Thursday, March 01, 2007
The Gorebot, carbon "offsets" and surplus capital
This post involves me dabbling in economics, which is always dangerous.
If you read conservative blogs you know that Al Gore -- the world's most famous advocate for the massive regulation of rich country economies in order to slow the growth of carbon dioxide in the atmosphere -- has been outed as a chickengreen. Gore has beclowned himself by campaigning for enormous sacrifices from hundreds of millions of Americans who have done a lot less damage to the atmosphere than he has done, and continues to do (for starters, he consumes more electricity in a month in just one of his three houses than the average Tennessee family consumes in a year). Gore's defense is that he buys "carbon offsets," which are essentially investments in projects that sequester carbon or produce power without spewing out carbon dioxide. While Gore's response does not address either his apparent hypocrisy nor the underlying facts, who's to argue with "carbon offsets"?
Well, just about everybody. The Economist argues that building clean power capacity does not solve the problem, because energy is tradeable:
It is not as if there is some fixed demand for energy, so that by using less carbon-emitting energy, you actually decrease the amount of carbon emitted.
This is, of course, ridiculous. When you donate money to build a new windfarm, you don't take any of the old, polluting power offline; you increase the supply of power, reducing the price until others are encouraged to buy more carbon-emitting power. On the margin, it may make some difference, since demand for electricity is not perfectly elastic, but nowhere near the one-for-one equivalence that carbon offsets would seem to suggest. Especially since the worst offenders, big coal-fired plants, are not the ones that renewables will substitute for; solar and wind power are not good replacements for baseload power. Instead, renewables are likely to take relatively clean (and expensive) natural gas plants offline, since those are the ones that provide "extra" power to the system. Similarly, by giving villagers in Goa energy-saving CFL bulbs, you do not lessen the amount of electricity consumed; rather, you make it possible for other people to purchase the extra energy freed up by more efficient lightbulbs. This may be excellent poverty policy, but it does not lessen the carbon footprint of your international flight.
There's more on the economics of carbon offsets here and here.
Bill Hobbs (via Taranto) figured out that Gore is characterizing certain investments as "buying offsets":
So far, so good. But how Gore buys his "carbon offsets," as revealed by The Tennessean raises serious questions. According to the newspaper's report, Gore buys his carbon offsets through Generation Investment Management:Gore helped found Generation Investment Management, through which he and others pay for offsets. The firm invests the money in solar, wind and other projects that reduce energy consumption around the globe...
Gore is chairman of the firm and, presumably, draws an income or will make money as its investments prosper. In other words, he "buys" his "carbon offsets" from himself, through a transaction designed to boost his own investments and return a profit to himself. To be blunt, Gore doesn't buy "carbon offsets" through Generation Investment Management - he buys stocks.
And it is not clear at all that Gore's stock purchases - excuse me, "carbon offsets" purchases - actually help reduce the use of carbon-based energy at all, while the gas lanterns and other carbon-based energy burners at his house continue to burn carbon-based fuels and pump carbon emissions - a/k/a/ "greenhouse gases" - into the atmosphere.
Gore's people tout his purchase of "carbon offsets" as evidence that he lives a "carbon-neutral" lifestyle, but the truth is Gore's home uses electricity that is, for the most part, derived from the burning of carbon fuels.
Commentary
There is enough in this controversy to fill a dozen blog posts, rich as it is with the hypocrisy, pompousity, and ludicrous insularity of the American celebrity class (of which Al Gore is now a leading light). There are two problems with Gore's "offset" argument that are particularly nettlesome: 1) any given investment in the production of green electricity cannot be said to "offset" any incremental carbon dioxide, and 2) if green investments offset personal carbon output, investments in businesses that spew carbon should then count against one's carbon footprint.
Money is fungible. There are two types of investment that one might make in green energy technologies: investments that are calculated to produce risk-adjusted returns commensurate with the market, and investments that are thought to produce below-market returns.
If Al Gore's investments are expected to produce returns comparable to competing investments of similar risk, then the businesses that are the recipients of his capital would be able to raise money anyway, even from people who do not care whether they are offsetting personal carbon output. Gore should not be able to claim offset "credit" for earning market returns on a given investment, because any business that pays market returns will be able to attract capital from any source, not just investors with an idiosyncratic interest in offsetting their personal carbon footprint.
