Jason Barton

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Archive for the ‘Government Intervention’ tag

Limited Government Intervention Can Aid Innovation

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Especially during the healthcare debates, many were heard to decry increased government intervention as stifling not only the economy, but also innovation. Many of the concerns regarding the inefficiency of the federal government were certainly valid, and I stand by my contention that, while every person in a country as wealthy as the US ought to have basic healthcare, the federal government is not the most efficient instrument to carry out this mission.

But for those who ask what new technologies have come out of the much more socialist Europe, I point to the vast strides they have made in renewable energy. As I said in an earlier post, Germany and China are leading this charge, two countries that have far more government intervention than we have here.

Yes, more fence sitting. I take the stand that limited government intervention is necessary to set the framework for more long term thinking, to provide the guidelines for business activity that will provide the same options we have now in terms of resource availability for future generations. Once that framework is set, the market ought to be able to work out the most efficient means to maximize welfare given the world’s physical constraints.

The quote below by Pietikainen captures this sentiment. Wow, imagine that coming from a socialist politician.

European Business and Policy Leaders Discuss the Role of Innovation and Energy

BRUSSELS, September 29, 2010 /PRNewswire-FirstCall/ —

– Dow Corning-Sponsored Roundtable Spotlights European Commission Vision to Accelerate Development and Deployment of Economic Stimulating, Low-Carbon Technologies

Political representatives and business leaders today provided a glimpse into the role that innovation and energy technologies will play in the economic recovery and environmental protection in Europe.

The roundtable at the European Parliament in Brussels was sponsored by Dow Corning and co-hosted by Members of the European Parliament (MEP) Fiona Hall and Sirpa Pietikainen. Panel participants exchanged views on pressing issues that will be addressed this autumn by the European Union’s institutions to position Europe for the 21st Century, including the upcoming innovation strategy and the revision of the EU’s industrial policy.


“Europe must ensure that companies can operate in a business-friendly environment that promotes low-carbon technologies and innovation,” said Pietikainen, “which will contribute to solving Europe’s greatest challenges by reducing costs and improving resource efficiency in production processes.”

Read the entire article here.

Written by Jason

February 11th, 2011 at 10:02 pm

BP Oil Spill Demonstrates Need for (Limited) Government Intervention

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Is it possible for the gov’t to establish who–whether BP, Halliburton, Transocean, Anadarko, or others– is responsible for what portion of the damages in an efficient manner?

As has been written many times before on this site, this is the job of government: internalize the costs of these external damages so that the firms and other parties responsible are paying the bills.

The report said the explosion that triggered the worst offshore oil spill in U.S. history resulted from management failures by BP and its contractors as well as “failures of government to provide effective regulatory oversight of offshore drilling.” It said the root causes of the disaster were “systemic” and “might well recur” without significant changes to industry practices and government policies.”

The regulation described here is usually highly inefficient, inhibiting firms from the innovation that makes them both safe and profitable. When firms are held responsible for the costs of their actions, rather than strangled by regulation, they can perform the risk analysis necessary to see whether or not the technology and infrastructure they have available will make a potential drilling location, yes, both safe and profitable.

Already, the report has its detractors. Rex Tillerson, chief executive of Exxon Mobil Corp., told reporters Thursday he did “not agree that this is an industrywide problem,” adding that the report’s conclusions shouldn’t be extended to the entire sector. Exxon was one of a number of oil companies that claimed last summer that the Gulf of Mexico blowout was a one-time event caused by unusual and risky decisions by BP.

Holding responsible those specific firms that were involved with the tragedy* also means avoiding placing blame on those firms that are more careful with their choices of where and how to drill, mine, etc.

Under this kind of scenario, the costs associated with the 2010 Gulf spill would be, for the most part, passed along to the customers of these firms, but this is a much more efficient means of paying them than having them paid by taxpayers who use the products and services provided by BP from the Deepwater Horizon rig.

