Exelon Corp. has called off plans to build two new nuclear reactors in Victoria, Texas. The culprit, chairman and chief executive John Rowe, told the Associated Press was “worries over the economy and the limited availability of federal loan guarantees.”
Picking winners in nuclear
It's not what the U.S. government says they want to do, but after doing it in nuclear by doling out selective loan guarantees, it didn't take long for the effects to be felt:
Interactive map of Waxman-Markey vote
The National Journal has a great interactive map to break down the Waxman-Markey vote by different factors:
Hat tip to an anonymous connection at the NRDC.
The interactive table below allows readers to analyze the vote from a variety of angles, including the members' margin of victory, whether Obama or John McCain carried their district, and whether their state is one of the 30 that rely on coal to generate at least 40 percent of its electrical power, according to federal Energy Information Administration figures. (Those states are designated in the chart as coal states.)One correction - it says at the bottom that the Democrats have only 59 votes in the Senate, but it's now up to 60.
Viewing the results through those prisms reveals several clear patterns. In all, the findings suggest that calculations about the underlying political and ideological inclinations of the districts may have shaped the Democratic vote somewhat more powerfully than assessments of the districts' vulnerability to energy price increases if the legislation passed.
Hat tip to an anonymous connection at the NRDC.
Japan developing rice-to-ethanol
Ethanol is already made from a wide range of food crops - corn in the U.S., wheat and barley in Europe, sugarcane in Brazil, and even sorghum in Florida and cassava in Vietnam. Rice was the only major cereal crop not used for ethanol, but that may change soon if a new trial in Japan is successful.
Japanese farmers are looking for domestic destinations for an increasing rice surplus and would clearly be pleased if rice-to-ethanol reached commercial scale. Rice consumers (particularly those importing on the global market) may not be as happy, as linkage with energy via biofuels is one likely culprit for recent run-ups in world grain prices. But then again, even without a viable rice-to-biofuels pathway, rice spiked even more dramatically than maize and wheat during the last two years. Economic theory would hold that substitution, competition for land and trade restrictions boosted all food prices, not only those that could be directly converted to transportation fuels.
Japanese farmers are looking for domestic destinations for an increasing rice surplus and would clearly be pleased if rice-to-ethanol reached commercial scale. Rice consumers (particularly those importing on the global market) may not be as happy, as linkage with energy via biofuels is one likely culprit for recent run-ups in world grain prices. But then again, even without a viable rice-to-biofuels pathway, rice spiked even more dramatically than maize and wheat during the last two years. Economic theory would hold that substitution, competition for land and trade restrictions boosted all food prices, not only those that could be directly converted to transportation fuels.
Bingaman optimistic about cap-and-trade in the Senate
Jeff Bingaman (D - NM) is one of the most soft-spoken U.S. Senators, but also one of the most senior and influential. The chairman of the Senate Energy and Natural Resources Committee is also a thoroughly good guy - I worked for him once upon a time and was very impressed by both his intellect and his integrity.
He's obviously a key player in getting both cap-and-trade and energy legislation through the Senate, and according to this interview with Politico, he thinks the votes are there:
While we're on the topic of Congressmen from New Mexico, Democratic freshman Harry Teague may be first in the line of fire from Republicans for his "Yes" vote to Waxman-Markey.
He's obviously a key player in getting both cap-and-trade and energy legislation through the Senate, and according to this interview with Politico, he thinks the votes are there:
Bingaman: People need to understand that we can enact a system which will not unduly burden anyone, but will put us on a track to reducing greenhouse gas emissions over the next seven decades. Clearly, there’s always some that are never going to be persuaded, and there’s some that don’t even think global warming is a problem. But most people here in the Senate believe the issue is real. They believe action is appropriate to put a price on carbon.Later in the interview he tactfully acknowledges the obstacles posed by related legislation (both his energy bill, which Majority Leader Harry Reid wants to package with cap-and-trade, and healthcare), but sees "a lot of desire to move ahead."
Politico: Do you think 60 people believe that?
Bingaman: I think so.
While we're on the topic of Congressmen from New Mexico, Democratic freshman Harry Teague may be first in the line of fire from Republicans for his "Yes" vote to Waxman-Markey.
Easterly fails to find the tipping point
Malcolm Gladwell's book The Tipping Point was a big hit, but I didn't like it - it seemed too much pop pseudoscience and not enough rigor. Seeing tipping points in hindsight is fun but not much use if the book offers nothing of predictive value.
Turns out Bill Easterly looked for the tipping point in racially segregated U.S. neighborhoods (one classic example) and didn't find it. Doesn't completely disprove the notion, of course, but it does nothing to dispel the impression of the sort of post-hoc narrative construction that Nicholas Naseem Taleb so enjoys demolishing.
Turns out Bill Easterly looked for the tipping point in racially segregated U.S. neighborhoods (one classic example) and didn't find it. Doesn't completely disprove the notion, of course, but it does nothing to dispel the impression of the sort of post-hoc narrative construction that Nicholas Naseem Taleb so enjoys demolishing.
