Different math on Cash for Clunkers

In response to those who say that Cash for Clunkers was way too expensive as a way to reduce carbon emissions, Joe Romm has a different way of running the numbers:

Let’s assume the new cars are driven nearly 20% more over the next 5 years, and that the average price of gasoline over the next five years is $3.50. Then we’re “only” saving 140 million gallons a year or roughly $500 million a year. The $3 billion program “pays for itself” in oil savings in 6 years. And most of that oil savings is money that would have left the country, so it is a (small) secondary stimulus.

Using a rough estimate of 25 pounds of CO2 per gallon of gas (full lifecycle emissions), then we’re saving over 1.5 million metric tons of CO2 per year — and all of the ancillary urban air pollutants from those clunkers — for free.

On one hand, I see his point; on the other hand, using this logic, any cash transfer from the government to the population could be considered "a stimulus," absolving the government of any mandate to be cost-effective with its programs. Since this particular "stimulus" pays out gradually over the course of six years, its relevance to the current recession is basically zero. So in conclusion, this isn't the kind of fiscal responsibility I'd like to see the government displaying given the current budget outlook.

"Price collar plus"

With Barbara Boxer considering a modified price collar for the Senate version of the climate bill, Joe Romm points to his preferred version, "price collar plus".

For context, here the Brookings Institute on the benefit of the price collar:

By preventing the policy from being either unexpectedly lax or unexpectedly stringent, a price collar protects both investors in green technologies and households and preserves strong incentives to abate.

There's broad agreement that price floors are a good idea since they reduce the downside for important investments; price caps are more controversial, because cap-busting safety valves run counter to the very principle of cap-and-trade.

Enter price collar plus, in which the ceiling is maintained by auctioning additional credits from a "strategic reserve", such that "the allowances the government sells are, to start, skimmed off of the emissions caps from 2012 to 2050." In other words, if the price gets too high, you borrow allowances from future years. Joe thinks this is win-win:

Indeed, fence-sitting Senators and industries can legitimately see price collar plus as achieving stronger cost-containment protection than their analysis suggests the House bill now provides, including protection against speculators running the permit price up, while progressives can legitimately see PCoP as achieving better environmental outcomes than their analysis suggests the House bill now provides.

I agree that price collar plus is a better mechanism than simply auctioning off additional allowances created from thin air, but the positive outcome only holds if the cap is ironclad in the later years we'd be "borrowing" GHG allowances from. And given the vulnerability of any piece of legislation to politically-driven meddling down the road, this strikes me as a little bit like addressing government budget overruns by adding debt for future generations to pay off.

How much time does blogging take?

Joe Romm, the prolific heart and soul of Climate Progress, sheds some light on his time commitment to blogging:

I’m also trying a small change in my blogging style, to accommodate this trip and the time I need to spend working on my book through mid-September.

Normally, about 2/3 of my posts take me some 60 to 90 minutes to write and about 1/3 take 90 to 180 minutes. I’ve been trying to do more 30-minute posts in the last few days, in case you hadn’t noticed, and I expect to continue that for another month. If it proves successful, I’ll keep doing it.

For someone who posts 5-10 times a day, that is a lot of time!! It does make me feel better about not being able to crank out such lengthy, well-researched and well-cited posts all the time (OK, probably ever, and rarely even close).

When I first started People and Resources I was so excited that I dedicated quite a bit of time to it; now the initial excitement is wearing off and I am lucky to find 4-5 hours per week given my other professional and personal commitments. Today I've managed 6 posts in an hour, which feels reasonably efficient (but they were all pretty short and none had particularly deep analysis).

I guess we will see how it goes and where this adventure takes us!! And I wish Joe luck with his goal of writing more 30-minute posts.

Climate Progress freaks out about Peak Oil

Proving that The Oil Drum has no monopoly on Peak Oil fanaticism, Climate Progress freaks out based on an interview with International Energy Agency chief economist Fatih Birol. It's perhaps telling that even The Oil Drum itself doesn't interpret the interview so dramatically.

The crux of the post is this synthesis, apparently extrapolated from the decline in production in existing fields and the IEA quote that current production is "patently unsustainable":

The IEA’s work makes clear that for oil to stay significantly below $200 a barrel (and U.S. gasoline to be significantly below $5 a gallon) by 2020 would take a miracle.

Unfortunately, going through their arguments I can't quite make the logical connection between the IEA work and that conclusion (unless one makes the logical leap that a peak in physical production must necessarily coincide with $200/bbl oil). The Climate Progress argument on Peak Oil is basically that the market can't adjust by itself, so we need the government to help it. I tend to disagree because:

1) High prices have been proven to be a very effective mechanism for "demand destruction", much more so than government measures like fuel efficiency standards in the U.S. - partly because of the Jevons Paradox, partly due to substitution, and partly because the U.S. constitutes a shrinking proportion of global petroleum consumption.

2) While the easy oil is dwindling, known oil reserves are nowhere near exhausted. Canada and Venezuela are both estimated to have reserves in oil sands equal to the entire world's reserves of conventional crude. Brazil recently discovered massive deepwater deposits, and there are likely similar deposits elsewhere in the world's oceans, waiting to be found. The Arctic may hold as much as 20% of undiscovered oil and gas reserves. Yes, these reserves cost more to producer than the archetypal Saudi onshore gusher, but last I checked oil companies were estimating $60-100/bbl breakeven for the Alberta tar sands and $40-60/bbl breakeven for Brazil's pre-salt reserves - nowhere near the $200/bbl doomsday prediction. And no, oil sands aren't that much worse for climate change than other kinds of oil.

Physical oil production may well peak in the next decade, but I don't yet see compelling evidence for such a steep fall-off from that point, and I think some people underestimate the power of the market - unabetted by any beneficent government intervention! - to adjust in response to price signals. So for now I find this degree of hysteria unwarranted.

Update: Tim Haab at Environmental Economics takes a similar position:

In my opinion, prices are the only (and simplest) mechanism powerful enough to provide the incentive for the widespread changes in opinion needed for industrial change of this magnitude. Unfortunately, some might interpret that as a call for governmental manipulation of prices. Please don't interpret it that way. That would be the wrong interpretation of what I'm saying and I might cry.

My position is simple: I'm confident that the market will take care of the prices all on it's own. When prices rise, people will take notice. But I'm just an economist...what do I know?