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Post-tsunami radio clip of Jerry Taylor/Cato discussing the past and future of US nuclear power

April 7th, 2011 No comments

In the wake of the troubles at TEPCO’s Fukushima nuclear power plants, on March 18, 2011, Jerry Taylor of the Cato Institute discussed the past and future of U.S. nuclear power on WOR’s The John Gambling Show.

I note that Taylor has really only scratched the surface of the problems relating to nuclear power. For example, far from governments simply shifting the risks of nuclear power cost over-runs to ratepayers and taxpayers, this incentive structure actually compounds financial risks, as the contractors do not have to bear the amount of cost over-runs, and the utilities can put their hands into the pockets of others.

Further, Taylor has not addressed the further subsidies provided in the form of Federal liability caps and by “limited liability” state corporation laws that leave shareholders without ANY liability for damages that nuclear accidents may cause others – as has now materialized in Japan. Just as we have seen in our financial sector, the result is a loss of personal “skin in the game”, a concomitant reduction in critical oversight, unleashed moral hazard, poor decision-making and then hand-wringing and blame-shifting when the “black swans” come home to roost.

Here is the link to 10-minute clip (which Cato has so thoughtfully made easy to share, but unfortunately seems too big to upload here)

[View:http://mises.org/Community/themes/mises2008/utility/:550:0]

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Jerry Taylor/Cato at Forbes: "Nuclear power quite simply doesn’t make economic sense."

April 7th, 2011 No comments

I’m a fan of Jerry Taylor, an even-handed, level-headed guy working out of the Cato Institute who sometimes almost (but not quite) comes across as a radical envirofascist. (My earlier posts referencing him are here.)

Jerry’s Cato bio says he “is among the most widely cited and influential critics of federal energy and environmental policy in the nation … a frequent contributor to the Wall Street Journal and National Review and appears regularly on CNBC, NPR, Bloomberg Radio, the BBC, and Fox News. His op-eds on public policy have appeared in the pages of The Washington Post, The New York Times, The Los Angeles Times and most other major dailies.’

Jerry and his collegaue Peter Van Doren have a new piece out at Forbes.com and Cato Institute on nuclear power; Jerry has kindly given me permission to cross-post it in its entirety here.

[Just added: Allow me to I note that Taylor has really only scratched the surface of the problems relating to nuclear power. For example, far from governments simply shifting the risks of nuclear power cost over-runs to ratepayers and taxpayers, this incentive structure actually compounds financial risks, as the contractors do not have to bear the amount of cost over-runs, and the utilities can put their hands into the pockets of others.

[Taylor also does not address the further subsidies provided in the form of Federal liability caps and by “limited liability” state corporation laws that leave shareholders without ANY liability for damages that nuclear accidents may cause others – as has now materialized in Japan. Just as we have seen in our financial sector, the result of these government interventions is a loss of personal “skin in the game”, a concomitant reduction in critical oversight, unleashed moral hazard, poor decision-making and then hand-wringing and blame-shifting when the “black swans” come home to roost. 

[Nuclear crony capitalism is just the tip of the iceberg of the vast, rotten and still metastasizing crony-capitalist mess that limited liability corporation laws have engendered: Beyond ‘Nuclear Crony Capitalism’: Does state-created corporations mean we are stuck with a wonderfully confused ‘capitalist’ mess of socialized risk?]

This is how the Taylor and Van Doren piece appears at Cato (emphasis added)

Nuclear Power in the Dock

by Jerry Taylor and Peter Van Doren

This article appeared on Forbes.com on April 5, 2011.  [TT: Here’s the Forbes link.]

The unfolding nuclear emergency in Japan has prompted a reconsideration of nuclear power here in the United States. Surprisingly, the political faith in nuclear power appears to be relatively unshaken at the moment, with opinion leaders on both the left and right cautioning against overreaction and politicians in both parties swearing continued fealty to the federal campaign to jump-start new construction orders.

This is unfortunate — not necessarily because nuclear power plants are a catastrophic meltdown waiting to happen — but because nuclear power makes no sense from an economic perspective and the political campaign to ram these plants down the market’s throat threatens catastrophic harm to both taxpayers and ratepayers.

The fact that nuclear power can’t come within light-years of passing a market test is painfully obvious to all who wish to see. Consider the feds are presently telling banks that if they loan money to a utility company to build a nuclear power plant and the loan subsequently goes bad, the U.S. Treasury (that is, you) will compensate the bank for up to 90% of its losses. And yet the banks still refuse to loan. For principled supporters of a free market, that should be information enough about the merits of this commercial enterprise.

There are all sorts of reasons why banks are saying “no” to nuclear. Two in particular, however, stand out.

First, nuclear energy is not even remotely competitive in power markets with gas-fired or coal-fired electricity now or in the foreseeable future. Even the more optimistic projections of new nuclear power plant costs — such as those forwarded by MIT — find that nuclear’s production costs over the lifetime of a new facility are about 30% above those for coal or natural gas-fired generators. So while we can only speculate about new plant construction costs (we haven’t tried building one for more than 30 years) and estimates vary a great deal, all parties agree on one thing: Nuclear is substantially more expensive than conventional alternatives at present.

That’s particularly the case when one figures in the revolution in natural gas extraction, which has significantly lowered the cost of gas-fired power. Exelon CEO John Rowe recently told the press that natural gas would have to cost more than $9 per million BTUs before nuclear power plants could compete — about double its current price and far north of the $5.3 per million BTU price over the next 5 to 10 years that forecasters predict for the future. MIT’s nuclear energy study, by comparison, projects a $7 per million BTU natural gas price (which makes nuclear energy seem more competitive than it actually is), but of course, the MIT study was based on 2007 data that failed to fully reflect the revolutionary advances in hydraulic fracking.

