Some thoughts from Bill Gates

Bill Gates answers a bunch of questions about how to avoid climate change and improve the lives of the poor, addressing the importance of energy, diet, etc. While reading, ask yourself: how many of the questions (and answers) boil down to economics?

A Modern Hero

Next time I teach Resource Econ I'm going to make all of my students read this short obituary of Norman Borlaug. Too many people are unaware of the massive life-saving implications of what he did. Yes, we are starting to see some negative implications too on the environmental side, and we need to address them, but the underlying accomplishment earned him a justly deserved Nobel Peace Prize. Take a few minutes!

Emissions trading more damaging than previously thought

A team of researchers has looked at the sulfur dioxide trading program in the US and Canada, and finds two big results: first, the cost savings are not as large as was previously thought. Simple emissions standards can be met in a few different ways, so plant operators can actually make things cheaper without being able to trade emissions. When those extra cost savings are factored in, the program doesn't get as much credit for saving money.

Second, and more importantly: as we learned in class, costs include not only money paid by plant operators, but also damages to the environment and people in the area. Power plants that are trading emissions still don't take those extra costs into consideration. That's a problem, because some of the plants buying pollution permits turned out to be upwind of big population centers, so their pollution did more health damage than would pollution from the other plants.

Emissions trading schemes still have the chance to reduce the cost of meeting a pollution standard, but as always, we must consider ALL costs when trying to find the right amount of a good to be produced, and also when we think about where that right amount should be produced.

Complicated problems!

Power is too cheap

Well, at least it is in Puerto Rico. While it sounds great to have an organization producing power and providing it free to the people, the problem is that someone is going to have to pay for that power. To make power, it takes capital (i.e. machines) and, in most cases, fuel. In addition, the machines and the power infrastructure has to be maintained. All of that costs money! If no one is paying, it's not sustainable, and at some point it's going to end. Hopefully PR can ease it out gently rather than bringing it crashing down!

Gas is too cheap

Great blog entry by energy economist Max Auffhammer. He notes that if we include all of the external costs, the amount we pay today for gasoline is less than half the true costs imposed on society of producing that gas. He points out that a certain government has set a minimum price for gas, to be sure that enough money is collected to pay for infrastructure (and maybe pollution remediation?). Guess where, and then go read his short piece!