The Enervation Bill

In other news China is unhappy about the energy bill just passed by the House. The bill will impose a U.S. tariff on Chinese imports because China does not limit greenhouse gas emissions. A secondary objection is that U.S. products, which will be subject to carbon taxes, will now be even more expensive to foreigners and lead to a bigger current account deficit, further weakness in the dollar, and degradation of China’s investment in U.S. Treasuries and other financial assets.

Of course, these economic issues are relatively unimportant and the energy bill is very important if all of the following propositions are true:

Rapidly Rising Temperatures: global temperatures will continue to increase, resulting in catastrophic changes (desertification, rising seas) that will occur “soon” (meaning, say, in 10 to 20, but not 100 years).

Greenhouse Gases are the Principal Cause: carbon dioxide, methane, and other greenhouse gases are the most important causes (as opposed to sunspot activity or volcanoes, for example) of the temperature increase.

Efficacy of the Energy Bill: the bill that Congress will enact will be effective in limiting the production of greenhouse gases.

For what it’s worth, this humble observer---who freely admits that he is not a scientist and has no expertise in this area---doesn’t believe that the combined probability of all of the above is greater than 50% (for example, .9 x .8 x .6 = .432). This energy bill is likely to wreck our economy further based on an unconvincing chain of logic.

Also, it doesn’t help our standing with our lenders (see post above) to see that we’re engaged in such magical thinking. When religion spills over into business, investors grip their wallets more tightly. © 2009 Stephen Yuen