Wednesday, January 24, 2007

Reply to A Commenter

William said...
Wow. What an elitist counterbalance to Kosla. The President last night called for 35 billion gallons of fuel production from alternate sourcs mainly from ethanol (more likely from cellulosic ethanol). At the same time we're pumping an additional 100,000 barrels a day into the Strategic Petroleum Reserve. There is a worldwide effort afoot to replace oil with bio sources because of political instability in the Middle East. The Chinese for example are looking at their rapeseed capabilities today to expand biodiesel production. So are the Europeans. Time in NOT on our side. We need to act quickly regardless of how it benefits Khosla's companies.

First, William, thanks for reading and commenting. Let me respond. I don't begrudge Khosla making money in the least. This blog is ardently capitalist. What I do object to are 1) capitalists who angle for government bestowed advantages to compensate for their lack of success in the marketplace, and 2) the government picking winners in a particular sector. Like Khosla, I too have investments relating to alternative fuels but asking for favors from the government is not part of my investment model. These efforts have to stand on their economic merits. I believe that the ethanol industry could be successful ultimately, but that they are on the margin of economic viability and are cynically relying on government to tip the balance. This is what is called economic rent-seeking and I believe it is an abuse and detracts from the development of a healthy, resilient economic environment.

This blog has always advocated "energy diversity". I want to see many alternative fuels, including ethanol, in use, but only to the extent that they are economically viable. There are many folks who feel that some notion of "virtuousness" ought to be applied to alternative energy. On that score, ethanol doesn't really stacked up well either. I would argue that biodiesel from waste oils and tallow are more "virtuous". But such a subjective notion is problematic in that it is difficult to make rational decisions and you invite a cacophony of competing voices that policy makers cannot possibly sort out. This also invites abuse of the political process. The market is the single best mechanism for sorting out a cacophony of views. I applaud Khosla the capitalist, I do not applaud Khosla the lobbyist; and, make no bones, he is assuredly part lobbyist in his efforts on behalf of ethanol.

Additionally, alternatives must be alternatives, not necessarily replacements. A commitment to energy diversity must also allow for an improvement in the status quo, namely better hydrocarbon fuels. In a few decades we have gone from leaded gasoline to where we now have something called Ultra Low Sulphur Diesel and a host of cleaner fuels. Fuels are getting cleaner and better and we should not hinder this process.

This all gives a moderate nod to the theories of anthropogenic global warming and Peak Oil. It makes good sense to have multiple energy options given these theories, but I don't think we should make policy (other than a policy of non-intervention to promote energy diversity) based on either of them. They both are highly speculative theories that leave ample room for justified skepticism. So when you say, "we are running out of time" I can only assume you are referencing either the Peak Oil notion that we will run out of oil or the global warming notion that we will destroy the earth before long if we don't act. I think you are wrong on both counts if that is indeed what you mean. We do not need to develop alternative fuels because of an imminent shortage of hydrocarbon resources, nor do we need to do it to avoid known and quantifiable negative effects on the climate. We simply need to do it as a matter of prudence.

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