If, however, Gore's investments are not expected to produce market returns (excluding, of course, the huge psychic income Gore receives for subsidizing green projects), then those businesses will be selling or otherwise disposing of the energy they create at less than the cost of its creation. In that scenario, Gore is in effect subsidizing the production of green electricity which will then artificially increase the supply and decrease the price of all the electricity in the affected market. What happens when the price of something declines? People buy more of it. The production of subsidized (i.e., money-losing) electricity that earns below-market returns will drive down the price of all electricity and make people more wasteful, not less. While there may be some small reduction in the total amount of dirty power consumed, the reduction will be far less than the amount of wealth-destroying green power that has been produced on account of Gore's subsidy.
In other words, Gore (or any other investor) should get no moral or actual offset "credit" for making green investments at a market rate, and virtually no such credit for investing in green businesses that cannot pay a market return.
The goose-gander thing. If, as Al Gore would have us believe, investments in carbon-negative businesses offset one's personal carbon footprint, then wouldn't investments in carbon-producing businesses increase one's personal carbon footprint? And, since most businesses spew out more carbon than they sequester in the process of creating wealth, doesn't this mean that under the Gore logic most investments are a big personal carbon "debit"? Doesn't that then mean that rich people -- such as Gore, Leonardo DiCaprio, and virtually everybody else with a ticket to the Oscars -- who do not invest all their money in carbon-negative businesses have an even larger personal carbon footprint than is indicated by their electricity bill or frequent trips by private jet?
If you buy Gore's "offset defense," the obvious implication is that all rich people -- no matter how green in their personal lives -- have a far bigger personal carbon footprint than even the most profligate working stiff simply by virtue of having invested their money in the global economy. Is that really the point Gore intended to make? Somehow I doubt he would have been so welcomed on the stage Sunday night if it were.
What am I missing here?
37 Comments:
By 
, at
Thu Mar 01, 11:42:00 PM:
By , at
Fri Mar 02, 01:56:00 AM:
The "carbon offsets" defense is like saying 'who cares if I robbed the bank, I left a penny in the tip jar.'
By 
Purple Avenger, at
Fri Mar 02, 04:08:00 AM:
If Algore wanted to make a measurable impact, he'd be out there bashing Microsoft for producing bloated software that's going to require a whole new generation of carbon intensive computers (in their manufacturing process) to be bought.
By , at
Fri Mar 02, 07:02:00 AM:
Sneer, fleer, and smear. Could you not discuss the issue without resorting to these tactics?
You were much more readable when Republicans controlled the Congress.
If you were in Spain in the 1400's it is likely you would have used these same tactics to dissuade the courts of Ferdinand and Isabella from funding Columbus.
By , at
Fri Mar 02, 08:39:00 AM:
TH,
Very interesting analysis. Getting to the root of the faulty "economics" of "offsets" is like trying to understand farm subsidies.
There's got to be a pony in there somewhere. :)
Mr. Gore probably truly believes he is being "virtuous" on some level, but in today's interconnected society, you can't make a move without creating a "carbon footprint".
If he really wanted to make a difference in his carbon footprint, he would advocate battery research, superconductor research or speeding up the approval process for nuclear power reactors.
-David
By , at
Fri Mar 02, 01:42:00 PM:
The true hypocrisy is evident in comparing Big (and getting bigger) Al's position on this with his normal "soak the rich" pitch. In essence, he says that because he can afford to buy "offset credits" he is entitled to leave a bigger footprint than those without the means to buy the credits. "The rich can consume all they can afford to"--sounds like a great slogan for his party. KSG
By Jason Pappas, at
Fri Mar 02, 02:05:00 PM:
I enjoyed reading the economic points but rational economics has nothing to do with the matter. It’s a religion. The whole point is to establish a ritual, reaffirm one’s values, and inculcate a disposition.
I remember when our separated garbage (trucked by two separate crews to the garbage dump) was combined and disposed of. When it was pointed out that this was costly and consumed greater energy, the establishment of habits and ritual was deemed more important. Even during the budget crunch a few years back Mayor Bloomberg had to give-up on saving money in this area so that the religious rituals were maintained.
