California's Electric Boogaloo to Nowheresville

No sooner does California move to ban the sale of gasoline-powered cars by 2035 and force everyone to buy electric cars than it announces, oh by the way, please don’t charge your electric cars last weekend because we’re going to be short of power as three-digit temperatures strain the grid. And turn your thermostats up to 78 while you’re at it.

Perhaps California will have figured out a way of expanding its carbon-free electricity sources and grid capacity in the next decade, and the recent week’s lopsided vote in the state legislature to keep open its Diablo Canyon nuclear power plant, which supplies nearly 10 percent of California total electricity at present, is a sign that energy reality is starting to intrude. But even if the dreams of a “carbon-free” California somehow come true over the next two decades, the electric car diktat represents a stark new moment in our green madness.

Gavin Newsom: now hear this, peasants.

Never mind that the electric car mandate was promulgated not by the elected state legislature, but by the eco-crats at the California Air Resources Board (CARB), representing yet another example of the administrative state in action. And never mind that the lifecycle environmental impacts (including carbon emissions) of the vast supply-chain for electric cars and their material-intensive batteries are nearly as large as conventional hydrocarbon vehicle. The strangest aspect of the scene is that the biggest enthusiasts for the electric car mandate are America’s auto manufacturers.

Barron’s magazine reported last month: The Biggest Fans of California’s No-Gas Policy? Ford and GM. “General Motors and California have a shared vision of an all-electric future,” said GM’s spokesperson Elizabeth Winter. “We’re proud of our partnership with California,” Ford’s “chief sustainability officer,” Bob Holycross, said in a statement. In Detroit-speak, “partnership” is today’s patois for “take orders from the government.” It was fashionable after the automakers were bailed out in 2009 to refer to GM as “Government Motors,” but today the label truly fits. The political takeover of the auto industry, long in the making, is now complete.

One way to perceive this slow-motion takeover more clearly is to ask why cars from every automaker now look the same. Most cars models now are squat, with teardrop-shaped bodies, nearly interchangeable with models from other manufacturers. Even high-end SUVs like the Ford Explorer or Range Rover are shorter and rounder than their predecessor models of just a few years ago. This is likely not a response to changing taste in car buyers, like tail fins in the late 1950s. A primary driver of current design are aerodynamic requirements to help meet the government-mandated fleet fuel-economy standards that have been slowly ratcheted up over the last decade.

Some years ago I met in Washington with senior executives from one of the big-three Detroit automakers to talk about energy and environmental policy, and how it affected their industry. They said that their single biggest problem in planning for the future was less the uncertainty of government regulation than wildly fluctuating gasoline prices. If car makers could predict what gasoline prices would be over the next decade, they’d know what kind of cars to build. When gas prices are low, consumers like SUVs; when gas prices are high, they shift on a dime to smaller, higher mileage cars. Car companies may see a shift to an all-electric car fleet as a means to ending the boom-and-bust cycle that has afflicted the industry for decades. Never mind that electricity rates are likely to become more volatile as we “green” the supply, as Europe is learning to its chagrin right now. And Californians already pay twice as much for electricity as the national average.

Pray it keeps working.

Beyond the final submission of the auto companies to our green commissars, there are a number of other ways California’s electric car mandate represents a step increase in the ambition of the climate crusaders. California has long enjoyed the privilege under federal law of setting its own tailpipe emissions standards for autos sold in the state that were tougher than national standards (a power the Trump Administration sought to curtail—and a lawsuit remains in process). Because auto makers didn’t want to manufacture two different kinds of cars (or surrender the California market), the California standard effectively became the national standard.

It’s one thing to impose a product performance standard; it’s another thing to ban a product that would be legal in the other 49 states. This may run afoul of the Commerce Clause of the Constitution, especially if California prohibits bringing gasoline-powered cars into the state. One can imagine a market for gasoline-powered cars sold just over state lines, and delivered to California buyers by Carvana or some other enterprise. Will the state attempt to “retire” the existing gasoline-powered vehicles in the state and close down gas stations? Look for a flourishing black market for gas and diesel. And the next wave of demand for H1B visas will be for Cuban auto mechanics, who are skilled in keeping gasoline-powered cars running for decades.

As it did with emissions standards, California likely thinks it can strong-arm other states or Congress to adopt its electric-car mandate. Texas (among other states) might have something to say about that. And what if car companies and consumers don’t go along with this extravagant target? The New York Times reported a crucial caveat:

To enforce its rule . . . California would fine automakers up to $20,000 for every car that falls short of production targets. The state also could propose new amendments revising the sales targets if the market doesn’t react as state leaders hope, said Jennifer Gress, who leads the California air board’s sustainable transportation division. [Emphasis added.]

Cuban mechanics wanted.

That language about “amendments” is the Emily Litella “never mind” clause. It has happened before. In a prequel to the current madness, in the early 1990s California tried to mandate that 5 percent of all new cars sold by the year 2001 be emission-free, which meant electric cars in practice. GM publicized lots of happy talk about its EV-1, a crappy electric car that cost six-figures (though it was “leased” at an implied purchase price of about $35,000), had a pathetically short range (50 miles on a good day), and took several hours to recharge. Not long before the mandate was set to take effect, it was quietly abandoned.

