Undoing Bush: the environment

I mentioned yesterday the series of post-Bush Administration-themed articles being carried by Harper’s at the moment. One of them is: the environment.

In general,

One of the best things about the departure of the Bush Administration will be the end of headache-creating cognitive dissonance. It has taken over institutions ostensibly devoted to defending the natural world—the Department of the Interior, the Environmental Protection Agency, the Council on Environmental Quality—and turned them into organizations devoted to environmental degradation. And it has passed a set of anti-environmental laws that sound like they were dreamed up by wild-eyed nature lovers—the Clear Skies Act turns out to gut the old Clean Air Act, for instance, and the Healthy Forests Initiative has initiated a great deal of unhealthy deforestation. (“No Tree Left Behind,” someone quickly dubbed it.) We’ll not be in some new green nirvana when Bush finally leaves, but at least we might start trying to solve real problems.

On climate change, specifically (sorry, Jason),

Bush came into office promising that he would require U.S. power plants to reduce carbon-dioxide emissions, and if he’d stuck to the plan, our country would already look quite different. Solar panels would have begun to sprout in real numbers, cars would be smaller, we’d be building more passenger trains. Instead, Bush repudiated the promise within a few weeks of taking office. He said he didn’t want to do anything that would raise the price of energy. His energy task force, chaired by Dick Cheney, barely even mentioned the possibility of global warming. It concentrated on new places to find fossil fuel, new pipelines to carry it, new refineries to refine it—and indeed, just as Cheney suggested, there are about 159 new coal-fired power plants in some stage of planning or construction around the country. Meanwhile, carbon-dioxide output has increased an average of 1.6 percent every year—and the average price for a gallon of gas has nearly doubled.

The author Bill McKibben also has unkind things to say about the Kyoto treaty. I belong to the other pariah state in this regard, however, I’m not sure he’s right. Kyoto, like any other treaty, only works as long as the big trouble-makers are onboard with it (see: trade). Kyoto probably wouldn’t have worked, probably not even as far as ratification in the houses of Congress. The crime is still there, however: the Bush administration walked away from it, poisened it, poisened the process, the people involved and the institution involved. We now see clearly where that toxicity comes from, but is seems to be a continuously renewable resource.

In short, this administration has made a mess. It has shit in its own nest, in our nests, in every nest it could find in government, and most of the nests it could get to overseas. How are we going to go about cleaning up? I hope the world is adult enough not to demand the next President spend half his or her first term travelling the world apologising for it (although I won’t hold my breath). First and foremost should be (i) the restoration of oversight, even the improvement of oversight. Particularly with regard to power generation (coal and nuclear plants), requiring them to install safety devices and anything that will clean up their emissions, and (ii) the restoration of adequate funding for the Environmental Protection Agency, National Parks – how about we just convence a taskforce and consult only land conservationists, hunting (but non-NRA) groups, Indigenous community groups, and the like? 

It’s amazing what these organisations can do when given the funding they require and left the hell alone from lobbyists and Vice Presidents. Their jobs, for example.

From leveraged buy-outs to leveraged buy-backs

While tremors ripple still across the financial pond, in re CDOs, leveraged debt investments, etc. word comes of a record-breaking leveraged buyout in Canada (parenthetical statements are mine).

BCE, the Canadian telecommunications group, has agreed to a CAD34.8bn (USD32.6bn) cash buyout by a group that includes the Ontario Teachers Pension Plan (“Retirement security tomorrow”) and two US private-equity groups, Providence Equity (“We paid for James Bond) and Madison Dearborn (they look really boring).

Of the USD32.6bn being put up for BCE, USD15.9bn is debt, itself lined up with a banking syndicate. Sound messy enough, yet? According to BCE chairman Richard Currie it will create value for their shareholders. If only they could figure out ownership of the company, now…

Share re-purchasing on the increase

The buy-out story is – as is common, for me – not the point. The interesting story is its sort-of counterpart: a recent run of leveraged share buy-backs. The Home Depot, as an excellent exemplar, is borrowing some USD12bn to help pay for a USD22.5bn buy-back of its own shares (I know, I know, who else’s shares would they buy back? Shut up). Expedia is going in for a USD3.5bn buy-back (42% of its shares outstanding) – also with the help of borrowing. And BHP Billiton, Toyota…it’s a long list.

The motives for this are mixed. Toyota has been at this since 1997, and it’s generally to shore up its market capitalisation (buying back shares takes them off the market, increasing the ownership and value inherent in the shares that remain outstanding). In the case of the Home Depot,

Home Depot’s proposed buy-back is one of the largest in US corporate history. Carol Tome, chief financial officer, told Wall Street analysts that increased indebtedness was justified to keep rewarding shareholders in the face of slower growth in profits and sales.

