Category: Energy/Environment

Environmentalists Back Biofuels that Cause Deforestation

  Forests are burned on plantations in Indonesia to clear land to produce palm oil which is "a key ingredient in biodiesel."  Source of caption quote and photo:  online version of WSJ article cited below.

 

(p. A1)  PONTIANAK, Indonesia — Investors are pouring billions of dollars into "renewable" energy sources such as ethanol, biodiesel and solar power that promise to reduce the world’s reliance on petroleum.  But exploiting these alternatives may produce unintended environmental and economic consequences that offset the expected benefits.

Here on the island of Borneo, a thick haze often encloses this city of 500,000 people.  The cause:  forest fires that have blazed across the island.  Many of them were set to clear land to produce palm oil — a key ingredient in biodiesel, a clean-burning diesel fuel alternative.

The bluish smoke is at times so dense that it leaves the city dark and gloomy even at midday.  The haze has sometimes closed Pontianak’s airport and prompted local volunteers to distribute face-masks on city streets.  From July through mid-October, Indonesian health officials reported 28,762 smog-related cases of respiratory illness across the country.

"I feel it in my breath when I breathe," said Imanuel Patasik, a 26-year-old delivery man, as he sat in one of Pontianak’s many open-air coffee shops on a recent evening.  When the smoke is really bad, he wears a mask to work, but still wakes up the next morning feeling sick.  "It’s part of life here," he sighed.

Seasonal rains have helped quell the fires over the past few weeks.  But the miasma of smoke from Borneo and the island of Sumatra — an annual phenomenon that blankets large parts of Southeast Asia in smog — underscores a troubling dark side of the world’s alternative-energy boom.  Among other problems, the fires in Indonesia spew millions of tons of carbon dioxide and other greenhouse gases into the atmosphere, experts say.  In doing so, they exacerbate the very global-warming concerns biofuels are meant to alleviate.

Such side effects are not an isolated problem.  In Indonesia, Malaysia, Canada and elsewhere, forests are being slashed for new energy-yielding crops or other unconventional fuels.  In India, environmental activists say, water tables are dropping as farmers try to boost production of ethanol-yielding sugar.

 

For the full story, see:

PATRICK BARTA and JANE SPENCER.  "Crude Awakening As Alternative Energy Heats Up, Environmental Concerns Grow Crop of Renewable ‘Biofuels’ Could Have Drawbacks; Fires Across Indonesia Palm-Oil Boom Ignites Debate."  Wall Street Journal  (Tues., December 5, 2006):  A1 & A13.

 

   Midday in Pontianak the smoke haze from palm oil is dense, and causes respiratory problems.  Source of caption quote and photo:  online version of WSJ article cited above.

 

Global Warming May Finally Open Northwest Passage to Shipping

 

  "The Canadian Coast Guard icebreaker Amundsen met a plate of "new ice" on the Northwest Passage, but it was easily traversed."  Source of caption, and photo:  online version of the Washington Post article quoted and cited below.

 

ICEBREAKER CHANNEL, Northwest Passage — The Amundsen’s engines growl low, as if in warning.  The ship steals ahead; its powerful spotlights stab at fog thick with the lore of crushed ships and frozen voyagers.  Ice floes gleam from the void like the eyes of animals in the night.

The Canadian Coast Guard icebreaker Amundsen weaves in graceful slow motion through the ice pack, advancing through the legendary Northwest Passage well after the Arctic should be iced over and shuttered to ships for the winter.

The fearsome ice is weakened and failing, sapped by climate change.  Ultimately, this night’s ghostly procession through Icebreaker Channel will be the worst the ship faces on its late-season voyage.  Much of the trip, crossing North America from west to east through the Northwest Passage, will be in open water, with no ice in sight.

The Amundsen is here to challenge the ice that has long guarded the legendary Northwest Passage across the roof of the Earth, and to plumb the scientific mysteries of an Arctic thawing from global warming.

A relentless climb of temperature — 5 degrees in 30 years — is shrinking the Arctic ice and reawakening dreams of a 4,000-mile shortcut just shy of the North Pole, passing beside the Arctic’s beckoning oil and mineral riches.

