Ethanol, produced by corn, “biomass,” cane sugar or other plant matter, is considered by many to be a great alternative to fossil fuels. They consider the origin to be more renewable (plants grow rapidly), the fuel to produce less pollution, the production to release fear “carbon emissions,” and as a bonus, it costs more so people might drive less.
Ethanol is so beloved by some that legislation to subsidize farmers who grew crops for biofuels was pushed through in many countries including Germany and the United States. It would save us from dependence on foreign oil, it would reduce pollution, and cars can run on plants, won’t that be wonderful? Some even argue that it would reduce gas prices because we could shake that oil addiction from the middle east and produce it here cheaply and efficiently!
The truth is, ethanol has its advantages. When burned, it pollutes less than straight gasoline, and it actually has a higher octane rating, making it produce more horsepower per weight than gasoline. It also burns somewhat cooler than straight gasoline.
These days ethanol is less popular, and you don’t hear so much about how great it is. BP isn’t running bright green ads with happy cars driving around on corn any more. But the legislation is still in place, the farmers are still growing corn to turn into fuel, and any attempt to stop this or repeal the legislation is met with exactly the same environmental claims and protests.
So what about these fuels, are they really that great? Are people who oppose ethanol just oil company stooges?
Greg Giraldo is dead now, but he was a very brilliant, very funny comedian. He was one of those comedians that all other comedians loved and thought was so hilarious but for some reason never really caught on or broke big.
He had a bit on biofuels in which he pointed out that for every gallon of corn ethanol, it requires two gallons of gasoline to produce. He noted the only reason corn ethanol is even pushed is because corn farmers want that sweet subsidy money. Al Gore not long ago admitted it wasn’t about the environment, but about kickbacks to farmers for political gain:
First generation ethanol I think was a mistake. The energy conversion ratios are at best very small. […] One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.
Every so often a politician will be honest.
The truth is, ethanol is not just a failure in every single category it was supposed to succeed, but a disaster. From food shortages to riots, to slavery and beyond, ethanol in all its forms is a horrific failure. Let us count the ways.
Christopher Taylor, “COMMON KNOWLEDGE: Ethanol and Biofuels “, Word Around the Net, 2014-04-25.
March 2, 2015
February 22, 2015
Jared Newman on Tesla’s plans to move into a new marketplace:
Tesla’s crusade against fossil fuels could soon hit home with a battery-powered energy pack.
The company plans to start producing a home battery within six months, Bloomberg reports, and will reveal more details in the next month or two.
One obvious application would be a source for backup power, replacing conventional fuel-powered generators. The upcoming Toyota Mirai hydrogen-powered car can also function as a backup power source for a house. But the Tesla pack could also help shift energy usage to reduce peak demand on the electric grid, thereby cutting down on energy bills. In an earnings call, Tesla Chief Technology Officer JB Straubel hinted at strong interest from utility companies for that very reason.
Potentially, homes with renewable energy sources such as solar panels could also power the pack, allowing users to wean or remove themselves from the electric grid.
If the price point is low enough, this could be a big boost to fans of locally produced electricity from solar or wind power … being able to store the energy you generate so you can use it when you need it makes it much more attractive to invest in those technologies.
January 16, 2015
When oil prices are high there is a rush of investment into oil based enterprises from multi-nationals to frackers. No bad thing but there is always a real danger of over investment leading to the exploitation of very marginal resources. A lower oil price will strand some of that investment and, just as importantly, postpone a great deal of it. Which frees up investment for other, potentially more useful, purposes.
The second thing which happens is that governments become addicted to the joys of relatively painless oil royalties. This looks like revenue but, because it is drawn from a diminishing resource, is actually a rather dangerous drawing down of capital. A lot of oil “revenue” is seen as general revenue and is spent on non-capital expenditures. With a booming oil sector governments are tempted to think the exaggerated revenues are available for general expenses and will continue to be. Which means that government budgets are set based on a purely extractive draw down of a province’s or nation’s capital. This is a poor idea.