It’s worth noting, moreover, that nuclear’s hefty price tag would be even heftier if government subsidies were to fall by the wayside. One economist calculates that existing nuclear subsidies are equal to one-third or more of the value of the power produced. Tufts economist Gilbert Metcalf estimates that nuclear power plant operators face a negative 49% tax rate. Hence, banks betting on nuclear power are also betting on the longevity of such breathtaking taxpayer largesse — a risky bet indeed.

Second, the risk of cost overruns and, thus, defaulted loans are higher than the politicians would have us believe. Most of the nuclear power plants built in this country have cost three times as much to build as utilities initially advertised at the onset of construction.

While the industry swears that this is a thing of the past, new power plants being built in Finland and France by Teollisuuden Voima and Electricite de France, respectively — the only nuclear power plants being built right now in free-market energy economies — are already coming far above their advertised cost. The Finnish plant — which was supposed to cost only 3 billion euros — is already 2.7 billion euros above cost and is four years behind schedule. The French plant fairing a bit better, only 1 billion euros over budget and two years behind schedule.

The fact that both of these projects deploy state-of-the-art reactors built by French nuclear giant Areva — arguably the most experienced nuclear power company in the world — speaks volumes. Accordingly, both the Congressional Budget Office and the Government Accountability Office expect about 50% of any future U.S. loans to default.

So why are utilities trying to build these things in the first place? Well, most aren’t. Those few utilities that are interested in going ahead do business in states where construction costs are automatically plugged into the rate base. So in theory at least, risks would be transferred from the utility to the ratepayer with utilities at least guaranteed to break even. Even so, the increasing cost gap between nuclear and gas-fired power makes it unclear whether any of these generators will actually get built.

As Peter Bradford, a former member of the U.S. Nuclear Regulatory Commission and former chair of the New York and Maine utility regulatory commissions, puts it, “In truth, the nuclear renaissance has always consisted of the number of plants that government was willing to build.” Regardless, federal attempts to jump-start the industry — as Herculean as they have been — haven’t come even close to closing the competitive gap with gas-fired generation. Events unfolding in Japan are unlikely to change that. And for that, at least, we can all be thankful.

Jerry Taylor and Peter Van Doren are senior fellows at the Cato Institute.

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[Update] Cato’s Jerry Taylor: Nuclear power is "solar power for conservatives" and needs "a policy of tough love"

February 24th, 2009 No comments

After decades of loathing nuclear power as the ugly, monstrous child of a big government Dr. Frankenstein, climate-change-fearing enviros like George Monbiot are finally coming around to the relative benefits of nuclear power.  This is a welcome change – as it is clear that coal has generated and continues to generate much greater environmental impacts (not only in extraction, but in acid rain, particulates, heavy metals, released radiation and fly waste) – but that doesn’t mean that libertarians or conservatives ought to support throwing any more taxpayer dollars at nuclear power.

Rather, as Jerry Taylor (a senior fellow at the Cato Institute and well-regarded energy/environment expert) argues (as noted in the excerpts below), we should push nuclear power off the federal dole, deregulate power markets, and – IF we decide that climate change risks merits a constraint on greenhouse gas emissions  – we should do that through pricing mechanisms rather than by having the federal government further involved in the business of trying to guess what technological approaches will be successful via massive subsidies for nuclear or other “clean” technologies.

I pretty much agree with Taylor in principle (including on tackling power market regulatory issues), but believe that he both (1) dodges the massive pollution costs imposed by and rent-seeking conducted by coal firms and coal-fired utilities and (2) understates the economic case for carbon pricing, as I have noted elsewhere.

For those interested, I’ve collected below a few pieces of analysis and debate from Jerry Taylor on nuclear power:

– at Cato.org on June 21, 2003:

The federal government has always maintained a unique public-private partnership with the nuclear industry, wherein the costs of nuclear power are shared by the public but the profits are enjoyed privately. In an attempt to resuscitate this dying industry, the current Senate energy bill proposes unprecedented federal support for nuclear power. …

But nuclear power was ultimately rejected by investors because it simply does not make economic sense. In truth, nuclear power has never made economic sense and exists purely as a creature of government.

In fact, a recent report by Scully Capital Services, an investment banking and financial services firm, commissioned by the Department of Energy (DOE), highlighted three federal subsidies and regulations — termed “show stoppers” — without which the industry would grind to a halt. These “show stoppers” include the Price Anderson Act, which limits the liability of the nuclear industry in case of a serious nuclear accident — leaving taxpayers on the hook for potentially hundreds of billions in compensation costs; federal disposal of nuclear waste in a permanent repository, which will save the industry billions at taxpayer expense; and licensing regulations, wherein the report recommends that the Nuclear Regulatory Commission further grease the skids of its quasi-judicial licensing process to preclude successful interventions from opponents.

But even these long-standing subsidies are not enough to convince investors, who for decades have treated nuclear power as the pariah of the energy industry. Nuclear generated electricity remains about twice as expensive as coal- or gas-fired electricity. Although the marginal costs of nuclear are lower, the capital costs are much higher. In light of this resounding cold shoulder from Wall Street, the federal government is opening the treasury wider than ever before.

– at NRO on Jan. 26, 2006:

Nuclear power is solar power for conservatives — an energy source with every merit in the world save for the most important — economic merit. Investors — not environmentalists — are the parties that have turned against nuclear and there’s no reason for government to second guess the businessmen …

– at a Rountable on Nuclear Power and Energy Independence at Reason Foundation on October 21, 2008: [worth reviewing in whole]

Nuclear energy is to the Right what solar energy is to the Left: Religious devotion in practice, a wonderful technology in theory, but an economic white elephant in fact

But nuclear power plant construction costs are so high that it would take a very, very long time for nuclear facilities to pay for themselves if they only operated during high demand periods. Hence, nuclear power plants are only profitable in base-load markets. Gas-fired power plants, on the other hand, can be profitable in either market because not only are their upfront costs low but it is much easier to turn them off or on unlike nuclear.

