3-month anniversary

So a week or two ago, People and Resources quietly passed the three-month mark, which in retrospect is an exciting milestone; I meant to blog about it, but then got swept away in a tide of work for a time. So in belated commemoration of this occasion, here are a few of the most exciting stats and milestones so far.
  • Over 350 posts (over 100 a month!). No way will I be able to keep up that pace long-term, but it means that I've passed Penelope Trunk's first hurdle: "If you can blog regularly for a month, you can be a blogger."

  • A handful of comments, mostly from friends, but also including a surprise cameo by my favorite finance blogger Felix Salmon and approval from an exploration geologist I don't know on a post I made on oilfield technology. Thanks guys!!

  • A spam comment, meaning I'm on the search engine map.

  • Another spam comment, long enough after the first that I had forgotten about it, and commemorated again.

  • I'm top 20 in Google for searches like "People and Resources"+China or +Brazil, and top of the list for more obscure searched like "People and Resources"+PetroSal.
It's a very modest beginning, but one that I'm excited about and grateful for. I'm still having a great time, and looking forward to taking this wherever it goes over the next months and hopefully even years.

Update: I forgot another nice milestone - I made the blogroll of Greed, Green, and Grains, a blog about agriculture and economics that I enjoy quite a bit.

Militants blow up girl’s school in Pakistan

Sad news, particularly for anyone who has read Three Cups of Tea.

Is Africa resource-rich?

Via Chris Blattman, an intriguing answer to this question:
OECD nations have $123,000 worth of wealth under the average square kilometer of soil, in spite of the fact that they’ve been pulling wealth out of the ground for 200 years.
The average wealth per square kilometer in Africa: closer to $23,000.

As Collier pointed out, we weren’t completely in error. The $23,000 figure comes from known resource wealth. This suggests that another $100,000 is probably lying under the average square kilometer in Africa.

That’s right. Think the ‘resource curse’ is bad now? Wait until known resources multiply by six.

He relates a conversation with the Sierra Leone government last week, days after the sudden discovery of oil. “Now you have diamonds and oil,” he said. “You can be like Angola!”
Indeed.

The post also includes a link to the Natural Resources Charter, which I had not seen before but seems to have the right spirit. Unfortunately it appears to be mostly academics and have no industry backers. The Extractive Industries Transparency Initiative has more sway, although I have heard it criticized as well. In any case, I think the move toward formalizing the social compact between resource-extracting foreign companies and the citizens of their host nations is a positive step, even if they don't come out perfect the first time.

The Referendum

Totally out of scope, but I loved this article on the life choices we make and comparing ourselves to our peers. Funny, too:
I may be exceptionally conscious of the Referendum because my life is so different from most of my cohort’s; at 42 I’ve never been married and don’t want kids. I recently had dinner with some old friends, a couple with two small children, and when I told them about my typical Saturday in New York City — doing the Times crossword, stopping off at a local flea market, maybe biking across the Brooklyn Bridge — they looked at me like I was describing my battles with the fierce and elusive Squid-Men among the moons of Neptune. The obscene wealth of free time at my command must’ve seemed unimaginably exotic to them, since their next thousand Saturdays are already booked.
Most of my married friends now have children, the rewards of which appear to be exclusively intangible and, like the mysteries of some gnostic sect, incommunicable to outsiders. In fact it seems from the outside as if these people have joined a dubious cult: they claim to be much happier and more fulfilled than ever before, even though they live in conditions of appalling filth and degradation, deprived of the most basic freedoms and dignity, and owe unquestioning obedience to a capricious and demented master.

I have never even idly thought for a single passing second that it might make my life nicer to have a small, rude, incontinent person follow me around screaming and making me buy them stuff for the rest of my life. [Note to friends with children: I am referring to other people’s children, not to yours.]

Vegetarianism can't keep up

It's a noble cause, but...
For every newly converted vegetarian, four poor humans start earning enough money to put beef on the table. In the past three decades, the earth's dominant carnivores have tripled our average per capita consumption; in the next four decades global meat production will double to 465 million tons.
Via MR.

Not yet beyond anti-trust regulation's reach

An Australian regulator has foiled what seems to be a thinly-veiled attempt to tighten China's already-strong grip on the world market for rare earth metals.
A Chinese company has abandoned plans to take control of the rare-earths explorer Lynas Corporation Ltd after Australian regulators demanded it reduce the scope of the planned transaction.
Market observers say the deal was an example of China's bid to tighten its grip on the rare earths market.

Almost all of the world's rare earths are produced in China.
This reminds me of the time that Russia tried to buy all of Libya's oil and gas. That wouldn't have been good news for Europe. This is a good reminder that there is no infallible anti-trust regulator of last resort in world capitalism.

1938 vs. 2005

I feel like I've seen this before - perhaps in Easterly's original, or did it make a cameo in The White Man's Burden? - but it's worth posting again, via MR:

I like the first comment:
Easterly's point is worth repeating:
All of the above seem to forget that technology does not implement itself. Technical knowledge needs people to implement it—people who have the right incentives to solve all of the glitches and unexpected problems that happen when you apply a new technology, people who make sure that all the right inputs get to the right places at the right time, and local people who are motivated to use the new technology. The field that addresses all these incentives is called economics.
The plight of Africa isn't because we haven't known what to do technologically. It's implementation and incentives.
Perhaps this is a consultant's vanity, but I harbor the idealistic hope that better management can in some ways make progress where other attempts have failed.

(Management of what? I'm not sure, exactly. Maybe governments, maybe NGOs, maybe the private sector - I think it is safe to say there is probably a lot of room for improvement in all three in much of the developing world.)

Chamber of Commerce exodus continues

Exelon has followed PG&E and New Mexico's PNM out the door, following the Chamber's now-famous proposed Scopes Monkey trial for climate change. It is a telling sign of the public power the climate change message has attained that utilities, far from fighting the coming cap-and-trade legislation, are leaving industry groups in droves (don't forget Duke Energy) to avoid being seen as obstructing it.

Blog milestone: first spam comment

Here; clearly People and Resources is exploding in popularity.

I think I already have word verification turned on - are there other ways to avoid spam comments like this?

Update: I lied - there was one spam comment before this one. I even blogged it as a major milestone at the time. Forgetting about one's older posts is a dubious sign of the longevity of one's blog, but I'll take it.

Alternate sources of capital

Let’s say you’ve recently nationalized major foreign oil assets (not to mention other strategic industries), but you want more foreign expertise and capital to develop your energy sector. Where do you look? China and Russia, of course.
Venezuela's President Hugo Chavez announced that China will invest $16 billion in an oil exploration project in the Orinoco River region, according to media reports.

The news comes only a few days after Venezuela signed a $20 billion joint venture agreement with a group of Russian oil companies to develop the Junin 6 deposit in the Orinoco basin, reports said.
Russian oil pipeline operator OAO Transneft plans to start building a $600 million oil pipeline in Venezuela within three to four years, the company said Friday after signing a memorandum of understanding with Venezuela's state oil company.

Under the memorandum signed with Petroleos de Venezuela SA, or PdVSA, Transneft will build infrastructure for development of the Orinoco oil belt, including a 1,300 kilometer pipeline.
It sure is a multi-polar world out there...