Not to take anything away from the bright guys who are fracking and mining their way to oil fortunes, the reality is that extracting oil does not leave much in the way of useful, secondary industry, much less innovation. Which, in turn, means that when the oil is no longer profitable to extract there is no residual, non-oil, economy left behind. If a government spends the oil revenue as it comes in, or worse uses it to secure loans, when the oil revenue dries up there is nothing to cover the spending or the debt.
The golden lining of additional pressures on nasty states like Russia, Iran and Venezuela is likely not as significant as the prevention of malinvestment and governmental squander. In time, as various emerging economies continue to grow, demand will drive the price of oil upwards again. With luck investors and governments will not make the same mistakes twice.
(One unalloyed good arising from the collapse of the price of oil is that so called clean energy renewables like wind and solar look even sillier with their present technology. I suspect wind will always make zero economic sense; I have more hope for photo voltaic solar as new materials promise significantly higher efficiency. And those same materials in a different configuration promise radical gains in battery efficiency for that daily occurrence known as darkness. Again, a low oil price will dampen the insane over investment in these marginal technologies.)
Jay Currie, “Oil Wars”, Jay Currie, 2014-01-03
November 12, 2014
Tim Worstall isn’t impressed with a recent report that claims traditional energy companies (oil, gas, and coal) get government subsidies that amount to $88 billion per year, just from the G20 countries:
The report itself is here. Have a look at it yourselves, by all means, but here’s the three things they’ve added up to get to that $88 billion figure:
A fossil fuel subsidy is any government action that lowers the cost of production, lowers the cost of consumption, or raises the price received by producers of fossil fuels. Types of fossil fuel subsidies include financial contributions or other support from the government, such as grants and direct payments, tax concessions, non-market investments made as a result of government ownership of fossil fuel companies, in-kind support (including specific infrastructure), credit support (loans and loan guarantees), insurance and indemnification, market price support, procurement, and responsibility for decommissioning (Koplow and Charles, 2010; Steenblik, 2008). This report divides ‘exploration subsidies’ into three categories:
• ‘national subsidies’, such as tax breaks to companies and direct spending by government agencies
• ‘investment by SOEs and
• ‘public financing’ including support from domestic, bilateral and multilateral international (e.g. loans, equity, and guarantees)
To take that second one first, SOEs are state owned enterprises. So when Rosneft spends money on drilling a new well, given that Rosneft is largely state owned (and most certainly closely state connected) then this is a government subsidy to fossil fuel exploration. No, this isn’t normally what we mean by a subsidy and shouldn’t be counted as one. Just that one classification error accounts for up to half of their $88 billion. Just to repeat the error: claiming that investment by a state owned company on purely commercial terms is a subsidy simply isn’t true. If Statoil drills a new well, upon which it makes the usual profits and finances it in the normal manner, this is not a state subsidy. Yet this report is trying to claim that it is.
The public financing part is a bit of a stretch to be honest. The claim is that if the World Bank lends money to open a coal mine in some poor country then that’s a subsidy from the rich countries (who subsidise the World Bank) to fossil fuels. You could, I suppose, make that case but it is very much a stretch. And if you were to make that case then the subsidy would be only the difference between commercial lending terms on that mine and the concessionary terms that the World Bank is offering. Which isn’t what they measure at all.
But the real problem is with their insistence that any tax break is a subsidy. In their estimates of tax breaks they include things that any normal company gets it’s just that given the differences in the extractive industries we tend to give them different names. Every company is, for example, able to write off the cost of R&D against future income. Drilling or surveying is a form of R&D but we just have a slightly different set of names for how fossil fuel companies can write off those costs. To include all of those “tax breaks” as subsidies when they’re on offer, in slightly different forms and slightly different names, to all producers of anything is not quite being accurate.
Update: In a post today, he revisits the subsidies argument.
