Economy Divorces Oil

The central myth on which opposition to climate legislation rests is crumbling away.  This myth states that the American economy is completely dependent on fossil fuels, such that any increase in the price of fossil fuels threatens economic growth—an especially potent threat in a fragile economy.  Indeed, the myth of the economy’s linkage to fossil fuels is so pervasive that even progressive outlets like ClimateProgress argue that high oil prices could “smother the nascent economic recovery,” repeating the conventional wisdom that “a sustained $10 increase in oil prices would shave about two-tenths of a percentage point off economic growth.”

But things aren’t working out as conventional wisdom might have predicted.  I’ve long maintained that no matter what energy prices are, markets will work to mute the impact of higher prices; “if government policy increases the price of energy, smart businesses will invent new technologies that reduce the cost of compliance and spawn entire new industries.”

And now we’re beginning to see evidence that I was right, and economic growth is decoupling itself from energy consumption.  In the New York Times:

The increase in energy prices is beginning to resemble the rise in 2008. But this time, the American economy may be better prepared for higher fuel costs.

Gasoline prices have risen by nearly a third in the last year, and oil costs more than $100 a barrel for the first time in more than two years, driven by fears of extended Middle East supply disruptions and increased demand from an improving global economy.

While the latest surge in energy prices is likely to cause some pain and slow the recovery from the recession, economists say the spike is unlikely to derail the rebound unless prices rise a lot further.

One big reason is that consumers and businesses have learned lessons from the last oil shock. Many drivers, for example, have given up their gas-guzzling sport utility vehicles. Automakers, which are selling more fuel-efficient cars than five years ago, reported higher sales in February even as gas prices rose.

Industries like airlines and trucking, which are most severely affected by fuel prices, have passed on their higher costs almost immediately instead of waiting for the price increases to hammer profits.

And much of the rest of the United States economy is far less dependent on oil than it used to be. Oil consumption has dropped more than 5 percent since 2005, while natural gas use has risen 10 percent. A glut of domestic natural gas has kept prices low, providing a lift to industries like chemicals and pharmaceuticals and tempering the price of electricity, much of which is generated from natural gas.

[…]

But so far, consumers and businesses seem to have adapted to the higher prices much more quickly than in 2008, when gasoline reached an average of $4.11 a gallon and oil topped $145 a barrel. In part, that is because the last oil shock helped prompt a new focus on energy efficiency.

Take automobiles, for example. Congress got hundreds of thousands of the worst gas guzzlers off the road with the cash-for-clunkers program. And automakers changed their product mix to emphasize more small cars and fewer sport utility vehicles, reflecting consumer demand and tougher fuel-efficiency mandates from the government.

As a result, the industry is better prepared for high gas prices. Mike Jackson, the chief executive of AutoNation, the country’s largest chain of dealerships, said half of the vehicles on his lots are now cars, up from 40 percent in 2008, and just 8 percent are sport utility vehicles, down from 15 percent three years ago.

In other words, individuals and companies responded to a combination of high oil prices and government mandates by finding ways to do the same things with less oil.  And now that we’re facing high oil prices again, those government mandates and adaptations are paying off, insulating budgets from the effects of costly oil.

It’s very clear: over the long term, high energy prices don’t mean less growth—they mean less energy will eventually be needed to fuel the same growth.

Global Warming Hits Wisconsin

Via Paul Krugman, global warming must really be getting out of hand if there are palm trees growing in Wisconsin… or else Fox News just showed stock footage of protests in sub-tropical areas to create the illusion of violent union protests.  Maybe both?

The real GOP response

Was anyone else thinking this while Paul Ryan was speaking?

Even Exxon believes in global warming

It’s an irony overload: Exxon Mobil is partnering with the US Navy to understand how the global warming it helped cause will affect shipping routes:

Executives from top U.S. companies, including Wal-Mart and Exxon, are teaming up with the U.S. Navy this week in a “gaming” exercise to study how a warming Arctic Ocean and the widening of the Panama Canal could dramatically change global shipping.

