Chart of Today: Shrinking Workforce

Posted on November 9, 2016 by matt ohern
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workforce_growthThis chart, published by Hamilton Lombard on the StatChat blog, shows how the working-age population of the United States has begun shrinking in much of the United States. While metropolitan areas still experience a growing workforce as they suck up labor from rural counties, even urban growth is slower than it was ten to fifteen years ago.
The downside of this trend, is that working Americans will have to support a fast-growing population of elderly Americans, along with the Medicare, Medicaid and Social Security programs that benefit them. As has been widely publicized, government will become increasingly hard-pressed to finance these entitlements in the absence of meaningful reform.2000_growth
The bright side of the story is that intensifying competition for workers should translate into lower unemployment and higher wages, assuming the economy can continue to produce even modest job growth. (The next U.S. president, whoever he or she is, will no doubt claim credit for the benefits of demographic shifts forces over which they have no influence whatsoever.)
Here in Virginia, the public policy apparatus has not begun to think seriously about the implications of a stagnant workforce. “With shrinking workforces and lower unemployment rates, most rural areas will need to change their focus toward attracting workers rather than just keeping them,” says Lombard.
The same can be said of urban areas as well. If metropolitan areas want to grow, they, too, will need to change their focus to attracting workers. Fifteen years ago, urban geographer Richard Florida noted that corporate investment chased the workforce, especially what he termed the “creative class.” As the nation enters a no-growth phase for the workforce, that phenomenon should intensify. Virginia communities will need to re-think what constitutes economic development. Instead of using subsidies and tax breaks to lure corporate investment, communities should expend resources to create the amenities that lure young workers, especially skilled and educated members of the creative class. Attract the workforce, and the corporate investment will follow.
(This article first ran in Bacon’s Rebellion on November 7, 2016)
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The China Syndrome

Posted on November 9, 2016 by matt ohern
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obama-in-china-150Conventional wisdom in the U.S. transportation infrastructure community is that our infrastructure is “crumbling,” and that China shows the way forward by “spending more on infrastructure each year than North America and Western Europe combined.” This has also been a theme of economist and New York Times columnist Paul Krugman in recent years. The comparison is very misleading, since China is an economy still emerging from underdevelopment, not an advanced western nation that already has extensive infrastructure. But there is also the question of whether China is making sound investments.
On the latter point, I was not completely surprised to read the following in a letter to the editor of The Economist (September 3, 2016):

“Over half of the investments in transport infrastructure in China are of such low quality that they destroy economic value instead of generating it—the costs of that spending are larger than the benefits they generate. Unless China shifts to fewer and higher-quality infrastructure investments, the country is heading for an infrastructure-led national financial and economic crisis.”

The letter writer was Bent Flyvbjerg, professor of economics at Oxford’s Said Business School and lead author of the classic volume, Megaprojects and Risk (Cambridge University Press, 2003).
His conclusions about China are derived from a major research project, summarized in “Does Infrastructure Investment Lead to Economic Growth or Economic Fragility? Evidence from China,” by Atif Ansar, Bent Flyvbjerg, Alexander Budzier and Daniel Lunn. I downloaded and read the paper last week, and found it a very well-done piece of empirical research.
Flyvbjerg and his team obtained data on 95 completed transport infrastructure projects in China. They are among the best-documented Chinese projects, since they received some of their financing from either the Asian Development Bank or the World Bank. Among the team’s findings from this dataset are the following:

  • 75% of these road and rail projects had cost overruns;
  • Actual costs averaged 31% higher than budget, but many were much worse;
  • Road projects were generally completed on schedule, but rail projects on average took 25% longer than planned;
  • 65% of the projects had “benefit shortfalls,” primarily lower traffic and revenue than forecast, averaging 41%, and some were much worse;
  • The remaining one-third were overloaded, by an average of 61%.

