Articles by Eric de Place

McKinstry Company to hire about 500 people in next two to three years

Innovation -- a business model we can believe in.

McKinstry Company is perhaps the most dynamic and interesting company in the Northwest right now. They're earning high-profile attention from President Barack Obama. And even in this economy, they're adding jobs and expanding.

Check it out:

SEATTLE -- Mayor Greg Nickels today presented McKinstry Company with a permit and approved plans for an expansion of its Georgetown facility in south Seattle. The company expects to hire an additional 500 people, a combination of professional and union craftsman, in the next two to three years.

But how can anyone prosper right now?

Well, a big part of the reason for McKinstry's success is that they get it. They get that the current energy economy is broken. They get that we're facing a climate crisis of alarming severity. And they get that a state like Washington shoveled $16 billion out the door in 2008 to pay for fossil-fuel imports.

Consider what David Allen of McKinstry Company said yesterday to the Washington legislature. In testimony before the House Ecology and Parks Committee, he fielded a hostile question about some businesses objecting to the governor's cap-and-invest bill. (Video is here, starting at about 43:15.)

Allen said flatly that McKinstry will be regulated. But he doesn't fear putting a cap on climate pollution.

Allen: "We need to suck it up and get innovative."

Why a cap without the trade is the worst of all worlds

As cap-and-trade legislation gets debated in Oregon and Washington, a worrisome lightbulb seems be going off for a number of folks. (Congressman DeFazio from Oregon, for example.) It goes like this: Instead of "cap-and-trade" how about just "a cap without the trade?"

Under this idea, we'd meet the terms of the cap through command and control regulation. There wouldn't be permits or a trading system (and hence no auctioning). To be sure, this will reduce emissions, which is a very good thing.

But in terms of fairness and inexpensiveness, let me be completely clear: This is a horrible idea.

For consumers and businesses who are already struggling to pay their energy bills, cap without the trade is actually worse than the very worst form of cap-and-trade. Plus, it misses out on almost all of the upsides of cap-and-trade done right.

In the worst form of cap-and-trade -- a "grandfathered' system, in which the government gives out permits to polluters for free -- consumers wind up paying massive windfalls to the big energy companies that get free permits. [Click here to learn why]. That's why we favor auctioned cap-and-trade, since it makes polluters pay for their permits -- and the public keeps the money. Auctioned cap-and-trade is fair, effective, and efficient.

But if you can believe it, cap-and-no-trade would actually be worse for consumers and businesses than a grandfathered system. Families would pay even more for energy, while Exxon and other big energy companies would get even bigger windfalls!

Here's why.

Magic exists: It's called 'cap-and-trade'

One of the problems with carbon taxes is that they're static. Let's say you set a tax at $20 per ton of CO2. It's going to stay at $20 when the economy is hot, even if the tax rate doesn't do much to reduce emissions. Conversely, when the economy goes south, the carbon tax will persist at $20, even though emissions may be dropping fast on their own -- and companies may need some breathing room.

The first scenario is bad for the climate. The second scenario is bad for the economy.

If only there were a way for carbon pricing to respond to changing economic conditions in real time without any intervention from policymakers. If only. That would be like magic.

But I have good news for you: magic exists! There is such a thing as a magical self-adjusting carbon tax. It tracks economic conditions precisely and it always ensures the right amount of reductions. It's called "cap-and-trade."

What gas taxes don't do

Surprising: state gas taxes appear to have very little effect on either driving habits or fuel consumption. More precisely, there's no correlation between a state's gasoline tax and the amount of fuel its residents use or the amount of driving they do.

Don't believe me? Feast your eyes on these babies:

And:

Those are big, fat, completely uncorrelated blobs. What you're seeing is all 50 states plus D.C. plotted to show a relationship between state gas tax rates and per capita fuel consumption (in the first chart) and per capita miles driven (in the second chart). There is essentially no relationship whatsoever.