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Ideologues hate it when the facts get in the way of their theories. California’s Gov. Jerry Brown signed trailblazing legislation last week that commits the state to audacious greenhouse gas emission reductions by 2030 of 40 percent below 1990 levels. Not surprisingly, longstanding critics from the business community were howling once againabout how California’s business climate will deteriorate as a result.

The law extended efforts under California’s previous cap-and-trade bill which set emission targets for 2020 to match 1990 levels.

Predictions of doom for the California economy are a perennial staple of California politics. But is there any truth to them?

First, here are the bald facts. Growth of California’s ‘overregulated’ economy has frequently exceeded the U.S. economy as a whole since 1998. Annual growth in gross domestic product shown in the linked graphs is not a perfect measure of economic vitality, but it shows that fears that California is somehow stunted by its so-called excessive regulatory and tax burden isn’t supported by the growth numbers.

Moreover, states that rank highest in typical business-oriented think tank ratings such as North Dakota and Wyoming saw their economies shrink by 6.7 and 2.9 percent respectively in 2015 as California led the nation with an expansion of 4.2 percent. Of course, North Dakota and Wyoming were hit hard by the decline of oil prices as their economies are largely extractive. California’s economy is far more diverse.

It’s probably true that carbon emissions intensive industries will now think twice about expanding their presence in California. But those industries aren’t really the future that California is seeking.

Instead, the state is becoming a leader in solar and wind energy and energy efficiency technology and policy. These are cutting edge industries that other states should envy California for. One has to look no further than the coal industry to see what’s in store for the fossil fuel industry as a whole and the economies that rely on them.

…click on the above link to read the rest of the article…

Hanjin shipping bankruptcy: ‘Efficient’ just-in-time delivery not so efficient after all

September 10, 2016

Hanjin shipping bankruptcy: ‘Efficient’ just-in-time delivery not so efficient after all

We are about to learn once again that lack of resilience is the flip side of efficiency. The world’s seventh largest shipping firm, Korean-based Hanjin Shipping Co. Ltd., failed to rally the support of its creditors last week and was forced to file for bankruptcy.

Retailers and manufacturers worldwide are in a bit of a panic as the fate of goods on Hanjin ships shifts into the hands of courts and lawyers for creditors intent on seizing Hanjin assets in order to ensure payment of outstanding bills. Much of Hanjin’s fleet is chartered, that is, owned by others, and those owners want to make sure they get paid their charter fees or get their ships back pronto.

The result has been that half of Hanjin’s container vessels are currently blocked from the world’s ports for fear that the ports will not be paid for their loading and unloading services. Other shippers which include trucking companies which carry containers to their final destination are reluctant to take on Hanjin freight for fear of not getting paid. (You are perhaps seeing the main theme here.) Meanwhile, the sudden drop in available shipping containers and ships has caused shipping rates to soar as businesses scramble to make other arrangements for items still to be shipped.

U.S. retailers are so panicked that they have asked the U.S. Department of Commerce to step in to help resolve the breakdown which is likely to hurt those retailers during the upcoming Christmas shopping season.

Let’s take a step back to understand how this all happened. Clever business owners have learned to run so-called “lean” operations to compete with their equally lean competitors. One way to be lean is to reduce idle inventories which just sit in expensive warehouses by arranging to have what the business needs delivered practically every day.

…click on the above link to read the rest of the article…

M. King Hubbert and the future of peak oil

July 17, 2016

M. King Hubbert and the future of peak oil

Almost synonymous with the term “peak oil” is M. King Hubbert, perhaps the foremost geophysicist of the 20th century, who first theorized about the eventual decline of oil production in the 1930s. His life has now been chronicled by science writer Mason Inman in a new biography entitled The Oracle of Oil.

Depending upon whom you speak with, peak oil is either a catastrophe waiting to happen or a far-off concern that has already been solved or will be soon. Frequently, peak oil is referred to as a myth. What you rarely hear is that peak oil is an empirical fact having already occurred in dozens of countries.

The term “peak oil” simply means that crude oil production for any field, region or country eventually reaches a peak or plateau from which it inexorably declines. Because the amount of oil in the Earth’s crust is finite, it is logical to assume that one day peak oil production will occur worldwide. The concern is that we as a global society are so accustomed to rising oil production that we have built an entire world around that assumption. Will we be ready when oil production begins to decline?

To shed some light on that and other questions author Inman takes us from Hubbert’s early days at the University of Chicago to his famous speech in 1956 (in which he predicted a peak in U.S. crude oil production no later than 1970) to his days in Washington, D.C. working for the U.S. Geological Survey and his fights there concerning the timing of a U.S. oil production peak.