Electric cars have gotten much better in recent years, but in a state where lots of drivers travel well beyond the range of an electric vehicle every day, EVs still won’t meet the needs of a large number of Californians—never mind citizens of rural states that need vehicles that can run all day long. Look for history to repeat itself with the California EV mandate.

EVs Down Under: No Bang for the Buck

I help my next-door neighbour out if she wants something done that only an electric drill can manage. Last Australian winter she bought a panel heater for her bedroom and asked whether I would affix it to the wall, which I did. A little time later she said that it kept tripping the safety switch. Ours is a 1973-built apartment building. Not among the youngest; not among the oldest in Sydney. The electrics were wanting when it came to handling the addition of a mere $250, 1,500W panel heater.

She had to call in an electrician to fix the problem; who, for the princely price of $600, put a contraption on her fuse box. Charging an electric car at home overnight apparently needs 7.2kW; almost five-times the power which stymied my neighbour's panel heater. Obviously, my building is not fit for purpose. How costly it would be to make it so; I simply don’t know. Nothing is yet out there to tell us. There is no clamouring of demand to pique enquiry. Incidentally, for the open road, rapid charging ranges from 50kW to 350kW. Better get those wind turbines a-spinning.

Would that i'twere so simple.

A friend shared with me an account by an electrical engineer who, for understandable reasons, prefers to remain anonymous. He’d been asked whether some electric-car charging points could be installed in a large apartment building in Melbourne’s central business district. Part of his account goes something like this:

Do you ever get the feeling that ambitions among those demonising fossil fuels are light years beyond our capacity to deliver? In the past I tended to think of queues for elective procedures at public hospitals as being preeminent in provoking unrealisable ambitions. Whenever, and in whatever country, there were inevitably long queues and some shameless politicians promising to spend other people’s money to slash their length. Two insuperable problems. Money doesn’t conjure up experienced doctors, nurses and technicians. And second, and more intractable, demand is never sated when those enjoying unhealthy lifestyles meet free remedial treatment.

That was in the past. Now, nothing compares, or has ever compared, to the boundless and fanciful ambitions of those intent on healing the planet. Electric vehicles (EVs) are, of course, only one facet of the delusional outer limits within which they abide.

In its 'Powering Australia Plan', the Australian government projects that the proportion of light EVs on the road will increase from 0.2 percent now to 15 percent (i.e., to 3.8 million vehicles) by 2030. Financial incentives and new charging infrastructure will do the trick, apparently. And the infrastructure: 1,800 new public fast-charging stations, and 100,000 businesses and 3.8 million households with charging capacity. All these figures have been pulled out of a hat.

For example, 3.8 million households represent about 35 percent of the projected number of about 11 million Australian households by 2030. I’ll guess none of the 43 households in my aging building will have one; and ditto for lots of other aging apartment buildings, and the millions of houses without garages. As it is, the vast majority of electric cars on the road are swanning around posh inner-city suburbs; a few miles at a time. You won’t find many, if any, in working-class suburbs and none traveling the 550 miles between Sydney and Melbourne. Let’s face it, the worthless promises of politicians have reached new heights of self-deception.

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I turned my mind to CO2. Just how much does a conventional car exhale? The answer from the American EIA is 19.64 pounds per gallon of petrol. Of course, it’s a U.S. gallon (= 128 fluid ounces) which for some reason lost in the mists of time is different from an imperial gallon (=160 fluid ounces). The babel of different measuring sticks, tons versus tonnes for example, can complicate calculations. Traps for the unwary. Lucky for me, my school learning paid off. While there are some standards which have 12 ounces to the pound; 16 applies uniformly in Australia, Britain and the U.S., where a pound is the same pound.

CO2 in the atmosphere is measured in units of one billion tonnes. Such a tonne is 1000 kg or 2,204.6 lbs, compared with 2,240 lbs of the imperial ton. Though, confusingly, gigatons and gigatonnes of CO2 are used interchangeably, both meaning the latter; written for short as GtCO2.

According to the IPCC Sixth Assessment Report (on the physical science), issued in 2021, the cumulative emissions from 1850 to 2019 are roughly 2,390 GtCO2. Global (fossil-fuel) emissions are estimated at 37 GtCO2 (rounded) in the year 2019; that is, before Covid hit, and had been inexorably rising year-by-year. Lofty emission-cutting ambitions notwithstanding.

Can you spell "insufficient capacity"?

Displaying prescience par excellence, the IPCC claim that if cumulative emission rise by another 1,350 GtCO2, we have only a 50 percent chance of avoiding 2.0°C and more of warming. For sure, 1,350 GtCO2 seems like a lot. However, it will be breached in 37 years, by 2059, even if emissions stabilise at their level of 2019. And they won’t. Fondness for coal among the Chinese and Indians will see to that. Be alarmed greenies, sweaty times ahead and way before 2059.

