July 31, 2006

Blair and Schwarzenegger Form Carbon Trading Coalition of the Willing

Prime Minister Tony Blair signed a carbon-trading letter of intent with California Governor Arnold Schwarzenegger. The Guardian reported this as a step around the current federal administration's opposition to mandatory carbon caps and the Kyoto accords. Top managers from British Petroleum and the Climate Group attended the meeting in Long Beach, California at which the accord was reached. The pact would add California's volume of emissions and stake in the environmental impact of global warming to that of the European Union.

The European Union has a legally mandated carbon cap-and-trade program. In California, polls indicate that climate change is the biggest issue among voters, according to the Guardian. Guardian Unlimited | Special reports | Blair signs climate pact with Schwarzenegger

According to the BBC, some 12,000 major emitters in the EU have been allocated CO2 emission allowances. The allocations are obligatory, not voluntary. Going over the emission allowance without buying offsets in the EU carbon trading market will earn the emitter monetary penalties for each ton of CO2 over their allocation. BBC NEWS | Science/Nature | Q&A: Europe's carbon trading scheme (BBC, Nov. 23, 2005)

The European Environment Agency has published a technical report on the application of the Emissions Trading Directive by Member States. The report is based on information in Member States' annual reports under Article 21 of the Directive and covers the period from 1 January – 30 April 2005.Application of the emissions trading directive by EU Member States (European Environment Agency Technical Report No. 2/2006)

See also: Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC That link includes links to other organic legislation and regulations of the European Union.


Posted by dougsimpson at 08:29 PM

July 29, 2006

Renewable Fuels Materials and Conference at Iowa State Univ.

Experts from Iowa universities provided the Iowa General Assembly with science based information on on ethanol, biodiesel and other bio-based alternative fuels in January of 2006. Available slides summarize their remarks on energy balance, performance, tax incentives, mandates and sustainability. View the presentation:

Text from the four summary pages closing the 87-page slide presentation follow below the fold:
(read more)

Summary: Energy Balance
• All processes, including ethanol and gasoline
production, consume more energy than you get out of
• Differing perspectives on energy balance of ethanol
plants reflect wide range of operating performance
among real plants.
• Modern plants have favorable energy balances, but
we can do better — advanced biofuels production
technologies currently under development.

Summary: Performance
• E10 delivers 96% and E85 80% of MPG of gasoline. All
biodiesel delivers nearly same MPG as diesel.
• Ethanol must avoid water. Distributed by more
expensive systems than gasoline.
• Markets for biofuel co-products (DDGS, soy meal)
are important. Co-products will compete with each
other and with alternative feed ingredients.
• About $2.5 billion for Iowa. About $3 is added to
every corn bushel for ethanol, DDGS use.

Summary: Tax Incentives and
• Biofuels receive significant federal/state tax subsidies
and incentives. Petroleum fuels have long history of
subsidies and incentives.
• To make renewable fuels competitive, promote energy
security and improve air quality, federal and state
governments attempt to level playing field with tax
subsidies and incentives.
• Iowa has incentive and comparative advantage
(feedstocks) to compete with other states for biofuels
growth, jobs and rural incomes.

Summary: Sustainability
• Risks: soil erosion, soil carbon, climate change, fuel
depletion, environmental pollutants.
• Benefits: energy security, displacement of
nonrenewable fossil fuels, carbon neutrality.
• Corn to ethanol (and biorenewables) offers
comparative advantages compared to fossil fuels if
risks properly managed.
• Other plant-based systems (i.e., switchgrass) offer
added advantages.

Found at The Office of Biorenewables Programs, which provides materials highlighting the activities of the BioEconomy Initiative at Iowa State University. The OBP provides a reading list of publications which provides introductory material on the production of energy, fuels, chemicals, and materials from biorenewable resources.

The OBP also includes information about the 2006 Biobased Industry Outlook Conference scheduled for August 28-29, 2006 in Ames, Iowa. According to OBP:

  • "The 2006 conference will focus on the financial, scientific, equipment, and educational investments that will be needed in order for U.S. agriculture to supply a significant portion of U.S. energy needs, while maintaining production of food, feed, and fiber. Targeted audiences include economic development professionals, lenders, venture capitalists, biobased product manufacturers, bioprocessing engineers, agricultural producers, fuel producers, energy providers, and elected officials.