Nuclear’s high up-front costs don’t just mean delayed profits, it also makes nuclear a more risky investment, especially since 20 states have scrapped policies that used to allow investors to charge rates that would guarantee their money back. This means that investors in new nuclear power plants are making a multi-billion dollar bet on disciplined construction schedules, accurate cost estimates, and the future economic health of the region. Bet wrong on any of the above and the company may well go bankrupt. Bet wrong on a gas-fired power plant, on the other hand, and corporate life will go on because there is less to lose given that the construction costs associated with gas-fired power plants are a small fraction of those associated with nuclear plants. …

Investors are also wary of nuclear plants because of the construction delays and cost over-runs that have historically plagued the industry. …  Nor have these construction delays had anything to do with regulatory obstruction or organized public opposition.

If nuclear power plants are so uneconomical, how then to explain the blizzard of permit applications for the construction and operation of new nuclear power plants that the Nuclear Regulatory Commission has received? Easy: These applications cost little and oblige utilities to do nothing. Industry analysts maintain that federal approvals will not translate into actual plants without a federal promise to private equity markets that, in case of default by power plants, the taxpayer will make good on the full sum of all bad nuclear loans.

Nuclear supporters often counter that construction costs would be a lot lower if regulators didn’t impose insanely demanding safety standards, byzantine and time-consuming permitting processes, or endless public hearings, any one of which could result in the plant being stopped in its tracks. Investors would also be more likely to invest, we’re told, if there were a high-level waste repository in place or more political support for nuclear power.

I would love to tell that story. I do, after all, work at the Cato Institute, and blaming government for economic problems is what keeps me in business. But what stops me is the fact that those complaints are not echoed by the nuclear power industry itself.

On the contrary, the industry in the early 1990s asked for – and got – exactly the sort of safety regulations, permit review process, and public comment regime now in place. Both public and political support for nuclear power is running so high than even a majority of Democrats in Congress are happy to not just tolerate nuclear power, but lavish even more subsidies upon it. And while Yucca Mountain may not be open now or ever, everyone seems reasonably content with the current on-site waste storage regime.

Indeed, if government were the reason why investors were saying “no” to their loan applications, I would expect that industry officials would be the first to say so. But they do not.

There’s another good reason why the industry is not protesting government intervention these days — the industry would not exist without it. Take away the 1.8¢ per kWh production tax credit available to the first 6,000 megawatts of new nuclear generation built prior to 2021, for instance, and Metcalf calculates that the levelized cost of new nuclear power plants jumps by 30 percent. Replace accelerated depreciation tax rules with regular depreciation rules and costs jump another 9 percent. Even zero taxation on nuclear power would increase costs by 6 percent because right now nuclear power enjoys a negative effective tax rate. Indeed, this jump by itself would make nuclear much more expensive than conventional coal, “clean” coal, and natural gas. Finally, repealing the $18 billion in federal loan guarantees recently promised the industry and eliminating regulations that relieve nuclear plant owners of the responsibility to pay third-parties to accept the risks associated with waste disposal would dampen market interest in nuclear power even further.

But the final nail in the coffin for the industry would be if the federal cap on the liability that nuclear power plant owners face in case of accidents (the Price-Anderson Act) were to be lifted.

Given all of this, how do France, India, China and Russia build cost-effective nuclear power plants? They don’t. Government officials in those countries, not private investors, decide what is built. …

Conservatives project nuclear power as the solution to greenhouse gas emissions. But they should resist that argument. If we slapped a carbon tax on the economy to “internalize” the costs associated with greenhouse gas emissions – the ideal way to address emissions if we find such policies necessary – then the “right” carbon tax would likely be about $2 per ton of emissions according to a survey of the academic literature by climate economist Richard Tol [As noted in the update further below, Taylor has subsequently moved from this low figure after reviewing Tol’s more recent work]. That’s not enough to make nuclear energy competitive against coal or natural gas according to calculations performed by the Electric Power Research Institute. In any case, if nuclear offers a cost-effective way to reduce greenhouse gas emissions, it should have to prove it by competing against alternatives in some future carbon-constrained market.  …

Those who favor nuclear power should adopt a policy of tough love. Getting this industry off the government dole would finally force it to innovate or die – at least in the United States. Welfare, after all, breeds sloth in both individual and corporate recipients. The Left’s distrust of nuclear power is not a sufficient rationale for the Right’s embrace of the same.

follow-up discussion on Reason Foundation’s “Out of Control” blog, involving Jerry Taylor and co-essayists William Tucker and Shikha Dalmia (also moderator) and various blog commenters. 

    One interesting point made in the follow-up discussion was that while our regulatory scheme is much tougher on nuclear power over risks that so far have been speculative, Taylor ignores the much heavier health damages (on the order of 25,000 deaths per year) generated by coal.  Taylor’s response:  perhaps so, but coal’s extra environmental cost should be directly addressed by being tougher on coal, not by subsidizing nuclear power.

 

[Update:  On the carbon pricing issue, subsequent to the October 2008 Rountable referred to above, I pointed out to Jerry that his reference to Tol was dated (based on a 2005 study rather than on Tol’s more recent 2008 study.  Jerry reviewed and summarized Tol’s most recent study at Cato in December 2008;  in this, (1) Taylor notes Tol’s conclusions that (a) the social cost of carbon emissions
is positive, that (b) there is so much uncertainty regarding costs that “a
considerable risk premium is warranted,”
and that, (c) consequently,
“greenhouse gas emission reduction today is justified,” and (2) Taylor concludes that “Given our skepticism about the underlying logic of discount rates of 1%
or less, any number between $3 per ton and $24 per ton seems
defensible.” 
However, Taylor remains conerned that “the political and economic transaction costs associated with imposing a carbon tax … likely exceed the benefits,” and argues that “there may be less expensive ways of reducing harm.”]

