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Are Electric Cars Good for the Environment?
Are Electric Cars Good for the Environment?
This article is Part 5 of an 11-part series analysis of Tesla, Elon Musk and EV Revolution. You can read other parts here.
My wife loves driving the Model 3, not for all the selfish reasons I like to drive it (it is fast and quite the iPad on wheels) but because she feels she helps the environment. Is she right?
Unlike an ICE car, which takes fuel stored in the gas tank, combusts it in the engine, and thus creates kinetic energy, Tesla takes electricity stored in the battery pack and converts it directly into kinetic energy. That’s a very clean and quiet process. However, the electricity that magically appears in our electrical outlets is not a gift from Thor, the thunder god; it was generated somewhere and transmitted to us.
As I write this, I am slightly disturbed by how the topic I am about to discuss has been politicized. I am not going to debate global warming here, but let’s at least agree that an excess of carbon dioxide (CO2) and carbon monoxide (CO) is bad for you and me, and for the environment. If you disagree with me, start an ICE car in your garage, roll down the windows, and sit there for about 20 minutes. Actually, please don’t, because you’ll die. So let’s agree that a billion cars emitting CO and CO2 is not good and that if we emit less CO and CO2 it is good for air quality.
Roughly two-thirds of the electricity generated in the U.S. is sourced from fossil fuels. The good news is that only half of that comes from coal; the other half comes from natural gas, which produces half as much CO2 as coal (though it has its own side effects – it leaks methane). Another 20% of U.S. energy comes from nuclear, which produces zero carbon emissions. The remaining 17% comes from “green” sources, such as hydro (7%), wind (6.6%), and solar (1.7%).
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Central Planning Failed in the USSR, but Central Banks Have Revived It
Central Planning Failed in the USSR, but Central Banks Have Revived It
The Federal Reserve’s changing of the guard — the end of Janet Yellen’s tenure and the beginning of the Jerome Powell era — has me remembering what it was like to grow up in the former Soviet Union.
Back then, our local grocery store had two types of sugar: The cheap one was priced at 96 kopecks (Russian cents) a kilo and the expensive one at 104 kopecks. I vividly remember these prices because they didn’t change for a decade. The prices were not set by sugar supply and demand but were determined by a well-meaning bureaucrat (who may even have been an economist) a thousand miles away.
If all Russian housewives (and house-husbands) had decided to go on an apple-pie diet and started baking pies for breakfast, lunch, and dinner, sugar demand would have increased but the prices still would have been 96 and 104 kopecks. As a result, we would have had a shortage of sugar — a common occurrence in the Soviet era.
In a capitalist economy, the invisible hand serves a very important but underappreciated role: It is a signaling mechanism that helps balance supply and demand. High demand leads to higher prices, telegraphing suppliers that they’ll make more money if they produce extra goods. Additional supply lowers prices, bringing them to a new equilibrium. This is how prices are set for millions of goods globally on a daily basis in free-market economies.
In the command-and-control economy of the Soviet Union, the prices of goods often had little to do with supply and demand but were instead typically used as a political tool. This in part is why the Soviet economy failed — to make good decisions you need good data, and if price carries no data, it is hard to make good business decisions.
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