Corn killed Bubba Gump Shrimp. "That's all I have to say about that". See how here.

Source: Big Picture Agriculture

Kay MacDonald over at Big Picture Agriculture has this graphic showing the "Dead Zone" in the Gulf of Mexico just off the coasts of Texas and Louisiana and the following comment:

"This year’s Deadzone in our Gulf of Mexico waters will be about the size of Connecticut. It is estimated that the Dead Zone causes losses of $82 million per year to the seafood and tourism industries. 

Much of it is caused by corn cropland fertilizer runoff that ends up going down the Mississippi River. Corn used to fuel cars – cropland used to feed cars, not people. In contrast, a healthy Gulf of Mexico sans Dead Zone would be capable of growing more shrimp, crabs, clams, and fish which humans love to eat."

This clearly illustrates an important concept in AP Microeconomics: Negative Externality.

Negative externalities occur when the production of a good imposes a cost (or costs) on third parties not involved in producing or consuming the good.

Farmers grow corn. The fertilizer used in the process becomes part of the run-off from irrigation and/or rains that make their way to streams and rivers then eventually the Gulf of Mexico in this instance.  The chemicals in the fertilizer destroy/damage the aquatic ecosystem that allow shrimp and other sea creatures to thrive.

Each farmers contribution to the problem is small but in the aggregate all farmers along the waterways that feed the Gulf of Mexico cause approximately $82 million dollars in lost revenues to fisherman of all types along the Gulf Coast.

This loss in revenue (a cost) is borne by the fisherman ("Third Parties") and not by the farmers and/or consumers of corn.

There are potentially 3 solutions to this problem:

(1) tax the producers and/or consumers of corn up to at least the amount of the damage--$82 million.
(2) impose a regulation forcing farmers to prevent the run-off hence the damage to the Gulf
(3) Farmers collectively agree to pay the fisherman $82 million for the damage they cause ("Coase" solution).

All 3 of these "internalize" the monetary value of externality and require the parties to the actual transaction to bear the full cost of the damage they impose.

Seems fair, doesn't it?

Nice graphic showing "what is" in terms of electricity generation as opposed to "what should be".

Just a reminder of "what is" in terms of electricity generation in the US (a positive statement), as opposed to "what should be" (a normative statement).  The graphic is from The Wall Street Journal.

"What is" is electricity from fossil fuels totaling 67%, nuclear 19% and all other classes of renewables 13%.

Efficient and effective policies to minimize the first and maximize the third are certainly welcome and needed.

Electricity produced from coal looms large and short of a miraculous technological advancement it will continue to be the dominant source for our immense electricity needs.

It is what keeps the lights on....

Source: The Wall Street Journal

Side by side comparison of drought conditions---today and 1934, a Dust Bowl year....

Here are side by side comparisons of drought conditions today and 1934, a Dust Bowl year.

A stark reminder of how bad the conditions really were back then.  Keep in mind how much MORE the average person depended on agriculture (directly or indirectly) as compared to today.  I look at this and can feel their fear!!

Source: USA Today

Nice graphic showing Americans are driving fewer miles... In general this is good, but maybe it is for the wrong reasons..

Number of the Week: Cutting Back On Driving

4.6 Billion: How many fewer miles traveled by drivers on U.S. roads in August than a year earlier:

Source: WSJ

These two graphs/charts don't synch up exactly, but you can see the direct relationship between the demand for gasoline and the miles driven over time.  The independent variable of course is the price of gasoline.

It is generally accepted that consumer demand for gasoline is relatively inelastic. This means that the percentage change in demand for a good is LESS than the percentage change in price.  In other words, consumers do not dramatically change their quantity demanded for a good when the price of the good changes.

In the case of gasoline, this is especially true when the price increases.  There is no immediate subsitute for gasoline in the short run---gotta have what you gotta have to satisfy how you have organized your life, job or business around, well, getting around.

This article and graphs suggest that the demand for gasoline has become MORE elastic in the last few years.  In other words, relative to previous gas price hikes, the percentage change in quantity demand for gasoline now is greater relative to the percentage change in quantity demanded for gasoline in a previous time period.  People are quicker to change behavior or have developed coping mechanisms the serve as subsitutes for consuming more gasoline:

""When gasoline prices started shooting higher earlier this year, U.S. drivers throttled back much more quickly than they used to in response to price increases. One reason why might be that the 2008 energy price shock is a recent enough memory that it’s easy for people to conserve. They still have the phone numbers of their old carpool buddies handy, and they know where the bus stop is. What’s more, with so many scarred by the recession and scared by the jobless rate, people seem quicker to cut back in response to price increases not just at the gas pump, but of any kind.""

It is certainly desirable for the country as a whole to consume less gasoline (hence oil) and drive fewer miles. However, the best way to achieve that is not through recession and economic hard times.  Improved transportation infrastucture, fuel effeciencies, and better consumer decision making would be far more preferrable.

Nice interview with Bill Gates on energy and the environment---He even uses the term Opportunity Costs...NICE!!!