The complex two-day exercise, which begins Wednesday at the Naval War College in Newport, Rhode Island, will look at the security concerns and massive investments that may be necessary to cope with the shake up of global trade routes.

[…]

Other companies taking part in the “Global Shipping Game” include Lowe’s, shipping giant Maersk, Raytheon Co, computer maker Dell, Zurich Insurance, toymaker Hasbro Inc, General Electric Co and railway operator CSX.

[…]

Just a few years later, he says, the warming of the Arctic Ocean will open the world’s fifth ocean to fishing, tourism, oil and gas drilling, and eventually commercial shipping.

“We have not seen a change like that since the end of the ice age,” he told a conference last month. “It’s one that will have a significant effect on trade and on prosperity.”

ARCTIC SHIPPING ROUTES

A major Pentagon review released last February urged the military to reduce the risks associated with climate change, including cutting its dependence on fossil fuels.

Roughead said the Navy was working hard to develop biofuels and improve energy efficiency, but also needed to think about the impact of rising sea levels on big coastal areas and changes in the formerly frozen Arctic.

Navy scientists say commercial shippers could save 5,000 miles and lots of fuel by using sending goods from Asia to Europe via the Arctic beginning in the mid-2030s, when they expect ice-free conditions for a full month each year.

It’s quite telling, really.  Even while many people remain ignorant of global warming, profit-driven businesspeople are already planning for a warmer world.  If even Exxon is banking money on an ice-free arctic, isn’t it about time the rest of us acknowledge that this global warming thing is real?

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“Compromise” is toilet talk

In light of the controversy over President Obama’s latest unilateral concession on freezing federal employee pay, I’m starting to realize that compromise is a lot like toilets.

Guys will understand this – in a row of urinals in a public bathroom, there are usually three situations:

1. No privacy dividers between toilets.  You feel a bit awkward, but at least the building saves money by not having to install dividers.  There’s no benefit, but also no cost.
2. Big privacy dividers between toilets.  These are nice because they make it where you can’t even see the person next to you… but they do cost the building money to install.  There’s high cost, but also high benefit.
3. Medium-sized privacy dividers between toilets.  These aren’t big enough to actually afford any privacy, but still cost the building a little bit of money to install.  In other words, they give you none of the benefit at some of the cost.

And unfortunately, the realities of politics often force us into the last category of low benefit at medium cost.

In America, we like to pretend that both extremes are wrong, and the truth is usually somewhere in the middle – that if you give and take from each side, you end up with the best of both worlds.  In reality, you usually need to go big or go home: each extreme usually has it’s upside and downside, but if you take a little from both, you end up with the worst of both.

Climate science is like gravity

If there were an industry whose profits depended on falling up, gravity would be a political issue.

Fortunately, airlines make money by using technology to overcome gravity rather than denying its existence.  So if there’s ever a physicist on TV explaining how gravity works, CNN will never feel the need to “balance” out his views with a Heritage Foundation analyst.

“I don’t know whether your grasp of theology or meteorology is more appalling”

In light of Rep. John Shimkus’s recent controversial remarks that we needn’t worry about global warming because “God said the Earth would not be destroyed by a flood,” I thought this was highly relevant:

Why I’m a Climate Hawk

A few people have asked me why I care about climate.  Why get worked up, they ask, about something that won’t get really bad until after I’m dead?  The question’s a bit confusing for me, because my concern is motivated by the same basic values I think drive most Americans to do what we do—and they have little to do with rational self-interest.

Here are the five reasons I’m a climate hawk:

5. Property rights – If I were to sit in my yard and spray a garden hose through your window into your house, you would have every right to be mad at me.  You would even have the right to ask the government to make me stop.  Why?  Because I’d be violating your property. By the same token, factories that burn fossil fuels dump carbon dioxide into my atmosphere, and the resultant climate disruption will damage property values worldwide, whether beaches swamped by rising seas or farmland turned to desert.  It seems reasonable that property owners and air breathers should have a say in whether polluters can dump pollution onto their property—or at least to have polluters compensate them for damages.  (Credit to Matt Yglesias for the garden hose analogy)

4. Markets – I have no doubt in the market’s almost endless ability to produce innovation in response to changes in the business environment—including changes such as a price on carbon. Where bureaucrats see barriers, innovators and entrepreneurs see opportunity, inventing previously unimagined solutions to get around these barriers—as long as the market tells them there’s profit to be had.  The problem is, when the dominant players are permitted to dump climate-disrupting pollution onto other people’s property for free, it allows them to charge artificially lower prices for their products, undercutting innovative startups’ ability to challenge their dominance. That’s why I support pricing carbon properly to allow the market to do its work.