Rookie holds off four-time NASCAR champ by hypermiling
Some nice publicity for hypermiling:
Joey Logano, a 19-year-old rookie on the NASCAR circuit, won a major race. In a sport defined by gas-guzzling speed, rain fell leading to a yellow flag and slow driving. Mr. Logano, with four-time Cup champion Jeff Gordon closing in on him, needed to hold on to his lead until the race was called after 273 laps due to bad weather. And that meant conserving as much fuel as possible to avoid a pit stop.
Yup, he took a page out of extreme hypermilers – the folks who try to stretch their fuel mileage as far as possible. Here’s how he described it on NPR’s All Things Considered: “I was just trying to save as much fuel as I can by cutting the motor off and coasting as long as I can,” he said. He was about five laps from running out of gas when the race was called.
Stavins >> Mankiw on cap-and-trade
I generally like Greg Mankiw's blog - he is very smart, curious, intellectually honest, respectful, and concise - but he gets it wrong here, where he laments the "missed opportunity" of not being able to use cap-and-trade revenues for non-environmental purposes (deficit reduction, healthcare, tax cuts, etc.). The problem with this argument is that, even if permits were auctioned, revenues were going to go toward some combination of consumer rebates and renewables/efficiency research anyway. A cap-and-trade bill that immediately raised prices for consumers wasn't politically realistic - even as is (close to budget neutral for most consumers) it barely made it out of the house.
Another Harvard economist, Robert Stavins, is much closer to the issue. He's pleased with the bill's positioning on international competition, and while he frets about protectionism and the compromise on ag offsets, overall he is sanguine:
Another Harvard economist, Robert Stavins, is much closer to the issue. He's pleased with the bill's positioning on international competition, and while he frets about protectionism and the compromise on ag offsets, overall he is sanguine:
The Waxman‑Markey bill has its share of flaws, but it represents a reasonable starting point for Senate deliberation on what can become a national climate policy that will place the United States where it ought to be - in a position of international leadership to help develop a global climate agreement that is scientifically sound, economically rational, and politically acceptable to the key nations of the world.
The enduring importance of wheat
Great quote from the Levin-Coburn report on speculation in the wheat market:
P.S. The report itself is lengthy and conflates correlation with causation (as do many others), but nevertheless makes for fascinating reading, particularly the historical evolution of the wheat futures market. Speculation is clearly not a new issue:
“No man qualifies as a statesman who is entirely ignorant of the problems of wheat.”Who knew Congress had a sense of humor?
--Socrates (469-399 B.C.E.)
P.S. The report itself is lengthy and conflates correlation with causation (as do many others), but nevertheless makes for fascinating reading, particularly the historical evolution of the wheat futures market. Speculation is clearly not a new issue:
The CBOT Annual Report for 1864 reflects how the nature of trading already had shifted from strictly cash transactions to speculative trading:P.P.S. Another footnote reminds me of the hilarious and instructive case of onion futures.“It is true that speculation has been too much the order of the day, and buyers and sellers of ‘long,’ ‘short,’ and ‘spot,’ have passed through all the gradations of fortune from the lower to the higher ground, and in many instances have returned to the starting point, if not to a step lower, but it is to be hoped that with the return to peace this fever of speculation will abate and trade will be conducted on a more thoroughly legitimate basis.”
Peterson deal didn't sway many ag Dems on Waxman-Markey
Turns out House Agriculture Committee Chair Collin Peterson's deal with Henry Waxman barely squeaked the bill over the finish line. Via Chris Clayton:
While the Climate Change bill, HR 2454, passed the House by a slim 219 to 212 margin on Friday, the members of the House Ag Committee, rejected the measure by a 31 to 15 vote. House Ag Committee Chairman Collin Peterson was able to persuade 14 of his Democratic colleagues to join him in a yes vote, which means that the Democratic majority within the Committee said yes by a 15 to 13 margin, while all 18 Republicans sided with Oklahoma Congressman Frank Lucas, the ranking Minority member of the Committee.
Bluefin tuna on the brink
Bluefin tuna may be tasty and in "enormous demand" at Nobu, but it's a classic tragedy of the commons (as are many fishery resources more generally):
Good thing environmental groups, celebrities and the French Navy are on the case. I prefer salmon sashimi to tuna anyway.
According to the World Wildlife Fund (WWF), the Atlantic bluefin will be wiped out in three years unless radical action is taken
Good thing environmental groups, celebrities and the French Navy are on the case. I prefer salmon sashimi to tuna anyway.
Protectionism in Waxman-Markey
Although I'm glad Waxman-Markey passed the House, it's scary to learn from Green Sheet and MR that potentially protectionist measures were smuggled in via the late-night Thursday night addition. According to the NYT:
Carbon tariffs could conceivably spark a disastrous trade war. One good sign is that Obama promptly stated his opposition to the potential sanctions.
Update: Tyler Cowen reemphasizes his skepticism.
The House bill contains a provision, inserted in the middle of the night before the vote Friday, that requires the president, starting in 2020, to impose a “border adjustment” — or tariff — on certain goods from countries that do not act to limit their global warming emissions. The president can waive the tariffs only if he receives explicit permission from Congress.
The provision was added to secure the votes of Rust Belt lawmakers who were wavering on the bill because of fears of job losses in heavy industry.
