Back in 2007, Congress created a biofuels mandate under which oil companies are required to use a minimum amount of cellulosic ethanol each year. The mandate was supposed to encourage the development of a domestic cellulosic ethanol industry. This has not happened. Several years after the mandate was imposed, there is still no commercial cellulosic ethanol production. This gets the oil companies off the hook, right? Nope. As the New York Times reports, companies are still paying fines, totaling nearly $7 million, for failing to meet a blending quota for a substance that does not exist. Were that not bad enough, this year the cellulosic ethanol quota will increase, as will the fines for failing to meet it.
Who would defend mandating the use of a substance that, for all practical purposes, does not exist? Not the renewable fuel industry. As the NYT reports, they acknowledge that commercial production of cellulosic ethanol remains years away.
“From a taxpayer/consumer standpoint, it doesn’t seem to make a lot of sense that we would require blenders to pay fines or fees or whatever for stuff that literally isn’t available,” said Dennis V. McGinn, a retired vice admiral who serves on the American Council on Renewable Energy.
The EPA, on the other hand, defends the mandate:
Cathy Milbourn, an E.P.A. spokeswoman, said that her agency still believed that the 8.65-million-gallon quota for cellulosic ethanol for 2012 was “reasonably attainable.” By setting a quota, she added, “we avoid a situation where real cellulosic biofuel production exceeds the mandated volume,” which would weaken demand.
In contrast to the historical ideal of Manifest Destiny, in which the conquest of the land was held to be a biblical right imbued to God’s loyal followers, a contemporary breed of religious practitioners are working to combine faith and ecology in new ways. Often found under the movements entitled “ecotheology” or “green faith,” religious practitioners of all denominations and creeds are acting to conserve what they consider to be God’s creation, following tenets many believe are already in line with their religious practices.
PERC Enviropreneur Institute graduates Fletcher Harper (‘07) and Stacey Kennealy (‘10) are looking to these religious groups to take action and work toward improving environmental quality. While there doesn’t seem to be much in common between those placing their faith in markets and those putting faith in the divine, Harper and Kennealy’s interfaith coalition, GreenFaith, recognizes that incentives matter.
GreenFaith’s mission is to inspire, educate, and mobilize people of religious backgrounds to protect the earth as a moral and sacred responsibility. As Paul Schwennesen writes in the latest issue of PERC Reports, however, “simply insisting that people ‘do what’s right’ doesn’t capture the full measure of GreenFaith’s work; the group calls for their members to address the mundane as well as the celestial. Values need to be specific and actionable.”
Thus, GreenFaith has used lessons garnered from PEI to attract new congregations to their Certification Program by touting the benefits of financial savings, as well as engaging new and younger members. The major force driving GreenFaith’s success, therefore, has not been morals, but the promise of growth – and this strategy is having success.
“In the end, GreenFaith isn’t just about teaching people that God wants a healthy environment,” said Harper. “It’s about mobilizing the faith-based sector – one of the largest social networks in the country – to make it actually happen. PERC has helped us understand new tools and perspectives on how to achieve this goal.”
Global crude oil reserves are on the rise, even though consumption is increasing. How can this be true for a finite resource? Proved oil reserves are the estimated volume of oil that exists in underground pools and can be extracted under current economic and technological conditions. It then makes sense that proved reserves would increase with new technology and higher prices.
Today’s higher prices are not indicative of dwindling global supplies. There are multiple reasons for the rise in gas prices as previously discussed. It is likely that oil production will peak at some point in time. That point, however, cannot be extrapolated by examining existing reserves and global consumption, not even if adjusted for population. What is missing from much of the peak oil analysis is basic economics.
As demonstrated in the chart, proved reserves have increased with higher oil prices and new technology. Higher prices and profits motivate increased research and development. Purchasing behavior also responds to changes in price and technology. Higher gas prices encourage conservation and a shift to substitute products. The peak of oil production will depend upon how purchasers respond to changing prices for oil, gas, and substitute products.
Q: Ecology is about preserving resources while economics is about exploiting them. How does one reconcile these two disciplines?
A: In a way, I think they are both about emergent properties. Ecology is about the spontaneous order that appears in the world through the interaction of different species — the pattern that you see. And economics is about the same thing in society. So they are both bottom-up fields for me. They’re both about how order emerges from the interaction of individuals.
Q: Are you suggesting economics could learn something from Charles Darwin and ecology could learn something from Adam Smith?
A: This is one of my crusades, actually. As someone who was an ecologist and nowadays writes a lot about economics, I am fascinated by the parallels. Charles Darwin read Adam Smith, so there is sort of an ancestral connection between the two fields. And there is a lot going on in evolutionary biology and ecology that is very parallel to what is occurring in economics and vice versa. People like F.A. Hayek knew this and went across to evolution to pinch ideas, so I think there is a very fruitful dialogue between ecology and economics.