What to do? We all have to do our bit, is the catchcry of the miniscule. Apropos the Australian government’s fantasy of having 3.8 million EVs on the road by 2030. Based on 2019-20 data, each vehicle on the road uses on average 441 (U.S.) gallons of petrol each year; incidentally, about a third less than in the U.S. Assuming, generously, that EVs will do as much travelling as conventional vehicles, which they won’t, this will save 1,677 million gallons per year. As each gallon accounts for 19.64 lbs of CO2 emissions, a bit of arithmetic shows a saving of 15 million tonnes of atmospheric CO2. This would equal just 0.04 percent of the emissions of 37 GtCO2 in 2019.

Ergo, in the very unlikely event that the Australian mouse succeeds in roaring, it’ll have bugger-all effect. And, by the way, how about the CO2 emitted to make the electricity to fuel the EVs? Wind and sun, they say, will do the trick. In such manner is ruse built upon ruse.

Piercing the Electric Car Fantasy

Electric cars are having a big moment right now, with the supercilious wonderboy of the Biden administration Pete Buttigieg proclaiming last week that we could escape the pain at the gas pump if more people could “access” electric cars (EVs). Very telling that he chose to say “access” rather than “afford” electric cars, because without the $7,500 tax credit, very few middle-class people can afford to buy an electric car. And very few middle-class people do: the lion’s share of “clean energy” subsidies are captured by high-income households.

But press beyond the typical economic illiteracy of leftists like Buttigieg who think having the government pay billions in subsidies makes something “cheaper,” and note that electrons aren’t printed out of thin air by the Federal Reserve like our fast-depreciating currency. With electricity rates rising fastest in those places that have overemphasized “renewable” energy such as California or Germany, it's not clear that consumers will save much by driving a more expensive electric car and paying higher utility rates. And that’s if you can still fill it up with electrons whenever you want to. During recent power crunches, which are threatening to become endemic in the U.S. under the current policies of the Biden apparatchiks, grid operators have asked EV owners not to charge their vehicles in the evening, when power demand is highest and the time of day when most working people will want to charge their cars.

The truth hurts.

Right now, electric vehicles make up about 1 percent of America’s car fleet. If they pose challenges for the electric grid already, what will the challenges look like if the EV fleet reaches 50 percent of the auto fleet as Biden proposes? No wonder Elon Musk says we’ll need to expand electric power generation by 30 percent or more to meet the demand of a larger EV fleet on the road. And yet it is supremely uncouth to point out that electrons for EV batteries are generated mostly from fossil fuels right now, and thus EVs may not deliver a net reduction in greenhouse gas emissions when a proper life-cycle analysis is done.

Economist Mark Perry notes that nearly two-thirds of current U.S. electricity is generated by coal and natural gas, and the figure rises to 86 percent if you include nuclear power, which environmentalists irrationally hate and are trying to eliminate. When you raise this problem, you are met with a hail of green indignation about how we’re starting on an “incredible transition” to a carbon-free energy future (a phrase Biden and energy secretary Jennifer Granholm have both used repeatedly with the unsettling grin of the chiliastic fanatic). “EVs are just an early step toward the carbon-free nirvana, which is just a few hundred thousand more windmills and square miles of solar power away!”

A recent little-noticed report from Volvo punctures this green myth, even though the very green Volvovians try very hard to obscure this conclusion. The report notes what a number of neutral analysts have pointed out for some time now: EVs are more material-intensive than old-fashioned gasoline-powered cars, requiring more steel, aluminum, copper, and other rare earth minerals and specialty products like magnets that must be mined (which environmentalists oppose) and require an energy-intensive process to manufacture into shiny EVs. And that’s before you get to the huge quantity of lithium needed for the batteries.

Where "clean energy" comes from: lithium mining in Zimbabwe.

Thus it is eye-popping when Volvo admits that the carbon footprint for the manufacturing of its C40 Recharge electric car is 70 percent higher than its comparable internal combustion version of the car (the XC40). But not to worry, says Volvo: you’ll make up the higher manufacturing emissions when you drive the emission-free EV far enough.

How far? Kudos to Volvo for calculating that: at the world’s average electricity sourcing today, a C40 driver would need to drive his car 68,000 miles to reach a break-even carbon footprint with a gasoline-powered model. The average American drives about 14,000 miles a year, and thus would need to drive his Volvo EV almost five years before reaching a lower carbon footprint. What if we had a grid that was 100 percent wind- or solar-powered? Volvo calculates that an EV driver would still need to drive 30,000 miles before reaching a carbon-footprint breakeven point with a gasoline car.

It is all a ruse anyway. If electric vehicles drop in price and effectiveness, which may be possible with enough brute-force engineering, you can expect environmentalists to turn against them, by noting the huge environmental footprint to make them and the human-rights problems of child labor in Africa mining all the cobalt EVs need. They did it before with natural gas, which environmentalists embraced back in the aughts (2000-2010) as a “bridge fuel” when they thought they could bash coal with gas, and turned on a dime when natural gas became cheap and plentiful. They’ll do the same with electric cars someday.