In a discussion on energy, Mr Gates invokes the important economic term "Opportunity Cost". He uses it terms of using land to produce food for either human consumption or energy production.  Trying to solve one problem (clean energy) creates unintended consequences (well, dead people from starvation/malnutrition).  I encourage you to read the whole interview (rather short).  He has some good insights and touches on many behavorial economic concepts as well the state of alternative energy on a macro and micro level. 

Q&A: Bill Gates on the World Energy Crisis

Anderson: When you look at the big picture, where should we be focusing besides nuclear? On massive solar plants in the desert? On middle-size stuff for office roofs? Or is there a reinvention that could be done right in the home?

Gates: If you’re going for cuteness, the stuff in the home is the place to go. It’s really kind of cool to have solar panels on your roof. But if you’re really interested in the energy problem, it’s those big things in the desert.

Rich countries can afford to overpay for things. We can afford to overpay for medicine, we can overpay for energy, we can rig our food prices and overpay for cotton. But in the world where 80 percent of Earth’s population lives, energy is going to be bought where it’s economical. People are going to buy cheap fertilizer so they can grow enough crops to feed themselves, which will be increasingly difficult with climate change.

You have to help the rest of the world get energy at a reasonable price to get anywhere. It’s great to have the rich world, because we’re there to think about long-term problems and fund the R&D. But we get sloppy, because we’re rich. For example, despite often-heard claims to the contrary, ethanol has nothing to do with reducing CO₂; it’s just a form of farm subsidy. If you’re using first-class land for biofuels, then you’re competing with the growing of food. And so you’re actually spiking food prices by moving energy production into agriculture. For rich people, this is OK. For poor people, this is a real problem, because their food budget is an extremely high percentage of their income. As we’re pushing these things, poor people are driven from having adequate food to not having adequate food.

The most interesting biofuel efforts avoid using land that’s expensive and has high opportunity costs. They do this by getting onto other types of land, or taking advantage of byproducts that aren’t used in the food chain today, or by intercropping....""

The whole article is HERE...

Which food source emits the most earth destroying Carbon? Sorry, Mary, the lamb has to go...Nice chart not to be missed...



Source: Matthew Ygleasias

 Read all about it HERE...

Oil and Bio-Fuels clash...The winner? Better question--The loser? Answer--all of us.

Bad energy policies equal bad outcomes...Two reminders in as to why we need to wean ourselves off of oil AND why using food-for-fuel is NOT the way to do so. You are just subsituting one set of bad trade-offs for another. Can we do better than this?...By the way, I am NOT a hardcore "Greenie"  at all.  I just believe in utilizing resources in the most efficient manner. While oil may have served us very well in the past to get us to an unprecedented level of standard of living, I think diminishing returns are setting in with it and we need to move on to develop a new fundemental source of energy production.  Are we there yet? No...Are we working hard enough to get there? I don't really know, but I believe we should be moving a little quicker to do so. Howver, in my humble opinion, bio-fuels are not the way to go.  Where am I going wrong???
Yellowstone river suffers oil spill

""An Exxon Mobil pipeline that runs under the Yellowstone river in Montana ruptured on Saturday, leaking hundreds of barrels of oil and causing a 25-mile (40km) plume that has fouled the riverbank.

The breach in south-central Montana led to the temporary evacuation of hundreds of residents along a 20-mile stretch of the river, a key tourist attraction in the region that runs through the famous national park of the same name. Cleanup crews deployed booms and absorbent material as the plume moved downstream at around 7mph (10km/h):""....Read more HERE

Biofuels land grab in Kenya's Tana Delta fuels talk of war

""The eviction of the villagers to make way for a sugar cane plantation is part of a wider land grab going on in Kenya's Tana Delta that is not only pushing people off plots they have farmed for generations, stealing their water resources and raising tribal tensions that many fear will escalate into war, but also destroying a unique wetland habitat that is home to hundreds of rare and spectacular birds.

The irony is that most of the land is being taken for allegedly environmental reasons – to allow private companies to grow water-thirsty sugar cane and jatropha for the biofuels so much in demand in the west, where green legislation, designed to ease carbon dioxide emissions, is requiring they are mixed with petrol and diesel.""...Read more HERE

Graphs to help explain the MAIN reasons we will have higher oil and gasoline prices well into the future...





Which is better for the environment, fake Christmas trees or real ones? The answer may surprise you...

Which is better for the environment, fake Christmas trees or real?  If you are trying to conserve trees, then fake is the way to go. But if you are trying to conserve resources overall and minimize your "carbon footprint", then the choice is not so clear...

NYTIMES:  How Green Is Your Artificial Christmas Tree? You Might Be Surprised

""Kim Jones, who was shopping for a tree at a Target store in Brooklyn this week, was convinced that she was doing the planet a favor by buying a $200 fake balsam fir made in China instead of buying a carbon-sipping pine that had been cut down for one season’s revelry.


“I’m very environmentally conscious,” Ms. Jones said. “I’ll keep it for 10 years, and that’s 10 trees that won’t be cut down.”


But Ms. Jones and the millions of others buying fake trees might not be doing the environment any favors.


