Glenn Reynolds has some thoughts on what we should do in the wake of the collapse of the Warm Mongers:
…what should we do?
Nothing. At least, in my opinion, we should continue to try to minimize the use of fossil fuels regardless. Burning coal and oil is filthy, and they’re more valuable as chemical feedstocks anyway. We should be building nuclear plants and pursuing efficiencies in the shorter term, while working on better solar (including orbital solar), wind, etc. power supplies for the longer term. That doesn’t mean “hairshirt” environmentalism, where the goal is for neo-puritans to denounce people for immorality and trumpet their own superiority. It just means good sense.
I think some elaboration is required. Starting with (to use a politically incorrect phrase from the old Lone Ranger joke), what do you mean “we,” white man?
That is, who should decide?
I have a weird concept. How about letting the market do it?
For example, overhaul Price-Anderson to deindemnify the nuclear industry to make them more responsible for plant safety, in exchange for removing many of the design restrictions imposed by an anti-innovation Nuclear Regulatory Commission. Eliminate the bans on drilling, both on and off shore, to reduce energy costs in the near term (and cut the income of those making war on us and the West in general) and provide wealth to invest in the technologies that will eventually replace fossil fuels. Stop trying to pick technological winners (something government is notoriously bad at) and distorting the market with tax credits. Put some federal money into R&D, but eliminate government mandates (such as ethanol) whose purpose is more for political payoffs than environmentalism, and let the market sort out what makes sense.
This should be one of the planks of any new Contract With America — let the energy market work.
[Update late morning]
Three major corporations have pulled out of Climate Action Partnership:
Oil giants BP PLC and ConocoPhillips along with Caterpillar, Inc., the Peoria, Ill., heavy-equipment maker, have decided against renewing their membership in the organization, according to a statement released by the group Tuesday.
Red Cavaney, ConocoPhillips senior vice president for government affairs, said USCAP was focused on getting a climate-change bill passed, whereas Conoco is increasingly concerned with what the details of such a bill would be.
“USCAP was starting to do more and more on trying to get a bill out without trying to work as much on the substance of it,” Mr. Cavaney said.
Gee, sounds like health care. I expect this to be the beginning of a corporate stampede that will finally put a wooden stake through the heart of this monster. Business is starting to sense the blood of the ecofascists in the water. I’m still wondering if the Audi ad was part of that.
Here’s what I find frustrating at times about this site – Obama is using loan guarantees to support private industry construction of nuclear power plants. In other words, he’s helping the market work, but you didn’t say anything about it.
If you’re not going to recognize when somebody does something you agree with, what incentive do they have to work with you?
Chris, do you really believe that government loan guarantees are “helping the market work”? Do you understand anything at all about how markets work? Just because I think that there should be more nukes doesn’t mean that I agree with loan guarantees for them.
This shows the fundamental difference between my mind and yours. You can’t conceive of anything good happening without some positive government action.
Rand – a loan guarantee is nothing more than somebody co-signing for a loan. How is that not helping a market work?
What also frustrates me is your tendency to take 2 + 2 and come up with 17.34. What in my post, or any post I’ve made, gives you the idea that I think “nothing good happening without some positive government action?”
It doesn’t “help the market work” because it allows one market player to borrow at a preferred rate — in effect, it lets the nuke industry issue t-bills. Meanwhile, potential competitors don’t get that break. It impedes market forces that work to find the best uses of capital.
Just about any business would get a leg up on the competition if it could issue t-bills while its competitors had to use old-fashioned debt or equity financing.
Do you understand the difference between a loan guarantee and a government loan guarantee? The latter has nothing to do with a free market.
What in my post, or any post I’ve made, gives you the idea that I think “nothing good happening without some positive government action?”
Because I’ve never seen you praise something that happens absent government interference.
I repeat for Rand:
“Stop trying to pick technological winners (something government is notoriously bad at) and distorting the market with tax credits.”
Apparently this is difficult for some to comprehend.
Loan guarantees “helped” the subprime borrowers and student borrowers. They are unhelpful even if it takes decades for them to crater.
