Akerson on Gas Tax and CAFE Standards

In an EconTalk podcast of Milton Friedman hosted by Russ Roberts, Friedman explains that businesses leaders do not usually support policy that strengthens markets.  They do what is best for them.

[I]t's always been true that business is not a friend of a free market...It's in the self-interest of the business community to get government on its side. It's in the self-interest of a particular business...But the real puzzle—puzzle isn't quite the right word—the real problem here is where do you find the support for free markets? If free markets weren't so damn efficient, they could never have survived because they have so many enemies and so few friends. People think of capitalism or free markets as something that obviously is supported by business. People think that if a business party is a party in politics, it will promote free market. But that's wrong. It will be in the self-interest of individual businesses to promote a tariff here and a tariff there…

With Friedman’s admonition in mind, I read the following interview of GM’s CEO, Dan Akerson (David Shepardson and Christina Rogers, “GM's Akerson pushing for higher gas taxes,” The Detroit News).

Detroit — General Motors Co. CEO Dan Akerson wants the federal gas tax boosted as much as $1 a gallon to nudge consumers toward more fuel-efficient cars…Akerson would like to see it (the federal government) step up to the challenge of setting a higher gas tax, as part of a comprehensive energy policy.

A government-imposed tax hike, Akerson believes, will prompt more people to buy small cars and do more good for the environment than forcing automakers to comply with higher gas-mileage (CAFE) standards.

If you believe that Americans should consume less oil, Akerson’s statement holds up pretty well.  GM does sell an electric car, the Volt that is highly subsidized by the government and the cost of driving the Volt would be much less sensitive to gas prices than a car that is only powered by gas.  They also make a number of fuel efficient cars that might do well relative to competitors if the cost of fuel rises due to a $1.00 per gallon tax.  Consumers would face a tradeoff.  They would substitute new car purchases toward more fuel efficient cars but the increase in gas prices is the same as a decrease in income.  The income effect would lower the overall sales of new cars.CAFE standards have several disadvantages relative to increasing the gas tax.  They increase the cost of making a vehicle, but lower the marginal cost of driving by increasing fuel efficiency. We will drive more because we will spend less at the pump, but not as much as we would have driven in absence of the increase in the CAFE standards.

Increased CAFE standards only result in increased fuel efficiency of new cars that meet higher standards. It does nothing to increase the efficiency of cars we already drive. Furthermore, to the extent that drivers resist buying efficient cars as they have in the past, the higher CAFE standards will result in an older U.S. fleet. Crandall (1992),[1] estimates that the full impact of the higher standards would not be realized for eight years after implementation.  Old cars also pollute more than new cars.

An increase in the gasoline tax would decrease the impact on automakers and consumers compared with increasing CAFE standards. People would drive less, reducing the demand for new vehicles. Demand would shift from less fuel efficient vehicles to more efficient vehicles. More subtle market signals for increased efficiency would replace heavy handed mandates.

All drivers, including those with older vehicles, face incentives to drive less with an increase in the gasoline tax. Gone is the adverse impact of the CAFE standards which incentives people to drive more by reducing the marginal cost of driving. Less driving also lowers pollution and congestion.

Crandall concludes that

The existing empirical literature suggests that CAFE costs about 7 to 10 times as much as a petroleum tax that would induce comparable reductions in oil consumption, because CAFE fails to equate the marginal costs of reducing fuel consumption across all uses, including usage of older vehicles and nonvehicular consumption.


CAFE is an even less efficient mechanism to reduce greenhouse gases. To reduce CO2 emissions, a carbon tax is much more efficient than a petroleum tax, which in turn is decidedly more efficient than CAFE standards. The empirical evidence suggests that CAFE would cost the economy at least 8.5 times as a carbon tax with equivalent effects on carbon emissions.

[1] Crandall, Robert W. Journal of Economic Perspectives, "Policy Watch: Corporate Average Fuel Economy Standards," Vol. 6, Num. 2, Spring 1992.
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Enough Fossil Fuel for Now?

Michael Lind writes a very good column for Salon entitled “Everything you’ve heard about fossil fuels may be wrong.”  At least I think it is a great article because it eloquently states opinions I hold.  While I should beware of confirmation bias, I hope other readers will be exposed to new ideas. 

