Cap & Trade Regulations Will Create an Energy Supply Shock

Today Corporate Social Responsibility is synonymous with environmental responsibility. Environmental responsibility, of course, means that a company accepts that global warming is occurring; man (particularly modern business) is the primary reason why global warming is occurring; the consequences of global warming will be disastrous for planet Earth; and consequently, businesses should be willing to sacrifice anything in the name of environmental responsibility.

From this perspective, the cap & trade regulations that Congress will be considering this Fall are a small price to pay to repent for our past environmental sins.

Before we accept our environmental flagellation, it is worth wondering just how painful the experience will be. If the pain is too high, perhaps we should consider other alternatives. Fossil fuels (oil, coal and natural gas) provide 86 percent of our current energy needs. According to the Department of Energy’s Energy Information Administration, it is not currently feasible for the alternative energy sources to significantly expand their energy contribution sufficiently in the near-term to substitute for current energy from fossil fuels. This implies that cap & trade regulations will effectively become an energy production cap – or an energy supply shock – at least in the near term.

It is not necessary to forecast the impacts that an energy supply shock will have on the U.S. economy. The U.S. economy has endured several supply-induced energy crises over the last 40 years. These have included energy supply shocks in 1974-75; 1979-81; and 1990-91; all three resulting from an "energy shock" or supply-disruption caused by Middle East tensions. These real world examples clearly illustrate that supply-induced energy shocks have adverse economic impacts.

Starting with the 1974-75 oil supply shock, oil prices increased dramatically during 1974-75 as a direct result of an interdiction in the oil supply initiated by OPEC countries. OPEC’s actions reduced total world oil supply significantly, and the price of oil rose as a result of the deprivation of oil supply. From trough to peak, total oil prices rose by over 134 percent, which had a devastating impact on the U.S. economy. The recession that followed the 1974-75 oil price shock cause the U.S. economy to shrink by 2.7 percent and the unemployment rate to increase by 3.9 percentage points. The stock market (measured by the performance of the Dow Jones Industrial Average) fell by over 35 percent from its highest daily close to its lowest daily close.

The story is exactly the same following the 1979-81 price shock, which reflected another Mid-East-related interdiction in supply as well as U.S. wellhead price controls, excess profits taxes on oil companies, and gas rationing. Following this energy supply shock, the price of oil again rose (by over 117 percent), the stock market weakened, the economy faltered (declining nearly 2.2 percent), and unemployment surged (increasing 2.2 percentage points). While by no means the sole cause of the U.S. recession of 1981-82, the high price of oil was a major contributor.

When Iraq invaded Kuwait in 1990, the U.S. responded with "Desert Storm." Again, oil supplies were greatly reduced, causing a supply-induced energy shortage once again. Oil prices rose and the world experienced an economic slowdown. The culprit was yet another Middle East-induced interdiction of supply that led to a collapse in the U.S. stock market and economy.

On average, the historical supply induced energy shocks increased the price of oil by over 113 percent, shrank the economy by over 2 percent, increased the unemployment rate by 2.6 percentage points, and led to significant declines in the stock market. The moral of these stories is clear: a supply-induced energy shock is bad for the U.S. economy.

These lessons should not be lost with respect to the potential future energy supply shock Washington D.C. is currently considering. If the U.S. Congress imposes cap & trade regulations this Fall, then the country will face a significant energy supply shock. The evidence on the impacts from past energy supply shocks on the economy is clear. Energy supply shocks lead to large increases in energy prices, reduce our welfare, and decrease employment. Due to the large economic pain that will result, cap & trade advocates (especially those businesses attempting to be socially responsible) should reconsider the wisdom of their penance.

QUOTE: “Here is my real world example of the Global Warming effects on Policy. The State of California just passed legislation based on the Global Warming hysteria that has forced electric bills to be billed by customer usage of kwh in “usage tiers”. Any usage over a certain mystery amount, that the nuts in the state legislature determined would reduce Global Warming, results in a penalty rate being charged to the customer.

My bill this month was $400 higher than last month due to the fact I consumed electricity into the penalty range of the “usage tier” they call “energy hogs”.
My electric bill went from $200 to $600 even though most days were in excess of 100 F last month and I set my thermostat at 82 F. I live near Palm Springs, Kalifornia.

I want a refund! This is the kind of crap the global warming nut jobs are using to say we are wasting energy and increasing the temperature of the planet with [provably] fraudulent research by NASA and others.