Chris:
If the government backs up the loans (which means it is forcing us to make good if it goes bad) of incompetently run banks, Goldman Sachs, etc, and poorly run companies that make things ranging from cars to nuclear reactors, it affects the market. What if I am have a well-run company that does not have he political clout to secure a loan? iIt is harder to compete against the guy who DOES get the government loan, not to mention harder to get investment capital. (If you are so great, then why didn’t YOU get that government assistance?)
Plus, why should folks like us have to bail out companies that fail? I’m not total death on loan guarantees, but if I went around co-signing for people that can’t afford their homes like the government had been doing, I would have been bankrupt a long time ago. If the government had not been so profligate in co-signing home loans, the housing bubble probably would not have happened.
Chris, what is Obama doing to reduce the barrier to entry for new nuclear plants? Loan guarantees just mean that you can borrow money for nonviable businesses. It doesn’t help create viable businesses.
The nuclear proposals are fundamentally a lost cause until the government reverses itself on the spent fuel requirements for certifying new plants. If you don’t have “permanent storage”, then you fail the final environmental review. And the only place that was in the pipeline to eventually become designated as acceptable for permanent storage is Yucca Mountain. Which is supposed to be canceled.
The slight bit of motion that has occurred is restarting plants that were canceled years ago and hoping to squeeze through the grandfathering.
That makes virtually every single word on this topic pure bluster. Typical.
There is simply NO REASON for the government being involved in selecting ENERGY POLICY or technologies for our Nation.
Solutions are available NOW once we get RID of governmental interference with free market decisions.
We don’t “need no stinkin’ government loan guarantees” (Ref: Treasure of the Sierra Madre). The government IS THE PROBLEM. Our Declaration of Independence and Constitution is THE SOLUTION.
The only market I wish the government would interfere with is the legal market. If we just had loser pays legal reform, a lot of things would improve. Our legal system is a big drag on our economy. I just finished reading Bleak House, Dickens’ best novel, whose backdrop is the unending legal battle of Jarndyce vs Jarndyce.
What if we let just the energy companies that start with the letter “P” get government loan guarantees? That wouldn’t distort the market at all, right?
Chris, using loan guarantees is the opposite of allowing the market to work.
The government guaranteeing a loan is a direct distortion of the market. It causes the costs to the favored entity to be reduced compared to those of it’s competitors. This is not helping the market work, it is giving an advantage to the firm and approach favored by the government.
Chris continues to demonstrate his inability to understand how markets work. Or why those who favor them on principle won’t be “grateful” when the government interferes with them, even for solutions they may favor. Which explains much of his preference for collectivist policies, such as in health care.
Lift the rules phasing out incandescent light bulbs.
“In other words, he’s helping the market work,”
Translation: “I am one of the 80% who pay 20% of federal taxes.”
Al says the unresolved problem of nuclear power is permanent storage of waste. Actually the solution is recycling — like they do in France. See here http://www.heritage.org/press/commentary/ed010108d.cfm
Maybe nobody’s noticed, because of the economy and all, but it turns out that we (and a good slice of the world, but the US especially) are sitting atop vast reserves of a very clean fuel whose primary drawback USED TO BE that it was increasingly expensive.
I say “used to be” because, over the last couple of years, the price of this stuff has plunged by more than half. Industry observers say it’s not just lack of demand driving the price downturn. New technology has put once-unattainable reserves of this stuff well within reach, and the process of obtaining it simpler and far less expensive.
It’s natural gas, if you haven’t guessed. What we need is simply legislation encouraging the use of this fuel. It turns out there’s so much of it, worldwide, that we can buy ourselves plenty of time to get other (nuke, wind, solar, whatever) power sources online and wean ourselves off oil and (especially) coal.
(Full disclosure: I have no dog in this hunt, aside from the interest we all share in clean, abundant energy.)
I’d like Chris to explain why he thinks that the nuclear industry needs government loan guarantees.
CBDenver, I don’t see it as a technical hurdle so much as I do a governmental one.
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It happens to be exactly the same hurdle waste-reprocessing has here in the states: the government has forbidden it.
