Climate Progress

You know your product is in trouble when the housing analogies come out:

The market for sport utility vehicles is starting to look a lot like the housing market, spreading pain to consumers, automakers and dealers….

I am not sure this post qualifies as schadenfreude — since that has been defined as “largely unanticipated delight in the suffering of another which is cognized as trivial and/or appropriate.” There is nothing unanticipated about high oil prices (see “My 1996 warnings and predictions: “MidEast Oil Forever?” — Part I: Drifting Toward Disaster“).

That is, the death of SUVs isn’t like, say, Martha Stewart going to jail. What has happened to SUVs — “Sales of S.U.V.’s are down 32 percent so far this year, and were off 43 percent for July” — was inevitable.

Well, in July, General Motors dealers had a 174-day supply of the Yukon XL/Suburban on hand, on average, up from a 92-day supply a year earlier. Inventory of the Chevrolet C/K Suburban nearly doubled over the same period, to 116 days from 63 days.

Just like hapless homeowners, countless car owners are now “underwater,” driving vehicles that are worth less than the balance on their car loans. And just like desperate homeowners, the sellers of S.U.V.’s are having to painfully cut asking prices.

How bad is it?

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“In every deliberation we must consider the impact on the seventh generation… even if it requires having skin as thick as the bark of a pine,” goes the Great Law of the Iroquois. If you embrace liquid coal, however, it is quite safe to say there is only one generation you are thinking of (see “Coal-to-Liquid Is a Dead End“).

“Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind. And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the USA,” goes the Great Law of the Capitalists.

Obviously, thick skin ain’t what it used to be. But greed never goes out of style. E&E’s Climate Wire has the sad story:

Last week, the Crow Nation announced plans to build a coal-to-liquids plant in Montana that may provide fuel for the Air Force. That followed news of a potential coal-fired power plant on Navajo Nation land in New Mexico.

Now, as many as six coal projects, including some that would produce liquid fuel, are “under consideration” in Montana either on reservations or in nearby locations that could make use of tribal labor and resources, according to Chantel McCormick, an energy development officer for the state. Her remarks echoed a Bush administration official who said Tuesday that several tribes had “expressed interest” recently in building plants that convert coal to diesel or jet fuel.

What’s especially sad is the inevitable lies that must accompany the pursuit of the dirtiest fuel imaginable:

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June 2008 saw another sharp drop in vehicle miles traveled (aka VMT) according to the Federal Highway Administration’s monthly report on “Traffic Volume Trends.”

Americans drove 4.7 percent less, or 12.2 billion miles fewer, in June 2008 than June 2007 — beating the record-setting drop of March (see here).

Since last November, Americans have driven 53.2 billion miles less than they did over the same period a year earlier — topping the 1970s’ total decline of 49.3 billion miles….

The moving 12-month trend-line is startling and again makes clear $4 a gallon is the first (but not the last) genuine tipping point for U.S. drivers:

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What happens when your utility is 68% dependent on coal?

American Electric Power said Thursday it must raise electricity rates 45 percent for its nearly 1.5 million customers in Ohio over the next three years, to cover soaring coal prices and the cost of modernizing its systems to keep them reliable….

AEP executives acknowledge that the increases will be tough on consumers already facing high gas and food prices during a slumping economy.

“The fact is that coal has doubled in cost in the last year alone, dramatically affecting AEP Ohio’s costs,” Joe Hamrock, AEP Ohio president and chief operating officer, said in a statement. “The tools given to us by the State’s new energy plan allow us to phase in those fuel price increases over time so that unlike the spikes Ohioans see in so many products, AEP Ohio’s rate increases are spread out to be made more affordable.”

Note to AEP Ohio — Other than gasoline, what are the “so many products” that Ohio consumers ever see rise 45% in three years? Answer — not bloody many.

Now it is inescapable that under McCain’s energy and climate plans, the entire country’s electricity rates and bills will soar for several reasons:

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The answer is perhaps as high as a hundred billion dollars.

First some background. I testified in front of the Senate Environment and Public Works committee in July. In my testimony, “The High Cost of Nuclear Power,” I pointed out the obvious — that nuclear is a mature source of power that has benefited disproportionately from government support to date:

From 1948 to today, nuclear energy research and development exceeded $70 billion, whereas research and development for renewables was about $10 billion. From 2002 to 2007, fossil fuels received almost $14 billion in electricity-related tax subsides, whereas renewables received under $3 billion.

The Price-Anderson Nuclear Industries Indemnity Act caps the liability for claims arising from nuclear incidents. It reduces the insurance nuclear power plants need to buy and requires taxpayers to cover all claims in excess of the cap. The benefit of this indirect subsidy has been estimated at between $237 million and $3.5 billion a year, which suggests that it has been worth many billions of dollars to the industry. It could be argued that the value is considerably larger than that, since the industry might not have existed at all without it: “At the time of the Act’s passing, it was considered necessary as an incentive for the private production of nuclear power … because investors were unwilling to accept the then-unquantified risks of nuclear energy without some limitation on their liability.

One can make a case that such insurance was reasonable for a new, almost completely unknown technology in 1957. Extending it through 2025 is harder to justify. If investors aren’t willing to accept the risks of nuclear energy now, without taxpayers liable for any major catastrophe, perhaps the technology no longer deserves government support.

