Using markets to protect the environment

Operating an industrial boiler requires skill and experience in addition to the significant capital outlay required to obtain them. It also requires something else – adherence to a lengthy set of operating rules laid out and frequently updated by the US Environmental Protection Agency.

Hardly anyone with the requisite skills to manage an industrial boiler is also gifted with the specialized knowledge required to fully understand nearly a hundred pages of detailed operating rules from the EPA, or to properly interpret their intentions and implications. Thanks to the approach to environmental regulation we have adopted, no one can safely operate an industrial boiler without seasoned technicians with the proper experience and protective gear. And a clever attorney.

Virtually no corner of industrial operations in the United States is free to operate without consulting a dense thicket of operating rules issued by regulators at the state, federal, and even local level. Those rules are designed to protect workers from injury, reduce pollution, prevent fraud, or accomplish any number of other laudable goals.

It is very difficult for a highly educated and trained scientist with a keen understanding of the impact of sulfur dioxide on the atmosphere to draft detailed operating instructions for a power plant without wreaking havoc on that plant’s operations. The challenge comes less from understanding how a smokestack works than from a different source.

A regulatory code, like a package of computer code, is stupid. It does not think or adapt or evolve on its own. It is a machine. The process of developing a code of regulations for something as complex as an industrial boiler is extremely time consuming. In an economy as dynamic as ours, those rules are often dated by the time they come into effect.

As the complexity of our economy and our lives accelerates, the cost of regulation is skyrocketing while it’s effectiveness declines. Fortunately, there is an alternative. We have already used it successfully in a few limited settings and it is perfectly suited to tackle our most challenging, complex, and dangerous pollution challenge – climate change.

Markets are much smarter than regulatory codes because they are, essentially, alive. If the rules of a market can be set to include the price of pollution, then markets could be made to do much of the work that otherwise falls to regulators. In many cases, this approach is already working.

Trading in pollution credits has been the key to a massive reduction in acid rain caused by sulfur and nitrogen oxides released from coal burning power plants. The program worked like this. Instead of issuing a new set of detailed regulations forcing power plants to adopt this or that technique for reducing emissions, the EPA set a new cap on sulfur dioxide emissions.

Companies that lowered their emissions below the cap could sell their additional polluting capacity to other companies that had failed to meet the targets. This created a market in pollution reduction with a very impressive side-benefit – new capital investment in innovation aimed at pollution reduction.

Regulators were freed from the tedious and increasingly futile challenge of writing rules that subject companies were constantly working to evade. Companies were released to find the best possible solution to their emissions problem and a new business model emerged around emissions reduction.

Since the plan was placed into effect, sulfur dioxide emissions from the plants covered by the program have decreased by more than half. It is difficult to determine precisely how much of the reduction was due to the trading scheme as opposed to continuing regulation and changes in the energy market, but it has clearly had a significant, sustained, positive impact. Along the way, the cost and misery associated with regulatory compliance also declined, adding to productivity and enabling faster innovation.

Challenges still exist in implementing such a scheme. A cap and trade approach does not immediately ban pollution. Pricing can be complex. It is possible to set the cap too high, which allows polluters to “bank” credits, slowing pollution reduction over time. Set the cap too low and the costs could become ruinous.

Non-profit organizations have participated in these markets by purchasing pollution credits, raising the price of the credits and taking additional sulfur pollution out of the system. This gives environmental groups an additional avenue of participation, having a direct impact on levels of pollution.

How much has cap and trade added to the cost of energy in the US? Slashing sulfur pollution by more than half has cost a few cents per kilowatt hour. The cost has been virtually invisible to consumers, a fraction of the cost of an ongoing dance between regulators and polluters. And it has been radically effective.

Instead of saddling power plants with the burden of additional operating rules that could not possible have adapted fast enough to keep pace with innovation, plant owners were able to capitalize on the most suitable remediation for their needs. This approach would not entirely replace traditional regulation, but offers an opportunity to meet public needs in an increasingly complex economy not just around pollution, but in banking, employment safety and other efforts.

Chris Ladd is a Texan living in the Chicago area. He has been involved in grassroots Republican politics for most of his life. He was a Republican precinct committeeman in suburban Chicago until he resigned from the party and his position after the 2016 Republican Convention. He can be reached at gopliferchicago at gmail dot com.