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There’s a second wrinkle to reprocessing that seems quite excellent as well: there are several types of new reactors that are designed to operate on compounds that would be considered waste at other plants and converts it into ‘better’ waste products. The ‘traveling wave reactor’ rocks. Or would rock. If there was enough reprocessing going on to fuel it.
What honest climate/greenhouse gas research will show is that our carbon footprints, far from being detrimental, are beneficial to the planet.
CO2 is FOOD for plant life. Plants reach maximum lushness between 5000 ppm (where we start to detect CO2 as stale air) and 10,000 ppm (where prolonged exposure starts to be harmful to us). Our current level of about 385 ppm is near the distress level of 200 ppm (experienced planetwide at the peak of ice ages) that puts plants under survival stress.
Our fractional increase over the last couple of decades has been shown by satellite remote sensing to account for a global increase in plant biomass. Back when the Himalayas were forming (45 mya ??) enough limestone was being crushed that a CO2 concentrations were estimated around 5000 ppm. Plant life was lush, with similar palm species from the equator to near the arctic circle–a far greener and more inviting planet than we have today.
Adam Smith did not advocate raw greed as the engine of progress, but gave more than a nod to the notion of enlightened self-interest. Don’t underestimate the spark of altruism that all of us have. Just make certain that some slicker doesn’t use it to sell you a bill of goods.
Every Boy Scout knows that you leave the campsite in better shape than you found it. Enough people get this attitude and we can work around the tragedy of the commons.
Chris, you don’t understand. The Psycho Libertarian’s First Principle is that anything the government does is bad, even if it’s good. Got that straight? Private failure is preferable to government success.
The Psycho Libertarian’s… [rest of stupidity snipped]
Thank you for once demonstrating that you live up to your idiotic screen name, in your density, and inability to even comprehend what we’re saying.
Rand – there are several reasons nobody’s built a nuke in the US for 30 years, but they can be summed up in “risk of getting the plant built.” The risk of getting the plant built has several subcomponents:
1) Getting a Federal license
2) Surviving the inevitable court challenges
The 2006 energy bill appears to have solved #1. There is no way to solve #2. This means that there is significant risk of the project not getting done, which means that the investors demand a higher rate of return in order to invest (debt or equity). At some point, this higher rate means it’s not profitable to build a plant.
A loan guarantee transfers some of that risk to the government, reducing the risk and cost to private investors. It also incentivizes the government to help get the project done.
Doug Graham – nobody has built a plant in the US for 30 years. So either every company is incompetent or we have some other issue at work here.
Karl Hallowell – reducing the cost of capital to build a plant is, by definition, reducing the cost of entry.
jgreene – actually, there’s a very good reason for the government to intervene in US energy policy. It’s called “national defense” or “stop subsidizing people who want to cut your throat.”
Rand is correct. Decontrol the energy business and get government the hell out of the way. End all the subsidies and loan guarantees and incentives.
A good place to start is by abolishing the Department of Energy, which, under Obama’s swollen budget, now has an annual budget of 46.3 billion dollars.
Since its inception under Jimmy Carter — who started it in 1977 with the stated goal of achieving “energy independence” (!!) — the Federal government has spent 513.3 billion dollars on this department.
That’s over half a trillion dollars! And for what? Nothing — except to line the pockets of various companies and individuals that have convinced the government to fund their pie-in-the-sky “alternative energy” schemes.
It’s just one more outrageous government boondoggle — precisely the sort of thing that is killing us. And what does Obama plan to do? Increase DOE spending, of course.
Stop the spending! Stop the regulating! Free the markets!
The 2006 energy bill appears to have solved #1. There is no way to solve #2.
You seem to have a limited imagination.
Rand – I find it hard to see how the kind of massive legal reform you seem to want can be done in my lifetime. I also think that overhaul Price-Anderson to deindemnify the nuclear industry would do nothing but increase the risk to plant owners. Increased risk = higher cost of capital = fewer plants = less experimentation in plant design. Very few people are willing to green-light multi-million dollar experiments.
DensityDuck does have a point – we’ve failed to accomplish nuclear plant construction for 30 years. The nations that are building plants seem to do so via some form of government subsidy.