The approved plans that authorized the projects to go forward (including ADB or WB financing) included benefit/cost ratios of 1.4 to 1.5—meaning “planners expected the net present benefits to exceed net present costs by about 40-50 percent.” Using data from the 95 completed projects, Flyvbjerg’s team recomputed their actual B/C ratios, finding that 55% of the projects had an actual ratio of less than 1.0. And, “a majority of these value-destroying projects suffered the double whammy of a cost overrun and a benefit shortfall.”
Well, you might think, at least China’s economy will be improved by all this new infrastructure, even if some of the money was wasted. The latter part of the paper addresses the macroeconomic consequences of these poor outcomes. First, the authors cite other work demonstrating that China’s biggest economic growth came prior to most of this infrastructure development. Bannister and Berechman found that “The ‘China miracle’ happened not because it had glittering skyscrapers and modern highways but because bold economic liberalization and institutional reforms . . . created competition and nurtured private entrepreneurship.”
Flyvbjerg and colleagues conclude that massive over-spending and poor outcomes in infrastructure have led to “an accumulation of a destabilizing pile of debt in the economy; unprecedented monetary expansion . . . and subsequent economic fragility.” And also, “perhaps even more damaging, are the opportunities foregone to build the right infrastructure.”
I’ve only skimmed the surface of this very important paper. Everyone interested in sound U.S. infrastructure policy should read it and ponder its findings.
(This article first ran in the October 2016 issue of Surface Transportation Innovations)
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Environmentalists file another ammonia notice with EPA

Posted on November 9, 2016 by matt ohern
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epa-150x150After last week’s blog, a helpful reader told me environmental groups already have filed the proper paperwork with EPA to file another lawsuit forcing it to review the possibility of regulating ammonia as a criteria pollutant under the Clean Air Act (CAA).
Common sense suggested that after two legal defeats, the environmental groups would file the appropriate 180-day notice.
On February 1, 2016, environmental groups filed “Notice of Intent to Sue for Unreasonable Delay in Responding to a Petition for the Regulation of Ammonia as a Criteria Pollutant”. The letter is signed by the lawyers from the Environmental Integrity Project (EIP). In addition to EIP, several other groups of environmentalists are requesting EPA take action on regulating ammonia. Some  background on each one signing the letter.
EIP is a national nonprofit which attempts to enforce CAA requirements on confined animal feeding operations (CAFOs) “…because these operations endanger public health and welfare with their unrestricted pollution emissions.”
Another signer, Center for Food Safety, is a nonprofit and is “…dedicated to protecting human health and the environment by curbing the proliferation of harmful food production technologies, such as AFOs, [animal feeding operations] and instead promoting sustainable agriculture. CFS represents over 700,000 farmer and consumer members throughout the country who support safe, sustainable agriculture.”
In the letter to EPA, CFS also declares “…EPA must regulate ammonia and other pollutants from factory farms in order to protect human health and the environment and create a healthier, safer food supply.”
Another signer, HSUS, also a nonprofit claims it is the largest animal protection organization in the U.S. HSUS claims it wants to “…ensure that its members are aware of and not injured by hazardous substances, including ammonia, released by AFOs.”
Another signatory to the letter is Iowa Citizens for Community Improvement (ICCI), a nonprofit which claims it has thousands of members working to protect rural communities and declares, “Many ICCI members live, farm, and recreate in rural Iowa, and are directly and adversely affected by AFO ammonia emissions.“
‘Irritated residents’
The Association of Irritated Residents (AIR) is located in California and represents members who live in the San Joaquin Valley. AIR claims to have fought “…the growth of the local dairy CAFOs in the San Joaquin Valley. For many years, AIR has requested that the San Joaquin Valley Air Pollution Control District regulate ammonia as a precursor to PM 2.5 because it forms ammonium nitrate in the winter.”
The Clean Wisconsin  entity  claims its mission is to protect Wisconsin as “…a wonderful place to live, work and play.”
The final signatory is  nonprofit Food and Water Watch (FWW). “For several years, FWW has advocated for stronger regulation of pollution from industrial livestock operations.”
The background of these organizations shows their intensity and strong desire to regulate ammonia emitted from CAFOs. The letter to the Administrator of the EPA states once again “…ammonia gas harms public health and welfare in numerous ways, including directly causing acute and chronic respiratory impacts; mixing with other pollutants to form fine particulate matter, which causes respiratory symptoms, decreased lung function, aggravated asthma symptoms, heart disease, and premature death;”.
The February letter claims EPA has taken five years to respond and regulate ammonia.  EPA also is accused of not even actively considering the ammonia petition. The letter claims that scientific research concludes that ambient ammonia pollution which is emitted from AFOs and CAFOs create air pollution which endangers public health and welfare. It also makes clear that “Large livestock operations are the leading source of ammonia gas emissions in the U.S.“
As I have suggested earlier, the battle over regulating ammonia emitted by CAFOs is far from over.