Prediction markets for government program budgets

I maintain that I'm still largely opting out of the healthcare debate (although not totally successfully). But I found this suggestion from Robin Hanson quite interesting (in response to Megan McArdle on the CBO projection of the healthcare legislations budgetary implications):
The alternative is prediction markets. Compared to the value of making good decisions on these bills, or to the effort spent in “rage and anguish” on them, the cost to create prediction markets giving quality unbiased estimates of actual bill budgets would be small.
This is a clever idea, but I'm afraid the major obstacle is that it would be very hard to create prediction markets large enough that they couldn't be manipulated by those who had a high stake in the outcome of legislation. To take one example, Democrats would have you believe that insurance companies stand to lose billions in profits if this legislation passes - you think the industry would hesitate to spend a few million dollars influencing the budget forecast of said legislation, were it in their power?

We've even had a recent example of this, first spotted by the hawk-eyed Nate Silver at fivethirtyeight.com: a McCain supporter investing "hundreds of thousands of dollars" in pumping up McCain presidential victory contracts on Intrade in September 2008.
Overall, if the trader’s motive was to influence the Intrade market, he was remarkably successful, Rothschild said. The trader’s actions help keep the probability of Obama winning the election on Intrade about 10 percent lower than Betfair and IEM for more than a month.
Enabling deep-pocketed stakeholders to influence the budget forecasts for major legislation by 10% would be downright disastrous.

P.S. Not only would potential arbitrageurs be seriously outgunned by insurance companies, but the long time horizon (when would the contract be closed out – 2019?) makes the arbitrage risky in other ways reduces the attractiveness of the return on an annualized basis.

Chart of the Day: Population density in Europe, Africa

From probably the best economics blog in Southern Sudan, which writes:
If you think that population density is important for political and economic outcomes (I do), this development could be pretty revolutionary.
From a resources perspective, urbanization can be a positive trend in terms of efficiency (particularly energy used for transportation), beyond the other well-documented effects on improving market linkages, etc.

There are potential downsides as well. Anyone who has visited slums in the developing world can attest that poverty and unemployment in an urban setting can be an explosive combination. The urban poor are much more vulnerable to food price spikes than rural farmers (although the latter are more vulnerable than many people realize - surprisingly many are net buyers of tradable staple crops). And it may also be that one cause of this rapid urbanization is the inability of the rural economy - again, primarily agriculture - to provide sufficient economic opportunities to a growing population.

Chart of the Day 2: PV solar by country

From Climate Progress. Amply demonstrates the power of subsidies. I also can't help but notice that Joe Romm appears to have ripped off Thomas Friedman's punch line:
JR: Well, conservatives must love importing oil from Saudi Arabia, since they’ve blocked every effort to promote efficiency and alternatives, so I guess they will love importing solar panels.

Brazil proposes restricting land for sugarcane

The Brazilian government announced on Sept. 17 a proposed law that will restrict the lands permissible for sugarcane farming and processing.

If passed, the bill sent to the National Congress by President Luiz Inácio Lula da Silva will prohibit the construction or expansion of sugarcane farms and production plants in any area of native vegetation, or in the Amazon, Pantanal (Brazilian Wetlands) or Upper Paraguay River Basin regions. Coupled with the areas unsuitable for sugarcane farming, the bill would effectively make 92.5% of Brazil’s national territory off-limits for sugarcane farming and processing.
This is good news for both the local and the global environment (not to mention existing sugarcane growers in Brazil). While the massive deforestation of the Amazon that contributes the lion's share of Brazil's greenhouse gas emissions isn't performed by cane-growers, it is less easy to make the case that growing cane cultivation isn't an indirect cause (by displacing soy, which in turn displaces ranching and lower-value crops - the sorts of things people do cut/burn down the forest to grow).

The research underpinning the proposed law proudly incorporated a relative of the triple bottom line:
ZAE Cana is the largest crop survey in Brazil’s history and the first ever to incorporate economic and social considerations into its proposed model for the sustainable development of the industry.
Having lived in Brazil, I can say that there is an impressively high public and political awareness of environmental issues. Many Brazilians are quite proud of being a flex-fuel nation with predominantly renewable power generation (mostly hydro). And of course you get things like this.

Felix Salmon, model blogger

All self-effacement aside, my favorite finance blogger Felix Salmon richly deserves this lengthy profile in Big Money. Here was my favorite part:
But every writer scribbles with an ideal reader in mind. Salmon is no exception. He may not covet the biggest audience but he does yearn for the best and most influential reader: "It’s a known fact," he says, "that Larry Summers reads a lot of blogs."

If that sort of audience is what he’s after, I ask, why not become a regular on CNBC? "Because Larry Summers doesn’t watch CNBC and say, 'Oh my God, that’s interesting, I should actually think about that when conducting economic policy.’ CNBC is people shouting at each other. If we were to get into a screaming match about health care reform, it doesn’t matter how smart we are, we’re not going to be shedding any light. Whereas the blogosphere is really good at drilling down very quickly to the nub of the question. People talk about it like it’s the best graduate seminar ever invented."
The "seminar-like" quality of the blogosphere is certainly what drew me to it, first as an avid reader and now as an extremely peripheral contributor (I optimistically estimate my current regular readership at approximately four people). And by articulating the qualities that make Felix a good blogger, this article helped me realize that in a way he is my blogging role model (perhaps along with Tyler Cowen) for the elegance and punchiness with which he uses the format. I think I have probably learned more about how to blog from reading him than anyone else, and while I still have a long way to go, it certainly helps to have someone great to model oneself after.

Chart of the Day: Jobs in America

Chris Blattman shares this great graphic, chronicling tectonic shifts in the American labor force. It looks like in 1850, 50% of Americans were still employed in agriculture. I'm actually surprised it wasn't more - it certainly is in many the rural areas of many developing countries today (maybe the cities balance it out).

Lifecycle emissions of LNG

Geoff Styles incidentally tosses off an interesting lifecycle emissions comparison between LNG and gas moved via pipeline:
According to a recent study by Pace Consultants, the emissions from gas liquefaction, LNG transportation, and re-gasification at destination would effectively increase the lifecycle emissions from a combined-cycle power plant by roughly 22%, compared to one running on domestic (pipeline) gas. However, that result would still come in around 40% lower than the emissions from the best coal-fired power technology without CCS, and 60% less than typical coal-fired power plants.
The post is actually on the massive Gorgon gas project in Australia, which Geoff worked on in a previous life, and his comments on mega-projects are also worth reflecting on:
While a variety of factors contributed to Gorgon's requiring something like 33 years from discovery to first production, big energy projects aren't like building a supermarket or office park. Aside from the great patience these efforts require, large sums of money must be spent over a long span of time before the first dollar of revenue can be collected to recoup them. That requires the deepest of pockets and the most meticulous strategic and financial planning. Only governments and the very largest companies--with massive free cash-flow or debt capacity--can pull this off. Moreover, because of the numerous risks associated with geology, permitting and development, a project like this works best when that risk is shared by more than one party, each of which has a portfolio of sufficient size and diversity to absorb the delays that are inherent in such ventures. So while it's true that the oil Super Majors need big LNG projects to bolster reserve replacement and cash flows that are being pinched by the challenges of gaining access to large-scale oil projects in the current environment, the global supply of clean gas from such projects would be much lower, without companies on this scale to develop them.
It is a point well-taken for those who would demonize oil majors - without their ability to execute lengthy projects of incredible technical and economic complexity, our energy supplies would rapidly dwindle and Peak Oil would soon become a genuine concern.