Here’s one report on what the IEA is saying:
Fossil fuels are reaping $550 billion a year in subsidies and holding back investment in cleaner forms of energy, the International Energy Agency said.
Oil, coal and gas received more than four times the $120 billion paid out in incentives for renewables including wind, solar and biofuels, the Paris-based institution said today in its annual World Energy Outlook.
Yes, all of that is entirely true. And it’s also true, as the IEA has said in the past, that we really would like to stop those subsidies to fossil fuels. On three grounds, the first that they’re very inefficient, the second that they don’t actually reach the poor they’re aimed at and the third that removing them would take us a long way to meeting our climate change targets.
However, nothing is ever that simple: and the big point to note here is that it really isn’t us in the rich countries that are subsidising fossil fuels.
There’s our two numbers, the renewables subsidy and the fossil fuel one. And yes it’s entirely true that we’d like to reduce that second, the fossil fuel one. Either so we can increase the renewables one because we have more money or so we can decrease it as we now longer have two policies working in opposition to each other.
However, here’s the thing for public policy. It’s us in the rich countries, largely so at least, who are subsidising the renewables. Great, that’s under our control. But it’s almost entirely not us in the rich countries subsidising the fossil fuels. That means, absent the reintroduction of colonialism, that those subsidies are not something under our control.
We should also note that these are “real subsidies”. These aren’t games being played with statistics as yesterday’s attempt to persuade us that we do subsidise by $88 billion. We’re not including tax breaks, not totting up R&D allowances or anything. This really is $550 billion in cash being spent by governments to subsidise fossil fuels.
October 31, 2014
JoNova on the newly discovered Global Placebo Effect:
Matt Ridley was questioning Baroness Sandip Verma at the House of Lords this week. He pointed out to the peers that even the IPCC admits there is “hiatus” that modelers can’t explain. Verma responded: “‘It [global warming] may have slowed down, but that is a good thing. It could well be that some of the measures we are taking today is helping that to occur.’” [Source — Dailymail]
Verma raises the intriguing possibility that windmills and solar panels that were built after 2005 have managed to keep global temperatures constant starting from ten years before they were constructed.
What’s even more remarkable is that none of these projects or activities have reduced global CO2 levels. It follows then, that the mere thought of building windmills is enough to change the weather.
Furthermore, it’s well known that more expensive placebo’s are more effective. Hence the final-final copy of the latest IPCC report — issued on Friday after the leak, the draft, and the redraft — will explain that they are 95% certain that if we spend $2 billion dollars a day on renewable energy (instead of just $1 billion) there will be no more category five storms, seas will stop rising, and goats will stop shrinking.
September 23, 2014
Megan McArdle explains why universities are not in a particularly righteous position when they push for divesting out of fossil fuels:
I understand that universities are exploring sustainability. Just the same, they consume huge amounts of fossil fuels: To heat and cool their buildings. To power their labs and computer networks. Maintenance and landscaping. Cooking all that food. Lighting all those rooms. Every year, they put on many large events to which people fly or drive long distances. Their students travel to and from their premises multiple times a year, rarely on foot. Their faculty fly to do research or attend conferences; many of my friends in academics have much better frequent-flier status than I could ever dream of. Their admissions officers fly hither and yon to recruit students. Their teams fly or drive to games. But you get the idea. The point is that the fossil-fuel consumption of every university in the country dwarfs the impact of their investments on climate change.
If divestment activists were serious about making a difference, setting an example, and drawing the full weight of America’s moral opprobrium onto the makers and consumers of fossil fuels, they’d be pushing a University Agenda that looked more like this:
- Require administrators, faculty, sports teams and other student groups to travel exclusively by boat and rail, except for “last mile” journeys.
- Cease construction of new buildings on campus.
- Stop air conditioning buildings, except for laboratories and archives that require climate control. Keep the heat no higher than 60 degrees in winter.
