Archive for March, 2009

The Mises Blog on climate change: a beacon of "dim rhetoric" on a surprisingly successful "Earth Hour"

March 31st, 2009 No comments

The Ludwig von Mises Institute (which kindly hosts these pages!) continues to outdo itself on providing empty climate posts, this time by bringing us a new author, Jason King (completely new to LvMI, and apparently with no prior internet-searchable commentary whatsoever).   How is it that LvMI is proving so singularly effective in telling us so little about Austrian perspectives on climate, climate politics and climate policy?

Mr. King presents us with “The Law of Intended Darkness”, a puzzlingly empty Mises Daily essay  that criticizes “Earth Hour” that – as a gesture to symbolize public support for political, corporate, community and personal action regarding climate change – was staged around the world last Saturday, March 28th, between 8:30 and 9:30 pm, with participating communities, firms and individuals shutting off non-essential lights for one hour.  

Mr. King’s chief points are (1) to criticize the Earth Hour for being likely ineffective, in and of itself, in affecting energy use over the course of an hour, and (2) so to conclude that participation in the Earth Hour must be intended to be symbolic.  Mr. King concludes with a triumphant report that the main sponsors of the event, the internationally well-regarded World Wildlife Fund, have themselves stressed that “The purpose of the event [is] not to save money or power. It’s a symbolic event”, but what Mr. King reveals instead is that he has completely failed to examine whether Earth Hour might be effective on its intended terms of symbolic speech. 

Rather than considering whether the event has been or is likely to be effective – from the point of the sponsors and participants – in gathering support and galvanizing action, what Mr. King has done is to wasted our time with his own essentially idle and rather poor speculations as to whether Earth Hour might be effective in reducing energy use for an hour – a goal that the organizers have expressly said is not their primary purpose.   As a result, Mr. King has in effect told us nothing. Mr. King argues that, since “the effects of Earth Hour boil down to dim rhetoric,” “as much attention should be placed on humanity’s hot air footprint as its carbon one.”  Cute, but this time the dim rhetoric and the hot air all Mr. King’s own.

Too bad – one wonders not only about whether Earth Hour might be effective on its own terms, but what are the aims of the project and its many corporate, municipal and individual participants, whether such aims are consistent with liberty or Austrian principles, or, if, not, what approaches are preferable for dealing with conflicting preferences regarding open-access resources in which there are no effective property rights.  Should citizens be seeking particular actions from their governments to deal with a collective problem that cannot be solved purely by private transactions and that requires international action?  All of this beef seems simply too much for LvMI and its readers to chew.

To tip my own hand, I noted last year Gene Callahan’s point that, with respect to climate change as much as for other matters,  public moral pressure is a perfectly appropriate way by which concerned citizens, acting in the market of public opinion, can influence behavior that generates externalities.  Further, given the nature of the atmosphere, any effective approach to climate change requires multilateral action (and as no single government can force a solution on others, this looks like Coasean bargaining, not Pigovian rule-making), and I hardly expect that we can expect to address global issues such as climate change without involving our governments (which don’t appear anxious to step out of the way in any event).

The inquiring reader – hardly in evidence on the related blog thread – is forced to do his own research about this, the third annual  “Earth Hour”, which was apparently a fairly strong success.   Earth Hour began in Sydney in 2007, when 2.2 million homes and businesses switched off their lights for one hour.  In 2008 some 53 million people and 371 cities in 35 countries switched off their lights, including global landmarks such as the Golden Gate Bridge, Rome’s Colosseum, the Sydney Opera House and the Coca Cola billboard in Times Square.  WWF reports that participation grew strongly in 2009, to hundreds of millions of people in over 4,000 cities and towns in 88 countriesMany more landmark buildings around the world switched off this year, including the Empire State Building, the Las Vegas strip, Niagara Falls, the Eiffel Tower, Rio de Janiero’s statue of “Christ the Redeemer,” Athens’s Acropolis, Egypt’s Great Pyramids, Table Mountain in Cape Town, the Merlion in Singapore, Hong Kong’s Symphony of Lights, the Shanghai Hong Kong New World Tower, and the London Eye.

Those interested in who participated and why might take a further look at the Earth Hour site linked above and here and here.

And as for thoughtful engagement regarding climate on the front pages of Mises Daily and the Mises Economic Blog?  Hope springs eternal.  At least LvMI and its editor, Jeffrey Tucker, allow an open discussion and are not running a corporate-funded spin site like Rob Bradley‘s “Master Resource” blog, which bans dissenters and refuses to acknowledge Exxon’s explicit support for carbon taxes.

Jim Hansen on Freeman Dyson on climate change

March 29th, 2009 No comments

I received the following in an email from NASA climate scientist James Hansen (whom I`ve mentioned a number of times), in connection with today`s New York Times Magazine article (“The Civil Heretic”) on Freeman Dyson, which is now making its way through the “skeptosphere”.  My short and unfair take on Dyson?:  Short Freeman Dyson: Yep, it`s warming; I LIKE vast uncontrolled experiments with climate, and who needs fish in the ocean anyway!

Dyson is rather critical of Hansen, but it`s not at all clear that he understand`s Hansen`s position.  But why attack Hansen, when Exxon  and its CEO Rex Tillerson are now explicitly pushing carbon taxes?  If any firm ought to understand fossil fuels – and the problems with government actions – it`s Exxon.  Hansen is a vocal scientist, but he represents no particular special interests.

In any case, Hansen`s mail is fairly brief, so I thought I`d just post it as if for all you open minds out there:  

            Tomorrow’s NY Times Magazine article (The Civil Heretic) on Freeman Dyson includes an unfortunate quote from me that may appear to be disparaging and ad hominem (something about bigger fish to fry).  It was a quick response to a reporter* who had been doggedly pursuing me for an interview that I did not want to give.  I accept responsibility for the sloppy wording and I will apologize to Freeman, who deserves much respect.