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Posted in Economics, Environment, Ownership Society
52 comments on “Using markets to protect the environment
  1. […] difficult to design from Washington a dense network of infinitely detailed economic regulations without creating absurd outcomes. Federal worker protections are important, but we should be very careful in how we craft […]

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  4. Brent says:

    What troubles me about this conversation is the very real and probable possibility that these discussions are already much too late. While I do hate to play the role of the Ghost of Christmas Future let me submit this for consideration:

    On the Environment: (cue Carole King – “Its too late baby, now, its too late”)

    1. The math suggests that we are already on an unstoppable trajectory to surpass the 2 degree temperature increase target:
    http://www.rollingstone.com/politics/news/global-warmings-terrifying-new-math-20120719

    2. Complex Systems Theory advises that systems don;t change – they cascade into collapse to reorganize at a lower level of energy and entropy. What this means for the climate is that the usual ambient conditions in which we and our agriculture have evolved will simply cease to be with eco-collapse the most probable scenario. See Stuart Kauffman “At Home in the Universe” for a discussion of Complex Systems and Thomas Homer-Dixon “Environment, Scarcity and Violence” for how this will look for us.

    It is possible that the changes in jet stream (think Global Vortex) is an expression of system flicker indicating that at least this part of the system is already completely destabilized. For fun compare the map of the Global vortex to a map of the Wisconsin Glaciation. It may not really mean anything but the parallel is interesting.

    3. Complex Systems Theory specifies positive feedback loops for which we cannot account. At least one of these loops is provided by Methane release from the tundra and ocean floors which is already occurring. We cannot quantify this danger and neither do we know if it will release gradually over decades or reach a tipping point and erupt suddenly. Since this has not been baked into the numbers it will make system collapse more rapid so take the article presented in item 1 as a best case scenario.

    On Regulation:

    On regulations I’ll just say that rent seeking behavior by lawyers and lobbyist create the Byzantine mess – there are simpler much more cost effective ways of both creating, writing and enforcing regulation; they just don’t provide job security to those most incented to bill by the hour.

    On the absolute need for a public representative to keep markets open and humane…

    On Markets:

    The very little I know of markets comes from Econ 101 and Daniel Friedman’s “Morals and Markets: An Evolutionary Account of the Modern World”. So I am far from conversant in markets. But what I do know from my considerable time in end of life care is that what we most value as humans, and what we most care about as our life slips away are those very intangibles for which markets cannot account. There was a time when we understood that all human activity, including human activity was dedicated to serving the common good (commonweal). We have forgotten and we are paying heavily. Markets only work for what can be quantified, nothing we love or is worthy of love can be quantified.see: Andrew Smoockler “The Illusion of Choice”, Michael Sandel “What Money Can’t Buy”.

    We live in a strange day of fundamentalism; political, economic and religious. I am deeply saddened to tell you that our kids are toast. If nothing else perhaps this will encourage you to really be present to your loved ones this Christmas. Drink them in and be sure they all know how much you love them.

    Merry Christmas

  5. Bobo Amerigo says:

    The problem as I see it is that the true cost (i.e., sickness and death) of carbon-fuels has never been reflected in the price of carbon-based products, including polymers . And industry continues to resist that kind of accounting.

    The WHO says that worldwide there are over a million premature deaths each year due to dirty air.

    In the US, UCS says 30,000 premature deaths each year is due to dirty air. (Isn’t that roughly the same as the number of soldiers who died in the Viet Nam war? Shouldn’t be be just a little upset about that?)

    Do I think most corporations voluntarily change their products to reduce dirty air? I do not.

    They have a short term focus made even more compressed by the quarterly reactions of the stock markets — Yay! Market influences for the common good.

    I haven’t read all government regulations. But I have read a few EPA regs.

    I was struck by terms like “where practical,’ which doesn’t sound all that burdensome.

    Stephen, I appreciated your insights.

    • flypusher says:

      “The problem as I see it is that the true cost (i.e., sickness and death) of carbon-fuels has never been reflected in the price of carbon-based products, including polymers . And industry continues to resist that kind of accounting.”

      Add in the price of all our military interventions in the ME, and the true cost is even higher.

      • Bobo Amerigo says:

        ^ Yes.