The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.
(This article first ran in Farm Futures on October 26, 2016)

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Energy Facts and Figures for Dummies, Part VIII

Posted on November 9, 2016 by matt ohern
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(This is part VIII of this series on energy. We hope it helps the reader better understand the issues facing our country and our state as we endeavor to tackle the problem of providing our citizens and our businesses with their energy needs.)

just-facts-energy 150Biomass

  • The term “biomass” refers to non-fossil organic materials that can be used as energy sources.

* There are three main types of biomass:

  • Biowaste, which are organic materials that are generally byproducts or waste products. An example of such is the methane gas that is collected from landfills and used to generate electricity and heat homes.[677] [678] [679]
  • Biofuels, which are primarily produced from plants and used for transportation. An example of such is ethanol, which is used in cars and mainly produced from corn, sugarcane, and sugar beets.[674] [675] [676]

Wood, which has traditionally been the largest source of biomass for the U.S. and the largest of all energy sources for developing nations.[671] [672] [673]

  • Biomass, particularly wood, was the first inanimate energy source that mankind learned to harness. Up through the Middle Ages, wood remained the primary fuel of civilization.[680]
  • The world’s first internal combustion engine ran on a mixture of ethanol and turpentine refined from pine trees. The world’s first diesel engine ran on peanut oil.[681]
  • In 2015, biomass supplied 4.8% of all primary energy consumed in the United States. Wood comprised 2.1 percentage points of this total, biofuels 2.2 percentage points, and biowaste 0.5 percentage point:

us_biomass_energy_consumption
 
In 2015, biomass supplied:

  • 7.3% of the energy consumed in the industrial sector.[683] [684]
  • 4.9% of the energy consumed in the transportation sector.[685]
  • 2.1% of the energy consumed in the residential sector.[686]
  • 0.7% of the energy consumed in the commercial sector.[687]

Biofuels

  • Ethanol is the dominant biofuel in the U.S. and globally.[688] [689] [690]
  • In late 1970’s, the federal government began promoting domestic biofuels by subsidizing the production of domestic ethanol and placing tariffs on ethanol imports.[691]
  • Federal laws passed in 2005 and 2007 mandate that increasing volumes of biofuels be used in the U.S. transportation sector through 2022.[692] [693] [694]