The E.V. Market: Mandated, Not Demanded

Over at the Wall Street Journal, Allysia Finley has a piece about the oddities of the Electric Vehicle market, which is driven almost entirely by government mandate. In practice this has meant that "a parade of electric-vehicle startups" found themselves with multibillion dollar stock valuations despite the fact that "most had never sold a single car." "Fueled by cheap credit and political subsidies," -- after all, our governing elite are convinced that E.V.s are the way of the future -- "their stocks surged, only to crash."

China, "the world leader in electric-vehicle production and exports," is seeing similar problems:

Beijing has set aggressive production quotas for car makers and provided generous subsidies for buyers. China’s annual electric-vehicle production capacity has ballooned to 5.7 million vehicles... and is expected to hit 15 million in a couple of years. Yet concerns are mounting in China about oversupply of what the country calls new energy vehicles. “Reckless investments and disorderly efforts can be seen in the country’s NEV industry,” Lin Nianxiu, vice chairman of the National Development and Reform Commission, warned in March. “We have too many EV firms,” Xiao Yaqing, minister of industry and information technology, said in September. Some 200 Chinese EV startups have launched in the chase for government subsidies. Many have struggled to scale up production, and some have gone bankrupt.

Both cases illustrate something instructive about the Electric Vehicle market, which is that, overall, it is built upon a desire to circumvent that basic organizing principle of economics, demand. This is a struggle even in China's "state capitalism" economic model, which is much more comfortable dictating to consumers, rather than responding to them, than America's ostensibly free market system is.

In America, E.V. companies like those mentioned above sprung up in response to Democrat-enacted policies whose object was to create an industry more or less ex nihilo, while also smothering the traditional, gas-and-diesel driven automotive industry. But with inflation soaring, and the cost of minerals like cobalt, lithium, and nickel (which are necessary for the production of E.V. batteries) rising, even government subsidies can't cover the cost of doing business. Finley quotes representatives for the E.V. company Canoo (which, she mentions, is currently able to produce only 12 cars per week) as saying that “substantial doubt exists about the Company’s ability to continue as a going concern” in the next year.

A kid could grow old and die...

Oddly, the only companies who seem able to take advantage of the regulatory preference for E.V.s (apart from Tesla, which consciously sells itself as a boutique status symbol for wealthy virtue signalers) are the established automobile manufacturers, who are essentially supporting their electric lines by means of government subsidies on the one hand, and gas-powered cars on the other.

But even they are struggling with our new economic realities. Finley mentions that Ford's new electric pickup truck, the F-150 Lightning, is currently selling for only $10,000 more than the traditional model, and they hope that scaling up production will allow them to further bridge that gap. But, once again, the cost of E.V. manufacturing is going up, not down. The great hope of Ford and the other major automakers is that the government will keep throwing money at them (they've been "lobbying hard" for Biden's "Build Back Better" bill) until a major breakthrough in battery technology makes E.V.s financially self-sustaining. Unfortunately for them, that's not how innovation works.

So how will they -- green politicians and automakers on the take -- keep their electric dreams alive? Finley suggests that it will be through a combination of carbon taxation, emissions mandates, and other forms of government intervention, which will have the effect of making traditional cars more expensive rather than bringing the cost of E.V.s down. Unsurprisingly, letting consumer preference -- demand -- sort out these problems seems never to have occurred to them.

We're becoming more like China every day.

A Tesla Goes Boom

A play in three acts:

Act One -- A man in Finland named Tuomas Katainen bought himself a 2013 Tesla Model S for tens of thousands of dollars.

Act Two -- He drove the car for awhile until it broke down. He brought it to the mechanic and, after a month of working on it, they told him the battery pack was dead. So he called Tesla about a replacement, and was told that, since it was out of warranty, a new battery pack would cost him $22,000.

Act Three -- He briefly considered paying up, but in the end he decided on a more sensible course -- he gathered a bunch of his buddies, went out into the woods, and blew the car up with a bunch of dynamite: 30 kg (or more than 66 lbs) of dynamite, to be exact, and with an Elon Musk dummy strapped into the driver seat.

Check out this video for the fun (I've set it to start a few moments before the blast):

While enjoying an post-explosion cigarette, Mr. Katainen was asked if he'd ever had this much fun actually driving the Tesla. "No," he replied, "No, I never enjoyed [myself] this much [in the] Tesla." Spoken like a true man.

Anyway, enjoy, and remember -- don't make Tuomas Katainen's mistake. Stick with internal combustion engines. That is, unless you've got 60 lbs of dynamite laying around and just want to have yourself some expensive fun.

EV Dreamin'

Michael Lynch has a good, unbiased piece at Forbes which tries to cut through the disinformation about Electric Vehicles and discern what their prospects over the next several years actually are. Spoiler alert: he's not overly optimistic.

Of course, the data necessary to make that kind of a projection is fairly hard to come by, in part because of the still-evolving technology and in part because the number of EVs actually on the road is so small, skewing sample sizes. But Lynch points out that the sample sizes are actually smaller than we previously thought -- he mentions a recent paper which concludes that right now EVs are principally being used as secondary vehicles for people who also own internal combustion cars. The EVs on the road are averaging about 6000 miles per year, less than half of the overall vehicle average, suggesting that they are mainly used for commuting, rather than longer drives.