On your other point: of course Gore is against wealth. The destruction of wealth is the point. And hypocrisy is a transitory state: abandoning old habits while acquiring new. They welcome such charges as they say “we all have to work on this together” by government regulation.
Fighting religion with reason isn’t easy. But, as Biddinotto notes, explaining how this religion has brought millions of deaths to the poor of the world might help. There’s nothing like charges of racism and genocide to make the left squirm.
By Catchy Pseudonym, at
Fri Mar 02, 02:50:00 PM:
I see that since you can't fight the facts on global warming, you instead vent on Al Gore.
I've heard right wingers bitch about liberals using the moral failures of christian leaders to demean and attack religion and how wrong that is to do that, yet it seems they've adopted the same tactics to take on the "religion" of global warming.
What I love is how Big Al can send you guys off on ridiculous silly rants. It's amusing.
By fullchoketubes, at
Fri Mar 02, 03:36:00 PM:
Commenter "catchy pseudonym" above captures the modern liberal mind-set perfectly. Sacrifice and living up to one's own words is the province of the unwashed masses. The Ruling Elite are above all that; they have important things to tell us and important guidelines for us to live by.
And their apologists want so badly to believe, or are so eager to become part of that Ruling Elite class, that they refuse to acknowledge blatant hypocrisy.
By , at
Fri Mar 02, 04:06:00 PM:
Re: Jason Pappas' comment on Recycling in New York.
While there is an element of faith in recycling rituals (as well as other aspects of conservation), recycling in New York was ultimately restored for very practical reasons - the cost of shipping and disposing of unsorted trash went up, and so did the value of recycled materials, and so it became more economically efficient to recycle.
There are potential parallels to alternative energy policies (i.e., government use and or incentives to use alternative energies that may not be profitable yet can stimulate both technology and/or economies of scale that eventually will make them profitable). I'm not so well-qualified to elaborate on that point, though I imagine others here (Greenman Tim?) could do a better job.
JK
By Catchy Pseudonym, at
Fri Mar 02, 04:42:00 PM:
Commenter "fullchoketubes" obviously didn't understand my post. Which doesn't matter, because I think he just wanted to use his favo-righty terms like "liberal" "apologists" and "Ruling Elite class".
Who is this "Ruling Elite" by the way? Is it the political, entertainment or business leaders? There's quite a bit of ruling elites in this country. You know Bush is a ruling elite. But he doesn't apply here.
Did you use a "cliche talking-points word generator machine" to create your post for you.
By D.E. Cloutier, at
Fri Mar 02, 05:04:00 PM:
"Who is this "Ruling Elite" by the way? Is it the political, entertainment or business leaders?"
Businesspeople buy politicians.
Businesspeople hire actors.
Businesspeople are the ruling elite.
By , at
Fri Mar 02, 07:00:00 PM:
I would have thought (from a economic perspective) providing business to the green energy market helps advance it.
One of the easiest ways to promote green energy would be to have the government announce it will buy and use electricity from the lowest bidder of green sources. The government would nearly corner the market and that would drive up prices (yes, temporarily raising costs on taxpayers). However the guaranteed market (and temporarily high prices) will spark investment, and market competition will improve efficiencies and technology, etc...
It's easily done, and more cost effective than giving grants to energy comapnies, or universities. It's transiently expensive, but that expense will largely go to capital improvements to our green energy infrastructure. A lot of that money would be churned back into our local economies while we reap both environmental and geopolitical benefits.
Whine all you want about Gore - you have a point.
As a separate point though: a better market for green energy makes for a better future.
-LankyB
By , at
Fri Mar 02, 09:22:00 PM:
Gee, all you smarties trying outdo one another.
The point of this is that Fat Al is a hypocrit. He talks the talk, but doesn't walk the walk. Plain and simple.
While I'm sure there are many cases of Republicans who say one thing and do another (don't send their sons to fight either, or televangelists "repenting" after getting snagged with 'hos, etc.) the reality is that you've got a rich Democrat trying to tell you how to live, but not living that way himself.
Just like Two Americas. Just like pretty much everyone in or connected to DC. Politicians are big businessmen. Not just the righties either.