In short, the Lind writes that new technologies like hydraulic fracturing have dramatically increased reserves of natural gas and oil.  Governments are funding basic research into other methods of producing gas hydrates that could supply enough hydrocarbons to fuel civilization for centuries.  Countries with now exploitable natural gas and oil reserves are numerous, stable and friendly.  This implies that energy markets will be more competitive, dramatically weakening if not eliminating OPECs ability to set price.  Finally, he observes that most governments are treating CO2 emissions as a low priority because catastrophic outcomes of global warming are low probability outcomes.Lind makes a supporting argument that I believe deserves more attention.

All energy sources have potentially harmful side effects. The genuine problems caused by fracking and possible large-scale future drilling of methane hydrates should be carefully monitored and dealt with by government regulation. But the Green lobby’s alarm about the environmental side-effects of energy sources is highly selective. The environmental movement since the 1970s has been fixated religiously on a few "soft energy" panaceas -- wind, solar, and biofuels -- and can be counted on to exaggerate or invent problems caused by alternatives. Many of the same Greens who oppose fracking because it might contaminate some underground aquifers favor wind turbines and high-voltage power lines that slaughter eagles and other birds and support blanketing huge desert areas with solar panels, at the cost of exterminating much of the local wildlife and vegetation. Wilderness preservation, the original goal of environmentalism, has been sacrificed to the giant metallic idols of the sun and the wind.

I might add to his arguments that supporters of alternative energy often act as if the cost of switching from hydrocarbon based fuels to alternative energy sources is low but experience has taught that the opportunity cost is high.  If it were easy to switch to alternative energy sources, we would have done it already.
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The Obama Energy Plan

The last few days have had interesting news regarding climate change and the regulation of carbon dioxide.  I will start with President Obama's new energy plan.  Yesterday, the president announced his administration's new energy program that potentially could increase drilling for offshore oil.  He explains that limited drilling is a bridge to the future as new energy sources are developed.  It is a Goldilocks plan that allows or restricts drilling in areas depending on environmental sensitivity.  He claims the plan walks a nonpartisan, science driven line toward energy independence while chiding critics from the left and right who are apparently neither nonpartisan or scientific.  A few paragraphs from President Obama's speech are provided below.  The full transcript is found in "Obama’s Remarks on Offshore Drilling" provided by the New York Times.

There will be those who strongly disagree with this decision, including those who say we should not open any new areas to drilling. But what I want to emphasize is that this announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy. And the only way this transition will succeed is if it strengthens our economy in the short term and the long run. To fail to recognize this reality would be a mistake.

On the other side, there are going to be some who argue that we don't go nearly far enough; who suggest we should open all our waters to energy exploration without any restriction or regard for the broader environmental and economic impact. And to those folks I've got to say this: We have less than 2 percent of the world's oil reserves; we consume more than 20 percent of the world's oil. And what that means is that drilling alone can't come close to meeting our long-term energy needs. And for the sake of our planet and our energy independence, we need to begin the transition to cleaner fuels now.

So the answer is not drilling everywhere all the time. But the answer is not, also, for us to ignore the fact that we are going to need vital energy sources to maintain our economic growth and our security. Ultimately, we need to move beyond the tired debates of the left and the right, between business leaders and environmentalists, between those who would claim drilling is a cure all and those who would claim it has no place. Because this issue is just too important to allow our progress to languish while we fight the same old battles over and over again.

For decades we've talked about how our dependence on foreign oil threatens our economy -– yet our will to act rises and falls with the price of a barrel of oil. When gas gets expensive at the pump, suddenly everybody is an energy expert. And when it goes back down, everybody is back to their old habits.

The speech seemed condescending and relied on a demagogic call for energy independence.  Despite decades of subsidies for "clean" energy, it isn't expanding as a percentage of our total energy production.  Subsidizing "clean" energy is a bridge to nowhere, not to a brighter future.  I for one don't want "clean" energy if it is more expensive when factoring in environmental costs and this is the rub.  My guess is that a great many environmentalists believe that carbon emission is a bigger environmental danger than spills from drilling and shipping oil.  The IPCC, Nobel laureate Al Gore, and Obama administration officials have warned of catastrophic economic consequences of environmental inaction. 