This, Lynch says, must be factored into how we discuss the cost of these cars --

[It] means that the cost per mile is much higher for EVs than most estimates, because most of the costs are for the vehicles, not the fuel, and applying it over 40% as many the miles as a conventional vehicle more than doubles the cost per mile.

He also points to two recent papers which analyze the tendency of EV drivers to switch back to internal combustion vehicles. It turns out that roughly half of them do so eventually, complaining most often of their limited range and the dearth of charging stations. For Lynch, this could be grounds for hope for the industry -- the former problem might be corrected by technological advances and the latter by government investment. But problems like the cost of battery replacement and resale value are just over the horizon for EVs, as few owners have had them long enough for either to become an issue. If those issues begin piling up before the still-theoretical range bolstering battery tech breakthroughs, it's easy to imagine the bottom falling out on Electric Cars.

Another reason for skepticism -- the studies which found that about 50 percent of EV owners eventually switch back to traditional engines showed that that number was actually somewhat depressed by data from California, where the figure is closer to 20 percent. Why so low in the Golden State? The theory is that it is at least in part because Left Coasters are more environmentally conscious, though it might have something to do with the fact that, though Californians spend a lot of time in the car coming to and from work every day, that has more to do with traffic than distance. In Middle America, where things are more spread out and commutes are longer, the range of EVs is likely a bigger issue. Which means its probably a bad idea to bet big on Ford's new electric pick-up truck.

With all that in mind, Lynch's verdict is that Electric Vehicles will remain a niche product rather than a market-dominant one.

Does that mean that our elites, who are so certain of their success that they're constantly announcing absurd plans to phase out internal combustion engines before the next full moon, will have to change course? Well, they're not known for admitting mistakes. But even so, their mandates can't alter reality.

Eyes Wide Shut

I read a report in the Wall Street Journal in April about a Tesla car crashing into a tree in Texas, killing the two occupants. Sadly, fatal car accidents are all too common. Striking however was the reported time of four hours that it took emergency crews to finally put out the fire that engulfed the car. Apparently, the batteries used in the car are hard to extinguish once ablaze; or at least they keep on reigniting after the job is seemingly done. The car was also equipped with so-called ‘Autopilot’ and, reportedly, neither of the occupants was behind the wheel at the time of the crash. Now, to be fair to Tesla, Autopilot does not quite mean autonomous; it is just a step on the way.

There is a lot of hype about autonomous vehicles. No doubt they will have their place in well-contained situations. Australian mining companies lead the way in using them on-site to shift material from one spot to another. There are trials afoot, including on dedicated lanes on public highways across North America and Europe. Imagine. Millions of cars and heavy trucks tearing down highways, through towns and suburban streets without drivers. What could possibly go wrong?

Call me a techno-skeptic. I can’t see anyone being clever enough to devise a system to safely control millions of speeding intersecting vehicles while orchestrating appropriate responses to untoward situations. To wit, avoiding or not avoiding, and how, that dog wandering into the road. And I’m still trying to figure out how motorcycles and push bikes fit in.

Fahrvergnügen?

Of course, there’s always artificial intelligence (AI) to come to the rescue. Nothing is beyond AI apparently. Elon Musk himself, along with other far-sighted people, including the late Stephen Hawking, is on record as believing that it might even subdue us and take over the world. Self-driving cars would be a doddle. However, I remain unconvinced.

In any case, it doesn’t matter because autonomous vehicles, so far as I can tell, will live or die in the marketplace. It a question of whether lots of people who like driving will take to them. Whether bolder trials will end in too many crashes for comfort. Whether algorithms can ever be devised to replace human judgement in handling the myriad of different, and subtly different, situations arising on the road. That story will eventually be told by technology and market forces acting together.

Electric cars belong to a different storyline altogether. Their development is inorganic. It’s artificial. It can’t be quelled by antibodies -- in this case by economic realities. Bad things can happen and will go unpunished.

Pound for pound, electric cars are more expensive to make than are petrol or diesel cars. They are heavier and impart more kinetic energy when they crash; they create a bigger fire hazard. They will require massive amounts of electricity overnight when the sun isn’t shining and the wind is often still. They depend on the extraction of rare earths which, by all accounts, is a dirty business for the environment and which increases dependency on communist China, the overwhelmingly dominant producer. They require massively expensive, power draining, ubiquitous roadside charging infrastructure. Then there’s the challenge of disposing, year after year, of millions upon millions of toxic defunct batteries.

And, pray tell, what to do during those extreme-weather events (threatened by John Kerry et al as the doleful wages of anthropogenic climate change) when a community’s electricity supply has been snuffed out by one of those weather events and families whose cars have flat batteries are advised to flee the area? Back to horses?

Make hay while the sun shines, comrade.

To reiterate, none of this would matter a jot, if governments were not forcing the issue and taxpayers were not picking up the tab and thus hiding the costs and damage that would ordinarily be revealed and quickly punished by the marketplace. At this stage only about 0.5 percent of vehicles on the road are electric and most of those are hybrids. That leaves just about ninety-ninety percent to go. There is no way of knowing how far-reaching and irreparably damaging making such a wholesale changeover will be. And, if that’s an unknown, put it together with growing dependency on electricity generated by wind and solar. Unknown unknowns.