Carbon tariffs could conceivably spark a disastrous trade war. One good sign is that Obama promptly stated his opposition to the potential sanctions.
Update: Tyler Cowen reemphasizes his skepticism.
Anglo looks to China
In response to Xstrata's merger approach, Anglo may be looking to China for a major investment to shore up its independence. They're not the first to try, but this doesn't always end well...
Biofuels to clean up Chernobyl??
That's what they claim, but I don't really understand how the science works... maybe the radioactive heavy elements get absorbed into the organic material, but they don't go away, do they? And is it any better to have them in someone's gas tank?
In other biofuels news, Vale invests in biodiesel from palm oil in the northern Brazilian state of Pará (environmentalists unlikely to approve), Verenium and BP apply for a DOE loan to build a cellulosic ethanol plant, and the old Imperium Renewables biodiesel plant in Seattle gets retooled for local waste oils (sound good, huh?).
In other biofuels news, Vale invests in biodiesel from palm oil in the northern Brazilian state of Pará (environmentalists unlikely to approve), Verenium and BP apply for a DOE loan to build a cellulosic ethanol plant, and the old Imperium Renewables biodiesel plant in Seattle gets retooled for local waste oils (sound good, huh?).
Close House vote actually BETTER for Waxman-Markey?
Via MR, Stan Collender argues counterintuitively that the close vote on Friday actually INCREASES the chance that a climate bill will be enacted this year, because Dems who voted against it this time are now more free to vote for the combined House-Senate bill later this year. A very interesting and attractive point of view, and I see how it COULD be true, but I'm not yet convinced it is.
Career advice: Get good at an unusual combo of 2-3 things, rather than great at 1
Via Ben Casnocha, some compelling career advice from Dilbert's Scott Adams:
If you want something extraordinary, you have two paths:
1. Become the best at one specific thing.
2. Become very good (top 25%) at two or more things.
The first strategy is difficult to the point of near impossibility. Few people will ever play in the NBA or make a platinum album. I don’t recommend anyone even try.
The second strategy is fairly easy. Everyone has at least a few areas in which they could be in the top 25% with some effort. In my case, I can draw better than most people, but I’m hardly an artist. And I’m not any funnier than the average standup comedian who never makes it big, but I’m funnier than most people. The magic is that few people can draw well and write jokes. It’s the combination of the two that makes what I do so rare. And when you add in my business background, suddenly I had a topic that few cartoonists could hope to understand without living it.
CFR on Iran
I attended a CFR discussion on Iran this morning which was pretty good. General consensus was that Obama has played it right (with the exception of his comment that Mousavi=Ahmadinejad), but the regime has cracked down very effectively since last weekend and the opposition has lost considerable momentum. To comparisons to 1979, it was pointed out that, unlike the Shah's regime, the hard-liners have both the will and the skill to asphyxiate their opponents, brutally if necessary. Two panelists argued that Mousavi should have moved earlier from street protests to strikes, but they acknowledged the difficulty he has with communication stifled and nearly his entire support system arrested.
Overall, the mood was that Ahmadinejad would probably prevail this time around. Maybe Sullivan et al have been too colored by optimism and the main stream media wasn't so far off after all?
Overall, the mood was that Ahmadinejad would probably prevail this time around. Maybe Sullivan et al have been too colored by optimism and the main stream media wasn't so far off after all?
Areva hat in hand?
Areva apparently looks to sell a 15% equity stake for $3-4bn in order to (partially) fund its investment plans. Not a good sign for nuclear, as Areva was considered to be one of the strongest players (although perhaps it's partly a cash flow issue inherent to such a capital-intensive business).
Intrade on cap-and-trade
Via MR, Intrade has the chances of "a cap and trade system for emissions trading to be established before midnight ET on 31 Dec 2010" at 50%. Note that this is not a contract on today's Waxman-Markey vote specifically, and the volume is also very thin.
Update: It passes!! 219-212 - not a very strong mandate, which doesn't bode well for the Senate. Intrade ticks up to 55.
Update: It passes!! 219-212 - not a very strong mandate, which doesn't bode well for the Senate. Intrade ticks up to 55.
Court rules against genetically modified alfalfa
I'm no lawyer, but the ruling that Monsanto's Roundup Ready Alfalfa "can cause potentially irreversible harm to organic and conventional crops" seems like a potentially monster precedent, given the current regulatory uncertainty around GM crops.
Mystery car company
Kleiner Perkins and T. Boone Pickens unveil an investment in V-Vehicle Co., which apparently no one has ever heard of. Details are minimal, but given the Pickens Plan I think it has to be a mass-market car that runs on CNG, no?
Greenland the next Kuwait?
Except... with >20x (!) the oil per capita. I'm struck by the (probably wise) comment of the experienced Greenlander businessman who says flat out, "I hope it doesn't happen." Besides his obvious recognition of the resource curse, it reminds me of two things: the old villager from Blood Diamond who tells Leo and Djimon something like, "God forbid they find oil here," and my second-favorite John Steinbeck book.
New BP chairman from... Ericsson?