From the right, critics claim that increased carbon emissions are not harmful, that data has been compromised, misused and tortured.  The evidence of higher concentrations of carbon dioxide leading to catastrophic warming are unquestionably less robust than six months ago (For an example of data problems see Christopher Horner, "Climategate: Three of the Four Temperature Datasets Now Irrevocably Tainted," Pajamas Media).  If being an environmentalist means that you are concerned with having a healthy and beautiful environment, I am one, but I believe that in the United States we should focus on reducing traditional pollutants and better forest management. 

The production of "clean" energy ignores an important fact.  Every type of energy production pollutes.  I don't like the land intensive nature of ethanol production and wind turbine electrical power.  I am not sure that we have good enough data to monetize our tastes. 
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Waco's Reaction to Ethanol

J.B. Smith, of the Waco Tribune-Herald, describes consumer dissatisfaction with E10 ethanol blended gasoline in,"Ethanol blend makes way to Waco gas stations."  It seems that others are having the same experience and reaction that I had. 

Ethanol blends have quietly made their way to Waco-area gasoline pumps this fall, and that has Bob Potter fuming.

Potter, a retired defense worker who lives in Hewitt, calls the 10 percent ethanol blend a “snake oil concoction” that hurts his gas mileage and maybe his engine.

“I’m not getting my money’s worth,” he said. “I don’t see any difference in price with the ethanol blend. I’m worried about damaging my vehicle, and I’m incensed that I’m paying the same price for less miles per gallon.”

It might be that Potter and I are the only two people that don't like E10 and that gasoline retailers are filling that demand, but Smith provides a more likely explanation.

Refiners have begun selling stations the 10 percent blend, called E10, because of federal laws that require them to ratchet up their ethanol sales nationwide over time. And E15, a 15 percent ethanol blend, may be on the way.

Responding to requests from the ethanol industry, the Environmental Protection Agency this month said it was considering increasing the amount of ethanol that retailers could blend into gasoline to 15 percent. The final decision would come no sooner than May, when the U.S. Department of Energy is to complete tests of whether E15 damages cars. The blend would be recommended only for cars from the 2001 model year and later.

The ethanol industry has sought the new standard, saying the ethanol market needs to expand to avoid overproduction. The industry argues that expanding the market would create an incentive for developing a new generation of ethanol plants that could use grass, corncobs and wood chips.

We are buying it because the federal government under the Bush administration says that we must.  Notice the contorted logic of the ethanol industry: "the market needs to expand to avoid overproduction."  Generally, when a producers find the market glutted, they cut production and price, but not ethanol producers.  They run to Washington and lobby for mandated use. 

Let me be blunt, if my experiences is the mean (my experience is described here), and if environmental benefits are as exaggerated as fuel efficiency, it would be cheaper to close ethanol plants and pay workers to stay home than continue making ethanol.  The only savings in gasoline would come from a decline in demand due to a fall in purchasing power (real income).  Ethanol makes our nation poorer.

Smith then interviews local mechanics and reports some problems but nothing major.  E10 has only been in local markets since October.  My guess is that major problems will occur in the future.  
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Chu on Cap and Trade

(HT Drudge) Ian Talley of the Wall Street Journal describes remarks by Energy Secretary Steven Chu at a smart grid conference in, "Steven Chu: Americans Are Like ‘Teenage Kids’ When It Comes to Energy."

“The American public…just like your teenage kids, aren’t acting in a way that they should act.” Dr. Chu said. “The American public has to really understand in their core how important this issue is.”

It is exactly statements like this that convince the American public that Washington is full of elitists that view them as inferior intellectually and morally.  In addition to teaching adults, or perhaps rather than attempting to teach adults, he administration intends to teach our children. 

The administration aims to teach them—literally. The Environmental Protection Agency is focusing on real children. Partnering with the Parent Teacher Organization, the agency earlier this month launched a cross-country tour of 6,000 schools to teach students about climate change and energy efficiency.

Talley continues.

Still, Secretary Chu said he didn’t think that the public would throw the same political temper tantrum over climate legislation has has happened with the healthcare debate.