    Posted by dougsimpson at 08:47 PM | Comments (0)
  • July 28, 2006

    IREA letter and contributions debated at RealClimate.org

    Real Climate has archived an image of the letter recently sent from IREA to other utilities, along with comments and responses from their readers. Intermountain Rural Electric Association (IREA) General Manager Stanley R. Lewandowski's July 17 letter objected that proposed carbon caps and observance of the Kyoto Treaty would add to electricity costs and announced IREA's $100,000 contribution of customer funds to global warming skeptic and climate commentator Patrick Michaels. In addition to soliciting help countering Al Gore's film"Inconvenient Truth,". Lewandowski alleged that that TV ads by the Competitive Enterprise Institute (CEI) "were financed by General Motors and the Ford Motor Company."

    RealClimate's post includes copies of statements from both auto companies acknowledging support of CEI but denying involvement or approval of the ads in question. "RealClimate » Disinformation? You want it, IREA's got it"

    Seth Borenstein's piece in the Washington Post, "Utilities Give Warming Skeptic Big Bucks" (July 27, 2006), also addresses the IREA letter and contributions, with commentary on both sides.

    In the interests of full disclosure, I receive funding from no one for my posts in Unintended Consequences. I do this in my spare time and maintain my modest website with my own money. I do so because I am very concerned that we are leaving a heavily damaged climate to my 19 year old daughter, as well as to billions of innocent people across the world who I believe will have to suffer for the temporary prosperity of the developed and some developing nations.


    Posted by dougsimpson at 05:27 PM

    July 27, 2006

    Rural Electric Coop IREA Gives Customer Money to Denier of Global Warming

    A rural electric cooperative based in Sedalia, Colorado, the Intermountain Rural Electric Association (IREA) has a big investment in coal-fired power plants, according to ABC News. A broad consensus of scientists recognize burning coal as a heavy contributor to dangerous global warming through emission of the greenhouse gas carbon dioxide.

    ABC News obtained a copy of a nine-page document that IREA general manager Stanley Lewandowski Jr., sent members of the National Rural Electric Cooperative Association. In it, Lewandowski condemns carbon taxes and caps on greenhouse gases. He also admits using $100,000 in IREA customer money to fund Patrick Michaels, a professor of environmental sciences at the University of Virginia. Michaels, a Cato Institute senior fellow and author, is one of a handful of scientists who deny the impact of global warming and that human emissions of greenhouse gases are the primary cause.

    Colorado consumer advocates have condemned IREA's contribution of customer money as a breach of trust and an extraordinary expenditure for a rural cooperative, especially without consulting the customers.

    Kevin Trenberth of the National Center for Atmospheric Research (NCAR) in Boulder, Colo. pointed to IREA's action as part of "a well-organized and well-funded effort to undermine the science and cause confusion in the minds of the public," from which a few contrarians such as Dr. Michaels have benefited.

    ABC News quoted Lewandowski as defending his expenditure, saying : "I'm trying to keep the low rates for our customers. And I'll do anything in my power to try and do that."

    ABC News: Making Money by Feeding Confusion Over Global Warming

    According to a March 26, 2006 piece by ABC News, a 1998 memo by the American Petroleum Institute said, "Victory will be achieved when ... average citizens recognize uncertainties in climate science." ABC News: Was Confusion Over Global Warming a Con Job?

    These tactics are very familiar to anyone who followed the decades of disinformation tactics by Big Tobacco against public health advocates like the U.S. Surgeon General. Big Oil's memo sounds sadly like the internal tobacco company memo that stated: "Our product is doubt." American Lung Association of Minnesota: "Our Product is Doubt"

    Thanks to Knight Science Journalism Tracker » Blog Archive » ABC News: A coal-happy Colorado electric company sends big money to global warming skeptic (July 27, 2006).


    Posted by dougsimpson at 07:54 PM

    Press, Coulter & Crichton Cherry-Picked Paper, Author Sets Record Straight

    Peter Doran, co-author of a 2002 paper in Science about climate changes in Antarctica, wants to set the record straight. Despite mischaracterization by media and outright "misuse" by Michael Crichton and Ann Coulter, Prof. Doran writes in the New York Times: "I would like to remove my name from the list of scientists who dispute global warming. I know my coauthors would as well." Cold, Hard Facts - New York Times (July 27, 2006)


    Posted by dougsimpson at 07:43 AM

    July 26, 2006

    Addicted to Cheap Insurance, South Florida Businesses in Withdrawal

    The Miami Herald points to the recent spike in business property insurance costs as threatening the continued strength of the South Florida economy. "The massive collapse of the hurricane insurance market for Florida businesses has morphed from an economic headache just weeks ago into a clear and growing threat to the region's economic vitality, experts say." MiamiHerald.com | 07/22/2006 | 'A crisis' for business in Florida (July 22, 2006)

    Unlike homeowners, commercial property owners have no "insurer of last resort" provided by the State of Florida. Some businesses are "going bare," others are accepting higher deductibles or deliberately under-insuring their business properties. Others are talking about moving their operations out of South Florida. For some, lender restrictions leave them fewer choices.

