Economic Impacts from the Promotion of Renewable Energy Technologies

Manuel Frondel, Nolan Ritter, Christoph M. Schmidt, Colin Vance have recently published a paper on the economic impacts of promoting renewable energy technologies in Germany.

The allure of an environmentally benign, abundant, and cost-effective energy source has led an increasing number of industrialized countries to back public financing of renewable energies. Germany’s experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far reaching energy and environmental laws that stretch back nearly two decades. This paper critically reviews the current centerpiece of this effort, the Renewable Energy Sources Act (EEG), focusing on its costs and the associated implications for job creation and climate protection. We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio. To the contrary, the government’s support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.

Politicized Science

When a business accused of fraud begins shredding its memos and deleting its e-mails, the media are quick to proclaim these actions as signs of guilt. But, after the global warming advocates began a systematic destruction of evidence, the big television networks went for days without even reporting these facts, much less commenting on them.

People who have in the past applauded whistleblowers in business, in the military, or in Republican administrations, and who lionized the New York Times for publishing the classified Pentagon papers, are now shocked and outraged that someone dared to expose massive evidence of manipulations, concealment and destruction of data– and deliberate cover-ups of all this– in the global warming establishment.

Today, politicized “science” has too big a stake in the global warming hysteria to let the facts speak for themselves and let the chips fall where they may. Too many people– in politics and in the media, as well as among those climate scientists who are promoting global warming hysteria– let the raw data on which their calculations have been based fall into the “wrong hands.”

People who talk about the corrupting influence of money seem to automatically assume that it is only private money that is corrupting. But, when governments have billions of dollars invested in the global warming crusade, massive programs underway and whole political careers at risk if that crusade gets undermined, do not expect the disinterested search for truth.

- Thomas Sowell

HT: Carpe Diem

Self interest and Energy Efficiency

Using data from the Department of Energy (here and here), Mark Perry illustrates that household consumption of energy declined by almost 33% between 1980 and 2005, and household expenditures on energy per square foot declined by over 40% in the same period. This suggests “that American homes are becoming more and more energy efficient all the time.”

Energy efficiency has also increased for standard household appliances since 1980, according to data Mark Perry collected from Association of Home Appliance Manufacturers.

For a home refrigerator in 1980, its energy factor (EF, a standard measure of overall energy efficiency for appliances) was 5.59, and by 2008 the EF for refrigerators had increased almost three-fold to 15.50, for a 177.3% improvement in energy efficiency. The other standard home appliances in the chart above also had significant improvements in energy efficiency, from a 41.5% increase for the room air-conditioner, to a 91.4% increase for the dishwasher.

What should you make of this? Mark Perry writes:

These significant increases in energy efficiency for both our homes in general and also for the appliances that we have in our homes have happened gradually, but steadily, for many decades, and many of these improvements in energy efficiency probably took place without any government intervention, stimulus or rebate programs.  The incentive to save money ensures that there will always be an incentive to become more energy efficient out of pure self-interest, since increased energy efficiency translates directly into monetary gain.

Cost Estimate for the Clean Energy Jobs and American Power Act

Earlier this week, the Congressional Budget Office (CBO) released a cost estimate for S. 1733, the Clean Energy Jobs and American Power Act, which was ordered reported by the Senate Committee on Environment and Public Works on November 5, 2009.

The legislated would introduce several changes in environmental and energy policies to reduce emissions of gasses blamed for global warming. The bill includes limits or caps on the quantity of certain greenhouse gases released from electricity facilities and other industrial activities starting in 2012.

The CBO and Joint Committee on Taxation estimated that over the 2010-2019 period, it would increase federal revenues by about $854 billion.

That’s $854 billion that Americans will be prohibited from spending on what they want and will instead be spent on what the government feels they ought to want. Lovely.

The Story of Cap & Trade

Who would pay more to tackle climate change?

The Economist reports:

Around 100 world leaders are set to attend the UN climate-change summit in Copenhagen to discuss a global deal to replace the Kyoto protocol. This will be tough. Scientists estimate that greenhouse-gas emissions from rich countries need to be cut by 25%-40% to keep global warming to a 2ºC rise above pre-industrial levels. The offers at Copenhagen add up to around 15%, with America offering only around 4%. The cost of averting an even bigger rise in temperature is put at a relatively small 1% of global output—a price, it seems, that many people are happy to pay. In a poll for the World Bank, over 40% of people in 13 countries said they would be willing to pay this extra amount for energy and other goods to help tackle climate change. China is the keenest on spending more while Russians were most unwilling to fork out any extra.

When It’s Okay to Poison Fish

From Freakonomics:

As the SuperFreakonomics chapter on global warming suggests, solutions that are initially viewed as repugnant sometimes gain acceptance over time. Consider, for example, that environmental groups have supported a “last-ditch effort” by Illinois environmental officials to dump a toxic chemical into a canal. The purpose? To target and kill the giant and destructive Asian carp from entering the Great Lakes and potentially bringing about the “collapse of the Great Lakes sport and commercial fishing industry.” As the Associated Press reports, the effort was expected to kill about 200,000 pounds’ worth of fish. More details here.

Quote of the Day

“Ethanol is not just hype — it’s dangerous, delusional bullshit. Ethanol doesn’t burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5% of our gasoline consumption — yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World.”

~ Jeff Goodell

Quote of the Day

“Today, there is a name for the political doctrine that rejoices in scarcity of everything except government. The name is environmentalism.”

~ George Will

Wind Power: The Economic Impact of Intermittency

G. Cornelis van Kooten (University of Victoria) has a new working paper on the economic impact of intermittency.

Wind is the fastest growing renewable energy source for generating electricity, but economic research lags behind. In this study, therefore, we examine the economics of integrating large-scale wind energy into an existing electrical grid. Using a simple grid management model to investigate the impact of various levels of wind penetration on grid management costs, we show that costs of reducing CO2 emissions by relying more on wind power depend on the generation mix of the existing electricity grid and the degree of wind penetration, with costs ranging from $21 to well over $1000 per tonne of CO2 reduced. Costs are lowest if wind displaces large amounts of fossil fuel production and there is some hydroelectric power to act as a buffer. Hydro capacity has the ability to store wind generated power for use at more opportune times. If wind does nothing more than replace hydro or nuclear power then the environmental benefits (reduced CO2 emissions) of investing in wind power are small.