negative externality of CAFE standard and stupid people

the recent elimination of exemption of autos over specific gvw is expected to raise economy and help fuel consumption but . if those seeking tax breaks and those seeking new truck sales behave in a rational manner the higher standard will just proove the fact that raising the bar generates stilt sales for taller stilts!! acording to this guys rant http://www.tpmcafe.com/node/28972 the car maker has made decisions to keep ahead of CAFE standards over the years that have produced porky trucks that do less than their predecessors. as a car Buff i see many flaws in the argument . but it is entirely possible that car makers have avoided innovation and increases in mileage over the years just to reduce costs. but he argues that they have been avoiding the standard. and that this revision of the standard will be a major improvment to helping fuel economy . what if ?, to get around the standard again the car makers just keep making the trucks heavy ? if all it takes is more weight then there is no reason they wont just bolt plates of lead into the floor and move on . to think that a change was needed and would be effective with out looking at his own argument that car makers have made decisions to keep advances out of trucks and purposly build heavy usless trucks is absurd. how about if it werent for CAFE standards the truck companys may have never made an extended cab truck , if not for the exmptions for taxes and write off potential to buisness, the small buisness owners wouldent buy trucks instead of cars.. i know of someone who hasent driven 1000 miles on his 2005 ford 1 ton truck and has no use for a truck yet because it qualifys for a specific credit or refund he bought a truck instead of a car. if there were no incentive there would have been a rational decision . many of these things may come about if CAFE hadent been implemented. so this authors argument that evil automakers arent using advances to make their product superior is quite flawed. and his comparason to a mercedes delivery truck is also laughable . instead of touting the mercedes advanced abilitys and more usefull attributes he should have been looking at the market forces that created such trucks . the real problem (if his supposition that the us truck makers had acted in the manner that he described) is how much better the domestic trucks would have been if CAFE standards hadent influenced the makers decisions . so if he is correct then he is also full of sandwich meat!!! and to counter his argument . in the medium duty truck market (which was minimaly regulated by mechanisims like CAFE) there were produced and still are produced 1.5 to 2 ton trucks that equall or surpass the capibilitys of the sprinter . they weigh more haul more and get darn near the same mileage with 20+ yr old tech. the delivery market and consumer market are vastly different and he has compared a delivery van with a farm truck.... the reason 20 + years ago there were allmost 2 ton trucks getting 20 mpg was its market was not interfered with! and buisness owners were looking for any way to deliver the goods with lowest costs and truck makers were looking to sell trucks! so if one were to compare apples to apples the real reason pickup trucks are gas hawgs is actually CAFE standards.

Global Warning

Although uncertainties lie in the realm of global warming, and despite the notion that warm spells have occurred many times throughout the life of our planet, increasing temperatures pose a problem whose most harm will be felt by future generations. By now everyone is aware of the predicament; production (be it microwaves or assembly lines) begets greenhouse gases such as carbon dioxide, which in turn prevents heat from radiating off the earth’s surface and back into the atmosphere. That much we do know.
But the connection of human activity and warmer climates is not being bought by the public; many find it hard to concern themselves with a threat that may be hundreds of years away from showing any bite. Recent surveys posted in the New York Times show the environment as being far down on the list of national worries behind the economy, terrorism, health care, poverty, education, and President Bush. There is a major difference, however, between the warming experienced in earlier times than that of today; higher effected population. If ice sheets in Antarctica and Greenland rise the several feet by 2100 as some experts are predicting, shorelines will be flooded. Approximately 80 percent of the world’s population lives “on the coast” and rising waters could turn disastrous. Federal insurance and government subsidies might no longer be a good idea for encouraging coastal development.
Whether or not the wellbeing of future generations is the responsibility of today or not is an individual decision, but policy needs to be considerate of problems we are all aware of. Perhaps a recent strong push for more efficient forms of energy will be the saving grace needed to prevent drastic damage to the environment and its people. Locally, UCCS is trying to do its part by implementing a new recycling program and striving for energy efficiency by adhering to the LEED policy that promotes more environment friendly practices during construction of the new science and engineering building.

Holy Freakin' Cow - look at these proposals

I was writing my Urban Econ term paper (I'm going to cross-post this on the other blog btw) and I came across this. These proposals have an amazing belief that we can achieve some sort of immediate utopia. Scroll down under the title "Solutions that are feasible, healthy, and sustainable" and you'll find such "feasible" solutions as "The immediate installation of full-roof solar panels on every building in America" and "An immediate tripling of minimum vehicle miles per gallon standards for all vehicles produced in America - accomplished by a quick and complete conversion of all factories to the building of only hybrid, solar, and fully electric vehicles." I like to dream too. I had to look up moratorium - it means "to put an end to" or "suspension."

