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September 28, 2008 – Vol.13 No.28

BEYOND THE BAILOUT.

As I write this the US Congress is still working out the details of the $700 billion bailout which is supposed to be a fix-all for all things gone wrong on Wall Street because of foolish and greedy investments in mortgage-backed securities. If the bailout passes muster, and is signed off on by President Bush, things won’t return to normal – whatever that is – right away. The bailout won’t automatically pull the nation out of its economic slump, The bailout is meant to keep the nation, always hungry to borrow more money to buy stuff, borrowing even more money so it won’t slide into an economic abyss.

Speaking of borrowing, Congress has also approved a $630-billion budget bill that includes a loan package for US automakers for up to $25 billion to retool to build vehicles that get at least 25 percent better fuel economy than their competitors. It’s the largest federal aid ever offered to the US auto industry. Automakers will pay it back at the low rate of 5 percent. The money won’t be immediately available: the US Department of Energy will have to review requests to make sure that automakers comply with the 25 percent better fuel economy rule. The reviews could take up to 18 months.

The loan package seems geared to tooling up to build cars like the Chevrolet Volt. Hopefully in the next administration and the next Congress either an incentive package, or regulations, or both, will be passed that will ensure that hyper-fuel economy vehicles are sold in the millions and become more than just niche vehicles. Thousands of 100-plus miles per gallon (or per gallon of gasoline equivalent) vehicles will do little if anything to cut our dependance on imported oil or make cuts in greenhouse gas emissions attributed to cars and trucks: the sales figures for units sold have to be in the millions each year.

Congress has also deliberately ignored its annual reinstatement of its ban on drilling on the US Outer Continental Shelf - effectively opening it up for drilling. So in the same bill Congress offers low interest cash for automakers to build more efficient cars and cut oil addiction while at the same time Congress offers new oil reserves to keep the addiction going. (Treat the addiction, but keep the drug flowing.)

Fortunately any new oil found in the Outer Continental Shelf won’t reach the shore for a decade or so. By then it may not be needed depending on who occupies the Oval Office.

According to the Center for Economic and Policy Research, “The increase in CAFE (Corporate Average Fuel Economy) standards signed into law by President Bush (in 2007) will have four times the impact on oil dependency as drilling in the Arctic National Wildlife Refuge and fourteen times the impact as drilling in the Outer Continental Shelf. The addition of Senator Obama's conservation proposal to the increased CAFE standards would have 21 times the impact of opening up drilling in protected offshore areas and 6 times the impact of drilling in the Arctic National Wildlife Refuge. The impact of opening drilling in either area will be zero for close to a decade. Even when these regions attain peak production in close to twenty years, the potential impact on gasoline prices will still be negligible.”

While Washington is playing with the nation’s economic future, its environmental future goes ignored. This week the Global Carbon Project found that worldwide emissions of carbon dioxide are escalating. Emissions from fuel burning and cement production increased by 3.5 percent per year from 2000 to 2007, nearly four times the growth rate in the 1990s.

 

Links:

Center for Economic and Policy Research
http://www.cepr.net

Global Carbon Project Figures
(A factsheet detailing the 2007 data for the Global Carbon Project, a joint international project on the global carbon cycle.)
http://www.csiro.au/resources/GlobalCarbonProjectFigures.html

 

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