The government is considering offering incentives to get people to trade in vehicles before model year 2001. Drivers could get up to $5000 toward a new car if they give up their older car and purchase new US-made cars that meet fuel efficiency standards.

Interesting way to boost GM and low-energy vehicles at the same time. A few problems: 1) messing with demand for durables can be expensive later; 2) I wonder how much energy savings this will actually promote, since some older cars are pretty gas efficient.

Any more that you can come up with?

End material for second midterm

Articles posted after this marker may appear only in questions on the final exam, not on a midterm.

Certification: a response to low resource prices

Vendors can raise prices if they can put special "sustainable" labels on their products, as niche markets are willing to may for them. An article in the New York Times highlights this for forestry, and a recent article in a publication by the Nature Conservancy describes how that organization is using a "local" label to raise selling prices enough to justify the higher costs of using sustainable methods. This is internalizing externalities in action, but it's tough when only parts of the market are internalizing a large share of the costs.

Renewables are expensive!

According to the New York Times today, wind and solar are still a long way from being cost competitive. Since wind power goes offline when there's no wind, a plan centered around wind requires backup, and adding backup really makes things expensive. Still, even figuring in the backup, solar checks in at twice the cost of wind. The low price of natural gas (see the next post) is making this all the more difficult. Ouch!

Natural Gas Glut in US

Recently, a globalized gas glut has led to lowered prices for gas that heats our food and homes and runs industrial factories throughout the world. This amazing trend comes after a shortage for natural gas in recent years. Darcel L. Hulse attributes this new imbalance among supply and demand to the global recession stating, “We had many years of ever increasing demand so the world geared up for that, but what the world did not prepare for was an economic recession that is global in scope and in impact.” There are six new production plants for natural gas coming on line. However, Asian and European markets, which use the most natural gas, are slowing.
The global capacity for gas exports will increase 25% from 200 million tons. The natural gas exports from Qatar, Egypt, Nigeria and Algeria which were suppose to enter European and Asian markets are now arriving on supertankers in the United States where there is a glut too. Natural gas prices have lowered in the United States as its use has fallen by two-thirds. The new imports will not lower the prices any further but will sustain the prices in the market until it comes out of the recession.
The new influx of natural gas into the United States has caused mixed reactions. Consumers will most definitely benefit from the lower prices. Many industrial products utilize natural gas in the production process to run machines and operate factories. Natural gas also provides one-fifth of the power generated by electric utilities. Proponents for energy independence, are on the other side of the issue, and are in fear that the new imports will ruin domestic production markets for natural gas. The domestic rig count will be cut by fifty percent as the imports increase. Prices for natural gas are down to $4 per thousand cubic feet from $13 only a year ago.
“The United States used to have gas bubbles all by itself; now the world can have a gas bubble,” said Donald Hertzmark. The once highly priced necessity for countries with little alternative energy sources has become abundant and will aide a global movement out of the recession.
Having a natural resource in such abundance is great for consumers and the producers who utilize it production processes. With such a high abundance and a lowered price, investments in renewable energy sources can be more heavily researched and tested. These practices will hopefully lead to greater energy independence and lead to developments of cleaner energy technologies.
-- Michael Fisher

Costs of Solar Power Falling

The cost of purchasing and installing solar panel systems in homes and businesses has been decreasing rapidly since a decade ago. That cost has dropped 27.6% from 1998 through 2007. In a study done by Lawrence Berkeley National Laboratory, the costs of 37,000 photovoltaic systems across the country were examined and it was found that the average price fell from $10.50 per watt in 1998 to $7.60 per watt in 2007. The study also revealed that the state in which the system is installed has an affect on the price of installation. Systems smaller than 10 kilowatts cost an average of $8.10 per watt in California, the second lowest average in the country next to Arizona. Maryland was found to have the highest average price at $10.60 per watt.

The solar panel industry is continuing to find new ways to drive costs of panels down by using new materials, new production processes, and streamlining installation techniques. The demand for solar energy is increasing as homeowners and businesses are looking to lower energy bills and leave a smaller carbon footprint. Economics is playing a major roll in the issue as photovoltaic solar energy still isn’t economical. It is said that this type of renewable energy needs to fall below $5 per watt in order to truly be competitive with other forms of energy production.