Tax incentive

I found a link that allows you to pick any state and find put what the state offers for tax incentives for buying a hybrid or electric vehicle.

If you look under the state of colorado it shows the amounts avialable for certain cars, which there are about only 6. One offers $4,718 for one year if u purchased a specific Toyota vehicle. There was not one tax credit amount under $1000 even on that list. Thats just unbelievable that we are getting taxed for other people buying cars and then giving them MORE money back. I find that just completely stupid and redundant.

In the state of Wisconsin allows the city to deduct almost the full cost of the vehicle.
"The full deduction is $50,000 for any truck or van with a gross vehicle weight rating (GVWR) of at least 26,000 pounds (lbs.) or a bus with seating capacity of at least 20 adults. The deduction is $5,000 for a truck or van with a GVWR greater than 10,000 lbs. and $2,000 for vehicles under 10,000 lbs."
However, they did starts a clean fuel school bus program, with some of those vehicles. The school runs the busses on biodeisel and files for reimbursement of the funds from the state. The state will incure the entire cost of the fuel being used, even when the biodiesel prices are higher than just petroleum diesel fuel.

So of the uses being provided state wise seems to be more rational that just simple tax credits to buyers of new vehicles. I like how the State of Wisconsin uses state money to fund a clean fuel bus line for the schools. The taxes are applied on the school program, as cost incure. The money is highly reguladed by the state and set aside for the program. If costs are lower than the tax credit amount the tax is allocated back to the people in a form of a utility credit.

Also one of the State Statues requires that "A state excise tax, based on the standard number of British thermal units per gallon generated by each alternative fuel, is imposed on the use of alternative fuels. No tax is imposed on alternative fuels used by vehicles for urban mass transportation of passengers." The state does not tax the excise tax on busses, but on personal vehicles. They are more efficient oh the use of the tax and the money the apply from those taxes.

I simply think that tax breaks on buying a more efficient car is the most efficient way or even a market ability that is necessary.

Rising Gas Prices---I call it price gouging

My first question I ask myself when I hear that gas prices are rising is How can prices climb so much, seemingly overnight, when the gasoline in the tank beneath the station was bought by the retailer a day or two before and was probably refined from crude oil weeks or even months ago?
I would classify the rising prices gouging where particular states have passed laws against "price gouging," their different definitions reveal how slippery and arbitrary the concept is. What all this boils down to is that prices higher than what observers are used to are called "gouging." In other words, prices under normal conditions are supposed to prevail under abnormal conditions. This completely misunderstands the role of prices. Why do prices exist at all? To cause things to be produced and made available to the public -- and to cause consumers to limit how much they consume. Why then do prices suddenly shoot up? Because there is either less of a supply available or more of a demand, or both. What do higher prices do? Force people to restrain their own purchases more so than usual. What do higher profits do? Cause more money to be invested in producing whatever is earning higher profits, and this in turn expands output. Isn't a larger supply of oil and a reduced consumption of it what we want? Thats the question Im still pondering when all this gas discussions arise.......

Ethanol production will save us all from the evil of oil!!!!!!

Please keep this in mind when talking about using food to power cars. "20 % of all fossil fuel in USA is used in relation to food production in this country !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! I was listening in class to ethanol discussion and later on in the week, I heard an interview with an author. He was writing about healthy eating, yet he ended up going over very economic stuff as well as political stuff. I guess it’s just that pervasive, politics and money, are involved with everything in life. He begins with discussion about the I industrialization of the food supply. And all the evils of bad diet etc… but about half way through the interview ethanol comes up.
Any way here is the author and his book

Michael Pollan, author of The Omnivore's Dilemma: A Natural History of Four Meals; Knight professor of journalism, University of California, Berkeley
Ethanol production is described here in detail
http://www.eia.doe.gov/oiaf/analysispaper/biomass.html

If you have 10 minutes I recommend you listen to this clip fast forward to the ethanol discussion if you want to save time.

http://download.npr.org/anon.npr-www/chrome/icon_listen.gifchain

After 6.30 (6 min 30 seconds)…listen in to the discussion till about 17 minutes.