In the fight over climate policy, Jerry Taylor of Cato tries to stiffen the spines of the purist enviros (in order to limit the "Bootleggers")

February 4th, 2009 No comments

Jerry Taylor of Cato is one careful observer of the carbon follies who sees the handwriting on the wall for some type of carbon pricing system coming from the Congress during the Obama Administration.  Strikingly, in an interesting post up at MasterResource (a new self-styled “free market” energy blog spearheaded by former Enron speechwriter Robert Bradley), Jerry is cheering on environmental hard-liners!

It’s worth a gander to understand why.

Jerry’s post borrows the “Bootleggers and Baptists” lingo of Bruce Yandle to comment on the dynamics by which both  Baptists/moralists (in this case, the enviros) and the bootleggers/rent-seekers (in this case, the firms trying to reap benefits from government prohibitions) are seeking to come to terms on new carbon-related government policies.  Jerry  first explains and warns that the core of the mandatory cap-and-trade program proposed by the United States Climate Action Partnership (USCAP a coalition of big business and environmental groups) includes “a replay of the old-source/new-source standards incorporated in the Clean Air Act (CAA), which likewise established tough emissions standards for future power plants but much lighter rules for plants currently in operation”.

Because his concern over this replay of a costly aspect of the CAA, Jerry cheers on the criticism of this plan coming from other parts of the environmental community, in particular from Joe Romm, a former Acting Assistant Secretary of the U.S. Department of Energy who comments frequently on climate change policy issues at the ClimateProgress.org blog of the Center for American Progress.  Says Jerry:

Why should a libertarian skeptic about the dangers of climate change applaud environmental absolutism in this case? Several reasons.

First, the bifurcated old-source/new-source regulation makes no economic sense whatsoever. It distorts the power market by artificially advantaging older plants relative to newer plants. It spawns a huge legislative/legal-industry to fight over old-source/new-source distinctions until the end of time, creating substantial deadweight losses. It creates huge, unearned windfalls for politically clever corporations and thus encourages future market-rigging mischief. It would be far, far better to settle on one standard and apply it across the board to old sources and new sources alike.

Second, without corporate support, … that bill would likely be rendered economically toothless, with loopholes and timetables delaying serious emissions reductions until some time relatively far into the future. I am unaware of any significant environmental initiative that was successfully signed into law that didn’t manage to scare-up significant, widespread corporate support.

Third, there is a virtue in political honesty. If politicians want to argue for laws that will seriously reduce anthropogenic greenhouse gas emissions, then let’s have an honest discussion about the costs and benefits of those proposed laws. Symbolically potent gestures that are more empty than real feeds the public belief in free lunches. While one could argue that it’s better to get an empty gesture than a real one, when the latter has far more costs than the former, I can’t believe that any good will come from a culture of political dishonesty and voter illusion.

(emphasis added)

Well, I agree that casting a light on potential political deals may be a valuable way to influence the outcome in ways that improve policy, but it may very well be that voter “dis-illusion” with political dishonesty is just what the doctor ordered, in getting voters to demand both greater honesty and less government in general.

I appreciate that guys like Jerry Taylor are trying to point out how members of USCAP are trying to lock in advantages for themselves over competitors and new entrants, but why isn’t there now (and why wasn’t there during the Bush administration) any concerted focus by libertarians on less-costly and market-friendly alternatives that still address enviros concerns, like public utility deregulation and allowing immediate depreciation of investments in energy inffrastructure, prizes for carbon-capture and fusion technologies, and making sure that information about climate change (and corporate performance on various yardsticks) is widely disseminated? 

As I have previously noted,  Iain Murray of CEI, Bruce Yandle of Clemson and PERC, Gene Callahan and Jonathan Adler at Case Western have all made suggestions in this regard – to deafening silence from libertarians in general.  At Mises, scorn of enviros and of their preferences with respect to open-access commons seems to be the order of the day.  Let’s wave the white flag, shall we?

Jerry Taylor/Cato fails to fully engage Yglesias’ "free-market case for revenue-neutral carbon pricing"

November 25th, 2008 No comments

Along with Roderick Long‘s recent Cato Unbound piece on libertarianism and corporatism, Cato hosted a reaction essay by liberal Matthew Yglesias, in which Yglesias made the following side comment:

The free-market case for a revenue-neutral carbon pricing scheme seems fairly impeccable to me. But instead of organizing its climate change efforts around seeking to ensure that any future carbon pricing plan be as close to revenue neutral as possible, Cato prefers to steadfastly defend the rights of industry to unload air pollution unimpeded.

Yglesias’ comment on carbon pricing elicited a longer response by Cato senior fellow Jerry Taylor, who in Cato-at-Liberty argues that the case for carbon taxes was not at all “impeccable”.   Unfortunately, Taylor does exactly what Yglesias argues –

  • Taylor ignores Yglesias’ implicit agreement that any carbon pricing should be as revenue-neutral as possible, which further implies support by Yglesias of the notion that the government should avoid using any carbon revenues to subsidize particular technologies;
  • Taylor refuses to address the question of whether relatively slim, revenue-neutral carbon pricing approaches are much preferable to the heavy-handed, pork-ridden policy alternatives that are being floated before Congress; and
  • by proffering arguments by Indur Goklany, Taylor in effect concedes that the best policy is for the government to do nothing, other than to encourage adaptation and to fund adaptation efforts in the developing world – thus conceding to industry a continuing “right to emit GHGs”. 