Asked if he expected a town-hall style pushback, Dr. Chu said he was optimistic the public would buy the administration’s arguments that energy efficiency and caps on greenhouse-gas emissions will spark an economic rebound.

“I don’t think so…maybe I’m optimistic, but there’s very little debate” that a new green energy economy will bring economic prosperity, Mr. Chu told reporters.

I believe Chu errs in his economic analysis in arguing that cap and trade legislation will "spark" economic growth and "bring economic prosperity."  As a new and costly policy designed to alter decisions about energy use, the policy will create uncertainty in every sector of the economy that will delay a rebound as energy users, both consumers and producers, attempt to analyze the impact of the bill and discover cheaper fuels and more efficient production methods.  Some geographic areas that have superior "green" energy sources will grow and areas with superior high carbon energy sources will decline, forcing businesses and households to relocate.  Benefits from the plan will not be felt for a generation and those who foot the bill will be festering in airtight carbon sequestering graves.   

These extraordinary adjustment costs may all be necessary if unabated carbon emissions would have a catastrophic impact on the economy and other countries follow our lead.  Otherwise, it will be cheaper to clean up the environmental mess if or as it occurs. 

I also think that Chu mistakenly believes that there will be little political pushback, particularly if the administration's private estimates that the bill will cost the average household $1,761 a year are correct (Declan McCullagh. CBSNews, "Obama Admin: Cap And Trade Could Cost Families $1,761 A Year").  That is a price that will raise complaints from the dead let alone the living. 
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What is Green and Glows in the Dark?

Environmentally friendly generation III nuclear power plants.  Some might argue with the environmentally friendly part, but they don't emit carbon to generate electricity.  Most economists believe that markets are innovative and the new generation of nuclear power plants provide evidence.  In a good article, titled "The New Nukes," Rebecca Smith of the Wall Street Journal writes that the new plants will be safer, cheaper and more efficient than old plants. 

For the first time in decades, popular opinion is on the industry's side. A majority of Americans thinks nuclear power, which emits virtually no carbon dioxide, is a safe and effective way to battle climate change, according to recent polls. At the same time, legislators are showing renewed interest in nuclear as they hunt for ways to slash greenhouse-gas emissions.

The industry is seizing this chance to move out of the shadow of Three Mile Island and Chernobyl and show that it has solved the three big problems that have long dogged it: cost, safety and waste. Researchers are working on reactors that they claim are simpler, cheaper in certain respects, and more efficient than the last generation of plants.

Some designs try to reduce the chance of accidents by automating safety features and minimizing the amount of hardware needed to shut down the reactor in an emergency. Others cut costs by using standardized parts that can be built in big chunks and then shipped to the site. Some squeeze more power out of uranium, reducing the amount of waste produced, while others wring even more energy out of spent fuel.

Smith points out that nukes will always have their critics.  My guess it is environmentalist who push a soft green solution of renewable energy: wind, tide and solar.  I don't know who will win the debate that will take place in markets and the Congress, but Smith describes the critics' concerns.

And while the industry is winning converts, plenty of powerful enemies remain. Many scientists and environmentalists still distrust nuclear power in any form, arguing that it can never escape its cost, safety and waste problems. What's more, critics say, trying to solve the problems in one area, such as safety, inevitably lead to more problems in another area, such as costs.

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Implementing Britain's Renewable Energy Policy

(HT Drudge)  Andrew Porter, the political editor of the Telegraph, writes about Britain facing impending blackouts due to mismanaged energy policy in "Britain facing blackouts for first time since 1970s," dated August 31, 2009.  In the talk of creating a green economy and jobs elected officials seem to miss an important point: most policies designed to foster the development of clean energy do so by driving up the cost of nonrenewable relative to renewable fuels.  That is the objective of carbon taxes, fuel taxes, and restrictions on building nonrenewable fueled power plants.  These policies are justifiable economically up to the point that the marginal benefits from a cleaner environment exceed or are equal to the marginal costs of implementing the green policies.  If the marginal costs exceed the marginal benefits, the policy should not be implemented. 

