SubsidyEye

Vinod Khosla on Failure: Take More Risk

Um, what kind of risk has Vinod Khosla been taking? Seems to me he's used his considerable political influence to socialize his risks -- i.e., by passing them on to the U.S. taxpayer.

Take Range Fuels, for example, his much-hyped foray into cellulosic ethanol production. That benefited from huge grants from the Federal Government, as well as subsidies from the State of Georgia. And at the time the initial decision to go ahead with the plant was made, the blenders' credit was $0.51 per gallon. But that wasn't good enough, so Khosla and his cronies lobbied Congress hard to create a special producer's tax credit of $1.01 per gallon, and for a separate federal mandate for the fuel.

"Our specialty is risk"?! He would be more truthful if he said, "Our specialty is milking the federal teat".

The Economic Benefits of Climate Legislation

From the article to which you link:

"In these areas [the Rust Belt], voters are going to be more willing to subsidize or underwrite legislation to attract new business. Solar and wind manufacturers will seek out these tax breaks and as time goes on they will get more generous. How generous can these programs get? When Taiwan wanted to build a chip industry, it created a tax credit structure so generous that for years behemoths like TSMC made more money after taxes in a profitable year than before because of accumulated credits. North Americans have been reluctant to go as far with their tax breaks as some foreign governments, but if the economy doesn't crumble, Midwest state governments will up the ante."

That's the scary bit. Perhaps North Americans have been reluctant to go as far with tax breaks as have places by Taiwan, but investment incentives have been used with abandon by many Midwest and southern states over the last two decades. For a good review of the trend, see Greg LeRoy's, "The Great American Jobs Scam" (greatamericanjobsscam.com), and Kenny Thomas's, "Investment Incentives: Growing use, uncertain benefits, uneven controls" (globalsubsidies.org/en...) Canadian provinces, by contrast, are at least part of a "no-piracy" pact -- i.e., they have agreed not to poach companies from one another with investment incentives

With all the extra money from the stimulus packages chasing new investments in cleaner energy, competition to attract investment is becoming fierce. As the people at Good Jobs First point out, the main winners in the competition among governments to offer larger and larger investment incentives are the companies that are the beneficiaries of these incentives.

It is certainly logical that a retooled Midwest would have a lot to offer new renewable-energy technologies, thanks to their central locations, skilled workers, and excellent transport connections. But the bargaining power over manufacturing location belongs to the companies, and until state governments agree collectively to restrain themselves in bidding against each other to attract big investors, there remains a big risk that the net benefits to the taxpayers of those states, and to the nation as a whole, will be significantly diminished.

The Energy Efficiency Paradox

While it is true that there is some "claw back" of energy use as efficiency improves, it rarely returns to the same level all other things being equal. That is, a 10% reduction in the energy needed to perform a service does not lead to a 10% increase in demand for that service.

Take automobiles: while people did start buying bigger, less energy-efficient cars and SUVs after the big gains in the 1975-85 period, lower energy prices also were a major factor. And don't forget that the U.S. population has grown by 1/3 since 1980. That growth has nothing to do with improved energy efficicency.

$90 a Barrel Oil Is the Floor for Cellulosic Ethanol, Says Study

"The U.S. consumed 137.8 billion gallons of petroleum in 2008 and overall demand for petroleum and substitutes will likely increase".

No. The U.S. consumed 137.8 billion gallons of GASOLINE in 2008. Its consumption of petroleum was more on the order of 300 billion gallons.

"75 billion gallon a year business"?! For the whole world, maybe. Someday. But not in the United States, not in most of our lifetimes.

Suntech to SolarWorld: Careful What You Wish For

Very informative article -- rare to see somebody on these pages discussing trade and subsidy policy in an informed way. The key line here is "At the same time, he [SolarWorld's CEO, Frank Asbeck] wants to institute environmental and quality standards that some analysts believe would make it difficult for Chinese companies to comply." There is a lot of such "murkey" protection around already involving national standards that differ from other countries' standards mainly to protect the local market. Dressing them up as environmentally motivated when they are not only undermines legitimate environmental standards and regulations.