Due primarily to these laws,[695] [696] the portion of automotive fuel that is comprised of ethanol has risen from 2.9% in 2005 to 9.9% in 2015:
ethanol_content_gasoline
* Ethanol is another name for ethyl alcohol or grain alcohol, and it is chemically identical to the intoxicating ingredient in alcoholic beverages.[699]
Before shipping ethanol, producers make it unfit for human consumption by adding inedible substances to it.[700]
* Ethanol has higher octane than gasoline, which increases engine power.[701] [702]
* The energy content per unit volume of ethanol is 31% below that of gasoline, which reduces fuel economy and hence vehicle range.[703] [704] [705]
* The elemental differences between ethanol and gasoline restrict the amount of ethanol that can be used in many engines and fuel systems. As compared to gasoline, ethanol:
is more corrosive to certain metals. erodes certain elastomers and plastics, including those sometimes used in fuel lines, gas tanks, and seals. acts as a solvent that can strip away certain lubricants and coatings. causes certain engines to run leaner and hotter, which can reduce engine life and catalytic converter efficacy. attracts water, which can cause corrosion and permanent engine damage.[706]
* Whether or not the above effects occur depends upon the designs of engines and fuel systems, the concentrations of ethanol, exposure timeframes, and other variables such as pressure and temperature.[707]
* Federal law prohibits material changes to automotive fuels and additives without approval from the Environmental Protection Agency (EPA). In 1979, EPA approved the use of automotive fuel comprised of up to 10% ethanol by volume.[708] [709]
* In the late 2000s, a combination of the following factors created a situation in which almost all general-purpose gasoline sold in the U.S. contained 10% ethanol by volume:[710]
Federal mandates requiring increasing usage of biofuels. [711]
Federal restrictions on the amount of ethanol that can be blended with general-purpose gasoline, [712]
Economic malaise, vehicle efficiency increases, and other factors that suppressed the use of transportation fuels. [713] [714]
* In 2015, nearly all ethanol consumed in the U.S. was used in a fuel called E10, which is a blend of 10% ethanol and 90% gasoline.[715] [716] Per the U.S. Energy Information Administration (EIA):
“The saturation of the United States’ gasoline supply with ethanol sold as E10” is called the “blend wall.”[717]
“The term ‘blend wall’ describes the situation in the ethanol market as it nears the saturation point (at the 10 percent content level) due to limited ability to distribute or use additional ethanol….”[718]
* In response to the looming blend wall, in 2009 a coalition of ethanol producers petitioned the EPA to allow for general usage of E15, which is a blend of 15% ethanol and 85% gasoline.[719] [720]
* In 2010, EPA approved the use of E15 for model year 2007 and later general-purpose autos, and in 2011 EPA extended this approval to cars with models years of 2001 and later. However, EPA did not approve the use of E15 in older cars, heavy-duty vehicles, motorcycles, boats, lawnmowers, chainsaws, and other nonroad equipment.[721] [722] [723] Per EPA:
“E15 can significantly impair the emissions control technology in MY2000 [model year 2000] and older light-duty motor vehicles, heavy-duty gasoline engines and vehicles, highway and off-highway motorcycles, and all nonroad products.”
“ethanol enleans the A/F [air-to-fuel] ratio; this may lead to emissions products that can cause increased exhaust gas temperatures and, over time, incremental deterioration of emission control hardware and performance. Enleanment can also lead to catalyst failure.”
“Additionally, ethanol can cause material compatibility issues which may lead to other component failure.”[724]
* In the wake of EPA’s rulings, the following factors have limited the usage of E15:[725]
As of 2011, “laws and regulations in about three dozen states … restrict gasoline with more than 10% ethanol.”[726]
Automakers, including BMW, Chrysler, Ford, Honda, Hyundai, Kia, Mazda, Mercedes-Benz, Nissan, Toyota, Volkswagen and Volvo, have expressed varying levels of concern about possible damage from using E15 in their vehicles, including cars with models years of 2001 and later. In 2011, some of the manufacturers stated that using E15 could damage engines and void warranties.[727] [728]
“[M]any fuel retailers are concerned about potential liability issues if consumers misfuel their older automobiles or nonroad engines with E15.”[729] [730]
To dispense E15, most service stations would have to make infrastructure investments including specialized fuel tanks and/or mixing pumps.[731] [732] [733]
* Certain autos called “flex-fuel vehicles” are designed to run on wide-ranging fuel mixtures up to 85% ethanol (E85). In 2012, 4.9% of light duty automobiles could run on E85, and 1.6% of gas stations dispensed E85.[734] [735] [736]
* Due to the blend wall and other practical limitations on the usage of biofuels, the EPA used its regulatory authority to reduce the amount of biofuels required by federal law in 2014, 2015, and 2016.[737] [738]
* Federal law also mandates the usage of biofuels that produce less greenhouse gases than corn-based ethanol. One of these fuels is cellulosic biofuel, which is made from grasses, crop waste, and trees.[739] [740] [741] [742] [743]
* In 2007, when the mandate for cellulosic biofuels became law, such fuels were not being produced in commercial quantities. The law specifies how much of these fuels are to be used starting in 2010, but before the outset of each year, EPA is required to project how much this fuel will actually be produced and to relax the mandate accordingly.[744] [745]
* For 2010, EPA lowered the law’s cellulosic biofuel mandate by 94%, but none of the fuel was actually produced. For 2011, EPA lowered the mandate by 98%, but none of the fuel was produced, and EPA leveled fines of $6.8 million on motor fuel suppliers for failing to use the nonexistent fuel. For 2012, EPA lowered the mandate by 98%, but a federal appeals court struck it down because EPA had not used a “neutral methodology” to set the mandate. EPA lowered the mandate by 99% in 2013, 98% in 2014, 96% in 2015, and 95% in 2016.[746] [747] [748] [749] [750] [751]
* As opposed to petroleum and refined petroleum fuels—which are primarily transported to wholesale terminals via pipelines—ethanol is mainly transported to wholesale terminals by rail, trucks, and barges.[752] Generally, the most economical and safest way to transport liquid fuels is through pipelines,[753] but wide-ranging technical and logistical issues currently prevent most ethanol from being transported in this manner.[754] [755]
\* Per EIA’s International Energy Outlook 2016, biofuel production “often depends heavily on policies or mandates to support growth.” This report projects that by 2040, biofuels will account for 7% of U.S. liquid fuels production (by volume) and 3% of global liquid fuels production.[756] [757]
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New EPA Regulations Harm Economic Growth