Rationing of economic goods can be accomplished in many ways.  Economists generally prefer rationing through price.  Those who desire to pay the market price can buy the good and those who believe the price is too high will not; the quantity supplied to the market will equal the quantity demanded.  Britain seems to be on a path to ration electricity through blackouts.  Blackouts can be avoided by increasing price.  Apparently, British policy makers would rather hide increases in cost by rationing through blackouts rather than acknowledge that their policy increases energy prices.

Porter describes the problem and how it came to light.

Demand for power from homes and businesses will exceed supply from the national grid within eight years, according to official figures...

The gap between Britain’s energy needs and demand throws fresh doubt on the Government’s assertion that renewable energy can make up for dwindling nuclear and coal capabilities.

The admission that Britain will face power-cuts is contained in a document that accompanied the Government’s Low Carbon Transition Plan, which was launched in July...

Under the plan, 40 per cent of the UK’s electricity will need to come from low-carbon energy sources including clean coal, nuclear and renewables...

Greg Clark, the shadow climate and energy change secretary, said:..."The next government has an urgent task to accelerate the deployment of a new generating capacity, and to take steps to ensure that as a matter of national security there is enough capacity to provide a robust margin of safety.”

Mr Clark also pointed out that the scale of the blackouts could in fact be three times worse than the Government predictions. He said some of the modelling used was “optimistic” as it assumes little or no change in electricity demand up until to 2020.

It also assumes a rapid increase in wind farm capacity. There is also the assumption that existing nuclear power stations will be granted extensions to their “lifetimes"...

Our citizens and policy makers should closely study Britain's problems in implementing a clean energy policy as we attempt to replace fossil fuels with renewable fuels. 
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Americans See the Light

A simple economic view of the light bulb industry might begin by comparing incandescent and recently introduced fluorescent bulbs.  Each provides light with a fixed cost, the purchase price, and a variable cost, the amount of electricity used per lumens.  They also differ in life, quality of light emitted, etc.  They are substitutes goods; the use of one substitutes for the use of the other.  As fluorescent bulbs were introduced, they took a segment of the market from incandescent bulbs.  If consumers considered fluorescent bulbs to be superior, they would have cannibalized the market share of incandescent bulbs much the way that MP3 players cannibalized the market for music playing devices from CD players.  Since they did not, any self respecting analyst would conclude that consumers' as a whole, prefer incandescent bulbs.

Our elected officials noted voter dissatisfaction with high oil prices that peaked in the summer of 2009, and decided that action was needed.  Action came in the form of the Energy Independence and Security Act of 2007, a mostly xenophobic and silly law.  To increase the supply of energy, the bill includes a give away to farmers, as if they needed more welfare, through mandates for increased production of biofuels.  The bill hits at consumers' demand for energy, raising CAFE standards and mandating the use of fluorescent bulbs. 

The Rasmussen Reports article, "72% Don’t Want Feds Changing Their Light Bulbs," dated July 23, 2009 surveys Americans about the ban on the sale of incandescent bulbs in favor of more expensive fluorescent ones.  Rassmussen finds that

Just 18% of adults think it’s the government’s job to tell Americans what kind of light bulb they use, according to a new Rasmussen Reports national telephone survey. Seventy-two percent (72%) say it’s none of the government’s business, and 10% are not sure...

Eighty-three percent (83%) of Republicans and 78% of adults not affiliated with either major political party say it’s not the government’s role to make Americans change their light bulbs. Among Democrats, 58% share that view, but 29% say it is the government’s job...

The survey also found that Americans wisely believe that markets generally provide better products than government.

When asked who would do a better job of providing quality products for consumers, only 23% of Americans say government planners and managers. Fifty-nine percent (59%) have more confidence in companies hoping to make a profit. Nineteen percent (19%) aren’t sure.

Men have more faith in the private sector than women. Sixty-eight percent (68%) of those who work for a private company say businesses motivated by potential profit will do a better job of coming up with quality consumer products. Just 45% of government employees agree.

Seventy-four percent (74%) of Republicans and 67% of unaffiliateds give the edge to private companies, while Democrats are almost evenly divided over which would do a better job.

Sadly, many Americans believe that they or perhaps other Americans need to make "major cutbacks in their lifestyle to save the environment, and elected officials are ready to help. 