One in Two Solar Firms Will Fail, Say Analysts

Eric: For future reference, the term is "economiEs of scale", not "economics of scale". (Or maybe it was your spell-checker's fault?)

How to Invest in Cellulosic Ethanol

Interesting that somebody would write an article on investing in cellulosic ethanol without even once mentioning the dependency of the industry's very existence on government policies. The oil price is, of course, a factor. But so is the $1.01/gallon producer tax credit for cellulosic ethanol (unlike the VEETC, it is not available for Brazilian ethanol), the 2.5% + $0.54/gallon import tariff on fuel ethanol, and the federal blending mandates, and the subsidies to farmers who convert over to growing feedstock for cellulosic ethanol production. In addition there are numerous state-level schemes supporting biofuels, some specifically targetted at cellulosic ethanol.

Yet at least some of those policies have expiry dates. And while the U.S. Congress has so far shown its willingness to keep extending the subsidies and tariff barriers, can it be counted on doing that indefinitely, especially once (if) the industry starts scaling up? Unlike subsidies for capital investment, the volume-related subsidies on which the ethanol industry relies have to be paid out year after year. With tight budgets, is Congress going to be willing to commit indefinitely to subsidize driving at several tens of billions of dollars a year?

As for Europe, don't be so sure. Europe does not have a large amount of "surplus" ligno-cellulosic biomass to turn into ethanol, and its environmental groups will not accept a big shift from growing crops for food and feed to growing crops for energy. Finally, and perhaps most important, its transport sector is much more dependent on middle distilates (diesel and jet kerosene) than it is on gasoline.

The Collapse of the CCX Carbon Emissions Contract

Interesting article, with useful graphics. Thank you, Walter Kurtz!

Greg Mankiw on Cap-and-Trade (NYT)

Gawd, I get so tired of hearing this mantra: "If we raise revenue from a carbon tax, the government will still demand as much in taxes from other sources as it did before." Are we that helpless as to be unable to hold our Congressional representatives to a revenue-neutral shift in tax revenues?

Leftfield: would you rather we keep going as we have: subsidizing fossil fuels, and then subsidizing biofuels because we are subsidizing fossil fuels, then subsidizing electric vehicles because we are subsidizing ethanol ... ad infinitum? From where do you think those subsidies come?

The American Patient: Energy

Just as an aside, I couldn't help but notice the large number of negative votes on Professor Banks' comments. So, curious, I looked at his complete tally. As of this morning, his comments have an overall rating of -1011 (1976 thumbs up and 2987 thumbs down). That has GOT to be some kind of record.

The American Patient: Energy

Note to "A Barrel Full, John s. Gordon and Ferdinand Banks:

Sweden gets most of its ethanol supplies, especially for its bus fleet (imported under a special arrangement with the EU that allows it to charge a much lower import tariff than otherwise), from BRAZIL. It produces a bit of ethanol domestically from wheat, and also as a byproduct of cellulose production, but the bulk is imported.

The main importer of that ethanol, SEKAB, last year created a private sustainability standard for ethanol called the "Verified Sustainable Ethanol Initiative." It claims that all of the ethanol thus certified attains a 85% improvement in life-cycle greenhouse gas emissions compared with gasoline. Unfortunately, actual audits suggest that the producers aren't quite attaining that level yet.

And, by the way, I thought that most of Tivoli Gardens (except for the concert halls) closes for the winter. Unless they open it up especially for the occassion, I doubt very much that Climate delegates are going to hang around there this December drinking large amounts of beer.

Robbing Renewable Energy to Pay for 'Cash for Clunkers'

Great points, jerrydd!