"Shipping companies are going to think about this, and if they think it’s worth it, they are going to try it," says the captain of the Amundsen, Cmdr. Alain Gariepy, 43.  "The question is not if, but when."

 

For full story, see: 

Doug Struck.  "Melting Arctic Makes Way for Man; Researchers Aboard Icebreaker Say Shipping Could Add to Risks for Ecosystem."  Washington Post  (Sunday, November 5, 2006):  A01.

 

   Source of map:  online version of the Washington Post article quoted and cited above.

 

Copenhagen Consensus: Money Spent on Global Warming Would Do More Good Elsewhere


(p. A12) The report on climate change by Nicholas Stern and the U.K. government has sparked publicity and scary headlines around the world.  Much attention has been devoted to Mr. Stern’s core argument that the price of inaction would be extraordinary and the cost of action modest.

Unfortunately, this claim falls apart when one actually reads the 700-page tome.  Despite using many good references, the Stern Review on the Economics of Climate Change is selective and its conclusion flawed.  Its fear-mongering arguments have been sensationalized, which is ultimately only likely to make the world worse off. 

. . .  

Mr. Stern is also selective, often seeming to cherry-pick statistics to fit an argument.  This is demonstrated most clearly in the review’s examination of the social damage costs of CO2 — essentially the environmental cost of emitting each extra ton of CO2.  The most well-recognized climate economist in the world is probably Yale University’s William Nordhaus, whose "approach is perhaps closest in spirit to ours," according to the Stern review.  Mr. Nordhaus finds that the social cost of CO2 is $2.50 per ton.  Mr. Stern, however, uses a figure of $85 per ton.  Picking a rate even higher than the official U.K. estimates — that have themselves been criticized for being over the top — speaks volumes.

. . .  

Last weekend in New York, I asked 24 U.N. ambassadors — from nations including China, India and the U.S. — to prioritize the best solutions for the world’s greatest challenges, in a project known as Copenhagen Consensus.  They looked at what spending money to combat climate change and other major problems could achieve.  They found that the world should prioritize the need for better health, nutrition, water, sanitation and education, long before we turn our attention to the costly mitigation of global warning.

We all want a better world.  But we must not let ourselves be swept up in making a bad investment, simply because we have been scared by sensationalist headlines.

 

For the full story, see: 

BJORN LOMBORG.  "Stern Review."  Wall Street Journal (Thurs., November 2, 2006):  A12.

(Note:  the ellipses are added.)

 

More Good Done With Standard Oil Money: Henry Flagler

FlaglerMemorial.jpg  The Flagler Memorial obelisk was erected in on a man-made island in 1920, when Miamians still remembered the accomplishments of Henry Flagler.  Source of image:  http://www.miamibeachfl.gov/newcity/depts/arce/art_public/rw_flagler_monument.asp

 

The Standard Oil "monopoly" is often lambasted as a sorry episode in our economic history.  And yet a strong case can be made that the Standard Oil wealth was created mainly by efficiently providing consumers with a commodity they valued.  In addition, mention is often made of the Rockefeller philanthropic activities.  Less known, is that others who became rich from Standard Oil, also engaged in productive entrepreneurship, and philanthropy, with their wealth.  One of these was Henry Flagler. 

 

In a region that prizes showy monuments to wealth, the lone monument to the man who made it all possible has languished in isolation for decades.

A soaring concrete obelisk dedicated to Henry Flagler, the oil tycoon who hastened South Florida’s development by building a railroad all the way to Key West, it sits on a tiny man-made island in Biscayne Bay, reachable only by boat or, more typically, Jet Ski.  Almost everyone here has glimpsed the Flagler Memorial, but few know what it is called, why it exists or how battered it looks up close.

”I’m telling you, it’s a beautiful work of art,” said Paul Orofino, a board member of the Environmental Coalition of Miami Beach, a nonprofit group that occasionally tidies up Monument Island, the memorial’s scruffy, overgrown home.  ”It’s a tragedy that nobody pays attention to this thing.”

It is not the kind of South Florida tribute one might expect for Flagler, who extended his railroad from St. Augustine to West Palm Beach in 1894, Miami in 1896 and Key West — a segment that lasted only 23 years until a hurricane demolished it — in 1912.