In surprise selection, BP picks Ericsson CEO Carl-Henric Svanberg to be its new chairman. BP had a hard time filling the post and I don't think many people saw this coming (Svanberg has lots of emerging markets and govenrment interaction experience, but none in the oil industry), but it is not the first time a European supermajor has looked to telecom for new direction. It will be interesting to see what Svanberg can bring to the table that outweighs his lack of experience in the resources sector.
Saw Jacqueline Novogratz
The founder of the Acumen Fund, she was well-spoken and a compelling presence. She told the amazing story of the titular blue sweater (of which I won a signed copy in a raffle!), touched on Sachs/Moyo/Easterly ("Dambisa raised the right debate but the answer needs more nuance"), told of how Acumen had to "start with the mediocre" (although one of their first three investments was Aravind - not bad!) and how her biggest challenge is to "maintain the intellectual honesty and moral courage to keep confronting the biggest new issues that arise". Perhaps the best part was her career advice of being true to yourself ("There are a lot of people who come to me saying they want to be social entrepreneurs, but they aren't entrepreneurs... they should be supporting them in some way"). She and her brother Mike (a co-founder of Fortress) are both true to their respective childhood dreams about how to change the world (Mike's is more the get-rich-and-powerful-first approach). All in all her combination of passion and intellect is formidable and I'm glad I grabbed the opportunity to see her.
Update: Finished the book (~50% word-for-word, ~50% heavy skimming). It was good. I was already familiar with Acumen and some of their success stories, so it wasn't completely eye-opening, but she has led a fascinating life and is an admirable role model of someone living with purpose and powerfully melding intellect with compassion to make the world a better place.
Update 2: MR's Alex Tabarrok enjoyed it.
Update: Finished the book (~50% word-for-word, ~50% heavy skimming). It was good. I was already familiar with Acumen and some of their success stories, so it wasn't completely eye-opening, but she has led a fascinating life and is an admirable role model of someone living with purpose and powerfully melding intellect with compassion to make the world a better place.
Update 2: MR's Alex Tabarrok enjoyed it.
Did ag compromise hurt Waxman-Markey?
Authoritative climate change blogger Joe Romm doesn't think so, because, while land use changes from biofuels do demonstrably contribute to emissions, the RFS mandate of 15 bn gallons by 20?? has a "full exemption from lifecycle analysis".
Via Environmental Capital.
Via Environmental Capital.
Did commodity indices break the wheat market?
The Senate's newly published Levin-Coburn report thinks so. CME has promptly "refuted" the charges. Felix Salmon buys it (and makes the connection to the USO oil ETF's exacerbation of oil contango).
It's very complicated to prove anything in this arena - my hunch is that the indices did play a large part in non-convergence of wheat contracts at the least, and maybe higher volatility as well, but I haven't seen anyone prove it to my own satisfaction.
It's very complicated to prove anything in this arena - my hunch is that the indices did play a large part in non-convergence of wheat contracts at the least, and maybe higher volatility as well, but I haven't seen anyone prove it to my own satisfaction.
Vietnam's first bioethanol plant
Work starts on Vietnam's first bio-ethanol plant, which will apparently use sugarcane and cassava as feedstock. Sugarcane is generally good both economically and environmentally, whereas I don't know much about cassava as biofuel feedstock. Hopefully it is not as disastrous as corn...
Sinopec to buy Addax
If I'm not mistaken, at $7.2 billion this would be the biggest upstream petroleum deal yet since the downturn... and while it's only one data point, it's hard not to read into the fact that it's a national oil company doing the buying. They have certainly been looking...
Update: Jay Yarow points out that "this is the biggest takeover of a foreign firm in China's history."
Update: Dealbook clarifies, technically China's 2nd-largest deal ever - the Alcoa/Aluminum Corporation of China JV to acquire 12% of Rio Tinto last year was bigger, at $14.3bn.
Update: Jay Yarow points out that "this is the biggest takeover of a foreign firm in China's history."
Update: Dealbook clarifies, technically China's 2nd-largest deal ever - the Alcoa/Aluminum Corporation of China JV to acquire 12% of Rio Tinto last year was bigger, at $14.3bn.
Medvedev in Nigeria
Russia extends its energy reach further into Africa, although this isn't quite as directly threatening to Europe as buying "all future volumes" of Libyan oil and gas...
Further dialogue on meat consumption
Parke's response to my comment on meat consumption:
Update: Parke:
Me:
Oh, and, as R indicates, it would be great to have a convergence in global meat consumption patterns at a level above that of Malawi and perhaps a third that of the United States. Under the current pattern, especially if you focus on feeding good food crops to animals (as opposed to using undeveloped grassland for animals), I can't think of meat consumption excess as a poor country problem. It's a rich country problem.My response:
I love the idea of harmonious convergence, but running the numbers it's hard to see how meat consumption could even be held constant without some combination of 1), a massive, awareness-driven global shift toward low-meat, high-protein diets (I'm all for trying, but seems quixotic), 2), continued widespread malnourishment, and/or 3), a severe population adjustment.