      • fiftyohm says:

        Would not those ‘true costs’ need to consider as well ‘true benefits’, like refrigeration, industrial-scale food production, vaccines, transportation, materials, and, in large part, the bulk of the technology of the modern world that has been enabled by the use of petroleum?

        Otherwise, the entire concept is completely invalid by any rational standard.

        As for military interventions in the Mideast, those are, lately at least, less associated with oil than other, (potentially invalid, I hasten to add), political considerations. Am I to assume we should add a tax on everything imported or exported of offset our ‘true cost’s related to the maintenance of global commerce through military presence? At least that would be somewhat calculable – in contrast to the aforementioned hairball.

      • Bobo Amerigo says:

        Such BS, Mr. Resistance.

        When did you start thinking it was okay for your product to make people sick?

      • CaptSternn says:

        Well said, Fifty. Fact is that we already pay the “true costs”, not that it matters to the left. They like throwing out slogans such as “living wage” and they can’t even define what that means. Then again, maybe those “true costs” would be much lower prices at the pump than what we pay now. Gasoline is just pennies per gallon in some nations. Then again, a prime example is a place where people can’t get enough food or even toilet paper.

        We pay for national defense through our income taxes, at least those of us that actually pay federal taxes do. That covers our national interests, such as keeping shipping lanes open and secure for trade. Those measures reduce over-all costs.

        Proper and reasonable regulation is necessary and benefits everybody. Over-regulation here only benefits other nations.

      • flypusher says:

        “Would not those ‘true costs’ need to consider as well ‘true benefits’, like refrigeration, industrial-scale food production, vaccines, transportation, materials, and, in large part, the bulk of the technology of the modern world that has been enabled by the use of petroleum?”

        Given that no one is seriously advocating that people go to living in caves, I haven’t seen those benefits not being considered in any rational discussion.

      • fiftyohm says:

        Bobo- Love you like a sister,but a pretty fair definition of real BS is ignoring a question by calling it BS.

      • fiftyohm says:

        And FP! You’ve got to be kidding me! Please do better to address my point than that totally lame response. Waaayyy below you – and I mean that with all due respect.

      • Bobo Amerigo says:

        50,

        I’m not ignoring anything. YOU are.

        As was said in a different context somewhere on GOPLifer’s blog, if you claim with pride the actions of WWII soldiers, for example, you can’t ignore just as real, less than heroic actions of our country during that time period.

        You claim all the benefits of petroleum, but do not acknowledge any downsides. This morning, for example, a brief radio report told of very large amounts of wasted natural gas at frackiing sites, being flared or simply released into the atmosphere. That means property owners aren’t being paid and the state isn’t receiving taxes.

        We all should pretend that bad action doesn’t exist?

        Some might call that willful blindness or narrow mindedness.

        Me, I ask when you started thinking it was okay for your products to make people sick.

      • flypusher says:

        50, are you really seriously claiming that the positive side of the balance sheet is getting short shrift here? If the upsides aren’t getting as much mention as you think they should, I’d say it’s because pretty much everyone takes them as a given. No rational person is going to deny that people benefit from refrigeration, industrial-scale food production, vaccines, transportation, etc. But you do see a pattern of denial and stonewalling and character assassination whenever someone calls out a popular and convenient and widespread practice as having harmful side effects that are being ignored (for example, the finding that lead additives in gasoline were putting a lot of lead contamination into the environment). It’s more correct to say that ENERGY allows for refrigeration, industrial-scale food production, vaccines, transportation, and other nice things, and the debate really is over which form of energy is going to deliver the goods with the least cost/damage for the longest amount of time. It’s a human failing to dismiss the negative side of the balance sheet when the externalities get dumped on someone else, and/or the damage caused manifests itself slowly. My point and Bobo’s point is that the oil balance sheet has been fudged by giving the negative side short shrift.

      • Crogged says:

        Fitty’s point is well taken, we will be unable to wave a wand and socialize the costs of fossil fuels without taking into account exactly how dependent we are and will be on them and why this is. This ‘true cost’ is a fiction, ‘sickness and death’ are a result of living, not of fossil fuels and if anyone thinks we can support our survival, much less the ‘lifestyle’ to which we are accustomed, without fossil fuel use is kidding themselves. I’m as green as they come, cap and trade is a good method of addressing these issues of pricing some of the detriment including the release of ‘harmless’ carbon dioxide, but we are nowhere near ending use of fossil fuels.

