Planet Carbon

By Joseph Romm

A contest to explain something that isn't true -- what a novelty. If I were running a contest, it would be, "What is a carbon cap and why should it not cover the transportation sector?" But I digress.

So I get an email from the Environmental Defense Fund asking me to direct my readers to this video/graphics competition:

Explain to America how a carbon cap will solve our oil addiction

Many scientists, economists, environmentalists and business leaders agree that a cap on carbon emissions is the best way to cure our addiction to oil. But, quickly and vividly explaining how a cap will solve our energy problems is a challenge.

We need your help conveying this concept to the American people in a clear, brief, convincing and memorable way to stick in the public's consciousness-like the well-known shot of an egg frying that depicted "your-brain-on-drugs."

Actually, I don't really know any scientists, economists, environmentalists, and business leaders who think a carbon cap is the best way to cure our addiction to oil. It is possible I hang out with the wrong crowd. But I think it is more likely that they all understand something I've written about on my blog many times -- a carbon price is a lousy way to drive oil savings.

In fact, it is all but inconceivable that a carbon cap will solve our oil addiction (see "Peter Barnes' Cap & Dividend plan is fatally incomplete"):

The key facts to remember are that: "$50 per tonne of carbon corresponds to 12.5 cents per gallon of gasoline (PDF) or 0.5 cents per kilowatthour for electricity produced from natural gas at 53% efficiency (or 1.3 cents per kilowatt-hour for coal at 34% efficiency)."

That means a price of $400 a metric ton of carbon (whether achieved through a tax or a cap & trade system) would increase the price of gasoline a mere $1 a gallon. How much efficiency would that drive? Not bloody much! How do we know? How much efficiency did going from $2 a gallon to $3 a gallon drive? [Hint: Not bloody much.] Second, I was just in England, and they're paying over $8 a gallon -- how much more efficient are their cars than ours? [Hint: As of 2002, the average fuel economy of European Union vehicles was 37 miles per gallon, just a tad more than what the new energy bill requires, and their taxes are typically some $2 a gallon above ours.]

This is so analytically obvious that the nonpartisan Congressional Budget Office just issued a report, "Climate-Change Policy and CO2 Emissions from Passenger Vehicles" to make this precise point:

Charging a price for CO2 emissions would raise the price of gasoline, but that increase–and the resulting decrease in vehicle emissions–would be relatively small. Most of the reduction in CO2 emissions would occur in other sectors.

The initial impact on vehicle emissions would be particularly small: People could drive less and at slower speeds, and some could switch to public transit, but in the short run they would have few other alternatives. Over time, consumers could respond to higher gasoline prices by buying more fuel-efficient vehicles and reducing their commuting distance when an opportunity arises. Substantial increases in gasoline prices in recent years have triggered measurable responses of both types. But a CO2 price high enough to induce sizable reductions from other sources of emissions would have only a small effect on vehicle emissions of CO2. Recent changes to the automobile fuel economy standards–greatly increasing their stringency–will result in a substantial decline in vehicle emissions whether gasoline prices increase or not.

Remember, the 2007 "Energy Independence and Security Act," requires new car fuel economy standards in 2020 to be at least 35 miles per gallon. As CBO notes,

… gasoline prices might have to rise above $6.50 per gallon–for example, from a CO2 price that added $2.00 or $2.50 per gallon to gasoline prices–for the average fuel economy of new vehicles in the United States to approach the 35 mpg that the new CAFE standards will require. But the CO2 prices contemplated in current U.S. climate legislation and in prominent international policy analyses would add much less than $2.00 to the price of gasoline. Thus, such pricing, by itself, would probably not increase average fuel economy beyond what the CAFE standards will require.

And, needless to say, 35 mpg does not bring us anywhere near curing our oil addiction. We're going to need at least triple that.

The bottom line is that a carbon cap is utterly irrelevant to curing our oil addiction. I'll repeat something I've said many times: No country has successfully introduced a mass-market alternative fuel vehicle without the help of major government incentives and mandates.

If you want to cure our oil addiction, while substantially reducing greenhouse gas emissions, you must replace the vast majority of the vehicle fleet with superefficient vehicles, plug-in hybrids, and pure electric cars while replacing essentially all of the grid with zero-carbon electricity. But the per-mile cost of driving on electricity is already one-fifth that of the per-mile cost of driving on gasoline.

So the key to ending our oil addiction in a climate-friendly way is not increasing the price of carbon through a cap. The key is much tougher fuel economy standards along with incentives and mandates for plug in hybrids and electric cars. [And, yes, pushing hard on cellulosic biofuels, especially for long-distance driving, trucking, and air travel, would also help (see "Are biofuels a core climate solution?").]

So my recommendation is that EDF cancel the contest and use the money to buy some tons on the European market and retire them.

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.

Posted at Fri, 10 Oct 2008 16:39:34 -0700 | Permalink

Posted at Fri, 10 Oct 2008 23:29:14 -0000 | Permalink

By Kate Sheppard

On Wednesday, John McCain told Fox News' Sean Hannity that his VP pick Sarah Palin is "probably one of the foremost experts in this nation on energy issues," and reaffirmed his desire to put her in charge of energy policy in his administration.

But on Thursday, Palin once again mangled the facts about energy issues, wrongly asserting to a crowd in Wisconsin that there's some sort of congressional ban on oil exports.

A crowd member told her he had heard that 75 percent of Alaska's oil is being sold to China, and if that's true, he wanted to know why.

"No. It's not 75 percent of our oil being exported," Palin said, suggesting that some of Alaska's oil is going abroad, but not that much, according to the Associated Press.

"In fact, Congress is pretty strict on, um, export bans of oil and gas especially," she continued.

The AP reporter fact-checked the assertion:

No Alaska oil has been exported since 2004, and little if any since 2000, according to the Energy Information Administration and the Congressional Research Service.

And Congress has never imposed outright bans on oil exports. Congress prohibited exports of Alaska oil in 1973 when the Alaska oil pipeline was built. But that ban was lifted in 1996 when there were large volumes of Alaska oil coming down from the North Slope and U.S. demand was soft.

The Alaska ban has never been reinstated.

Though natural gas exports must be approved by the Energy Department, there isn't the same stipulation for oil. According to the Energy Information Administration, more than 95 million barrels of Alaskan oil -- or about 2.7 percent of the total produced in Alaska -- were exported between 1996 and 2004, the majority of it to South Korea, Japan, China and Taiwan. The EIA states that there have been no Alaskan oil exports since 2004, but that's not because of any congressional restriction on exports.

This isn't the first time that Palin has misstated the facts about Alaska and energy supplies. Last month, she claimed that Alaska provides "20 percent" of the nation's energy. In fact, it provides just 3.5 percent, and several fact-checking sites have since thoroughly debunked her claim. And the natural-gas pipeline she keeps touting as evidence of her success in energy policy? It only exists on paper, and the necessary federal approval is still years away.

