Energy Honesty

Charles Krauthammer comments on how the Senate hopes to hide the true costs associated with increased energy efficiency in the recently passed energy bill. Money quote:

I have no objection to paying more to reduce our dependency on foreign energy. But it is hard to conceive of a more politically dishonest and economically inefficient way to do it than with mandates that make private industry do Congress's dirty work, hide the true cost of energy efficiency and perpetuate the fantasy of the tax-free lunch.

To me the really sad thing about the current debate on energy policy is the complete lack of discussion of the costs associated with increasing fuel efficiency the use of renewable fuels. Unfortunately, these costs will impact the poor the most because they represent a higher portion of a poor person's income than a rich person's income. In my view it is best to deal with these costs openly rather than to try to hide them in the hopes of appearing to offer a free lunch.

Senators: Not Serious on Ethanol

A couple of days ago, the Club for Growth blog mentioned that the Senate had rejected an amendment to eliminate the 54 cent tariff on imported Ethanol. This strikes me as completely disingenuous at a time when the same Senators are concerned about price gouging for gasoline. Just for fun I used Google Maps to create this map showing how the Senators from each state voted. Now we have a visual representation of where the real price gougers live!

Update: A picture of the map is now included below.

Let's Get Serious

Charles Krathammer unloads on the President's ridiculous energy proposals in today's Washington Post. Krathammer makes compelling arguments for taxing gas, drilling for oil in the Arctic and outer continental shelf, and increasing use of nuclear power to reduce our reliance on foreign sources of energy. The problem is that all of these solutions have costs, which means that our politicians do not want to talk about them.

Guaranteeing access to energy is a compelling national interest. We need to start acting like we believe that by taking the tough steps necessary to decrease our reliance on foreign energy sources.

State of the Union

After watching the President's State of the Union address last night, I think that the speech was pretty much at least a year too late.

The most positive aspect of the speech was the President's proposal to level the playing field on health insurance by making health insurance premiums tax deductible and making employer provided health insurance a taxable benefit. Where was this proposal last year? The Wall Street Journal editorial page has been talking about this reform for the better part of the last decade. Of course now that the democrats control congress this proposal has just about zero chance of passing. This smacks of building up an electoral issue instead of trying to improve our nation's laws.

Perhaps the most depressing domestic policy proposal was the President's approach on reducing gasoline consumption by 20%. I do not necessary disagree with the goal, but setting increased fuel efficient standards and requiring the use of more ethanol is nothing more than a heavy handed way for government to regulate the markets. The sight of all the farm state congressmen whopping it up when the President mentioned increasing ethanol use disgusted me because we could easily increase ethanol use by just reducing the tariffs on sugar or ethanol produced by sugar as I have mentioned before. But these guys don't want that. They want the government to require consumers to buy more expensive corn produced ethanol from their constituents. Talk about mafia government...

And while were are on the subject: earmarks. The president's goal is to cut them in half this year. Please. Why not cut them to zero. How hard is that? Oh but then all the lobbyists would have to schlep off to 50 state capitals to make their money. We couldn't have that now could we.

On the Iraq war, I am certainly not happy with the situation, but it is just too important to lose. Any kind of significant US withdraw this year, next year, or probably for the next five years will likely cause even more chaos in the region. We have to stabilize that country. So I am willing to give the President the benefit of the doubt and give his plan a chance to succeed. Nonetheless, why didn't we "plus up" last year or the year before that?

On net I thought the speech was OK, but would have been better if the president had delivered it last year when he actually had congressional support.

Ethanol in Brazil

Yesterday's New York Times reported on the increased use of ethanol in Brazil as a substitute for gasoline. Apparently the Brazilian are greatly increasing their use of ethanol and are nearly energy independent as a country. Good for them.

The key technology here is flex fuel vehicles, which allow the vehicle to operate on either gasoline, an ethanol blend, or some mixture of the two. From the picture in the article, it appears that the ethanol blend sells for approximately 30% less than gasoline, so obviously people are eager to use it. What I am not sure about in this situation is how much of this progress is attributable to private innovation in the presence of a monopoly and how much of this is attributable to government intervention. Brazil has been one of the leaders in "Latin American State Capitalism", so the later would not surprise me at all.

Unfortunately, here in the United States, we are not really doing a good job of following in Brazil's lead:

But Brazilian officials and business executives say the ethanol industry would develop even faster if the United States did not levy a tax of 54 cents a gallon on all imports of Brazilian cane-based ethanol.

The farm belt sees corn based ethanol as a new market to exploit, but only if they can protect it from lower cost imports. How is that good for the US consumer? What we really need to do is drop the tax on ethanol imports and let the market develop. Since Brazil will not be able to supply all of the demand in the near term or any term, there will be a place for corn based ethanol along side the cheaper imports. We need to get smarter about energy policy and by that I mean let the market figure it out.