This brings us back to the original question: To what extent it is possible that government establish responsibility?

The goal is to ensure that those benefitting from the the consequences, both intended and unintended, of the drilling, are also held responsible for the direct as well as indirect costs. Taxpayers benefit in different proportions that the government is not able to establish.

The companies, once faced with the fines and other clean up costs, will pass those costs along to their users, meaning We The People (private consumers, not taxpayers) are able to decide how much these benefits are really worth.

  • JANUARY 7, 2011

BP Gets Lift From Oil-Spill Report


The U.S. presidential commission’s report on last year’s Gulf of Mexico oil spill reduces the likelihood that BP PLC will be found guilty of gross negligence, legal experts and industry analysts said Thursday, potentially lowering the ultimate cost of the disaster to the U.K.-based oil giant.

A 48-page chapter from the report, released Thursday, shone a harsh spotlight on BP’s actions in the run-up to the blast at its gulf well, but also piled criticism on two of the company’s contractors, Transocean Ltd. and Halliburton Corp.

Read the entire article here.

Written by Jason

January 11th, 2011 at 9:24 pm

UK Forcing Oil Companies to Internalize their Externalities

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It looks like the UK will force energy companies wishing to drill for oil off its coasts to be responsible for potential indirect costs of their operations. Such a strategy, which economists would call internalizing their external costs, is what I and many others consider the most efficient way to preserve both economic and environmental health.

I think this is great news.

  • JANUARY 6, 2011, 5:33 A.M. ET

UPDATE: UK Lawmakers Question Deep Water Drilling Safety

   By James Herron

LONDON (Dow Jones)–U.K. lawmakers Thursday raised serious doubts about whether the oil industry is prepared to tackle an oil spill similar to the Deepwater Horizon blowout should it occur in the North Sea, but they stopped short of recommending a moratorium on drilling similar to that imposed in the U.S.

Instead, the U.K. Parliament’s Energy and Climate Change Committee called on the government and regulators to compel companies to improve their spill response plans, install extra failsafe equipment on rigs, and increase financial provisions for spill costs.

Major changes to drilling regulations could have a significant impact on the U.K. because its main deep water area, west of the Shetland Islands, is thought to be home to the bulk of the country’s undeveloped oil and gas resources. For this reason, “a moratorium on deep water drilling off the west coast of Shetland would undermine the U.K.’s energy security and isn’t necessary,” said Tim Yeo, the Conservative member of Parliament who is chair of the committee.

Read the entire article here.

Real People Show the Need to Internalize the Externalities

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If the devastation of the Gulf oil spill is too abstract, as it is for many of us, this story places faces and immediacy on the tragedy. The women discussed here have already lost their husbands and are now in danger of further losing their ability to make ends meet, as soon as the end of this month, this of all months. Yet executives and policy makers bicker over who’s responsible.

If BP and the other companies that operated the well were not fully prepared to pay the costs, then they should not have ventured after the benefits.

To put it unemotionally, the pain these women are experiencing is an externality. The job of government is not to distort the market, letting these firms profit at the expense of third parties, but to ensure that these companies are free to pursue their profits while ensuring that they must pay the costs, internal and external, direct and indirect, associated with their business.

Ah, it’s so simple, no?

  • DECEMBER 16, 2010, 12:08 P.M. ET

Widows Push Congress to Act on Gulf-Spill Measure


Two widows of men killed in the Gulf of Mexico explosion that led to the largest offshore oil spill in U.S. history say they fear Congress is losing interest in passing a measure soon that would allow them to seek damages in court for the tragedy.

Under current law, families of anyone killed at sea—rather than on land—are banned from receiving damages for loss of care and comfort. Congress is considering a measure that would change the law for families of workers who died in the BP PLC explosion.

Read the entire article here.