Lastly, this “OMG government bad” flies exactly in the face of your arguments for government subsidies in the space industry. (COTS, anybody?)
Increased risk = higher cost of capital = fewer plants = less experimentation in plant design.
Not if the new design is intrinsically less risky.
DensityDuck does have a point – we’ve failed to accomplish nuclear plant construction for 30 years.
Density Duck made no such point. Density Duck simply set up and knocked down a straw man.
Lastly, this “OMG government bad” flies exactly in the face of your arguments for government subsidies in the space industry. (COTS, anybody?)
I was expecting someone to come up with that flawed comparison. Thank you for being so predictable.
One of these things is not like the other. Unless, that is, the government has been running its own nuclear plants for its own power needs and is now being asked to purchase power from private providers.
I’m kind of stuck on Yucca Mountain being closed down by Obama and him saying he “supports nuclear power”. Unless he has an alternative waste disposal site/method in mind it really does no good at all to talk about new power plants: We can’t even deal with the wastes from the existing power plants until the next Administration reopens Yucca.
Lastly, this “OMG government bad” flies exactly in the face of your arguments for government subsidies in the space industry. (COTS, anybody?)
Um, no. First, Rand would never say Oh My God. Second, he never said government is bad. That argument was posed by Density Duck. In fact, Rand replied that Density Duck obviously didn’t comprehend the discussion. Over a dozen other commenters had made arguments suggesting you, Gerrib, don’t get it. Perhaps you ought to consider their comments, rather than some nom de guerre of Duck.
Rand: Not if the new design is intrinsically less risky. No such creature, at least in a corporate boardroom. You’ve got a techie with drawings arguing against an insurance guy looking at historical track records. The insurance guy wins, because he’s the one setting the premiums on the policy.
Regarding DensityDuck – so we’ve succeeded in building nukes over the past 30 years?
You’ve made the airmail argument on this blog. A loan guarantee, much like paying somebody to fly airmail around, is an indirect subsidy. It’s also potentially cheaper, in that the loan guarantee is only paid in event of a default.
Leland – I did read the other commentors. They all said variations on “keep government out of the market.” Nice idea, but that’s not going to happen in any market. Well, unless you want to see human flesh for sale at the butcher store. (See Jerry Pournelle.) Government will always be a player in the market – loan guarantees are among the least intrusive ways they can play.
Karl Hallowell – reducing the cost of capital to build a plant is, by definition, reducing the cost of entry.
Recall the rest of what I said. Loan guarantees do not create viable businesses. The reason is that the cost of capital is not a serious obstacle. The primary effect of government loan guarantees is to transfer capital to businesses that have a negative return.
You’ve got a techie with drawings arguing against an insurance guy looking at historical track records. The insurance guy wins, because he’s the one setting the premiums on the policy.
You’re demonstrating a profound ignorance of the history of nuclear technology and plant design.
Regarding DensityDuck – so we’ve succeeded in building nukes over the past 30 years?
This is a complete non sequitur with respect to Density Duck’s nonsense.
You’ve made the airmail argument on this blog. A loan guarantee, much like paying somebody to fly airmail around, is an indirect subsidy.
Again, one of those things is not like the other. And neither is like COTS.
The one positive thing the government could do is stop all Wind and Solar subsidies, cut back 90% on AGW research (ie. leave some hard core scientists to looks at it).
Then use the funds to research advanced nuke, like fusion. Thiry years may sound like a long time, but no not really. A concerted effort to solve our energy problems is worth lots of research $$$ to get fusion off the ground.
Over the next 60 years it could solve many problems.
Karl Hallowell – of course high cost of capital is a barrier to entry – that’s Finance 101. Per Finance 101, loan guarantees reduce cost of capital and allow more entrants. A loan encourages viability in that everybody is expecting the loan to be paid off.
Rand – you’re demonstrating a profound ignorance of the dynamics of corporate governance and finance. The people financing nukes are not technical people. They are finance people and business people, and will evaluate risk based on potential liability, evaluated over the track record of the technology. A new piece of tech with high liability and no track record will be a non-starter.