U.S. ag subsidy effects

Following up on this earlier post, I thought I'd post this comment sequence from Michael Roberts' Green, Green and Grains.
R: Your argument that ag subsidies don't boost production is very interesting. I don't understand how the conservation acreage is determined (or by whom) - is it centrally decided, or do farmers have the option in any given year of either growing crops or receiving a fixed (or varying?) payment for setting aside land?

Also, I think I saw you mention somewhere that most subsidies are not volume-related - is that true? If so would be interested to learn more.

Michael: Good questions. Conservation acreage is determined by legislation. I also know from first-hand experience that program administrators in USDA anticipate, even now, about how they might change the size and nature of conservation programs in the event commodity prices rise. Congress ultimately sets the acreage goals, but things change quickly when commodity prices change and bureaucrats know to expect this.

And yes, most payments received by farmers are not tied to the amount the produce. Most are tied to the amount and mix of crops they produced many years ago. The payments are attached in some sense to the history of the land, and so they transfer from one farmer to the next. These payments are called "direct payments" and "counter-cyclical payments."

It could be that some farmers plant particular crops today in anticipation of payments in the future. But since programs and prices change so much over time, only farmers very confident in their foresight might try to game the system in this way.

Subsidies that are connected to production volume come from the "loan rate program," which effectively servers as a price floor--the government pays farmers the difference between the price they receive and the "loan rate" should it turn out lower than the marketed price. The ostensible purpose of the program is to give farmers flexibility about when they sell their crop. But if they can't sell it for more than the loan rate, the loan rate serves as a price floor. Loan rates have been well below market prices for quite awhile.

One last point: The demand for commodities is really steep. Prices go up a lot if production falls just a little short. So, the purpose of farm programs is to keep farm incomes high then the best way to do this is to limit production somewhat. This helps to keep prices high. Paying farmer to produce too much really defeats the purpose because that steep demand curve means that extra supply will drive down prices a lot. So restricting production is the easiest way to keep farm income high.

R: Hmm. So who has the final say on conservation acreage for a given season? I have to imagine it's the USDA since it must be impossible to get Congress to turn on a dime in response to commodity prices...

Also, how are the top-down acreage targets cascaded down to thousands of producers? Is there any choice at the individual producer level, and how are they compensated for not growing?

And finally... if removing rich-world subsidies wouldn't materially shift world production or prices, why are developing countries so hung up on them in free trade negotiations like Doha? Do they simply misunderstand the mechanics and implications of the subsidies, or is there something else going on?

Michael: In some cases the USDA (the Secretary of Agriculture) has discretion for the amount of acres so long as it is beneath a target set by congress. That discretion can vary somewhat from bill to bill.

Today all the land is in the Conservation Reserve and the amounts in that program do appear a bit more "sticky" than more discretionary set-asides in the past (probably more environmentally beneficial, too). But when prices spiked last summer, there was serious pressure to reduce the size of the program, and they did. If prices staid high, I'm quite sure CRP would have further declined. Right now about there are about 34 million acres in the program and that is begin ratcheted down to 32 million. Before the run-up in prices the cap was 39 million acres. If prices staid high acreage would have fallen much more (I'd guess another 10-15 million acres).

Enrollment in CRP is up to the farmer. Most acres are enrolled in a competitive process wherein the farmers offer parcels with certain environmentally friendly covers, request a rental rate, and then all offers are scored and ranked. Some of the land is more targeted (like buffers for streams and lakes). For the targeted lands farmers are offered generous sums that they are unlikely to refuse.

I don't completely understand the trade negotiations. Clearly developing countries don't like us giving cash to our farmers. They like our conservation program (that's a "green box" program) because they keep prices high. The politics here must be very complicated. I've speculated here that agriculture may be something of a red herring to muck of the negotiations or other purposes. But I just don't know.

To make things stranger, I think developing countries as a whole would benefit more from lower commodity prices than from higher prices. The U.S. exports food to developing countries and this helps to feed more people in the world. But the hungry masses aren't the ones sitting at the trade negotiation table...

Anyway, on fairness grounds alone, I can see why people really don't like the big cash payments to farmers.

R: I had a quick look and both the FAO and IFPRI project world price rises in full trade liberalization scenarios. I'm guessing they are knowledgeable enough to know what they're talking about (what do you think?). So two hypotheses:

1) Are EU ag subsidies more volume-linked or otherwise production-increasing than ours?

2) Maybe there is also an effect from removing the domestic price controls (usually caps) in many developing countries?

Food prices are a double-edged sword. On one hand, it irritates me when people like Pollan root for higher food prices without acknowledging (or even realizing?) how they would increase undernourishment in poor countries, since most hunger is due to lack of purchasing power, not physical access. On the other hand, low ag commodity prices make it harder for agriculture to be an engine of economic development in rural areas of poor countries (where it is often 80-90% of the rural economy). So low prices are definitely good for poor urban food buyers, but their net effect on the rural poor is tricky to judge.
Interesting stuff, and great to have someone with such substantial academic and practical knowledge on the other side of the conversation.

How NOT to run a resource wealth fund

Nigeria gives us a textbook example of how NOT to run a save-for-a-rainy-day resource wealth fund:
Nigeria withdrew 87 billion naira ($564 million) from a fund created to save revenue from oil exports when prices are high, ThisDay newspaper reported, citing Oludare Osibote, the country’s acting Accountant-General.

The money will enable the federal, state and local governments to meet some of their expenditures following a drop in revenue earmarked for them in this year’s budget, the Lagos- based newspaper said.
First of all, this is not a rainy day:
Funds are placed into the so-called excess crude account when oil prices rise above $45 a barrel, and are used as a reserve when prices decline.
Compare that to current oil prices of around $70/bbl. But even more concerning is this:
The account now holds about $9 billion, down from $20 billion at the beginning of this year, according to the newspaper.
The fund has lost or had withdrawn half of its assets in the last nine months?? Even though equity markets are up and oil prices have barely dipped below (and mostly stayed well above) the $45/bbl threshold?? Something doesn't add up here.

The case against reprocessing

Frank von Hippel, a physicist and professor of public and international affairs at Princeton, has an op ed in the LA Times arguing against reprocessing spent nuclear fuel. The simple case for reprocessing is that it reuses much of the spent nuclear fuel that we in the U.S. consider waste (and were, until recently, planning to store at Yucca Mountain). There is a catchy sound byte I can't find that says something like all of France's nuclear waste is stored in a warehouse the size of X (not very big).

Unfortunately, it is not so simple. (To be fair, the media has pointed this out before, e.g. in this NYT piece on reprocessing from May). But von Hippel brings true expertise to the table, so his articulation of the objections is worth citing (subtitles are mine).
Cost: "Based on French and Japanese experience, the cost of producing this recycled fuel is several times that of producing fresh uranium reactor fuel."
Waste volume (not actually reduced): "The French reprocessing company AREVA claims that its method reduces the volume and longevity of the radioactive waste produced by nuclear power reactors. But when you take into account the additional radioactive waste streams created by reprocessing and plutonium recycling, the volume of the long-lived radioactive waste is not reduced."
Radioactivity: "Reprocessing is enormously dangerous. The amount of radioactivity in the liquid waste stored at France's plant is more than 100 times that released by the Chernobyl accident. That is why France's government set up antiaircraft missile batteries around its reprocessing plant after the 9/11 attacks."
Plutonium: "Even more dangerous, however, is the fact that reprocessing provides access to plutonium, a nuclear weapon material. That is why the U.S. turned against it after 1974, the year India used the first plutonium separated with U.S.-provided reprocessing for a nuclear explosion."
von Hippel favors eventually storing waste in a long-term storage like Yucca Mountain (except perhaps one in a community which already has a nuclear plant, for easier acceptance, as successfully done in Finland and Sweden). In the meantime, he thinks we should sit on the current dry cask storage, rather than "panic" and take the "very expensive and dangerous detour" of reprocessing.

