Environmental Economics

Inkstain gets it!

From Inkstain:

Dan Yurman calculates the jobs he thinks would be created by expanding the federal loan guarantees for nuclear power:

The Federal loan guarantee program for construction of nuclear power plants, set by Congress at $18.5 billion, could if expanded to cover the entire fleet of 21 proposed new reactors, create nearly 80,000 construction jobs, and more than 17,000 permanent operations jobs over the next 10-15 years.

I rather think John Whitehead’s macroeconomic argument about green jobs applies here. There are jobs to be had creating the infrastructure necessary to supply our nation’s energy needs. If they are not created in providing that energy through nuclear power, they will be created in providing it with coal, or wind, or whatever. To the extent that more jobs are created by doing it with nuclear energy than with other approaches, that merely means nuclear energy is less efficient.

My analysis suggests we could maximize energy-related job creation by hiring a bunch of extreme athletes to pedal those silly bike machines you see in late night infomercials. Hook ‘em up to the grid. All the food they have to eat would also add farm sector employment. Win!

(OK, I’m being flip. Just as Whitehead argues with “green jobs,” there may very well be good reasons for pursuing an expansion of nuclear energy. But job creation should not be one of them.)

This is what I'd add:

Over 10-15 years the government spending created jobs will simply replace those in another sector of the economy. The new construction jobs will hire workers away from other construction projects increasing the wages of construction workers. The higher wages will reduce the quantity demanded of construction workers from the private sector.

Another offset will occur from the source of the federal funding. The higher taxes will reduce consumer demand for goods and services and reduce jobs in the consumer spending sector of the economy. If the government borrows the money, the jobs will be a net gain if the deficit is externally funded by China and others. However, this sort of deficit financing is unsustainable over the long term. At some point the debt to GDP ratio will rise to a level where foreigners will feel super nervous about loaning the U.S. government money. At that point interest rates spike (this is known as crowding out) and all heck breaks loose.

Finally, the permanent jobs will simply offset the job losses in other non-nuclear power plants.

What I did yesterday...

In a noble effort to ward off the pending caloric gluttony of the rest of the day, official oldest daughter of env-econ and I battled the 25 degree weather of Dublin, OH and ran in the 2008 Flying Feather Four Miler.  The results:

• Abby Haab (12 y.o), 41:13, (10th place female out of 45 in the 14 and under age group).
• Tim Haab (39 y.o.), 41:17, (too embarrassed to list a place, but he finished, and paced his daughter.  Unfortunately she outkicked him to the finish.  But she carries 100 lbs less).

Trying to work at home

I'm reading a paper on the computer and a 6 year old gets in my lap:

6 year old: read that to me

me: naw, it is too boring

6 year old: please read it to me

me: OK. In equation (14) e(∙) is an endogenous regime switching function in which the regimes ...

6 year old: stop, that IS boring

Where I'll be at noon tomorrow

Section 110, Row A, Seat 1 (2 or 3) [first row behind the visitor's bench, left hand side (as you are looking at it) 40 yard line]:

No. 13 South Carolina State (10-2) at No. 2 Appalachian State (10-2), 12 p.m., ESPNU

Not so fast international climate negotiators!

From the WSJ Morning Brief:

The United Nations Climate Change Conference that begins in Poznan, Poland, next week will in some ways mark the end of an era. The U.S.'s long-standing opposition to climate regulation is vanishing, offering new opportunities for cooperation with its allies in Europe and beyond, but to some extent, international climate negotiators will remain in limbo until Jan. 20, when President-elect Barack Obama enters the White House.

My guess is that international climate negotiators might be waiting until at least January 20, 2010 when the income effect increases the demand for climate change policy (i.e., hopefully, the U.S. and other economies will be in the recovery stage of the business cycle [too much to hope that we're in the expansion phase]).

Happy Thanksgiving

A Thanksgiving energy tip from TerraPass:

Don’t open the oven door to peek at what’s cooking inside unless you actually need to check something. Instead, turn on the oven light and check the cooking status through the oven window.

The problem, of course, is that it is much more fun to open the oven door and peek. Must all holiday energy saving ideas be so dreary (e.g., the vegetarians might suggest avoiding the turkey altogether in order to save energy)?

Anyway, go Lions!

Happy Thanksgiving

Following up on John's travel post...

Despite plummeting gas prices and unusual last-minute holiday deals on airplane tickets, more people are expected to stick close to home this Thanksgiving.

In fact, the Automobile Association of A merica says the 41 million Americans expected to take trips at least 50 miles for Thanksgiving is about 600,000 less than traveled last Thanksgiving.

The reason, as a surly economist might say? It's the economy, stupid.

"The economy is in such bad shape. ... They're still really hesitant to take that trip," said Beth Mosher, spokeswoman for AAA Chicago.

In comparison, over the July 4 weekend when gas prices were far higher than the same weekend the previous year, the number of travelers dropped just 2.3 percent, she said. At that time, the economic news wasn't as dire as it is now.

Demand and supply in the airline industry

Airlines have announced price cuts targeting leisure travelers through the usually busy winter holiday season and beyond. Analysts view the moves as an attempt to woo back consumers who are putting off trips in response to the unfolding economic crisis.

Translation: income falls (or is expected to fall or is more uncertain), demand falls creating a surplus and price falls.

The downturn is emerging as the biggest threat to the industry since it was buffeted by summer fuel prices. Now fuel prices are retreating, but so is the demand for seats.

Translation: Don't buy airline stock.

In theory, there should be few empty airline seats. Airlines have eliminated about 200,000 seats per day by zapping routes and grounding planes.

Translation: Supply fell ...

The reduction was supposed to give airlines room to raise fares. But analysts say winter sales suggest that airlines are struggling to fill their planes.

Translation: But demand has fallen even farther ...

And where you have empty seats, you have discounts, says Rick Seaney, chief executive of FareCompare.com, which allows travelers to compare prices among Web sites.

Translation: Creating a surplus which leads to falling prices.

Source: Holiday airfares drop and ticket demand slumps.

Food Fight!

From the Columbus Dispatch:

Fending off criticism that they fear could jeopardize ethanol subsidies, Ohio corn growers shot back at corporate food producers yesterday, saying they continue to charge high prices and reap big profits even as corn prices plunge.

Corn growers are facing off against a broad coalition including livestock groups, restaurants and corporate food companies that is calling on President-elect Barack Obama to end the nearly $5 billion in annual subsidies for the ethanol industry.

Since I've already angered the auto industry, why stop there?  I'm opposed to many (most?) farm subsidies.  I'm all for correcting externalities by subsidising beneficial behaviors and taxing costly behaviors.

But artificially inflating incomes of inefficient businesses? That's bad policy.

Reverse causality

Just as the world seemed poised to combat global warming more aggressively, the economic slump and plunging prices of coal and oil are upending plans to wean businesses and consumers from fossil fuel.

From Italy to China, the threat to jobs, profits and government tax revenues posed by the financial crisis has cast doubt on commitments to cap emissions or phase out polluting factories.

Automakers, especially Detroit’s Big Three, face collapsing sales, threatening their plans to invest heavily in more fuel-efficient cars. And with gas prices now around $2 a gallon in the United States, struggling consumers may be less inclined than they once were to trade in their gas-guzzling models in any case.

Here is a quick comment on the first sentence of the third paragraph of the excerpt (Economic Slump May Limit Moves on Clean Energy): Isn't the causality wrong here? "Detroit's Big Three lack of planning to invest heavily in more fuel-efficient cars has led to collapsing sales."