Flagler was the state’s original megadeveloper, after all, creating its tourism industry by turning swampy pioneer settlements into the world’s grandest resorts.  He was also, perhaps, its first huckster, advertising the nascent Miami as ”the most pleasant place south of Bar Harbor to spend the summer.”

His over-the-top winter home in Palm Beach, awash in gold, is now a museum, but most of its visitors come from out of state, said John Blades, the museum’s executive director.  Mr. Blades has tried to get a statue of Flagler erected in Palm Beach, which owes its sumptuous existence to the man, but has so far failed.

”Flagler,” Mr. Blades said, ”is probably the most unappreciated titan of the Gilded Age.”

 

For the rest of the story of the impressive, but deteriorating, Flagler Memorial in Miami, see:

ABBY GOODNOUGH.  "South Florida Journal; Unappreciated, With Memorials to Match."  The New York Times (Fri., October 7, 2005):  A12.

(Note:  the hurricane destroyed the Key West link of the railroad in 1935.)

 

   Henry Flagler.  Source of image:  http://flaglermuseum.us/html/flagler_biography.html

Entrepreneur Makes Risky, Massive Infrastructure Bet

  A Louisiana site where Cheniere is building a terminal for liquified natural gas.  Source of image:  online version of the NYT article cited below.

Charif Souki is making a risky business decision.  If he is wrong, he and his investors will lose much. If he is right, consumers will be better off, having a larger supply of liquified natural gas (LNG).  And if he is right, he should be allowed to make a lot of money, both because that is just, and because it is useful for those who have bet right in the past, to have ample means to bet right in the future.   

(p. C1)  CAMERON PARISH, La. — The Sabine River channel, where alligators and speckled trout live alongside petrochemical plants and oil refineries, has suddenly become the center of a quiet revolution in the world of natural gas.

And it is mainly at the prodding of a little-known company called Cheniere Energy, with help from Exxon Mobil and Sempra Energy.  Together they have overcome formidable regulatory hurdles to build three new liquefied natural gas terminals on the channel that will double the nation’s capacity to import natural gas by 2011.

It has been 24 years since anyone on American shores has built a new liquefied natural gas terminal.  Two of the country’s four existing onshore terminals, which dock tankers the size of aircraft carriers ferrying supercooled gas from places like Qatar and Trinidad, were mothballed for years because production at home was plentiful and prices were low.

As recently as five years ago almost nobody in the energy world thought it possible to make money from a new American terminal project — with price tags that start at $600 million — let alone get a federal permit.

One lonely believer was Charif Souki, a Lebanese immigrant entrepreneur who had previously raised (p. C4) money for real estate in Paris and hotels in Hawaii before becoming chairman of Cheniere, a floundering gas exploration company.  Not even the 9/11 attacks, which made many people on the Atlantic and Pacific Coasts view liquefied natural gas terminals as potential terrorist targets, diverted him from his vision.

Now, even as natural gas prices sag, along with his company’s stock price, and the word glut is on the tip of the tongue among the drilling crowd, Mr. Souki says he is fixed on the longer view.

He is convinced the nation will need to import more gas because North American production is declining.  That is the same view Mr. Souki held six years ago, when he decided to shake up the company’s business plan.  He defiantly changed its stock symbol to LNG in 2003, and devoted himself to scoping out the country’s coastlines for potential terminal sites.

The already energy-intensive shoreline along the Gulf of Mexico, he concluded, made the most sense, economically and politically, and he started buying real estate in uninhabited harbors close to existing pipelines and gas-thirsty refineries and petrochemical plants.

“People were actually amused that we would be thinking about importing natural gas,” dryly giggled Mr. Souki, 53, a man with a taste for double-breasted suits.  “Nobody took us very seriously.”

Cheniere was so unprofitable and utterly spurned by investors in 2002 that Mr. Souki had to borrow $30,000 from his company’s president just to meet a payroll.  But over the last four years, Mr. Souki has managed to arrange financing, sign up long-term buyers and master the regulatory process. 

 

For the full story, see:

CLIFFORD KRAUSS.  "A Big Bet on Natural Gas."  The New York Times  (Weds., October 4, 2006):  C1 and C4.

GasTerminalLousianaMap.gif    The map shows the area in which the terminal is being built.  The bottom photo shows a Louisiana site where Cheniere is building a terminal for liquified natural gas.  Source of image:  online version of the NYT article cited above.

