Can we construct adversarial electricity portfolios made of new zero-carbon resources that undermine the profitability of specific existing fossil plants? Some version of this is already happening, but it’s incidental rather than targeted. The economics of existing coal and nuclear plants are being eroded by flat electricity demand in combination with cheap gas, wind, and solar. Economical storage and dispatchable demand aren’t far behind. But how much faster would the energy transition be if we actively optimized new energy resources to undermine the economics of existing fossil generation?
In my last post, I suggested that while we like to think of housing as an investment, it’s really more like a crappy savings plan, potentially redeemed by the fact that you can live inside the piggy bank. Land can be a profitable speculative investment, but allowing land to appreciate and drag the cost of housing upward in real terms is fundamentally incompatible with housing being affordable.
Economists (including Adam Smith, David Ricardo, Thomas Paine, Henry George, Thomas Friedman, Joseph Stiglitz, and Matt Yglesias) have highlighted the negative impacts of allowing land owners to collect monopolistic “ground rents” but nobody seems to care. So now tens of trillions of dollars worth of real estate in the US is predicated on the idea that landowners get to retain these speculative gains. Barring a glorious Georgist Revolution, this is probably the arrangement we have to work within.
Build, Baby Build!
Luckily, in a city with increasing land values, where property owners get to keep all of those unearned financial gains, there’s an All American Capitalist Solution™ of sorts, which can potentially keep housing affordable, even when land is expensive: build more housing on less land. By building densely, high land costs can be shared across more households, reducing the overall impacts of expensive land, and allowing home buyers & renters to pay primarily for housing instead of land.
After more than two decades of growth and success, Fort Collins based New Belgium Brewing became 100% employee owned three years ago, with the employee stock ownership plan buying out the 59% of the company previously held by its founders. Today it sounds like they might be putting themselves on the auction block. With around 500 employees, and a potential valuation of a billion dollars, it’s not too hard to understand the temptation. That’s $2 million worth of company value per employee.
Our society’s prevailing economic zeitgeist assumes that everything has a price, and that both costs and prices can be objectively calculated, or at least agreed upon by parties involved in the transaction. There are some big problems with this proposition.
Externalized costs are involuntary transactions — those on the receiving end of the externalities have not agreed to the deal. Putting a price on carbon can theoretically remedy this failure in the context of climate change. In practice it’s much more complicated, because our energy markets are not particularly efficient (as we pointed out in our Colorado carbon fee proposal, and as the ACEEE has documented well), and because there are many subsidies (some explicit, others structural) that confound the integration of externalized costs into our energy prices.
The global pricing of energy and climate externalities is obviously a huge challenge that we need to address, and despite our ongoing failure to reduce emissions, there’s been a pretty robust discussion about externalities. As our understanding of climate change and its potentially catastrophic economic consequences have matured, our estimates of these costs have been revised, usually upwards. We acknowledge the fact that these costs exist, even if we’re politically unwilling to do much about them.
Unfortunately — and surprisingly to most people — it turns out that understanding how the climate is going to change and what the economic impacts of those changes will be is not enough information to calculate the social cost of carbon. Continue reading The Myth of Price
Sprawling single-family suburban development is more expensive than compact land use. There’s more infrastructure per capita and per unit area (pavement, power lines, water and sewage lines, etc), in conjunction with much lower tax revenues per unit infrastructure. This is true if you look at either the capital (up front) costs or the ongoing operational costs. Most subdivisions aren’t actually prepared to pay their own way when the bill comes due.
Share Everything: Why the Way We Consume Has Changed Forever. Sharing material goods makes it cheaper to use high quality, durable, well designed things, and the higher utilization factor means that many fewer things need to exist to satisfy everyone’s needs. It works especially well in urban areas where the geographic transactional overhead is small. This is a big piece of the dematerialization of our economy, and one of the most underappreciated reasons cities are a core climate solution.
A writeup by The Atlantic Cities of a paper in the Transportation Research Board journal of the National Academies looking at the effects of parking on the vitality of urban centers. It’s found that the detrimental effects of dedicating urban real-estate outweigh the potential benefits of making it easier for drivers to access your central business district. Those cities that stopped adding parking to their urban cores after 1980 were found to have more jobs and higher incomes on average than those that continued adding parking.
Orange County’s toll roads are unable to pay their own way, leading the state of California to investigate whether their administrative agencies are viable as a going concern. Obviously the situation is complicated by the fact that there are public highways (I-5 and I-405) that duplicate some of the connectivity of these tollways, but their financial duress would seems to suggest that when people actually have to pay, directly, to use freeways… they’re far less interested in footing the bill than when we socialize the resource, and force everyone to pay. This isn’t very surprising, but it does get one thinking: just how much of our infrastructure would we have never built if it was transparently priced? How many hundreds of billions or even trillions of dollars have we wasted on a polluting, oil dependent, dangerous, city destroying, obesity inducing means of transportation? If you’re going to subsidize something at the scale we’ve subsidized automobiles, you better be darned sure that the externalities that come along with it are positive! Hopefully this will serve as a wake up call to the beltway developers around Denver.
The New York Times looks at our national policy of paying to rebuild vulnerable coastal communities, no matter how ill advised their developments might be. In effect, we’ve encouraged people to upscale their beachfront shanties into expensive vacation homes, increasing the value at risk next time a storm hits. As the seas rise, ever more money will be sent down this gopher hole. Instead, we should prohibit future development, map out the most vulnerable locations, and draw up buy-out offers ahead of time, so when disaster strikes, it can be used as an opportunity to re-direct investment into less risky areas.