His arguments have something for everyone - cost for businessmen and economists, waste volume for the environment, radioactivity for human health and plutonium for security hawks. In particular I think the high cost of reprocessing is not well-known and deserves to be mentioned more prominently in a balanced debate.

Data abuse at The Oil Drum

This is just sloppy:
These charts show very similar patterns in the rise of both Oil and the €uro against the Dollar, a clear sign that the record 147 $/barrel had much to do with the weakness of the greenback.
Yes, clearly a 25% rise in the euro ($1.28 to $1.60) caused a 130% spike in oil prices (from $60 to $140/bbl) in 2007/8.

Economists against ethanol subsidies

Via Environmental Economics; I am only surprised that >20% of economists do think ethanol subsidies are a good idea.
Government subsidies on ethanol in the U.S. should be (N = 120)
  • eliminated - 55%
  • reduced a lot - 11%
  • reduced somewhat - 13%
  • kept about the same - 12%
  • increased somewhat - 9%
  • increased a lot - 1%
I would love to see a breakdown by region (as a proxy for something like the dependence of the member's university or organization on farm-related funding).

Energy Independence Sentence of the Day

So, if you like importing oil from Saudi Arabia, you’re going to love importing solar panels from China.
From Tom Friedman's decent NYT op ed in which he discovers that none of Applied Materials' 14 solar panel factories are in the U.S., then laments the lack of government support responsible.

Climate change interfering with beer production

And now for some REAL motivation - as widely reported, climate change is affecting beer production:
The quality of Saaz hops, which are required to make pilsner lager, has been decreasing lately, and climatologist Martin Mozny of the Czech Hydrometeorological Institute thinks he knows why: Global warming. Indeed, Saaz hops are delicate and the higher air temperatures in the Czech Republic are affecting them negatively.
But of course climate change doesn't stop at the borders of the Czech Republic. Regions of eastern Germany and central Slovakia have noticed similar changes in their crops.

Cost of climate change and adaptation

Via Climate Progress, a new report has sized both the risks posed by climate change and the costs and benefits of effective adaptation.
A report from the Economics of Climate Adaptation Working Group released today indicates that climate risks could cost nations up to 19% of their GDP by 2030, with developing countries most vulnerable. The report concludes, however, that cost effective adaptation measures already exist that can prevent between 40 and 68 percent of the expected economic loss with even higher levels of prevention possible in highly target geographies. [emphasis mine]
The report is authored by McKinsey and a group of business and non-profit sponsors. The headline numbers are interesting, and I will be interested to see how various constituencies react.

Emanuel Derman on financial sector returns

Here:
Last night I held a panel at Columbia about the economic system and the principles that should govern it. One interesting question raised but not answered by Prof Bhagwati was: Why are the returns to the finance industry so great? No one had a really good explanation but two reasonable ones were: the existence of cartels, and secondly, that financial firms' outsize returns are periodically wiped out by risks they weren't paying adequate insurance for. [emphasis mine]
Those both sound reasonable to me. More specifically, I find the cartel argument (or more broadly speaking, obstruction of competition) compelling for retail banking (e.g. through high switching costs and lack of transparency), traditional investment banking (e.g. M&A advisory, IPOs, debt issuance, etc.), and private equity (e.g. the emergence of mega-deals and club deals in the last boom). I find the high returns/tail risk argument compelling for trading operations, hedge funds, and private equity (e.g. the massive use of leverage that fueled the last boom).

Incidentally, I used to work in finance and at the time rather enjoyed Derman's My Life as a Quant.

Update: Felix Salmon looks at a similar question for credit cards:

It’s pretty clear from this chart that between them, the big credit card issuers absolutely have the ability to set prices. It’s also clear just by looking at their marketing materials that none of them is particularly interested in competing with the others by reducing the maximum interest rate that they charge.

In most contexts, a chart like the one above would I think bespeak a competitive market. But in credit cards, I’m not so sure.

World Bank seems off on land grab

The World Bank has picked up the land grab issue, but taken a slightly bizarre tack:
Yet little attention has been paid to how these transactions are happening and whether the investors are following the same processes and procedures as normal land lease deals involving foreign individuals or companies.
It seems almost as if they are more worried about Westerners not getting equal access than about the welfare of the citizens of the landed countries. They get back toward this a little bit at the end, but as the World Bank I feel like the effect on country development should be their lead thought on this particular issue.

Oilfield technology is basically good enough

Via Green Sheet, long-time energy investment banker Matthew Simmons doesn't think oilfield technology has much room for improvement (and therefore technological progress is not a good argument against Peak Oil).
The final topic the Gang discussed was the rapid advances in oilfield technology. Sadly, this is the greatest myth of all. I spent four decades as an investment banker to the global oil-service industry, which collectively invented all of this technology. The concept that there are new innovations in this area is false.

In fact, the seeds of this so-called technological revolution -- the ability to exploit oil from deep water or drill horizontally -- were first developed 40 years ago. I personally raised a great deal of the venture capital that helped implement some of the most important technical advances in the industry. Our firm, through advising on mergers, consolidations, reorganizations, and bankruptcies, helped save the oil-service companies that created these great technological advances that help us find and commercially exploit oil and gas.

None of this technology is new -- in fact, it is now quite mature. Sadly, there are few new ideas in the oilfield pipeline to replace advances that were made decades ago.
These ideas may be old, but they are still in the process of being deployed commercially against new reserves, whether deepwater like BP's new Tiber find or onshore unconventional reserves like oil sands and shale oil. To me, the crux of the technology argument is not that a new silver bullet will magically appear on the horizon, but rather that the frontier of existing technology allows us to exploit a wide range of unconventional oil reserves, of whose production potential we have only scratched the surface (e.g. Canada and Venezuela are both estimated to have reserves in oil sands equal to the entire world's reserves of conventional crude). At higher prices, probably, which means lower demand, but not imminent and catastrophic supply shortfall.

Solar yelling match

Grist went ballistic over this WSJ article on the collapse of Spain's solar industry, but I'm not sure they really addressed the right points head-on. The story as I can tell it goes something like this:
WSJ: The sudden withdrawal of generous solar subsidies killed Spain's solar industry, which should be a cautionary tale for the U.S.

Grist: The U.S. solar subsidies in California are TOTALLY DIFFERENT than the Spanish subsidies, so conflating the two is a crime against humanity.
Yes, the subsidies are different, but they are still subsidies (as are Renewable Portfolio Standards). They are OK for now, but not forever. And despite Grist's blithe assertion that "Solar is getting cheap—cheaper than fossil fuel alternatives", even MIT seems a bit confused as to whether solar power is ready to compete with fossil fuel power generation on a level playing field (Geoff Styles runs the numbers and decides probably not). And ultimately, for solar to be a success, it needs to compete, and win, on a level playing field - subsidies can't last forever and won't do the trick alone. Which is why it will be interesting (and necessary) to see how the economics of truly large-scale solar installations like Desertec and this 2GW project in Inner Mongolia play out in practice. Few people are rooting for solar to stay expensive, but it is fair to want to see before believing that it won't.