Posted at Fri, 10 Oct 2008 15:59:44 -0700 | Permalink

As people following our energy situation are aware, many if not most energy stocks are down 60-70% or more from their summer highs. In a bizarre but not completely surprising announcement after the close (we knew SOMEONE was selling), it was announced that Chesapeake, (the US largest natural gas producer) CEO Aubrey McClendon has involuntarily been liquidated out of his rougly 30,000,000 remaining shares of CHK in the past 3 days due to margin calls. CHK, which in July was over $70 per share, hit as low as $11.99 today, and then had a 38% rally to close at $16.52 on 5 times normal volume. We don't typically comment on individual stocks or price movements on TOD but this and related developments will have an impact on the industry's future. In additon to McClendons announcement, Chesapeake also announced further reductions in capex budgets going forward which means lower natural gas production, and thus higher prices, ceteris paribus. To make things more complicated, the majority of complicated financial hedges undertaken by CHK, are at Morgan Stanley, which fell to single digits today, (but is rumoured to be being bought out by Citi tonight after the close). What this all might mean for natural gas is below the fold.
[break]

"I am very disappointed to have been required to sell substantially all of my shares of Chesapeake. These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis. In no way do these sales reflect my view of the company’s financial position or my view of Chesapeake’s future performance potential. I have been the company’s largest individual shareholder for the past three years and frequently purchased additional shares of stock on margin as an expression of my complete confidence in the value of the company’s strategy and assets. My confidence in Chesapeake remains undiminished, and I look forward to rebuilding my ownership position in the company in the months and years ahead.”

This news was on top of an announcement to substantially reduce 2009 and 2010 capital expenditures (drilling).

Many (all?)natural gas companies stocks have been in freefall this week, though in hindsight that was perhaps fast money front running the rumour of margin calls on McClendon. But concerns about CHK were real, as pointed out in this Bloomberg story

Investors are concerned that Chesapeake and other U.S. oil and gas producers have hedging contracts with financial firms and other counterparties that won't be able to pay for their output at the agreed-upon prices because of the global credit crisis, said Robert Goodof, who helps manage $25 billion at Loomis Sayles & Co. in Boston.

Chesapeake also has so-called knockout swap contracts on more than one-third of its 2009 production, and those deals don't obligate the buyers to take gas when prices drop to $6.28 per thousand cubic feet of the heating and power-plant fuel, according to analyst Joseph Allman of JPMorgan Chase & Co. in New York. U.S. gas futures dropped to $6.65 today and have plunged 50 percent since the end of June.

According to Allman, Morgan Stanley is Chesapeake's biggest counterparty. Morgan Stanley shares fell 39 percent, dropping for a fifth straight day, after Moody's Investors Service said it may cut the investment bank's credit rating.

Allman said that if gas falls to $6 per thousand cubic feet, Chesapeake would have to sell $3.5 billion of assets.

``In our view, getting through 2009 is tough, but Chesapeake has a lot of non-producing assets it could sell and discretionary spending it could cut,'' Allman said.

Investors were ostensibly concerned about a natural gas train wreck if Morgan Stanley were to go under, that would cause Chesapeake to follow. I just cannot imagine that happening. The government might let Chuck E Cheese go under, but not our largest natural gas producer. I was thinking during the day that the financial types that were shorting Chesapeake and other nat gas companies into the ground (and buying Credit Default Swaps just like they did with Lehman and AIG) would pat themselves on the back for making good coin, then go home to find no heat, plastic bottles or diapers. Yet another juxtaposition of money and energy...

Finally, as discussed 2 weeks ago after the first cap-ex cut by Chesapeake, the marginal cost of natural gas is over $8 per MCF, and the average cost being close to $6 in North America. Natural gas is on average getting more expensive to procure. Now that capital is less available, we are going to see more and more production cuts. We need to analyze what it really means - 5% drop? 15% drop? Aubrey McClendon has been seen on TV advocating the Pickens Plan to use natural gas as a vehicle fuel. I wonder if recent events will change the landscape of our natural gas industry and this plan. At prices during mid-day today, I was wondering if ExxonMobils $40 billion in cash (less $10 billion in debt they could just assume) might be put to work. The landscape has seemingly changed daily. I think even people who have never had an ecology class or never heard of theoildrum understand, or at least have an inkling, that natural gas and oil are more precious than dollar bills. Is it too early for nationalization of the energy industry?

Here are some previous TOD posts discussing the natural gas situation in North America:

An Update on the Energy Return on Canadian Natural Gas
At $100 Oil, What Can the Scientist Say to the Investor?
The Energy Return on Time
Peak Oil - Why Smart Folks Disagree - Part II
Ten Fundamental Truths about Net Energy
The North American Red Queen - Our Natural Gas Treadmill
Energy From Wind - A Discussion of the EROI Research
A Net Energy Parable - Why is EROI Important?
Natural Gas and Complacency

Please add any comments or links below.

Posted by Nate Hagens on main, Miscellaneous, Aubrey McClendon, capex, chesapeake, natural gas, original at Fri, 10 Oct 2008 22:52:52 -0000 | Permalink

By Tom Philpott

"They have a whole range of new tools from ... all sorts of technical terms that I do not know. But they're working very hard. And [former Goldman Sachs banker, now Treasury official] Neel Kashkari will be in charge of that. He's setting up shop and trying to hire as many people as possible."

-- White House press secretary Dana Perino, responding to a question about the tools left for the government to use to contain the financial crisis

Posted at Fri, 10 Oct 2008 15:28:00 -0700 | Permalink

By David Roberts

This slide comes from a recent powerpoint presentation by FERC Commissioner Jon Wellinghoff -- hardly what you'd call a green radical (click for a larger version):

Note that the cheapest sources of new delivered electricity are also the cleanest. Happy news, right?

Posted at Fri, 10 Oct 2008 14:50:28 -0700 | Permalink

Posted at Fri, 10 Oct 2008 21:48:00 -0000 | Permalink

By Guest author

This is a guest post by Hope Shand, research director of ETC Group, a civil-society organization that tracks new technologies, monitors corporate concentration, and supports food sovereignty.

-------

Synthetic biologists, a brave new breed of science entrepreneurs who engineer life-forms from scratch, are holding their largest-ever global gathering in Hong Kong this week, known as "Synthetic Biology 4.0."

Although most people have never heard of synthetic biology, it's moving full speed ahead fueled by giant agribusiness, energy and chemical corporations with little debate about who will control the technology, how it will be regulated (or not) and despite grave concerns surrounding the safety and security risks of designer organisms. Corporate investors/partners include BP, Chevron, Shell, Virgin Fuels, DuPont, Microsoft, Cargill, and Archer Daniels Midland.

"Bankrolled by Fortune 500 corporations, synthetic biologists meeting in Hong Kong are promising a green, clean post-petroleum future where the production of economically important compounds depends not on fossil fuels -- but on biological manufacturing platforms fueled by plant sugars," explains Jim Thomas of ETC Group.

"It may sound sweet and clean, but this so-called sugar economy will catalyze an unprecedented corporate grab on all plant matter as well as destruction of biodiversity on a massive scale," warns Thomas. ETC Group and other civil society activists will speak on a panel during SynBio 4.0.

A new 12-page report from ETC Group, "Commodifying Nature's Last Straw? Extreme Genetic Engineering and the Post-Petroleum Sugar Economy," warns that corporate biorefineries fueled by plant sugars will create a massive demand for agricultural feedstocks, which threatens to devastate marginalized farming communities, deplete soil and water, and destroy biodiversity.

The future bio-economy will rely on "extreme genetic engineering." This suite of technologies is still in early stages of development. It includes cheap and fast gene sequencing, made-to-order biological parts, genome engineering and design, and nano-scale materials fabrication and operating systems.