My local barber said his bill was in excess of $1000, a $600 increase because of bogus science. This is a real world example of consensus science run amok. My barber will have to pass the cost along as well as all the other businesses in this state. This is pure insanity. How do I as a homeowner pass the cost along?

We all are going to the City Council Meeting next Tuesday and are going to protest the new electric rates. I am going to bring in the new data from NASA to debunk their arguments about Global Warming.

You all should be outraged that public policy is based on junk science . You are going to be paying too. Like they say, California is usually the leader in liberal [Left-wing “progressive”] policies. If California passes something, so goes the nation.” ~ Posted by: ScottyDog | August 11, 2007 12:46 PM MORE: http://www.norcalblogs.com/watts/2007/08/1998_no_longer_the_hottest_yea.html

You might find this post I did on a private science email list I’m on to be of interest:

One scientist writes:
“...our daughter, not a scientist, asks me for a short and simple, easily understandable overview of the evidence that it is human activity which produces problems for earth’s climate and global warming ....is there a short, simple few-pages article giving some basic understanding to a non-specialist? It should indicate the relative relevance of the various influences considered. ..” ~ Peter R... Lanzenhaeusern, Switzerland Wednesday, 8/22/2007

Peter, Perhaps the best readable analysis that interested non-scientists are likely to understand is by Kerry Emmanuel, an MIT meteorologist. ..~ Randy I... USA Thursday, Aug 23 2007

@ My response: Your daughter may find this short, simple, easily understandable overview helpful [Note - if links don’t work, copy and paste them into your browser manually]:

Emmanuel is Randy’s MIT source, QUOTE: “The evolution of the scientific debate about anthropogenic [man-caused] climate change illustrates both the value of skepticism and the pitfalls of partisanship.” “ Scientists are most effective when they provide sound, impartial advice, but their reputation for impartiality is severely compromised by the shocking lack of political diversity among American academics, who suffer from the kind of group-think that develops in cloistered cultures. Until this profound and well documented intellectual homogeneity changes, scientists will be suspected of constituting a leftist think tank.” “On the left, an argument emerged urging fellow scientists to deliberately exaggerate their findings so as to galvanize an apathetic public...” “Conservatives have usually been strong supporters of nuclear power. .. Had it not been for green opposition, the United States today might derive most of its electricity from nuclear power, as does France; thus the environmentalists must accept a large measure of responsibility for today’s most critical environmental problem.” ~ Kerry Emmanuel http://bostonreview.net/BR32.1/emanuel.html

Then there’s K. Emmanuel’s colleague, Richard S. Lindzed - the Alfred P. Sloan Professor of Meteorology at MIT.

Lindzed is my MIT source, QUOTE: “Recently many people have said that the earth is facing a crisis requiring urgent action. This statement has nothing to do with science. Frankly, the very idea of consensus in such an immature and multi- faceted subject as climate change should be suspicious ab initio. Consensus is largely a propaganda claim designed to relieve ordinary people of the need to understand the issue. This is neither good for science nor for public policy. . “ ~ Richard S. Lindzed Global Warming: The Origin and Nature of the Alleged Scientific Consensus http://www.cato.org/pubs/regulation/regv15n2/reg15n2g.html

Here’s the view on global warming of the paramount living physicist:

QUOTE: “... all the fuss about global warming is grossly exaggerated. Here I am opposing the holy brotherhood of climate model experts and the crowd of deluded citizens who believe the numbers predicted by the computer models. Of course, they say, I have no degree in meteorology and I am therefore not qualified to speak. But I have studied the climate models and I know what they can do. The models solve the equations of fluid dynamics, and they do a very good job of describing the fluid motions of the atmosphere and the oceans. They do a very poor job of describing the clouds, the dust, the chemistry and the biology of fields and farms and forests. They do not begin to describe the real world that we live in. The real world is muddy and messy and full of things that we do not yet understand. It is much easier for a scientist to sit in an air-conditioned building and run computer models, than to put on winter clothes and measure what is really happening outside in the swamps and the clouds. That is why the climate model experts end up believing their own models.”.... Freeman Dyson, (8/8/07) http://www.edge.org/3rd_culture/dysonf07/dysonf07_index.html

Randy’s source, Kerry Emmanuel, admits as much, QUOTE: “Computer modeling of global climate is perhaps the most complex endeavor ever undertaken by mankind. A typical climate model consists of millions of lines of computer instructions designed to simulate an enormous range of physical phenomena, including the flow of the atmosphere and oceans, condensation and precipitation of water inside clouds, the transfer of solar and terrestrial radiation through the atmosphere, including its partial absorption and reflection by the surface, by clouds and by the atmosphere itself, the convective transport of heat, water, and atmospheric constituents by turbulent convection currents, and vast numbers of other processes.