If all you suckers just consumed less, there'd be more for me ... now gas up my private jet.
By , at
Fri Mar 02, 09:58:00 PM:
It's also like buying your way into the carpool lane, which some cities are doing. Kinda defeats the purpose.
I also heard European companies purchase their carbon credits in China by buying a coal plant and shutting it down. So they stopped all that polution. But China isn't bound by anything, so they build another next door, and the European does it again.
Ain't Kyoto grand!
By Pudentilla, at
Fri Mar 02, 10:36:00 PM:
Gee whiz you guys - after the utter fools you made of yourselves over the Kerry picture you'd think everyone would a tad more cautious over the exxon to aei to tennessee center for policy research to Drudge to the blogs play on Gore. This many finger prints on a smear and you got wonder if we should just indict folks for being felony stupid.
What are these terrifying recommendations Gore is urging that will shackle the pure freedom of all the right wing hacks who still haven't got over their unfortunate experience with Ayn Rand at an impressionable age?
1) use cfls; 2) lower your thermostat 2 degrees (oh, the horror!) in the winter and raise it 2 degrees in the summer; 3)change your furnace and ac filters; 4)use a programmable thermostat - by god the damn hordes of liberals are in your thermostat - what's next, your tax cuts?; 5) and it goes on and on. He has the nerve to suggest that we turn off our electric appliances when aren't using them. Of course, he wants al-Qaida to win. Doesn't he know we're fighting them over there so we can leave our computers on all night here?
TH suggests that there is not 100% agreement among economists about carbon offsets and therefore what - we should wait until the eastern seabord is atlantis? You don't believe climate crisis is an issue - fine, buy your suv. Gore believes it's a problem and he's trying a range of responses to do something about it. Why the absolute insistence that he be absolutely perfect in his achievement. Given the record of the fellow carrying your flag, I have to assume you're not troubled by double standards.
I guess a guilty conscience about Bush v. Gore and its consequences might explain the vitriol - but, you do remember that your guy won that case, don't you.
By , at
Fri Mar 02, 11:49:00 PM:
Just how much fuel did gore use in his going all over the world promoting this global warming poppycock i mean im sure he did,nt arive at the accademy awards on foot and he sure did,nt come in a hybrid
By Pudentilla, at
Sat Mar 03, 12:02:00 AM:
i mean im sure he did,nt arive at the accademy awards on foot and he sure did,nt come in a hybrid
you might be sure, but you'd sure be wrong.
By TigerHawk, at
Sat Mar 03, 07:11:00 AM:
Actually, Pudentilla, I'm a conservationist from way back. My old WASP ethic calls for avoiding waste whenever possible. However, all that stuff is overwhelemed if you make the basic decision, as many jet-setters do, to "live large" in the first place. Having wealth does not mean that it must be spent on a vast house or private jet travel or other ostentatious displays. I have at least ten times the income of my neighbors, usually buy used cars, shop at Wal-Mart or Kohls, and going out for us is Applebees. I occasionally spend money for an experience that others can't afford (the trip to China last summer is well-known to regular readers), but other than that we are extremely modest.
The most egregious thing that celebrities have done is move to private jet travel. There really is no reason other than their own preferences why they can't fly in first class on regularly-scheduled flights. Twenty years ago, you used to see celebrities in first class all the time, especially if you travelled out of New York and Los Angeles. Now you never do. The reason is the shared jets business, which is indefensible from a carbon load point of view. Unplugging hundreds of appliances won't make up for a single unscheduled jet flight. So while I agree with the merits of many of Gore's arguments because I believe in conservation, the first step in conservation is to start living pretty much the way that ordinary middle class people live.
By , at
Sat Mar 03, 07:51:00 AM:
I never thought I'd find myself in a position where I am about to "defend" Al Gore on this one, but please note that under the federal Clean Air Act, "off-setting" of emissions in certain contexts is REQUIRED and the way that we do this is to generate creditable emission reductions in an existing source and then use those to "offset" emissions from a new source. Although I'm not an expert in CO2 offsetting, I simply point out that the concept of offsetting is well established. In other words, the Gorebot did not make this up.