The common denominator is that all these technologies -- biotech, nanotech, synthetic biology -- involve engineering of living organisms at the nano-scale. This technological convergence is also driving a convergence of corporate power.

Synthetic biology enthusiasts envision a sugar economy" where industrial production will be based on biological feedstocks (agricultural crops, grasses, forest residues, plant oils, algae, etc.) whose sugars are extracted, fermented and converted into high-value chemicals, polymers or other molecular building blocks.

The quest for the sugar economy is fueling high-dollar deals in the university-industrial complex, most notably the $500 million alliance between BP and University of California Berkeley. Corporate alliances also involve synthetic biology start-ups and some of the world's largest corporations - including Big Oil, Big Pharma, chemical firms, agribusiness giants, automobile manufacturers, forest product companies, and more. For example:

• Amyris Biotechnology is attempting to modify the genetic pathways of yeast so that it ferments sugars to produce longer chain molecules of gasoline, diesel and jet fuel. It recently signed a deal with Brazil's largest sugar producer Crystalsev to turn sugar into commercially available diesel fuel within two years.

• Solazyme, Inc., which partners with Chevron, recently announced that it has successfully produced the world's first microbial-derived jet fuel by synthetically engineering algae to produce oil in fermentation tanks.

• DuPont, in partnership with Genentech and sugar giant Tate & Lyle, engineered the cellular machinery of an E. coli bacterium so that it ferments corn sugar to produce Sorona fiber - a product that Dupont says will eventually replace nylon. It takes six million bushels of corn to produce 100 million pounds of the key ingredient in Sorona fiber - the annual output of DuPont's Tennessee-based (USA) bio-refinery.

According to biotech industry estimates, it takes a minimum of 500,000 acres of cropland (that is, the crop residues or "wastes" from that area) to sustain a moderately-sized, commercial-scale biorefinery.  Advocates insist that the "food vs. fuel" debate will be irrelevant because feedstocks will eventually come from cheap and plentiful "cellulosic biomass"- plant matter composed of cellulose fibers (including crop residues such as rice straw, corn stalks, wheat straw; wood chips; and dedicated "energy crops" such as switchgrass, fast-growing trees, algae, etc.).

Synthetic biology's grand vision of a post-petroleum economy depends on biomass - whether derived from "energy crops," trees (including GE trees), agricultural "wastes," crop residues or algae. If the vision of a sugar economy advances, all plant matter become a potential feedstock. Who decides what qualifies as agricultural waste or residue? Whose land will grow the feedstocks? An article in the February 2008 issue of Nature suggests that synthetic biology approaches "might be tailored to marginal lands where the soil wouldn't support food crops." (emphasis added)

The implications, especially for marginalized farming communities and poor people in the South, are profound. At a May 2006 meeting of synthetic biologists, Nobel laureate Dr. Steven Chu pointed out that there is "quite a bit" of arable land suitable for rain-fed energy crops, and that Latin America and Sub-Saharan Africa are areas best suited for biomass generation. Failing to learn from the first-generation agrofuel train wreck, The Economist naively suggests that "there's plenty of biomass to go around" and that "the world's hitherto impoverished tropics may find themselves in the middle of an unexpected and welcome industrial revolution."

"Haven't we learned anything from the disaster of first generation agrofuels?" asks Camila Moreno of Terra de Direitos in Brazil. "Industrial agrofuels are driving the world's poorest farmers and indigenous peoples off their lands. Agrofuels are the single greatest factor contributing to soaring food prices, pushing millions from subsistence to hunger. With synthetic biology's sugar economy, the demand for plant biomass will increase exponentially -- not just for transportation fuels, but for plastics and chemicals as well. We're about to repeat the debacle of first-generation agrofuels on a more massive scale," said Moreno, who will be speaking at SynBio4.0.

Advocates of synthetic biology and the bio-based sugar economy assume that unlimited supplies of cellulosic biomass will be available. But can massive quantities of biomass be harvested sustainably without eroding/degrading soils, destroying biodiversity, increasing food insecurity and displacing marginalized peoples? Can synthetic microbes work predictably? Can they be safely contained and controlled? How will they be regulated?

No one knows the answers to these questions, but corporate enthusiasm for a sugar-coated, bio-engineered future is plowing forward.

"Once again, land, labor and biological resources in the global South are in danger of being exploited to satisfy the North's voracious consumption and reckless waste," observes Neth Dano of Third World Network, who will also be speaking at the conference. "We're seeing a new convergence of corporate power that is poised to appropriate and further commodify biological resources in every part of the globe," said Dano.

ETC Group will be blogging from Hong Kong during SynBio 4.0. Watch for updates.

Posted at Fri, 10 Oct 2008 14:04:05 -0700 | Permalink

Posted at Fri, 10 Oct 2008 20:58:19 -0000 | Permalink

In the UK the BBC News is reporting that Nature loss ‘dwarfs bank crisis’.

The global economy is losing more money from the disappearance of forests than through the current banking crisis, according to an EU-commissioned study.

It puts the annual cost of forest loss at between $2 trillion and $5 trillion.

The figure comes from adding the value of the various services that forests perform, such as providing clean water and absorbing carbon dioxide.

The study, headed by a Deutsche Bank economist, parallels the Stern Review into the economics of climate change.

This report helps put the current global financial situation into perspective. The world’s finances will mend again, have no doubt about that, but our forests are vanishing, some with little hope of recovery. The forests most at risk belong to countries, and people, that can ill afford the costs of preserving them, or who simply benefit financially from the ripping up of these precious resources. Carbon Planet has always proudly championed forestry, both reforestation and avoiding deforestation. As the current financial scandals play out, we’ll keep working hard, doing our part to help ensure that the world’s forests, and forest peoples, don’t get left behind. — DS

Technorati Tags: avoided deforestation, Climate Change, economics, financial crisis, forests, GFC, global warming, REDD

Posted by Dave Sag on Climate Change, The Carbon Economy, avoided deforestation, economics, financial crisis, forests, GFC, global warming, REDD at Fri, 10 Oct 2008 20:26:43 -0000 | Permalink

By Kate Sheppard

Last night, the PBS program Frontline hosted a sneak preview of its new global warming documentary, "Heat," which will air on Oct. 21. The film covers both the science and the politics of climate change, and we'll have more on that for you soon.

More interesting for political junkies, though, was the panel afterward, which featured Obama climate and energy adviser David Sandalow, who is also a senior fellow at the Brookings Institution, and Douglas Holtz-Eakin, a senior policy adviser for John McCain. The two began their remarks by noting how great it is to have two presidential candidates who agree that climate change is real, human-caused, and needs to be addressed.

"We have in this presidential campaign two candidates, both of whom have publicly committed to a cap-and-trade solutions to carbon and greenhouse gas emissions to address global warming." said Holtz-Eakin. "That's a sea change for the United States, and sadly not too well understood by the public."

Plugging for his own candidate, Holtz-Eakin continued, "McCain has worked on this issue, introducing legislation on this issue beginning in 2003, with the Climate Solutions Act with Joe Lieberman [...] He believes deeply that we need to do this."

Sandalow also pitched his candidate: "For Sen. Obama, this is at the core of what he's going to be doing should he be elected president. We just heard in the last debate on Tuesday the priority he attaches to the energy issue, which is at the core of his climate-change program."