3. America – America doesn’t need a permission slip from other countries to do what’s right.  That’s why I’m tired of Negative Nancys saying we should wait around for other countries to do something about climate before we do anything ourselves.  Since when does America base its actions on what Tuvalu does?  Being a leader means taking personal responsibility to do what’s right, whether or not others follow—and if you’re a strong enough leader, others will follow.   So when I hear pessimists saying America should just wuss out on climate and let developing countries take the lead, it makes me think, these ostensible patriots must not think America has much left to say on the world stage.

2. Jobs – The engine of job creation isn’t just small business—it’s new business.  Research cited in the Wall Street Journal shows that nearly all jobs created in the US since 1980 were in firms younger than 5 years old; more recent NBER studies confirm this.  But since few new firms turn a profit in their early years, tax rates have almost nothing to do with their success.  This means that the best way to create jobs isn’t by cutting taxes, but rather by removing barriers to entry for new firms, as well as challenging existing players to do more with what they have (especially when big firms are sitting on $1 trillion of idle cash).  Carbon pricing, loan guarantees for clean energy and efficiency, and other common sense solutions would create markets for new firms to enter, and give existing companies the certainty they need to launch new business units.  And this means jobs—real jobs, making stuff, not just sticking our hands in the next guy’s pocket.

1. Personal responsibility – While I certainly believe that addressing climate disruption makes both patriotic and economic sense, that’s not what this issue ultimately boils down to.  For me, it’s a simple issue of personal responsibility – and personal responsibility doesn’t go away when we walk into our place of business.  I’m all for pursuing our individual self-interest, as long as we play within the rules of the game.  At the very least, that means not pillaging what belongs to others as we go about our business.  This is true from the mundane to the cosmic.  If I deplete the last of the office coffee, it’s my responsibility to renew that resource by putting on a new pot for others to enjoy (even if that coffee is a crude black sludge that people only drink because Starbucks is more expensive and a little farther away).  Likewise, as a Christian, I was always taught that we’re to be responsible stewards of the earth God has given us—to work, care for, and preserve its resources, not to plunder, deplete, and move on.  To do the latter is the way of the locust, and Biblically speaking, we call that a plague.

Those are my reasons.  What are yours?

Climate craps: Global warming and uncertainty (or what to say when you hear “the science is not settled!”)

[Note, this is a re-post from my old blog, WAG]

First was Snowpocalypse. Then Snowmageddon. And now the third major snowstorm to hit DC this year… Snowtf? I’m not even kidding, people are snowboarding down Lee Highway outside my window.

So naturally, it’s time for a global warming post. And NYT journalist Andy Revkin’s provided a good starting point, dropping an illuminating bit of insight in a post Tuesday evening:

But after reviewing the chapter myself just now, I have to say that at least one passage — as far as I can tell — did not contain a single caveat and did not reflect the underlying body of evidence and analysis at the time (or even now):

Human-induced warming of the climate system is widespread. Anthropogenic warming of the climate system can be detected in temperature observations taken at the surface, in the troposphere and in the oceans.

I have yet to see anyone provide definitive evidence — with no error bars — that the fingerprint of human-generated greenhouse gases (or other emissions or actions) is unequivocal. The only thing described as “unequivocal” in the report was the warming, not the cause, unless I really haven’t been paying attention for the last two decades.