It is a puzzle that Taylor doesn’t explicitly address these points, particularly as the policy debate has very much shifted ground from whether the government should act to the question of what policy is preferable.   While I believe that Jerry Taylor and Indur Goklany make important points, they can hardly expect to be effectual in their efforts to stand against greater federal policy intervention if they ignore the change in political currents and fail to more directly engage obviously sympathetic observers like Matt Yglesias, to establish and build on common ground, or to more forcefully argue on the basis of principles.

Moreover, Taylor rather surprisingly compounds his disengagement by pulling an apparently skewed figure (the rather low mode rather than the higher mean) from a 2004 review of climate change cost-benefit studies by economist Richard Tol,  who has conducted further reviews and analyses and this year has come very strongly out in favor of carbon taxes.  In the August 12, 2008 issue of Economics — the Open-Access, Open-Assessment E-Journal, Tol concluded:

… the uncertainty about the social cost of carbon is so large that the tails of the distribution may dominate the conclusions
(Weitzman 2007b)—even though many of the high estimates have not been peer reviewed and use unacceptably low discount rates. …

There are three implications. Firstly, greenhouse gas emission reduction today is justified. Even the most conservative assumption lead to positive estimates of the social cost of carbon (cf. Table 1) and the Pigou tax is thus greater than zero. Yohe et al. (2007) argue that there is reason to reduce greenhouse gas emissions further than recommended by cost-benefit analysis. The median of … peer-reviewed estimates with a 3% pure rate of time preference and without equity weights, is $20/tC. …. The case for intensification of climate policy outside the EU can be made with conservative assumptions. … Secondly, the uncertainty is so large that a considerable risk premium is warranted. With the conservative assumptions above, the mean equals $23/tC and the certainty-equivalent $25/tC. More importantly, there is a 1% probability that the social cost of carbon is greater than $78/tC. This number rapidly increases if we use a lower discount rate—as may well be appropriate for a problem with such a long time horizon—and if we allow for the possibility that there is some truth in the scare-mongering of the gray literature.  Thirdly, more research is needed into the economic impacts of climate change—to eliminate that part of the uncertainty that is due to lack of study, and to separate the truly scary impacts from the scare-mongering.

Tol, R.S.J. (2008), ‘The Social Cost of Carbon: Trends, Outliers, and Catastrophes‘.

Taylor should be aware of this paper, as Richard Tol is well-known and -regarded, and Tol’s above paper was available as a draft in August 2007 and widely discussed (including here).  Consequently, Taylor’s quoting of old numbers that Tol has himself moved away from looks like cherry-picking and in any case will not convince anyone who has moved on from 2004.

Further, while Taylor refers readers to an excellent study by Indur Goklany, he fails to note that Goklany is a strong advocate for “adaptation”, namely, the view that:

The world can best combat climate change and advance well-being, particularly of the world’s most vulnerable populations, by reducing present-day vulnerabilities to climate-sensitive problems that could be exacerbated by climate change rather than through overly aggressive GHG reductions. 

But can’t one agree with Goklany’s preferences and yet kill two birds with one stone, by using domestic carbon taxes to fund contributions to global development efforts?  The “adaptation is preferable to mitigation” dichotomy simply fails.

Here’s to hoping for more constructive engagement from Jerry Taylor and from Cato.

More carbon tax advocacy, this time from Jerry Taylor/Cato, in a piece criticizing Pickens’ plan

July 30th, 2008 3 comments

Jerry Taylor, a senior fellow at the Cato Institute, published a pithy criticism in last week’s Financial Post of T. Boone Pickens’ plan to get wind subsidies and other favors from Congress;  said Taylor:  “Virtually every claim made by T. Boone Pickens to justify the lavish subsidies he is seeking for his wind energy investments is flat wrong.”

Jerry also had a few interesting things to say about about carbon taxes:

Fourth, if reducing our carbon footprint is the goal, then the most direct and efficient means of reducing that footprint is to impose a tax on carbon emissions and then leave it to the market to sort out how to most efficiently order affairs under those new prices. Maybe it will mean windmills and CNG [compressed natural gas], but maybe not. Perhaps it will mean more nuclear power, new hydrogen-powered fuel cells, “clean” coal, the emergence of cellulosic ethanol, battery-powered cars or hybrids — or a continuation of the existing energy base but less consumption as a consequence.

(emphasis added)

I agree with Jerry, but note that Jerry he has not explicitly accepted that reducing our carbon footprint SHOULD be a goal.  Rather, he has simply concluded that, should such a goal be adopted,  that carbon taxes are the best policy tool.  And that might be as much as we can expect, from the time being, from a long-time advocate of limited government such as Jerry.

Jerry Taylor joins Ron Bailey (Reason), George Will, AEI and a long list of others in favoring carbon taxes over any other AGW-directed policies.

 

In which I try to help Bob Murphy clear the air on climate proposals by the Niskanen Center

April 2nd, 2015 No comments

I left this comment at Bob Murphy’s Free Advice blog, where he has post noting A Critique of Jerry Taylor’s “Conservative Case for a Carbon Tax”, which links to a piece authored by Bob at the “Institute for Energy Research”. [Note: I’m not sure when/if Bob will actually clear this comment.]