But then moderator Judy Woodruff asked, if they're both in agreement about this issue, what is the difference between their plans, and then the "Kumbaya" period was over.

"I guess I could sum that up in two words: Sarah Palin," said Sandalow. "I really do applaud Sen. McCain for getting out in front in 2003 on this issue, but, you know, just two months ago he chose as his vice president somebody who is in the papers within the past week questioning the validity of the science of global warming."

"I think that has to give pause to anybody who cares about this issue," continued Sandalow. "We have seen this bad movie before. The vice president of the United States who questions the science, and who the president says will be in charge of energy policy. I don't think we want a rerun of this movie."

Holtz-Eakin maintained that McCain remains as committed to the issue as ever, and that his plan is the more politically feasible. He chided Sandalow for making the Cheney comparison, and shrugged off the Palin issue -- even though just one day before McCain was reaffirming his desire to put Palin in charge of energy policy, and his willingness to let her persuade him on energy and environmental issues.

"I thank David for doing his job. It is his job to tie John McCain to George Bush at every opportunity," said Holtz-Eakin. "John McCain has three times brought [climate] legislation into Congress. He's fought his own party. He has sent his staff to the international meetings for years now. He is conversant with the international community on this issue. He is dedicated to solving the problem. And there's nothing about Sarah Palin that changes that."

Holtz-Eakin also argued that while Obama calls for 80 percent emission reductions by 2050 and McCain calls for 60 percent, both are "within the range of scientific uncertainty." But, he argued, McCain's plan is more politically feasible.

"Our view is that McCain's plan has been focus-group tested within the most difficult audience on the planet, which is the U.S. Senate, and that that's a plan that has a chance to move quickly as opposed to an 80 percent target," said Holtz-Eakin.

Posted at Fri, 10 Oct 2008 13:21:49 -0700 | Permalink

Posted at Fri, 10 Oct 2008 19:43:14 -0000 | Permalink

By Tom Philpott

Food policy hasn't exactly been a hot-button issue in the presidential election. And it's not going to be. We're sure to hear more about a vague acquaintance of Barack Obama, or a bush-league politician's fantasy-world twaddle about energy independence, than farm subsidies or school-lunch policy.

Knowing that full well, Michael Pollan has published a serious article on food policy the upcoming Sunday's New York Times Magazine adressed not to the candidates but rather to the next president. Pollan deftly places food at the center of three key topics: climate change, energy, and healthcare. Anyone seriously interested in addressing those issues -- and we can only hope the next president will be -- should read his piece.

Pollan does a masterful job of framing his piece to appeal directly to the next Oval Office occupant. If that person is a thinking human being who cares about more than his own career -- and not a rage-addled twit -- it could actually have some influence.

Here's his pitch in a nutshell:

[M]ost of the problems our food system faces today are because of its reliance on fossil fuels, and to the extent that our policies wring the oil out of the system and replace it with the energy of the sun, those policies will simultaneously improve the state of our health, our environment and our security.

People should plow through the whole 8,000-word piece. I want to highlight a few ideas Pollan raises that I think are particularly smart.

• He points to a proven way that the Midwest's vast corn and soy fields could be transitioned to something much more ecologically robust and probably more lucrative for farmers. In Argentina, he writes ...

... in a geography roughly comparable to that of the American farm belt, farmers have traditionally employed an ingenious eight-year rotation of perennial pasture and annual crops: after five years grazing cattle on pasture (and producing the world's best beef), farmers can then grow three years of grain without applying any fossil-fuel fertilizer. Or, for that matter, many pesticides: the weeds that afflict pasture can't survive the years of tillage, and the weeds of row crops don't survive the years of grazing, making herbicides all but unnecessary.

• He calls for a rethinking of subsidies. Now, they reward gross output of a few crops, mainly corn and soy. Rather then pushing quantity, Pollan wants to push variety:

... payment levels should reflect the number of different crops farmers grow or the number of days of the year their fields are green -- that is, taking advantage of photosynthesis, whether to grow food, replenish the soil or control erosion. If Midwestern farmers simply planted a cover crop after the fall harvest, they would significantly reduce their need for fertilizer, while cutting down on soil erosion. Why don't farmers do this routinely? Because in recent years fossil-fuel-based fertility has been so much cheaper and easier to use than sun-based fertility.

• To address the question of whether a more ecological-minded, quality-oriented agri-system could "feed the world," Pollan points out that "40 percent of the world's grain output today is fed to animals; 11 percent of the world's corn and soybean crop is fed to cars and trucks, in the form of biofuels." Given the vast amount of farmland devoted to grain production both here and worldwide, cutting down on meat consumption and eliminating biofuel incentives would free up vast amounts of land. Why not put the weight of federal policy behind those goals?

• He also pushes an idea I raised in a speech to the Organic Summit last June in Boulder: "A program to make municipal composting of food and yard waste mandatory and then distributing the compost free to area farmers would shrink America's garbage heap, cut the need for irrigation and fossil-fuel fertilizers in agriculture and improve the nutritional quality of the American diet." Yes!

Again, the article brims with good and provocative ideas -- it needs to be read in its entirity.

If there is a weakness in Pollan's writing, it's his blindness to economic issues, particularly with regard to class. That's on display here, too -- although by no means fatally so. He writes, for example:

It is no small thing for an American to be able to go into a fast-food restaurant and to buy a double cheeseburger, fries and a large Coke for a price equal to less than an hour of labor at the minimum wage -- indeed, in the long sweep of history, this represents a remarkable achievement.

That's an important insight, but Pollan doesn't tease out its implications. The ability to buy plenty of tasty calories on a low-wage salary actually lies at the heart of our economic system. For 30 years, our system has maintained corporate profits through a steady attack on wages. One of the major reasons workers have accepted stagnate wages is, I think, that food prices as a percentage of income have fallen steadily since the 1970s, a trend which went into reverse only last year. (The other is the ready availability of cheap consumer goods made by even-lower-paid workers in China).

Given that reality, it makes little sense to talk about transforming the food system and revaluing food without transforming the economic system and revaluing labor. Pollan never gets too far into those topics.

At this point, we're watching the neoliberal era of our economic history unravel before our eyes. It's anyone's guess what replaces it. I do think we'll be better off if the next president reads Pollan's essay carefully and takes its ideas seriously.

Posted at Fri, 10 Oct 2008 12:40:28 -0700 | Permalink

Posted at Fri, 10 Oct 2008 19:37:02 -0000 | Permalink

Posted at Fri, 10 Oct 2008 19:21:23 -0000 | Permalink

By Tom Philpott

A few months ago, the "smart money" was pouring into all things agricultural. Corn was flirting with $8/bushel (up from less than $2 as recently as 2005), hedge funds were snapping up farmland everywhere from the Midwest to Africa, and that weird guy who babbles and blusters about stocks on cable TV -- Jim Cramer -- was bellowing the praises of fertilizer companies.

People like me lamented the consequences: gushers of agrichemicals onto farmland and into air and water, expansions of monocrop agriculture into environmentally sensitive areas, all without any real increase in food security or food access for the globe's billion poor people.

All of that indeed came to pass -- but the bloom seems to have faded on the industrial-ag renaissance. The ever-intensifying credit crisis has stoked fears of a global recession and sent investors fleeing all but the safest investments.

