ZOMBIE CONTENTIONS

Roger Pielke noticed Warren Buffett’s big bet on coal the other day and wondered what the Sage of Omaha knows.

http://rogerpielkejr.blogspot.com/2009/11/warren-buffetts-big-bet.html

As it happens my son sent me a long DOE report the other day that made me think things aren’t as bad as I had thought even if global warming fears are wholly reasonable. Or perhaps I’m just in an optimistic frame of mind.

http://www.netl.doe.gov/energy-analyses/pubs/Bituminous%20Baseline_Final%20Report.pdf

If the assumptions of the study and the analysis leading to the executive summary aren’t too far wrong electricity from coal will cost about 50% more with very high CO2 capture and storage. That means fossil fuels alone can support recently normal rates of economic growth for a hundred years or more. If the transition can take place over twenty years it’s not an insurmountable economic problem, if only because many existing uses of electricity are pretty inefficient and the economy will enforce a lot of energy conservation as electicity costs rise. So the actual economic effect of the energy cost change in terms of living standards will be less than a 50% rise.

And that leaves out the possibility that the public will eventually get comfortable with nuclear fission, which is operating now at cost levels that must be at least comparable to coal plants without carbon capture (or else it wouldn’t be operating). It also leaves out the possibility that fusion will eventually become possible at some cost that’s reasonable in the context of rising fossil energy costs due to carbon capture and depletion. It also leaves out wind and solar and biomass and such; but they strike me as nearly trivial in the 20 year term next to the bigger sources of energy despite all of the hype.

The economy commonly reacts to such cost changes, and even worse cost changes, over time without too much disruption if the politicians don’t meddle too much, as they did in the 1970′s for a time. For instance oil and thus gasoline prices can rise and have risen in the past by more than 50% in a year or two without causing more than moderate pain, at least to anyone who has access to the technology to read this, despite all of the whining that always attends such price changes.

Perhaps that’s why Warren Buffett made his big bet on coal.