So it takes 1/3 gal of oil to produce enough corn to make about 1\3 gallon of ethanol which has less energy content than gasoline per gallon… If the president wants to use corn ethanol to solve oil problems then he is misinformed as a leader I wish his advisors were smarter! And had him qualify his statement with non-corn based. Basically to solve an oil crisis it is not a great idea to use corn…Why? You ask…. Well for one thing Corn is an oil product!!!!!!! Ethanol production should be from low cost items like saw grass etc.. Corn just takes tons of energy to make. So our investment will not pay dividends.


At 19:29-he talks about corn based economy problems.

The subsidy system has caused the perceived problem so we have problems with allocation of tax dollars causing another problem that we are considering subsidizing as well.

Reminds me of some quote about good after bad… think it involved money. The government is just so huge it cant see the left hand and the right at the same time so it ends up paying out to cause a problem and then paying to solve same problem. It’s the same fundamental problem that communism had there are so many choices to make in an economy that those decisions should be made by the market to be efficient. Communism thought a central control could make all the right decisions and I keep seeing when there is a failure of the market it usually involves taking power from the market to decide.

I also found this
View Ethanol Today magazine's "Technical Connections" series on the steps of the ethanol production process.
http://www.sciencedaily.com/releases/2005/03/050329132436.htm
Study: Ethanol Production Consumes Six Units Of Energy To Produce Just One
In 2004, approximately 3.57 billion gallons of ethanol were used as a gas additive in the United States, according to the Renewable Fuels Association (RFA). During the February State of the Union address, President George Bush urged Congress to pass an energy bill that would pump up the amount to 5 billion gallons by 2012. UC Berkeley geoengineering professor Tad W. Patzek thinks that's a very bad idea.

"I've come to the conclusion that if we're smart about it, nuclear power plants may be the lesser of the evils when we compare them with coal-fired plants and their impact on global warming," he says. "We're going to pay now or later. The question is what's the smallest price we'll have to pay?"
Some other tidbits from the interview that were interesting.
28:34 talks about sustainability of food production.
80 % of Iowa food is imported…
56 calories to move 1 calorie of food to cross country “real efficient” eh.

We subsidies corn syrup and tariff sugar cane. Thus preventing cane sugars domestic price from being competitive

Ethanol infrastructure Not there to distribute it and since energy content also not there we will need to consume more to receive same marginal benefit.

Corn costs oil to produce. Its energy is from oil not necessarily the sun…and its use is pervasive. Corn syrup. Beef, chicken, lots of products are corn based. It’s one crop, which we use extensively.

A large percentage of all our stuff is from corn… including us… chemical fertilizer I bushel of corn takes 1\3 gallon of oil we produce 20 billion bushels a year!!!!!!!!!
Corn is subsidized, then we get Ethanol from corn, so if they subsidise ethanol? its duble down time on the tax dollars Is a break-even process… maybe 90% waste?

So at best we get 10% return. On our oil input. What a deal sign me up.

Gas price policies

A couple of weeks ago, Ben Lieberman over at the Heritage Foundation analysed some proposed suggestions to the increase in gasoline prices. Lieberman did his analysis from a framework of what is cheaper for consumers, so I decided to see analyse his analysis from an efficiency perspective.

Point one - expand energy production at home

When economists talk about expanding production at home, we are talking about subsidizing an industry. This would be bad from an economic perspective since there are no positive externalities associated with energy production. However, Lieberman is not talking about government doing more to lower prices, as subsidies would do, but he is instead talking about it doing less. He points out that when prices were cheap, government banned drilling in ANWR and offshore sites. Such a ban cannot satisfy efficiency. It ignores the fact that producers could get oil out of the ground for cheaper than the market price; if they couldn't, such a ban would be pointless. Since there is no efficiency reason for government to be involved, externality, monopoly, or public good, then it would be more efficient for government to do less.

Point two - deregulate

Lieberman's second point is that deregulating the production of gas from oil would lower the price of gasoline. These regulations are command-and-control regulations that serve no efficiency purposes. They are attempts at protecting the environment, but if there were reasons to do so that the market was failing to account for, and again this would require a monopoly, externality, or public good to exist, then measures could and should be taken to fix the market failure and make things more efficient. However, the argument for market failure usually centers around the possibility of externalities (aesthetics, health, etc.), so the only government intervention that might be more efficient would be subsidies and taxes, not regulations. Lieberman's proposal of deregulation would not only lower gas prices, but would also be more efficient.