Signs are everywhere. "How low can U.S. grains go?" asks the headline of a recent Reuters story. The news agency reports that corn is now "hovering above $4 a bushel, down 14 percent since Sept. 30 and about 45 percent lower than the record high of $7.65 set in June."

The price could come down even further. Reuters reports that commodity index mutual funds -- investment vehicles that buy stuff like corn on speculation -- still have heavy positions in corn. Meanwhile, it's springtime in the southern hemisphere, where farmers in Brazil and Argentina are now planting. A bumper crop down there could send corn prices tumbling.

Then there are the shares in the big fertilizer companies like Mosaic (two-thirds owned by Cargill, the globe's largest agribiz firm) and Potash Corp. of Saskatchewan. These companies rode the ag wave to the stratosphere, propelled along by the government-fueled ethanol boom. From June 1 2006 to the last week of June 2008, these companies saw their share prices rise by 900 percent and 700 percent, respectively. The performance propelled Jim Cramer from his normal sputtering incoherence into full-on screaming ecstasy.

Now? Since June 17, Potash shares have surrendered nearly 60 percent of their value, while Mosaic's have plunged close to 80 percent. As for Cramer, he recently groused: "No, once the momentum breaks there is nothing there. All of the fertilizer stocks are a sell here." Translation: he expects their share prices to keep dropping.

Even long-time, stock-market darling Monsanto, which dominates the global seed and herbicide markets, has seen its shares plunge 40 percent over the past six months.

As for ethanol makers, not even rising government biofuel mandates and lower corn prices can ease their plight. Check out this Reuters piece from Wednesday:

Ethanol companies may have lost most of their value over the last two years, but that doesn't necessarily make them cheap for possible suitors, who may be looking for share prices to fall even further.

Take the case of Verasun Energy, an ethanol maker that went public two years ago at $23 per share. Today, it was fetching about $1.70. According to Reuters, at that valuation, the company is trading at "below the replacement value of the company's ethanol distilleries and tanks."

Investors have evidently bought the message that corn-based ethanol is a joke, and some kind of cellulosic revival isn't going to save these companies any time soon.

When I started writing this Thursday afternoon, the Dow was down 300 points. A couple of hours later, it's down 650. Given the state of chaos in financial markets, I think I'd better leave this one here rather than try to come to a sweeping conclusion.

Posted at Fri, 10 Oct 2008 12:05:58 -0700 | Permalink

By David Roberts

I keep saying this, possibly to the point of tedium, but I really want to drive it home: as long as going green is viewed as an expensive and vaguely altruistic undertaking, it will never be a top priority.

Evidence is everywhere right now. After several years of ceaseless focus on climate and pop culture green-is-the-new-black hype, we're seeing it all go out the window at the first sign of dropping oil prices and economic hard times.

Over on IHT, Daniel Altman (via Brad Plumer) says that in the face of economic downturn, "going green could begin to be seen as an unaffordable luxury." Over on Time, Bryan Walsh discusses how fears of recession are sidelining green concerns. AFP reports that financial woes may derail international climate talks, and the Guardian has uncovered papers which indicate that the EU Council is preparing to bail on green commitments. With oil down to around $88/barrel, the Big Three automakers, who have been shifting to high-fuel-economy vehicles, are panicking. Oh noes! Maybe we should go back to gas guzzlers!

What's to blame for the seeming fragility of green concerns? Here are some possible answers:

1. Too much climate: Despite the warnings of pleadings of bright greens, there's still been too little work done tying green measures to economic revitalization and national security. Economic rescue and stimulation are one thing. Energy independence is another. And climate is a third thing. In that taxonomy, climate will always come last. The goal should be a comprehensive vision of a clean economy that creates jobs, increases security, and reduces emissions. That way people are solving their own immediate problems along with far-off global problems.
2. Green = expensive: The political and intellectual establishment for the most part thinks of green initiatives as a big money suck. So when's oil prices are low, why worry? When oil prices are high, is now the time to increase costs more? This is a failure, as I said the other day, to place efficiency at the center of the green agenda -- efficiency lowers costs and makes them more predictable, just what we need in this day and age.
3. Status quo = safe: Any time we're told this or that green initiative is expensive, the question should be, "compared to what?" Oil supply isn't going to keep up with demand; coal's getting more expensive; natural gas is getting more expensive. Climate change is causing droughts, storms, displacements, and conflicts. Unless we do something to make our economies more resilient in the face of these trends, we can expect wild fluctuations and crises and general anxiety. The path we are on is only going to take us to worse and worse places. Green is the offramp.
4. Too few articles like this in the mainstream press, to drive this point of view into the public's consciousness.

What's your explanation for why green is always the first to go?

Posted at Fri, 10 Oct 2008 11:09:13 -0700 | Permalink

By Joseph Romm

The current Consumer Reports has a quiz to help educate readers about those benign-sounding industry-funded front groups. As CR writes, "You think Americans for Balanced Energy Choices tout solar power? Nope."

Match the groups with their missions (click to enlarge, answers below):

Even better, CR has set up a website with the Center for Media and Democracy, Full Frontal Scrutiny:

... to focus public attention on the people and organizations who function in our society as hidden persuaders. You'll find them at work posting to blogs, speaking before city councils, quoted in newspapers and published on the editorial page, even sponsoring presidential election debates. All this while pretending to represent the grassroots when in fact they are working against citizens' best interests.

The site has a blog and a wiki. Kudos to CR and the CMD.

Answers:

Here are the answers to the quiz: A, 3; B, 1; C, 6; D, 2; E, 4; F, 5.

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.

Posted at Fri, 10 Oct 2008 10:52:51 -0700 | Permalink

By Kate Sheppard

An environmental action group founded by former vice president Al Gore is accusing ABC of censoring an advocacy ad the group paid to air on the network.

The Alliance for Climate Protection late Wednesday sent an e-mail blast to supporters with the ominous subject line, "ABC won't air our ad."

"Did you notice the ads after last night's presidential debate? ABC had Chevron. CBS had Exxon. CNN had the coal lobby," wrote Alliance CEO Cathy Zoi. "But you know what happened last week? ABC refused to run our Repower America ad -- the ad that takes on this same oil and coal lobby." The message sent readers to to a web page where they could send a form letter to the network.

The ad in question, which was aired by several other networks, is a 30-second spot that starts off with a call to "Repower America," with images of a little girl, windmills and solar panels. Then music in the ad gets more intense, as the narrator's voice asks, "So why are we still stuck on dirty and expensive energy?"

"Because Big Oil spends hundreds of millions of dollars to block clean energy," it says. "Lobbyists, ads, even scandals, all to increase their profits, while America suffers."

The Alliance had arranged to run the ad during the Sept. 26 airing of the news magazine 20/20, the same night of the first presidential debate. The group said it submitted the ad seven days before it was scheduled to run. According to representatives from the campaign, on Sept. 25 ABC sent an e-mail notifying them that the ad had been rejected. The network's stated reason? The one frame of the ad showing the Capitol building violated the network's guidelines.

"Per our Guidelines, national buildings may be used in advertising provided the depictions are incidental to the advertiser's promotion of the product or service," said the e-mail, which was provided to Grist by the Alliance. "Given the messages and themes of this commercial, the image of the Capital building is not incidental to this advertising. Please replace the image with one that is not of another national building or monument. Thank you."

Alliance communications director Giselle Barry told Grist it should be clear that the image of the Capitol building is pertinent to an advertisement about the lobbying power the fossil fuels industry has in Washington, D.C.