Written by Jason

December 16th, 2010 at 11:54 pm

More Solid Challenges to Government Protection of Ethanol, This Time from the Left

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The article below points out that historically there are three forms government intervention in markets: mandating a product’s use, protecting it from foreign competition through measures such as tariffs, and subsidizing its production.

Corn ethanol benefits, at our expense, from all three.

This does not encourage the kind of innovation that will make domestic, clean energy a larger part of our energy matrix. Instead, it binds us to an inefficient and expensive (made artificially cheap by our tax dollars) practice that is environmentally damaging, not beneficial.

Congress, please, let your baby fend for itself on the free market. Even Al Gore agrees with me.=

  • DECEMBER 5, 2010, 7:10 P.M. ET

Ethanol on the Run

A left-right coalition is emerging against this energy boondoggle.

The political class inevitably invokes the moon shot or Manhattan Project as a model for every unrealistic energy goal, but for once maybe that hyperbole is apt: A left-right coalition is emerging to end ethanol subsidies.

Last week, no fewer than 17 Senators signed a letter calling ethanol “fiscally indefensible” and “environmentally unwise.” Led by Democrat Dianne Feinstein and Republican Jon Kyl, the group said Congress shouldn’t extend certain subsidies that expire at the end of the year, including the 45-cent-per-gallon tax credit for blending ethanol into gasoline and tariffs on cheaper imports. Conservatives like Tom Coburn dislike this costly industrial policy, while liberals like Barbara Boxer and Sheldon Whitehouse are turning against the hefty carbon emissions that come with corn fuels.

Read the entire article here.

Al Gore Finally Opposes Corn Ethanol

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An editorial in The Wall Street Journal this morning discusses Al Gore’s apparent change of heart from supporter to opponent of subsidies for corn ethanol in the U.S.

It’s not that I’ve ever put much stock in Al Gore. I’m glad he’s helping more Americans understand the importance of environmental health, but I don’t think climate change science is the way to do it.

The article below provokes two different, almost visceral reactions in me: One to corn ethanol and one to the attention paid to climate change.

Climate Change:

Whether or not it’s accurate to say that the climate is changing in negative ways, and that humans are the cause of it, it’s simply too distant to most people’s daily lives for it to gain real traction in making change.

For example, Hurricane Katrina: Did a one degree increase in the Caribbean Sea’s temperature drive the wind and rain that much harder into New Orleans to make the storm so much more severe that it led to thousands of deaths? Was that temperature increase caused by humans?

Hurricane Katrina was clearly a terrible event, and many things went wrong there, but in terms of the environmental facets, the climate change discussion distracts us from the real and tangible fact that WE MOVED A RIVER!

Isn’t there a sufficiently poignant lesson to learn in seeing the terror of what happened when the river moved back? Digressing into the chemistry of atmospheric leads us away from tangible facts that can induce real and effective change.

Similarly, we don’t need to convince someone of climate change for them to understand why it’s not healthy for our lungs to go jogging next to a freeway. Their lungs help them to understand, without Gore’s Powerpoint, why we should work to limit vehicle emissions.

Can we focus on solutions when we see problems? How am I supposed to understand the real impacts of my own actions when I’m focusing on that one degree change and my possible role in it?

I can’t believe anyone would still be reading at this point, and this site has enough about my thoughts on the inefficiency of corn ethanol, so thanks if you’re still here.

Suffice it to say that I’m glad Al Gore has joined the chorus of those opposing subsidies for corn ethanol. Now if he could convince Obama to go back to his earlier criticisms of this boondoggle, we’d be making some real progress.

Rather than continuing on that subject that’s been discussed so often, I’ll hold off and let you continue to the Journal’s editorial.

  • NOVEMBER 27, 2010

Al Gore’s Ethanol Epiphany

He concedes the industry he promoted serves no useful purpose.

Anyone who opposes ethanol subsidies, as these columns have for decades, comes to appreciate the wisdom of St. Jude. But now that a modern-day patron saint—St. Al of Green—has come out against the fuel made from corn and your tax dollars, maybe this isn’t such a lost cause.