Robbing Renewable Energy to Pay for 'Cash for Clunkers'

I don't know which is worse: funding a program (C4C) with a low level of cost effectiveness (see the previous Seeking Alpha article on the cost per ADDITIONAL vehicle sale stimulated, which may be as high as $45,000), or leaving some of the money in to subsidize further expansion of domestic ethanol production.

In Sam Jaffe's enthusiasm for loan guarantees, however, he forgets that some of the parts and components of renewable-energy and grid-upgrading projects would also likely be imported. (That is not necessarily a bad thing, by the way: it is the price of being a member of a club, the WTO, that helps keep other economies open to U.S. goods and services as well.) Hence there is no basis for him to claim that $2 billion in loan guarantees will result in at least $20 billion worth of economic activity, "all of which will have to take place on U.S. soil."

BP Scientist: Ethanol Easier than Biodiesel

"Subsidyeye as you most likely know oil is fungible thus whenever oil is bought anywhere it drives the price up. Since it's a world market and our enemies control 40% of it, 40% of every dollar we pay for oil goes to them."

Yes, I know oil is fungible. But from where did you get the 40% number? According to this chart, total world oil reserves are 1,350 billion barrels.

nationmaster.com/graph...

Being generous in the definition of "enemy", I would count the reserves of Iran, Venezuela, Russia, Libya, Yemen, Syria, Sudan, Burma and Cuba. Adding those together, I get just under 25%. I am not counting Saudi Arabia (20% of world reserves) as an enemy. Though some of its diaspora (like Osama) might be sworn enemies of the United States, its government is not, nor are most of its citizens. Not wanting U.S. military bases on its soil does not make Saudi Arabia an enemy, any less than it makes Finland, France, Ireland, Sweden, Switzerland or any of a large number of other countries who don't want U.S. military bases on their soil enemies of America. (Would you like Saudi Arabia to set up a military base in your state?)

"We are at war in Afghanistan because Osama who wanted us out of Saudi Arabia where we were because of OIL was hiding, attacking us from there, No?"

No. Ever heard of the Taliban? They long precede Osama. Indeed, the United States encouraged the Taliban at first as our enemy's (Sovient Union) enemy. The Taliban regards western culture as decadent; so does Osame. They were a match made in heaven.

"The money for terrorist mostly comes from the countries, people who are wealthy, in power because of oil. No? Where were most of the 9-11 hijackers from? Iceland?"

At the time that the 9-11 attacks were being planned, oil prices were at a record low. It does not take much money to fund terrorism. And, as you point out, oil money is fungible. So even if the USA were to stop importing oil, other countries would. Trying to stop terrorism through subsidizing biofuels is about the least cost-effective way I can imagine to address the problem of terrorism.

We need, above all, to be winning hearts and minds in the countries harboring terrorists; not creating new terrorists and terrorist sympathizers (as we did in Iraq); and getting serious about tracking down the leaders and bringing them to justice.

"While there were some other excuses no one who thinks well so I guess that leaves you out ... "

Translation into English, please?

BP Scientist: Ethanol Easier than Biodiesel

JerryDD writes, "Last yr we spent $500B for imported oil which could instead make jobs, invest here instead of it going to Iran, Russia, oil dictators and terrorist[s]."

Note to Jerry: U.S. imports of petroleum from Iran are zero, and have been for some time (since the U.S. government started imposing sanctions on trade with Iran after the 1979 revolution):

tonto.eia.doe.gov/dnav...

And just out of curiosity, from what terrorists is the United States buying oil? I'm sure that the State Department would want to know. Please provide names and contact details. I assume Canadians (e.g., Quebec separatists) do not count.

Speaking of terrorists, JerryDD asserts that "We are at war now for 1 reason, OIL!!!". So, it has nothing to do with terrorism (in Afghanistan, which has no oil), alleged weapons of mass destruction (in Iraq), or that GWB wanted to finish a war (in Iraq) that daddy started, or to secure a strategic base in order to be able to mount strikes against (possibly nuclear-armed) Iran?