Bob, I know that as senior economist for the Institute for Energy Research DC fossil fuels lobbying outfit (one that was expressly abandoned by Exxon in 2008 because its “position on climate change could divert attention from the important discussion about how the world will secure the energy required for economic growth in an environmentally responsible manner”) you’re not allowed to make consistent libertarian/market-principled arguments on climate/energy policy, so allow me to note my old post that summarized what I thought might be a productive libertarian approach to climate:

http://tokyotom.freecapitalists.org/2010/02/10/productive-libertarian-approach-climate-energy-environmental-issues/

Btw, I see that Jerry Taylor/Niskanen Center has responded to you here:
http://niskanencenter.org/blog/debating-the-carbon-tax/

Yours,

Tom

P.S. Here are a few of my old blog posts on IER, from when my blog was still hosted at the gracious Mises Institute: http://tokyotom.freecapitalists.org/?s=Institute+for+Energy+Research

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Institutionalized moral hazard: Fun with Nuclear Power in Japan, or, prepare for a glowing twilight, with scattered fallout in the morning

March 26th, 2011 4 comments

Thanks for indulging the rambling title, dear readers. My thoughts wander even as try to gather them.

I thought I would share with you some of the observations I’ve been making – tweeting, largely – on the troubled nuclear reactors that TEPCO so thoughtfully lined up on the Fukushima coast to meet the massive tsunamis on March 11.

A environmental journalist who posted the Atomic Boy’s Upset Stomach YouTube video called it little more than government-industry propaganda that glosses over the colossal abrogation of responsibility that led to the Fukushima crisis.”  While I don’t think the video was government- or industry-sponsored, I share his further sentiment (emphasis added):

there’s a gaping omission right at the beginning. Nuclear Boy has a stomach ache. No kidding. Why? …. Could it be because the government of Japan let the Toyko Electric Power Company build a series of nuclear reactors next to a seismically active fault line?

Sticking with the bowel-malfunction metaphor, perhaps the video’s creators could have produced a few frames testifying to the reality that Nuclear Boy’s parents fed him some poison because they forgot to read the label carefully. Something along those lines.

Is that too much for Japanese kids to swallow (so to speak?) I don’t think so. Responsibility is something we all try to teach our children as early as possible. It’s important that Japanese leaders acknowledge the real reasons why they (and their children) are going to have to spend tens of billions of dollars to replace the Fukushima reactors years earlier than expected. Reactors that require an independent source of electricity to maintain coolant levels are, of course, a bad idea, and one that today’s generation of reactor designers have abandoned. But building them in an earthquake zone is tantamount to lunacy.

This prompted me to leave a comment with some of my thoughts (emphasis added):

 James, your criticisms are almost spot-on.

The risk-shifting start with ‘limited liability’ corporations that frees shareholders from responsibility, escalates with ‘public companies’ (regulations isolate managers from shareholders and create barriers to entry), and is ramped up even more for utilities, which are effectively granted monopolies and guaranteed returns on investment by government. Operators of nuclear plants are then given express liability caps for damages that radiation releases may cause others.

None of the utility managers/executives will have PERSONAL liability, of course.

Given all of these government policies that truncate responsibility, can there be any surprise that risk analysis and decision-making produces obviously flawed results — and ongoing efforts to cover up and hide blame?

Here are some recent tweets on this:

Nagao versus TEPCO:Case of now dead nuclear worker reveals how Japan protects corps that exist to fulfill state policy http://bit.ly/hModQE

Japan megabanks to extend TEPCO $25 billion lifeline,as Govt is sure to limit TEPCO’s liability for damages http://bit.ly/e9tBnw #eqjp #p2

These days,it’s ‘capitalists’ who r the biggest socialists:’Japanese Gov prepares to protect TEPCO frm liability’ http://bit.ly/hpx8Eb #jpeq

Moody’s on the obvious:”business risk of operating nuclear pwr plants in Japan is higher thn previously contemplated” http://bloom.bg/e8TIlm

Cato’s Jerry Taylor: Nuclear power is “solar power for conservatives”+needs “a policy of tough love” TT’s Lost in Tokyo http://bit.ly/h07XHj

Posted by: TokyoTom | March 25, 2011 9:12 AM

More in posts to come.

 

 

Categories: Uncategorized Tags:

Stop the nuclear industry bailout

March 3rd, 2010 No comments

And now a public service market  announcement (with the captioned title) from your friendly local mankind-hating envirofascist, courtesy of Dave Schwab of Green Change, who is apparently the author of the following missive that found its way into my email inbox:

Dear Tokyo,

President Obama has proposed a whopping $54 billion in loan guarantees for the construction of new nuclear power plants.

What does that mean? If the costly new nuclear plants aren’t finished, then taxpayers cover the huge financial loss.

If they are built, then we’re stuck with power plants that generate
overpriced electricity and create deadly radioactive waste that will
remain toxic for thousands of years.

Either way, the nuclear industry wins, and we lose.

Tell President Obama to stop the nuclear power boondoggle.

Nuclear power creates deadly radioactive waste, from the mining process
onwards.   It’s got a scary history: think Chernobyl and Three Mile
Island.

Just recently, a nuclear plant in Vermont was ordered shut down after
radioactive tritium, which is linked to cancer, leaked from the plant
into local water supplies.

Nuclear power is so financially risky that even Wall Street won’t bet
on it.  It’s a public health and financial disaster waiting to happen.

Instead, our government should promote energy efficiency and a
decentralized power system based on safe, clean, renewable energy.

Tell President Obama today: don’t risk our future with nuclear power subsidies!

Peace,

Dave Schwab

Online organizer
Green Change

Note that I strongly disagree that nuclear power presents serious health risks; it seems to me that the health hazards and risks from nuclear power activities are orders of magnitude less than those presented by coal and other fossil fuels. Nuclear “waste” has been well-managed, and is waste only because the government has stopped industry from re-using it as fuel in breeder reactors. So while I understand the “scary” nuclear power theme (a consequence of the massive and counterproductive role of government in developing and testing nuclear weapons), I think it is counterproductive.