In the course of the story Inman puts to rest misconceptions about Hubbert and about peak oil. First and foremost, peak does NOT mean running out. As explained above it means the trend of rising oil production reverses into a decline.

…click on the above link to read the rest of the article…

Disconnect: Congressional hawks hate sustainability, but love military that seeks it

June 23, 2016

Disconnect: Congressional hawks hate sustainability, but love military that seeks it

Recently, I toured a U.S Navy mine sweeper and destroyer during Fleet Week. Just before the tour entrance line a tent with exhibits caught my attention. On the first table were a set of small bottles containing various kinds of liquid fuels, a sampling meant to highlight the biofuels now being developed and used by the Navy. At the second table I was greeted by a Navy public relations specialist who handed me a quarterly magazine devoted exclusively to the Navy’s energy and environmental initiatives.

The U.S. Navy isn’t the only service seeking to make itself less dependent on fossil fuels and friendlier to the environment. The U.S. Department of Defense (DOD) has committed itself to more sustainable practices and alternative fuels across all services. The reason: The DOD takes climate change and fossil fuel dependence as serious risks to the nation’s security and to the U.S. military’s own ability to fight and protect the nation.

Why does the U.S. military establishment take these threats seriously and act on them in such a thoroughgoing fashion while the military’s strongest congressional supporters are the most ardent opponents of sustainable practices?

Using the hawkish Center for Security Policy’s (CSP) 2013-2014 congressional scorecard as a proxy for devotion to all things military, we find 21 so-called “champions” of national security in the U.S. House and Senate who voted for all items favored by the CSP during the session. Among those 21 legislators, nine had a 0 percent rating from the League of Conservation Voters for 2014, four had a 3 percent rating, four had a 6 percent rating, one had 20 percent rating, one had a 60 percent rating, and two were not rated.

…click on the above link to read the rest of the article…

Can the world go all-electric?

June 18, 2016

Can the world go all-electric?

Recently, word leaked out that Norway may ban the sale of diesel- and gasoline-powered vehicles by 2025. The move toward electric vehicles is part of a dream shared by those concerned about climate change and about fossil fuel depletion (especially oil depletion), namely, to turn the world into one big all-electric paradise by running everything we can on electricity.

Theoretically, this is possible, but getting there won’t be easy. First, such a transition will take time. In the Norwegian example cited above, the transition to an all-electric private car fleet would take about 15 years based on Norwegian new private car registrations in 2015 and the current total number of registered private cars.

But the ban wouldn’t take effect until 2025. While Norwegian electric car registrations are rising, so are total car registrations. Even if we generously assume that the rise in electric car registrations between now and 2025 will shave five years off the transition, that still means Norway won’t achieve an all-electric private automobile fleet until 2035. And, Norway is already a leader in the move toward all-electric transportation. Other countries lag far behind.

The Norwegian example points out a second difficulty in the transition to an all-electric world. Norway gets 95.9 percent of its electricity from hydroelectric dams. It gets another 1.6 percent from wind turbines. Only 2.5 percent of its electricity comes from thermal power plants, the kind that burn fossil fuels such as coal and natural gas and that provide 66 percent of the world’s electricity.

Transitioning to electric transportation in places that primarily burn coal, natural gas and/or diesel fuel to produce electricity would undermine the goal of lowering greenhouse gas emissions. In thermal power plants, the ones that burn fossil fuels, two-thirds of the energy produced is lost in the form of heat. Only one-third is turned into electricity.

…click on the above link to read the rest of the article…

May 29, 2016

The faux insurgency of the climate change deniers and the need for closure

Climate change deniers like to style themselves as latter-day Copernicuses and Galileos, lone visionaries bucking the established wisdom of the ages embodied back then in the teachings of the Catholic Church.

There is a certain appeal to imagining oneself as isolated and embattled but unbowed. The analogy, however, is specious on its face. For neither Copernicus nor Galileo had giant international oil and coal companies supporting them with tens of millions of dollars of annual public relations expenditures and scores of fake think tanks which would have provided them comfortable and profitable sinecures while shielding them from the attacks of the church.

No, the climate change deniers actually work for the established church of our age, wealthy corporate interests opposed to doing anything to mitigate the ongoing carnage of climate change–the very interests that continue to have a stranglehold on the legislative bodies of the world to such an extent that relatively little has actually been done to address climate. The most compelling evidence is the steady march upward of atmospheric carbon dioxide levels measured at the world’s best known measuring station, the Mauna Loa Observatory.