            You might guess (correctly) that I was referring to the fact that contrarians are not the real problem – it is the vested interests who take advantage of the existence of contrarians.

            There is nothing wrong with having contrarian views, even from those who have little relevant expertise – indeed, good science continually questions assumptions and conclusions.  But the government needs to get its advice from the most authoritative sources, not from magazine articles.  In the United States the most authoritative source of information would be the National Academy of Sciences.

            The fact that the current administration in the United States has not asked for such advice, when combined with continued emanations about “cap and trade”, should be a source of great concern.  What I learned in visiting other countries is that most governments do not want to hear from their equivalent scientific bodies, probably because they fear the advice will be “stop building coal plants now!”  These governments are all guilty of greenwash, pretending that they are dealing with the climate problem via “goals” and “caps”, while they continue to build coal plants and even investigate unconventional fossil fuels and coal-to-liquids.

            I will send out something (“Worshiping the Temple of Doom”) on cap-and-trade soon.  It is incredible how governments resist the obvious (maybe not so incredible when lobbying budgets are examined, along with Washington’s revolving doors).  This is not rocket science.  If we want to move toward energy independence and solve the climate problem, we need to stop subsidizing fossil fuels with the public’s money and instead place a price on carbon emissions.

            My suggestion is Carbon Fee and 100% Dividend, with a meaningful starting price (on oil, gas and coal at the mine or port of entry) equivalent to $1/gallon gasoline ($115/ton CO2).  Based on 2007 fuel use, this would generate $670B/year – returned 100% to the public (monthly electronic deposit in bank accounts or debit cards), the dividend would be $3000 per adult legal resident, $9000/year per family with two or more children.  This is large enough to affect consumer product and life style choices, investments and innovations.  Of course all the other things (rules re vehicle, appliance and building efficiencies, smart electric grid, utility profit motives, etc.) are needed, but a rising carbon price is needed to make them work and move us most efficiently to the cleaner world beyond fossil fuels. 

Jim Hansen

*             The reporter left the impression that my conclusions are based mainly on climate models.  I always try to make clear that our conclusions are based on #1 Earth’s history, how it responded to forcings in the past, #2 observations of what is happening now, #3 models.  Here is the actual note that I sent to the reporter after hanging up on him:

 I looked up Freeman Dyson on Wikipedia, which describes his views on “global warming” as below.  If that is an accurate description of what he is saying now, it is actually quite reasonable (I had heard that he is just another contrarian).  However, this also indicates that he is under the mistaken impression that concern about global warming is based on climate models, which in reality play little role in our understanding — our understanding is based mainly on how the Earth responded to changes of boundary conditions in the past and on how it is responding to on-going changes.  

If this Wikipedia information is an accurate description of his position, then the only thing that I would like to say about him is that he should be careful not to offer public opinions about global warming unless he is willing to first take a serious look at the science.  His philosophy of science is spot-on, the open-mindedness, consistent with that of Feynman and the other greats, but if he is going to wander into something with major consequences for humanity and other life on the planet, then he should first do his homework — which he obviously has not done on global warming.  My concern is that the public may assume that he has — and, because of his other accomplishments, give his opinion more weight than it deserves.

      (emphasis added)      

Categories: carbon pricing, Exxon, Jim Hansen Tags:

Overlooked by those warmed by climate rhetoric ("alarmist" or "denialist") – the fact that our most important commons have NO property rights rules

March 12th, 2009 1 comment

Roger Pielke, Jr., a political scientist who rather persistently blames politically naive climate scientists for the very natural fact that there is a politicized debate over climate policy,  posted last week at his Prometheus website a guest commentary by Michael Zimmerman, Professor and Director, Center for the Humanities and Arts at the University of Colorado.  Zimmerman’s post, “Coal Trains, Death Camps, and Recent Anti-Modernism,” which only recently came to my attention, apparently addressed politically-oriented remarks and actions by climate scientist Jim Hansen.  “Apparently”, I say, because the essay itself has been taken down by the author in light of factual errors and other criticism made of it, both at Prometheus and around the blogosphere (which sometimes does not lap so strongly at my distant shores).

But having finally been drawn toward Roger’s site by the fuss and taking a look through comments, I felt compelled to make a few comments, despite my inability to read the actual post.  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. 

We can see this not only in George Will‘s recent piece about sea ice, but also in the ongoing series of posts by the supposedly “free market” libertarian Rob Bradley and his co-bloggers at MasterResource.

With that as background, here is what I posted at Roger’s (emphasis added):

I’m sorry I missed the fun; did anyone happen to archive Mr. Zimmerman’s work, apparently so flawed that it required a withdrawal rather than an update or two?

Roger, I note the criticisms of you and Mr. Zimmerman at Things Break, and have to say I agree with them: Perhaps Mr. Zimmerman has never carefully read the man whom he attacks in his piece, but you have, and it’s crystal clear that Hansen has ALWAYS been talking about coal’s relationship to species extinctions, not coal’s impact on humans. I’m surprised that you would post such an obvious misreading of Hansen.

I think I can agree with tomfid and Len Ornstein without the benefit of reading Zimmerman’s piece. It’s clear that we have no ability to instantly replace coal, but it’s also clear that even without the climate change issue, coal is not even now bearing its environmental costs – witness the roughly $1 billion TVA flyash spill, the 25,000 or so annual deaths that the American Lung Assn attributes to coal, etc – w/o even getting to China and India. Investors make profits, while losses are shifted to others. There’s hardly anything conservative or socially beneficial in that business model.

It’s also very clear that, far from wanting to return to a golden age, environmentalists (largely a well-to-do/wealthy slice of America) have quite legitimate concerns about the future, and about our uncontrolled, widespread and large-scale experiments with our planet. Find me someone ranting about “Malthusians” or somesuch, and I’ll show you someone who doesn’t understand – or refuses to acknowledge – the difference between wealth-creating markets based on private property / contracts protected by law, and the tragedy of the commons situations that result when there are NO property rights (atmosphere, oceans) or when the pressures of markets swamp indigenous hunter-gather community rules.