No one has this secret knowledge of the future. Nor do markets. But markets, ever alert, tend to weed out bad ideas not too long after they germinate. In other words, we seldom find out how bad things could get. The marvel of markets is that we don’t have to think too hard about what to produce and how to produce it. That’s a good job, because we don’t have sufficient knowledge. It’s a pretence of knowledge, as Hayek put it, to think that we do.

Communism is built on a pretence of knowledge. The means and makeup of production are directed from above. That things turn out badly is no surprise.

Proud papa of the Trabant.

The response of western governments to ‘climate change’ is essentially taken from the communist playbook. Transport and energy are at the core of modern economies. Determining how they will evolve by government edict is not fiddling around the edges. It is bound to end in tears. And those tears will inevitably go beyond economics to every facet of life.

It’s hard to imagine, if it were not happening. The ways of fuelling transport and generating electricity being foisted on us would never have powered the industrial revolutions which have led to today’s prosperity. And, to make matters worse, if that is at all possible, none of it will cool the planet.

Toyota Chief on Electric Cars: Slow Down!

The Observer reports on some very striking comments by Toyota Motor Corporation president Akio Toyoda, on the topic of Electric Vehicles. EVs are hot right now, with the automotive industry investing heavily in them, and governments throughout the world (prominently, as The Observer mentions, those of Great Britain and California) looking to aid their development by banning the sale of gasoline and diesel engines in the not-too-distant future.

But Mr. Toyoda is not convinced that they are the answer. At a recent press conference, he pointed out a few problems with the projected shift to EVs. First, he claimed that “the current business model of the car industry is going to collapse" if the industry shifts to EVs too quickly. No word on whether he thinks that the oft-discussed 10-15 year timeline put forward by activists in and out of government falls into that category, but it wouldn't be surprising if that is exactly what he had in mind.

Next, he pointed out that "Japan [for one] would run out of electricity in the summer if all cars were running on electric power." There just isn't enough electricity to go around, especially with battery technology being what it is. He estimated that "the infrastructure needed to support a 100 percent EV fleet would cost Japan between 14 trillion and 37 trillion yen ($135 billion to $358 billion)," a hefty percentage of GDP for a famously stagnant economy like Japan's.

Worth noting that it is a lot cheaper to generate the electricity a given vehicle needs on site -- that is, within the vehicle itself, as a gasoline powered combustion engine does -- than producing it elsewhere and transporting to the car.

And, following up on that point, he called attention to the fact that "most of the country’s electricity is generated by burning coal and natural gas, anyway," so the stated goal of leaving fossil fuels behind by shifting to EVs isn't going to happen. In his words:

The more EVs we build, the worse carbon dioxide gets… When politicians are out there saying, ‘Let’s get rid of all cars using gasoline,’ do they understand this?

Unfortunately the answer to that question is probably "No," both for the politicians and the propagandists in the media.

Is It Me That's Mad, or the World's Leaders?

Yes, I know that the headline should really read “Is it I who am mad—or the world’s leaders?” but the dubious grammatical form used above is better suited to the populist sentiments of this article. And though populism and populist are words routinely used to mean “insane,” “dangerous,” or worse “problematic,” some kinds of populism are in fact social truths that experience has shown to be accurate and valuable, i.e.,  commonsense.

That applies especially to truths about spending, saving, investment, and borrowing. Copybook maxims on that score go from Thomas Jefferson’s “Never spend your money before you have it,” to Shakespeare’s “Neither a borrower nor a lender be/For loan oft loses both itself and friend/And borrowing dulls the edge of husbandry.”

With that prudent advice ringing in our minds, let’s look at how prudently our political masters are handling our collective expenditures, revenues, borrowings, and investments. The first thing to notice (though few do) is just how massive the sums involved are.

Estimates differ but in the U.S., apparent president-elect Joe Biden is proposing a budget of $5.4 trillion equal to 24 percent of America’s GDP. He’s also proposing a smaller (but still massive) tax increase that would leave a gap of $2 trillion dollars for the U.S. Treasury to borrow. But cheer up—it’s bipartisan. President Trump’s budget estimates for 2021 weren’t much lower at 4.8 trillion equal to 21 percent of GDP and a deficit of $966 billion.

Now, expenditures to cope with the pandemic and lockdowns are emergency spending that almost everyone agrees is justified or, to be more precise, inevitable. That’s why the Trump budget rose to an annualized rate of 30 percent of GDP at the height of the pandemic this year. But a cool $700 billion is accounted for by Biden’s “Build Back Better” agenda that would increase spending on infrastructure, the environment, and the Green New Deal. That's equal to one-eighth of Biden's projected total spending for 2021 and one-third of the likely deficit.

The picture is the same in Britain where Boris Johnson’s government, as well as spending vast sums to ameliorate the pandemic and concomitant recession, is embarking on a green industrial revolution and unrelated (even contradictory) infrastructure spending. There too the Labour, Lib-Dem, and Green opposition parties attack these plans as too little, too late. In both countries the general attitude has been Spend! Spend! Spend!

