How the DOE deflated FutureGen

The NYTimes reports that the GAO released a report showing that in calling for the cancellation of FutureGen (the integrated IGCC, CCS, hydrogren demonstration plant), they compared the original estimated cost in constant dollars to a new estimate that was in current dollars.  Now to be fair, just last week I screwed up deflating some data.  To be reasonable, I was not determining the fate of a billion-dollar project:

According to the report, in calculating the costs of the project, the Energy Department mistakenly compared two numbers that should not have been used together. One cost estimate was made in so-called constant dollars, reflecting the purchasing power of a dollar in 2005, and the other in dollars as they would have been spent over the following few years, worth less each year because of inflation.

The Bush administration said the projected cost had nearly doubled, to $1.8 billion from $950 million; the auditors said it had gone to $1.3 billion, up 39 percent.

Ummm…this is not new.  I went to a hearing of the Energy and Water Appropriations Subcommittee back on May 8, 2008.  I never got around to writing a post, but looking through my old notes from that hearing, I can tell you with certainty that both Sens. Durbin and Dorgan directly asserted that the main source of cost overruns was due to inflation accounting.  Then-Secretary of Energy Bodman denied this, and kept claiming he didn’t know what the source of the overruns were, but that the other folks at DOE surely had the answer.

As it turned out, those in attendance only had to wait half an hour or so for the answer.  And it came from FutureGen chairman Paul Thompson.  To paraphrase, he said that the project cost was indeed $1.8 million — in nominal dollars.  That hearing was zeroing in on an answer.  Too bad Bodman left the hearing before Thompson gave his testimony.

Indeed FutureGen’s costs rose — as delays continued, it cost money to hold up construction, interest accrued, and so on.  But 50 percent of the overrun claimed by the DOE was due to a clerical error.  Competence and honesty points abound for the Bush administration.

The Wall Street Journal is an idiot

Yesterday I wrote about an egregious mistake made by the WSJ editorial page. While the error, confusing the carbon footprint of production with the carbon footprint of consumption, is substantial, it is a fairly nuanced subject. I talked with Evan and others about it and most people just assumed that some intern grabbed a chart of the WRI web page without really thinking about it. While the data were misleading, I didn’t really think the deception was intentional.

Which is why Dallas and I wrote a simple letter to the editor, explaining the nature of the mistake. Here’s what we sent:

In the Journal’s March 9 editorial “Who Pays for Cap and Trade?” the editors offer readers a bait-and-switch argument to assert that carbon cap-and-trade regimes would take from “working class” America and give to “affluent” citizens.

The editorial correctly notes that the cost of the cap would be borne mainly by consumers, not producers. It then includes a chart showing a large disparity in per capita emissions between states. But it fails to point out that the data relates to economic production, not consumption. This is a big mistake. Every household in Wyoming would have to pilot a private jet to reach carbon consumption of 154.4 tons. The truth is that while there is some variation in the carbon intensity of consumption across states, it is orders of magnitude smaller than what the editorial claims – thus severely overstating the degree to which cap and trade will burden some states and benefit others.

–Dallas Burtraw and Richard Sweeney, Resources for the Future, Washington, DC

Our communications department was also in contact with the editorial desk.

Then an hour ago we were informed that the Journal would not be running our letter. Apparently the editors either disagreed with our comment or simply did not think the mistake was important enough to alert the readers. I’m not sure which is worse.

This isn’t quite George Will wrong, but its prettyfrigginbad. Please disseminate.

World Bank: IGCC = clean technology

Oh dear god.  David Wheeler over at the Center for Global Development’s Views from the Center blog writes that the World Bank’s Clean Technology Fund Trust Fund Committee is voting on investment criteria that would make “best available coal technology” eligible for subsidy as a clean technology (it’s a good post).  I believe this refers to higher-efficiency IGCC plants that could hypothetically later be retrofitted for CCS.  I think that at this point, CCS is so untested at large scales that claiming IGCC plants to be low-carbon technology because of this potential extension is completely ridiculous.  Let’s just start clearing space for all the sweet fusion power plants that we might possibly build someday maybe.

