How did $50B high-risk, job-killing nuclear loans get in the stimulus?

[I urge readers to stick their head in a vise before reading this.]

I have previously discussed the non-job-creating $50 billion in nuclear loan guarantees the Senate put into the stimulus (see here). For the record it was Sen. Robert Bennett (R-Utah), which I point out merely because "R-Utah" perfectly describes thinking behind this farce.

Not only won't these loans generate any jobs in Obama's first term, but as Peter Bradford, former member of the Nuclear Regulatory Commission, explained to me, it could actually kill jobs. How?

The capital markets are not swimming in credit. If you have billions in taxpayer backed loans for your project, even for a project that will take years to finalize and see actual jobs, you may well suck up money that might be otherwise be available for, say, wind projects that are shovel ready now. Bradford called the nuke loans "straw ready."

Worse, utilities that actually use these loans to build a nuclear plant would face an all but certain drop in their credit rating -- see here. That means we are setting ourselves up to take over more trouble assets, since the Congressional Budget Office estimates the likely default rate of these loans at over 50 percent. If you liked nationalizing banks and insurance companies, you'll love nationalizing nuclear utilities!

But here is where it gets particularly farcical: The loans only got snuck into the bill by budget gimmickry that replicates the high-leverage, fraudulent risk analysis that got us into the subprime mortgage and credit default swap mess. Some leading nuclear energy experts explained this to me Tuesday, and I will do my best to explain it to you.

Time to get charged up about advances in smaller, faster lithium-ion batteries

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'Climate change,' 'global warming,' 'climate chaos' — what terminology fits best?

The usual scientific term for what I refer to as "climate chaos" is "climate change." Scientific preference is a strong argument in favor of using the latter term, and climate scientists prefer it to the term "global warming" because it encompasses changes besides average surface temperature, such as rising sea levels, increased floods and droughts, and stronger storms.

But in my opinion it encompasses too much. After all, denier blather about a new ice age also describes a (discredited) type of climate change. It is rather like referring to cancer as "cell change." (Cancer certainly is one kind of cell change.) Also a lot of delayers like the term "climate change" because it is emotionally neutral, and it helps them frame the debate they way they want.

What about the term "global warming"?

Richard Tol says wildly optimistic MIT/NBER study is 'way too pessimistic'

An amazing comment (here) from climate economist luminary Richard Tol epitomizes the narrow, linear, non-scientific thinking of the economics profession in the climate arena.

In Voodoo economists, part 3, I explained why a recent study, "Climate Shocks and Economic Growth [PDF], was a new favorite of global warming deniers. In projecting the economic consequences of global warming this century, the authors:

• knowingly ignored many of the key impacts (like sea-level rise, extreme weather, species loss)
• (unknowingly?) ignored all the other key impacts (like desertification and loss of the inland glaciers and ocean acidification)
• assumed the the tiny global warming impacts we have experienced in the last few decades could be be extrapolated in a linear fashion to determine the huge global warming impacts projected for this century on the business-as-usual emissions path
• absurdly did not assign China and India "significant negative consequences of climate change" because those countries would soon be rich.

That's the only way they could come up with conclusions like "we find very little impact of long-run climate change on world GDP" or "Changes in precipitation had no substantial effects on growth in either poor or rich countries" -- conclusions the right wing deniers at the Heritage Foundation and elsewhere were quick to embrace. But Richard Tol posted a comment here:

Creating transit-oriented communities addresses many different issues

Last November, Seattle-area voters gave a resounding shout-out to mass transit. Building on that support, a new bill in Washington state focuses on sustainable development near transit stations. This "Creating Transit Communities" legislation calls for dense, walkable communities in transit hot-spots.

It would provide local jurisdictions with resources and incentives for sustainable growth and strengthen existing provisions about making low-income housing available near transit centers.

Think those are unrelated issues? No way, say bill supporters from Futurewise, Washington Low Income Housing Alliance, and Transportation Choices Coalition. "Our state may face no challenge greater than the threat of global warming and the lack of sufficient affordable housing," they argue in a recent Seattle P-I editorial, "and we can't solve either unless we solve both."

They go on to illuminate the connections:

Higher productivity and lower health costs outweigh additional spending

Grist has discussed the consensus among most economists that the net cost of solving the climate crisis will be around 1 percent of gross domestic product (GDP). Basically this consensus says that total expenditures in various greenhouse gas emitting sectors will increase by 1 percent for the same economic output if emissions are controlled.

To be fair to economists, these estimates are based on studies that include substantial increases in energy efficiency -- even count some of the maintenance and capital savings. They are actually taking a stab at following Amory Lovins' dictum to count all costs and benefits.

