They call this stimulus?!

It's been a while since I've posted, but I just had to put up this article by Michael Boskin at Stanford. Here's the punchline for all the environmental economists out there:

As for energy policy, the president's cap-and-trade plan for CO2 would ensnare a vast network of covered sources, opening up countless opportunities for political manipulation, bureaucracy, or worse. It would likely exacerbate volatility in energy prices, as permit prices soar in booms and collapse in busts. The European emissions trading system has been a dismal failure. A direct, transparent carbon tax would be far better.
Moreover, the president's energy proposals radically underestimate the time frame for bringing alternatives plausibly to scale. His own Energy Department estimates we will need a lot more oil and gas in the meantime, necessitating $11 trillion in capital investment to avoid permanently higher prices.

So there would be both a price (cap and trade) and a subsidy (oil/gas "investment") on carbon? This is a serious mixed signal. I agree that the cap and trade system will likely be subject to political abuse and a carbon tax would be much more effective. If carbon offsets are allowed in this system (which I'm sure many lobbyists will support), then the system won't stand a chance at being effective in reducing polution, just ask Europe.

The Future of Energy!*

I ran across a very interesting prospective on the future of energy when I was browsing the net today. This piece compares the future of energy to the history of the internet. The similarities are striking and I think that it gives wise suggestions to the industry for future development. It also highlights about the only good point about the Farm Bill that I have heard:

"The best thing about corn ethanol is that taxpayer money is being misspent in the Middle West instead of the Middle East."

*Sounds very visionary, eh?

Sustainability in the Tar Heel State

I went to UNCW's Economic Outlook Conference today where the theme was sustainability. Besides the normal "our economy is in peril" outlook for the next year (which actually didn't turn out to be as pessimistic as the media would have you believe), the conference included a keynote speech by the director of energy for North Carolina and a few panels with local business leaders. What interested me the most was the keynote speech. The director mentioned multiple projects for energy conservation, recent regulations, as well as educational and training services that the state is providing. While all of these things are great (and some are quite surprising from a coal-powered state...), there was little mention of economic incentives. The closest thing to an economic incentive that was mentioned were subsidies for energy conservation projects and tax returns for other projects. While this is great, I wish I would've heard something about entering a CO2 permit system (such as the recently formed system in the NE...with fewer permits issued) or initiating a carbon tax. Maybe with a new president we will see more national attention on this issue as opposed to regional, but I'm not holding my breath.

China and a High Marginal Cost Curve?

According to this article at Bloomberg, China is calling for other, developed nations to pollute less so that it can pollute more. This would make sense if China's marginal cost curve was higher than other, developed nations. However, with the US saying that we're willing to talk to the UN about cutting our emissions as long as China and India are included, it makes negotiations seem unlikely. Possible solutions?...Do a study to see *how much higher* China's MC curve is than the US MC curve (as an aggregate). Although it will probably be higher, the large growth rate of China's GDP would have to be taken into account. I'm just hoping that we don't see a similar request from India with their $3000 car coming soon (read: 3000 pound polluting gorilla...).

First Post!

This is my first post here so I'm still trying to get a feel for it. I'll be posting here in the future on economics issues that interest me and on articles I steal (er...borrow) from other sites.

DM