A certain senior member of the minority known for climate denial just submitted two (silly) written questions to me for the record on this:

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New nuclear power plants aren’t cheap. Neither is storing their waste. E&E News (subs. req’d) reports on at Yucca Mountain:

DOE has spent $13.5 billion since 1983, and figures to spend $54.8 billion on construction, operation and decommissioning of the repository; $19.5 billion for transporting the waste — including building the canisters for holding waste; and $8.4 billion for other program activities.

The report notes that the expenses were based on a repository opening date of 2017 — a best possible opening date that Sproat has already said is no longer possible due to budget constraints, which have pushed it to 2020. The lifecycle estimate also does not include the at least $11 billion in liability expenses DOE expects for breaking its contract with utilities to begin taking away the spent nuclear fuel in 1998.

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Green Car Congress reports:

US sales of light-duty vehicles continued their decline in July, dropping to a total 1.136 million units, a 13.2% reduction in volume compared to July 2007, according to Autodata….

The year-on-year decrease came, in general, out of the light-duty truck segment. Sales of cars in July 2008 slightly increased 0.3% on a volume basis (not on a day-sales rate) to 620,213 units, according to Autodata. Light truck sales, however, dropped 25.2% by volume from the year before to 515,963 units.

The car-truck ratio for the month was 55:45, the fifth consecutive month cars have held the majority of the new light vehicle market.

Sadly, Toyota really screwed up in its planning for hybrid production:

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Record Big oil profits from record oil prices and taxpayer subsidies — where does all your money go?

With ExxonMobil’s report of a $11.68 billion haul in the second quarter of 2008, the world’s top five oil companies are now on track for more than $160 billion in profits this year…

I know what you are thinking: Surely, Big Oil will take those staggeringly immense and almost immoral profits from the suspiciously fast rise in oil prices [you just love adverbs, don’t you!] — along with the $33 billion in taxpayer-funded subsidies you’re going to give those politically powerful and remarkably greedy companies over the next five years (see here) — and invest in both new drilling and new energy technology. No it won’t, no it won’t, and stop calling me Shirley.

In fact, the AP reports:

The five biggest international oil companies plowed about 55 percent of the cash they made from their businesses into stock buybacks and dividends last year, up from 30 percent in 2000 and just 1 percent in 1993….

Hmm, 55% of $120 billion is a staggering $66 billion used to pump up their own stock price.

But some critics say Big Oil focuses too much on boosting stock prices, in an industry that sometimes ties executive pay to stock price.

“Some critics”? “Sometimes ties executive pay to stock price”? Don’t forget that the industry always gives mega-stock options to executives.

The percentage they spend to find new deposits of fossil fuels has remained flat for years, in the mid-single digits….

What about R&D?

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The rich do get richer — and at your expense. The energy giant has posted the largest quarterly profits of any U.S. company ever:

Profits at oil companies this quarter continued to reflect oil prices that almost doubled in the second quarter from the year earlier.

Exxon Mobil on Thursday reported that second-quarter profit rose 14 percent, to $11.68 billion, the highest-ever profit by an American company. Exxon broke its own record.…

Earlier in London, Royal Dutch Shell, Europe’s largest oil company, reported a 33 percent increase in second-quarter profit on Thursday, helped by a higher oil price even as production declined…. Shell’s profit rose to $11.56 billion from $8.67 billion in the period a year ago.

So, yes, you should’ve listened to your father’s friend when he said to you in college, “petrochemicals.”

Paul Krugman has a blog post about one of my favorite economists, Marty Weitzman. He has the central point right, which is that “on any sort of expected-welfare calculation, the small probability of catastrophe dominates the expected loss.”

But Krugman’s general lack of understanding of global warming — and his willingness to believe anything Bjørn Lomborg says — undermines his entire analysis:

Bjorn Lomborg … says that climate change will reduce world GDP by less than 0.5%, so it’s not worth spending a lot on mitigation.

Weitzman’s point is, first, that we don’t actually know that: a small loss may be the most likely outcome given what we know now, but there’s some chance that things will be much worse. (Marty surveys the existing climate models, and suggests that they give about a 1% probability to truly catastrophic change, say a 20-degree centigrade rise in average temperature.)

… Suppose that there’s a 99% chance that Lomborg is right, but a 1% chance that catastrophic climate change will reduce world GDP by 90%. You might be tempted to disregard that small chance — but if you’re even moderately risk averse (say, relative risk aversion of 2 — econowonks know what I mean), you quickly find that the expected loss of welfare isn’t 0.5% of GDP, it’s 10% or more of GDP.

Well, ‘yes’, on the final point, but ‘no’ on every other point.

Indeed, a 20°C rise in average global temperature — which translates to perhaps 50°F warming over much of the inland U.S. — is “James Lovelock” territory where “the Earth’s population will be culled from today’s 6.6 billion to as few as 500 million.” Catastrophic climate change is anything significantly over 3°C, which is not a 1% chance, but a near certainty if we don’t reverse greenhouse gas emissions sharply and soon (see “Is 450 ppm politically possible? Part 0: The alternative is humanity’s self-destruction“).

Lomborg, of course, does not have anywhere near a 99% chance of being right that “climate change will reduce world GDP by less than 0.5%.” Indeed, if we actually followed Lomborg’s do-nothing prescription, then he has precisely a zero chance of being right. He is a pure disinformer (see “Lomborg skewers the facts, again” and “Debunking Bjørn Lomborg — Part III, He’s a Real Nowhere Man“).

Weitzman’s analysis is, however, very important for traditionally economists — and everyone else — to understand, so let me reprint my September post, Harvard economist disses most climate cost-benefit analyses, below:

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