Oil rose to predominance without subsidies

In a post celebrating modern oil's 150th birthday (yes, I've meant to blog this for a while), Geoff Styles shows how the astounding growth of oil demand and supply far outstrips renewables deployment today, based on its overpowering economic advantage versus competing technologies. Notably, this was driven entirely by the private sector without substantial government assistance, as far as I'm aware.
As impressive as the growth rates for wind and solar power have been over the last few years, they still fall short of the early growth of car ownership. Between 1901 and 1916, annual US car registrations grew from a few thousand units to over one million, a sustained compound average growth of around 40% per year. Over the same interval, oil production more than quadrupled, led by the combination of soaring demand for gasoline, which was produced by simple distillation of petroleum in "tea kettle" refineries, and the discovery of numerous large oil fields. This remarkable growth wasn't spurred by government incentives or economics that made oil and its products merely a little better than their closest competition. It was the result of a quantum leap in personal mobility facilitated by oil's extraordinary inherent advantages in convenience.
He believes this experience holds relevant lessons for today's aspiring renewable energies of the future.
Subsidies and regulations seem anemic substitutes for the inherent advantages of cost and convenience that can sweep away incumbent technologies within a decade or two.
I completely agree - government subsidies for renewable energy cannot go on forever - and Morgan Downey makes a similar point when commenting on a David Mackay article that I mentioned and anticipated.
The repayment time horizon for wind, solar, geothermal, nuclear and other sources of power tends to be much longer than that of fossil fuels.

There are many financial solutions to this timing disadvantage. One solution being used is for the government to step in on behalf of taxpayers and quicken the pace which investors get their money back. Such government spending is unsustainable.

Wind and other renewables have to compete without subsidies if they are to be scaled to the size David MacKay mentions.
Downey believes it will take shortage-driven high fossil fuel prices to make the economics work for renewables at scale.
A shift to renewables on a MacKay scale may have to wait until fossil fuels production declines. Only then will high energy prices provide a sufficiently quick [payback] pace for renewable investors.
A more optimistic view is that large-scale deployment will quickly bring down the cost of renewable technologies like wind (the so-called experience curve or learning curve argument). That's what I want to believe... but if I'm totally honest with myself, I'm not sure I do.

Behavioral challenges in ag development

Robin Hanson passes along this illuminating and frustrating anecdote:
There are higher-yielding varieties of groundnut than those that farmers in Malawi tend to plant, but getting them to switch is tough. Better seed is pricey, increasing their risk. So researchers from the World Bank ran an experiment. With local NGOs, they offered the farmers loans. Some loans even came with a crop-insurance policy: if the season was dry and the yield a dud, the debt would be forgiven. The farmers’ risk was lowered. Of farmers offered conventional loans, 33% signed up. With the added incentive of insurance, 18% did. The researchers were puzzled.

It’s been more than 30 years since microfinance began its fantastic rise, spreading billions of dollars in credit to hundreds of millions of overlooked borrowers around the world. Insurance is the next big promise of financial services for the poor. But there aren’t many takers. That’s not from lack of interest on the part of suppliers. The Gates Foundation has plowed millions of dollars into microinsurance initiatives...
Hanson speculates that people (obviously not rational actors) buy insurance more for signaling purposes than to improve their actual risk profile:
My best guess is that most insurance is bought not to reduce risk but instead to signal prudence and caring. The first life insurance companies had a terrible time selling “bets on their death,” and only succeded when they framed insurance as what a caring and prudent husband and father did to take care of his family. While simple adverse-selection theories predict that high risk folks buy the most insurance, in fact low risk folks buy more insurance. And we don’t want to insure our big life risks because such a desire would signal a lack of confidence in our prospects.

Poor folks want loans because they want the money, but to want insurance they’ll have to want to signal prudence and caring, above and beyond the signals they now use. Seems a hard sell to me.
Sounds like a tough nut to crack, and illustrative of the huge challenge of improving pitiful agricultural yields in poor countries, compared to their agroecological potential.

Where U.S. oil comes from

Green Sheet has this great graphic on where U.S. oil imports come from:

It illustrates very clearly a point I've made before: while the U.S. is highly dependent on oil imports, most of that oil comes from close to home, rather than the Persian Gulf. Note how Canada, Venezuela, and Mexico are our three biggest suppliers, and Saudi Arabia is supplying less than 5% of total U.S. oil consumption.

Do U.S. ag subsidies really increase production?

Agricultural subsidies in the developed world are the perennial bogeyman of world trade negotiations. Michael Pollan also blames them for America's nutritional crisis, because they make food too cheap.

In reviewing Pollan's recent NYT op ed, Michael Roberts links backs to several interesting posts on why he doesn't think ag subsidies (aside from ethanol mandates) increases U.S. agricultural production. This is a pretty interesting argument, as it runs counter to the obvious intuition on subsidies.

His main point is that agricultural production appears to be driven by conservation policy and payments, not subsidies. I don't quite understand how conservation acreage is determined from his post, so I don't yet entirely understand his argument.

The other interesting point is that not all subsidies are volume-driven (so these obviously wouldn't effect production).

What would be the implications for world trade if this weren't true? Well, it wouldn't make rich-world farmers any more willing to give up their subsidies. But it might change our beliefs about the trade gains to be realized if the subsidies are eliminated (the standard argument is that African farmers would receive higher prices for their products if it weren't for these subsidies). Unfortunately, that argument alone is unlikely to effect any major breakthroughs at the international negotiating table.

Image of the Day: The ghost of global shipping

Via Green Sheet, "The Incredible Ghost Fleet Off The Coast Of Singapore":
Off the coast of Singapore is a collection of ships larger than the U.S. and English navies just sitting idle, waiting out the recession.
Shipping rates are apparently still down 90% or more from this time last year.
While the President says the economy has been pulled from the brink, and economists say the recession has ended, these ships floating in Asian seas are big reminder that we're still far off from recovery.
Indeed.

Libya creeps a bit further

Libya has been getting tough with foreign oil companies, and now in one stroke has screwed both Chinese and Canadian companies:
China National Petroleum Company said Tuesday that it was withdrawing its $460 million bid to buy the Libyan assets of Canadian oil producer Verenex Energy amid stiff resistance to the transaction from the Libyan government.

The Libyan government is now expected to acquire Verenex’s Libyan assets at a lower price than what the Chinese were offering. Verenex’s shares tumbled 19 percent on the news Wednesday.
This sort of meddling - not allowing a foreign owner to realize full market value for its holdings - will raise fears of a "creeping nationalization" of the nations oil assets, and may chill foreign investment (although some countries are still trying pretty hard).

The food-healthcare connection

Michael Pollan connects the healthcare debate to food:
To listen to President Obama’s speech on Wednesday night, or to just about anyone else in the health care debate, you would think that the biggest problem with health care in America is the system itself — perverse incentives, inefficiencies, unnecessary tests and procedures, lack of competition, and greed.