The language around “no error bars” is what I wanted to call out here, because it reflects a widely held belief that there’s a bright line between certain and uncertain – and more importantly, that it’s prudent to wait until we’re “certain” about something before taking any action. Indeed, it’s this notion – that there’s such a thing as “certainty” in science – which enables deniers and delayers to get away with spouting alarmist nonsense like, “the science is not settled!” and “we shouldn’t risk trillions of dollars in GDP until we know for certain humans are causing global warming!”

The problem is, as any true skeptic knows, there’s no such thing as certainty in science – at least to the degree that a scientific study could ever hope to show “no error bars.” Remember, even something as obvious as gravity still has scientific uncertainty associated with it; Einstein proved that gravity’s nature was different than how Isaac Newton imagined it, and even Einstein’s theories are not reconciled with Quantum Mechanics.

This is especially true for climate science, which is intimately concerned with predicting the future. The earth is not a controlled experiment that allows scientists to add CO2 and empirically test the precise amount of warming that results. There are simply too many variables not in scientists’ control. To predict the consequences of carbon emissions, we must therefore rely on climate models built from our best understanding of how the climate system works. And yes, those models are uncertain, with error bars greater than zero: as with any prediction of future events, you inherently can never be certain you’re right until those events have already occurred. Certainty can only exist with hindsight.

But here’s the kicker: once we’re in a position to make hindsight judgments on CO2, once we’ve reached the point that we can empirically assess CO2’s impact on climate in the real world, it will be too late to avert the effects. This is because once CO2 gets into the atmosphere, it takes several decades for the temperature to catch up with the new energy imbalance (see here, here, and here for explanations).  So even if you stopped all CO2 emissions today, there would still be warming left “in the pipeline.”  Moreover, it’s likely that once warming crosses a certain threshold, certain feedbacks will take over that drive continued warming regardless of what happens with CO2. Choices we make today commit us to consequences tomorrow.

Thus, as in any facet of life, we must make decisions today in a world of uncertainty, based on our best predictions of what will happen tomorrow; past a certain point, debating levels of certainty is a fruitless recipe for dithering and delay.  A businessman who waits for certainty that an investment will pay off will lose the opportunity to a bolder entrepreneur.

Similarly, by the time we’ve received empirical confirmation of how much humans are contributing to global warming, it will be too late to do anything about it. We can’t be certain whether a doubling of CO2 will ultimately result in 1.1 degrees C or 6.4 degrees C of warming, but we can make a pretty good guess, and the latter end of that spectrum would result in a nightmarish world out of “science fiction.”  It seems prudent, therefore, to invest a small amount of GDP as insurance against the risk of catastrophe.  (Indeed, as The Economist points out in making this argument, the investment required to curb global warming is less than the world spends on insurance every year). 73% of economists and the world’s biggest re-insurance company agree with me.

The bottom line: Just because we are not certain whether or not bad events will happen in the future does not mean we should not take action to hedge against those risks. By definition, if your condition for acting on greenhouse gases is 100% certainty in the science, then we can never act in time to make an impact. If you want to gamble our future by continuing to emit greenhouse gases, the question becomes, do you feel lucky? Well, do ya punk?

Just don’t expect the rest of us to play at your climate craps table.

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[Note, this is a re-post from my old blog, WAG]

I liked this quote (from an interview with the McKinsey Quarterly because it aligns well with what I’ve said before:

And then on climate change, our opinion—and it’s my opinion, this is a very personal thing—is that there is sufficient evidence of an increase in the level of emissions in the atmosphere to be concerned about the effect that it may have on the climate. But the science of climatology is by no means complete, and it is going to take a long time before we really know what the effect of these emissions is going to be. In the meantime, it is prudent and reasonable to try to reduce those emissions as much as we can.

Remember, that’s not a hemp-wearing hippie talking. It’s not Al Gore, or Joe Romm, or any number of climate activists. It’s Andrew Gould, CEO of a $23 billion a year oil services company—a company with a vested interest in climate change not being real. If even he can admit that climate change is probably real, and that it makes sense to invest a small percentage of our wealth in averting its worst effects, surely even the most skeptical libertarian can admit that climate change may not be a hoax after all.

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