According to FAPRI, current per capita meat consumption is 115 kg/year in the U.S., 80 in the EU, and 50 in China (growing to 62 in the next decade). They don't appear to have numbers for Sub-Saharan Africa, but I've seen ~15 elsewhere. Hard to know where needed protein intake ends and excessive consumption begins, but for the sake of argument say it's around where China will be in a decade (~60kg/capita/year). 1bn Africans shifting up to 60 would outweigh all of the U.S. and Europe shifting down. Less-developed E/SE Asian countries will likely rise as well. So hard to see per capita consumption falling on a global level, and overall consumption will have positive population growth layered on top for some time to come.
Update: Parke:
I'm not sure if R is advising: (a) that we should pursue GMOs now (because the alternative of moderating meat consumption is unrealistic), (b) that we should come to grips with the challenge of seeking convergence at and average annual meat consumption of, say, 40 kg per person rather than even the modest 60 kg per person, or (c) despair.
Me:
To point (b) in your original post, I think we should come to grips with the fact that meat consumption is unlikely to decline on a global level, and let that constraint inform the discussion of whether a local/organic ag system can feed the world. I certainly don't know the answer to that!!
Resource ripples from Iran
I was worried that the amount of space on this blog dedicated to Iran was beyond its original intended scope, but never fear, resource implications are seldom far away... might Uganda's recent energy deal with Iran be put in jeopardy?
I think world crude markets have noticed too but I try not to pay too much attention to their day-to-day fluctuations.
P.S. For anyone interested in a serious exploration of the resource curse, I highly recommend "Escaping the Resource Curse" - Stiglitz and Sachs edit a collection of strong essays on a variety of relevant topics from a variety of perspectives (academia, business, law, government, etc.).
I think world crude markets have noticed too but I try not to pay too much attention to their day-to-day fluctuations.
P.S. For anyone interested in a serious exploration of the resource curse, I highly recommend "Escaping the Resource Curse" - Stiglitz and Sachs edit a collection of strong essays on a variety of relevant topics from a variety of perspectives (academia, business, law, government, etc.).
"A nuclear plant with none of the conventional drawbacks"
Sounds pretty great, right?
According to Steve Kirsch:
And best (or worst) of all, it was developed 25 years ago at Argonne National Laboratory. The government pulled the plug in 1994, but GE Hitachi Nuclear Energy has developed a version called the S-PRISM which is apparently "profitable" (I assume this means it can recoup its capital costs with a healthy return within a reasonable period of time) at 5 cents per KwH.
It's healthy to be skeptical of blanket panaceas for our energy and climate change issues, but this certainly seems like a promising technology.
Any questions?
According to Steve Kirsch:
The Integral Fast Reactor (IFR) is a fourth generation nuclear design that provides a clean, inexhaustible source of power, cheap, with virtually no waste, inherently safe (if you remove the cooling, it shuts down rather than melts down), and the added benefit that it consumes the nuclear waste from other nuclear plants that we can’t figure out how to get rid of.
Advantages include:
- It can be fueled entirely with material recovered from today's used nuclear fuel.
- It consumes virtually all the long-lived radioactive isotopes that worry people who are concerned about the "nuclear waste problem," reducing the needed isolation time to less than 500 years.
- It could provide all the energy needed for centuries (perhaps as many as 50,000 years), feeding only on the uranium that has already been mined
- It uses uranium resources with 100 to 300 times the efficiency of today's reactors.
- It does not require enrichment of uranium.
- It has less proliferation potential than the reprocessing method now used in several countries.
- It's 24x7 baseline power
- It can be built anywhere there is water
- The power is very inexpensive (some estimates are as low as 2 cents/kWh to produce)
- Safe from melt down because if something goes wrong, the reactor naturally shuts down rather than blows up
- And, of course, it emits no greenhouse gases.
And best (or worst) of all, it was developed 25 years ago at Argonne National Laboratory. The government pulled the plug in 1994, but GE Hitachi Nuclear Energy has developed a version called the S-PRISM which is apparently "profitable" (I assume this means it can recoup its capital costs with a healthy return within a reasonable period of time) at 5 cents per KwH.
It's healthy to be skeptical of blanket panaceas for our energy and climate change issues, but this certainly seems like a promising technology.
Any questions?
Water and biofuels, continued
Geoff Styles refers back to his summary of another damning report on corn ethanol's water intensity. From a thoughtful broader reflection on the meaning of "sustainable" energy and its conflation with "renewable" energy which bears reading (hint: water and fossil fuels aren't the only scarce resources in the world).
This can't be good
Not only would record profits for Goldman look TERRIBLE on many levels, it is also hard to believe and even harder to know that they are not achieving them by taking on the type of systemic risks that nearly brought down the world financial system, oh, nine months ago.
Update: I take it back, I can think of at least one silver lining - if this signals higher profits in general for the financial sector, those could start to plug the massive holes in their balance sheets that everyone has more or less stopped worrying about of late.
2nd update: James Kwak at The Baseline Scenario draws out the optimistic and pessimistic interpretations.
Update: I take it back, I can think of at least one silver lining - if this signals higher profits in general for the financial sector, those could start to plug the massive holes in their balance sheets that everyone has more or less stopped worrying about of late.
2nd update: James Kwak at The Baseline Scenario draws out the optimistic and pessimistic interpretations.