No one disputes that the $2.3 trillion we devote to the health care industry is often spent unwisely, but the fact that the United States spends twice as much per person as most European countries on health care can be substantially explained, as a study released last month says, by our being fatter. Even the most efficient health care system that the administration could hope to devise would still confront a rising tide of chronic disease linked to diet.

That’s why our success in bringing health care costs under control ultimately depends on whether Washington can summon the political will to take on and reform a second, even more powerful industry: the food industry.
This is, of course, Pollan talking to his own pet cause… but in this case it makes a certain amount of sense.

I found this interesting:
Recently a team of designers from M.I.T. and Columbia was asked by the foundation of the insurer UnitedHealthcare to develop an innovative systems approach to tackling childhood obesity in America. Their conclusion surprised the designers as much as their sponsor: they determined that promoting the concept of a “foodshed” — a diversified, regional food economy — could be the key to improving the American diet.

All of which suggests that passing a health care reform bill, no matter how ambitious, is only the first step in solving our health care crisis. To keep from bankrupting ourselves, we will then have to get to work on improving our health – which means going to work on the American way of eating.
I think the battle between the proponents and critics of industrial agriculture will be fought on many battlefields for a long time.

RIP Norman Borlaug

A great man with a controversial legacy, but one could argue that he did more for human well-being than anyone else in the history of the world.
In 1960, before his techniques were widely adopted, the world produced 692 million tons of grain for 2.2 billion people. By 1992, largely as a result of Borlaug's pioneering techniques, it was producing 1.9 billion tons for 5.6 billion people -- using only 1% more land. India and Pakistan are now agriculturally self-sufficient as a result of his intervention.
That's from this LA Times obituary, the first of many I am sure. It has an engaging discussion of his quest to improve crop yields through breeding.

Critics (particularly from the organic agriculture world) see him as the forefather of monoculture-dominated industrial agriculture and the myriad environmental and nutritional damages it has wrought. The jury is still out, but in my mind the burden of proof still lies on those who hold that organic agriculture can scale up to feed the world without bringing massive tracts of new land under cultivation.

Update: Here's a great story from later in Borlaug's life:
Borlaug formally retired from the International Wheat and Maize Project in 1979, becoming a professor at Texas A&M University. But in 1984, he got a call from Japanese industrialist Ryoichi Sasakawa, who offered Borlaug funding for five years of work to aid agriculture in Africa.

Speaking through an interpreter, Borlaug said, "I'm 71. I'm too old to start again." Sasakawa called back the next morning and said, "I'm 15 years older than you, so I guess we should have started yesterday. Let's start tomorrow."


Update 2: World-Grain.com has a good quote from Borlaug's Nobel Prize acceptance speech, showing awareness of the wider world beyond his discipline:
"We must recognize the fact that adequate food is only the first requisite for life. For a decent and humane life we must also provide an opportunity for good education, remunerative employment, comfortable housing, good clothing and effective and compassionate medical care."
It also has the interesting tidbit that Borlaug was a Hall of Fame wrestler at the University of Minnesota.

Update 3: Chris Clayton:
In the U.S., we are blessed so much that debate over agriculture focuses on the quality of food, where it comes from, how it's grown and how it's cooked. With the passing of Dr. Borlaug, perhaps people will be inspired to reexamine the higher calling of agriculture and those throughout the world who still have yet to be touched by the green revolution.


Update 4: A few people try to size how many lives Norman Borlaug saved. The Indian Minister of Agriculture says 245 million. The Liberty Papers says 1 billion. Greed, Green and Grains thinks even 1 billion might be an understatement (and with over 1 billion people currently suffering from undernourishment, I think he could be right).

Update 5: A long and interesting interview with Borlaug from 2000.

Update 6: Here is a provocative but loosely-reasoned piece on Norman Borlaug's complicated legacy. I applaud the author's attempt to explore the rippling ramifications of Borlaug's work, but, as this commenter details, there are "several inaccuracies - some tiny, some major."

Update 7: Here's a longer NYT article, including this reference to Vandana Shiva; I'm sympathetic with Borlaug's response.
In a characteristic complaint, Vandana Shiva, an Indian critic, wrote in 1991 that “in perceiving nature’s limits as constraints on productivity that had to be removed, American experts spread ecologically destructive and unsustainable practices worldwide.”

Dr. Borlaug declared that such arguments often came from “elitists” who were rich enough not to worry about where their next meal was coming from. But over time, he acknowledged the validity of some environmental concerns, and embraced more judicious use of fertilizers and pesticides. He was frustrated throughout his life that governments did not do more to tackle what he called “the population monster” by lowering birth rates.

Ugly protectionism

Yikes - Obama has slapped tariffs on Chinese tires and China is already retaliating. Greg Mankiw is justifiably disappointed. I hope Obama isn't trying to drum up support for healthcare through protectionism. Healthcare reform is not worth the negative impact a trade war would have on living standards worldwide.

Update: Condemnation in the econoblogosphere is rapid and unanimous, cutting across ideological lines. E.g. Brad DeLong: "Barack Obama Does Something Really Stupid". The WSJ's Real Time Economics rounds up others, including this gem from Ferris Bueller's Day Off:
“In 1930, the Republican controlled House of Rep, in an effort to alleviate the effects of the… Anyone? Anyone?… the Great Depression, passed the…Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act which, anyone? anyone? Raised or lowered?… Raised tariffs, in an effort to collect more revenue for the federal gov’t. Did it work? Anyone? Anyone know the effects? It did not work, and the US sank deeper into the Great Depression.”

Infant mortality stat of the day

The bad news is that infant mortality is still far too high, and is highly concentrated: just three countries — India, Nigeria, and the Democratic Republic of Congo — between them account for 40% of the world’s under-5 deaths.
That is Felix Salmon; the good news is that worldwide, infant mortality fell 28% between 1990 and 2008.

Trying but failing to help, dolphin-safe tuna edition

In a classic illustration of the unintended consequences that well-intentioned environmental advocacy can generate, it turns out that dolphin-safe tuna is an ecological disaster. It turns out you can catch (lucrative) tuna by either following dolphins (in which case you also catch dolphins) or by attracting tuna with floating objects (in which case you also catch every other kind of ocean fish).
If you work out the math on this (and you don’t have to, because the environmental justice foundation did) , you find that 1 dolphin saved costs 382 mahi-mahi, 188 wahoo, 82 yellowtail and other large fish, 27 sharks, and almost 1,200 small fish.
Ouch. Oops.

4.6 barrels per year

Morgan Downey at Scarce Whales brings us this fascinating chart:

He explains of the curious stability of per capita oil consumption since 1982 as the shift to open markets:
Why has per capita consumption been so stable since 1982 having grown at an increasing pace for the prior 120 years (chart 2 again)? The answer is that a new method of rationing demand emerged in 1983: benchmark pricing linked to transparent free liquid markets (see chapter 1 of Oil 101). Free markets and necessarily volatile oil price became the adjusting factor matching available supply to demand.
This may be true in part, but I am still surprised - economic growth tends to increase per capita consumption of resources even in the presence of free markets (which we can see with oil):
To put the global average of 4.6 barrels of oil consumption per year in perspective, the number of barrels consumed per person in 2008 in India was 0.9, China 2.2, Brazil 4.6, Germany 11.1 and the US 23.3.
Since global GDP has grown quite a bit since 1982 (I would guess faster than population), I would have expected per capita consumption of oil to rise accordingly. In other words, I would have expected the free market to match supply and demand, but to meet higher global demand. Have efficiency gains completely offset this? I'd be interested to hear if anyone has a good explanation.