    The binge of building in the storm-threatened South Coast has for years depended on cheap insurance, short-sighted building codes and zoning decisions and deliberately subsidized federal flood insurance. See, e.g. Unintended Consequences: Government Policies Increase Hurricane Damage: Climatologists (July 26, 2006). It may not have seemed cheap at the time, as state and federal regulators and aggressive competition kept the cost of development and rebuilding low.

    (read more below the fold)

    Hurricane Katrina and Rita reminded insurers and reinsurers of the vulnerability of the coastal zone to really big storms that cause massive catastrophe losses. As a result, the "weak hands" have folded and left the game. Some insurers have been closed by the Insurance Department for lack of sufficient reinsurance, and others have voluntarily reduced their policycount and raised premiums, with the approval of the Insurance Department. Reinsurers, many of them European and Asian giants beyond the regulatory reach of local politicians, have brought back market discipline. See "Unintended Consequences: Reinsurance shortages shutter Florida insurers" (July 21, 2006)

    Economic discipline is sometimes hard for the local economy and local politicians to accept. In similar situations, other states have given in to the temptation to install "quick fixes" to counteract natural free market forces. Those quick fixes may tax the general population to subsidize coastal insurance, may saddle insurers with the deficits of "residual market" plans, or may attempt to "lock in" insurers at inadequate rates or unreasonable terms.

    Any of those choices only postpone the inevitable bill for costs of over-building in harm's way. The temptation is real to put those costs off to a later administration, to a time after the next election, after the next fiscal year. The temptation is real to "whistle past the graveyard" and hope that the next big one won't hit while you are underinsured or "bare." But the future eventually catches up, and yesterday's expedience becomes today's disaster.

    As Knowledge Problem points out, the future has arrived in Queens, where years of politically expedient decisions to put off investment in electric generation and conservation infrastructure have caught up with hundreds of thousands of customers left for days without light, air conditioning or refrigeration during a lingering heat wave. Risk Prof comments: "Political institutions do not care about capacity (until it is too late) as long as prices are low. This is exactly the same problem Florida has for insurance and reinsurance capacity." RiskProf : Queen's Blackout is Related to Florida Hurricane Crisis (July 26, 2006).

    Thanks to: RiskProf : More on Business Property Insurance in Florida (July 24, 2006)


    Posted by dougsimpson at 05:24 PM

    Government Policies Increase Hurricane Damage: Climatologists

    Ten leading experts in climatology disagree on whether or not global warming is making hurricanes stronger. They do not disagree that continued development in coastal regions in harms way means that hurricanes will be more destructive in the future than they have in the past.

    As they say in their statement: "Rapidly escalating hurricane damage in recent decades owes much to government policies that serve to subsidize risk. State regulation of insurance is captive to political pressures that hold down premiums in risky coastal areas at the expense of higher premiums in less risky places. Federal flood insurance programs likewise undercharge property owners in vulnerable areas. Federal disaster policies, while providing obvious humanitarian benefits, also serve to promote risky behavior in the long run."Climate Experts Warn of More Coastal Building - New York Times (July 25, 2006).

    A copy of the statement signed by the experts is on the Kerry Emanuel's Homepage, Dr. Emanuel is a Professor of Atmospheric Science at M.I.T. and the author of "Divine Wind: The History and Science of Hurricanes" (Oxford Univerisity Press, Sept., 2005)


    Posted by dougsimpson at 12:02 PM

    Economy Absorbing Recent Oil Price Rise : CBO Study

    The doubling of the price of crude oil in the last three years had less effect on the overall U.S. economy than comparable price shocks of the 1970's, according to a recent study by the Congressional Budget Office.

    From the Summary: "Contrary to general expectations, the large and persistent rise in energy prices that has occurred over the past two and a half years has not caused substantial problems for the overall U.S. economy. Although many households have had trouble adjusting to the higher prices, the effects on the nation’s gross domestic product (GDP), employment, and inflation have thus far been moderate."
    * * *
    "The nation’s experience with oil price increases in the 1970s led many people to believe that such increases would lead to sharp slowdowns in economic growth and persistently higher inflation. The absence of such severe effects in recent years has thus been surprising."