- Put strict caps on power consumption by students, keeping it to enough electricity to power one computer and one study lamp. Remove power outlets from classrooms, except for one at the front for the teacher.
- Ban meat from campus eateries and require full-time students to be on a meal plan.
- Remove all parking spots from campus.
- Stop operating campus shuttles, except for disabled students.
- Divest the endowment from fossil-fuel companies, if it makes you feel better.
Why has No. 8 jumped to No. 1? Because it’s easy. Because a group of students pushing endowment divestiture can shut down a public meeting and be rewarded with the opportunity to hold a teach-in; a group of students pushing a faculty flying ban and the end of campus parking would find the powers that be considerably more unfriendly. Not to mention their fellow students. Or, for that matter, their fellow activists, few of whom are actually ready to commit to never in their lives traveling out of America’s pitiful passenger rail network.
September 22, 2014
Published on 13 Mar 2013
Matt Ridley, author of The Red Queen, Genome, The Rational Optimist and other books, dropped by Reason‘s studio in Los Angeles last month to talk about a curious global trend that is just starting to receive attention. Over the past three decades, our planet has gotten greener!
Even stranger, the greening of the planet in recent decades appears to be happening because of, not despite, our reliance on fossil fuels. While environmentalists often talk about how bad stuff like CO2 causes bad things to happen like global warming, it turns out that the plants aren’t complaining.
September 17, 2014
Gregg Easterbrook on the difference between ordinary jobs and government subsidized job creation:
Elon Musk Recharges His Bank Account: Tesla’s agreement with Nevada to build a battery factory is expected to create about 6,000 jobs in exchange for $1.25 billion in tax favors. That’s about $208,000 per job. More jobs are always good. But typical Nevada residents with a median household income of $54,000 per year will be taxed to create very expensive jobs for others. Volkswagen is expanding its manufacturing in Tennessee, which is good. But the state has agreed to about $300 million in subsidies for the expansion, which will create about 2,000 jobs — that’s $150,000 per new job, much of the money coming from Tennessee residents who can only dream of autoworkers’ wages. The median household income in Tennessee is $44,140, about a third of the tax subsidies per new Volkswagen job. The Tesla handout was approved by the Democratic state legislature of Nevada; Tennessee’s Republican-controlled state government approved the Volkswagen corporate welfare deal.
At least it’s a bargain compared to federally subsidized solar jobs. A Nevada solar project — state that is home to Senate Majority Leader Harry Reid, President Barack Obama’s closest ally on Capitol Hill — cost $10.8 million in subsidies per job created. Local public interest groups noticed the extreme subsidy while the national media did not.
This cheeky website monitors giveaways state by state.
June 22, 2014
Environmentalists seem to all feel that capitalism is the enemy of sustainability, but in fact capitalism is the greatest system to promote sustainability that has ever been devised. Every single resource has a price that reflects its relative scarcity as compared to demand. Scarcer resources have higher prices that automatically promote conservation and seeking of substitutes. So an analysis of an investment’s ability to return its cost is in effect a sustainability analysis. What environmentalists don’t like is that wind does not cover the cost of its resources, in other words it does not produce enough power to justify the scarce resources it uses. Screwing around with that to only look at some of the resources is just dishonest.
I did not critique the analysis of energy payback per se, but if I were to dig into it, I would want to look at two common fallacies with many wind analyses. 1) They typically miss the cost of standby power needed to cover wind’s unpredictability, which has a substantial energy cost. In Germany, during their big wind push, they had to have 80-90% of wind power backed up with hot fossil fuel backup. 2) They typically look at nameplate capacity and not real capacities in the field. In fact, real capacities should further be discounted for when wind power produces electricity that the grid cannot take (ie when there is negative pricing in the wholesale market, which actually occurs).
Warren Meyer, “Bizarre Payback Analysis Being Used for Alternate Energy”, Coyote Blog, 2014-06-16.