Put on your blogging shoes

Loved this cartoon, via Chris Blattman:

Book review: Poisoned Wells

I just finished reading Poisoned Wells: The Dirty Politics of African Oil, by Nicholas Shaxson. I was turned on to the book by Chris Blattman.

Overall, I recommend the book because it is interesting reading (although not so highly that you should throw down whatever you're reading now and rush to the nearest Barnes and Noble). There is a lot of interesting ground to cover with African oil, and the author's 15+ years of journalism on the subject have made him very, very deep. He has a lot of interesting details and anecdotes to supplement the overall historical narrative (which is not new).

He has some conspiracy theories, but they are generally plausible and not too outrageous. He's critical of oil companies, but not so blinded by hatred that he can't take a nuanced view, which I appreciated. On the other hand, I was often irritated by the feeling that he was cherry-picking facts and stories to tell his tale in a very journalistic and non-rigorous way.

At the end of his book, he commendably attempts to move beyond criticism to suggest three "radical surgeries" that would help "draw the poison.
  1. "Cut our energy use, drastically and urgently." This one is hard to argue with in theory, but tougher to implement in practice. He suggests increasing fuel taxes and cutting other taxes to compensate. (Note: another revenue-neutral solution would be to tax-and-rebate; I really like the theoretical elegance of this solution, which is like turning the tragedy of the commons on its head.)

  2. Crack down on tax havens for dirty money. This one is also nice in theory but hard in practice. Shaxson believes that "much of the problem could be eliminated with a few well-aimed legislative strokes", like criminalizing receipt of proceeds of illicit activity by U.S. banks, and forbidding banks from operating in jurisdictions which are beyond the law. I don't know enough to judge these measures on feasibility and effectiveness.

  3. Distribute oil revenues directly to citizens. This final and most audacious suggestion is the one I'm most uncomfortable with. The idea has pedigree (it was proposed by a Columbia professor in an IMF working paper in 2003). I see how it could reduce corruption, by limiting the opportunities for distributional funny business by politicians. But it basically gives up on what should be the core goal of resource extraction - translating a country's physical, non-productive wealth (like oil or metals or gems) into economically productive capital (physical or human). Directly distributed oil revenues would likely be funneled largely into consumption, rather than investment; in addition to terrible inflation, this would fundamentally squander the opportunity to use resource wealth on public goods and capital formation. Yes, corruption makes this very hard, and attempts to mimic Norway's success with its resource wealth fund have mostly fallen short; but that alone is not a good enough reason to stop trying.
My favorite quote was near the end, and sums up what I think is his strongest argument throughout the book - that oil money exacerbates existing ethnic and political tensions, with often disastrous outcomes.
Finding oil is like dumping itching powder from helicopters, aggravating existing divisions.
He also brings to life the complexity of corruption, and how the black and white Western view is very difficult to reconcile with the African political and cultural context (and is often resented as a form of ideological colonialism).

If you're interested in a preview, check out this chapter on the recently deceased Omar Bongo, who ruled Gabon as president for 42 years (Chris Blattman also blogged this a few months ago). This short interview in Harper's also covers most of his main points in a concise way.

Images of the Day: Disconnected Africa

From Bill Easterly's Aid Watch, three striking images of that illustrate Africa's isolation, aside from South Africa:

World shipping routes (just South Africa and Nigerian oil)


World airline routes


World internet connections

There's more than one China

China has much lower per capita greenhouse gas emissions than developed countries, but Environmental Capital picks up the interesting news that emissions in urban, wealthier China already approach those of developing countries.
“There are many parts of China where emissions intensity and emissions per capita are looking much like some of the richer countries in Europe,” [Lord Stern] said in a speech that laid out his predictions on global warming.

He said there are 13 regions with higher per-capita emissions than France, and six with higher per-capita emissions than the U.K. (None, apparently, have yet caught up with Australian or American levels.)
This has concerning implications for a conutry where urbanization continues to proceed rapidly, and throws a wrench in the case that the West should underwrite China's transition to a cleantech economy.

Wrinkles in measuring GDP from space

At Roving Bandit ("Probably the best economics blog in southern Sudan"), the Skeptical Bandit lists some good objections to the catchy idea of measuring GDP from space (which I mentioned here). His points about accuracy are well-taken; his point about extractive industries not showing up is theoretically on point, but if we care about economic growth as it contributes to human welfare, I wonder whether this is actually a better measure than GDP (after all, if the wealth from natural resources isn't finding its way into the community, is that really GDP we want to be conuting?).

The original MR post also cites the WSJ saying that the effect of resources do actually show up in pseudo-controlled situations:
They also noted how data from night lights can be focused to provide data on a local level. In Southern Madagascar large deposits of rubies and sapphires were discovered in late 1998 near the towns of Ilakaka and Sakaraha, leading to an economic boom. But the data from the satellites tell the story of where the benefits were felt most deeply. “Over the next five years there was a sharp growth in the number of pixels for which light is visible at all, and in the intensity of light per pixel,” the economists said. “The other town visible in the figure, Ihosy, shows no such growth. If anything, Ihosy’s light gets smaller and weaker, as it suffers in the competition across local cities for population.”

More geothermal problems

September hasn't been kind to geothermal power - first the AltaRock shutdown, then this:
Government officials here are reviewing the safety of a geothermal energy project that scientists say set off an earthquake in mid-August, shaking buildings and frightening many residents of [Landau, Germany].
Like other earthquakes that have been attributed to geothermal plants, the Landau temblor was sudden and brief and was accompanied by a sound that in some cases has been likened to a sonic boom. There were no injuries and there was no known structural damage to buildings in the city. But the 2.7 magnitude quake has stoked fears and set off debate in the state Parliament, which subsidized the construction of the plant, about the method’s safety.
At this rate, reputational obstacles may soon surmount (considerable!) practical ones:
But some experts in the field say they worry that projects like the one in Germany, if the managers deny responsibility for inducing earthquakes or play down the effects on people’s lives, could damage the reputation of geothermal energy, even in highly environmentally conscious areas of the world like California or Western Europe.
And these assets aren't even running yet; once they are the economics are pretty good, but the risk-return ratio is not very attractive for anyone considering a project from scratch.

Family planning = cheap carbon abatement

Via Environmental Economics:
Contraception is almost five times cheaper as a means of preventing climate change than conventional green technologies, according to research by the London School of Economics.

Every £4 spent on family planning over the next four decades would reduce global CO2 emissions by more than a ton, whereas a minimum of £19 would have to be spent on low-carbon technologies to achieve the same result, the research says.

The report, Fewer Emitter, Lower Emissions, Less Cost, concludes that family planning should be seen as one of the primary methods of emissions reduction. The UN estimates that 40 per cent of all pregnancies worldwide are unintended.
Now, at £4/ton of CO2e, contraception wouldn't be the cheapest carbon abatement lever (many energy efficiency opportunities actually save money, for example), but it would certainly be cheaper than the marginal carbon abatement lever.

Looked at through this lens, China's one-child policy could be seen as a massive investment in the environment - a thought that has already occurred to some Chinese officials.

Carmelina - the new jatropha?