    Staff from the CBO's Macroeconomic Analysis Division wrote the 36-page study with the assistance of people at UCSD and Ford Motor. The study includes useful charts and graphs comparing economic data over the last 40 years. CBO - "The Economic Effects of Recent Increases in Energy Prices" (July 2006).

    The public benefits of a capitalist system are lost if the inefficient are protected and the efficient penalized. One necessary consequence of letting the system work is that some short-sighted enterprises will fail or be absorbed by the more fore-sighted. That evolutionary system has proven over generations to build a strong economy. We weaken ourselves by using public funds to protect businesses that have proven short-sighted and inefficient, without some counterbalancing public benefit.

    Various interest groups may choose to exploit a generalized fear of economic or strategic harm due to high energy prices to promote favored government treatment of their client industries. Some of those have fattened themselves in times of cheap energy by selling high-margin products that fulfill individual fantasies at the expense of public safety and welfare.

    This report provides data valuable to evaluate pleas from such legacy industries that want public protection from the souring of their once-profitable corporate bets on low energy costs. See, e.g. Unintended Consequences: Senator Obama on Health Care for Hybrids (June 30, 2006) and Unintended Consequences: Gas prices hammer sales of inefficient vehicles (July 4, 2006)

    Thanks to beSpacific: Economic Effects of Recent Increases in Energy Prices (July 21, 2006)


    Posted by dougsimpson at 08:41 AM

    July 25, 2006

    Hybrids' Contribution to Oil Savings

    Union of Concerned Scientists Clean Vehicles Engineer Don MacKenzie testified on July 20, 2006 before the Energy and Resources Subcommittee of the House Committee on Government Reform. He was one of four witnesses on the topic "Hybrid Cars: Increasing Fuel Efficiency and Reducing Oil Dependence" He posted a transcript of his remarks at HybridCenter.org.

    He put forth hybrids as one part of a three part approach that will:
    "1. Reduce the amount of fuel consumers burn by increasing fuel economy standards;
    2. Reduce the number of miles that our vehicles are being driven; and
    3. In the long term, replace the petroleum fuels that we are using with sustainable, low-carbon alternatives."

    He compared true hybrids that reach for fuel efficiency to "muscle hybrids" and "hollow hybrids" that claim hybrid technology but that sacrifice or omit technologies that result in high fuel efficiency. Don encouraged manufacturing incentives tied to fuel economy and increased fuel efficiency standards. Hybrid Watchdog: Hybrids' Contribution to Oil Savings

    The Committee's website on the hearing includes:

  • Hybrid Cars Briefing Memo
  • Testimony of Dr. Andrew Frank, Director, University of California-Davis Hybrid Electric Research Center
  • Testimony of Mr. David Hermance, Executive Engineer, Toyota Motor North America
  • Testimony of Mr. John German, Manager, Environmental and Energy Analyses, American Honda Motor Company

    Thanks to HybridBlog: House Hearing on Hybrids


    Posted by dougsimpson at 07:44 PM
  • July 21, 2006

    Reinsurance shortages shutter Florida insurers

    Florida insurance regulators took control of the first insurance companies lacking sufficient reinsurance in the face of the coming hurricane season. Florida Select writes about 70,000 homeowners policies and is the 20th largest insurer in the state, according to the Business Journal of Jacksonville. The list is expected to grow as global reinsurers pass through the expected cost of more damaging coastal storms. Once an insurer is declared insolvent and ordered liquidated, the cost of hurricane claims can be passed to the Florida Insurance Guaranty Association (FIGA), which passes them in turn to all other insurers continuing to write in the state. Reinsurance crisis may spark more takeovers - The Business Journal of Jacksonville: (July 17, 2006).

    State Farm received approval of an average 52% rate increase for homeowners and 70% for condominium owners, with the biggest increases in coastal areas. According to the South Florida Sun-Sentinel and other media outlets. The cost and availability of reinsurance is driving the increases, which are as much as 94% in parts of Brevard County. Following Katrina, reinsurers are rebuilding capital and surplus and re-assessing risks and the likelihood of increasing damage from coastal storms. State Farm rate hikes hit coast hardest - Orlando Sentinel : State News State Farm rate hikes hit coast hardest - Orlando Sentinel : State News (July 19, 2006)

    The second severe storm in a week struck St. Louis this week, leaving 200,000 electric customers without power, days after over 500,000 were blacked out. Ameren, the local power company for over a century, said the earlier storm was "the worst storm in company history," almost half of its 2.4 million customers in two states were out. New storm socks Ameren St. Louis customers - Yahoo! News (July 21, 2006).