Grist's repeated requests for comment from ABC and Disney were not returned. Meanwhile, the Alliance said its letter-writing campaign had yielded more than 128,000 e-mails to the network within the first 24 hours of sending out their e-mail blast. The group is hoping that public pressure will convince the network to air the ad during tonight's episode of 20/20.

"It's the height of irony. [It's] outrageous actually," said Barry. "The reason why we put the email out yesterday is because the presidential debate coverage, not just on ABC but all of the networks, it was like ad after ad from oil and gas companies, Exxon, Chevron. It just makes no sense, it's outrageous that they would air ... ads about the benefits of fossil fuels, but not air our ad, which is the simple point of oil and coal companies spend millions of dollars on advertising."

Barry said changing the ad would be expensive and time consuming, and they didn't agree with the reasoning behind the request. "There's just no reason," said Barry.

Zoi sent a letter to Disney-ABC Television Group President Anne Sweeney on behalf of the Alliance, protesting the decision.

"This advertisement simply points out that the massive spending by oil companies on advertising and lobbying is a primary reason our nation hasn't switched to clean and renewable sources for our energy. The assertions that our ad makes are factual, common sense and are needed in the national debate about our energy future. Your viewers should not be denied the right to hear this point of view," wrote Zoi.

"Your rejection is even more indefensible given the overwhelming number of misleading ads that the oil and coal industry have run on your network," she continued. "This year alone, oil and coal companies and interests have spent hundreds of millions of dollars in an effort to convince the American people that they are focused on solving our energy and climate crises. On its face, these assertions by oil and coal defy all reason."

Barry said the group did not receive a response from ABC. The "Repower America" ad ran on CBS, CNN, CNN Headline News, Fox News, and MSNBC. ABC was the only one to reject the ad, according to the Alliance. The time spot purchased on ABC cost the group nearly $100,000, according to the Alliance. Instead of airing "Repower America," ABC ran the group's "Free Us" ad, which was already running on the network.

Here's the ad that ABC rejected:

UPDATE: ABC spokeswoman Julie Hoover talked to the Guardian about the ad: "All of our advertising is reviewed on a case-by-case basis, and the context of this particular ad was determined not to be acceptable per our policy on controversial issue advertising."

Posted at Fri, 10 Oct 2008 10:10:14 -0700 | Permalink

Appalachian Voices shows you how to connect to legislators shilling for Big Coal and how to follow the $$. They do good work there at AV. We've pointed to their actions before (with Mountaintop Removal, for one).

Go to this link: Follow the Coal Money. Then click on Zip Code and Name search. Then you get two ways to see the connections-- one, a visual mapping that connects your political representative to her/his funders; the other, tabulated data. The image below shows the results for Virgil Goode (R-VA), who is (unfortunately) the congressional representative for my district.

Posted by Benjamin Cohen none@example.com on NatureLand: What They Used to Call the Environment at Fri, 10 Oct 2008 12:10:00 -0500 | Permalink

Posted at Fri, 10 Oct 2008 17:06:52 -0000 | Permalink

By David Roberts

Speaking of studies on oil sands, there's another one out of the University of Toronto showing that oil sands will pollute the Great Lakes, reversing decades of cleanup efforts in the region.

"This expansion promises to bring with it an exponential increase in pollution, discharges into waterways including the Great Lakes, destruction of wetlands, toxic air emissions, acid rain, and huge increases in greenhouse gas emissions," [the report] says.

The report says that Ontario government is "remarkably unengaged" in the question of oil sands' environmental impact, and that state governments in the Great Lakes region are unaware of the pollution storm headed their way, and consequently totally unprepared.

But remember: it's renewables that are expensive!

Posted at Fri, 10 Oct 2008 10:04:44 -0700 | Permalink

Posted at Fri, 10 Oct 2008 17:01:50 -0000 | Permalink

By Sean Casten

A great frustration for those who (a) really care about reducing CO2, and (b) believe in the power of well-structured market mechanisms is that the current discussion around carbon policy has bastardized the language of environmental economics. There are tremendous economic and environmental benefits to be gained by a true cap-and-trade CO2 system. Unfortunately, all the plans that are currently being bandied about as cap-and-trade structures are really carbon taxes.

To understand why, we need to review a couple basic environmental economic concepts. There are essentially three ways that government can induce environmentally responsible behavior: mandates, taxes, and tradeable permits.

Mandates

The best example of a mandate is the Clean Air Act, and since we first started crafting environmental regulation, this has been the dominant approach. Thou shalt unlead thy gasoline. Thou shalt install a baghouse. Thou shalt comply with Best Available Control Technologies. In all cases, these are top-down, proscriptive approaches that mandate technologies and/or pollution limits. Their great advantage is that their environmental impacts can be known with some degree of certainty. (e.g., if you mandate a phase-out of leaded gasoline in five years, you can be certain that there will be no more lead emissions from tailpipes five years hence.) The disadvantage of these approaches are two-fold:

1. They are economically ignorant. If the mandate does not direct the lowest-cost pollution control solution, the lowest-cost pollution control solution will not be deployed.


2. They are strictly pass-fail, and encourage a nation of D students, environmentally speaking. If a mandate compels my factory to achieve no more than 10 ppm NOx emissions as a prerequisite of operation, I'll make sure I can achieve 9.9 ppm NOx; but since there's no incentive to make deeper cuts, I won't reduce any further. This adds to the economic problem with mandates, since it does not differentiate between the individual who can make deep cuts cheaply and the one who faces huge costs for shallow cuts -- and in so doing, fails to maximize pollution reduction.

Pollution taxes

A better tool is a tax. Such models simply price the externality, so that one can still pollute, but only at a price. Relative to mandates, their great disadvantage is that they do not lead to certain reductions. I can mandate the elimination of leaded gasoline and know that leaded gasoline will go away, but if I instead place an added tax on leaded gasoline, I cannot be certain that the tax will be sufficiently high to eliminate its use.

On the other hand, pollution taxes do solve the two problems with mandates. By placing a fixed and known price on pollution, markets are encouraged to use the lowest-cost means of pollution control to minimize their net pollution payment. Moreover, since the tax is paid per unit of pollution emitted, deeper pollution reductions afford greater economic savings. On balance, this gives pollution taxes (in my opinion, at least) a net benefit against mandates. But they still have a couple glaring weaknesses:

1. Most obviously, they include the word "tax," which is often a political non-starter.


2. They are sticks without carrots. Like income taxes, they constitute a great source of government revenue and, on the margin, do compel markets to factor the price of pollution into their math, but they don't provide any more direct incentive to invest in pollution reducing technology than an income tax provides an incentive to quit your job.


3. As noted above, they do not guarantee pollution reductions.


4. Finally, they are politically uncertain. Governments are always tempted to fiddle with tax policy, but are unable to fiddle with existing contracts. A factory that installs a scrubber to comply with sulfur pollution regulations will cry foul (and have ample legal protection) if the regulator comes back and tries to rescind their permit five years hence. On the other hand, if sulfur emissions are taxed at$20/ton and government decides to lower or raise the tax five years hence, the same factory cannot readily complain that they invested in their scrubber in anticipation of a permanent tax regime. As a result, it is considerably harder to deploy capital in response to a pollution tax than in other, contractual approaches.