Also, although I understand that power is "fungible", if you consider that we will be building new capacity, then building the new plants to generate fewer GHG emissions than the "old" technologies does achieve real reductions. That is why, over time, our air quality has improved. And, when we rebuild/refurbish old plants, we trigger rules that require additional air pollution control - which also reduces emissions.
This is not an economic analysis, of a bit OT perhaps. Just wanted to point our that there is a way of looking at the issue that is consistent with conventional Clean Air Act practice.
By Country Squire, at
Sat Mar 03, 08:18:00 AM:
Pudentilla’s points regarding thermostats and filters are all well intentioned and can be followed by all of us as simple means of conserving energy. However, what struck me about Vice President Gore’s electric bill is that after adjusting for the size differences of our respective homes, Mr. Gore still uses three times the energy that I do. And that’s before you factor in his air travel.
By TigerHawk, at
Sat Mar 03, 08:25:00 AM:
Nancy T:
Far be it from me to contend with you on environmental matters, but is it not the case that in the other situations in which "offsets" apply the emissions in question are subject to a cap? That is, there is a regulation in place that caps the total emission, so any new emission must be offset by a reduction, n'est-ce pas? There is no such cap for CO2, so the same logic does not apply. Unless I am wrong in my thinking, the absence of the cap eviscerates the value of the offset for the reasons I (and others with actual economic training) set forth. Now, Gore (I believe) advocates a CO2 cap, but until one exists it is unbelievably disingenuous to claim that offsets -- especially of the sort that Gore has claimed -- "make up" in any way, shape or form for his massive carbon footprint. Country Squire, I think, nails it.
By , at
Sat Mar 03, 08:30:00 AM:
Just as a note, this "offset" argument never seems to work for me when I try and justify having desert because I "offset" the calories by only drinking Diet Coke with dinner. While my wife may not object, my waist still seems to notice. Funny.
By Gordon Smith, at
Sat Mar 03, 08:53:00 AM:
Pudentilla makes an excellent point when she says,
"exxon to aei to tennessee center for policy research to Drudge to the blogs play on Gore."
This meme is part of a smear campaign, and, Tigerhawk, you're playing along. That's how the Wurlitzer works, even for bloggers who think of themselves as independent agents.
Gore gets smeared, thus reducing the credibility of his enviro message. Then folks won't have to worry as much about having government alter pollution standards. Whenever I read someone who's parroting Hannity, it just looks like the VRWC hard at work.
Hawk, you're a "conservationist from way back", but I haven't seen you expend a tenth of the energy promoting conservation as you do to tearing down this global leader in conservation advocacy. This speaks to priorities and to, dare I say, hypocrisy.
Put your posts where your mouth is.
By Gordon Smith, at
Sat Mar 03, 09:14:00 AM:
And, just my own curiosity, which is worse?
1. Al Gore flying in a private jet while touting conservation?
or
2. LINK - “The government [missing] all 34 deadlines set by Congress for requiring energy-efficiency standards on everything from home appliances to power transformers,”?
Number one is one man not reaching an ideal. Number two is the executive branch willfully ignoring the legislative branch despite the harm to our environment, our health, and our economy.
By Country Squire, at
Sat Mar 03, 09:50:00 AM:
Hey Screwy,
Have you considered that Tigerhawk's conservation and Vice President Gore's "conservation" are two different positions and that perhaps Gore's should be discredited because of his own deeds as well as the "science" he employs in support of his position?
By D.E. Cloutier, at
Sat Mar 03, 10:38:00 AM:
Re: Private jets
There are not many private jets in the world. They are too expensive to own and operate. And only about 300 TV and movie actors make more than $30,000 a year from acting. Most of the actors don't get enough work to earn more.
I sell aviation products. I use a private jet. When NASA has an emergency need for a spare part to launch a rocket, when the Israeli Air Force has an emergency need for a spare part to keep a jet fighter in the air, when an airline has an emergency need for a spare part to get you home safely from a business trip, they don't want me to tell them to wait for UPS.
By TigerHawk, at
Sat Mar 03, 11:12:00 AM:
DEC,
There are clearly applications for chartered jets. Presumably, the use of one to deliver a spare part quickly so that the military can keep a jet fighter in the air is a small increment to the carbon load of the fighter, and easily justified by the trumping need for speed. The question is this: Does that portion of the celebrity class (by which I include not just entertainment figures (including actors, professional athletes, musicians, etc.) but also politicians, "celebrity" businessmen, journalists, and so forth) which believes CO2 emissions are the great cause of our time see any inconsistency in using private jets for mere convenience?