    Many climatologists associate global warming with increased hurricane activity and more intense thunderstorms and inland flooding, as warmer oceans put more water vapor into the warmer atmosphere. For additional readings on the reaction of the global insurance community to the climate changes brought on by human activities increasing greenhouse gases in the atmosphere, see: Unintended Consequences: Insurers "Feeling the Heat" of Climate Change (July 9, 2006)


    Posted by dougsimpson at 07:01 PM

    July 14, 2006

    Weart: Discovery of Global Warming

    Dr. Spencer Weart, physicist and historian, is Director of the Center for History of Physics of the American Institute of Physics. He has prepared an extensive suite of historical and scientific material online, all hyperlinked and footnoted, which supports his most recent book, "The Discovery of Global Warming" (Harvard University Press, 2003).

    Climate Change: Discovery of Global Warming is mounted on the Web site of the Discovery of Global Warming site at the the American Institute of Physics, supported by the National Science Foundation and the Alfred P. Sloan Foundation. Spencer Weart has a bachelor's degree in physics from Cornell and a Ph.D. in Physics and Astrophysics from the Univ. of Colorado.

    Thanks to RealClimate -- The Discovery of Global Warming


    Posted by dougsimpson at 02:46 PM

    July 13, 2006

    Watch Discovery Channel's 'Global Warming - What You Need to Know '

    Though I've long considered myself an environmentally responsible person, composting all my leaves and grass clippings for the last 25 years and selecting relatively fuel efficient vehicles, I did not become truly worried until this year when I became aware of the science about global warming.

    One element in that was reading Jared Diamond's powerful book Collapse : How Societies Choose to Fail or Succeed, in which he examines the archeological and historical record of how certain ancient civilizations chose to fail at the very peak of their wealth and power, usually by sacrificing their environment to short-term cultural, political or economic interests.

    Another was viewing Al Gore's must-see film "An Inconvenient Truth", in which Gore presents in plain speech and images the information detailed in his 1992 book Earth in the Balance : Ecology and the Human Spirit. I agree with the New Yorker's David Remnick that it might be the most important film of the year. Yet, as I watched the film, I wished it included sidebar information that would provide the supporting sources for the science Gore presents. Gore's assertions are one thing, having source material another.

    Provided the opportunity to preview the Discovery Channel's "Global Warming: What You Need to Know" I found that it provides both the dramatic imagery of the ongoing research, the present-day impacts of climate change, and interviews with the actual scientists who have documented the facts. Hosted by Tom Brokaw, the 2-hour program illustrates the overwhelming consensus among the science-based community that the earth's oceans and atmosphere are warming because of human greenhouse gas emissions, will continue to warm, and what the present and future consequences are in this country and around the world.

    Like Gore's film and companion book, it does not dwell on the political and business interests that have worked to deny the reality of the climate crisis, but focuses on the solutions that are available using present day technology. Gas-electric hybrid autos, E-85 ethanol, wind and solar power, as well as carbon sequestration programs are among the technologies offered as available solutions.

    I recommend that you watch and discuss it with your family, your friends and your elected representatives.

    "Global Warming: What You Need to Know" premieres on the Discovery Channel on Sunday evening, July 16 at 9 PM ET/PT.


    Posted by dougsimpson at 07:12 AM

    July 12, 2006

    Scientists: Corn-based ethanol won't be enough

    Tracing the full life-cycle of production of several biofuels shows that corn-based ethanol provides marginal help to reducing dependence on foreign oil and reduction of greenhouse gases (GHG). Counting all inputs including the petroleum and GHG costs of fertilizer, cultivation, and conversion to ethanol, corn-based ethanol yielded only 25% more energy than put in. Soy-based biodiesel yielded 93% more. Other sources are still in the research stage.

    Either way, the study by Univ. of Minnesota ecologists, biologists and economists says that there is not enough farmland in the U.S. to produce the crops needed to replace petroleum. Also, directing large quantities of corn or soybeans now used for human and cattle feed would drive up the cost of food for humans. U of M: U News Service: News Release: U of M researchers identify energy gains and environmental impacts of corn ethanol and soybean biodiesel and propose alternatives for the next generation of biofuels

    The original article abstract: Environmental, economic, and energetic costs and benefits of biodiesel and ethanol biofuels -- Hill et al., 10.1073/pnas.0604600103 -- Proceedings of the National Academy of Sciences (free). The full article itself in PDF format is available to PNAS subscribers or for a one-time fee at: PNAS -- Sign In Page.