A: I don’t think so because I think that the amount of resources we have depends upon our ingenuity. In other words, the more prosperous we get, the more frugal we get in our use of resources. Land is a good example: We use less and less land to produce the same amount of food because we’re getting better at it. We’re applying fertilizer or irrigation or whatever it is. The same is true for the amount of steel in a bridge; it is a lot lower than it was 20 years ago, etc.
So actually we are shrinking the amount of resources we need to run society at the same time that we are growing them, because there are more of us and we’re becoming more prosperous. I actually think the richer we get in this century, the more comfortable the resource position is going to be because we’re going to be better at recycling, better at finding resources, and better at using them frugally.
Q: That is somewhat counterintuitive. The more we use, the more we’re going to have, the more frugal we’re going to be, and the wealthier we are going to be.
A: Until now, the problem has been called the Jevons Paradox, which says that the cheaper you make energy, the more people will use it. And that’s true with a lot of resources. But there is evidence that the Jevons Paradox is reaching its limits with some resources. Land is a good example, again. We are actually reforesting land all over the world, we’re taking land out of farming all over the world, because even though there are more of us every year, and even though more of us want to eat chickens and pigs and all these land intensive forms of food, we still, even with this profligacy, can’t keep up with our increasing efficiency, our productivity. So actually we taking land out of agriculture and turning it back to nature reserves. And as the population growth rate falls in this century, I think that process will accelerate.
Q: So what would your response be to those who argue that we should literally go “back to nature,” back to pre-industrial times?
A: I think if seven billion people tried to go back to nature it would be a catastrophe for nature. A hunter-gatherer basically needs a thousand hectares to support himself and even at that level he can extinguish species. We know that there was a problem with hunter-gatherers wiping out species in the past. So imagine if each of us needed a thousand hectares—it can’t be found. There wouldn’t be room for any places that were off limits. So I’m afraid we would have a much larger impact on nature if we tried to live lower-tech lives than if we try to live high-tech lives.
Q: So you have this optimistic view on the future of not only human well-being, but of nature and the environment itself. What might stand in the way that could possibly derail that view?
A: There are things that could go wrong. The birth rate could start going back up in some countries and the general greed with which we want to increase our use rate. For example, if we all want to have private jets maybe there is a problem. But, in a way, I think the biggest threat comes from politics – from people saying, “No, we must not use a technological advancement like genetically modified food,” or, “No, we mustn’t allow prosperity to increase because that’s bad for nature.” And, “We mustn’t use fossil fuels; we must go back to using biofuels, wood, and crops.” Well, that’s a disaster. That’s taking land that could be producing natural habitat and putting it to human use again. Most of what environmentalists are demanding in the environmental movement would actually increase the human footprint, not decrease it, because they want biofuels, renewable energy, and organic food. These are things that take up more and more land. And I think that’s a pity. I think we should be trying to take up less and less land.
Q: And so we have come full circle. What stands in the way of your optimism would be top-down politics and the wrong kind of activism. If we leave people and nature to its own bottom-up devices as Darwin has shown us in ecology, we can do it through economics as well.
A: I think that is absolutely right. There is far too much top-down thinking in the world, trying to ordain the solution rather than let the solution emerge.
In 1965, the American economist Kenneth Boulding popularized the phase “Spaceship Earth” expressing his concern about the fragility of our planet. His logic went something like this: since the Earth’s resources are finite, just as bacteria growing in a Petri dish will eventually exhaust their resources, we too must sooner or later run up against the Earth’s limits. This is a deep current in contemporary environmentalism and one expressed today in the New York Times by Thomas Friedman. As my friend Roger Meiners observes, this line is “…a timeless classic that always sells well.”
Wait, wait, I’ve seen this movie before!
One of the earliest examples is Fairfield Osborn’s 1948 book, Our Plundered Planet. In 1970, the definitive work of this movement, The Limits To Growth, was published. Limits To Growth predicted that, at present rates of consumption, supplies of many important commodities would be exhausted by 1992. More recently the Archbishop of Canterbury called for an end to economic growth to save the planet, and the World Wildlife Fund warns that we are consuming 20 percent more natural resources a year than the Earth can provide.
Economic growth is neither designed nor intended to ruin the Earth. And while it is true that nature has sometimes been destroyed in the quest for economic growth, the aim of economic development is to generate resources that improve the condition of humanity. Across time and cultures, we have reaped the benefits, as technological advances and economic growth have proved the only sure path to a cleaner, safer environment. (For a sobering look at the condition of the “people’s” air and water, check this link out.)
This quest for progress benefits not only present generations, but future ones as well. By using natural resources to create wealth today, we increase the probability that those yet unborn will be able to meet their material needs better than any preceding generation. Prosperity, now and in the future, increases the odds that we will avoid a life that Thomas Hobbes described as “solitary, poor, nasty, brutish, and short.”