Food Inc., continued
Comment on Parke Wilde's comment on Marc Gunther's review:
Point (b) is complicated by the fact that the majority of current meat consumption and the VAST majority of future growth in meat consumption takes place in the developing world. It’s easy to make a moral case for why an obese American should eat less meat; much harder for a poor Malawian farmer or Chinese laborer with a protein-deficient diet.
As far as I understand, the jury is still out on both the long-term environmental sustainability of the “Norman Borlaug” model (i.e. high fertilizer/pesticide/herbicide use, monocultures of GM seeds, etc.) and whether the “Michael Pollan” model (i.e. organic inputs, high crop rotation, etc.) can deliver sufficient yields on a large scale to feed a world population of 8-10bn people a nutritious diet without dramatically expanding land use (which causes deforestation, reduces biodiversity, etc.). I’d love to know if anyone is aware of balanced, authoritative academic research into these topics – most of what I’ve seen is fairly polemical from one side or the other.
Cheap gas? Don't plan on it
Some commentators are toying with the notion that, because natural gas is cheap now, we should consider using it instead of coal or renewables to reduce our GHG emissions from power generation (or even for cheaper standalone economics, emissions aside). I don't buy it. My sense is that gas is only priced off of coal right now because there's a global recession reducing power demand and a glut of LNG, and that once economic growth resumes it will leap back up to pricing off of fuel oil. So unless you don't believe the world is laying the groundwork for the next oil price run-up by underinvesting in new supply capacity, starting to build a shiny new gas plant now because the stuff is $3/mmbtu this summer is foolhardy.
CBO report on ethanol
I recently came across a good CBO report on ethanol via Geoff Styles (who also provides some incisive analysis). The key takeaway is that, standalone (i.e. no subsidies), corn ethanol is profitable when the price of retail gasoline is more than 0.9 times the price of a bushel of corn.
According to USDA data, corn averaged $2.98/bushel during 2004-2008 and $2.32/bushel during the previous two decades (1984-2003). Going forward, both the USDA and FAPRI are projecting prices in the $3.50-4.00/bushel range. This would imply corn ethanol is economically profitable only with gasoline in the $3.20-3.60/gallon range - well above the historical average.
As the report says, "It is unlikely that, on average, ethanol producers over the past several decades would have turned a profit if they had not received production subsidies." Given the mounting evidence that corn ethanol won't dent our oil consumption and provides miniscule (if any) reduction in greenhouse gas emissions on a lifecycle basis, it's no wonder that many stakeholders across the board oppose continuation of the subsidies.
Unfortunately the power of the farm lobby (there are 21 farm states and 15 with ethanol production of >200m gallons) will make the subsidies difficult to stop - Obama is beholden to those congressional votes to push through his agenda on various issues and seems disinclined to take a principled stand on this particular issue.
According to USDA data, corn averaged $2.98/bushel during 2004-2008 and $2.32/bushel during the previous two decades (1984-2003). Going forward, both the USDA and FAPRI are projecting prices in the $3.50-4.00/bushel range. This would imply corn ethanol is economically profitable only with gasoline in the $3.20-3.60/gallon range - well above the historical average.
As the report says, "It is unlikely that, on average, ethanol producers over the past several decades would have turned a profit if they had not received production subsidies." Given the mounting evidence that corn ethanol won't dent our oil consumption and provides miniscule (if any) reduction in greenhouse gas emissions on a lifecycle basis, it's no wonder that many stakeholders across the board oppose continuation of the subsidies.
Unfortunately the power of the farm lobby (there are 21 farm states and 15 with ethanol production of >200m gallons) will make the subsidies difficult to stop - Obama is beholden to those congressional votes to push through his agenda on various issues and seems disinclined to take a principled stand on this particular issue.
New report argues smart growth is win-win
A new report from the Center for Clean Air Policy (CCAP) makes a detailed case for why "smart growth" both reduces carbon emissions and saves money. As the NRDC's Kaid Benfield says at the end of his summary of the report, "Bravo."
Via Felix Salmon, one of my favorite finance bloggers, who also comments insightfully on a surprisingly wide range of issues (in this case, the challenge of political will).
Via Felix Salmon, one of my favorite finance bloggers, who also comments insightfully on a surprisingly wide range of issues (in this case, the challenge of political will).
Xstrata and Anglo in talks
This would be a massive deal, both financially and structurally for the mining industry. False alarm, or is M&A in resources sectors showing signs of life?
Update: Predictably, Anglo indignantly rejects Xstrata's approach, which tells us... nothing.
Update: Predictably, Anglo indignantly rejects Xstrata's approach, which tells us... nothing.
"The Water Footprint of Biofuels: A Drink or Drive Issue?"
Their conclusion that "Overall, we can not expect a major shift in our energy supply from the oil fields of the Middle East to the farm fields of the Midwest to occur without some detrimental impacts" is not new, but props to Rice University's new report for 1), tackling the crucial and complex biofuels/water interconnection, and 2), a very clever title.
Via biofuelsbusiness.com.
Via biofuelsbusiness.com.
Distribution of climate change effects within Asia
This chart (on Asian rice production) illustrates nicely how the negative impact of climate change will fall disproportionately on some regions. Note how rice production remains almost flat in Southeast Asia, while falling sharply in South Asia.