The U.S. Navy has anointed carmelina its next-generation biofuel feedstock of choice. It certainly sounds like a model candidate...
Camelina was selected by the DESC because it does not compete with food crops, has been proven to reduce carbon emissions by more than 80 percent, and has already been successfully tested in a commercial airline test flight. In addition, camelina has naturally high oil content, is drought tolerant and requires less fertilizer and herbicides. It is an excellent rotation crop with wheat, and it can also grow on marginal land.
... but remember what happened to the last biodiesel darling.

By the way, running military vehicles on biofuels because they're "domestically produced" doesn't strike me as a particularly good argument.

Algerian cereal harvest triples

A report issued by the Algerian Agriculture Ministry showed that the country has produced nearly 6 million tons of cereals in 2009, almost three times more than last year, APS reported.
This year's production rise was made possible by good rains and new financial incentives from the government, the ministry said. Those incentives have included soft loans for farmers and subsidies for fertilizers and high-yielding seeds. Last year, the government also said it would almost double the price it pays farmers for their grain as part of efforts to boost domestic output.
I find this news interesting because it illustrates the availability of additional food supply with high enough prices (or in this case, high enough subsidies). We really aren't butting up against Malthusian/Ehrlichian resource constraints on food production yet.

Carbon tax in France

Greg Mankiw is pleased that France has proposed a revenue-neutral carbon tax. Tyler Cowen is less sanguine:
In reality, France’s carbon tax is basically just a gasoline tax—and a tiny one at that. The electricity sector, overwhelmingly powered by emissions-free nuclear power, isn’t part of the plan [TC: Duh!], Prime Minister Francois Fillon told Le Figaro. The tax will basically fall on liquid fuels—raising pump prices 3 euro cents a liter (that’s roughly 15 U.S. cents a gallon).

In theory it will be revenue-neutral but most French voters are nonetheless opposed to the measure.
Incidentally, one argument that carbon tax proponents make against cap-and-trade is that a carbon tax is less subject to loopholes and political manipulation. That argument has always been silly; now it is more demonstrably so:
Large CO2 emitters, such as oil refiners and steel makers, will be exempted from paying the new tax. The government will propose special compensations for fishermen, farmers and truckers...

P.S. Not the first backdoor gasoline tax we have seen proposed this year.

Nuclear's long regulatory march

A U.S. nuclear renaissance faces many hurdles, not the least of which is the government:
On Wednesday, General Electric claimed a significant step toward getting one of its advanced reactor designs, the Economic Simplified Boiling Water Reactor, approved by the Nuclear Regulatory Commission — although the model has recently lost most of its customers.
G.E., along with its nuclear reactor partner, Hitachi, said on Wednesday that it was moving ahead. "Over the last five years, we have answered well over 6,000 questions from the N.R.C.," said Daniel L. Roderick, senior vice president of G.E.-Hitachi. "We have all of those answered; we have zero open right now."

But while Exelon, the Chicago-based utility, had planned to build two of G.E.’s new reactors in Victoria County, Tex., the utility dropped the idea last November, at least partly because of delays in design certification. It switched to an older Hitachi design.

Dominion, another large energy provider, still has plans on file for an E.S.B.W.R. in Virginia, but it says it is exploring alternatives.

Detroit Edison is the only company still on record as wanting to build an E.S.B.W.R.
Safety should be the top priority, of course, but bureaucratic inefficiency isn't doing the technology any favors in the race to reduce emissions from the nation's power generation.

Senate shuffle and new ag chair

As a result of the Senate committee musical chairs following Ted Kennedy's unfortunate passing, Chris Clayton reports that Blanche Lincoln will likely assume chairwomanship of the Agriculture Committee. This looks like bad news for climate legislation and any sort of agricultural trade reform.
Lincoln will likely change some dynamics in agriculture policy. She has been a staunch defender of commodity payments and resisted tighter payment caps or income eligibility requirements in the 2007-08 farm bill debate. Lincoln also likely is going to be more skeptical of climate legislation because it may offer little benefit for rice growers or producers of other southern crops. She was quoted in mid-August saying Congress should just focus on a renewable-energy bill and drop the cap-and-trade emissions plan.

Political newspapers say Lincoln already faces a tough reelection bid for 2010 and may have come across as more conservative in Arkansas to keep her seat as well.
This could hurt climate bill efforts almost as much as the temporary loss of the 60th vote.

Update: Didn't take long for her to voice her skepticism:
Just minutes after taking the gavel of the influential Senate Agriculture Committee, new chairwoman Blanche Lincoln cast even more doubt about the future of climate legislation in the Senate.

"I think it's a heavy lift for the Senate," said Lincoln. "We have a tremendous amount of work to do, having been in the hearings today."

Update 2: Joe Romm echoes an optimistic NYT quote that “the new chairwoman said she does not expect her panel to hold a markup on any contributions to the climate bill.”

The advantages of autocracy

From Tom Friedman's latest NYT op ed:
One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century.
In general I find Friedman lacks the nuance to push thinking on very complex issues, but he shines when driving home simple ideas in an accessible way. This is a great example. Many promoters of democracy don't seem to appreciate how it is (as a result of the same minority protections which enable it to preserve political rights) inherently bad at making hard societal decisions. You can see it in the need to pander to agriculture and coal special interests in order to pass climate legislation, and you can definitely see it in the current battle over healthcare and more broadly any political action around long-term fiscal issues like Social Security and Medicare entitlements. It is very easy for elected officials to kick hard decisions down the road, and as a result hard choices get put off and Social Security and Medicare end up as effective Ponzi schemes that dwarf Bernie Madoff.

Obviously these principles apply very directly to any sort of environmental sustainability issues, although rich-country democracies have actually done a pretty good job of non-climate environmental regulations (and China's track record is horrible).

There are probably other counterexamples waiting to be made of times when democracies did make hard, long-term decisions - readers?

Barrick bullish, buys out gold hedges

Barrick really wants to get out of its fixed-price gold hedges:
Barrick Gold will issue $3 billion in stock to eliminate all of its fixed-price gold hedges and a portion of its floating hedges, taking a $5.6 billion hit to third-quarter earnings, the world's top gold miner said on Tuesday.

For Barrick, which expects gold prices to keep rising, the deal should remove what has been a big drag on its shares, the legacy of the company's past reliance on hedging, a practice it abandoned in 2003.
Presumably they're buying out the contracts at market prices, making this a strong bullish bet on gold prices (not only do they now have directional exposure, they've also assumed the risk of earnings volatility that was hedged away before).

The supports rationale the NYT cites seems questionable, though:
A raging gold market also made the timing right, the source said.
Unless you are a big believer in the commodity super-cycle, a "raging market" should sound like a market peak, i.e. a good time to lock in long-term prices for your production... and yet Barrick is doing the exact opposite.

Only time will tell how this works out, but it is a naked directional bet - and not as sure a thing as media coverage would have you believe.

Update: The investor community seems to like it - the offering was so oversubscribed that they've raised their target to $3.5bn.

Update 2: The broader market isn't as convinced the move will add value for existing shareholders - Barrick is down 6%.

Update 3: My favorite finance blogger Felix Salmon agrees with me, only more harshly:
And then there are the hedges which just don’t make any sense at all: like Barrick Gold, which locked in low gold prices and is now spending a whopping $3 billion to unlock them at the top of the market. Anybody care to explain that one to me?