I am in favor of nuclear power (though NOT in favor of subsidies), and believe we’d see alot more if coal was full-costed (it receives federal and state subsidies via licenses to mine, pollute the air and pollute land and water with wastes). I’ve blogged more on nuclear power here. As Cato’s Jerry Taylor put it: Nuclear power is “solar power for conservatives” and needs “a policy of tough love”.

However, I do feel strongly that we ought to encourage energy efficiency – by removing public utility power monopolies.

We ought likewise to eliminate subsidies for other types of power production, and instead let free markets and consumer and investor choice work their wonders.

Towards a productive libertarian approach on climate, energy and environmental issues

February 10th, 2010 No comments

[This is a work in progress and largely taken from previous posts, but readers might find some value in it in the meanwhile.]

1. Heated but vacuous climate wars

On environmental issues in general and climate in particular, find me someone (like George Will) ranting about “Malthusians” or “environazis” or somesuch, and I’ll show you someone who doesn’t understand – or refuses to acknowledge – the difference between:

(1) wealth-creating markets based on private property and/or voluntary interactions/contracts protected by law, and

(2) the tragedy of the commons situations that result when there are NO property rights (atmosphere, oceans), when the pressures of developed markets swamp indigenous hunter-gather community rules, in many cases where governments formally own and purport to manage “public” resources, and when governments absolve purportedly “private” actors from liability for harms to others (such as via grants of “limited liability“).

So what’s the deal? Here’s a perfect opportunity for skeptics to educate the supposedly market ignorant, but they refuse, preferring to focus instead on why concerned scientists must be wrong, how concerns by a broad swath of society about climate have become a matter of an irrational, deluded “religious” faith, or that those raising their concerns are “misanthropes” or worse.

Such pigheadedness is met by those on the left likewise see libertarians and small-government conservatives as deluded and/or deliberate pawns of evil Earth-destroying corporations.

Both sides, it seems, prefer to fight – and to see themselves as right and the “others” as evil – rather than to reason.

While we should not regret that we cannot really constrain human nature very well, at least libertarian and others who profess to love markets ought to be paying attention to the inadequate institutional framework that is not only poisoning the political atmosphere, but posing risks to important globally and regionally shared open-access commons like the atmosphere and oceans (which are probably are in much more immediate and grave threat than the climate). And they also ought to recognize that there are important economic interests that profit from the current flawed institutional framework and have quite deliberately encouraged the current culture war.

2. Why the reflexive libertarian disengagement?

I have on numerous occasions tried to point out, to posters on the Mises Blog who have addressed climate issues, the stunning unproductivity of the approach that they have taken — that of focussing on science and dismissing motivations and preferences, rather than exploring root causes and middle ground, and have continued to scratch my head at the obstinacy and apparent lack of vision.

The following seem to be the chief factors at work in the general libertarian resistance to any government action on climate change:

– Many libertarians, as CEI’s Chris Horner has stated,  see “global warming [as] the bottomless well of excuses for the relentless growth of Big Government.”  Even libertarians who agree that is AGW is a serious problem are worried, for good reason, that government approaches to climate change will be a train wreck – in other words, that the government “cure” will be worse than the problem.

– Libertarians have in general drifted quite far from environmentalists (though there remain many productive free-market environmentalists/conservationists). Even though libertarians and environmentalists still share a mistrust of big government, environmentalists, on the one hand, generally have come to believe that MORE government is the answer, despite all of the problems associated with the socialized ownership of resources and/or inefficient bureaucratic management (witness the crashing of many managed fisheries in the US), the manipulation of such management to benefit bureaucratic interests, special interests and insiders (wildfire fighting budgets, fossil fuel and hard rock mining, etc.) and the resultant and inescapable politicization of all disputes due to the absence of private markets. On the other hand, many libertarians  reflexively favor business over “concerned citizens”, while other libertarians see that government “solutions” themselves tend to snowball into costly problems that work in favor of big business and create pressures for more government intervention. Thus, libertarians often see environmentalists as simply another group fighting to expand government, and are hostile as a result.

– Libertarians are as subject to reflexive, partisan position-taking as any one else. Because they are reflexively opposed to government action, they find it easier to operate from a position of skepticism in trying to bat down AGW scientific and economic arguments (and to slam the motives of those arguing that AGW must be addressed by government) than to open-mindedly review the evidence or consider ways that libertarian aims can be advanced by using the pressure from “enviro” goals.

This reflexive hostility – at times quite startingly vehement – is a shame (but human), because it blunts the libertarian message in explaining what libertarians understand very well – that environmental problems arise when property rights over resources are not clearly defined or enforceable, and when governments (mis)manage resources, and that there are various private steps and changes in government policy that would undo the previous government actions that are at the root of environmentalists’ frustrations.The reflexive hostility is also a shame because it has the effect, in my mind rather clearly, of rendering libertarians largely blind to the ways that large energy, power and certain manufacturing corporations continue to benefit from (and invest heavily in maintaining) the existing regulatory structure, in ways that shift large costs and risks to unconsenting third parties.

– There are some libertarians and others who profess to love free markets at AEI, CEI, Cato, IER, Master Resource and similar institutions that are partly in pay of fossil fuel interests, and so find it in their personal interests to challenge both climate science and policy proposals that would impose costs on their funders.

I felt particularly struck by the commonness of a refrain we are hearing from various pundits who prefer to question the good will or sanity of environmentalists over the harder work of engaging in a good faith examination and discussion of the underlying institutional problem of ALL “environmental” disputes:  namely, a lack of property rights and/or a means to enforce them. 

3. The whys of climate concerns and calls for “clean” energy

I want to get started with a list of policy changes that I think libertarians can and should be championing in response to the climate policy proposals of others.