Point three - don't raise taxes

Lieberman also pointed out that a couple of politicians proposals that would increase the price of gasoline. The first is to raise taxes. Tax increases have been proposed for various reasons, including to reduce consumption of gasoline or purely because they don't like how much money oil companies are making. While Lieberman is right that it would increase gas prices, a tax on gasoline may be legitimate if negative externalities exist for the use of gasoline, such as pollution (and current taxes don't already fix those externalities). However, raising taxes simply because a company has profits is rediculous. There is no externality for profits, and the motives are pure envy, not efficiency.

Point four - no additional regulations

Lieberman also suggested consumers would be hurt by more regulations. The regulations being considered include forcing automakers to make more fuel-efficient cars. Fuel-efficiency is not a public good and no one has a monopoly on fuel-efficiency or anything related to it, so these regulations must be inefficient. Even if their was a market-failure, it would be an externality, so forcing politicians' will on automakers would not achieve efficiency.

Lieberman wasn't directly using efficiency as a framework for analysing these policies, but his framework is similar, and I wonder if he had efficiency in the back of his mind. He may have been thinking of the efficiency framework, but using the "consumer" framework so that everyone could relate better. Either way, the conclusions of the two frameworks are quite similar if not the same.

Global Termperature 1880 - 2000

You can check out a chart of global temperatures via NASA right here.

Mobile-Source Air Pollution

This is a great site for Mobile-Source Air Pollution stats.

States Taking The Lead on Alternative Energy Ideas

Since we recently discussed these topics in class, alternative energy and sources of economic efficiencies, I thought it was an appropriate blog.

This article was written by the managing editor of the Rocky Mountain Institute (RMI), Joel Swisher. RMI is "an entrepreneurial nonprofit organization that fosters the efficient and restorative use of resources to make the world secure, just, prosperous, and life-sustaining".

Swisher opens the article describing how DC keeps talking about alternative energy sources, but that states are ahead of the national government. He then debates as to whether or not these alternatives are economically efficient. He describes how some states are starting to use portfolio standards that require alternative energy sources to be used by utility companies within a certain period of time (5-15 years). Portfolio Standards are a "flexible, market-driven policy that can ensure that the public benefits of wind, solar, biomass, and geothermal energy continue to be recognized as electricity markets become more competitive. The policy ensures that a minimum amount of renewable energy is included in the portfolio of electricity resources serving a state or country, and -- by increasing the required amount over time -- can put the electricity industry on a path toward increasing sustainability. Because it is a market standard, pollution standard relies almost entirely on the private market for its implementation. Market implementation will result in competition, efficiency and innovation that will deliver renewable energy at the lowest possible cost." (Renewables Portfolio Standard)

Other alternative energy considerations Swisher outlined were for states to use "feebates". A feebate is a fee or a rebate that is assigned to each individual vehicle type based on a fuel economy benchmark set annually for each vehicle size class. Buyers of more efficient vehicles receive a rebate; buyers of less efficient vehicles pay a fee. This would shift the costs to the right people, not taxing everyone, but taxing the right people.

Swisher refers to a document that the RMI wrote in conjunction with the Pentagon entitled The Oil Endgame. In the document they consider how auto manufacturers should be developing lines of lighter, safer and more fuel efficient domestic vehicles to reduce our overseas oil consumption. Additionally, that we should look closer at hybrids and They believe that this change of technology will shift the supply and demand balance of oil. The issue they did not discuss was the costs of production using these new lighter materials, such as carbon composites, advanced steels. And, will the production costs outweigh the competitive price of other similar vehicles? Or, will they produce the lighter cars at the right time while gas prices are at an all time high and let the market dictate.

If anyone wishes to read the "The Oil Endgame", I have downloaded a copy that can be emailed.

A call to ation for clean air

Air pollution is taking its effect on those both healthy and sensitive people. Even with low levels of pollution there is still an adverse effect on people. With air being the most vital resource to all living species we need to find a better way to keep it cleaner. In the Atlatnta region the smog problem has reached one of the worst in the country. The last time that this region has passed the federal air quality standard was in 2004. This past year in 2005 the city had 17 red smog days. Over half of the population in Georgia is breathing unhealthy air. Georgia's childrenwith asthma recive 28 million dollars in health care a year and on some days are not allowed to be outside for an extended period of time due to the pollution. Everytime we turn on a light or start our car we are using energy which produces pollution. One way that we can try and reduce these problems is to try and drive less and keep lights turned off in rooms that are not being used. This may only help with some of the problems but we also need to use our technilogical advancements to reduce the big contributers to the pollution like smokestacks. Although air pollution is a big issue i do not think that the problem is by itself causing heart disease, asthma, and lung problems. These problems may be enhanced by the effects of air pollution but do they really cause the problem itself? We are approaching a dangerous abundance of the number of polluting gases which in turn is increasing global warming. These issues need to be resolved or we will see a decrese in life expectency.