Tradeable permits

In theory, tradeable permits are the ne plus ultra of pollution regulation, correcting all the failures of the above mechanisms. The model is that the government sets an allowed level of overall pollution (thereby ensuring that future pollution levels are known) and then allows pollution sources and sinks to trade among themselves for the rights to emit their pollution levels within that cap. Government's role is to set the cap and ensure that sufficient measurement and verification is in place between pollution buyers and sellers, but not to stipulate technologies nor price.

These models ensure that markets are always pursuing the lowest-cost pollution-reduction measures, while still ensuring that pollution is reduced to environmentally acceptable levels. The political consequences of a tax are avoided and sticks are perfectly balanced with carrots (since every buyer is matched to a seller at the same price per unit of pollution).

Applying to modern GHG policy

This didactic review is necessary because if you only read the headlines, you might be tempted to conclude that current GHG policy is actually based on the idea of tradeable permits. After all, we talked about carbon taxes and decided we'd do cap-and-trade instead. Since the phrase "cap-and-trade" includes the words "cap" and "trade," it must include both, right?

Sadly, no.

Every GHG policy out there today -- from RGGI to Kyoto -- is really a tax masquerading as a cap-and-trade. Notice why:

1. A pollution tax requires polluters to pay money to a regulatory body, who then distributes the proceeds as they see fit. A tradeable permit approach is based on bilateral trading of pollution credits without any government intermediary. Every existing GHG policy has a government intermediary and is therefore structured as a tax rather than a tradeable permit.


2. A tradeable permit model provides an incentive to reduce pollution that is exactly the same as the cost it stipulates for those who choose to pollute. If you want to release 50 units of pollution and I want to reduce pollution by 50 units and I agree to sell you my reduction for $200, you've paid $4/unit and I have been paid $4/unit. By contrast, a pollution tax places a cost on pollution, but the only benefit that accrues to those who are reducing pollution is the avoidance of a tax. Which, as noted above, is the same benefit that accrues to those who don't have any income. All of our current GHG policies are structured more like taxes than tradeable permits since regulatory agencies use the proceeds of their GHG auctions to provide a variety of social goods, not all of which lead to GHG reductions; ergo, less than 100 percent of the proceeds go to GHG reduction, and the value of reduction is less than the cost of pollution.

If the issue were merely semantic, this wouldn't be worth making a big deal about, but the problems with carbon taxes are real, and they don't go away simply because we choose to relabel a tax as a tradeable permit. As we go into the next political season and get serious about GHG policy, let's hope that we don't lose sight of these realities.

Posted at Fri, 10 Oct 2008 09:21:05 -0700 | Permalink

Posted at Fri, 10 Oct 2008 16:20:55 -0000 | Permalink

Posted at Fri, 10 Oct 2008 15:47:03 -0000 | Permalink

The twenty-first century is having a troubled infancy. Eight years in and it is facing the twin perils of climate change and a looming energy crisis. Solutions to both are in high demand and many research dollars and pounds are being channelled into developing environmentally-friendly, renewable resources.

Biofuels - the product of living things - certainly fit the bill, being both renewable and biodegradable. But there is always a catch. Currently, biofuels are mostly a matter of harvesting single crops grown on fertile soils such as corn or sugarcane or waste products such as straw.

In George Bush's State of the Union address of January 2007, corn-based biofuels played a major role in reducing the USA's dependence on oil. But it is highly unlikely that these fuels will make a large dent in America's energy demands.

The fuel-bearing plants need land to grow on, and the choice becomes either using up current agricultural land that provides much-needed food for growing populations, or to clear natural land and damage the ecosystems they nourish. Any new crops must also be irrigated and treated with potentially polluting fertilisers and pesticides. And the water, chemicals and eventual crops must be transported with fossil-fuel-burning vehicles.

At first glance, biofuels seem to create more problems than they solve. In an ideal world, we would source biofuels from crops grown on used land with no other agricultural value, with a minimum of chemical help. But such a world may be just round the corner, thanks to scientists from the University of Minnesota. Two years ago, David Tilman, Jason Hill and Clarence Lehman found evidence which suggested that the key to low-maintenance biofuels is diversity.

Posted by Ed Yong none@example.com on Environment at Fri, 10 Oct 2008 10:00:30 -0500 | Permalink

This is a slightly abridged version of an actual letter from a reader and my answer, regarding a change in career in the light of peak oil. What would you have said? This reader was not from the US. How would advice differ for different parts of the world?

Dear Gail:

I read some of your posts on The Oil Drum, and I wanted to ask you a question. Taking into consideration peak oil, what careers are likely to be better places in the years ahead?

(continued under the fold)
[break]

For example, given the current financial meltdown, it seems the Financial Sector is looking like a terrible place to be, never mind what might happen if oil production starts to decline. I just read that Kenneth Rogoff, Economics Professor at Harvard and former Chief Economist at the International Monetary Fund, has joined the chorus:

The worst is yet to come in the U.S. The financial sector needs to shrink; I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.

I am still in my 20s, currently working as a math teacher, but am planning on going back to school. I have considered engineering, but that can be very energy-dependent. Until recently, I was aiming to position myself for a career in finance - I don't think that will be a good long term move anymore. But I'm a bit in the dark about what is a good move. I'd imagine health care and education would be "safer"...not that I necessarily want to be in those sectors, to be honest.

Anyway, I was just hoping you could give me your opinion as to what sectors of the economy you reckon are going to be better positioned once world oil production starts declining?

Sincerely,

A Reader

Hi Reader,

You ask a good question. I would agree that the financial sector is a terrible career choice. The question is what is better.

The big question is how far society drops, and how quickly.

I think electricity is one of the critical things needed to keep society going. The electrical utility area has not hired in a very long time. I have read that even now, the US electrical industry is trying to outsource as much as they can to India--wonderful! Nevertheless, I think that in the years ahead, there have to be jobs in electrical related fields, if society keeps going at all in the way we are now headed.

My view is that long term, the future of electricity is going to be more local. We are going to have an increasingly difficult time keeping up infrastructure for transporting electricity long distances. Also, many of the newer sources of electricity are smaller and more local. I was reading a book recently called "Perfect Power" by Robert Galvin and Kurt Yeager. They argue that there are great improvements in efficiency that could be made at the local level (for example, universities, big manufacturers, and big office buildings). If some electricity could be generated locally and effective storage devices were available, this local generation could help take the stress off the grid. There would be less need to build large new power plants and add transmission lines. It seems like it will be only a matter of time until local groups are permitted to make their own electricity and add the excess to the grid. Allowing local electricity might permit more co-generation (combined heat and power) as well.

I think the other area with a real need is something related to agriculture / biology. What plants will grow without too much support in each area of the country? What approaches can be used to keep pests away that require relatively little technology? What kind of crop rotation would work well? If water is in short supply in a particular area, what techniques can be made to make it go farther (more drought resistant crops, low tech devices for irrigation. The advantage of an agriculture-related field is that you might learn some things helpful for your own family's needs.

I would stay away from health care, at least as taught in universities. I think there are way too many people in healthcare right now. We are not going to be able to afford the huge amount we are spending on it today. If everything becomes more local, healthcare will have a hard time adapting. There are a lot of techniques my father learned when he went to medical school in the early 1940s that might be helpful in an energy-constrained world (for example, diagnostic techniques that don't depend on laboratory tests, and setting bones by "feel"), but these aren't taught any more. After medical school, he learned hypnosis, and used it when stitching up wounds and in helping women with child birth. Health care now is all pill dispensing and surgery, and this won't work long-term.