To hear the deniers one would think that we are already groaning under the weight of carbon taxes across the globe. The reality is that only a handful of countries and jurisdictions have bothered with such taxes, and one of them, Australia, repealed its tax. Yes, yes, there are cap-and-trade emissions schemes in the European Union, northeastern United States, California and Quebec. None of these jurisdictions has collapsed economically as a result. In fact, all are becoming leaders in a technological revolution that is moving us away from dependence on finite, climate-changing fossil fuels.

…click on the above link to read the rest of the article…

Why you can’t argue with a “modern”

May 2, 2016

Why you can’t argue with a “modern”

The modern world is filled with things many of us regard as antiquated and old-fashioned. Modern people often say that ancient rituals are mere superstition, that science tells us what is real and what is not, and that we are now free from ideas including untestable ideas from religion that have slowed continual improvement in the lot of average humans.

That the modern outlook has all the hallmarks of a religion never occurs to a thoroughly modern person (whom I’ll refer to merely as a “modern”). A modern believes that the modern outlook is above and outside all superstition and groundless belief. In effect, the modern outlook is a myth that does not believe it is a myth.

In using the word “myth,” I do not mean to label the modern outlook false. In this context myth is simply a narrative that outlines a worldview. It turns out that a myth of any vintage, ancient or modern, can be a powerful tool in motivating behavior, in explaining and manipulating the world, and in assigning meaning to human existence. And any myth of any vintage can turn out simply to be mistaken in some or all of its details.

The modern myth has some unique characteristics that make it particularly powerful and particularly dangerous at the same time. The modern myth tells us the following about the world and our place in it:

Humans are in one category and nature is in another.

Scale doesn’t matter.

History can be safely ignored since modern society has seen through the delusions of the past.

Science is a unified, coherent field that explains the rational principles by which we can manage the physical world.

Let me take these claims one at a time.

…click on the above link to read the rest of the article…

Why the fight for GMO labeling is (possibly) over

April 18, 2016

Why the fight for GMO labeling is (possibly) over

Ever since it became clear that Vermont’s law for mandatory labeling of foods containing genetically engineered ingredients would actually go into force this summer, the big question has been how many food companies would choose to label their products and how many would choose simply not to sell in Vermont.

There is a third choice which purveyor of canned fruits and vegetables, Del Monte Foods, announced recently. The company will eliminate all genetically engineered ingredients from its foods, obviating the need for special labeling. This won’t be too difficult since there are very few genetically engineered fruits and vegetables.

While the Vermont law is huge victory for the proponents of labels, the U.S. Congress could still pre-empt state labeling laws, something it failed to do earlier this year. But as more and more of the public demands to know which products have so-called genetically modified organisms or GMOs in them and as the number of products on grocery shelves with non-GMO verified labels increases, growers and processors may have no choice but to acquiesce. They may be forced by circumstances either to label their products (or automatically be suspected of trying to hide something for not doing so) or to eliminate GMO crops and ingredients for fear of losing customers regardless of what happens in Congress or in other states.

Nassim Nicholas Taleb, author of The Black Swan and other books on risk, explains why this is so in a draft chapter of an upcoming book called Skin in the Game. His investigation begins with why nearly every packaged drink in the United States is labeled certified kosher.

…click on the above link to read the rest of the article…

Corruption, resources, climate and systemic risk

April 10, 2016

Corruption, resources, climate and systemic risk

Corruption is a loaded word. One person’s corruption is another’s sound social policy. Some people believe providing unemployment benefits to laid-off workers corrupts them by making them “lazy.” Many others think such benefits are sound social policy in an economic system that is prone to major cyclical ups and downs.

Fewer people agree that bailing out major U.S. banks at taxpayer expense in the aftermath of the 2008 crash was a good use of public money. An alternative would have been for the U.S. government to seize the banks, inject funds to stabilize them, and then resell them to investors, perhaps at a profit.

Was it corruption that led to the bailout instead of a takeover? Or was it an honest difference of opinion about what would work best under emergency circumstances?

We can argue whether these examples of transfers of funds from one group to another are fair. But by themselves they do not constitute a systemic risk to the stability of the entire economic and social system. In fact, some would argue that such transfers enhance that stability. However one evaluates these transfers, I would contend that a much worse corruption is to subject our society knowingly to systemic failures such as severe climate change and widespread crop failures.

To understand this contention, we must review the material basis for our modern society. Despite all the hype about the service economy, the activities which make the service economy even possible are agriculture, fishing, forestry, mining and manufacturing. These sectors create the surplus food and fiber, the surplus energy and minerals, and the surplus goods that allow so many of us to do something other than farm, fish, log, mine or manufacture goods.