Well, it is -- right?

After all, everyone knows that Tomorrow Is Another Day!

Scarlett O’Hara, Gone With The Wind’s heroine, may be out of fashion in racial politics, but financially she’s never been so enchanting to so many powerful people.

That may be because we simply can’t get our minds or even our imaginations around the figures when they rise from million to billions to trillions. To help us do that, here’s David Schwartz, the science writer and a brilliant popularizer, explaining them to NPR listeners:

The difference between a million, a billion and a trillion is like the difference between eleven and a half days, 32 years and 32,000 years.” Do the sums: a $2 trillion dollar deficit the equivalent of 64,000 years in time measurements.

And an $5.4 trillion dollar total annual budget... or a $23 trillion accumulated national debt... is equal to... but I see the audience’s eyes glazing over... No -- they’re crying.

Now, it’s certainly true that borrowing is economically justifiable and potentially profitable if it’s likely to produce a stream of income or equivalent benefit that over time more than equals the cost of the capital borrowed. A home mortgage is a humble example.

It’s also the case that government investment can be economically worthwhile if it creates an economic environment that hikes productivity, spurs general economic growth, and thereby increases tax revenue for the Treasury. Some state investment meets those criteria, but by no means all. So we should apply certain tests to proposals such as the green industrial revolution and the Green New Deal?

The test that governments seem to like most at the moment is the question:

Can we borrow at a low interest rate?

It’s a fair question but it should be a secondary one. A low interest rate means it’s cheaper to borrow, but that’s a modest benefit at the best of times and no benefit at all if the investment produces less wealth than the cost of borrowing. And if interest rates rise as they tend to in periods of inflation produced by government over-spending, then the modest benefit becomes a horrendous cost, especially when your accumulated borrowing has reached $23 trillion. So the next—or rather, prior—question becomes:

Can we make sure the investment pays off?

To which the honest answer is, No. As the distinguished political theorist, James Burnham, author of The Managerial Revolution, used to say in his rules on life: You can’t invest in retrospect. Some of the visionary Green schemes proposed by Joe and Boris, such as electric airplanes and cheap hydrogen cars, can’t be  invented simply because we establish a state fund to invent them, any more than the flying cars and personal jetpacks of Matt Ridley’s youthful imagination exist today because we wanted them, as he noted in a column on the ten big things wrong with the green industrial revolution.

I quoted the column last week, but it can’t be quoted too often because to judge from government policy no one in Whitehall or the Beltway has read it. It should be especially worrying that many of the schemes for transitioning from fossil fuels to “renewables” all cost more than the cheap fuels they are meant to replace and need state subsidies for longer than their advocates claim in advance. Demands for extended government subsidies should be a warning. Innovations will occur, of course, because a free economy is an innovation machine. We simply don’t know what they’ll be, and if we concentrate state funding on bright ideas too early, we risk being unable to fund the good ones that survive the sorting out process.

But they lift productivity and economic growth, surely?

Again, the proof of the pudding will be in the eating, but the signs don’t look that good. What economic benefit is likely to arise from the total electrification of Britain electric cars require that would match both its cost and the cost of forcing motorists to give up petrol-driven cars from 2030 onwards? If the answer is that we will benefit from the technological innovations that British and American auto manufacturers make in the course of developing cheaper and more efficient EV’S, we could have those benefits anyway by allowing them to make the cars that the motorists want at a price they can afford and at a pace that would allow government and industry to transition in line with market demand changes. Then we might get technical innovations in both EVs and petrol-driven cars.

But, Miss Scarlett, do you really need an electric car?

We don’t do that because the real aim of policy is not technical innovation—that’s a by-product at best—but a reduction in carbon emissions, or net-zero in short. That’s why everyone concedes that electricity prices will rise for industry as well as for consumers, putting the industries in countries with green hairshirt economic policies at a serious disadvantage with their foreign competitors. How will that kind of enforced economic primitivism help us either to raise productivity or to pay back the money we’re now borrowing? It won’t.

Since this is a global problem, though, surely, our competitors like China are making the same sacrifice?

Well, no they’re not, as a matter of fact, and when they say they will, they usually ask “the West” to give them subsidies to do so. In the meantime, the Chinese Communist Party—no idealistic Greens in that Politburo—is bringing new coal-fired power stations on line with emission levels greater than the U.K.’s entire carbon output.

So why are we doing this?

That’s a bigger question to which I’ll return next week. But it certainly requires explanation because unless the laws of economics have been repealed, the policy of spending and borrowing massively in order to make our economies less productive and efficient can only have one result. It was forecast most eloquently by Rudyard Kipling in his once-familiar poem "The Gods of the Copybook Headings":

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: "If you don't work you die."

Something to think about.

Driving Towards Utopia, Skidding on ICE

“Against stupidity the gods themselves struggle in vain, O’Sullivan,” my grammar school teacher, quoting Goethe, would say as he handed back my weekly essay with helpful comments. “So what chance do you have against it?”

They said things like that in those days. And I have often wished that Mr. Hughes were both around and in a position to “mark” the policy announcements of various governments painting the glorious future they were shaping. Her Majesty’s Government headed by Boris Johnson especially needs his dry and weary judgmentalism.