Nearly half of Americans (49%) agree, however, that they need to make major cutbacks in their lifestyle to save the environment. Thirty-six percent (36%) disagree, and 15% are undecided.

This marks a significant change from early May when 42% supported major lifestyle changes to better the environment but 44% were opposed.

Sixty-eight percent (68%) of Democrats agree that Americans need to make major changes in lifestyle to help the environment, but 55% of Republicans don’t believe such changes are necessary. Unaffiliated adults are closely divided over the question.

I wonder if our abstract desire to cut back on our lifestyle will hold when faced with concrete examples of those cutbacks.  If Americans are unhappy with the government when it orders them to use inferior light bulbs, what will happen when they see the vehicles that roll off the assembly line in response to the increase in CAFE standards?  Maybe Americans would rather determine where they cutback rather than have the government tell them.
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Bryce and Energy Independence

Robert Bryce is the managing editor of Energy Tribune and the author of "Gusher of Lies: The Dangerous Delusions of 'Energy Independence.'" In "So Much for 'Energy Independence,'" an article written for the Wall Street Journal, he predicts the impact of a proposal to "eliminate expensing of "intangible drilling costs" (such as wages, fuel and pipe), which allows energy companies to deduct the bulk of their expenses for drilling new wells; and the allowance for percentage depletion, which allows well owners to deduct a portion of the value of the production from their wells." Bryce writes,

Whenever you read about ethanol, remember these numbers: 98 and 190.

They offer an essential insight into U.S. energy politics and the debate over cap-and-trade legislation that recently passed the House. Here is what the numbers mean: The U.S. gets about 98 times as much energy from natural gas and oil as it does from ethanol and biofuels. And measured on a per-unit-of-energy basis, Congress lavishes ethanol and biofuels with subsidies that are 190 times as large as those given to oil and gas.Those numbers come from an April 2008 report by the Energy Information Administration: "Federal Financial Interventions and Subsidies in Energy Markets 2007." Table ES6 lists domestic energy sources that get subsidies. In 2007, the U.S. consumed nearly 55.8 quadrillion British Thermal Units (BTUs), or about 9.6 billion barrels of oil equivalent, in natural gas and oil. That's about 98 times as much energy as the U.S. consumed in ethanol and biofuels, which totaled 98 million barrels of oil equivalent.

Meanwhile, ethanol and biofuels are getting subsidies of $5.72 per million BTU. That's 190 times as much as natural gas and petroleum liquids, which get subsidies of $0.03 per million BTU.

Bryce concludes,

Mr. Obama has been pro-ethanol and anti-oil for years. But he and his allies on Capitol Hill should understand that removing drilling incentives will mean less drilling, which will mean less domestic production and more imports of both oil and natural gas.

That's hardly a recipe for "energy independence."

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The Batteries Tradeoff: American Jobs Vs Clean Environment

Economics involves tradeoffs.  The tradeoff is not one I believe[1], but based on goals stated by the Obama administration: clean energy and domestic job creation.  Two pieces of legislation exemplify these goals, one passed, the other pending.  The stimulus package, formally known as the American Recovery and Reinvestment Act, provides $190 billion of funds for green energy research and development, including batteries.  Pending legislation would provide funding for 100,000 U.S. made plug-in hybrid cars.  Both bills include buy American provisions.  Richard Waters, describes the current battery market (Battery makers view for US aid," Financial Times, May 17, 20090.  The emphasis added is mine.

A handful of US battery makers is scrambling for government support ahead of a deadline this week as the US struggles to win back lost ground from Asian competitors in one of the world’s next important technologies.

The race is also the first test of how the administration will use the near-$190bn in stimulus money earmarked this year to support “green” technologies, from alternative fuels to energy-efficient building materials.
Advanced batteries are seen as a strategic technology, given their importance to electric and hybrid vehicles, and their military applications.

As with the chip industry two decades ago, the US has lost the lead to manufacturers in Asia that have invested in high-volume manufacturing.

Currently, buying American batteries is more costly, implying that companies that use them in their products will be selling them at a higher priced input than they would if they could buy foreign batteries.  The supply of alternative fuel vehicles will grow more slowly and pollution, decline more slowly than otherwise.