Nonetheless, I think there are some good reasons why the consensus is wrong about there being a net cost at all. I think the overwhelming evidence is that a climate-stable future will have a higher GDP, even before avoided climate disruption is counted.

The main extra benefits economists overlook are the helpful side effects other than mitigating the climate crisis -- "positive externalities," in economic jargon.

For example, about half of all economic activity takes place in climate-conditioned buildings. Greening these buildings could increase[PDF] productivity [PDF] by around 10 percent. Similarly, switching most long-haul freight trucking miles to long-haul freight rail would increase productivity in transportation. Many energy-saving practices in industry, such as reducing scrapping and reducing spills and other types of emitting stoppages, would increase productivity as well. A switch to wind and solar would reduce labor productivity in the electricity sector; the conventional wisdom is that a switch to organic agriculture would do the same in that sector, though I think this is much less certain that people think. At any rate, sectors where productivity would rise greatly outnumber the tiny sectors where it might fall -- resulting in a huge net increase, probably greater than 5 percent for the economy as a whole.

Another example would be huge benefits to health. Eliminating or greatly reducing the use of fossil fuels would reduce air pollution, water pollution, and exposure to toxics. A switch to organic and low input agriculture would decrease direct ingestion of toxics, and increase available vitamins and minerals in food. Whether such a switch alone would encourage a switch to healthy increase in the consumption of non-starchy vegetables and fresh fruits I don't know, but it certainly could be part of policy that accomplished this. Overall, I think it is almost impossible that switching from fossil fuels to renewables and efficiency, that switching from toxic soil-consuming agriculture to non-toxic soil building agriculture, from unsustainable to sustainable forestry, would not increase GDP.

Two last points.

No particular policy instrument is appropriate for all environmental problems

I introduced my previous post by noting that there are several prevalent myths regarding how economists think about the environment, and I addressed the "myth of the universal market" ­-- the notion that economists believe that the market solves all problems. In response, I noted that economists recognize that in the environmental domain, perfectly functioning markets are the exception, not the rule. Governments can try to correct such market failures, for example by restricting pollutant emissions. It is to these government interventions that I turn this time.

A second common myth is that economists always recommend simple market solutions for market problems. Indeed, in a variety of contexts, economists tend to search for instruments of public policy that can fix one market by introducing another. If pollution imposes large external costs, the government can establish a market for rights to emit a limited amount of that pollutant under a so-called cap-and-trade system. Such a market for tradable allowances can be expected to work well if there are many buyers and sellers, all are well informed, and the other conditions I discussed in my last posting are met.

The government's role is then to enforce the rights and responsibilities of permit ownership, so that each unit of emissions is matched by the ownership of one permit. Equivalently, producers can be required to pay a tax on their emissions. Either way, the result -- in theory -- will be cost-effective pollution abatement, that is, overall abatement achieved at minimum aggregate cost.

The cap-and-trade approach has much to recommend it, and can be just the right solution in some cases, but it is still a market.

Book exposes the messy conditions of Canada’s tar sands

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Memo to tax sirens: Both a carbon cap and a tax can be implemented well

This is a guest post from David Hawkins, director of the climate program at NRDC.

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In the Odyssey, Odysseus had to be tied to the mast to resist the call of the Sirens, who tried to lure his ship onto the rocks.  These days the siren song of a carbon tax fills the ear of many commentators who urge us to recognize its beauty and steer our ship in its direction.  A Washington Post editorial is a recent example.

The premise of the Post editorial is that cap-and-trade regimes are complex and vulnerable to special pleading, and they do not guarantee success in reducing emissions, while a tax is simple and sure in its effects. But this is grass-is-greener thinking. The Post compares a flawed version of one approach (cap-and-trade) to an idealized version of the other (tax) and not surprisingly, the idealized approach wins.

The fallacy in this argument is that the same political body (our Congress) that, we are assured, will insist on putting special interest features into a cap-and-trade bill, but when presented with a tax approach, will vote only for the purest proposal, firmly rejecting all lobbyists' pleas. Those who argue that a tax approach is less likely to be designed for special interests than a cap approach simply are ignoring the tax code. We have decades of empirical evidence in the U.S. that when Congress designs tax policies it rarely resists the entreaties of special interests.

It is worth reading the history of recent (Nixon onward) energy tax proposals done by the group Tax Analysts. It is hard to see anything in that history that suggests a carbon tax would be successful (or if something called a carbon tax were enacted that it would actually accomplish anything).

The fate of the 1993 BTU tax proposal by Bill Clinton is instructive.