Last week I contrasted two things: first, HMG’s apparent decision that, having already announced a ban on the sale of petrol- and diesel-fueled vehicles by 2035, it would bring forward that timescale to 2030; second, the substantial reasons why electric cars might not be the inevitable future—consumer resistance, the vast expense of expanding the electricity network to cope with EVs, and the possibility that a new battery needed to make EVs cheaper and more efficient might not materialize for a future as near as 2030.

That’s a tough contradiction. But it was resolved on the day I wrote it by the adverse reactions of both specialist writers and the market to Elon Musk’s “Battery Day” announcement that Tesla hasn’t come up with that hyped-up battery yet but it will soon.

Here’s the summing up of Tesla’s stock gyrations over the next few days by Market Watch: “Shares fell 22%, as of Thursday’s closing price, as a widely anticipated update on the company’s battery technology failed to wow investors. The decline is worse than Tesla’s 21% drop in March, when the entire market was plummeting because of the coronavirus.”

Even Goethe had his critics.

Now, the market isn’t infallible. Some of the higher share price may have been in response to salesmanship by Musk that now looks over-optimistic.  It’s also likely that research and innovation will develop a lighter and more efficient battery and thus a cheaper EV in time, if not necessarily in line with a politically driven target like 2030.

That said, public policy should not be based on optimistic forecasting of specific innovations in technology. Which means that the U.K. government should not bring forward its ban on selling petrol-fueled cars—ICE cars in the jargon—to 2030 and should even push it forward to beyond 2035. That would give us the time needed to consider a better mix of public policies on carbon emissions and much else.

As it happens there are very solid reasons for doing so, as Professor Gautam Kalghatgi, a fellow of the Royal Academy of Engineering, the Institute of Mechanical Engineers and the Society of Automotive Engineers, who is currently a visiting professor at Oxford University, argues in his monograph, The Battery Car Delusion:

The first sentence of his summary introduction alone is a stark questioning of current orthodoxy in Whitehall: “Battery electric vehicles (BEVs) do not represent a significant improvement over internal combustion engine vehicles (ICEVs) in terms of their carbon dioxide footprint unless all the energy for their manufacture and use is CO2 -free.”

There’s a huge cost -- as in Pounds and Dollars -- in carbon emissions as well, from building a larger and more robust system of electrification to accommodate BEVs. It’s paid not only by government but also by EV owners who would have to install battery-charging pillars in their garages and driveways in order to avoid long lines and waiting times to refuel their vehicles.

And what are the benefits to set against these extraordinarily heavy costs? Still in his summary, Professor Kalghatgi points out that “Even with a 100-fold increase in the number of BEVs to 10 million, around 85% of transport energy will still be delivered by ICEs. And this large increase will at best save about 4% of the GHGs [Greenhouse Gas Emissions] associated with transport in the UK. ”

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In short the switch to electric vehicles, even if we could be confident that they will be cheaper and more efficient for EV drivers (which we can’t be) would offer an extraordinarily modest benefit to set against heavy costs. It’s a public policy that makes no sense.

Unfortunately, if you want to get a policy changed, it’s not enough to persuade governments that it will have a net negative impact on the country. You also have to convince that them there is a policy that will also meet their aims—here it’s reducing carbon emissions—to compensate them for having to abandon their destructive approach.

In this case there is an alternative policy. It  is to improve the efficiency of the internal combustion engine so that it releases fewer carbon emissions into the atmosphere. It’s a very simple and practical approach to solving a difficult problem. It does not require the building of any infrastructure, let alone a massive one, in order to work effectively. For that and other reasons, it doesn’t constitute a heavy increase in expenditures by governments and consumers.  It’s already being accomplished by the research departments of automobile companies which have transformed conventional cars to an astounding extent since the 1960s.

How effective might this approach be in reducing carbon emissions? Professor Kalghatgi estimates that a 5 percent reduction in fuel consumption by ICE vehicles would obtain a larger reduction in carbon emissions than the massive switch to electric cars with all its attendant infrastructure costs. That alone would be a massive prize. But he also believes that a reduction much larger than 5 percent in fuel consumption by ICEVs could be obtained through such methods as “better combustion, control and after-treatment systems along with partial electrification and reductions in weight.”

The snag is that though these innovations are being pursued now, how long is that likely to continue if the U.K. government instructs car manufacturers that they must stop selling their product in ten years? What incentive is there for companies to maintain large R&D expenditures when they are officially told that these innovations, even if successful, will reduce  carbon emissions and make other improvements in their automobiles for only a short period before production is halted altogether?

Let's relax and think this through.

Indeed, how long will automobile companies continue to invest at all in products other than those which, unless Musk gets that elusive breakthrough, will be too expensive for most consumers to buy unless the government steps in with subsidies to help them?

It’s policy fueled by the moral vanity that Britain should lead to the world in combatting climate change by destroying a major industry, making a huge dent in the Exchequer, and contributing a reduction in world carbon emission so small that it would not register on any meter.

Against stupidity the Gods themselves struggle in vain.