How Speculators Stablilize Gas Prices

As long ago as 1953, Milton Friedman argued that speculation normally helps to stabilize prices rather than destabilize them.

Mr. Friedman’s argument was applied to currency trading, but the same reasoning works here.  If speculative trading tends to push prices higher when they are already high and lower when they are already low, then traders must be buying high and selling low.

That would mean that traders have to lose money on average — which does not seem very likely.  To the contrary, speculative traders try to buy low and sell high, activities that by their nature tend to push prices up when they are too low and down when they are too high.

Since Mr. Friedman’s 1953 article several papers have been published, both supporting and attacking this argument.  But the general principle seems quite robust.

 

For the full commentary, see: 

Hal R. Varian.  "ECONOMIC SCENE; The Rapidly Changing Signs at the Gas Station Show Markets at Work."  The New York Times  (Thurs., August 24, 2006):  C3.

 

The Milton Friedman article that Varian refers to, is: 

Friedman, Milton. "The Case for Flexible Exchange Rates." In Friedman. Essays in Positive Economics. Chicago:  University of Chicago Press, 1953.

Unintended Consequences of “Protecting” Rare Woodpecker

  Red-cockaded woodpecker.  Source of image:  http://www.fws.gov/athens/images/Red-cockaded%20woodpecker%20120%20KB%205×7.jpg

 

BOILING SPRING LAKES, N.C., Sept. 23 (AP) — Over the past six months, landowners here have been clear-cutting thousands of trees to keep them from becoming homes for the endangered red-cockaded woodpecker.

The chain saws started in February, when the federal Fish and Wildlife Service put Boiling Spring Lakes on notice that rapid development threatened to squeeze out the woodpecker.

The agency issued a map marking 15 active woodpecker “clusters,” and announced it was working on a new one that could potentially designate whole neighborhoods of this town in southeastern North Carolina as protected habitat, subject to more-stringent building restrictions.

Hoping to beat the mapmakers, landowners swarmed City Hall to apply for lot-clearing permits.  Treeless land, after all, would not need to be set aside for woodpeckers.  Since February, the city has issued 368 logging permits, a vast majority without accompanying building permits.

The results can be seen all over town.  Along the roadsides, scattered brown bark is all that is left of pine stands.  Mayor Joan Kinney has watched with dismay as waterfront lots across from her home on Big Lake have been stripped down to sandy wasteland.

. . .

Like the woodpeckers, humans are also looking to defend their nest eggs.

Bonner Stiller has been holding on to two wooded half-acre lakefront lots for 23 years.  He stripped both lots of longleaf pines before the government could issue its new map.

“They have finally developed a value,” said Mr. Stiller, a Republican member of the state General Assembly.  “And then to have that taken away from you?”

 

For the full story, see:

"Rare Woodpecker Sends a Town Running for Its Chain Saws."  The New York Times, Section 1 (Sun., September 24, 2006):  20.

 

Higher Oil Prices Provide Incentive to Seek Deeper Oil


Source of map:  online version of the WSJ article cited below.

 

(p. C1) The successful production of oil from the five-mile-deep Jack well in the Gulf of Mexico is likely to spur more deep-water exploration around the world — and that prospect is helping calm overheated crude-oil markets anxious about future supplies.

. . .

The successful Jack test underscores what a group of economists and oil-industry executives have been arguing for a while:  High prices will encourage energy companies to find and pump oil in deep, dark places around the world that otherwise would have been uneconomical.

 

For the full story, see:

RUSSELL GOLD.  "More Companies May Dig Deeper In Search for Oil Gulf of Mexico Discovery Fuels Prospects of Finding New Supplies; Lack of Resources Could Slow Push."   Wall Street Journal  (Tues., September 19, 2006):  C1.


“Responsible Biotechnology is Not the Enemy: Starvation Is”

  Source of the book image:   http://search.barnesandnoble.com/booksearch/isbnInquiry.asp?z=y&EAN=9781930754904&itm=1

 

 

Who won the Nobel Peace Prize in 1970?  You may be forgiven for not remembering, given some of the prize’s dubious recipients over the years (e.g., Yasser Arafat).  Well, then:  Who has saved perhaps more lives than anyone else in history?  The answer to both questions is, of course, Norman Borlaug.