Just look at how the oceans are being trashed and strip-mined of fish, for an alternate example. It is a first order priority of mankind to grapple with the problem of managing our commons, before we irreversibly impoverish them. For the atmosphere, the handwriting has long been on the wall, though those who profit by externalizing risks have done a pretty good job of scribbling all over it.

Of course, while on the one hand the “skeptics” manage to so completely ignore their supposedly much greater understanding of markets, on the other hand, we hear very little talk about markets from most of the enviro pundits.   Even if scientists have a right to be worried, that doesn’t really tell us what we should do. 

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 about climate have become a matter of an irrational “religious” faith, or that those raising their concerns are “misanthropes” or worse.

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 Austrians (a breed of libertarian-linked economists, for any visitors not already familiar with these pages or the great LvMI organization that hosts them) 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 institutional framework and have quite deliberately encouraged the current culture war.

(One such economically interested party, Exxon, has recently stopped funding one culture war outfit, Rob Bradley‘s climate “skeptic” shop – “MasterResource” – which remains dedicated to trumpeting relentlessly pro-coal talking points – e.g., civilization will collapse if we try to substitute nuclear, gas or other technologies for coal, or try to make coal investors pay for the climate and other environmental risks that they shift to society as a whole!)


[Update] Rot at the Core: Rob Bradley at "free market" MasterResource blog shows his true colors as a rent-seeker for fossil fuels

March 11th, 2009 2 comments

[Update:  I`ve added more background on Exxon, “Malthusians” and productive engagement.]

How has Rob Bradley showed his hand?  By shutting down reasoned (if challenging) debate at his blog, in the face of comments that were certainly more “free market” than displayed by Rob himself and his co-bloggers.

In a series of posts here and in comments at his blog, I have been critical of a number of obviously skewed and uninformative posts at MasterResource, the self-proclaimed “free market” energy blog of Rob Bradley‘s Institute for Energy Research, that downplay climate risks, cheer on coal and fossil fuels and point out problems with alternatives, while disappointingly show little evidence of a commitment to or understanding of free markets, much less a commitment to libertarian principles.  

Rob has fairly consistently simply ignored difficult questions from me on his posts, but what does he do when his guest bloggers (in particular, (a) Tom Tanton of  Pacific Research Institute, who jumped in on a post by Rob on drawbacks to wind that ignores the external costs of coal, and (b) climate scientist/paid policy consultant Chip Knappenberger) have no good answers to my comments and questions?  Even when I am just responding to his guest bloggers and others on the thread, he simply stops posting my remarks.  I am now blocked (“on moderation”) on all threads.  Granted, both Tanton and Knappenberger were in difficulty, but rather than allowing all (including other readers) to learn by having an open conversation, he apparently decided that open discourse with someone who can hold their own isn`t worth the potential embarrassment and distraction from the “mission”.  Tanton, to his credit, though he shows little understanding of market principles, at least chased me back to my linked blog post to throw in a few more parting words.

Of course the blog his plaything – or that of whoever funds it for him – so it’s entirely his right to decide whom he allows to comment.  But by deciding that hard questions and critical comments from a fundamentally libertarian, market perspective were too inconvenient, he’s tipped his hand that his interest is not in promoting “free markets” in energy, but in protecting the interests of his fossil fuel funders.  I noted on a previous post by Rob that boosted coal while bashing the “Malthusian anti-energy crusade” that:

I haven’t concluded here that Rob’s a rent-seeker; more evidence would be needed, but it’s fair to inquire and to wonder.

However, Austrians are problem solvers, not trying to win government
favor for a particular industry or bashing those with different views
for the benefit of clients.
It doesn’t looking like Rob is trying very
hard to be even-handed.

I think it’s fair to question what precisely are the objectives and
who is funding Rob, “Master Resources”, the Institute for Energy
Research, the American Energy Alliance and affiliated
institutions/personages. My understanding is that fossil fuel firms are
the principal funders, and it looks like the funding is rather generous.

So the jury is now in.

Too bad, as it’s just another manifestation of how powerful corporate interests work to manipulate the public debate (of course the wealthy citizens and corporations that fund enviros also deserve mention).  Further, it`s a turning away from principled and productive engagement over resource problems and the role of government in providing, facilitating or getting in the way of solutions to them. 

I queried Rob about his methods of engagement in response to a post by him entitled “Long Live King Coal?” in which he said that “coal looks to remain a mainstay in the domestic energy mix and bodes to help defeat the Malthusian anti-energy crusade.”  My comment?:

TokyoTom { 02.05.09 at 2:50 am }

are the John Badens, Terry Andersons, Bruce Yandles, Elinor Ostroms and
others who want to find ways to manage our commons better – by
improving ownership, incentives and pricing signals – also part of a
“Malthusian crusade”?

I just wanna make sure I know who to hate.

As for that big fly ash breach/spill in Tennessee, I’m glad that you
didn’t point out how this was a result of government ownership of TVA,
with the added benefit that costs will be borne not only by direct and
indirect victims, but by taxpayers as well. No sense in pointing out
how government is so often in the way, particularly if it detracts from
our “we hate enviros!” message. Last thing we ever want to do is to
reach a shared understanding with enviros of the institutional
underpinnings of problems, since that means our funders might lose some
of their fairly purchased, government-given special privileges.

Interestingly, though, apparently ExxonMobil – a well-run firm that Rob Bradley praises – has decided to actively promote carbon taxes. As I pointed out in a recent post, Exxon CEO Rex Tillerson,in a speech on February 17 at the Stanford University-centered Global Climate and Energy Project (the world`s largest, and internationally collaborative research prject focussed on clean energy), which Exxon commenced funding six years ago and has committed $100 million over ten years to, specifically endorsed carbon taxes AND pointed out its support as an effort to persuade others:

is rare that a business lends its support to new taxes. But in this
case, given the risk-management challenges we face and the alternatives
under consideration, it is my judgment that a carbon tax is the best
course of public policy action. And it is a judgment I hope others in
the business community and beyond will come to share.”