It is actually the 5th-largest. There are other-indicating signals. Last week (or so) they agreed to a USD10bn deal to sell their supply division – giving them the other half (or so) of the cash required for the buy-back. The supply unit, by the by, when to a group of 3 equity firms.

This move gives The Home Depot’s board (and the board of any other company doing the same) more power, buys out (hopefully) so-called ‘activitst’ shareholders, and increases the value of the shares held by whomever is left. A bit aggressive, but it secures for the board a greater hand in decision-making. They’re planning on yet more capital expenditure this year, even as sales are slowing with housing. It won’t be likely to deliver great returns for shareholders, but if you can buy those people out now, all well and good.

There’s an interesting article about the relative merits of buy-backs over at Investopedia, which I recommend. It becomes an interesting exercise, with private equity Baby Huey-ing through the corporate and financial landscape, to follow the actions of publicly-listed companies and sift out the motives – board control, debt consolidation, various financial ratios (there probably isn’t much excess capital floating around public companies these days), even keep private equity itself at a distance. Bloody exciting.

NSW for sale, cheap

What an antipodean kind of day it is, so far.

Australia has a long history (by white standards: we’re not talking the 40,000 years of Indigenous land use that preceded us) of conversion of land from crown to private hands, from the early days of pastoral squatting and 99-year leases to Landcom. Gone are the days when you could move a bit further out, put up a fence and set the dogs on any black man who ended up inside them. But not all that far, it seems:

Thousands of hectares of publicly owned wilderness will be systematically sold to private landholders at a fraction of market value from this week.

Green groups say NSW’s temperate woodlands and endangered wetlands are among about 6000 Crown leases that face a new land clearing threat, as the NSW Department of Lands pushes ahead with a program to sell more than 3 million hectares of public land.

The program is expected to raise almost $38 million from the sale of 10,000 leases, although the total market value of the land is $4.7 billion.

Wow, you say – for a programme supposedly about raising revenue, selling AUD4.7bn worth of assets for AUD38m seems a trifle…odd. If not surprisingly so, for this state government.

In fact the amount for which the government can sell the land is tied in part to the amounts for which the government had let the land be leased over the last couple of centuries. So-called ‘perpetual leaseholders’ have been offered the chance to buy their leases outright for 3% of the market value, not because someone in the government has lost their marbles completely, but because perpetual leaseholders have probably been leasing that land at the same 3% for God knows how long.

According to advice to the department, obtained by the Herald, the Government risked a breach of contract if it tried to charge more than an average of $3,165 per lease, or 0.65 per cent of market value.

Now by my numbers, 3% of AUD4.7bn is AUD141m, not AUD38m. And selling 10,000 leases for AUD3,165 is also not AUD38m (although it’s close enough for government work). I guess I don’t understand where their ‘market values’ are coming from, but still. The numbers aren’t adding up, for me. All I know is the state government is selling off Crown land bloody cheap.

The flipside to this is if the land was sold at market value. Already farmers who don’t buy are facing higher leases in the future, now that the country has ridden on the sheep’s back for long enough to leave our myths behind us. Not giving them the land for a song would probably impose a cost they could not bear. At the very least costs for us as consumers would become more expensive – but then we’d just import even more food than we do already, and our pastoralists would all go under.

It is, to quote the US government, possibly a matter of ‘food security’: in a sector of the economy with almost no chance of making money, the government has to give land away. Of course, this is also how wheat, sheep and cattle barons got started in the first place, all those years ago.

The state’s Department of Lands has replaced its own ability to control Crown land with covenants signed with the new freeholders, to protect wildlife and wilderness, prevent land clearing, and so forth. The willingness or ability to police this seems to be causing some problems, and the land-clearing is a big issue. For me, the biggest. Any chance of the likes of Monsanto (sustainable agriculture my ass) ever having any hope of buying out large tracts of land and just growing soy or corn need to be set to zero. After that, frankly, the farmers can have it. I’m not pretending I have a better use for it. I would still like to see the government get a better deal for it, though.

Circumstances meeting our prejudice = proof, in politics. Or, Kevin Rudd does what unions tell him to do

John Howard is spending billions on finally doing something about infrastructure, social and otherwise, in Australia’s Indigenous communities. From my perspective it is for all the wrong reasons – claming there is a national emergency out there, etc. Indigenous Australians have suffered a national emergency ever since we landed more than 200 years ago.

From the Prime Minister’s perspective it is for all the right reasons: squeezing indigenous community groups, undoing decades of progress on Indigenous land rights and, of course, the election. Fortunately most people can see through that one. At last, 11 years in, the dirty tricks of John Howard have become punches well-enough telegraphed for the general public to understand.

