{"id":510,"date":"2012-10-19T11:31:59","date_gmt":"2012-10-19T16:31:59","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=510"},"modified":"2012-11-13T12:30:33","modified_gmt":"2012-11-13T18:30:33","slug":"positive-externalities-exist","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2012\/10\/19\/positive-externalities-exist\/","title":{"rendered":"Positive Externalities Exist"},"content":{"rendered":"

Ed Dolan recently posted on his blog: <\/span>\u201cWhy do we Need Government to Tell Business to be Energy Efficient?\u201d <\/span><\/a>\u00a0.<\/span><\/span><\/p>\n

Of course, I wouldn\u2019t blog about it if there wasn\u2019t something I could highlight.\u00a0\u00a0 Thanks Ed for the inspiration to write something \u2013 I have had bloggers block.\u00a0\u00a0 The first issue to comment on is the following:\u00a0\u00a0 <\/span><\/span><\/p>\n

\u201c\u2026stopping government subsidies that make the prices of some inputs artificially low. For example, without subsidies to corn farmers and ethanol blenders, we would use less corn ethanol in our automotive fuel. According to most studies I have seen, less ethanol would mean a more efficient fuel mix.\u201d<\/span><\/span><\/em><\/p>\n

The thing here is that Ed is not relating the context of why the subsidies in ethanol must occur.\u00a0 Clearly every action is not about efficiency or even energy itself.\u00a0\u00a0 It is a balancing mechanism \u2013 though not the best \u2013 for the subsidies that occur in several middle east countries for petroleum.\u00a0\u00a0 In those countries their citizens are paying a fraction of the world market prices.\u00a0\u00a0 As Ed should know those areas are also seeing one of the largest growths in petroleum demand.\u00a0 We have seen an unprecedented price rise in petroleum prices in such short time period.\u00a0\u00a0 The cure for high prices has been high prices.\u00a0\u00a0 However if the areas observing the greatest growth for petroleum do not see the high price signal then the responsibility for the demand destruction lies on economies like the US.\u00a0\u00a0 Our continued purchases of the high prices support\/subsidizes them.\u00a0\u00a0 Without stronger trade restrictions, a subsidy on what we produce the most and what the rest of the world needs makes sense; \u00a0in this case it is corn.\u00a0 In essence the US is swapping food for oil to balance out the trade and price discrepancy issue.\u00a0 It is not perfect, but until we come up with a better way, I wouldn\u2019t want it to go away.<\/span><\/span><\/p>\n

\u201c\u2026fixing government policies that allow businesses to take resources without paying for them. Promarket economists like my early mentor Murray Rothbard have long argued that pollution is a form of \u201ctaking\u201d via uncompensated harm to other people and their property. That means harm to people and property owners who live downstream or downwind from a specific factory or power plant, and in the case of some pollutants, it means harms that are felt even more widely, even globally\u2026.Look at it this way: A business owner is like a dog owner. Just as the burden of cleaning up the dog\u2019s poop is the owner\u2019s responsibility and becomes part of the cost of owning a dog, the harm that pollution does to downwind residents and property owners is a both a moral and an economic responsibility of the businesses\u201d<\/span><\/span><\/em><\/p>\n

This thinking has become very common \u2013 the values of externalities need to be incorporated into the price of energy.\u00a0 However most people assume externalities are only negative value.\u00a0 I will agree there are negative values for downstream\/downwind people who are not directly consuming the energy \u2013 e.g. particulate matter.\u00a0 However even the downstream\/downwind people are seeing positive value ,even though they are not directly consuming or paying for energy.\u00a0\u00a0 What are those values?\u00a0\u00a0<\/span><\/span><\/p>\n

Societal stability through economic prosperity.\u00a0 As complicated as tracking negative externalities, there is a complex web for tracking positive externalities.\u00a0 I will state a few potential examples.\u00a0 Because the upwind region has local energy to consume, though potentially polluting to downwind. Their ability to use the local resource limits the population from migrating downwind and potentially causing instability through crime, disruption of supply\/demand of other resources, etc\u2026\u00a0 Also there is value that the upwind region is consuming a source of energy.\u00a0\u00a0 If they did not consume the local source of energy they may demand the source that the downwind region is using.\u00a0 This will likely cause economic harm to the downwind region particularly if the upwind region has more capability to buy the resource.\u00a0\u00a0 There are numerous examples I could come up with among the numerous examples discussed for negative value externalities.\u00a0\u00a0 <\/span><\/span><\/p>\n

The value for the negative externalities is as real as those of the positive externalities.\u00a0 And how to value each of them is complicated.\u00a0\u00a0 The dog poop example Ed brings up really doesn\u2019t work unless you add more reality to the situation.\u00a0\u00a0 The caveat could be: by allowing the dog owner to have the dog, \u00a0you are reducing your chance, \u00a0the owner would be a grumpy and potentially go postal on you one day.\u00a0\u00a0 Therefore potentially an occasional poop missed is worth the trade-off on not allowing him to have a dog because he doesn\u2019t always clean up.\u00a0 There is some level of pollution that balances the trade-off.\u00a0\u00a0 What that balance is becomes very variable and will depend on the situation and societal choices.\u00a0\u00a0 Ed does note at the end:\u00a0 <\/span><\/span><\/p>\n

\u201cto safeguard the integrity of energy pricing we can use government fines, or pollution charges, or taxes, or whatever you want to call them. So much per ton of SO2, so much per ton of carbon and so on. Yes, in some philosophical sense, that is a second best, a less elegant solution than one that internalizes all pollution costs through voluntary contracts and the enforcement of property rights. Yes, it is hard to get the prices just right. But I see it as the best hope we have for making our planet cleaner, healthier, more sustainable and\u2013importantly\u2013more efficient.\u201d<\/span><\/span><\/em><\/p>\n

However society needs to know all the facts not just the negative side of things. \u00a0In Ed’s article, he \u00a0did not balance the negative externalities with the positive externalities.\u00a0 How will the price ever be close to being \u201cright\u201d if we don\u2019t have a comprehensive dialogue\u2019s of both the pros and cons?<\/span><\/span><\/p>\n

I take pride in making sure I take a 360 perspective.\u00a0\u00a0 One always needs to challenge one\u2019s own thinking to make sure all bases are covered.\u00a0 If you are looking for an unbiased well-rounded perspective on energy issues please, consider contacting All Energy Consulting.<\/span><\/span><\/p>\n

Your Energy Consultant,<\/span><\/span><\/p>\n

\u00a0<\/span><\/p>\n

David K. Bellman<\/span><\/a><\/p>\n

614-356-0484<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Ed Dolan recently posted on his blog: \u201cWhy do we Need Government to Tell Business to be Energy Efficient?\u201d \u00a0. Of course, I wouldn\u2019t blog about it if there wasn\u2019t something I could highlight.\u00a0\u00a0 Thanks Ed for the inspiration to write something \u2013 I have had bloggers block.\u00a0\u00a0 The first issue to comment on is […]<\/p>\n","protected":false},"author":1,"featured_media":216,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,26,6],"tags":[37,45,178,177],"class_list":["post-510","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-oil-petroleum-products","category-power","tag-economics","tag-energy-efficiency","tag-ethanol","tag-externalities"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/510","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=510"}],"version-history":[{"count":8,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/510\/revisions"}],"predecessor-version":[{"id":513,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/510\/revisions\/513"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/216"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=510"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=510"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=510"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}