I guess can see a situation in which investing in modern coal plants would increase energy efficiency and reduce emissions in the short term, to be replaced/augmented by low-carbon energy technologies (CCS, wind, solar) when the costs and technology uncertainty have decreased in the future.  In addition, it will probably be important for the developing world to have some capacity to start using CCS — if it works, if costs fall, and if there is no sufficiently prevalent superior alternative.  Regardless, under the present levels of uncertainty associated with scaling up CCS any time soon, the path dependency problem of subsidizing IGCC plants under the guise of clean technology is troubling.

Technology transfer is going to have to play an enormous role in solving climate change., but this is probably not the way to move forward.

John, Tim – HELP!

All of us at CT don’t even know how to begin to respond to this:

Seriously, Dr. Stavins, just because you haven’t figured out how to walk and chew gum at the same time, doesn’t mean nobody else can.

I’m hoping that Environmental Econ can help clarify Stavins’ point in a simple (and funny) manner. I can think of few people who have done more to advance environmental regulation than Rob Stavins, and find the whole post infuriating.

I’d just like to quickly point out that one of the related posts at the bottom of an article deriding environmental economists is titled “RFF Must Read – The Stern Report Got it Right”. Things to note:

• Apparently economists suck, except when they agree with climate progress
• Stavins is a university fellow at RFF
• Apparently RFF is “center-right”. WTF?

UPDATE: John weighs in.

And, another by the way, walking and chewing gum at the same time are much easier dual activities than cooking dinner in the shower. My guess is that Rob CAN, in fact, walk and chew gum at the same time. Stimulating a macroeconomy and cleaning the environment are both difficult things to do by themselves. Trying to do both at once is like, well, trying to cook dinner in the shower.

The RFA is also an idiot

From Greenwire (gated, sorry): Big ethanol The Renewable Fuels Association (RFA) has been lobbying the Obama transition administration proposed three major initiatives that are based entirely on good economics and policy and have nothing to do with the fact that their industry is floundering:

1. Give the ethanol industry $50 billion in federal loan guarantees for new infrastructure and capacity.
2. Automakers accepting federal bailout money must build all of their vehicles with flex-fuel capability starting with the 2010 model year.
3. Establish a tax credit for ethanol producers for each green job created.

The problem common across all of these is that they seem to presume that ethanol is a good idea.

The first one is not a categorically terrible plan because if we ever get second-generation biofuels up and running in an efficient, low-carbon, cost-competitive manifestation, we will need infrastructure to distribute it.  However, I don’t think that the ethanol industry needs any federal backing to expand capacity.

They seemed to be doing just fine on their own (if a 51-cent/gal blending subsidy equates to independence) until the last year or so, as is evident from this chart from the RFA itself.  To be fair, this boom was during the good times and things are tougher these days, but this kind of undermines the argument for loan guarantees.  Should we be shoring up the risk for an environmentally questionable endeavor while it seems exceptionally likely to fail?

The second request is preposterous.

The third is even worse.   First, let’s pretend that we can define a green job.  Think about possible loopholes in this tax law for about three seconds and you’ll see my problem.  Second, does anyone outside the RFA really think that a job producing first-gen ethanol should be considered green?  If so, my night job tending my tire fire should also qualify for a tax break.  If I never read the phrase “green jobs” again in my entire life, I’ll still consider myself overexposed.

Dubai is an idiot

Versace, the renowned fashion house, is to create the world’s first refrigerated beach so that hotel guests can walk comfortably across the sand on scorching days.

The beach will be next to the the new Palazzo Versace hotel which is being built in Dubai where summer temperatures average 40C and can reach 50C.

From here. More here.

H/T soil the ham nicely