    Federal promotion of E-85 may be very good for the large agribusinesses that produce the bulk of the corn and soybeans in the America, which are already the beneficiaries of complex and controversial federal subsidies and price supports (See Washington Post, "Growers Reap Benefits Even in Good Years", July 3, 2006) and crop insurance subsidies that the GAO calculates at $2.5 billion each year, including an estimated $117 million in fraud, waste and abuse. "GAO - Crop Insurance: More Needs To Be Done to Reduce Program's Vulnerability to Fraud, Waste, and Abuse GAO-06-878T June 15, 2006".

    Policy makers should take with a grain of salt those promoting ethanol and E-85 as if they were a solution to our energy and climate crisis. Even E-85 hybrids are subject to the supply/demand problem of corn ethanol (See Hybrid Cars - What's Next for Hybrids? E85 Hybrids.)

    Automakers opting for E-85 programs may be forming an alliance with a limited future if consumers realize that an "Organization of Corn Ethanol Producers" (OCEP) has replaced the "Organization of Petroleum Exporting Countries" (OPEC) as the puppet master of America's auto fleet.

    As Tom Whipple wrote in May: "A food vs. fuel debate has already broken out between Cargill and Archer, Daniel, Midlands (ADM), the two giants of the US agribusiness. While addressing a group of business writers, the CEO of Cargill said he saw the production of food as the most important task of agriculture. He pointed out that if the entire US corn crop were used for fuel, it would only replace 20 percent of US gasoline consumption.

    The next day, the chairman of ADM retorted that the world has plenty of capacity to grow food. He maintains "there is no consumption vs. combustion debate" and that hunger and malnutrition around the world come from "a lack of infrastructure and a lack of capital." ADM is producing about 1 billon gallons of ethanol a year and plans to increase this to 1.5 billion.

    * * *
    If current trends continue much longer —crop destroying droughts, hurricanes, increasing energy prices, and the construction of ethanol plants— it is obvious that food is going to become more expensive, probably much more expensive. * * * There are acceptable alternatives to putting corn into your gas tank such as slowing down, staying home, taking a bus, or joining a car pool. There are no substitutes for eating."
    Falls Church News-Press -- "Peak Oil Crisis" (May 2006). (Thanks to: EnergyBulletin.net)

    Well said, Tom.


    Posted by dougsimpson at 05:11 PM

    July 09, 2006

    Insurers "Feeling the Heat" of Climate Change

    The present and future crisis of climate change, already driving up insurance losses, threatens investment portfolios as well. Insurance companies have been described as a combination of risk spreader and mutual fund. As such, they face a compound exposure. First, from increased losses due to stronger and less predictable windstorms, wildfires and floods. Second, due to the coming decline in value of investments in companies unprepared for the change in climate or regulatory response.

    Joel Lang, in "The Insurance Industry is Feeling the Heat of Global Warming," Hartford Courant, Northeast Magazine (July 9, 2006) provides a concise briefing on the responses of leading insurance giants and public investment managers, including Lloyds of London, Marsh, Inc., American International Group (AIG), Risk Management Services (RMS), the investment coalition Ceres and the State of Connecticut's Treasurer Denise Nappier.

    Ceres, an investor coalition formed to promote environmentally responsible corporate actions, offers Ceres Publications that include Availability and Affordability of Insurance Under Climate Change: A Growing Challenge for the U.S. (Dec. 2005), which includes a postscript on Hurricane Katrina.

    One of its authors, Even Mills of the U.S. Department of Energy, wrote "Insurance in a Climate of Change," (Science, 12 August 2005), in which he described the $3.2 trillion insurance industry as a "lightning rod" for disruptions to the global economy.

    Ceres manages INCR, Investor Network on Climate Risk, of which the State of Connecticut is a member. State Treasurer Denise Nappier, fiduciary of $23 billion in Connecticut retirement and trust funds, is one of the INCR participants pushing for greater disclosure of climate change risks by publicly held companies. INCR News - "$1 Trillion of Investors Call on SEC To Require Corporate Disclosure on Financial Risks of Climate Change" (June 14, 2006).

    At Marsh, Inc.'s resource page on climate change, it offers a Risk Alert - Marsh - "Climate Change: Business Risks and Solutions" - that looks at the complex global issue from a risk management perspective. (free download, online registration required). Marsh affiliate NERA Economic Consulting provides additional information on the economic impact of climate change. NERA Economic Consulting | Focus Area.