I think education will be scaled back a lot too. A lot of the stuff being taught today really won't be very relevant in the future. If there is growth, it will be in the practical subjects in high school.

Hope these thoughts help.

Sincerely,

Gail

Posted by Gail the Actuary on main, Miscellaneous, career, education, finance, original, peak oil at Fri, 10 Oct 2008 14:15:34 -0000 | Permalink

This is a post run just over a year ago, by emeritus TOD contributor Stoneleigh. It was instructive as much as it was prescient. Both Stoneleigh and her writing partner Ilargi at The Automatic Earth have had a consistently, and unabashedly phenomenal call with respects to the financial and debt crisis. It is certainly not over, but we now begin to see the impacts that a financial crisis may have on future energy supplies - it's like losing the battle as well as the war. Still, the quickness of the deterioration in the economy may be a blessing in disguise - more resources left in ground for some better planned use.

Below the fold, a reprint of Stoneleigh's excellent primer on the credit crisis. Right about now is when it starts to impact the energy world.
[break]

We have been living in inflationary times, for as long as most of us can remember. The money supply keeps expanding and prices increase over time as a result. Central bankers have many tools at their disposal which they can use to tweak the economy-–they can raise or lower interest rates, can control reserve requirements for fractional reserve banking and can inject liquidity into the banking system, among other things – and we have become used to thinking that they can prevent the kind of 'economic accidents' that previous episodes of excess have led to in the past. Especially in recent years-–since the apparently successful containment of the dot com aftermath--we have acted as if risk were a thing of the past. Sliced, diced and spread around Wall Street and the rest of the global financial system, risk has seemed tamed, contained and controlled, until last week that is.

For years, industry insiders and so-called experts have proclaimed the virtues of slicing, dicing, and repackaging risk. They waxed on about how borrowers and savers, and society as a whole, could only benefit from such machinations. They suggested any sort of exposure could be disbursed and dissipated to the point where it essentially disappeared. Some even claimed that the crises of the past would no longer exist.

Yet amid the hype and assurances, few supporters spoke of the dark side of wanton and widespread risk-shifting. They didn’t seem — or want — to acknowledge that by combining complicated risks in unfamiliar and unnatural ways, the end result could be an uncontrollable monstrosity—one that eventually turned on its masters.

Nor did they heed the notion that by scattering risk into every nook and cranny of the global financial system, the vast web of overlapping linkages virtually guaranteed that serious problems in one sector, market, or country would trigger far-reaching shockwaves.

All of a sudden, markets are reeling around the world, deals are unraveling, the mainstream press is talking about a credit crunch and the world’s central bankers are injecting unprecedented amounts of liquidity to calm the markets. Risk has made a comeback, and in that environment the evident concern of the central bankers does not seem very reassuring.

The Dot Com Crash and Money Dropped From Helicopters

As the dot com boom morphed into the dot com bust (threatening to become a full-blown meltdown by the end of 2002) central bankers cut interest rates drastically and held them down for a long period of time.

In 2001, the US Federal Reserve Bank, the spigot of credit in America’s debt-based economy, drastically slashed its interest rates 84 %, from 6.5 % in 2001 down to 1 % in 2002. The Fed did so because the collapse of the dot.com bubble in 2000 had so damaged US financial markets (the NASDAQ fell by 80 %) the Fed feared a depression could result.

As Ben Bernanke was preparing to take over from Alan Greenspan at the Federal Reserve, he promised to drop money from helicopters if necessary to prevent deflation. Having spent his academic career studying the causes of the Great Depression, Bernanke understood the danger of deflation and was determined to avoid the liquidity trap by maintaining the demand for credit. As good as his word, Bernanke, and Greenspan before him, oversaw a doubling of the money supply since 2000. Adjusted for changes in the money supply (inflation), real interest rates (the nominal rate minus inflation) were negative for several years. Instead of dropping money from helicopters, Bernanke dropped free debt.

Real Interest Rates (Nominal Rate Minus Inflation)

The key in all of this is not inflation, as most believe. The Fed says they are most worried about inflation risks, but the reality is that they are most worried about deflation risks. Always. Always deflation. The Fed has no choice but to always remind us that the risks are tilted toward inflation, just as the Treasury Secretary, whichever one happens to be in office at the time, must always say that the U.S. maintains a strong dollar policy, even if monetary policy and fiscal policy are conspiring to devalue the dollar.

Fractional Reserve Banking and the Expansion of the Money Supply

Fractional reserve banking allows banks to lend into existence money they do not have (on the assumption that their depositors will not all want their money back at once), provided that they keep a certain percentage of their deposit base with the Federal Reserve to cover withdrawls. Ten percent would once have been a typical figure, but since the 1990s, the Fed has deliberately shepherded reserve requirements down, essentially to zero, through dropping required reserve percentages, reducing the categories of funds needing a reserve and allowing funds to be swept from a reservable category to a non-reservable category overnight (using sweep accounts). As reserve requirements have fallen, banks have been able to expand the money supply far more rapidly than would previously have been the case, at the cost of removing the cushion they previously held as insurance against financial accidents. As with everything else, the resilience has been stripped from the system in the name of efficiency, in this case in the use of capital to generate maximum returns.

The Housing Bubble and the Debt Mountain

The combination of drastically reduced reserve requirements and negative real interest rates predictably led to a borrowing binge of epic proportions, increasing what was already a dangerous level of indebtedness. Many of those whose fingers had recently been burned in the stock market turned to real estate, and, by extension, all of the supporting industries surrounding it. People moved to larger properties, bought investment properties, renovated, upgraded and re-equipped. The surge in demand, and depreciation of the currency through rapid expansion of the money supply, led to a huge increase in property prices. This enabled owners to use their appreciating properties as ATMs, at first using the windfall for luxuries, but increasingly relying on it to fund basic living expenses through refinancing. This created both a debt mountain and a structural vulnerability to a fall in property prices.

Banks offered credit to those further and further down the credit-worthiness scale, with scant regard to the ability of those borrowers to repay their loans. Instead of holding debt on their own books as they would once have done, banks now make their money from fees and sell the loans on to investors as mortgage-backed securities. As they no longer bear the risk of default, they are unconcerned about it. They often asked for little or no information from prospective borrowers – often no proof of income, employment or even identity - leading to the label of ‘liar’s loans’.

With rates so low, borrowers were far more concerned with the level of monthly payments than with the balance outstanding. Exploiting this blinkeredness, banks offered a range of loans called neg am ARMs – adjustable rate mortgages with negative amortization. Borrowers were offered low ‘teaser’ rates for the first few years, paying less than the interest owed on their loan during that time, while the unpaid interest was added to the principle in the meantime. Often they signed the loan documents without understanding the concept of teaser rates. At the end of the teaser period, the full monthly interest payment would be due on the now larger principle at the new prevailing interest rate. As interest rates have increased recently, monthly payments on resetting ARMs are often set to more than double. In October of this year, $50 billion dollars worth of ARMs will reset, with a further $30 billion a month doing the same for over another year.

Marginal borrowers, who were often already only barely affording their existing payments, are highly unlikely to be able to affor