January 1, 2014
VA Viper dug up an Asimov essay from 1964, where he speculated on what life would be like in 2014. It’s an interesting read:
What will life be like, say, in 2014 A.D., 50 years from now? What will the World’s Fair of 2014 be like?
I don’t know, but I can guess.
One thought that occurs to me is that men will continue to withdraw from nature in order to create an environment that will suit them better. By 2014, electroluminescent panels will be in common use. Ceilings and walls will glow softly, and in a variety of colors that will change at the touch of a push button.
Windows need be no more than an archaic touch, and even when present will be polarized to block out the harsh sunlight. The degree of opacity of the glass may even be made to alter automatically in accordance with the intensity of the light falling upon it.
Robots will neither be common nor very good in 2014, but they will be in existence. The I.B.M. exhibit at the present fair has no robots but it is dedicated to computers, which are shown in all their amazing complexity, notably in the task of translating Russian into English. If machines are that smart today, what may not be in the works 50 years hence? It will be such computers, much miniaturized, that will serve as the “brains” of robots. In fact, the I.B.M. building at the 2014 World’s Fair may have, as one of its prime exhibits, a robot housemaid: large, clumsy, slow-moving but capable of general picking-up, arranging, cleaning and manipulation of various appliances. It will undoubtedly amuse the fairgoers to scatter debris over the floor in order to see the robot lumberingly remove it and classify it into “throw away” and “set aside.” (Robots for gardening work will also have made their appearance.)
General Electric at the 2014 World’s Fair will be showing 3-D movies of its “Robot of the Future,” neat and streamlined, its cleaning appliances built in and performing all tasks briskly. (There will be a three-hour wait in line to see the film, for some things never change.)
The appliances of 2014 will have no electric cords, of course, for they will be powered by long- lived batteries running on radioisotopes. The isotopes will not be expensive for they will be by-products of the fission-power plants which, by 2014, will be supplying well over half the power needs of humanity. But once the isotope batteries are used up they will be disposed of only through authorized agents of the manufacturer.
An experimental fusion-power plant or two will already exist in 2014. (Even today, a small but genuine fusion explosion is demonstrated at frequent intervals in the G.E. exhibit at the 1964 fair.) Large solar-power stations will also be in operation in a number of desert and semi-desert areas — Arizona, the Negev, Kazakhstan. In the more crowded, but cloudy and smoggy areas, solar power will be less practical. An exhibit at the 2014 fair will show models of power stations in space, collecting sunlight by means of huge parabolic focusing devices and radiating the energy thus collected down to earth.
Communications will become sight-sound and you will see as well as hear the person you telephone. The screen can be used not only to see the people you call but also for studying documents and photographs and reading passages from books. Synchronous satellites, hovering in space will make it possible for you to direct-dial any spot on earth, including the weather stations in Antarctica (shown in chill splendor as part of the ’64 General Motors exhibit).
For that matter, you will be able to reach someone at the moon colonies, concerning which General Motors puts on a display of impressive vehicles (in model form) with large soft tires: intended to negotiate the uneven terrain that may exist on our natural satellite.
Any number of simultaneous conversations between earth and moon can be handled by modulated laser beams, which are easy to manipulate in space. On earth, however, laser beams will have to be led through plastic pipes, to avoid material and atmospheric interference. Engineers will still be playing with that problem in 2014.
Conversations with the moon will be a trifle uncomfortable, but the way, in that 2.5 seconds must elapse between statement and answer (it takes light that long to make the round trip). Similar conversations with Mars will experience a 3.5-minute delay even when Mars is at its closest. However, by 2014, only unmanned ships will have landed on Mars, though a manned expedition will be in the works and in the 2014 Futurama will show a model of an elaborate Martian colony.
November 13, 2013
Ethanol was supposed to be an environmentally friendly substitute for gasoline, and it was renewable … but it’s not living up to promises:
With the Iowa political caucuses on the horizon in 2007, presidential candidate Barack Obama made homegrown corn a centerpiece of his plan to slow global warming. And when President George W. Bush signed a law that year requiring oil companies to add billions of gallons of ethanol to their gasoline each year, Bush predicted it would make the country “stronger, cleaner and more secure.”