…click on the above link to read the rest of the article…

Vermont calls Big Food’s bluff on GMO labels

April 3, 2016

Vermont calls Big Food’s bluff on GMO labels

Large food processors have long claimed that state laws forcing them to label foods containing genetically engineered ingredients would lead to 1) higher prices for consumers who would end up paying the cost of special labeling for one or just a few states and/or 2) fewer food choices as processors simply withdrew some or all of their products from states requiring labeling.

It seems that the state of Vermont has now called their bluff and won.

Neither scenario appears likely when Vermont’s labeling law for products containing genetically engineered ingredients goes into effect on July 1. Instead, General Mills Inc., Kellogg Co., ConAgra Food Inc., Mars Inc. and Campbell Soup Company have announced they will use one label that is in accordance with Vermont law for all markets for products containing genetically engineered ingredients and thus avoid the cost and logistical hassle of separate labels and special handling for products bound for Vermont. This was always going to be the simplest way to comply, and Vermont’s governor knew it. Expect more companies to follow suit soon.

The fate of Vermont’s labeling law for foods containing genetically engineered ingredients–commonly referred to as genetically modified organisms or GMOs–had hung in the balance as a court challenge and federal legislation threatened to overturn it.

But, last year a federal judge decided that Vermont’s law was constitutional and refused to issue an injunction to prevent its implementation. This year the U.S. Congress considered a voluntary GMO labeling law that would have pre-empted the Vermont law. But, the federal legislation failed to pass the Senate.

It seems unlikely that the Congress will pass any bill soon enough to prevent the Vermont law from going into effect, making it the de facto GMO labeling standard for the nation. That doesn’t mean Congress won’t act later.

…click on the above link to read the rest of the article…

Energy policy and uninformed opinion

March 28, 2016

Energy policy and uninformed opinion

Famed economist John Kenneth Galbraith used to respond to questions about the direction of the economy and financial markets by saying: “I answer because I’m asked not because I know.”

Such is also the case with poorly informed members of the public whose views pollsters seek on every conceivable topic including energy. A recent Gallup poll asked a sampling of Americans whether they believe the United States will face a critical energy shortage in the next five years.

Some 31 percent responded yes, the lowest number on record since the question was first asked in 1978 (though it was not asked again by Gallup until 2001.) In 2012, the last time the question appeared in a Gallup survey, the number was 50 percent. The highest result came, not surprisingly, in 2008 when oil was making its historic climb to an all-time high of $147 per barrel. In March of that year (five months before the oil price peak) some 62 percent of American respondents thought the United States would face a critical energy shortage in the next five years.

There is, of course, the problem of what “critical energy shortage” means to each respondent. Prices for all varieties of energy were elevated in 2008, but there weren’t any critical shortages–just very high prices which made it impossible for some to afford as much energy as they would like.

Currently, in the face of gasoline prices which have fallen to $2.11 per gallon nationally and natural gas prices that recently touched lows reminiscent of the late 1990s, it is remarkable that even 31 percent still think critical energy shortages could show up within five years. That belief be may the after-effect of the highest average daily prices on record for crude oil four years running from 2011 through 2014.

…click on the above link to read the rest of the article…

Oregon says yes to coal-free electricity

March 21, 2016

Oregon says yes to coal-free electricity

The Oregon legislature has adopted a first-in-the-nation plan to phase out electricity from coal, a major source of climate-changing greenhouse gases.

The state’s environmental community had been gearing up for a ballot initiative this year that would have forced the state’s utilities to abandon coal as a fuel for electricity. But negotiations between the two groups resulted in a legislative compromise–dubbed the Clean Electricity and Coal Transition Plan–that will wean the state off coal-fired electricity no later than 2030 except for one out-of-state power plant that is partly owned by an Oregon-based utility. That plant will be retired no later than 2035.

The plan also calls for an increase in the percentage of energy that electric utilities must get from renewable sources such as wind and solar from 25 percent by 2025 to 50 percent by 2040.

Coal currently provides almost 34 percent of the state’s electricity. Hydroelectric generation provides almost 43 percent. Natural gas and wind account for 13.5 percent and 5.6 percent, respectively. Regarding Oregon’s renewable energy targets, for contextCalifornia and New York have mandated the same percentage as Oregon but by 2030. Vermont has targeted 75 percent by 2032, and Hawaii has mandated 100 percent renewable energy for electricity by 2045.

The Clean Electricity and Coal Transition Plan targets the state’s two large investor-owned utilities, Pacific Power and Portland General Electric, which together provided 65 percent of all electricity to the state as of 2014 according to the Oregon Department of Energy.