This must pain Rob to no end, as IER was once funded by Exxon; Exxon cut off funding last year to IER and certain other climate change denial groups.  An Exxon spokesman noted:

“We discontinued contributions to several public-policy research groups whose 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

Rob`s skewed data flow and perhaps even his own denial on climate science, investments and politics could be seen on his recent post in which he highlights comments from Exxon`s Tillerson about Exxon`s unwillingness to invest in renewables due to the unreliability of the government-provided incentives.  When I managed to get in a comment that pointed out Tillerson`s explicit endorsement  of carbon taxes, Rob responded that Exxon had not endorsed carbon taxes, but had argued that carbon taxes were simply preferrable to cap and trade.  Rob`s parsing of Exxon is ridiculous, as Exxon has clearing been signalling for the past few years that it believes that coordinated government action on climate change is merited.  But on top of that, I responded to Rob with a link to Tillerson`s Stanford speech, which clearly shows that Exxon HAS endorsed carbon taxes and that Rob is wrong.  But Rob won`t post this correction (which I made in earlier “moderated” comments as well), obviously preferring to continue to mislead his readers (with the statement that “ExxonMobil has not come out in favor of a carbon tax or pricing carbon
per se
; they favor a tax over cap-and-trade. Two different things.”).

If Rob doesn’t want to let me in over there (I’m hoping he’ll change his mind), I guess I’ll just have to start an “anti-MasterResource” thread here.  Maybe I’ll see if I can get funding from Exxon!

Rot at the core: federally-owned TVA’s massive coal flyash spill – the TVA "protects" affected residents by hassling/arresting the volunteers who help them

March 10th, 2009 No comments

A few items of interest have come to my attention regarding the TVA’s massive spill last December 22 of wet coal fly-ash into a lovely river area near Kingston, TN (about 35 miles west of Knoxville, at the junction of the Emory and Clinch Rivers).  The collapse of a retaining wall released over five million cubic feet (more than a billion gallons) of wet coal ash
flooded nearly 400 acres of land adjacent to the power plant and into the nearby
Clinch and Emory rivers, filling large areas of the rivers, damaging homes and property, rupturing
a major gas line and damaging a
railway line.

– according to a report in the Tennessean, the TVA was long aware of the possibility of a release from the Kingston site, but elected not to proceed with any costly fix – the most expensive fix apparently in the ballpark of $25 million – because it didn’t want to set a precedent for spending similar sums at its other wet ash storage sites.  Penny wise, pound foolish – how often that happens when decision-makers don’t face personal responsibility for the downsides (yes, my “limited liaibility breeds moral hazards” meme)!

– in response to the accident, the EPA announced on Monday that it will: request electric utilities
nationwide to provide coal ash impoundment information (the EPA estimates there may be as many as 300 coal ash impoundments across the US
); conduct on-site assessments to determine structural
integrity and vulnerabilities; order cleanup and repairs where needed; and develop new regulations for future safety.  Said administrator Lisa Jackson: “Environmental disasters like the one last December in Kingston should never happen anywhere in this country.”  Not only are such regulations too little too late and probably unneccesarily costly, but one wonders why in this case she fails to note that as the TVA is wholly-owned by the US government, in this case the government did this to us itself.  The industry must be really grateful to TVA for leading the way to more regulations!

– The TVA is spending $1 million a day on the cleanup, and estimates final recovery may cost $525 million to $825 million.  This is just the cost for recovering the spilled ash, which could take two years or more, and does not cover long-term mediation costs, or litigation expenses, fines or any settlements
from the accident or the extra cost of upgrading coal ash ponds at
other TVA plants
, or costs being borne by local, state or other federal agencies.  So we could be easily talking physical damage of a billion dollars or more, and decades before local homeowners can start enjoying the rivers again.

– The TVA announced in February that TVA it lost $305 million in the fiscal quarter
ending Dec. 31 2008 due to the $525 million charge
the utility took for the
estimated cost of the ash spill.

– In response, TVA president and CEO Tom Kilgore, who earned $2.2 million in FY2008, saw his base and incentive compensation for FY 2009 cut by about half.  Said Kilgore, who had outraged ratepayers in October (on the heels of rate increases) by taking large compensation increase for FY2009 (in a package worth up to $3.275 million), “I’m at the point in
my career where it’s not all about money.”

– The fly ash poses health risks, both as the small particle dust can affect the lungs and since the ash contains elevated levels of heavy metals that were left behind from the combusted coal.  A Tennessee Department of Health survey indicates that a third of the people living near the toxic coal ash spill are experiencing respiratory problems, and about half
have increased stress and anxiety.  

According to TVA President Tom Kilgore, TVA and the state Department of Environment and Conservation have tested the water and believe there’s “no reason to believe that the water is not safe,” but “water quality tests conducted by environmental activists showed arsenic
levels as high as 48 times the primary drinking water standard in river
water nearest the spill
. Coal industry watchdog United Mountain Defense
and Washington, D.C.-based Environmental Integrity Project said January
levels of arsenic, lead, selenium, cadmium, beryllium, antimony and
copper violated water quality standards and exceeded primary drinking
water standards.”

State senator Tim Burchett (a Republican) characterized TVA officials as “arrogant clowns” on March 10 as he presented legislation on coal ash storage to a Senate committee.  “I want to assure my colleagues that any offense (to TVA) is intentional,” he said. “I have little faith in what TVA is telling us.”

More on water testing results and on health, safety and environment impacts is here.

– the TVA is naturally trying to buy out residents, both to cut future losses and to limit coverage of the affected area. Apparently these buyouts require the sellers to waive all future health claims against the TVA.