There are by now a few dozen such models in the world, but they are not entirely independent of one another, often sharing common pieces of computer code and common ancestors.

Although the equations representing the physical and chemical processes in the climate system are well known, they cannot be solved exactly.

It is computationally impossible to keep track of every molecule of air and ocean, and to make the task viable, the two fluids must be divided up into manageable chunks. The smaller and more numerous these chunks, the more accurate the result, but with today’s computers the smallest we can make these chunks in the atmosphere is around 100 miles in the horizontal and a few hundred yards in the vertical, and a bit smaller in the ocean. The problem here is that many important processes are much smaller than these scales.

For example, cumulus clouds in the atmosphere are critical for transferring heat and water upward and downward, but they are typically only a few miles across and so cannot be simulated by the climate models.

Instead, their effects must be represented in terms of the quantities like wind and temperature that pertain to the whole computational chunk in question.

The representation of these important but unresolved processes is an art form known by the awful term parameterization, and it involves numbers, or parameters, that must be tuned to get the parameterizations to work in an optimal way.

Because of the need for such artifices, a typical climate model has many tunable parameters, and this is one of many reasons that such models are only approximations to reality. Changing the values of the parameters or the way the various processes are parameterized can change not only the climate simulated by the model, but the sensitivity of the model’s climate to, say, greenhouse-gas increases.

How, then, can we go about tuning the parameters of a climate model in such a way as to make it a reasonable facsimile of reality? Here important lessons can be learned from our experience with those close cousins of climate models, weather-prediction models. These are almost as complicated and must also parameterize key physical processes, but because the atmosphere is measured in many places and quite frequently, we can test the model against reality several times per day and keep adjusting its parameters (that is, tuning it) until it performs as well as it can.

But with climate, there are precious few tests. One obvious hurdle the model must pass is to be able to replicate the current climate, including key aspects of its variability, such as weather systems and El Niño. It must also be able to simulate the seasons in a reasonable way: the summers must not be too hot or the winters too cold, for example.

Beyond a few simple checks such as these, there are not too many ways to test the model, and projections of future climates must necessarily involve a degree of faith.

The amount of uncertainty in such projections can be estimated to some extent by comparing forecasts made by many different models, with their different parameterizations (and, very likely, different sets of coding errors). We operate under the faith that the real climate will fall among the projections made with the various models..” ~ K. E.

~ [signed] Here’s more: August 20, 2007 New Peer-Reviewed Scientific Studies Chill Global Warming Fears http://tinyurl.com/226jbe

Bad FReeper! Quit using air conditioning and swelter in the summer desert. Your barber should do likewise to further enhance the misery of his customers. Californians as expressed through their elected representatives desire to live in misery. So embrace this train of ever-increasing misery and learn to live “off the grid.” If you count yourself among the dwindling number of Americans who do not embrace misery, then your life never again will be as good as it is now.

Various Distinguished Representatives in the Congress demand a $6 trillion industrial carbon-dioxide emissions tax (assuming current usage), a $17,000 annual per capita tax on exhalation, and crippling taxes on livestock designed to decimate the milk and meat food groups. Those are in addition to higher income taxes on the “wealthy,” a repeal of all temporary or other Bush tax cuts, higher payroll taxes, various other tax hikes, a barrage of new tariffs, and additional expropriations necessary to fund a socialist health care system. Then we must pay enough taxes to fund massive mortgage bank bailouts, other new social-welfare programs, and various extraneous entitlements. And California will heap on ever more and higher taxes on its citizens to increase its revenues to match its exponentially expanding per capita spending.

The American people cannot afford all those new taxes and their present levels of consumption. We have only one solution: federally enforced popular destitution. Get ready to work much harder for many more hours per week just to afford taxes, food, water, and a few minor necessary expenses. Notice that “heat” and “air conditioning” aren’t among them because the inhabitants of Third World countries do not enjoy those luxuries. And plan to cut your eating in half while switching to an overwhelmingly vegetarian diet.

Embrace the future, man. Move to a cave for its better thermal regulation. Just remember, we’ll be living like cavemen without fires or meat once the liberals pass their Stone Age Restoration agenda. Did I forget to mention that cavemen didn’t suffer the IRS, but you will?

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