I’m kind of stuck on Yucca Mountain being closed down by Obama and him saying he “supports nuclear power”. Unless he has an alternative waste disposal site/method in mind it really does no good at all to talk about new power plants: We can’t even deal with the wastes from the existing power plants until the next Administration reopens Yucca.
Yucca Mountain was an unnecessary boondoggle. We can store spent fuel more cheaply and practically in dry casks, up here on the surface. There is no need for expensive, contentious, decay-heat-trapping underground mines-in-reverse.
The people financing nukes are not technical people. They are finance people and business people, and will evaluate risk based on potential liability, evaluated over the track record of the technology.
They will also listen to technical people.
A new piece of tech with high liability and no track record will be a non-starter.
You mean a new piece of tech with low liability because it’s intrinsically much safer (as in, cannot melt down) than the old tech? Or do you not understand the meaning of the word “intrinsically”? Even most finance people do.
Unfortunately, what nobody seems to be addressing is the 800 lb gorilla in the room, namely lawsuits and NIMBY-ism. When the legal costs of building a new power plant can be as great as the cost of construction, and drag on for a decade, you have a serious disincentive for anyone to build a new power plant ever.
There is absolutely zero chance that Obama will address this. Unfortunately, the chance that the Republicans will address it isn’t much better.
Unfortunately, what nobody seems to be addressing is the 800 lb gorilla in the room, namely lawsuits and NIMBY-ism. When the legal costs of building a new power plant can be as great as the cost of construction, and drag on for a decade, you have a serious disincentive for anyone to build a new power plant ever.
That’s a generic issue for all power plants, and not one that loan guarantees for nukes will help.
Why yes, we have. We even move them around the world in submarines and aircraft carriers.
RK – Agree on wind and solar (at least ground solar). Disagree on fusion; at least with regard to tokamaks.
There has been work done on magnetic-confinement fusion for fifty years, and it has consumed tens of billions of dollars and a great deal of scientific and engineering manpower – and the probable result is that in maybe thirty years’ time we will be able to build fusion plants twenty stories tall, costing billions and producing more radioactive waste than an equivalent fission plant.
I would advocate cutting tokamak fusion research budgets to zero, and using the money (and the people) on research that might actually produce something useful before half the people reading this (probably including me) are dead. The two other fusion approaches, wave power, OTEC, oil-bearing algae, thermal depolymerisation…
Rand – the guy saying “intrinsically safe” has PowerPoint slides. The insurance guy saying “I could be out billions of bucks” is saying “show me some operating history.” If liability is unlimited, the insurance guy wins, either by getting stupidly-high premiums or not writing the coverage.
NIMBY-ism – The risk is that the NIMBYs win, and the borrower defaults. A loan guarantee, which pays in the event of a default, transfers that risk out of private hands, reducing the cost of funds.
Mark A. Flacy – in other words, we should adopt the NASA model and have the government buy and run the nukes?
Rand – the guy saying “intrinsically safe” has PowerPoint slides.
No, he has physics. Smart insurance guys understand this as well, even if you don’t. Are you saying that nothing should ever be done for the first time?
NIMBY-ism – The risk is that the NIMBYs win, and the borrower defaults. A loan guarantee, which pays in the event of a default, transfers that risk out of private hands, reducing the cost of funds.
Then it should be done for all power plants, not just nukes, because they’re all subject to NIMBYism.
Are you saying that nothing should ever be done for the first time? – no, I’m saying that if a private entity has unlimited liability, doing something risky for the first time will be extremely expensive. If that something is already extremely expensive, the added expense will make it even less likely to get done.
Not impossible, just less likely.
Considering that nobody’s been beating down doors to build (inherently expensive) nuclear power plants for the past 30 years, adding costs seems to be the wrong approach if you actually want plants to get built.
NIMBY risk is an order of magnitude less for conventional power plants. We are still building those, after all.
I’m saying that if a private entity has unlimited liability, doing something risky for the first time will be extremely expensive.
Doing something intrinsically safe for the first time is less risky than doing something intrinsically unsafe for the hundredth time.