audit by the Department of Labor’s Inspector General found that the Administration’s green jobs training program was falling far short of the promised goals. USA Today notes “The program’s goal was to train 124,893 people and put 79,854 in jobs. But 17 months later, 52,762 were trained and 8,035, or roughly 1 in 10, had jobs.”

The effects of this failure are being seen on the ground. In Seattle, two recent announcements demonstrate the impact.

The City of Seattle recently admitted that a $20 million program to weatherize houses in Seattle will fall well short of the promised jobs goal. When it began, the City promised the program would create 2,000 jobs. As the Seattle P-I notes, however, “The program’s most recent quarterly report, ending in December, showed the program had created only 16 jobs.” Despite those results, the city continues to equivocate about the success of the program. The program manager told the P-I, “Are we going to get to 2,000 jobs? We don’t know. Probably not, but we are going to keep making these investments.” Rather than steer funding to efforts that might help the environment, the City will continue supporting a program it knows has failed.

The failure to face reality has a real cost, not only to taxpayers but to workers who spent time and money training for green jobs that don’t exist. Just outside Seattle, the WorkForce Development Council of Snohomish County announced they were suspending a green jobs training program because only 20 percent of graduates were finding work. Remarkably, one of the community colleges involved in the program indicated they knew the program would fail. The Everett Herald reported:

In late 2010, the college conducted its own study of green jobs and training, by determining possible programs and policy going forward. The college’s findings suggested “that a general green education and, specifically, such an education offered through a community college certificate program, lacks vocational applicability in the present job market.”

This is unconscionable. Even as these colleges understood that the training they were offering was unlikely to help people find jobs, they continued to collect tuition and take the students’ precious time away from other studies that might offer them a job.

The failures, ironically, are blamed on the economic downturn. The programs were justified in the first place because they were going to provide “stimulus” to the economy. In other words the programs that were supposed to help revive the economy are now failing, say supporters, because the economy is bad. Their own words undermine the stimulative justification for the program.

Last year we noted that the states listed as the most favorable for “green jobs” also had some of the largest increases in unemployment during the economic downturn. Now we are seeing that areas relying on green jobs to bring them out of the downturn are wasting taxpayer dollars and the time of students hoping for one of these rare green jobs.

Feb 07, 2012 | 2 comments | by

Those Pesky Global Temperatures Lose A Bet for Climate Scientist

For an issue where the science is settled, some climate scientists seem to be pretty unsettled. The BBC carried a short segment today about a bet between two climate scientists regarding the trend in worldwide temperatures. Despite claims that the world would continue warming, we’ve gone more than a decade without a new temperature record. This stands in contrast to the projections of some climate models and the certainty that climate alarmists frequently tout.

Here is how the BBC put it:

A four-year bet between two scientists about global warming is settled. In 2008, after there had been no new record for the global average temperature since 1998, David Whitehouse and James Annan disagreed over whether there would be a new record set by 2011.

Well, the results are in and in the ensuing three years, the world did not see a new temperature record. Both Whitehouse and Annan do agree that the decade of the 2000s was the warmest average decade on record, but that wasn’t the bet. This undermines the claim that temperature increases would accelerate due to increased CO2 concentrations in the atmosphere. This indicates that natural forces are playing a greater role than anticipated or that anthropogenic forces are less than believed.

When the interviewer, economist Tim Harford (who, by the way, has a new book out that I am excited to read), challenges them to renew the bet, they generally agree.

I promise to update the results four years on.

Jan 21, 2012 | 1 comment | by

Redneck Locavores, Organic Onions and the Environment

You might be a redneck locavore if you refer to the squirrels in your yard as “free range.”

One of the fastest growing environmental fads is the push to cut “food miles,” and transportation-related carbon emissions, by buying locally grown food. Those who adhere to this philosophy, known as “locavores,” believe that buying food from local farms reduces the environmental impact by reducing the amount of fuel necessary to transport the food. In Seattle, one locavore has taken this idea to an extreme: eating squirrels she traps in her yard.

A retired “environmental analyst” told the Seattle Times she couldn’t eat prime rib without guilt and that eating squirrels is one way she is “trying to quiet her conscience.”

She doesn’t explain what is troubling her conscience, but given the context of the argument, we can only assume the guilt is the assumed environmental impact of eating food shipped from other parts of the country. Studies have shown again and again, however, that focusing only on the final distance that food travels is misleading.