The incessant calls for – and criticism of – government climate change policies and government subsidies and mandates for “green/clean power” both ignore root causes and potential common ground.  As a result, both sides of the debate are largely talking past each other, one talking about why there is a pressing need for government policy to address climate change concerns, while the other is concerned chiefly about the likelihood of heavy-handed mis-regulation and wasted resources. This leaves the middle ground unexplored.

There are plenty of root causes for the calls for legislative and regulatory mandates in favor of climate policies and clean / green / renewable power, such as:

  • concerns about apparent ongoing climate change, warnings by scientific bodies and apprehensions of increasing risk as China, India and other developing economies rapidly scale up their CO2, methane and other emissions,
  • the political deals in favor of environmentally dirty coal and older power plants under the Clean Air Act,
  • the enduring role of the federal and state governments in owning vast coal and oil & gas fields and relying on the royalties (which it does not share with citizens, but go into the General Pork Pool, with a relatively meager cut to states),
  • the unwillingness of state courts, in the face of the political power of the energy and power industries, to protect persons and private property from pollution and environmental disruption created by federally-licensed energy development and power projects,
  • the deep involvement of the government in developing, encouraging and regulating nuclear power, and
  • the frustration of consumer demand for green energy, and the inefficient and inaccurate pricing and supply of electricity, resulting from the grant by states of public utility monopolies and the regulation of the pricing and investments by utilities, which greatly restricts the freedom of power markets, from the ability of consumers to choose their provider, to the freedom of utilities to determine what infrastructure to invest in, to even simple information as to the cost of power as it varies by time of day and season, and the amount of electricity that consumers use by time of day or appliance.

4. Is a small-government, libertarian climate/green agenda possible and desirable?

So what is a good libertarian to suggest? This seems rather straight-forward, once one doffs his partisan, do-battle-with-evil-green-fascist-commies armor and puts on his thinking cap.

From my earlier comment to Stephan Kinsella:

As Rob Bradley once reluctantly acknowledged to me, in the halcyon days before he banned me from the “free-market” Master Resource blog, “a free-market approach is not about “do nothing” but implementing a whole new energy approach to remove myriad regulation and subsidies that have built up over a century or more.” But unfortunately the wheels of this principled concern have never hit the ground at MR [my persistence in pointing this out it, and in questioning whether his blog was a front for fossil fuel interests, apparently earned me the boot].

As I have noted in a litany of posts at my blog, pro-freedom regulatory changes might include:

Other policy changes could also be put on the table, such as:

  • an insistence that government resource management be improved by requiring that half of all royalties from mineral and fossil fuel development be rebated to citizens (with a slice to the administering agency), and
  • reducing understandable NIMBY problems by (i) encouraging project planners to proactively compensate persons in affected areas and (ii) reducing fears of corporate abuses, by providing that corporate executives have personal liability for environmental torts (in recognition of the fact that the profound risk-shifting that limited liability corporations are capable of that often elicits strong public opposition and fuels regulatory pressure).

5. Other libertarian discussants

A fair number of libertarian commenters on climate appear to accept mainstream sciences, though there remain natural policy disagreements. Ron Bailey, science correspondence at Reason and Jonathan Adler, a resources law prof at Case Western, Lynne Kiesling at Knowledge Problem blog, and David Zetland, who blogs on water issues, come to mind.

I`m not the only one – other libertarian climate proposals are here:

  • Jonathan Adler at Case Western (2000); he has other useful commentary here, here,
  • Bruce Yandle, Professor Emeritus at Clemson University, Senior Fellow at PERC (the “free market” environmentalism think tank) and a respected thinker on common-law and free-market approaches to environmental problems, has in PERC’s Spring 2008 report specifically proposed a A No-Regrets Carbon Reduction Policy;
  • Iain Murray of CEI; and
  • Cato’s Jerry Taylor is a frequent commentator and Indur Goklany has advanced a specific climate change-targeted proposal.
  •  AEI’s Steven Hayward and Ken Green together have provided a number of detailed analyses (though with a distinct tendency to go lightly on fossil fuels).

Several libertarians recently urged constructive libertarian approaches to climate change:

There have been several open disputes, which indicate a shift from dismissal of science to a discussion of policy; the below exchanges of view are worthy of note:

  • The Cato Institute dedicated its entire August 2008 monthly issue of Cato Unbound, its online forum, to discussing policy responses to ongoing climate change.  The issue, entitled “Keeping Our Cool: What to Do about Global Warming“, contains essays from and several rounds of discussion between Jim Manzi, statistician and CEO of Applied Predictive Technologies, Cato Institute author Indur Goklany; climate scientist Joseph J. Romm, a Senior Fellow at the Center for American Progress; and Michael Shellenberger and Ted Nordhaus, the co-founders of The Breakthrough Institute.  My extended comments are here.
  • Reason Foundation, posted an exchange on Climate Change and Property Rights June 12th, 2008 (involving Reason’s Shikha Dalmia, Case Western Reserve University law professor Jonathan H. Adler, and author Indur Goklany); discussed by Ron Bailey of ReasonOnline here; here`s my take.
  • Debate at Reason, October 2007, Ron Bailey, Science Correspondent at Reason, Fred L. Smith, Jr., President and Founder of CEI, and Lynne Kiesling, Senior Lecturer in Economics at Northwestern University, and former director of economic policy at the Reason Foundation.
  • Reason Foundation, Global Warming and Potential Policy Solutions September 7th, 2006 (Reason’s Shikha Dalmia, George Mason University Department of Economics Chair Don Boudreaux, and the International Policy Network’s Julian Morris).

 

Finally, I have collected here some Austrian-based papers on environmental issues that are worthy of note:

Environmental Markets?  Links to Austrians

Ones such paper is the following: Terry L. Anderson and J. Bishop Grewell, Property Rights Solutions for the Global Commons: Bottom-Up or Top-Down?