Welcome to the college of converts, Mr. Vice President. “It is not a good policy to have these massive subsidies for first-generation ethanol,” Al Gore told a gathering of clean energy financiers in Greece this week. The benefits of ethanol are “trivial,” he added, but “It’s hard once such a program is put in place to deal with the lobbies that keep it going.”

Read the entire article here.

Should China Award Subsidies to US Clean Energy Firms?

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One way for us to boost domestic clean energy production is to enact protectionism that excludes foreign firms from receiving U.S. government grants, as was discussed in a post earlier this year. Another way is to urge others, namely China, to open their economies further so that U.S. firms can earn Chinese government grants.

US wants China to reciprocate green energy subsidies

(AFP) – Nov 15, 2010

SHANGHAI — US Energy Secretary Steven Chu said on Monday China should allow foreign companies to qualify for its subsidies aimed at encouraging renewable energy projects.

Chu said foreign firms, including Chinese companies, qualify for US clean energy subsidies but barriers, such as Beijing’s local content requirements, exclude US companies from receiving government help in China.

“The United State recognises the right of China to give subsidies just as we use subsidies… but in the United States, we make a point of including all industries,” Chu told reporters on a visit to Shanghai.

“We would ask China to consider the same reciprocity, namely if a foreign company wants to come to China to set up manufacturing and production that it would be open to the same kind of help,” he said.

Read the entire article here.

Steven Chu Walks the Walk, or Rides

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It’s excellent that the head of our Department of Energy is so knowledgeable about the technologies with which he’s working. One might think this is par for the course, but as the article discusses it has not often been the case.

Riding his bike to work is a great touch that lends even more credence to his leadership.

None of this changes the fact, however, that one person should not be making decisions about which technologies or firms receive government investment. While Dr. Chu’s integrity may be unassailable, in order to ensure our energy future is as efficient as possible there need to be greater checks and balances on doling out these funds.

Overcoming old habits in terms of building materials and power systems is indeed a challenge. Chu would be wise to let the free market be his guide as makes his decisions and encourages the movement to a cleaner, renewable, domestically-powered energy future.

For energy chief, race is on to find fuel alternatives

Concerns about climate change and the economy have intensified Energy Secretary Steven Chu's focus on new technologies and greater energy efficiency.

Concerns about climate change and the economy have intensified Energy Secretary Steven Chu’s focus on new technologies and greater energy efficiency. (Alex Wong)

By Steven Mufson

Sunday, November 14, 2010

It’s a stunning fall morning in Washington, and Energy Secretary Steven Chu, clad in bike shorts and a snug Stanford University biking shirt, climbs onto his Colnago bicycle and rolls down his leafy street and onto the Capital Crescent Trail. Then it’s a 20-minute sprint – breaking the trail’s speed limit – to downtown Washington. A Secret Service agent keeps close behind, with the help of a small electric motor. The trees are ablaze across the Potomac as he drops into Georgetown.


Aides say Chu’s ability to understand and absorb technical information sets him apart from the previous 11 energy secretaries – a financier, three business executives, an admiral, two governors, a U.S. senator and other politicians.


Chu’s talk spans environmental history, deep-water drilling and energy efficiency. Explaining why electric car batteries are large and heavy, he uses a common measurement of energy and notes that a lithium ion battery stores 0.54 megajoules per kilogram. Body fat has 38 megajoules per kilogram, and kerosene has 43.


Chu’s scientific bent was unexpectedly useful over the summer, when the Obama administration was desperate to stop the oil spill in the Gulf of Mexico. Chu was dispatched to BP’s Houston offices to see what could be done.

He recommended that BP use gamma rays to see into the blowout preventer; its several inches of steel were obscuring other methods of figuring out whether the shear rams were clamping into the drill pipe.