On the Freakonomics blog, Steve Sexton notes that “local food consumers should understand that they aren’t necessarily buying something that helps the planet.” The reason is simple: if you grow food where it isn’t suited, the additional energy to grow the food more than outweighs the small savings in transportation. Sexton cites research that shows “Transportation only accounts for 11 percent of the carbon embodied in food anyway, according to a 2008 study by researchers at Carnegie Mellon; 83 percent comes from production.” Focusing on the 11 percent and ignoring the 83 percent isn’t a good way to reduce resource use.

Others argue that even if the environmental benefit isn’t significant, local food tastes better. When you are reduced to eating squirrel, that argument starts to sound a little hollow.

As an aside, you might be a redneck locavore if you traded your washing machine for a clothes line that hold four pairs of jeans and three squirrels.

Seattle’s squirrel-eating locavores are one more bit of evidence that environmental ideology is as much about self image as the environment. Now, even The Onion (America’s Finest News Source) is indicating that just because you call something “green” doesn’t mean it is. In its “American Voices” section, The Onion asks “As they ramp up production to meet the demands of a growing market, some organic farms are coming under scrutiny for agricultural practices that may do more harm to the land than good. What do you think?” The answers are, in true Onion style, silly (“This is precisely why I’ve stuck all these years to synthetic carrots.”). The genius of The Onion is to convey reality in a humorous way. Questioning organic food wouldn’t work unless the topic had the ring of truth.

Obviously, not everyone who cares about the environment is going to end up as an urban, squirrel-eating, redneck locavore. But when you’ve reached the point you are creating recipes for “risotto di roentia” and are being mocked by The Onion, you might want to think about whether you are on the right track.

By the way, you might be a redneck locavore if you damage your Prius trying to hit a squirrel.

Jan 05, 2012 | 10 comments | by

Eco-Fads: Paul Krugman’s Silly Solar Claims

New York Times columnist Paul Krugman has a particularly silly column today in the Seattle Times, proclaiming “That’s right: Solar power is now cost-effective.” His central claim, after he finishes attacking natural gas exploration, is that “we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal.”

He doesn’t provide a source for this dramatic claim, and with good reason: it simply isn’t true.

The best source for projections about costs of energy and technology is the Energy Information Administration (EIA). The EIA releases an annual estimate of future cost of energy production for a wide range of sources. In its report released in late 2010 on the “levelized cost of new generation” for the year 2016, the EIA includes this chart:

2016 Levelized Energy Costs

Solar energy, which the EIA notes as “Solar PV” for photovoltaic solar, has the third highest cost per megawatthour (MWh) of all new energy generation sources. As for Krugman’s claim that it is cheaper – or will soon be cheaper – than coal, it will be more than twice the cost of coal in 2016.

Krugman goes on to claim “if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.” Wrong again. The line listed as “Advanced Coal with CCS” represents new requirements to reduce traditional air pollution from coal and capture the carbon emitted – carbon capture and storage (CCS). Even under that scenario, solar is expected to cost 54% more than coal.

The cheapest source of energy is that which Krugman spends the first half of the article attacking: natural gas. It will be less than one-third the cost of solar in 2016. What’s more, natural gas releases half the amount of carbon of coal, meaning it is a good stepping stone to a carbon-reduced economy. This is exactly the strategy the UK used to meet their targets under the Kyoto Protocol. They went from an economy that was heavily coal-based to one that is now more reliant on natural gas.

These numbers are why those who care about reducing carbon emissions have shied away from recommending solar energy. A study by the McKinsey Company updated just last year that is widely cited in the environmental community (and sponsored by the Natural Resources Defense Council) puts solar energy toward the end of its list of dozens of policies that can reduce carbon.

Krugman claims the cost of solar is declining dramatically, implying that recent technology breakthroughs are driving cost reduction. In reality, the costs have come down for a very different reason: China. China has invested heavily in solar panel production, using its advantage in manufacturing costs and capacity to drive prices down. The largest irony here is that Krugman takes credit for China’s success to support solar panels even as he attacks China for its trade policy. Following his advice on China would actually increase the price of solar panels, undermining the general thrust of his claim about solar energy becoming more competitive.

Put simply, focusing on solar energy wastes money that could be better spent on dozens of other strategies.

Krugman, like many others, has fallen for trendy environmentalism, looking at policies that sound cool rather than looking at the data. In a column full of ironies, the largest irony is that following Krugman’s approach would waste money on policies that don’t work and miss opportunities to make real improvements in energy efficiency. That is the corrosive power of eco-fads at work.

