thebigp

Larry Bell—FORBES Contributor
Al Gore and David Blood not only emphasize the regulatory risk of f****l f**l investment, they have aggressively worked to ensure it. Their article provides a roadmap to disaster, including: “direct regulation on carbon led by authorities at the local, national, regional or global level; indirect regulation through increased pollution controls, constraints on water usage, or policies targeting health concerns; and mandates on renewable energy adoption and efficiency standards.” They further note that “Even the threat of impending regulation creates uncertainty for long-lived carbon-intensive assets.”
There can be no doubt that they have found a strong advocate for these strategies in the current White House. The Small Business Administration estimates that compliance with such regulations costs the U.S. economy more than $1.75 trillion per year -- about 12%-14% of GDP, and half of the $3.5 trillion Washington is currently spending.
Still, the U.S. Government Accounting Office can't figure out what benefits taxpayers are getting from those many billions of dollars spent each year on policies that are purportedly aimed at addressing c*****e c****e. A May 2011 GAO report noted that while annual federal funding for such activities has been increasing substantially, there is a lack of shared understanding of strategic priorities among the various responsible agency officials. This assessment agrees with the conclusions of a 2008 Congressional Research Service analysis which found no "overarching policy goal for c*****e c****e that guides the programs funded or the priorities among programs."
The Obama administration’s latest ploy to justify these economic regulatory burdens conjures statistical sorcery purporting to assess a “social cost on carbon.” This is supposed to represent an accounting method to quantify market externalities attached to human fossil- burning emissions, whereby each ton of CO2 leads to a future societal cost of about $40 (in today’s dollars). The idea is that any newly-proposed regulation intended to reduce future CO2 emissions will get to claim an equivalent social cost credit for each ton avoided. This scheme is intended to enable EPA and other regulatory organizations to build stronger political cases for their burdensome policies.
The plan is already so wildly successful that the administration has raised its previous estimate of social cost-saving benefits by more than 50% from its May assessment. At the same time, even the UN’s alarmist Intergovernmental Panel on C*****e C****e has had to finally admit that global temperatures have been flat for at least 16 years despite rising atmospheric CO2 levels. IPCC has also confessed that their theoretical simulation models have grossly exaggerated climate sensitivity to CO2. As a result, those social costs resulting from human-caused c*****e c****e are at least one-third less (and more likely 100 percent less) than those in the administration’s calculations.
An even larger glitch in this accounting contrivance is a failure to credit positive social costs of adding atmospheric CO2, (aka. plant fertilizer). A recent analysis by Dr, Craig Idso of the Center for the Study of Carbon Dioxide and Global Change estimates that over the past 50 years, the value of global food production has increased by $3.2 trillion as a result of those CO2 emissions. This suggests that if anything, those social cost estimates should actually be negative.
And Regarding those “Competitive” Renewable Alternatives…
Gore and Blood urge that “Investors should pressure executive teams to divert cash flow away from capital expenditures on developing f****l f**ls [which have embedded carbon risks] and toward more productive uses in the context of a t***sition to a low -carbon economy.” Instead, they urge that portfolios be tilted towards assets with low or no carbon emissions which provide opportunities to capitalize on emerging solutions such as energy generation (e.g., solar, wind, geothermal). This, they argue, can help to avoid pitfalls of “carbon stranding” due to market influences of renewable technologies which they claim “are already economically competitive with f****l f**ls in a number of countries without subsidies.”
Really? And which renewable technologies and countries might those be?
Europe’s g***n e****y debacles offer teachable lessons for investors everywhere. Slightly more than 12% of Germany’s electricity comes from “renewables”: 7.8% now comes from wind, 4.5% from solar, 7% from biomass, and 4% from hydro. Meanwhile, German households pay the second highest power costs in Europe… as much as 30% more than other Europeans. Only the Danes pay more, and both countries pay roughly 300% more for residential electricity than we Americans do.
Speaking at a June 12 energy conference in Berlin, Chancellor Angela Merkel called for scaling back renewable energy subsidies to contain spiraling costs. She warned: “If the renewables surcharge keeps rising like it did in recent years, we will have a problem in terms of energy supply.”
Yet despite huge investments, German wind has produced only about one-fifth of its rated installed capacity. And while half a dozen wind farms are still being built in the North Sea, there are no follow-up contracts due to high consumer utility rates. Ironically, since shutting down some of their older nuclear plants in response to the nuclear accident in Japan, they now have to import nuclear power from France and the Czech Republic.
If romance with increasing reliance upon renewables isn’t being strained enough by painful electricity costs, power blackouts are adding to buyer’s remorse. The German energy industry group BDEW warns that the surge of renewables is increasingly clogging the power grid operational efficiency.
A 2009 study reported by CEPOS, a Danish think tank, found that while wind provided 19% of Denmark’s electricity generation, it only met an average 9.7% of the total load demand over a five year period, and a mere 5% during 2006. Since Denmark can’t use all the electricity it produces at night, it exports about half of its extra supply to Norway and Sweden where hydroelectric power can be switched on and off to balance their grids. Still, even with those export sales, high government wind subsidies cause Danish customers to pay the highest electricity rates in Europe.
In 2011, U.K. wind turbines produced energy at about 21% of rated installed capacity (again, not demand capacity). And this was during “good” wind conditions. As in Germany, unreliability in meeting power demands has necessitated importation of nuclear power from France. Also similar to Germany, the government is closing some of its older coal-fired plants--any one of which can produce nearly twice more electricity than all of Britain’s 3,000 wind turbines combined.
In Australia, a resounding September right-of-center Liberal Party defeat of the Green Party-backed Labor Party following its six years in power reflected a rude public awakening. It was broadly recognized to be a referendum victory to dismantle and consolidate the myriad anti-carbon g****l w*****g-premised schemes spawned under the previous government.