I believe that it is obvious economics will be the deciding factor with solar energy’s success or failure. Right now a small system for homeowners costs approximately $25,000. This price, roughly that of buying a new car, is not economical if a homeowner wants to recover their investment in a reasonable amount of time. The time it takes to recover expenses would also depend on the location of the home; closer to the equator would increase efficiency and shorten the time it takes to “break even”. I am totally interested in having a solar energy system on the house that I purchase in the future, if the cost declines or I stumble upon a large pile of money. Having household appliances connected to a solar power system would reduce energy bills significantly, however, a monthly payment for the solar power system would wipe out that affect and possibly cost more to the homeowner.
--Kevin Kelly

Funding for Solar

For a change, Berkeley's crazy left wingers seem to have done something right. Solar panels have always been hard to sell because you basically have to front the cost of almost all of your power for the next 30 years before you get anything back. Under Berkeley's new model, the cost of solar panels is paid for by a loan taken out by the city, and residents pay it back as part of their property taxes. This article is about some people in southern California who are saving money from the new plan implemented by their city. Says one lady, "You know, I am happy it is also good for the environment."

Severin Borenstein (who works in Berkeley) says that we shouldn't fund solar because the technology is inefficient (i.e. it doesn't generate enough power to pay for itself even accounting for the externalities associated with traditional power generation) and it's hard to argue with him given his thorough study. He calls for increased resources to be invested in research, so that better solar panels can be produced.

There may be other ways that cities can use this mechanism to invest in increased energy efficiency, which would be good too. On top of that, though, I have to think that this new means of securing funding for solar might provide the impetus to get the research done that Borenstein calls for. Hopefully most everyone can agree on that!

Water markets kill a small town

An article in the New York Times today discusses the fate of Quillagua, a town with very little water in the desert of northern Chile.

My favorite quote is the, "market can regulate for more economic efficiency, but not for more social-economic efficiency." I'm not sure exactly what that means, but there's a grain of truth to it.

There are a few interesting issues here: first, if the town doesn't have enough water, it seems like it should die, and that might be sad but unavoidable. The twist at the end of the story, though, is that it sounds like the mining company that's taking all the water may be forcing that end by taking more water than it has water rights for. If that's the case, then trust in markets has blinded economists and policymakers to the potential for abuse- and that abuse, that externality, is killing the town.

Show me a transaction with no externalities and I'm a libertarian too- I just don't see too many of them out there!
-- James

New Treatment for Wastewater

In the article “Green Iron” from The Economist, the author discusses a new solution for treating industrial wastewater. As we all know, wastewater that is dumped from factories into rivers and streams has large amounts of harmful dyes, nitrogen, phosphorus and other chemicals. These chemicals can have serious effects on the waterways ecosystem, kill fish, and can even contaminate drinking water. This is a serious issue for these and many other reasons.

Dr. Wei-Xian Zhang had previously developed a system for cleaning groundwater and contaminated soil using iron nanoparticles. This method was effective but very expensive, averaging $100 for a kilogram of these nanoparticles. In recent work, Dr. Zhang and fellow colleague Dr. Luming Ma invented a much more efficient and cost effective method. By using ordinary scrap iron that you might find in a junk yard, Dr. Zhang was able to devise a method for treating water being discharged from factories.

By adapting the standard technique for treating wastewater, Dr. Zhang’s created a method that passes water through iron filings held in large tanks. The industrial chemicals are attracted to the surface of the iron filings, which have a large surface area. Scrap iron can be purchased locally for 20 cents a kilogram and after being coated with a solution of copper chloride to increase the effectiveness, costs only rise about another 5 cents. This techniques effectiveness is much greater than the biological treatment method. The amount of nitrogen removed goes from 13% to 85%, phosphorus from 44% to 64%, and colors and dyes from 52% to 80%.

This discovery could make a huge impact on the way factories such as pharmaceutical companies, textile factories etc… dispose of contaminated wastewater. The external costs of such pollution are quite large. By developing a more effective and less expensive method, Dr. Zhang has in turn lowered the companies MAC (Marginal Abatement Cost). The MAC is how much it costs for companies to clean up pollutants in the water. By drastically lowering the cost of cleaning the wastewater, factories will be able to abate more pollutants than before and at a much lower cost.

The benefits to society from factories discharging less contaminated water are clear. The external costs will be much less and this new technology will enable and encourage factories to willingly do so because of increased efficiency and decreased costs. The added benefits of buying the scrap metal from local junk yards near the factories are important to look at as well. Instead of having these materials pile up in landfills, they would be put to good use and the amount of revenue collected from them would help stimulate the local economy. This discovery benefits society, the environment, the factories, and the scrap metal companies.
--James Stierhoff