Curbside Recycling

I recently read a commentary that most recycling programs are a waste. Among the points noted were: no shortage of landfill space (another thousand years of garbage would only fill an area 35 miles square by 100 yards deep), double energy consumption and pollution (just preparing the recyclables can use as much energy and create as much waste as using virgin material), and cost (most recycling programs lose money).
All that having been said, the fact that something can be recycled doesn't mean it should be. Forget the esoteric arguments about externalities, finite resources, and so on--in the end recycling will (or won't) work because it is (or isn't) cheaper than throwing stuff away. This varies with the material being recycled. As a general proposition, any manufactured product that is (a) heavy or expensive in relation to its bulk, (b) homogeneous, and (c) easily separable from the waste stream by consumers can be recycled economically. Metals, notably steel and aluminum, are the obvious examples; both have high recycling rates. Surprisingly, so does newsprint. The poor candidates, at the moment, are plastics and mixed paper (including magazines). Plastics are too light and heterogeneous, while mixed paper contains too many contaminants. In the end we may conclude that this junk is best consigned to landfills. But given the advance of technology, who knows? We're in the midst of a great national experiment, and we'd be foolish at this stage to prejudge the results.

Why cellulosic ethanol is better than corn ethanol

In recent debates with energy policies, fuel has become and increasing problem for policy makers. The decisions to switch from gasoline to alternative fuels has lead officials to asses different alternatives, one being the use of ethnol. In the last decade the use of corn ethnol as an clean burning fuel has been thought of as the optimal source in creating environmental efficientcy by providing cleaner burning fuel. However, a new form of ethanol has come to emerge as the sole provider of cleaner burning fuel. Is this alternative a better solution?
In assessing whether or not biofuel saves more energy in the complete process of creating energy we must first take a look at the cultivation of the vvarious crops taht can be used to produce fuel. Fuel that uses the more traditional approtach by way of corn may yeild only marginal renewalbe envergy retruns, while ehtanol obtained from cellulose (a technology that uses fibours materials such as wood chips, or farm residues) has a clear advantage. The biggest reason cellulosic ehtano has a better energy balance than corn is that the whole plant can be used within the fuel proces. The fermentable compoonenet( is sperarated from the nonfermentable component(lignin) which yields a high energy value.
On the flip side, large scale ehtonol production rasies other envronmental concerns, the biggest being air quality. The low blends predominantly used today have higher evaporatiotvie emissions than regular gasoline in warmer climates which contributes to ozone problems. A solution to this problem could be to use ethanol in high blends.
Today ethanol is only used as a fuel additive to help it burn cleaner. The question now is how quickly can we make the transition to using ethanol as an alternative fuel as aopposed to jsut an additive?

Tax Incentives for Hybrids: Deductions and Credits

We are running out of oil, our main form of energy now. There are promising technologies and alternatives coming tomorrow.

There are numerous tax incentives and rebate programs for using less energy. The most immediate one is for those of us who purchased hybrid vehicles in 2005 (and earlier); depending on the vehicle, you can take a deduction of up to $2,000 off your income, even if you don’t itemize deductions. Depending on your tax bracket, this could reduce your tax bill by about 1/3 of this amount (around $660) this year.

Procrastinators rejoice, in 2006 the energy bill includes a tax credit for hybrids up to $3,600. A credit is subtracted from your total tax, not from your gross income, so it’s an actual dollar savings.

These incentives are interesting in several ways. The obvious is that we consumers have additional motivation to move towards energy efficient vehicles. But this works for the manufacturers too; any additional cost associated with making more efficient engines is offset, making them more attractive to buyers. And this is a pretty significant amount of money, after the credit the total cost will be reduced from $23,000 to around $20,000, or about 13% savings. People have been waiting to take delivery and the long wait for hybrids which has abated recently, is growing again.

Another interesting aspect is that the credit is indexed to the fuel economy of comparable non-hybrid vehicles. So let’s say you own a Toyota or Honda, you do very well this year because your cars are much better than average. But if GM is smart (well, it’s not) it would try and soak up a couple extra MPG out of every car and SUV on the lot by tuning down the existing engines; reduce the “sportiness” but increase the MPG. They can do that and it would hurt their competition by reducing the benefit of the tax break. So in good American competitive spirit, I say go for it. And if they do, there’s a nearly instant reduction in emissions and gasoline usage. This is the kind of incentive I believe in.