In the most definitive study of the perennial real vs. fake question, an environmental consulting firm in Montreal found that an artificial tree would have to be reused for more than 20 years to be greener than buying a fresh-cut tree annually. The calculations included greenhouse gas emissions, use of resources and human health impacts.


“The natural tree is a better option,” said Jean-Sebastien Trudel, founder of the firm, Ellipsos, that released the independent study last year""

“You’re not doing any harm by cutting down a Christmas tree,” said Clint Springer, a botanist and professor of biology at Saint Joseph’s University in Philadelphia. “A lot of people think artificial is better because you’re preserving the life of a tree. But in this case, you’ve got a crop that’s being raised for that purpose.”

Ok, rationality has left the building--to pass a tax bill that increases the deficit, Senate leadership offers incentives to reluctant Senators that will, well, increase the deficit...Will it ever end?

Why, oh, why does it have to be ethanol.  It is the one subsidy that has widespread support from the left and right to get rid of.  If they can't eliminate this one bad policy, I have little faith they can cut any spending on anything significant in the federal budget...Business as usual??

Reid Sweetens Tax Deal With Ethanol, Green Subsidies  

Senate Majority Leader Harry Reid, D-Nev., late Thursday unveiled a new version of the tax cut deal President Obama hammered out with Republicans. The package keeps the basic framework but adds several provisions clearly aimed at winning over wavering Democrats. Chief among them is an expansion of ethanol subsidies. The bill would extend existing tax credits on the additive as well as a tariff on imported ethanol.

What does ethanol have to do with expiring tax cuts? Well, Sen. Tom Harkin, D-Iowa., has slammed the deal but is also eager to preserve ethanol subsidies, a big deal in his corn-producing state.

The bill also extends tax credits for biodiesel and renewable fuels, energy-efficient homes, alternative fuels, manufacture of energy-efficient appliances, and investing in “alternative vehicle refueling property.” The provisions have been endorsed by the clean energy lobby and may help win over reluctant Democrats.

Additional article: Add-ons turn tax cut bill into 'Christmas tree'

For urban lawmakers, there's a continuation of about-to-expire tax breaks that could save commuters who use mass transit about $1,000 a year. Other popular tax provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, coal and energy-efficient household appliances would be extended through the end of 2011 under the new add-ons.
The package also includes an extension of two Gulf Coast tax incentive programs enacted after Hurricane Katrina to spur economic development in Mississippi, Louisiana and Alabama.

A few questions for the organizers of the Climate Change Summit in Cancun...First one, "Why are you not holding this conference in Chad or Niger?"...just askin'



Actual Conference Center:  Lots of damage to the eco-system to build this, no?

 I may be a bit critical here, but is it REALLY necessary to have a United Nations Summit on Global Warming in Cancun, Mexico?  Did they not have a summit recently in Copenhagen, Denmark?  Is it safe to say that 90% of the people at this summit (and the Copenhagen summit AND every other summit) know each other and have met on MANY occasions before? Do these summits cost LOTS of money? Does the UN NOT have a budget problem like most other entities? Rhetorical question: Where does the UN get its funding?  Could they have been sensitive to the plight of 99% of the rest of world that is struggling to get by, and held this summit using the latest and greatest technology to tele-conference?  Oh, and lest I forget, could they have REDUCED the carbon emissions they are trying to prohibit us from emitting by not flying hundreds/thousand(s) of people there in the first place?  Is that not the goal of these summits?

I am not against meetings at exotic locales (ok, I lied, I am against them especially when it is on someone elses dime), just meetings that at the outset EVERYONE knows will produce minimal results, if any.  I believe this group travels more than U2 on a concert tour....  wonder where the next stop will be and if I can get a Tee-Shirt...

Note: I DO care about the environment, but I don't care for feeble attempts at trying to solve a problem...Why don't they meet in sub-Saharan Africa so they can see problems first hand?  Guess that would not be as comfortable for them and the Margaritas are probably not as good either...

Al Gore is my NEW HERO! He expresses regret for his support for ethanol/corn subsidies... Brrr...It is cold here in Hades!

U.S. corn ethanol "was not a good policy"-Gore From Reuters:

Former U.S. vice-president Al Gore said support for corn-based ethanol in the United States was "not a good policy", weeks before tax credits are up for renewal...

"It is not a good policy to have these massive subsidies for (U.S.) first generation ethanol," said Gore, speaking at a green energy business conference in Athens sponsored by Marfin Popular Bank....

"First generation ethanol I think was a mistake. The energy conversion ratios are at best very small....

"It's hard once such a programme is put in place to deal with the lobbies that keep it going."...

He explained his own support for the original programme on his presidential ambitions.

"One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president."...

A food-versus-fuel debate erupted in 2008, in the wake of record food prices, where the biofuel industry was criticised for helping stoke food prices....

Gore said a range of factors had contributed to that food price crisis, including drought in Australia, but said there was no doubt biofuels have an effect....

"The size, the percentage of corn particularly, which is now being (used for) first generation ethanol definitely has an impact on food prices....

"The competition with food prices is real."