One less-publicized outcome of climate change is the likely positive effect on agriculture in some areas - think longer growing season, higher precipitation and higher temperatures in vast expanses of Canadian prairie and Russian steppe. One reason why climate change is not the top priority of Minnesota corn farmers, for example.
Lest you think this is OK, keep in mind that the tropical regions of the earth are by far the poorest, most densely populated, and most dependent on agriculture vs. other forms of economic activity. So while climate change's net effect on overall agricultural production may be a wash, the effect on actual people from a utilitarian perspective is far worse.
From Blog World Hunger.
Dead Aid
I read Dambisa Moyo's recent book the weekend before last (there may have been some skimming involved). In general I agree with the negative reviews - her premise lacks nuance and her analysis lacks rigor. Ryan Hahn at the World Bank's Private Sector Development blog argues that some decent ideas around sourcing of capital have been ignored in the general dismissal.
1.02 billion people hungry
The FAO (UN Food and Agriculture Organization) publishes new estimates that the number of undernourished people in the world has climbed to 1.02 billion (from ~925m last year and ~850m in 2005). The main drivers of the rise are the global economic slowdown and high food prices, which have subsided somewhat from highs in 2008 but still not returned to 2002-2004 levels.
This is sad because undernourishment has lifelong negative effects and because hunger is, as Amartya Sen argued in his signature body of work, overwhelmingly an issue of economic access rather than physical access. The world produces enough food, the poor just don't have enough money to buy it.
This is sad because undernourishment has lifelong negative effects and because hunger is, as Amartya Sen argued in his signature body of work, overwhelmingly an issue of economic access rather than physical access. The world produces enough food, the poor just don't have enough money to buy it.
Economics of cap-and-trade
A lot of people on both sides of the climate change issue are worked up about the Waxman-Markey cap-and-trade bill that seems due for a vote on the House floor next week. Purists are upset that only 15% of the allowances will be auctioned, as opposed to 100% (as Obama promised on the campaign trail). Here are two posts I find particularly helpful in unraveling the economics.
1) Harvard Kennedy School professor Robert Stavins explains why cap-and-trade is environmentally effective and economically efficient regardless of the initial allocation of permits. This is a VERY attractive property in a policy mechanism which will inevitably be subject to political horse-trading, and one not shared by a carbon tax. I tend to think that some stakeholders clamoring for a carbon tax (e.g., major oil and coal companies) do so because in practice it would be politically infeasible.
2) Geoff Styles explains why the Waxman-Markey allocation of allowances would implement a de facto gasoline tax. Basically you can do two things with cap-and-trade revenues: rebate them to consumers, or invest them in clean energy research and energy efficiency. (I suppose you could also use them for a third thing, e.g. paying for universal health care, but let's ignore that for simplicity.) 100% rebates would be required to avoid price increases, which consumers (read voters) don't like. On the other hand, some investment of proceeds will, in theory, lower the long-term cost of complying with the cap. The current allocation effectively rebates for electricity (by giving 35% of permits to the power sector) but does not for transportation fuels (they have to buy permits on the market, likely from the renewables sector, which gets more permits than they need). In case you're wondering, the quick back-of-the-envelope is it takes about 100 gallons of gas to emit 1 ton of CO2 equivalent, so an allowance price of $20/t of CO2e would equate to a "tax" of about 20 cents per gallon.
P.S. Stavins' killer synthesis: “The appropriate characterization of the Waxman-Markey allocation is that more than 80% of the value of allowances go to consumers and public purposes, and less than 20% to private industry.”
P.P.S. Stavins has a new post on Waxman-Markey taking on international competitiveness and collective global action on climate change. His conclusion: "Like any legislation, the Waxman-Markey bill has its share of flaws. But it represents a solid foundation for a domestic climate policy that can help place the United States where it ought to be -- in a position of international leadership to develop a global climate agreement that is scientifically sound, economically rational, and politically acceptable to the key nations of the world."
1) Harvard Kennedy School professor Robert Stavins explains why cap-and-trade is environmentally effective and economically efficient regardless of the initial allocation of permits. This is a VERY attractive property in a policy mechanism which will inevitably be subject to political horse-trading, and one not shared by a carbon tax. I tend to think that some stakeholders clamoring for a carbon tax (e.g., major oil and coal companies) do so because in practice it would be politically infeasible.
2) Geoff Styles explains why the Waxman-Markey allocation of allowances would implement a de facto gasoline tax. Basically you can do two things with cap-and-trade revenues: rebate them to consumers, or invest them in clean energy research and energy efficiency. (I suppose you could also use them for a third thing, e.g. paying for universal health care, but let's ignore that for simplicity.) 100% rebates would be required to avoid price increases, which consumers (read voters) don't like. On the other hand, some investment of proceeds will, in theory, lower the long-term cost of complying with the cap. The current allocation effectively rebates for electricity (by giving 35% of permits to the power sector) but does not for transportation fuels (they have to buy permits on the market, likely from the renewables sector, which gets more permits than they need). In case you're wondering, the quick back-of-the-envelope is it takes about 100 gallons of gas to emit 1 ton of CO2 equivalent, so an allowance price of $20/t of CO2e would equate to a "tax" of about 20 cents per gallon.