Also, remember that fractional ownership has made private jet travel much more affordable by distributing the fixed costs...
By TigerHawk, at
Sat Mar 03, 11:14:00 AM:
Screwy,
Al Gore hasn't denied the allegations about his household energy consumption, so it is hard to call this a "smear."
As regular readers know, I have no problem with wealth or rich people and think taxes on income and wealth should be as low as humanly possible. However, I have a *huge* problem with conspicuous consumption. Perhaps it is the combination of my old WASP family and my Iowa upbringing, but I think that wealthy people should live their lives similarly to merely comfortable people. Drive your own car, get on the same commercial flights, wear normal clothes from normal stores and have a house that allows you to live comfortably without trying to impress anybody. So the truth is, I really dislike the flaunting of wealth, and I find it particularly offensive that the leading politicians of the left -- who specialize in class warfare -- at the same time cozy up to the celebrity class, which specializes in flaunting its wealth.
By D.E. Cloutier, at
Sat Mar 03, 12:02:00 PM:
TH: "...see any inconsistency in using private jets for mere convenience?"
I am not debating your core point, TH. At the same time most jet owners who must have a plane appreciate ways to recover some of the cost. Chartering is one way to get back some of your money.
Also, many privately owned corporate jets seldom go to a destination with only one passenger. My plane is usually full.
By D.E. Cloutier, at
Sat Mar 03, 12:52:00 PM:
This comment has been removed by the author.
By D.E. Cloutier, at
Sat Mar 03, 12:55:00 PM:
TH: "Drive your own car..."
Not wise in Third World countries.
TH: "...wear normal clothes from normal stores..."
Better clothes last longer. I wear Gucci shoes. My brother wears "normal" shoes. Over a 10-year period, I spent less on shoes than he did.
TH: "...live comfortably without trying to impress anybody..."
In today's global marketplace, people don't have time to get to know other people well. An expensive suit, an expensive pen, and an expensive briefcase imply success. Nobody wants to do business with a loser.
By TigerHawk, at
Sat Mar 03, 02:05:00 PM:
You've made these points before DEC, and far be it from me to argue with your method for success in business. My business is a bit different -- we sell very expensive products to hospitals that are under tremendous cost pressure. While the surgeons and hospital administrators that we deal with understand that our products are enormously expensive to develop, produce, and support (with clinical science and so forth), they do not want to think that we making huge profits off them. I am absolutely persuaded that the key to success in our industry is modesty, especially in attitude and appearance.
By D.E. Cloutier, at
Sat Mar 03, 02:31:00 PM:
I understand, TH. When I was younger, I had a customer who became angry because I drove an expensive car.
Several of my executive friends have two personal offices at work. One office is spartan for customers like your customers. The other office is elegant for other types of customers.
Conspicuous consumption creates jobs for average working folks (chauffeurs, carpenters, etc.). In a way, conspicuous consumption helps your fellow man.
By , at
Sat Mar 03, 03:02:00 PM:
The trickle down benefits of conspicuous consumption created a hgihly diversified underclass in Victorian London. Who's up for a bit of mudlarking? Or you could get a job as a crossing sweeper, pushing turds out of the way of well-heeled aristocrats. Recycling back then was left to those who peddled the dung to tanneries.
By D.E. Cloutier, at
Sat Mar 03, 03:06:00 PM:
GreenmanTim: "...pushing turds out of the way of well-heeled aristocrats."
We still have those people. They are called lawyers.
By , at
Sat Oct 13, 07:59:00 AM:
What disappoints me after reading the Comments section are people with differing ideologies fighting and protecting ideas on their sides, yet not seeing the sad truth. I have been unapologetically Liberal Left all my life, yet after reading recent news and reports on Gore, my respect for the person has dwindled, it is immaterial whether the Republicans are worse, or the Democrats are Satan's kids. The bottom-line is kick the ideology if it ends up hurting. No ideology is bigger than the individual.