– On top of such purchases, though, TVA – through its own police department – is trying to make it difficult for residents to remain and to prevent full disclosure of health risks, by restricting access to public roads and to the homes of residents, requiring any who receive medical checkups from TVA doctors to waive health claims and by hassling volunteers who, at the invitation of residents, do ash, water and air testing, deliver bottled water, and assist some residents with the transportation needs.   In two recent incidents, the TVA police have gone onto private property to detain volunteers and force the removal of private air quality monitoring devices, and arrested, shackled and jailed on March 6 a driver who had used a public road – now restricted by the TVA – to drop off a two grandmothers (one elderly and vision-impaired) at their homes after a town meeting – and who had written permission from residents to visit at any time.

According to one group, volunteers “have relatives in the Swan Pond Community and have an
open invitation to visit residents or their property near the disaster
site at any time day or night.”   The volunteer who was arrested reports the following, entirely believable – conversation with a TVA officer when he was being booked:

So as I was escorted to the Roane County Jail for processing I was informed by the TVA officer that he was “protecting the residents” of the Swan Pond Community from “people like me.”  When I questioned him further about this he stated that he meant onlookers and sight seers and people taking video while disrupting vehicle traffic and impeding the cleanup of the disaster site.
Well if TVA has any video proof of me personally disrupting vehicle traffic or impeding the cleanup of the disaster site I would like to see it, please post it to YouTube; show the world exactly what I am doing, PLEASE.    When I stated,” why would the residents need to be protected from someone who is delivering water, taking people to the grocery store, hospital, doctor, not trespassing, monitoring air/ water/ coal ash, helping facilitate trainings and organize with the local community, and sit at the Harriman American Legion building for more than 20 hours helping with heavy metal exposure testing,” he could not answer.

So far, one lawsuit against the TVA has been filed in federal court in Knoxville on
behalf of 109 citizens.  The TVA harassment policy may be aimed in part at preventing residents from gathering independent evidence to support their claims.

The TVA is governed by a nine-member board of directors, all current members of which were appointed by nominated by former President Bush (on
the approval of senators from the region) and confirmed by the Senate. 
Over the objections of the current chairman and two others
(Republicans),former national GOP committee chairman and former TVA board member was reappointed in February as chairman.  Since the TVA board has two vacancies, will
have two members terms expire in May and another in 2010, President Obama will have the opportunity to take control of the board.

– Photographic and video images of the impact of the ash spill are here:

– by renowned photographer Carlan Tapp

– by local residents (first three minutes are home footage before the accident)

– More information by the enviro group doing testing and resident support work

– the TVA’s home page, etc.


Where is anyone calling for the privatization of the TVA?

Categories: Coal, damage, limited liability, moral hazard, TVA Tags:

Rot at the Core: KC Fed Pres. Hoenig says "Too Big has Failed", and calls for receivership of failed banks / end to bailouts

March 9th, 2009 No comments

Finally, someone in the Fed is arguing that the Fed should stop printing money like crazy to bail out managers, owners and counterparties of failed banks.

In a speech on Friday, March 6, Thomas Hoenig, President of the Kansas City Fed, argued strongly that “Too Big has Failed“, and that the continuing ad hoc bailouts are just stringing out the ultimately necessary realization and workouts of failed banks and bad assets, thus creating uncertainty while increasing the cost of the crisis by prolonging the unavailability of credit.  Hoenig argues that a transparent receivership program should be set up for large, insolvent institutions, whose management should be fired and shareholders wiped out.  The whole speech is worth a read.

It is bracing to see someone in the Fed finally start talking about action to end the bailouts, but an honest observer would have to realize that federal and state regulators already have all the authority the need to take over insolvent banks; they just need to have the Fed and Geithner stop handing out money to those who have already lost hundreds of billions.  In rougher terms, no more “stinking badges” are needed; just action.  It is unlikely that simply the creation of a new RTC for too-big-to-fail banks will, as Hoenig suggests, by itself “restore an important element of market discipline …, limit moral hazard concerns and restore  and restore … fairness of treatment”.   Federal and state banking regulators already have sufficient authority; what they`re lacking is the political will to stand up to the managers and owners of failed institutions and pull the trigger.  Hoenig is essentially punting to our lazy and corrupt Congresscritters, who will no doubt give owners and managers a chance to influence any new receivership law.

Hoenig does indicate that lawmakers/regulators should consider how to prevent firms in the future form backing “to big to fail”; my suggestion?  Follow the suggestion of Glassman and Nolan that banks be encouraged to adopt a partnerhip or corporate structure that does not include a limited liability feature for owners, who, because they would have unlimited personal liability for losses, would  be incentivized to very closely monitor risks.

h/t to Calculated RISK  

Categories: banks, Fed, limited liaiblity, moral hazard Tags:

[Update] Rot at the core: Paul Volker notes that something is wrong with incentives, but can`t quite put his finger on it; guess that means MORE regulation

March 7th, 2009 2 comments

[Update:  Links fixed]

Bloomberg reported on March 6 that Former Fed Chairman Paul Volker, in proposals to the Obama administration regarding financial regulatory reform that were included in a January report he wrote with the “Group of 30”, commented that:

the financial industry’s problems stem from larger issues. “I don’t think this is just a technical problem, it’s a societal problem,” he said. He cited bankers on Wall Street receiving multimillion-dollar bonuses for engineering failed mergers.

“There’s something wrong with the system,” Volcker said. “What are the incentives, what’s going on here?”

 But it seems that Volker can`t quite put his finger on the core of the moral hazard problem.  Do any of my readers have any ideas?

Categories: limited liability, moral hazard, Volker Tags:

Rot at the core: Fed Vice Chair Don Kohn`s Senate testimony reveals the Fed’s moral hazard maximizing strategy (h/t Willem Vuiter at the FT)

March 7th, 2009 No comments

The March 6 Financial Times has a great piece by Willem Vuiter, professor at the LSE and former chief economist of the EBRD, that completely rips the Fed`s bailout of AIG`s credit default swap counterparties, as emblembatic of the epidemic of moral hazard that has rotted out our financial system. 