But the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today.
As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, an Associated Press investigation found.
Five million acres of land set aside for conservation — more than Yellowstone, Everglades and Yosemite National Parks combined — have vanished on Obama’s watch.
Landowners filled in wetlands. They plowed into pristine prairies, releasing carbon dioxide that had been locked in the soil.
Sprayers pumped out billions of pounds of fertilizer, some of which seeped into drinking water, contaminated rivers and worsened the huge dead zone in the Gulf of Mexico where marine life can’t survive.
The consequences are so severe that environmentalists and many scientists have now rejected corn-based ethanol as bad environmental policy. But the Obama administration stands by it, highlighting its benefits to the farming industry rather than any negative impact.
September 21, 2013
Robert Bryce explains why — no matter how much we might want it to be so — alternate forms of energy like wind and solar power cannot cover our demands:
That 32 percent increase in global carbon dioxide emissions reflects the central tension in any discussion about cutting the use of coal, oil and natural gas: Developing countries — in particular, fast-growing economies such as Vietnam, China and India — simply cannot continue to grow if they limit the use of hydrocarbons. Those countries’ refusal to enact carbon taxes or other restrictions illustrates what Roger Pielke Jr., a professor of environmental studies at the University of Colorado, calls the “iron law of climate policy”: Whenever policies “focused on economic growth confront policies focused on emissions reduction, it is economic growth that will win out every time.”
Over the past 10 years, despite great public concern, carbon dioxide emissions have soared because some 2.6 billion people still live in dire energy poverty. More than 1.3 billion have no access to electricity at all.
Now to the second number: 1. That’s the power density of wind in watts per square meter. Power density is a measure of the energy flow that can be harnessed from a given area, volume or mass. Six different analyses of wind (one of them is my own) have all arrived at that same measurement.
Wind energy’s paltry power density means that enormous tracts of land must be set aside to make it viable. And that has spawned a backlash from rural and suburban landowners who don’t want 500-foot wind turbines near their homes. To cite just one recent example, in late July, some 2,000 protesters marched against the installation of more than 1,000 wind turbines in Ireland’s Midlands Region.
Consider how much land it would take for wind energy to replace the power the U.S. now gets from coal. In 2011, the U.S. had more than 300 billion watts of coal-fired capacity. Replacing that with wind would require placing turbines over about 116,000 square miles, an area about the size of Italy. And because of the noise wind turbines make — a problem that has been experienced from Australia to Ontario — no one could live there.
In 2012, the contribution from all of those sources amounted to about 4.8 million barrels of oil equivalent per day, or roughly one-half of a Saudi Arabia. Put another way, we get about 50 times as much energy from all other sources — coal, oil, natural gas, nuclear and hydropower — as we do from wind, solar, geothermal and biomass.
September 20, 2013
In The Spectator, a muted tone of “we told you so” about the upcoming IPCC report:
Next week, those who made dire predictions of ruinous climate change face their own inconvenient truth. The summary of the fifth assessment report by the Intergovernmental Panel on Climate Change (IPCC) will be published, showing that global temperatures are refusing to follow the path which was predicted for them by almost all climatic models. Since its first report in 1990, the IPCC has been predicting that global temperatures would be rising at an average of 0.2° Celsius per decade. Now, the IPCC acknowledges that there has been no statistically significant rise at all over the past 16 years.
It is difficult to over-emphasise the significance of this report. The IPCC is not simply a research body making reports and declarations which are merely absorbed into political debate. Its word has been taken as gospel, and its research has been used to justify all manner of schemes to make carbon-based energy more expensive while subsidising renewable energy.