      • fiftyohm says:

        Hah! Our friend crogged nailed the term! “Fiction” is what he called this nonsense variously termed ‘true costs’ or ‘externalities’. Whenever I see such a reference, I see red, and blurt, “Bullshit!”. Glad his cooler head prevailed. For me, it’s ‘fiction’ from now on.

        Listen: that last gallon of petroleum that just arrived at the refinery might just as well power an ambulance or school bus, or provide **deadly” (*snicker*) polymers for an OR, as spew from the tailpipes of Oprah’s Global Express jet. Those last few kilowatt hours of electricity produced could well power FP’s or JG’s lab lighting and equipment rather than 20 flat screens displaying another episode of “Dancing with the Stars”.

        Polymers will never, be made from sunshine and thin air. Transportation fuels are a very long way from that as well.

        Of course there is no free lunch. Production and use of fossil fuels has a social and environmental cost. Pretty much everything we do has a price – like building anything. Like living anywhere. Like flushing the goddam toilet. I have never, ever heard a single soul mouthing the word “externality” refer to anything other than the cost side of the balance sheet. Why? Well, as FP quite correctly points out, the credits are taken for granted! They are effectively forgotten. It’s a rhetorical device; misleading in its intent, and fiction to its core.

        Yes, we have to continue to develop progressively less damaging sources of energy and feedstocks. And more efficient methods of using what we produce. And we need to use domestic resources to avoid the foreign entanglements that have cost us so much blood and gold. But we have to do this in a clear minded and rational manner without throwing the baby out with the bath. And without the *fiction*.

      • fiftyohm says:

        I had intended to close that last comment with, “Anyone who goes about with the words “externality” or “true cost” on their lips should be boiled in their own pudding, and buried with a stake of holly through their heart”.

        But of course my friends, that Dickensian reference is only figurative. I wish you all a very Merry Christmas, Hanuka, Kwanza, or the ritual of your choice, and a happy New Year to you all!

    • unarmedandunafraid says:

      Good to meet you captsternn,

      Have you contacted your congressman and told him you support cap and trade?

    • Bobo Amerigo says:

      50, I included a html tag for hugs. System didn’t like it and deleted it. So hugs in regular English.

    • Bobo Amerigo says:

      It’s entertaining that 50 and crogged can argue so well against arguments not made.

      That means that they’ll have lots of room when it comes to making personal improvement resolutions for the new year.

      • Crogged says:

        Bobo,
        I think the devil is in the details–certainly sugar can make people fat and we can have this guy tell us all the possible ‘costs’ to society from every product. One reason for the increase in petrol usage is what we are doing right here, those giant server farms holding all these wise words get hot. I’m not wise btw……..might be a good resolution…….

        https://screen.yahoo.com/bag-glass-000000237.html

  6. The actual language of the CFR isn’t the half of it. Add in rule makings, letters of interpretation, advisory bulletins, waivers, etc., etc. and the regulatory morass becomes simply impenetrable. Much like barnacle fouling on a ship’s hull, the regulatory leviathan is an accretive organism on the body politic, resulting in layer upon layer of internally inconsistent and sometimes contradictory rules that agglomerate over time, gradually strangling the vibrancy and efficiency of an entire nation’s economic engine.

    As Madison so presciently noted in Federalist 62, “It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?”

    Cap and trade is only one arrow in the quiver of regulatory reform. Others spring immediately to mind: Automatic sunsets for federal laws, such that every federal law and its accompanying regulation must be periodically revisited by Congress and the regulatory agencies. Ironclad congressional rules governing the size of bills and the public review period. Strict limitations on the rule making leeway of regulatory agencies. Etc., etc.

    Of course, none of this matters when law makers, executives and the judiciary have little understanding of, and even less respect for, the rule of law. So long as the white house is occupied by a man bent on promulgating arbitrary diktats sprung full-formed from the forehead of the chief executive and executed by the fiat power of pen and phone, expect no relief.