Municipal utilities, cooperatives and public utility districts are not covered by the plan. These entities currently get a large portion of their electricity from the Bonneville Power Administration (BPA). BPA derives 83 percent of its power from federally-owned hydroelectric dams dotting the Northwest and 10 percent from nuclear power stations. BPA does not generate coal-fired electricity though a small portion of its purchased electricity may come from coal-fired plants.

…click on the above link to read the rest of the article…

Ready for more punishment: Investors load up on oil share offerings

March 6, 2016

Ready for more punishment: Investors load up on oil share offerings

The $9.2 billion investors paid to snap up new equity offerings from U.S. oil companies in 2016 proves those investors are indeed ready for more punishment.

The amount is in line with the pace of such equity offerings in 2015 even as the mood in the oil markets has grown more dour. In June of last year I wrote:

New investors in U.S. oil company shares must believe they are catching the bottom and will have a very profitable ride up from here. This demonstrates that OPEC’s work is not done and accounts in part for the decision to leave production quotas unchanged. OPEC’s next task is to convince those making new investments in oil that rather than catching a bottom in oil prices, they have caught a falling knife.

A lot of investors did end up catching a falling knife as oil careened downward from about $60 a barrel last summer to Friday’s close of about $36. Investors this year may still find that the knife is falling, though it admittedly doesn’t have as far to fall this time around. Still, it seems they misunderstand OPEC’s strategy or believe that that strategy will fail. As I said in the same piece:

The cartel must dampen enthusiasm for investment for the long term if the organization’s members are going to benefit. A crippled U.S. oil industry without friends in the investment world is the only way to assure that rising prices won’t simply lead to a stampede back into U.S. shale deposits.

It seems that the oil industry still has friends in the investment world and that OPEC’s work is therefore not yet done. The big question then is: Will OPEC stay the course or relent with a production cut this year to raise prices?

…click on the above link to read the rest of the article…

“The Future” as a sales pitch

March 2, 2016

“The Future” as a sales pitch

No one can know the future. But it turns out we can invent a place called “The Future” and invite people to inhabit it.

In order to inhabit “The Future”–which is really just an enactment of our ideas about the future–you need the right accessories. For starters you’ll need the basics: the latest iPhone with the latest social networking app, a fully electric car (if you can afford it), and a FitBit watch. To that you can add your own personal drone, personal robot, and a farm cube for growing your own lettuce indoors.

In fact, before the pageants we call trade shows (such as the Consumer Electronics Show, coverage of which is linked above), we had world fairs that allowed us to “see the future.” Perhaps the most important thing to note about such events is that they began by focusing mostly on scientific and technical progress and its resulting consumer products. At these events our future political and economic system apparently remains unchanged. This is, in part, because political and economic reform cannot be packaged and sold like consumer products.

Of course, I could fill up this entire piece just listing all the other futuristic devices and even places that are available to us today and not scratch the surface. We are a society that venerates progress and that always has its eyes on the future. We think of ourselves as innovative and regard innovation as almost invariably good.

My interest in “The Future” as a sales pitch comes from a series of conversations with a good friend, James Armstrong, who is currently teaching a course in science fiction film. One of the films he’s showing is 2001: A Space Odyssey.

…click on the above link to read the rest of the article…

Stability begets instability: The challenges of the post-2008 world

February 15, 2016

Stability begets instability: The challenges of the post-2008 world

Most people value stability in their lives. And, this makes perfect sense. Stability usually means an adequate, secure income; an established group of friends and family members with whom we are close; an identity in our communities based on our jobs, community involvement, and personal networks; physical safety in our daily lives, that is, no war or extreme violence where we live; and relative psychological calm that reflects that stability.

But humans value other things such as variety and novelty. In short, we can get bored. And, in order to address our boredom, we must actually seek out instability in our lives. We proceed to upset the very stability which we believe makes us comfortable and safe by engaging in activities that subject us to physical, financial and emotional risk such as sports, gambling or new relationships.

There is, of course, the disruption of our routine that comes from external events, from things that we do not necessarily choose: the loss of a job, a divorce, the death of a loved one, or injury due to accident. External events can also be positive: an unsolicited job offer, an unexpected romance, or the miraculous recovery of a loved one.

As it is with individuals, so it is with nations and complex social systems such as corporations and markets which reflect these same seemingly contradictory desires for stability, but also variety and novelty. It seems the social mood cannot go long without experiencing some interesting disruption: a war, an economic boom or a bust, a change of political parties, a change in fashion, a disruptive technology.

As moderns we are taught that constant change is good and a sign of progress. It should not seem strange that all this change can undermine our personal stability.

…click on the above link to read the rest of the article…

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