P.S. Stavins' killer synthesis: “The appropriate characterization of the Waxman-Markey allocation is that more than 80% of the value of allowances go to consumers and public purposes, and less than 20% to private industry.”
P.P.S. Stavins has a new post on Waxman-Markey taking on international competitiveness and collective global action on climate change. His conclusion: "Like any legislation, the Waxman-Markey bill has its share of flaws. But it represents a solid foundation for a domestic climate policy that can help place the United States where it ought to be -- in a position of international leadership to develop a global climate agreement that is scientifically sound, economically rational, and politically acceptable to the key nations of the world."
Learned from Lectures: First Palestinian intifada deliberately limited types of violence
I recently began watching lectures by The Teaching Company and can't get enough. (Since January I've ordered 20+ courses and, perhaps more tellingly, already completed 8.) Today I learned from "United States and the Middle East: 1914 to 9/11" that in the first Palestinian intifada, the Palestinians explicitly limited violence to stone-throwing, in hopes of provoking a disproportionate Israeli response and an international reaction. (It worked.) Maybe not quite as noble as the non-violent protests that appear to be going on in Iran, but it was eye-opening to me that the principle of non limited violence is no stranger to the Middle East.
Biophysical limits of crop production
I just started reading Feeding the World by Vaclav Smil and it is excellent. He's a biophysicist by training and his pragmatic, scientifically driven, top-down approach reminds me of David Mackay's in "Sustainable Energy - Without the Hot Air" (free for download and also highly recommended, particularly for anyone with an interest in renewable energy).
Brief background - Thomas Malthus famously said that agricultural production could only grow linearly and thus could not support geometric population growth (some argue he recanted later in life, but this doesn't enter the popular perception). VERY briefly, the reason humankind has been able to refute this (up until now) has been huge improvements in agricultural productivity (per hectare of land cropped). Whether this improvement can continue is a huge topic for debate.
Smil brings the top-down biophysical perspective, and says that ag productivity per hectare basically boils down to the photosynthesis rate (how fast carbon is converted to plant matter) and the harvest index (what % of the plant matter is edible). Interestingly, centuries of cultivation - from ancient breeding to modern biotech and GM crops - has not improved the photosynthesis rate AT ALL. Recent yield improvements have been driven entirely by an increase in the harvest index - for example, traditional wheat had a harvest index of 20-30% at the beginning of the 20th century, but by the 1970s certain semidwarf strains were approaching 50%. The theoretical maximum for most cereals is 65% - you can only have so much edible "phytomass" and the rest needs to go to inedible structural components.
What does this mean? There is still room for yield improvements via higher harvest indices, but there is also an upper bound not too far off. Once we hit that asymptote, our remaining options to produce more food are:
1) figure out how to improve the photosynthetic rate
2) plant more land (obviously there is an upper bound on that too, although it too is a subject of fierce debate)
3) improve yields in poorer countries (e.g. Sub-Saharan Africa) to approach those in developed countries (e.g. the U.S.)
Brief background - Thomas Malthus famously said that agricultural production could only grow linearly and thus could not support geometric population growth (some argue he recanted later in life, but this doesn't enter the popular perception). VERY briefly, the reason humankind has been able to refute this (up until now) has been huge improvements in agricultural productivity (per hectare of land cropped). Whether this improvement can continue is a huge topic for debate.
Smil brings the top-down biophysical perspective, and says that ag productivity per hectare basically boils down to the photosynthesis rate (how fast carbon is converted to plant matter) and the harvest index (what % of the plant matter is edible). Interestingly, centuries of cultivation - from ancient breeding to modern biotech and GM crops - has not improved the photosynthesis rate AT ALL. Recent yield improvements have been driven entirely by an increase in the harvest index - for example, traditional wheat had a harvest index of 20-30% at the beginning of the 20th century, but by the 1970s certain semidwarf strains were approaching 50%. The theoretical maximum for most cereals is 65% - you can only have so much edible "phytomass" and the rest needs to go to inedible structural components.
What does this mean? There is still room for yield improvements via higher harvest indices, but there is also an upper bound not too far off. Once we hit that asymptote, our remaining options to produce more food are:
1) figure out how to improve the photosynthetic rate
2) plant more land (obviously there is an upper bound on that too, although it too is a subject of fierce debate)
3) improve yields in poorer countries (e.g. Sub-Saharan Africa) to approach those in developed countries (e.g. the U.S.)
Mesmerized by Iran
I am mesmerized by what's going on in Iran - it has the feeling of history in the making. I'm trying not to be carried away by optimism - we don't actually know what the real vote count was, or even if the increasingly evident fraud will be addressed - but it is easy to be inspired by the (thousands? millions?) of people who are courageously protesting for their political rights and sticking to non-violence, despite the lack of guarantees.
Andrew Sullivan has impressively comprehensive coverage. LaraABCNews is a personal acquaintance who's twittering from Tehran - very exciting. The mainstream media didn't get off to a great start.
Andrew Sullivan has impressively comprehensive coverage. LaraABCNews is a personal acquaintance who's twittering from Tehran - very exciting. The mainstream media didn't get off to a great start.
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