Who?  Norman Borlaug, 92, is the father of the "Green Revolution," the dramatic improvement in agricultural productivity that swept the globe in the 1960s.  He is now the subject of an admiring biography by Leon Hesser, a former State Department official who first met Mr. Borlaug 40 years ago in Pakistan, where they worked together to boost that country’s grain production.  "The Man Who Fed the World" describes, in a workmanlike way, how a poor Iowa farm boy trained in forestry and plant pathology came to be one of humanity’s greatest benefactors.

. . .

Mr. Borlaug is still tirelessly working to keep hunger at bay.  He remains a consultant to the International Maize and Wheat Improvement Center in Mexico and president of a private Japanese foundation working to spread the Green Revolution to sub-Saharan Africa.  He believes that biotechnology will be crucial to boosting world food supplies in the coming decades and decries the underfunding of the world’s network of nonprofit agricultural research centers.

He also laments the unnecessary suspicion with which biotech is treated these days.  "Activists have resisted research," he notes, "and governments have overregulated it."  They both miss the point. "Responsible biotechnology is not the enemy:  starvation is."

 

For the full review, see:

RONALD BAILEY.  "Bookshelf; Going With the Grain."   Wall Street Journal  (Tues., September 5, 2006):  D8. 

 

The reference to the book is:

Hesser, Leon.  The Man Who Fed the World: Nobel Peace Prize Laureate Norman Borlaug and His Battle to End World Hunger (Durban House Publishing: Dallas, 2006) ISBN: 1-930754-90-6; Hardback $24.95

World Health Organization (WHO?) Endorses DDT

MalariaGraphic.gif  Source of graphic:  online version of the WSJ article cited below.

 

The World Health Organization, in a sign that widely used methods of fighting malaria have failed to bring the catastrophic disease under control, plans to announce today that it will encourage the use of DDT, even though the pesticide is banned or tightly restricted in much of the world.

The new guidelines from the United Nations public-health agency support the spraying of small amounts of DDT, or dichloro-diphenyl-trichloroethane, on walls and other surfaces inside homes in areas at highest risk of malaria.  The mosquito-borne disease infects as many as 500 million people a year and kills about a million.  Most victims are in sub-Saharan Africa and under the age of 5.

 

For the full story, see:

BETSY MCKAY.  "WHO Calls for Spraying Controversial DDT To Fight Malaria." Wall Street Journal  (Fri., September 15, 2006):  B1.

Case for Wind Power is “Absolute Baloney”

I once heard a top MidAmerican Energy executive express considerable, articulate, scepticism about the economics of wind power.  (Wind power is unreliable, so that electric companies still must stand ready to provide the electricity by other means.)  If wind power made economic sense, you wouldn’t need subsidies to promote it—profit maximizing power companies would pursue it on their own.  MidAmerican now invests in wind power, not because it has become an efficient energy source, but because wasteful government subsidies, make wind power profitable for MidAmerican.

Glen Schleede, a retired power company executive, has nothing to lose by speaking the truth: 

 

(p. 1B) The turbines do bother some folks, including Glenn R. Schleede, a retired power company executive from Round Hill, Va., who said the wind power industry puts out "absolute baloney" to justify its existence.

"I’m tired of subsidizing Warren Buffett companies," Schleede said, referring to federal tax subsidies that go to MidAmerican Energy Holdings Co., a division of Omaha-based Berkshire Hathaway Inc. that is headed by Buffett.  Those are MidAmerican’s turbines in the fields around Schaller.

Schleede’s criticisms, mostly in academic-style papers he writes, concentrate on the economics of wind power and what he called "false claims about how this is good for an energy system."

"In fact, these things, because they’re intermittent and volatile and unpredictable, they don’t really add a lot of capacity to an electric grid," he said.  "When you see these things advertised, they talk about how many megawatts of capacity, the number of homes served and all that garbage.

"I would maintain that they don’t serve any homes."

 

For the full story, see: 

Jordon,  Steve.  "Harvesting Wind;Farmers like payout, but critics of wind power point to costs."  Omaha World-Herald  (Sunday September 3, 2006):  1D-2D.