This has been a rough week in DC, but maybe we need some #energytwitter nerd threads to distract us. Today: why economy-wide GHG pricing doesn't work for the transportation sector, absent complementary policies.
1/ First, stipulate that "economy wide GHG pricing" is a supply/demand-set price per ton (or any other mechanism that treats all tons of GHG pollution as economically equivalent.)
2/ Suppose you buy a reciprocating engine to generate electricity. You run it 5 days/week, all year long, or 5x24x52 = 6,240 hours per year. When you make that investment, you plan on keeping it for 15 years before you have to replace it.
3/ Now suppose you also buy a reciprocating engine that in the form of your commuter vehicle (e.g., an IC engine). You have a 45 minute (each way) commute. You keep it for 15 years. That engine runs 45 minutes x 5 x 52 x 15 = 5,850 hours over the course of it's entire life.
4/ In other words, the same technology, but in one case used for power generation and in the other for transportation. In one mode you operate 6000 hours/yr, and in the other you operate it 6000 hours over 15 years.
5/ Since your fuel use is a function of operating hours (e.g., you don't burn gasoline while your car is in the garage), that means that fuel cost is ~15x as important to the investment thesis in a power plant as it is in a vehicle, all else equal.
6/ To put this in more personal terms: in the example above, if you average 35 mpg on your commute and get 27 mpg, you're spending $155/month on $4/gallon gas.
7/ I'll bet that's less than your monthly car + insurance payment. And note that if the price of gasoline moves by $1 / gallon, your differential cost is just $40/month.
8/ Which, by the way, is the same impact as a 25% change in fuel economy. The obvious implication being that in the (passenger) transpo sector, the economics of vehicle ownership are dominate by vehicle cost. In the heat & power sectors, the economics are dominated by fuel cost.
9/ Now let's bring that back to GHG pricing. GHG pricing, by definition is applied to the thing that emits greenhouse gases when burned - the fuel.
10/ Any price that is set at a high enough level to change the economics of the heat & power sectors & decarbonize will be too low to decarbonize transpo. And any price high enough for transpo will be way too high for H&P.
11/ Or, in economics parlance, the GHG price set in a supply/demand balanced paradigm will never clear at a high enough price to affect transportation economics.
12/ To be clear, we should - nay, MUST - put a price on GHG emissions. The point is just that decarbonizing the transportation sector will also require complementary policies that affect the price of the vehicle. I'm a big fan of feebates, personally: casten.house.gov/media/press-re…
13/ Another way to think of this for the financially inclined. How much more would you pay for a car that had zero fuel cost? e.g., in the example above, how much would you pay to save $150/month?
14/ If you are Homo Economicus rational and you are financing your car with a 7 year, 5% loan, you'd be willing to pay about $10,000 more for that car (since at anything above that level, your car payment increase > your fuel savings)
15/ Such a vehicle of course doesn't exist (Damn you thermodynamics!) but I think we can stipulate it would cost more than $10,000 more than Beck's current Hyundai.
16/ (Sorry for the obscure song reference - couldn't resist.) Point is, decarbonizing transportation requires policies to lower vehicle cost. Decarbonizing power and industrial sectors requires policies that price GHG emissions. /fin
Because there seems to be some confusion on this point. A $150/month car payment at 7 years would amortize a 5% loan. This is basic financial math, not a political statement on how much people should pay for fuel economy.
(Shorter version for those without any finance training: open Microsoft Excel on your computer. Click "help" and read up on the PMT function.)
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Just updated my regular look at what power sources are driving the US electric sector on a % basis. Nice cause for optimism. Renewables still growing. Coal use slightly increasing recently but all at the expense of natural gas - which is just economic switching.
e.g, markets are still preferentially deploying and dispatching in least cost order. (In non econ speak: people prefer cheap energy). The push to export LNG has predictably pushed up domestic gas costs giving coal a slight preference on the margin but renewables still win.
Here's a simpler look, just comparing zero carbon to carbon-based generation. We aren't where we need to be yet but the trends are steady.
Here’s a brief story, with receipts about Trump administration corruption and crypto industry collusion that WILL be investigated once the majority of the House is filled with people who take ethics and the Constitution seriously:
1. First, in November 2023, Binance (a large crypto exchange) pled guilty to money laundering and agreed to pay a $4 BILLION fine. Also, their founder CZ Zhao was sentenced to 4 months in prison. justice.gov/archives/opa/p…
2. Read that again. They pled guilty. They acknowledged their guilt. And agreed to pay a lot of money. And their founder and CEO went to jail.
Lisa Cook is ALLEGED to have committed crimes by a man who was CONVICTED of 34 felonies. Due process matters. A country based on the rule of law that attracts foreign capital because of that promise should be steadfast in opposition to her termination.
When I said yesterday that this was only about racism it kicked up a nest of trolls. But the second part is the one that hurts us all - white, black, racist and tolerant alike. We will all be poorer if the world loses faith in the US economy.
@JustinWolfers noted yesterday that really bad things happen when you don't have an independent monetary policy committed to low inflation and/or don't have an executive committed to upholding the rule of law.
Van Drew is of course full of shit. He's a disposable sycophant who gets some TV time prior to his disposal. But just to humor him, let's pretend for a moment that you are Dr. Evil and are setting out to tamper with our democracy. How would you do it? (thread)
1. It's worth going through this exercise because if you want to catch a criminal, you have to think like a criminal. So assume you have nefarious intent but want to minimize your chances of getting caught and spend the fewest possible resources to flip the most possible votes.
2. Everything Van Drew describes is actually really hard on both fronts. States have voter registries. Your ballot may be slightly different from your neighbors ballot a few blocks away because you're in a different fire/school/library/judicial/etc district.
Scott Bessent is a smart guy. But he only got the job as Treasury Secretary because Trump knows how to identify people who will roll over for him. Which is to say, he knows better. So let’s fact check his oped in today’s WaPo, shall we? washingtonpost.com/opinions/2025/…
1. First, if you want to understand what the crypto legislation that passed the House will actually do to financial markets, here are the facts.
2. Let’s define terms. “Blockchain technology” is just accounting. It’s a digital tag, tied to a digital purchase that records the buyer and seller. It is interesting, if not especially sexy. To the extent people can’t use it it’s because it doesn’t meet robust audit standards.
Just learned that Mike Johnson, before coming to Congress claimed to be the Dean of a law school named after a pedophile. Which may explain a few things. Notably…
… he then voted to table a resolution I introduced to compel the release of the Matt Gaetz ethics report, which also included significant allegations of underage sexual abuse. clerk.house.gov/Votes/2024490
Anyway, just worth pointing out that his decision to send the House home early rather than force release of the Epstein files is far from the first time he’s put the interests of sex offenders ahead of their victims.