Nov 08, 2011 | 1 comment | by

Which Energy Source Receives the Largest Subsidy?

One of the common refrains from those advocating “green” energy is that we need to stop subsidizing coal, oil and natural gas. And while they admit, even advocate for, the existence of subsidies for wind, solar and the like, they imply that if only we got rid of subsidies for oil, those other forms of energy would be more popular.

To see if this argument makes sense, we can turn to the Energy Information Administration’s “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010” released in August of this year. The study looks at how much the federal government spends on subsidies in a number of areas, and relates it to the amount of energy produced.

For electricity, when we compare the amount of energy produced and the size of the subsidy, we see that solar receives significantly more per kilowatt hour (kWh) of energy produced. The breakdown looks like this:

Energy Source Subsidy per kwh
Coal $0.0006
Natural Gas and Petroleum Liquids $0.0006
Nuclear $0.0031
Renewables $0.0154
      Biomass Power $0.0020
      Geothermal $0.0125
      Hydroelectric $0.0008
      Solar $0.9680
      Wind $0.0525

Coal receives about 6/100ths of a cent per kWh while solar receives an enormous 96.8 cents per kWh. Wind receives 5.25 cents per kWh and nuclear receives just under 1/3 of a cent per kWh.

Green advocates generally have two responses to this list.

First, they note there are external costs (i.e. carbon emissions) that are not captured here. With a $20/per ton carbon tax, however, the price of coal would go up about 2 cents per kWh and natural gas would increase in price by about 1 cent, far less than even the 5.25 cents subsidy received by wind power and far below the solar subsidy.

Second, they argue that oil requires us to spend money overseas in places like Iraq to protect our supply of oil. Oil, however, is a very small part of electric generation, so it doesn’t factor much in these numbers. This also assumes the United States would largely disengage from the world if we didn’t need oil. That certainly isn’t the case in Afghanistan, Bosnia, Uganda, Europe, Japan, Taiwan and other places where we see humanitarian and strategic interests without oil being involved.

It should be noted that the solar subsidies here, since they are for 2010, do not count the $528 million lost in the Solyndra bankruptcy alone. If that had occurred in 2010, it would have added another 50 percent to the cost of solar subsidies.

Put simply, the failure of solar and other renewables to be price competitive certainly isn’t because the federal government isn’t doing everything it can to prop them up.

Nov 06, 2011 | 5 comments | by

Despite Occupy Wall Street, Left Embraces “Green” Crony Capitalism

The recent wave of failed “green” programs, ranging from Solyndra to green jobs programs that fall far short of the promises, should provide those who claim to be worried about crony capitalism, like Occupy Wall Street, with ample opportunity to stand up against this example of corporate-government collusion. Instead, many on the left embrace these programs, even when they enrich a few at taxpayer expense.

My recent column in the USA Today, with examples from my recent book Eco-Fads, highlights this contradiction:

Writing in TheWall Street Journal, [New York Senator Kirsten] Gillibrand’s piece was titled “Cap and Trade Could Be a Boon to New York.” It described the inherent complexity of cap-and-trade not as a drawback, but as an opportunity from which Wall Street brokers could profit. At a time when securitized assets and creative derivatives were being indicted for their part in creating a nationwide housing bubble, she saw an opportunity to use those same instruments in a government-created energy market.

Why was she so tone-deaf to the risks of her proposal? With the rise of trendy environmentalism, politicians and businesses eagerly try to cash in with the public — politically and financially — by appearing green. As the social value of appearing green has increased, politicians propose public policy ideas designed to take advantage of that appearance, selling policies that may do little for the environment, but rig the rules of the game to benefit both favored businesses and sponsoring politicians.

Although cap-and-trade was never passed by Congress, other “green” policies were. In many ways, the bill is now coming due for those policies that emphasized image over effectiveness. You can read the whole piece here.

Nov 01, 2011 | 1 comment | by

Your One-Stop Solyndra News Spot

There has been a great deal of good journalism about the Solyndra mess. Here are a number of blogs, stories and interviews that offer some good insight into the problems with Solyndra’s business model, the decision to put the taxpayers on the hook for its failure and the implications of that failure.