He also tapped into his Stanford network to get names of engineers who could give advice, and he told Obama early on that the flow rate of oil pouring into the gulf might be greater than what BP was letting on. Weeks later, he marveled about how little innovation there was in the deep-water drilling business and how few gauges and backup mechanisms were installed on the blowout preventer.

Read the entire article here.

Moving Clean Energy Beyond Climate Change

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Clearly these elections did not come down to such simplistic terms as those in the headline to the article below. Our energy future may be my #1 concern, and it’s definitely on the minds of many other voters, but there’s a lot more at stake here as well.

I’ve been pretty torn in this year’s elections. On one hand, I’m very much in favor of a more progressive approach to energy issues, believing that while fossil fuels will remain an important part of our energy matrix for decades and hopefully centuries to come, but I also understand that continuing business as usual will doom us to some frightening dead ends. On the other hand, government intervention, as it has been implemented for corn ethanol, is inefficient and creates market distortions that limit innovation.

If our state’s government can create market based incentives that encourage the most cost effective clean technologies, rather than simply supporting their own pet projects, then these investments will be much more able to pay themselves back in the mid and long term.

As for climate change denial versus clean energy, we need to transcend these contentious barriers and see that there are many more advantages to clean, renewable, domestic energy than simply avoiding climate change. If we continue to hammer away at that one point, we will continue fighting, rather than building on the already-abundant common ground that exists where we can see that these clean energy efforts are good for our economy, good for our environment, and good for America.

Gene Karpinski

Gene Karpinski

President, League of Conservation Voters

Clean Energy Defeats Climate Denial in Colorado

As I’ve said before, we lost many friends on Election Day — friends who stood up to the Big Oil companies and championed clean energy policies. And while corporate polluters and their lobbyists may claim this was a referendum on clean energy reform that was clearly not the case. Our election eve poll showed that voters who supported the Republican candidate in 83 battleground districts did not do so because of the Democrat’s vote for clean energy and climate legislation. In fact, in an open ended question, only 1 percent of voters who supported the Republican candidate cited cap and trade as their reason for opposing the Democratic candidate.

Read the entire article here.

Written by Jason

November 13th, 2010 at 9:34 pm

Biomass Energy Industry Needs Guidelines, Not Crippling Regulation

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It looks to me like these changes may represent good moves. Without these restrictions in place, companies would be incentivized to clear cut forests for their energy content. This is not long term thinking.
That said, if there is excessive regulation of the processes, rather than simple benchmarks that let companies work in a transparently free market, the regulation will be self defeating. (Ouch, this fence is really digging in.)

Biomass energy industry decries proposed efficiency regulations

Incentives tied to emissions cuts

By Michael Norton

State House News Service / September 21, 2010

New Patrick administration rules restricting tax credits for biomass energy, aimed at curbing greenhouse gas emissions, are facing strong pushback from industry and labor officials, who say the changes will stifle job growth.
The draft regulations were released Friday evening and targeted for a mid-October public hearing. The regulations would permit credits only for projects that can demonstrate substantial reductions in greenhouse gas emissions and require biomass units to meet a new high-efficiency standard.
The rules allow renewable energy credits only for power produced with biomass fuels derived from forest residue, forest salvage, and energy crops, a constraint designed to ensure forest sustainability. With restrictions, trees removed in forest management thinning operations are considered eligible biomass fuels, according to a Department of Energy Resources overview of the regulations.

The regulations would also create a fuel certification, tracking, and verification system to ensure that eligibility criteria are met, with an advisory panel established to review compliance and the state required to conduct a “forest impact statement’’ every five years.

He described a limited amount of feedstock for biomass in New England and a “big’’ difference in greenhouse gas implications between electric-only biomass plants and those that combine heat and power. The regulations, he said, “mean putting our incentives towards the more efficient types of facilities and grandfathering out incentives for some of the electric-only facilities.’’

Read the entire article here.

Written by Jason

September 22nd, 2010 at 9:14 pm