The Earth’s resources are not in any meaningful sense fixed. Every material that we consider a resource was at one time worthless. The economist Erich Zimmermann explains. “Previous to the emergence of man, the earth was replete with fertile soil, with trees and edible fruits, with rivers and waterfalls, with coal beds, oil pools, and mineral deposits; the forces of gravitation, of electro-magnetism, of radio-activity were there; the sun set forth its life-bringing rays, gathered the clouds, raised the winds; but there were no resources.”
“Resources are, reserves become.” Not until human creativity goes to work does any physical thing become useful and valuable. This explains how many resources are evermore abundant and less expensive in the face of growing consumption.
Our manipulation of resources fosters economic progress. This allows us time to participate in our communities, create a responsible and enjoyable culture, and live long and fulfilling lives. Our technology frees us from drudgery, cleans our water, powers medical equipment, and fuels the jet turbines and diesel engines that make global trade possible. In sum, all this allows us to fulfill the most basic of our aspirations, i.e., improving the wellbeing of our loved ones.
Progress over the past 100 years has been stunning. Life expectancy has more than doubled from a world average of only 30 years in 1900, rising to 46 years by 1950, and is now for (both sexes) 66.57 years. The World Health Organization thinks life expectancy will increase to 73 years by 2020. This is an unprecedented improvement in the condition of humanity.
The idea that economic growth must be curtailed is cruel tragedy in a world where billions of people still live in dire poverty.
Don't miss PERC senior fellow Bruce Yandle’s article in the latest issue of Regulation magazine.
With 40 years of accumulated executive order wisdom to draw on and knowledge tapped from turning out some 2.5 million pages of Federal Register rules since 1970, President Obama looked the Leviathan in the eye and called for a review that will “root out regulations that conflict, that are not worth the cost, or that are just plain dumb.”
In a world where everything can be regulated, requiring agencies to act on better benefit-cost analysis is a wonderfully important idea and requiring retrospective reviews of mossy rules is to be celebrated. But as good as they are, those ideas and others in EO 13563 do not take account of our regulation driven capitalism and the incentives playing throughout it.
In short, “EO 13563 gives commands to an army of regulators who operate as if they are external to the economy they seek to fix, while in fact they are a part of it.” Read more here.
The vertical axis is the percentage of total economic output or person-years lived over the past two millennia. According to the chart makers:
By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010, according to an updated version of Angus Maddison's figures.
In other words, in terms of years lived, one third of post-1AD human history has occurred since 1900, and more than three quarters of total economic output. What accounts for this phenomenon? Matt Ridley's latest book, The Rational Optimist, provides a great explanation. (Hat tip to Mark Perry)
Is seven billion too many people on earth or not enough?
It is commonly assumed that population growth is bad. More people means more mouths to feed, more homes to heat, and more bodies to transport. Land is limited. Can we feed more people? Oil, gas, and much of the energy that we use are nonrenewable. More people means, on average, less per person for home heating, transportation, and production. Have we exceeded the limits of earth’s carrying capacity?
July 11 marked World Population Day, a day defined by the United Nations Development Program in 1989. In the last two centuries, life expectancy at birth has more than doubled. The global population has doubled in the last thirty years. This year will mark the global population reaching 7 billion people.
Yet life on earth is getting better, not worse. People are living longer, they are wealthier and healthier, the air and water is getting cleaner, and we are not running out of resources. In fact, the general trend of resource prices (after adjusting for inflation) is declining.
We owe this to human innovation and our ability to adapt. We grow more food on less land. As prosperity rises there has also been an increased demand for environmental quality. Our demand for resources stems from the benefits they provide to us, not the resource per se. Hence, as resource prices rise, people adapt through innovation and technology to get more from a given resource and by finding alternatives and substitutes.
There are tradeoffs. As more and more people inhabit more land there is less habitat available for wildlife. But even wildlife prospers when the institutions are right. Once endangered, rhinos in South Africa are now abundant where they are seen as an asset to locals, even with more people, but they are scarce in Kenya where property rights and laws differ.
The Center for Biologicial Diversity claims there are “Too many of us. Not enough room for them [wildlife].” But is it really a population problem or is it a behavioral problem that is defined by the incentives provided (i.e. the institutions)?
Founded 30 years ago in Bozeman, Montana, PERC—the Property and Environment Research Center—is the nation’s oldest and largest institute dedicated to improving environmental quality through property rights and markets.
The goal of PERC’s programs is to fully realize the vision of establishing “PERC University,” where scholars, students, policy makers, and others convene to expand the applications of free market environmentalism.
PERC's fellowships share a common goal of exposing new scholars, students, journalists, and policy makers to free market environmentalism, as well as enable scholars already familiar with FME to explore new applications.