Waste Coal Plant Under Attack

A coal power plant uses coal to produce energy. A waste coal plant produces energy by burning waste coal piles that have accumulated from 1900-1970, but these plants produce more pollution than burning coal alone. If coal is not burned it is left in piles and harmful elements are released into the air and waterways in the surrounding area creating problems such as acid drainage. There are currently 18 waste coal power plants around the world, 14 of them being in Pennsylvania alone. However, another use for waste coal that has been found is growing beach grass. These grasses have been found to thrive in waste coal soil.
In a Pennsylvania town, the Sithe Energy Company has spent millions of dollars on a $550 million power plant near the Quehanna Wild Area. It will burn waste coal even though this is known to generate a large amount of carbon dioxide and other greenhouse gases. The Department of Environmental Protection supports the plant because of its alkaline fly ash that will neutralize the acid mine drainage. The Sierra Club is protesting this plant because they believe its financial and ecological costs outweigh its benefits. The benefits are that this type of plant will consume waste coal that is currently adding pollutants to streams. Also, the methane that will be released into the atmosphere is worse then the amount of carbon dioxide released. These three plants will emit 8 million pounds of carbon dioxide a year.
Other benefits include its contribution to the areas economy. The Sithe Energy power plant will add one billion dollars to this economy. It will also reduce its emissions by 90% compared to older plants. The Sierra Club has initiated the National Coal Campaign to fight these waste coal plants. The plants will eventually make global warming worse and harm families in the area.
While I agree that using waste coal would help eliminate the effects it is currently putting on the environment, the release of more carbon dioxide would harm the environment much more. Other uses of waste coal should be found instead such as the growing of beach grass.
-- Jessica Noratel

Obama’s Cap, Trade Irk Some in Party

For those that have been listening to President Obama on the campaign trail for the past two years or so, it should be no surprise that the President was going to take action on implementing global warming policies once in office. Unfortunately for some of the Democratic Senators who supported him during his run to office, he is sticking to his word sooner than expected. President Obama has proposed climate-change laws that are aimed to reduce carbon-dioxide emissions by implementing a cap and then selling the pollution rights to businesses.

The President estimates that by designating property rights on these admissions then allowing them to be sold and traded, it will generate about $650 billion in the first ten years. The plan sounds simple enough, but has ruffled some feathers since two thirds of this revenue will then be used for tax cuts for the low- and middle income families to help ease the pain of any increased energy prices that will be the result of this new policy. Most of the opposition can be found in the landlocked states of the rust belt that already must deal with higher energy prices, and fear that any further increase could be catastrophic to an economy that is already in shambles.

While some argue that the President is setting a standard that is long overdue and could possible help generate needed revenue for the economy, others do not agree. Due to the large scale, cost, and rapid timescale for implementation many people who were once fond of the idea have now grown disenchanted with the idea of this drastic change of policy.

Since the majority of the revenues for these tax cuts are going towards the middle and lower class, I am fairly certain this will gain the support necessary to become a law. I think it is a scary time to raise the price of anything knowingly with the way the economy has turned. It is about time somebody became responsible for the vast amounts of carbon-dioxides that are emitted annually. I think those who are firm believers of global warming and those who aren’t can agree mutually that regardless of the severity or magnitude of the gasses being released, it can’t be a good thing. Like any other form of pollution it must be accounted for and reduced when at all possible, if the government can generate some revenue in the process then by all means we need it these days. I think it is a bold idea and respect the President for trying to move forward with it, but he should just stay true to his promise of those tax cuts.

--Matt DiPasquale

Delaware River Deepening

The deepening of the Delaware River has become a huge issue between the Pennsylvania and South Jersey politicians. Basically, the plan to dredge the Delaware River consists of increasing the depth of the river from 40 feet to 45 feet. Originally the proposal stated that the project would save over 40 million dollars in transportation costs per year. Since then that figure has been deemed inaccurate. One study actually shows that the benefits received from the project would only be 50 cents per dollar spent to do the actual project. But the supporters of this project claim it is essential for bringing back more business to the Philadelphia ports.
Not only does the economic perspective on the project not look to be very beneficial, there are environmental externalities to consider. The National Wildlife Federation says that the dredging will affect the horseshoe crabs, oysters, and migrating shore birds of the region. This project could ruin their habitat and food sources. There is also the threat of a possible contamination of the water from the project. Also, there is no clear plan to where the dredged muck will go. The main reason South Jersey is opposed to it is the Pennsylvania politicians want it to be dumped there instead of in their state. Representative Rob Andrews is a huge opponent for this main reason.
I personally don’t think this is a very good plan. With the environmental and economic costs being so high, it does not seem to offer much benefit. Also, since I am a resident of South Jersey, actually in Representative Andrews district, I agree with him. I think for this project to work they would need to find somewhere to actually put the muck dredged up that all states involved agree on, and figure out a way to decrease the costs and internalize the externalities.
-- Katie O'Riordan