Vuiter doesn`t focus on the dynamics that led to the problem (limited liaibility by shareholders, which has led to a vacuum in risk management, as no one had enough “skin in the game”), but correctly notes that the Fed`s actions incentivize further irresponsiblity – and that the Fed and Congress themselves don`t have enough skin in the game, as they are playing with taxpayer money, not their own.

The article is worth reading in whole; here are excerpts of the parts that resonated most with me (emphasis mine):


The reports on the evidence given by the Vice Chairman of the Federal Reserve Board, Don Kohn, to the Senate Banking Committee about the Fed’s role in the government’s rescue of AIG, have left me speechless and weak with rage.  AIG wrote CDS, that is, it sold credit default swaps that provided the buyer of the CDS (including some of the world’s largest banks) with insurance against default on bonds and other credit instruments they held.  Of course the insurance was only as good as the creditworthiness of the party writing the CDS.  When it was uncovered during the late summer of 2008, that AIG had nurtured a little rogue, unregulated investment banking unit in its bosom, and that the level of the credit risk it had insured was well beyond its means, the AIG counterparties, that is, the buyers of the CDS, were caught with their pants down.

Instead of saying, “how sad, too bad” to these counterparties, the Fed decided (in the words of the Wall Street Journal), to unwind “.. some AIG contracts that were weighing down the insurance giant by paying off the trading partners at the full value they expected to realize in the long term, even though short-term values had tumbled.”

An LSE colleague has shown me an earlier report in the Wall Street Journal (in December 2008), citing a confidential document and people familiar with the matter, which estimated that about $19 billion of the payouts went to two dozen counterparties between the government bailout of AIG in mid-September and early November 2008. According to this Wall Street Journal report, nearly three-quarters was reported to have gone to a group of banks, including Société Générale SA ($4.8 billion), Goldman Sachs Group ($2.9 billion), Deutsche Bank AG ($2.9 billion), Credit Agricole SA’s Calyon investment-banking unit ($1.8 billion), and Merrill Lynch & Co. ($1.3 billion).  With the US government (Fed, FDIC and Treasury) now at risk for about $160 bn in AIG, a mere $19 bn may seem like small beer.  But it is outrageous.  It is unfair, deeply distortionary and unnecessary for the maintenance of financial stability.

Don Kohn ackowledged that the aid contributed to “moral hazard” – incentives for future reckless lending by AIG’s counterparties – it “will reduce their incentive to be careful in the future.” But, here as in all instances were the weak-kneed guardians of the common wealth (or what’s left of it) cave in to the special pleadings of the captains of finance, this bail-out of the undeserving was painted as the unavoidable price of maintaining, defending or restoring financial stability. What would have happened if the Fed had decided to leave the AIG counterparties with their near-worthless CDS protection?

“I’m worried about the knock- on effects in the financial markets. Would other people be willing to do business with other U.S. financial institutions…if they thought, in a crisis like this, they might have to take some losses?”

Let’s step back a minute and ponder this.  US banks and shadow-banks (like AIG’s Financial Products Division) took on excessive leverage and excessive risk.   There was not only too much careless lending by US banks, there was too much careless lending to US banks.  When this crisis is over and when, in the fullness of time, the real economy has recovered, we want to see less lending by and to US banks than we saw in the years 2004 – 2006.  How do we get those who provided US banks and other financial institutions with too much funding at too low a cost to behave with greater prodence and caution in the future? Presumably by making sure that they pay the price for there (sp) reckless financial decisions.  The counterparties of AIG who had been unwise enough to buy insurance against default on debt instruments they held, by acquiring CDS written by AIG should have been told to eat it.



Unless the counterparties pay the full price for their hubris and recklessness, they will be back for more.  It is therefore tragic that central banks and governments everywhere are going out of their way to protect and shelter the unsecured creditors of the banks (holders of junior and senior debt among them), by raiding the tax payer or the credit and reputation of the central bank.  Significant mandatory debt-to-equity conversions and large write-downs of (haircuts on) the claims of other unsecured creditors should be an integral part of any financial assistance package. …

While the demise of Lehman and the destruction of most of its unsecured creditors was an unnecessary surprise, it was still the best option available to the authorities, given the absence of an SRR [Special Resolution Regime].  Markets and market participants are educated only by painful example.

The cardiac arrest followed the realisation, well after Lehman went kaput, that (1) most of the internationally recognisable US banks were insolvent or would be but for past, present and anticipated future government financial support; that (2) many other non-bank financial institutions (AIG) and shadow-financial institutions (GE) were either insolvent or at death’s doorstep; and that (3) the government was not on top of the issues and the Congress was deeply divided and irresponsible.

The logic of collective action teaches us that a small group of interested parties, each with much at stake, will run rings around large numbers of interested parties each one of which has much less at stake individually, even though their aggregate stake may well be larger.  The organised lobbying bulldozer of Wall Street sweeps the floor with the US tax payer anytime.  The modalities of the bailout by the Fed of the AIG counterparties is a textbook example of the logic of collective action at work.  It is scandalous: unfair, inefficient, expensive and unnecessary.



Well said!


[Fixed] Exxon/Rex Tillerson: No longer willing to be "conservative" on climate risks, advocates carbon taxes and invests in carbon-lite tech

March 7th, 2009 No comments

most of my excerpts of Tillerson`s speech weren`t included in my first try; there`re here
this time.]

It may still seem novel to some, but Exxon
Mobil Corporation
began throwing its weight behind carbon pricing
than two years ago

Subsequently, Rex
Exxon`s Chairman and CEO, has
number of speeches
Exxon`s actions (and cost savings) in reducing its own GHG emissions, its
investments in energy technologies that further improve energy efficiency and
GHG efficiency, and Exxon`s views on climate risks and preferred policy
options.  Why is this worth mentioning?  Simply, Exxon is an
excellent, well-run company that knows the energy business and climate risks
well (its scientists have been sitting on the IPCC panels fromtheir inception),
so it has some credibility (in this vein, Rob Bradley`s MasterResource
“free-market” energy blog has a post up toda,
similarly remarking on Exxon`s credibility
as well-run, principled and
“the consumer’s friend and the taxpayer’s friend;” Rob just
conveniently fails to mention Exxon`s pro carbon-tax stance).