Sadly, as the Wall Street Journal reports today, the Obama Administration seems to have ignored the lessons of this event. They quote Energy Secretary Chu admonishing doubters, saying “If we want to be a player in the global clean energy race, we must continue to invest in innovative technologies that enable commercial-scale deployment of clean, renewable power like solar.”

Here are some nice stories addressing the Solyndra meltdown.

ABC News provides a nice background piece on the scandal – Solyndra: A Loan to Nowhere.

Megan McArdle has two good blogs on the issue. The first, How Did Solyndra Spend All That Money,  addresses Solyndra’s apparent business model and why they seemed to accelerate the spending even as they were running out of cash.

The second, Solyndra Was Just a Bad Bet From the Beginning, examines the many market challenges the company faced.

The Washington Post reports that not all companies producing solar panels were seduced by government money. It is a lesson in, as the Post puts it, “what can go wrong when a rigid government bureaucracy tries to play venture capitalist and jump-start a nascent, fast-changing market.”

The Daily Mail reports today that Nancy Pelosi’s brother-in-law has received an even larger loan guarantee than Solyndra. This project is a thermal solar project, where the heat of the sun is concentrated to generate energy, as opposed to photovoltaic solar which are the standard solar panels we usually think of when we hear the word “solar.” Interestingly, the Energy Information Administration says that thermal solar will be the most expensive form of energy at $312 per megawatt hour (MWh) in 2016. By way of comparison, solar PV will be $211 per MWh and wind will be $97 per MWh. Put simply, the federal government is putting the taxpayers on the hook for a technology the EIA predicts will be the least competitive energy source.

Chris Horner of the Competitive Enterprise Institute and the American Tradition Institute also has a nice, and clear, radio interview about the larger issue.

There are many others doing good work on the issue. If you have additional suggestions, please post them in the comments.

Sep 29, 2011 | 4 comments | by

The Siren Song of Solyndra – How An Eco-Fad Seduced Politicians

The bankruptcy of solar-energy company Solyndra, taking half-a-billion taxpayer dollars down with them, has been described as the “first major scandal of the Obama Administration.” E-mails are demonstrating the Office of Management and Budget (OMB) had reservations about the deal and even predicted, virtually to the day when Solyndra would go bankrupt.

ABC reported:

Even after Obama took office on Jan. 20, 2009, analysts in the Energy Department and in the Office of Management and Budget were repeatedly questioning the wisdom of the loan. In one exchange, an Energy official wrote of “a major outstanding issue” — namely, that Solyndra’s numbers showed it would run out of cash in September 2011.

Since it was apparent that Solyndra would not likely survive even with a government loan guarantee, why did the Obama Administration push so hard to provide taxpayer support? The simple fact is that the power of eco-fads supplanted sound judgment.

Megan McArdle of The Atlantic offers this assessment:

For the government, there was no upside: they were on the hook if the loan failed, but all they got if the loan succeeded was the psychic benefit of a job well done.

If the company failed, which it did, taxpayers would be on the hook. If the company succeeded, taxpayers could receive nothing, but politicians would be able to point to a success. This is precisely what lies at the center of eco-fads. Politicians are willing to take foolish risks with taxpayer money in the hopes they can look “green.”

Not all companies with government loan guarantees end up bankrupt, of course. But the need for government loan guarantees tends to indicate the companies in question aren’t strong enough to receive traditional private support. Worse, loan decisions are made, as in the case of Solyndra, for political purposes which further obscure economic realities.

One Nobel-Prize winning economist has outlined why these types of politically chosen projects so often fail:

You can’t propose a one-size-fits-all policy for industries as different as aircraft, semiconductors, and telecommunications. Instead, you have to base interventionist proposals on detailed predictions about how firms will change their strategies in response to hypothetical policy changes, how these strategic moves will affect profits, wages, R&D, and so on, and finally, how all of these changes will spill over to the economy at large. To have any hope of doing all this you need lots of detail about the technology, history, and policy environment of an industry – and even then you may, if you admit it to yourself, be at a loss when it comes to making quantitative judgments.

Analysts point to this very dynamic in the Solyndra case. China became more competitive, making it hard for Solyndra to survive. It was difficult to predict this, and the decision to offer the loan guarantee was built more on wishful thinking and politics than sound finance.

Have politicians learned their lesson from this experience? Unlikely. The power of eco-fads is strong and there is an election on the horizon.

Oh, by the way, who was that Nobel Prize winning economist? Paul Krugman.

Sep 16, 2011 | 1 comment | by
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