    Lang's article quotes AIG's policy statement accepting the reality of human-driven climate change: "AIG recognizes the scientific consensus that climate change is a reality and is likely in large part the result of human activities that have led to increasing concentrations of greenhouse gases in the earth's atmosphere." AIG’s Policy and Programs on Environment and Climate Change

    Lloyd's of London, an important source of reinsurance and catastrophe insurance, has warned insurers in a May 6, 2006 press release that they "must act now to understand and actively manage risks from emerging threats such as greenhouse gases and rising sea levels. With recent scientific evidence suggesting that climate change is happening faster than previously thought, investment in research and a change in industry behaviour is long overdue." The warning is in Lloyd's report "Climate Change: Adapt or Bust".

    At a June, 2006 conference, the National Association of Insurance Commissioners (NAIC) resolved to ask Congress to create a Natural Catastrophe Preparedness Commission. 2006 Amended Resolution in Support of a Comprehensive Legislative Solution To The Problems Presented by Natural Catastrophic Exposures For the Benefit of All Americans


    Posted by dougsimpson at 12:31 PM | Comments (0)

    July 07, 2006

    Warmer West, More Wildfires

    Science Express: Warming and Earlier Spring Increases Western U.S. Forest Wildfire Activity (July 2006). Science Express is the online advance version of the journal Science.

    From the abstract: "We compiled a comprehensive database of large wildfires in western United States forests since 1970 and compared it to hydro-climatic and land-surface data. Here, we show that large wildfire activity increased suddenly and dramatically in the mid-1980s, with higher large-wildfire frequency, longer wildfire durations, and longer wildfire seasons. The greatest increases occurred in mid-elevation, Northern Rockies forests, where land-use histories have relatively little effect on fire risks, and are strongly associated with increased spring and summer temperatures and an earlier spring snowmelt.

    One author, Thomas Swetnam, director of the Laboratory of Tree-Ring Research at The University of Arizona in Tucson: "We're showing warming and earlier springs tying in with large forest fire frequencies. Lots of people think climate change and the ecological responses are 50 to 100 years away. But it's not 50 to 100 years away -- it's happening now in forest ecosystems through fire." :: ScrippsNews : Warming Climate Plays Large Role in Western U.S. Wildfires, Scripps-led Study Shows. (July 6, 2006).

    The researchers also suggested that increasing fires could change forests from net consumers of CO2 to net emitters of atmospheric CO2, further adding to global warming and increasing fire danger. More Large Forest Fires Linked to Climate Change (July 6, 2006)

    Serendipitously, Dr. Gavin A. Schmidt posted at RealClimate.org a brief explanation of "tipping points" in the context of positive feedback loops in complex systems. He specifically related it to climatological changes and emphasized that in systems as large and complex as the global climate, there are multiple sub-systems in which local or regional tipping points may occur. His posting is relevant to the study noted above, and the author's observation.

    He says in his post:
    "The idea is that in many non-linear systems (of which the climate is certainly one), a small push away from one state only has small effects at first but at some 'tipping point' the system can flip and go rapidly into another state. This is fundamentally tied to the existence of positive feedbacks and is sometimes related to the concept of multiple 'attractors' (i.e. at any time two different 'states' could be possible and near a transition the system can flip very quickly from one to another). * * * A positive feedback occurs when a change in one component of the climate occurs, leading to other changes that eventually "feeds back" on the original change to amplify it." RealClimate » Runaway tipping points of no return (July 5, 2006)


    Posted by dougsimpson at 07:51 PM

    Kochan: Bloggers as Pamphleteers

    Donald Kochan's new article in the Nexus Law Journal, "presents an historical perspective on information flow and the marketplace for ideas, and argues that the blogosphere is merely a technological transformation and stimulus of traditional pamphleteering - an individual's opportunity to introduce his ideas to the community." SSRN-The Blogosphere and the New Pamphleteers by Donald J. Kochan

    Posted by dougsimpson at 07:24 PM

    July 05, 2006

    Coal to Vehicle Fuel - Disaster for Environment, Good for Big Coal

    New York Times points to synfuel initiatives based on coal, and federal tax incentives attracting several companies. The Germans developed the Fischer-Tropsch technology to create diesel from coal during WWII. The big downside is increased CO2 emissions.

