It's typically held that the market will price in all current information. To avowed economists, this means markets can virtually predict the future. If you buy that logic, the market may be signaling something environmentally positive about coal and carbon legislation. This from Greenwire ($ub. rqd): Citing high input costs, weather and environmental concerns, the global bank Citigroup yesterday downgraded coal stocks across the board and shaved earnings estimates and targets for Peabody Energy (NYSE: BTU), Arch Coal Inc. (NYSE: ACI) and Foundation Coal Holdings Inc. (NYSE: FCL). In a metals and mining report to investors, Citi analyst John Hill …

The quest to reduce carbon emissions is plagued by a near-pathological case of economic illiteracy. This illiteracy has caused us to focus on the wrong problems, and the wrong solutions ... and it's stalled the realization of any politically tenable carbon reductions. Ironically, while the goal of reducing carbon emissions has political allies and adversaries, the economic illiteracy is found on both sides. It has become self-reinforcing. The only solace is that the economists are just as guilty. Let me first make a few points clear. We must reduce carbon emissions. The comment above in no way suggests that the …

Environmental pressures have forced us to generate more of our power from natural gas, and this focus on gas has caused power prices to increase ... right? Wrong, conventional wisdom notwithstanding. And the lessons from the last 15 years indicate the importance of considering how markets will respond when mandating new technologies and fuels. Consider: In 1990, the U.S. had 184 GW of natural-gas fired generation, from which we produced 373 million MWh of electricity. Electric load grows reliably at 1 to 2 percent per year, mandating consistent increases in generation investment, and environmental considerations have made it virtually impossible …

Yesterday, I spoke to a group of manufacturers in Arkansas. Throughout the conference there was a fair amount of pride in the successful squashing of Bingaman's RPS bill -- and for reasons that are not entirely unreasonable. Among the speakers was the chair of the Arkansas Energy Commission, who said that he personally objected to the bill because it was unfair. Specifically, it would not allow Arkansas to count their existing hydro-electric capacity in the RPS targets, but would allow existing wind to count. From his perspective, this looked like a sop to Bingaman's wind-rich home district, and while we …

David Roberts' recent post compelled some ideas that have been germinating for awhile, but are too long for just a comment on his post. Namely: we should stop talking about the need to subsidize green technologies, and instead frame the debate as a need to level the playing field. It is a strange feature of energy policy that it is easier to create subsidy than it is to remove one. Thus, whenever energy bills get drafted, they are layered with pork that include very little actual structural reform. Renewables get a subsidy here, nukes get insurance liability waivers there ... …

RPS legislation (which seems to have recently died in the Senate, although could conceivably be reintroduced on amendment) is well-intended, but poorly constructed. Roll the clock back 100 years, and assume you're the legislator tasked with figuring out how to get the population to go West. Which do you choose: (a) the Homestead Act, giving people land as soon as they prove that they can get there and cultivate it, or (b) a tax rebate to anyone who hitches five white horses to a Conestoga wagon and takes Route 66 west? A silly question perhaps, but a good metaphor for …

Too much of the debate on carbon-control policy starts from flawed assumptions. Take those assumptions away, and one quickly realizes that we have a lot of pretty good options. Let's parse the carbon policy argument, and think for a moment about how to best engender the most economically beneficial carbon reduction policy. First, let's strike any false assumptions from our logic: Let's not assume that it costs money to reduce carbon emissions until proven otherwise. Let's not presume that any of us know what the answer is. Take these away, and you can pretty quickly get a good model. Picture, …

Getting our energy policy right does not require new technology, added societal cost, or economic disruption. However, it does require the political courage to question the sacred cows that have shaped 100 years of electric-market regulation. A few ideas that are missing from the energy debate: Fossil fuel use in the U.S. is split approximately in thirds between transportation fuels, electric power generation, and heat generation (buildings, industrials, etc.). GHG emissions track accordingly. The electric industry is -- with very limited exceptions -- a regulated monopoly, subject to cost-plus pricing. This has been the case for 100 years. In other …