    • The system here (New Zealand) is
      Proposed legislation is created by a committee
      The proposed legislation is published on the web – and starts off with an explanation of what it is designed/expected to do
      Anybody can comment on it – either remotely or in person
      The proposed legislation plus the comments is fed back to the committee
      (All of which is on record)

      A revised version of the legislation is submitted to Parliament – and if it passes becomes law

      Parliament CAN short circuit this by declaring “urgency” but that is expected to be only in exceptional circumstances

      This works quite well – not perfect but not too bad
      IMHO the most important part is ” starts off with an explanation of what it is designed/expected to do”

    • texan5142 says:

      Tracy Thorleifson says:
      December 20, 2014 at 6:14 pm
      The actual language of the CFR isn’t the half of it.

      Yes it is ,and then some. States often mimic the CFR rules in their own pollution control standards. The CFR is confusing and redundant and much like the tax code, they both need an overhaul.

    • Crogged says:

      If you had told Madison he could fly in an iron bird or talk to Jefferson without his presence, I believe he would understand how the complexity of law would change. We wouldn’t have less of a regulatory state if the entire CFR had to be rewritten every five years, and no one could build an interstate pipeline network if ‘local’ regulation changed every fifty miles. Regulation sucks, it’s just a ‘cost’, all those lawyers and accountants could dig ditches and cut our hair.

      • texan5142 says:

        Not talking about rewriting the regulations per say, by overhaul I mean making them easier to understand.

      • Crogged says:

        The ‘regulation too hard to understand’ argument is a chimera, why do I need to understand every regulation written for every industry? Splitting atoms to boil water is complicated, any regulation regarding the same will be complicated even for the physicist. It’s a cost of business and no one likes the costs, which I can completely understand as I fight everyday to justify my employment………….

  7. CaptSternn says:

    I think I will just post a link that sums up my point of view rather than starting from scratch or plagiarizing the work of somebody else …

    http://www.acton.org/pub/religion-liberty/volume-8-number-3/environmentalism-triumph-politics

    • unarmedandunafraid says:

      In the very last paragraph. Here’s a time saver. He is for cap and trade,

      “Setting overall emission levels and allowing the trading of permits, or imposing pollution taxes based upon emissions, would be more cost-effective in reducing air pollution than are present policies. Taxing cars based on their emissions would be a superior means of reducing auto-generated pollution than imposing more and more restrictions on new vehicles.”

    • I have just read Cappy’s link – what a lot of total bollocks!

  8. Hi Goplifer
    I had a quick look at those regulations – It would take somebody like me a couple of days to turn those into an operating plan for a specific boiler
    Less for the second one
    So using an engineer as a consultant for a little job like that would cost about $3K
    For a boiler installation costing $300K
    Or 1%

    But why would you need a consultant?
    You are buying the plant from somebody?
    As part of the purchase the supplier would be writing the operating manual
    And part of the ongoing maintenance agreement would a responsibility to make sure that you are still current

    Regulations like that do look horrible
    But to a professional in the field they are actually easy to understand
    And you DON’T want somebody who doesn’t understand writing your operating manual

    • stephen says:

      I am trying to be respectful. But the GOPLifer is writing about power plant boilers not a small industrial boiler. A world of difference of cost and regulation. We are talking about millions of dollars to design and build the power plant boiler and millions per year to operate it. Also there are much tighter regulations of emissions for power plants. In my previous post I was trying to say for the larger part we already live in a market force type of regulation. Until Obama we pretty much have had mainly Republican administrations since Ronald Reagan. In the main Republican ideas have won out over the last forty years. Our Tea Nut element in the GOP is now threating to turn that around. But would be another post.

  9. stephen says:

    I found this blog post very interesting.I work in the power industry and my job is to do the analysis needed for and to operate the boiler chemistry treatment. We also do the scrubbers and other pollution reduction systems analysis needed to operate them, I also operate water treatment systems including the steam cycle and make up to it. It takes many season technicians of various discipline to make a modern power plant go. We have a whole department to make sure we comply with all environmental regulations. We consult them constantly. My company has sold and bought pollution credits. We have combine cycle and coal fire plants at the power complex where I work. The cost of fuel is a variable that can change rapidly and extremely.While the amortization cost of plants is set and fixed on a particular fuel source at construction. This is why smart operators have multiply fuel source capability. And power companies own part of each others plants to spread the risk around. The power industry is very capital intense. Half of the plant I am assign to is environmental protection equipment.So we have regulatory pressure but also competitive pressure from the market. At times coal has been the cheapest and other times it has been natural gas. I think when this country starts to export natural gas it’s cost is going to go up to the world market price and coal will again assume dominance in my industry. Getting in your planning the ability to adapt to this changing cost of fuel sources is more important and difficult than adapting to new regulations. And that is totally market driven. Right now we have retrofitted systems to reduce mercury into the environment and have systems in place to reduce nox as well as sulfur dioxide into the atmosphere. We are a liquid zero discharge site. Generally we are given limits and not told how to meet them. That is up to the operator of the plant. I pretty much live in the world you have described already. Is it worth it all of this regulation? I have lived about five miles from my work for over 40 years. There has been no decline in the environment from before the plant’s existence. And the plant site has become a wild life refuge. We are still very profitable. I think it is worth it.

    • Stephen, what’s your opinion on the EPA’s proposed CO2 emissions rule? (https://www.federalregister.gov/articles/2014/06/18/2014-13726/carbon-pollution-emission-guidelines-for-existing-stationary-sources-electric-utility-generating)

      Do you feel that the EPA’s classification of CO2 as a *pollutant* is legitimate? Do you see this an example of regulatory overreach usurping the role of the legislative? What effect is the final rule going to have on your industry, your livelihood, and my electricity costs? Just curious, thanks.

      • stephen says:

        Naturally I do not like it. This is going to push up the cost of electricity. I read an article in the New York Times the other day about using a fuel cell to capture and store CO2. Solar and Wind power are becoming more competitive but they cannot be use everywhere. Nuclear is already a good piece of our electric generation but it has waste disposal problems. To have a reliable and economical power grid we have to do all of the above including natural gas and coal. Like in investment diversification is the ticket to success.I think we will eventually figure out how to sequester carbon economically. Like most power plant technicians there are plenty of jobs in other industries for me. My skills are scarce and highly transferable. And besides that point I plan on retiring next year.

  10. fiftyohm says:

    Markets have indisputably worked to reduce substantially both SO2 and CO2 emissions. The conclusion that Cap and Trade has been a primary force in all of this is highly questionable, however.

    Coal use for electricity generation has fallen precipitously since at least 2007. The driver behind most of this, (at least recently), has been the price of natural gas. This is a good thing. Unlike coal, natural gas combustion produces very little SO2, much less NOx, zero particulates, no heavy metals like Hg, and far less CO2 per unit energy than coal. Its production is also less damaging to the environment. But coulld “a few cents per kilowatt-hour” of additional cost associated with Cap and Trade have driven this sea-change? C’mon.

    Here are a few ways that ‘markets’ work to reduce environmental degradation: Cars that get crappy gas mileage don’t sell well. Neither do A/Cs with low SEERs. Incandescent lights are slowly losing the battle in life-cycle costs. Housing is becoming better insulated, less do to regulation than to operating expenses. These are real market forces, and not the pseudomarkets created by fiat.

    Environmental regulations play a pretty small role in ‘boiler regulations’. Basically, boilers that run fuel-rich cost more to operate. Efficiency is effectively its own reward.

    If the desire is to impact, in a substantial and meaningful way the release to the environmental of combustion products from coal, encourage the use of natural gas. Thing is, I’m not at all convinced the assumption inherent in that statement is really the goal at all from the most vocal on the topic.

    • unarmedandunafraid says:

      fiftyohm you are a real load, a real resistor. Sorry, couldn’t help myself there. I am always anxious to see the comments on goplifer’s blogs. I see that you have definite opinions on how markets work. Having read about the rationality of markets and seen first hand the results of markets over the years, I’ll have to disagree with you.

      First, people will chose short term over long term gain fairly consistently. That is a few cents more per mile loses versus cheaper purchase price. Same with SEER. There are all kinds of irrational action in a lot of markets. Hence the government gets involved with building codes and SEER rating and auto mileage and the kind of lightbulbs you can buy.

      Cars that get crappy gas mileage don’t sell well? How about macho pickups with large V8’s in the US.

      But anyway, seeing how conservative have changed their thinking on providing medical insurance and cap’n’trade in general, I would like to say – As a LIBERAL I and all other LIBERALS hate the idea of using goplifers ideas to replace BIG GOVERMENT regulations. Please do not try to to put these ideas into use. Please don’t try to force them on us. We will cry and cry if you do. Please don’t throw us into the briar patch… er. that is all.