    "It's a potential disaster for the environment if we move in the direction of trying to create a big synfuel program based on coal to run our transportation fleet," said Daniel A. Lashof, of the Natural Resources Defense Council, to the Times. "There's a brown path and a green path to replacing oil, and Fischer-Tropsch fuel is definitely on the brown path." Search for New Oil Sources Leads to Processed Coal - New York Times (July 5, 2006).

    Jeff Goodell contends that easy decisions to turn to coal fuel sources preserve the illusion that we can "drill and burn our way to prosperity" instead of pushing to the new, disruptive technologies of solar, biofuels and other renewable resources: "The biggest problem with our bounty of coal is not what it does to our mountains or the atmosphere, but what it does to our minds. It preserves the illusion that we don't have to change our lives. Given the profound challenges we face with the end of cheap oil and the arrival of global warming, this is a dangerous fantasy." Jeff Goodell - Our Black Future - New York Times (June 23, 2006)

    Is America's addiction to burning oil going to be replaced by an addiction to burning coal?


    Posted by dougsimpson at 09:26 AM

    July 04, 2006

    As Predicted, Insurance Prices Spike for NOLA Apartment Owners

    Apartment owners in New Orleans face dramatic insurance price hikes on renewal, as insurance capital withdraws from the Gulf Coast wind exposure. While they can turn to the Louisiana Citizens Property Insurance Corp at higher prices, or self-insure, local business people see the higher costs as restricting development in New Orleans. Apartment premiums skyrocket -- New Orleans CityBusiness -- Deon Roberts, July 3, 2006.

    The market for "cat bonds," debt securities that respond to catastrophes such as hurricanes and earthquakes, nearly doubled following Hurricanes Katrina, Rita and Wilma. The alternative risk transfer mechanism steps in when reinsurers withdraw from the market, a recurring market dynamic following a catastrophe. Katrina alone cost insurers $38 billion, of which reinsurers absorbed $20 billion, with some threatened with insolvency, according to Global insurers shift more risk to bond market | Reuters.com (June 23, 2006)

    Bob Sargent wrote about these market forces shortly after Katrina, in: Specialty Insurance Blog: Katrina Chat (Sep 21, 2005).

    In November 2005, Risk Prof provided some insights and useful links to theoretical models explaining insurance price increases resulting from Katrina, Rita and Wilma. Capacity constriction and costs of raising new capital suggested that existing insurers would pull back and build capital internally. At the same time, new capital is emerging in new reinsurers, some backed by hedge funds. Though insurance consumers and their elected representatives are likely to be unhappy, this looks like the capitalist system at work. RiskProf: Explaining Price Increases Post-Katrina (November 16, 2005).

    For more on the Gulf States' "wind pools," see: Unintended Consequences: Impact of Katrina on Gulf states' wind pools (Sep. 17, 2005)


    Posted by dougsimpson at 07:40 PM

    Gas prices hammer sales of inefficient vehicles

    High gas prices are once again driving a shift to fuel-efficient vehicles, and away from gas-guzzling pickups and SUVs. The automakers who rode the addiction to big, inefficient vehicles are now seeing drops in their profits. Meanwhile, Toyota, maker of the Prius and Camry hybrids, had a record month, with sales up 14.4% "Fuel-efficient products continue to drive the market, even as consumers are likely becoming acclimated to today's fuel prices," Jim Lentz, Toyota executive vice president said in a statement. "Buyers are turning to hybrids and smaller, more fuel-efficient vehicles as a hedge against future uncertainty." Pickup truck sales latest victim of high US gasoline prices - Yahoo! News

    Sales of Ford's best selling SUV, the Explorer, dropped 36% in June. Expedition sales were off 46%. "There's no question that higher gas prices have hurt demand for these products," said Ford sales analyst George Pipas, Ford, Chrysler June auto sales down - Yahoo! News

    AP story with details on 22 automakers sales comparisons June 2005 to June 2006: June 2006 U.S. Auto Sales: Financial News - Yahoo! Finance

    Like a junkie hooked on heroin, auto makers addicted to the big profits selling what Harry Pearce, vice chairman of GM, called "pigs" as he was leaving a press conference in August 2000: "If pigs are big and popular, I guess we'll make pigs." High and Mighty: SUVs -- The World's Most Dangerous Vehicles and How They Got That Way

    Will it be long before they are looking for a bailout from the American taxpayer? Senator Obama and others want a commitment to more efficient vehicles if they do. Unintended Consequences: Senator Obama on Health Care for Hybrids


    Posted by dougsimpson at 05:51 PM