In other arenas, though, there is still game to be had. Specifically, the old canard that Labor belongs to the unions. I liked the SMH’s take on the ’story’ (“Another leak casts Rudd as a puppet”), although the Australian’s was also good (“We’ll tame Rudd, union vows”). Get it? The unions are so confident that they can run the Labor party that they say so to their members.

Here are my headlines:

Labor policies keep unions onboard

Unions will never support Howard, Robertson says

Fire Howard, work with Rudd, union boss says

See, the theme of my headline is the theme of what union chief John Robertson told his bloody members: that whatever Labor is doing, either to position themselves for the election or because Rudd actually means it, they’re better off with Labor in charge than the Liberals. So for now they’re better off not rising to the bait of Labor’s electioneering, focussing instead on the harm done by Howard’s governing. It was rather a good rallying of troops, I thought, and rather a good playing of cards, because Robertson is right. There may or may not be former bosses of the ACTU on Labor front benches anymore, but it doesn’t matter. Labor is still the better party for the interests of the worker, and Robertson’s constituents need to remember that, for their own self-interest.

But then the story would be “Nothing has changed” – hardly as much fun as leaked tapes, weak leaders, parties in bed with unions, and so forth. Howard will be desperate for it to stick, though, because his Indigenous Emergency is no Children Overboard or Interest Rates. It didn’t work well and it’s already backfiring.

If marching the army in and victimising Indigenous Australians the last 3 inches they have left in this country is the best he had up his sleeve, Costello will be waiting even longer to become Prime Minister.

Yes, your plasma-screen television will use more electricity. A lot more

This is mostly for the Australians. I noticed in today’s Sydney Morning Herald a story about how much more expensive it is to run a plasma-screen television:

Plasma televisions are sending home power bills sky high as more people install bigger and more energy-intensive screens.

Electric hot-water systems remain the No.1 energy guzzler in the home but plasma TVs are fast overtaking refrigerators and freezers as a greenhouse gas culprit, with poorly performing sets adding as much as $100 to electricity bills, energy experts say.

I see a problem there: the clever graphic employed by the SMH suggests a AUD42 p.a. energy bill, not AUD100 – where did that figure come from? Also, even at AUD100 I think we disagree on the working definition of “sky high”.

In any event, God help us if this is news to you, seriously. I use stories about this for homework for my undergraduate economics students. From the Guardian/Observer:

Our insatiable appetite for the big picture is threatening the planet. A scientist has warned that if half of British homes buy a plasma-screen TV, two nuclear power stations would have to be built to meet the extra energy demand.

They also discuss the fact that a plasma-screen TV is likely to be a component in a digital entertainment network made up of DVD players/recorders, Playstations and who knows what else, which makes the energy load much greater, even when everything is on stand-by (don’t leave your appliances on stand-by, folks, they still use plenty of power. Moreso flat-screen TVs. If you work in an office/building, switch off every monitor you see on your way out the door at night).

The starting-point for my homework question is discussed, a little bit, in this article – that there is no regulation, in the form of ratings, governing televisions. We actually discuss what is needed in a broader sense (it’s Principles of Economics, after all). If there is that great an energy use, and that great a contribution to environmental degradation, then there is a social cost that isn’t being carried by the price of the televisions, and the government should tax plasma-screen TVs, to reflect that (or should they?). In the process it will bring the sales of them down, etc.

The other argument is market-based, that if the costs of running these electrical goods is higher, demand will falls anyway, market pressures will insist upon higher energy-efficiency levels, etc. There will be no need for the government to intervene. The problems? People already own the ‘bad’ televisions, and will do for 5 years or more. If however they dumped it and bought some newer, ‘good’ television that used less energy, the load required would fall, but there’d be another television’s worth of harmful plastics and metals being picked apart by some child in a landfill in China somewhere. So…

On the other hand, taxation can be a problem also. If people will respond like this to the higher operating costs, surely they would not have been able to afford the significantly-more-expensive television in the first place? Was it purchased on credit? Was it purchased because some social effect is so high that the willingness-to-pay for one of these things becomes much greater? Probably a bit of both, in which case a tax will not have a significant effect on demand, unless it is set so high that it is immediately seen as the government keeping working-class people from having a rich man’s television.

In this instance I favour a rating system, which is almost command-and-control, but not quite. People – thanks to whitegoods – understand energy ratings. As long as plasma-screen televisions can achieve high ratings, such a system will work. If none of them bother trying for more than one or two stars, it won’t work and the government will need to get tougher (‘need’ defined as strongly as the government feels inclined to act, of course).