Posted on October 26, 2016 by matt ohern
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epa-150x150As Virginia struggles to figure out how to build a more robust economic future, employ more of our citizens in better paying jobs, and encourage those who have left the workforce to come back into it, the federal government’s regulatory drive seems to be a stumbling block to these efforts.
The Thomas Jefferson Institute just released a study that shows the impact of the Environmental Protection Agency’s newly enacted Renewable Portfolio Standards (RPS) on our state’s economy, the ability to grow new private sector jobs, and the costs on consumers. And the projections are not good. This study was written by Dr. Timothy J. Considine, Distinguished Professor of Energy Economics at the University of Wyoming, and was part of a larger study focusing on several states. The Jefferson Institute published the Virginia results separately so that our citizens and policy makers can see those impacts.
Renewable Portfolio Standards require the utilities, including those here in Virginia that provide us with our electricity, to produce specific amounts of that electricity from what are considered renewable fuels – wind and solar. In Virginia’s case we are to produce at least six percent of our electricity from renewable fuel sources by 2025. According to the study, Virginia plans to produce fully 83% of its renewable requirement from solar power and rest from wind. That means substantial investment by the utility companies will be needed to reach this goas and those costs will be passed on to the consumer in higher prices. As existing coal powered power plants that produce less expensive electricity are shut down, the cost for your light bills will increase as new, expensive solar power plants are built. This study pegs the increased electricity cost for our homes and businesses at ten percent. These increased electricity costs for business will be passed on to their customers, you and me, as well. So we will be hit from both directions with increased costs.
Our expenses will increase leaving less disposable income to be spent for savings, food, clothes, entertainment, etc. And the price for keeping the doors open at the businesses across Virginia –most employees work for smaller companies where ten percent increases in electric bills is a real hardship – will increase meaning that fewer folks will by hired and less money will be available for pay increases. When electric bills increase by ten percent, the overall economy takes a real hit.
Just as dramatic is the result on private sector employment.  According to Dr. Considine’s study, after 2020 – just three years from now – job levels will be 13-24 thousand below what they would be if the RPS standards had not been imposed.
So as our elected officials, government policy makers, business and academic leaders struggle to figure out how to encourage economic growth and wean ourselves from such a heavy reliance on federal spending, the federal government continues to impose regulations that make expanding our economy more and more difficult. In this case it deals with EPA’s newly imposed Renewable Portfolio Standards.
I understand the concerns about Global Warming although it is far from clear that these new RPS standards will have a significant impact in this area as has been clearly stated by those who have brought these new standards to us. And if we are required to build renewable energy sources to power our electricity needs, then let’s also build the infrastructure for those “cleaner energy sources” such as natural gas, nuclear power and even the “clean coal” available technology at the same time.
Meeting our future electricity needs, beyond the six percent figure imposed upon us, by relying on a dramatic increase in solar and wind is still an iffy proposition at best. As we try to figure out how to develop economically viable energy alternatives we should develop what we have and do it responsibly. For instance, bringing natural gas that is now in abundance to where it is needed; being reasonable on development of cleaner coal power plants; and finding a way to build and distribute nuclear power through smaller community based units while using new technology based procedures to keep our air and water healthy makes good sense.
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