The failure of its predictions undermines the certainties which have been placed upon the science of climate change. Previous IPCC reports — and much of the debate over how to react to them — have appeared to treat the Earth’s climate as if it were a domestic central heating system, with carbon emissions analogous to the dial on the thermostat: a small tweak here will result in a temperature rise of precisely 0.2°C and so on. What is clear from the new IPCC report is that the science is not nearly advanced enough to make useful predictions on the future rise of global temperatures. Perhaps it never will be.
Some climate scientists themselves, to give them credit, have admitted as much. Their papers now incorporate a degree of caution, as you would expect from genuine scientists. The problems arise when the non-scientists leap upon the climate change bandwagon and assume that anything marked ‘science’ must be the final word. As the chemist and novelist C.P. Snow once warned in his lecture about the ‘two cultures’, you end up in a situation where non-scientists use half-understood reports to silence debate — not realising that proper science welcomes refutation and is wary of the notion of absolute truths.
August 3, 2013
Tim Harford talks about an obscure 19th century prognosticator and the implications of one of his predictions:
Despite Keynes’s admiration, Jevons might now be forgotten, save for one famous prediction and one intriguing argument. The famous prediction — that the UK’s economic prosperity was at risk because the country would run out of viable reserves of coal — was contained in The Coal Question (1865), a book that made Jevons a celebrated pundit at the age of 29. The coal industry did fall into decline. Production peaked exactly a century ago, when there were 1.1 million coal miners — four times as many as when Margaret Thatcher was elected in 1979. Whether this had much to do with the fall of the Empire is a fascinating question.
Jevons remains notable in some circles for an argument he made in The Coal Question, rebutting critics who claimed that a coal shortage was no problem because steam engines would become dramatically more efficient. Jevons replied: “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth.” This idea became known as the Jevons paradox: that energy efficiency does not reduce energy consumption. When light was hugely expensive, a person might read by the fickle flame of a single candle; now it’s so cheap we flood our cities with it. Double glazing could mean lower heating bills but in practice it means warmer houses.
So was Jevons right? That’s a hotly contested topic. On a microeconomic level, he was not: a 50 per cent increase in the energy efficiency of a device will lead to increased use, but rarely to the doubling in usage that would be necessary for Jevons to be correct. Aha, reply Jevons’s defenders: even if a fuel-sipping car does not induce me to drive much further, I may still spend my cash savings on some other energy-guzzling device. True. But energy is a small enough part of the economy — about 6 to 10 per cent — that the actual cash savings available to spend elsewhere will usually be modest.
July 27, 2013
The South China Morning Post on the economic troubles of the provincial, municipal and local authorities in Jiangsu:
The nightmare scenario for China’s leaders as they try to wean the country off a diet of easy credit and breakneck expansion is a local government buckling under the weight of its own debt. Few provinces fit that bill quite like Jiangsu, home to China’s most indebted local government.
Hefty borrowings through banks, investment trusts and the bond market by Jiangsu’s provincial, city and county governments have saddled the province north of Shanghai with debt far higher than its peers, public records show.
Many of the province’s mainstay industries, including shipbuilding and the manufacturer of solar panels, are drowning in overcapacity. Profits are dwindling, and the government’s tax growth is braking hard.
Little public information is available on the total debt of Chinese local governments. Indeed, earlier this month China’s Vice-Finance Minister Zhu Guangyao said Beijing did not know the precise level of their debts either.
But from what ratings agencies and think-tanks can piece together, Jiangsu may be the standout debt risk among China’s 31 provinces.
Looking at bank loan books, they can see that China’s eastern provinces including Jiangsu have the highest concentration of government debt. Jiangsu then looms large because of its reliance on costlier and alternative forms of financing, which they said suggested that cheaper bank loans and land sales are not giving the authorities the funding they need.
The risk that Jiangsu might pose to the Chinese economy in a crisis is clear. On its own, the province would be a top 20 global economy with GDP greater than G20 member Turkey. Its 79 million population tops that of most European countries.