Sunday, November 28, 2010

You Fix Budget

NYTimes interactive tool for exploring how to reduce the US deficit.

Thursday, November 25, 2010

Information Flow

Sometimes more information can make us dumber.

Princeton Professor Michael Oppenheimer has done some interesting research on negative learning.

Uncertainties in scientific models such as the mechanisms of climate change can cause consensus to coalesce around wrong numerical results. This becomes a problem when policy decisions need to be made sooner than consensus can find the true value. There are a lot of reasons why this happens, but it's pretty new and interesting field of research.

(I just finished writing my essays for the Princeton STEP program.)

Wednesday, November 24, 2010

Richard Kauffman on Energy Reform

Richard Kauffman (Professor, Yale School of Management; Former CEO, Good Energies; Former Partner, Goldman Sachs) gave a speech at the Coalition for Green Capital's "Future of Energy Reform" conference last week

Richard Kauffman's Speech

The problem is that the money is one place and the incentives are in the other. In particular, we do not have a financial structure that is effective or efficient in promoting renewable energy production or energy efficiency adoption.

Financial structure seems to be a vague term, perhaps with different definitions in different fields. I plan on looking into this more soon.

It seems that many clean energy projects cannot get the funding even though there is funding available.

Projects are funded with bank debt, even though the projects are long-dated assets.

project equity. The money is there, but obstacles prevent from flowing to where it is needed. While there are billions of dollars in funds eager to invest in wind and solar projects, the yield requirements of these funds exceed the yields the projects can offer. Infrastructure funds typically target 15-20 returns while, as noted above, returns the projects can deliver are less, 9-12 percent. Hence, even though these are objectively attractive rates of return, projects that could be built, aren't being built because developers can't find equity at these lower levels.

Kauffman ends by talking about how the US has focused on trying to build green industry by funding innovation instead of deployment or creating demand. Interesting! since I just wrote my NSF proposal about the impact of policies on clean technology diffusion (deployment), precisely because of the importance of post-adoption innovation. Innovation from deployment does not just lower costs because of scale. It lowers costs because of improved reliability, improved performance, experience and availability of human capital, and improved logistics.

Moore's Law is not an independent law of physics but rests on the role of markets; without a vibrant market into which to sell integrated circuits, the shape of the performance curve would look very different.


Subsidy and Tax Equity for Renewables

Sunset for a solar subsidy

One way to promote the clean energy industry is to have tax credits. Solar installation companies do no make much profit so tax credits are sold as "tax equity." Most costs are upfront capital rather than maintenance costs or consumables. Therefor costs depend heavily on interest rates, although I don't know exactly the mechanism for that. I suppose it is because you have to borrow to buy early, and then interest rates will change how much you have to pay back. Financing clean tech and other environmental management projects might be close to my interests.

In a conference call with reporters, another solar executive, Edward Fenster, the co-founder and chief executive of SunRun, a company that finances and installs solar equipment, pointed to another way that the current downturn has handicapped solar.

Friday, November 19, 2010

NSF Research Proposal

I applied for NSF again. I am concerned about being disqualified because of my grades, but they actually didn't really mention that last year, and at least this time I have a much better research proposal.

Impact of policy on clean energy technology diffusion in US states

Keywords: environmental economics, public policy, climate change, technology policy


Global climate change is a pervasive and hugely consequential negative externality stemming from energy consumption that needs to be managed in order to ensure prosperity for generations to come. Substituting clean energy generation technology such as wind and solar for fossil fuels is a primary component of mitigating climate change. Dominant carbon emissions reduction policy tools are carbon emissions taxes, emissions trading systems, and renewable portfolio standards for clean energy. Technology diffusion is a particularly challenging stage of technological innovation in the energy industry. Understanding the effects of policy on clean energy technology diffusion in each state is central to fostering cooperation amongst states and developing effective policies for reducing US carbon emissions.

Environmental Economics Theory To Do

Sunday, November 7, 2010

Fair Complaints or Whiny Liberals?

It grates on me when liberal commentators like Frank Rich complain about how the Obama administration is not being clear enough about the game plan. On the one hand, they are valid complaints, but on the other hand, they're supposed to be the journalists, so why don't they figure out the game plan, and then tell us about it. Instead, they are just stoking people's anger so that even people who should be supportive of the president's agenda are angry at him. Then, people are demoralized and discouraged instead of pitching in to build support. Frank Rich complains that Obama isn't explaining the tax cuts well to the American people, and he gives some suggestions, which is great. However, aren't there journalists and other people who could be explaining the tax cuts to the American people? There is only one Obama, and even though I also wish the communication and political maneuvering could have been much better, there's only so much one person can get around to doing. I am pretty certain that if we had 10 or 20 Obama's, things could be better, but there is only one. I think liberal commentators and activists need to get better at actually being helpful.

Saturday, November 6, 2010

Externalities of Deep Ocean Drilling

It's not completely conclusive, but coral reefs seem to have died as a result of the oil spill. I'm not sure how you would price this, though, since it is not really known how much value living coral reefs are. This is why I think it would be difficult to price all the externalities of carbon emissions.