[1]  I do not agree with the notion that forcing governments, or economic agents to buy American produces jobs.  It moves jobs from one sector to another.  I also do not believe that it is easy to isolate "green" sources of energy as the production of energy necessarily produces pollutants.  We only select the pollution type that we find less objectionable.
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My Earth Day Speech

I lived in a community that kicked off a campaign to stop teen drinking with a cocktail party.  The teens saw the double standard.  (HT Drudge) Mark Knoller hit the just the right tone in "Obama Earth Day Flights Burned More Than 9,000 Gallons Of Fuel," CBS NEWS, April 24, 2009. 

It happens every time a president leaves town to make an Earth Day speech. Reporters scramble to point out how much fuel was expended so the President could talk about conserving energy and using alternative fuels.

President Obama could have saved at least 9,116 gallons of fuel by giving his speech at the White House – but no wind turbines are manufactured here.

President Obama called for a new era of energy exploration promoting his administration's plan to develop and promote renewable and alternative fuels.  I wish the president would have delivered a different speech.  Overlooking a national park, it would begin, 

Americans remain grateful to leaders like Theodore Roosevelt for preserving land as parks, creating a refuge for flora and fauna.  As a nation, we have made great progress lowering pollution levels and providing the public goods of clean air and water.  There is room for progress.  In attempting to protect our forests from fire, we have allowed dense underbrush to accumulate, making fires when they occur larger and more dangerous.  I am announcing a public program to clear our forests of the accumulated underbrush, restoring them to a more natural order.  Once achieved, forest fires will be smaller and less dangerous.  They will be allowed to burn unless endangering human life.

Our economy is built on the strength, creativity and efficiency of Americans working through markets.  Problems of rising energy prices will largely be resolved in the private sector.  The government will assist by funding basic research and the legal and institutional framework that recognizes that increases in our welfare have been and will be linked to increasing energy consumption, but no more. 

Enjoy the beauty of the country that God has placed under our stewardship and be wise stewards so that future generations will enjoy an even cleaner and more beautiful environment. 

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Bah Humbug

(HT Drudge Report)

From Australia

SCIENTISTS have warned that Christmas lights are bad for the planet due to huge electricity waste and urged people to get energy efficient festive bulbs.

I wonder what other parts of my spending offends these scientists.

Dr. Glenn Platt, said the nation's electricity came from "centralised carbon intensive, coal-based power stations" which were responsible for emitting over one third of Australia's greenhouse gas emissions.

The hot air put out by Dr. Platt exceeds greenhouse emissions from Christmas lights.

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Steven Chu as Energy Secretary

President Elect Obama has named his new Energy Secretary, Steven Chu a brilliant man who won the Nobel Prize in Physics in 1997 for cooling and trapping atoms using lasers. His selection signals a shift in priorities for the department from development of nuclear weapons and spent fuel disposal to alternative energy development and reduction of greenhouse gas emissions and therein lays my disagreement with the president elect.

For now, I will set aside any discussion of externalities such as greenhouse gasses, and focus on economic organization. It is the same disagreement that I have with my father-in-law, an engineer and former employee of the International Atomic Energy Agency who held diplomatic rank with the United Nations. He's a smart guy to and a good man. He believes more in a top-down organization of society in which politicians have broad visions for society's direction. They present these visions to physicists, engineers, and others even if they are not workable today. In the long run, ten to twenty years, scientists overcome the barriers and implement the politicians' vision.

I believe in a more spontaneous organization. When traditional energy sources become expensive, individual consumers acting in their own interest, change consumption habits, switching to more efficient vehicles, refrigerators, insulating homes, etc. Companies selling these products are incentivized by profit to increase their efficiency. Energy consuming firms also demand more energy efficient equipment, and their suppliers are incentivized by profit to provide it.

Simultaneously, energy producing businesses are incentivized by high profits to expand energy production. If one source of energy, say oil, becomes expensive they will find the next best source and when it is cost efficient bring it to market.

When push comes to shove, I trust the private sector's ability to produce cheap alternative energy through self interest more than the government's ability to produce it through benevolence.

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