EDITOR'S NOTE: Many of you passed the test that was in the last TMR. I indicated that Justice Powell said of pornography "I know it when I see it." We all know that it was Justice Potter Stewart, not Powell. I just wanted to see if you were reading and it appears many of you are. Thanks for setting me straight!

READER FEEDBACK ON ENERGY BILL AND ENERGY POLICY

Comment 1: It is impossible to support the Energy Bill and not necessarily because of anything having to do with energy. The bill is simply a pork laden set of welfare benefits, pollution excusing, and other goodies for big oil. I am utterly opposed to it because of that. I would love to debate the energy aspects of the bill, but it is difficult to find many.

Comment 2: Why did you say, "President Bush is a Republican who, one would expect, would support market policies for energy?" Neither mainstream party readily goes against its constituency to support ideological positions. Some of the most consistently Republican states, i.e., the Southeast, are the least competitive as far as electricity sales go. The Alaska Republicans always support federal subsidization of a gas pipeline across the mainland. I'm a Democrat myself and I support competitive energy markets. The issue transcends political parties. As far as voting representation goes, the position the politician takes has more to do with who the constituents are and where the money is coming from than which party he/she belongs to.

Comment 3: Reading George Bush's speech should finally persuade you that Republicans - at least Republican politicians and donors - do not favor reliance on "markets" so much as they favor promoting businesses - preferably ones that will donate large amounts like the oil industry does. 

The "energy plan" described by Bush is a pastiche of subsidy programs for politically important business groups, including for the oil industry which is currently benefiting from record prices that are not likely to go down anytime soon. Not only are subsidies particularly wasteful at a time of record oil company profits, but accelerating depletion of domestic supplies hardly seems like a rational long-term strategy, since it shifts to the future greater problems of world oil dependence. 

If Bush believed in using markets to restrain demand, he would propose a sizable tax on energy consumption (gasoline, BTU, or carbon) so as to restrain demand, allow markets to decide allocation issues, reduce our terrible balance of trade problem - and start to arrest the frightening budget deficits created by his administration (with help from the other mythical "fiscally responsible" Republicans). The prospect of his lecturing the G-8 countries on how other countries should promote conservation and efficiency borders on the laughable given U.S. energy consumption, subsidies and inefficiencies.

On balance, the "energy plan" is mostly a compilation of subsidies designed to reward enough groups to get it passed, without really coming to grips with the fiscal and energy problems the country faces. It allows Bush to say he did something and while rewarding loyal businesses. It doesn't advance energy markets, only energy businesses. 

READER FEEDBACK ON DEMAND RESPONSE

The reason that the DR folks seem so well organized is that they have working on this stuff since the late 1970's. While "demand response" is relatively new jargon, it is just "conservation and load management" or "DSM" by another name. As with the DSM activities of the 1980's, we can use a tariff that mimics efficient prices (RTP/TOU/interruptible), or we can design and administer programs (rebates and such) to compensate for bad regulatory pricing, or we can unbundle the markets and set up a market structure that requires people to take responsibility for their actions in the marketplace (TX model banning wires company provision of "competitive energy services"). We had those options decades ago, and we have them today. When they were proposed decades ago, they we met with great resistance because very few people admitted that regulatory pricing was horrid. Say what you wish about your friends in Calif., but it was the 1993 "Yellow Book" that preceded the 1994 "Blue Book" that told the story about how regulation was not working.

READER FEEDBACK ON GLOBAL CLIMATE CHANGE

Comment 1: Global Climate Change (previously referred to as global warming; or, more previously, as global cooling) is going nowhere, which is exactly where it should be going. The science is shaky. The models cannot model the past. How can they be relied upon to model the future? The weatherpersons don't know within 1 degree F. what the temperature will be tomorrow, no less in 2100!

Kyoto is step one of a process intended to bring the U.S. to its knees economically. Ronald Bailey of Reason wrote a great set of articles about the COP 10 meetings [The 10th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (link)]. The end point, in the minds of the biggest proponents, is stabilizing CO2 concentrations at ~500 ppm. The recommended approach to achieving this end point is referred to as "contraction and convergence" (everybody uses less and everybody uses the same amount). This would require a reduction of ~95% in U.S. CO2 emissions per capita. This would not be easy, as Senator McCain suggests, nor would it be cheap. The easiest way to avoid sliding down this "slippery slope" is to avoid stepping onto the slope in the first place.

Comment 2: I think dealing with global warming is necessary (it is pretty clear now that this is a real externality with real potential harm) and it is best dealt with at the national/international level. The emphasis from our side needs to be that solutions should be market oriented (cap and trade or carbon taxes) not command and control oriented (everyone must have a specific portfolio mix or every source needs to reduce emissions by the same amount).