Tillerson made another such speech on February 17, on the occasion
of a visit to the Stanford
Climate and Energy Project (GCEP)
, the world`s largest privately-funded
effort to conduct basic research on energy technologies that will further
reduce GHG emissions.  Exxon has has committed $100 million to
GCEP over ten years and has been the lead funder of GCEP since its
establishment in December 2002.  The punchline of Tillerson’s remarks?

is rare that a business lends its support to new taxes. But in this
case, given the risk-management challenges we face and the alternatives
under consideration, it is my judgment that a carbon tax is the best
course of public policy action. And it is a judgment I hope others in
the business community and beyond will come to share.”

full speech here
is worth a look; I excerpt a few portions below – climate
policy comments are largely at the end (emphasis added):

GCEP’s research program, like ExxonMobil’s, is shaped to fit the contours of what has been termed the “grand challenge” before us. It is, in fact, a dual challenge — supplying the energy essential to global economic growth, while at the same time reducing greenhouse gas emissions and managing the risks of climate change. …

However, the world economy will recover. History shows that human ingenuity and productivity cannot long be suppressed. And when the world economy recovers, so will world energy demand.

Growing populations in developing countries who are seeking higher standards of living will drive this increased energy demand, which is expected to be 35 percent higher in the year 2030 than it was in the year 2005, despite the current and temporary economic conditions.

Meeting this growing long-term societal demand requires that we develop all economic and environmentally sound sources of energy. This includes hydrocarbon energy sources like oil and natural gas, which are abundant, available, versatile and affordable.

Huge investments over many decades have enabled oil and natural gas to meet close to 60 percent of the world’s enormous energy needs today, and projections are that oil and natural gas will account for a majority of the world energy demand through at least the year 2030. They are simply indispensable and irreplaceable at scale.

This global energy demand challenge is matched by a global environmental challenge — curbing greenhouse-gas emissions and addressing the risks of climate change. Thanks to greater energy efficiency and growing use of cleaner energy such as natural gas for power generation, greenhouse-gas emissions levels are expected to decline in some developed economies. …

The challenge for developing economies is more daunting, where energy demand is increasing as growing populations strive for higher standards of living. For example, by the year 2030, China’s carbon-dioxide emissions will be comparable to those of the United States and Europe combined — even recognizing that China’s energy use and emissions will be much lower on a per-capita basis — rising from 4 metric tons per capita in 2005 to 5.8 metric tons per capita in 2030.

Nonetheless, the net effect of these countervailing trends will be a sizeable increase in greenhouse-gas emissions worldwide. Even with dramatic gains in efficiency, rising demand for energy will continue to push related carbon-dioxide emissions higher through the year 2030 — an increase of 28 percent from the year 2005. …


To develop these integrated solutions, we will need to find the best ways to unlock new technology. Energy innovation — led by private enterprise, furthered by independent research, spread by free markets, and supported by sensible and stable public policy — will be essential to enabling us to achieve each of these aims. It is the key to a more prosperous, more secure, and more sustainable energy and environmental future.

It is important to remember, however, that gains in efficiency and technology occur over time.

The most dramatic changes will not happen overnight, due to the sheer complexity of the technologies we develop and the enormous scale of the global energy market. Technological transformation takes time.

The history of energy over the last century helps put such transformation into perspective. For example, it is estimated that at the beginning of the 20th century, coal and wood provided more than 95 percent of the world’s energy needs. From that point, it took more than half a century for petroleum — a cleaner and more versatile alternative — to surpass coal as the world’s largest energy source. It took nearly 50 years more to develop the technologies and build the global infrastructure so that natural gas, an even cleaner-burning source, could play a sizable role in the world’s energy mix.

This reality about timeframes is another reason why we need energy policies that allow for long-term planning and consistent, disciplined investments that lead to technological advances.

National and state governments can play a helpful role in this vital enterprise.

By creating a stable, long-term policy framework for investment in academic and commercial research efforts, government can be a partner in the short-, medium-, and long-term technological transformations we need.

One of the areas where government can provide needed stability is by implementing simple, transparent, and predictable policies to mitigate greenhouse-gas emissions. Throughout the world, policymakers are considering a variety of legislative and regulatory options. In our view, assessing these policy options requires an understanding of their likely effectiveness, scale and cost, as well as their implications for economic growth and quality of life.

Consistent with that view, we believe that a carbon tax would be a more effective policy option to reduce greenhouse-gas emissions than alternatives such as cap-and-trade. Pricing carbon through a direct and transparent tax could incentivize the search for lower-emissions energy solutions while also providing the stability and predictability industrial companies need to make long-term, capital-intensive investments in equipment and research.

To ensure revenues raised from this tax are indeed directed to investment, and to assist those on lower incomes who spend a higher proportion of their income on energy, a carbon tax should be offset by tax reductions in other areas to become revenue neutral for government.

It is rare that a business lends its support to new taxes. But in this case, given the risk-management challenges we face and the alternatives under consideration, it is my judgment that a carbon tax is the best course of public policy action. And it is a judgment I hope others in the business community and beyond will come to share.

Categories: Bradley, carbon pricing, Exxon, Tillerson Tags:

MasterResource/Tom Tanton: another muddle-headed "free-marketer" who thinks it’s fine that coal gets to shift pollution costs to others

March 6th, 2009 6 comments

Sadly, so-called “free-marketers” are often so busy smacking down bad arguments from greens that they fail to note, much less acknowledge, that they’re fairly frequently making bad arguments themselves or ignoring gaping inconsistencies in their own positions.  Of course it IS awfully easy to get caught up in partisan conflict, which provides a nice rush of self-righteousness, but it probably also helps if you’re being paid to post by fossil fuel interests, like the folks over at the supposedly “free-market” MasterResource energy blog, of Rob Bradley‘s Institute for Energy Research.  In any case, it’s disappointing, not solely because it comes from “free-marketers”, but because it offers no hope of engaging productively with those with whom they disagree.  In other words, more of Culture Wars “R” Us.