      • fiftyohm says:

        Unarmed- Welcome to the blog. First off, the Ohm is a complex impedance. Resistance is not futile – only a special case.

        Market psychology has in fact, both short-term and long-term goals. If you are content to believe that only government regulation can possibly steer markets in what you happen to consider the ‘right’ direction, by all means carry on in your naivety – having ‘read’ as much about the topic as you have..

        If you can think of a single thing that has affected SO2 and CO2 emissions as much as the conversion from coal to natural gas for power generation, please get back to us.

        Is this all? Of course not.

      • “First, people will chose short term over long term gain fairly consistently.” Well, only those folks that couldn’t pass the Gom Jabbar test, and they ain’t fully human, anyway. 😉

        Seriously, unarmed, some of us actually have use for our “macho pickups with large V8’s.” You can toss a dead stinky pig in the back seat of your Corolla if you insist, but I suspect your significant other might take exception to the practice. (This assuming your Corolla didn’t first disgorge parts it couldn’t live without whilst navigating the rocky goat tracks of your favorite hunting lease.)

        I drive a 2004 4WD Nissan Titan with a 5.7 DOHC V8 with fuel injection. It gets about 16 mpg in free fall with a tail wind. That was pretty decent back in ’04, and almost twice the gas mileage of my first pickup, a ’68 Chevy C-10 2WD with a carbureted push-rod 350 small block. Still, it’s only about 2/3 the gas mileage achieved by the current generation of pickups, many of which get highway gas mileage in the mid- to high-20’s.

        There’s no doubt that government regulation has had something to do with this improvement in gas mileage over time, but it’s also true that the current generation of pickups is superior in *every* way to the trucks I drove in my misspent youth. My Titan has 200K miles on it and is still going strong; my old C-10 was a bucket o’ bolts at 100K miles. You see, unarmed, it turns out that people *are* motivated by long term value, and will in fact pay for it.

      • unarmedandunafraid says:

        Tracy, I don’t doubt that there are macho men driving their macho trucks doing macho stuff. Or that they bought the truck for its “investment value”. (He said to wifey) But if every V8 pickup was out hunting pigs, your goat track would have traffic jams like downtown Manhattan.

        No, my point was that people (in general) don’t act rationally and buy a commuting device with the best gas mileage. In my city you will see the highways filled with extended bed pickups and huge SUV’s driven by suburban cowboys and cowgirls.

      • johngalt says:

        Switching to natural gas from coal probably has had the biggest impact on emissions of SO2 and NOx. But part of the economics of this has been increased operating costs of coal-fired plants due to pollution regulations, imposed by governments. You’ll get no argument from me that there are more efficient ways to achieve this than reams of EPA regulations, but power generators did not voluntarily reduce emissions in an unfettered market.

      • fiftyohm says:

        JG wrote: “part of the economics of this [switching fuels} has been increased operating costs of coal-fired plants due to pollution regulations, imposed by governments.” Absolutely. I think only a fool would call for a complete absence of emission regulations for power generators.

        My point here is that there is far more leverage to be exerted and real results to be realized insofar as power plant emissions are concerned with the active encouragement by government to produce more domestic natural gas, which in turn, encourages the transition away from coal, than this C&T stuff, as we have observed. Of course, this is not considered “green” by many – the facts notwithstanding.

    • unarmedandunafraid says:

      fiftyohm – Thank you for your welcome. Your reply induced a current of thought that we may have the capacity to come to a resonant point in this discussion.

      I’m sorry if I was unclear about my thoughts on markets. We are probably far apart on this government regulation/free market thing. But I am not “content to believe that only government regulation can possibly steer markets”. As you know, markets perform well when all participants have perfect data and they act rationally.

      It seems very clear that you are correct about gas being cleaner than coal.

      But it seems the increased use of gas is a economic market output mainly. Is there market pressure to convert a coal burning plant to gas beyond economic? And to the point about present reduced pollution, lifer did allow that both the cap and trade and changes in energy supply were responsible. We would have to get a chart out and blah blah.

      I believe the only thing you can say for certain is that all markets have outcomes. And then some look at those outcomes, bow down and say, there you go. The market got what the market wanted. All hail the market.

      On the other hand, I believe we should feel free to look at those outcomes judge whether the market was close to “perfect” or not.

      I need someone to tell me why the market insisted that a car bought in the 60’s had rusted through before you got to the end of the payment book.

      • fiftyohm says:

        Your 60’s car example is excellent. Best available technology at the time was crappy regarding materials and coatings. Engines needed tuning every few thousand miles. Brake shoes and drums every few thousand, too. A modern Lambo doesn’t require that kind of attention, nor is doomed to such a rusty outcome!

        Yet none of the improvements associated with any of these things were mandated by regulation. No corrosion standards. No minimum tune-up intervals. Nothing. Market forces, unarmed. Safety standards aside, you couldn’t sell 60s automotive technology to Cubans.

      • unarmedandunafraid says:

        And your response is excellent. And it gets to my point exactly.

        I just do not agree that the best available technologies were used in the 60’s and 70’s autos. Engineers bought competitions cars and took them apart, looking to see if one less bolt could be used or a cheaper component. New car conversations were about how many trips to the dealer were required to fix the problem list. And tomato cans were used as vacuum storage which didn’t help with image. And better technology was available. DIsk brakes and radial tires in Europe and a very good rust inhibitor could be purchased after market …

        I remember each year the quality got worse. Not what market worshipers tell us happens if we just let them work.

        The point was each year a market output these things. So what happened when imports were finally accepted later is not an answer to my attempt at humor.

        But please, the market outcome was very poor quality. And if Demming hadn’t gone to Japan and we didn’t have the oil shocks, would we still be driving cars that dropped bolts as we drove them home for the first time? Would we still be waiting for some externality to give us a better product?

        After all, externalities are random and there is no guarantee one will come along at a convenient time. We burnt gazzillions of tons of coal waiting for fracking to give us an another alternative.

        So I guess an honest answer is “Yes markets produce good results efficiently, sometimes.” “Sometimes markets produce crap very efficiently”

      • fiftyohm says:

        unarmed – First, I think you underestimate the significance of modern materials and process technology in the quality of modern cars. Are you suggesting in your comment that only domestic cars were crap, and the imports, including those from Japan and Europe were all great insofar as corrosion protection, maintenance, and all the rest? I hope not, because that is entirely untrue. I’m old enough to have owned both. And was poor enough to have to work on both.

        To the rest of your post, I take no great issue. Markets do not always produce ‘good results’. As you stated earlier in the discussion, they produce ‘outcomes’ – some good, and some bad. The increasing quality of automobiles over the last 50 years was one of those outcomes. When we attempt to regulate a market – any market – that too produces an outcome. These outcomes too are sometimes good, and sometimes bad. They are also seldom certain, and can be unpredictable. We have enough data to assert, at least over the short time frame under consideration here, that an outcome of encouraging the production of domestic natural gas will impact the fuels market in the power sector, and have decidedly positive effects on the environment. The outcome of the synthesis of a psuedomarket out of thin air is far less certain. Y’know, emissions ‘credits’ are about the purest form of a derivative I can think of. Those types of markets are perfectly predictable, aren’t they? 😉

      • unarmedandunafraid says:

        Well FiftyOhm, Looks like we have more agreement than disagreement. Pretty lame thread, huh. Maybe I should leave it there.

        Nah.

        I haven’t kept up with auto tech lately. But in the 60’s and 70’s I did keep up. And it is my opinion market forces were driving quality and safety in the wrong direction. And I did own a British and an Italian car back in the day. Yessir, you are right about the U.S. not having a lock on crap. But I’m sure you will agree that the Japanese led us back , through market forces, to much higher quality expectations. I consider that Japanese wave as an external or disruptive force that must be considered but is not “part” of the market. In other words I consider markets as the period between disruptions. Not sure if I expressed that well or not.

        As for whether a market solution to protect the environment is better than regulation, I don’t know. So how did pollution cap and trade do in the past? I guess I’ll have googling and pull out the charts and blah, blah, blah. Maybe someone looking at the comments have a link already?

      • Crogged says:

        And when you talk about fungible products or ‘market uncertainty’ you have either the last thing on your list or the first. Like trading electricity.

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