I’ve already commented quite a number of times here about Rob Bradley and his co-bloggers at MasterResource, but I continue to be astonished by the inability of the bloggers (and some commenters) to notice when they are being inconsistent or are taking anti-market/anti-lbertarian positions.  A recent post by Rob Bradley on the limitations of wind power, with follow-on comments by others, is a case in point.  In his post, Rob trots out some very old literature to make some perfectly fine – if rather obvious and well-known – points about the limitations of wind power; I observed that of course one can make similar observations about the short-comings of other energy sources, such as the social costs of coal. 

While Rob fails to respond, a visitor and one of his guest bloggers, Tom Stanton, senior energy fellow at the Pacific Research Institute (which bills itself as a “champion [of] freedom,
opportunity, and personal responsibility for all individuals by
advancing free-market policy solutions”) ride to his rescue, with strawmen and astonishingly non-libertarian (indeed, utilitarian) commentary.  Why can’t the right do better than this?

For the interested, I excerpt the relevant comments below (emphasis added):

TokyoTom { 03.04.09 at 12:09 pm }

Rob, thanks for this; you are right of course about the drawbacks to wind.

Now can I interest you in some very, very old tracts on how dirty
coal is, both in mining and combustion, or newer ones about deaths,
health costs, damages to property that are still ongoing and
BTW, while you are obviously an advocate for coal, are you also an
advocate that coal producers and consumers bear their own costs? Or is
shifting those costs to others a right that they have homesteaded?

Andrew { 03.04.09 at 6:45 pm }

the question isn’t “is coal bad?” its “is it better than (essentially)
nothing?” It is. Coal, I submit, has save far more lives than it has
cost, and has improved quality of life more than damaged it.

TokyoTom { 03.05.09 at 3:58 am }

the question is NOT whether “coal is it better than (essentially)
nothing?”, just as it is not whether wind or any other energy source is
perfect or preferable.

The question is whether those who engage in economic activities are
bearing the costs or risks of those activities, or whether those
activities appear relatively preferable to the people involved because
they are able to shift damages, costs, risks and/or responsibilities
for consequences to others.

True libertarians insist that individuals (and firms) bear full
responsibility for harms caused to others; some in fact insist that
those who are harmed without their consent have the right to use courts
to enjoin the damaging activity. Maybe this all seems a little quaint
to you?

My point is simply that Rob is ignoring, rather obviously and perhaps deliberately, the human costs of the use of coal.

Tom Tanton { 03.05.09 at 9:15 am }

“human cost of coal” has been extensively studied as have most other
energy (nay, all economic) technologies. That study are most often
referred to as “externalities”–Guess what? The economic ‘costs’ of coal
are mostly, if not completely, offset by the economic benefits.
negative externalities are NOT enough to offset the higher cost
premiums of technologies like wind that never quite mature (most likely
because of the heavy per unit subsidy they’ve become dependent on after
35+ years.)
Now let’s see about human costs–in countries with coal (or nuclear or
any meaningful) baseload power isn’t the average life span about twice
that of folks living in countries with no or primitive energy? Aren’t
THOSE folks also less educated, and less free? Do they even have 15
minutes a day of “leisure time”?Aren’t those folks also burdened with
spending every daylight hour finding a piece of wood (or dung) to cook
their measly daily bread and using unsanitary water to boot?
I don’t believe Rob is ignoring the costs of coal. I believe Sir you’re
ignoring the economic and human benefits of coal and modern energy

TokyoTom { 03.05.09 at 12:08 pm } [links added]

it seems that you understand little, if anything, about free markets or
libertarian principles. Murray Rothbard`s paper on air pollution makes
it clear that it was utilitarian arguments like yours – “the damage my
pollution does to you is fine because people want to but my products” –
that industry used in the 1800s to subvert the common law and run
roughshod over property rights, leading to the “pollution is free”
philosophy and ruinous competition where the non-polluter went
bankrupt. The upshot was the horrible pollution in the 50s, 60s and 70s
that led to tremendous citizens` movements to use government to bring
pollution under control – with laws signed by Republican presidents.

No externalities? Where were you? What motivated the Clean Air Act, Clean Water Act, SuperFund?

As for coal vs. wind, please spare me the strawman. I`m not at all
suggesting that wind OUGHT to be subsidized. I`m just asking for a
little intellectual honesty that will recognize that coal use IS
subsidized, by being allowed to shift real and significant costs to
others, and that we`d all be better off if those socialized costs were

Perhaps someday it will occur to those who (correctly) want to bash
greens for their stupid proposals that they might be more successful if
they were a little more consistent themselves and started exploring
common ground. Where`s the post praising the federal court decision
forcing TVA to do a better job at cleaning flue gases than required by
the CAA in order to limit harm caused in NC, for example? Where`s the
post calling for the privatization of the bumbling, polluting TVA,
which keeps generating costs for taxpayers and ratepayers?

But that`s not what this blog is all about, is it? You guys are more
into making enemies and fighting over government than in truly shifting
risks and regulation back to markets and the courts.

As for countries abroad, this is of course unrelated to a discussion
local/regional costs and energy alternatives in the US. But since you
bring it up, don`t forget that the real reason why these other nations
aren`t developed yet is that they`re still kleptocracies that don`t
sufficiently protect private property rights and returns on
investments.  Why are you cheering on poor governance, instead of
suggesting that they could become wealthier sooner by accelerating
their move up the Kuznets curve
(which is an artifact not only of
preferences, but of insufficient information and laws that protect the
elites over private property of the masses)?