Estimating the costs of greenhouse gas reduction

A very useful exercise undertaken by McKinsey. This article features what I like to call a “killer chart” — a chart that you can envision in your head but for which you lack the data to actually construct. McKkinsey has gone ahead and constructed it, and it’s full of interesting insight.

At the low end of the curve are, for the most part, measures that improve energy efficiency. These measures, such as better insulation in new buildings (see “Making the most of the world’s energy resources”), thus reduce emissions by lowering demand for power. Higher up the cost curve are approaches for adopting more greenhouse gas-efficient technologies (such as wind power and carbon capture and storage) in power generation and manufacturing industry and for shifting to cleaner industrial processes. The curve also represents ways to reduce emissions by protecting, planting, or replanting tropical forests and by switching to agricultural practices with greater greenhouse gas efficiency.

In the linked article, McKinsey has some great, practical examples of how the U.S. might improve energy productivity.

Residential heating and lighting. With 25 percent of global energy demand, residential property represents the largest energy-use segment. Key opportunities include fitting out new homes with tight building shells, including chemically treated windows to reduce the amount of cold that comes in during the winter and the amount of heat that comes in during the summer; high-grade insulation; compact fluorescent lighting; and solar water heaters. In addition, higher efficiency standards for appliances and reductions in standby power requirements yield positive returns and simultaneously cut demand for energy. We estimate that these and other technologies in lighting, heating, and cooling could slow growth in residential energy demand to 0.5 percent a year, from 1.4 percent, and reduce 2020 energy demand by 15 QBTUs (or 3 percent of the total).

Electricity generation and distribution. Another large opportunity would come from reducing the losses that arise in generating and distributing electricity. In 2003, 129 QBTUs (30 percent of global energy use) were needed to generate 57 QBTUs of delivered electricity—meaning that generation and distribution consumed nearly 60 percent of all energy inputs. This implies a conversion rate (energy delivered divided by energy used) of around 40 percent. Some of the losses are unavoidable, but even today conversion rates range from under 30 percent in older coal plants to more than 50 percent in newer gas ones. We estimate that new technologies, such as advanced combined-cycle gas turbines, with an IRR of 10 percent or more, could reduce demand by 18 QBTUs as of 2020.

By then, the expansion of China’s power sector will represent 13 percent of the growth in global energy demand. If China meets it by building new, high-efficiency coal plants, the country’s overall energy demand will fall by 7 QBTUs—more than 1 percent of the global total—by 2020.

Steel, refining, and other industrial sectors. There are enormous opportunities to improve energy efficiency by replacing the least efficient tail of production with current technologies and by implementing currently economical energy-saving upgrades. These opportunities could reduce global energy demand roughly 65 QBTUs by 2020.

The Ethanol Glut

The New York Times covers the ethanol glut that we all knew was coming. The sudden drop-off in pricing, though, has caught even experts by surprise.

The article highlights again the law of unintended consequences. For example, governments are not as effective as markets at determining how much of a given commodity should be produced.

The ethanol boom was set off when Congress enacted an energy law in 2005 that included a national mandate for the use of renewable fuel in gasoline, obliging the market to consume 7.5 billion gallons a year by 2012, compared with 3.5 billion gallons in 2004.

Already, ethanol producers are poised to outpace that mandate, with capacity expected to reach 7.8 billion gallons by the end of 2007 and 11.5 billion gallons by 2009, although some in the industry are now predicting that the expansion could slow.

The number of ethanol plants in the country has increased to 129 today from 81 in January 2005, according to the Renewable Fuels Association, while plants under construction or expanding have mushroomed to about 80 from 16 during the same period.

“As ethanol supply increases over the next 12 months, the challenge will be to find a home for it,” said Mark Flannery, head of energy equity research at Credit Suisse. “The ethanol surplus is here already.”

Moreover, the glut of production has strained the transportation infrastructure, which must be upgraded (and is NOT subsidized as part of the federal energy program), creating bottlenecks.

Because ethanol is corrosive and soaks up water and impurities, it cannot be shipped through the country’s fuel pipeline network. So it must be transported by train, truck and barge, a more expensive transportation network that is suddenly finding it hard to keep up with the surge in ethanol production.

There is a long backlog in orders for specialized ethanol rail cars to ship the surplus production. Many rail terminals at the ethanol plants do not have spurs large enough to accommodate the long trains that ethanol promoters like to call “virtual pipelines.” And pumps from the storage tanks to the rail cars at the terminals often do not have sufficient capacity to load trains quickly and efficiently.

Phillip C. Baumel, economics professor emeritus at Iowa State University, said that in many cases ethanol producers ramped up their production so rapidly that they gave “inadequate attention to meeting transportation and distribution needs.”

Civil Liberties I: The Economist on Terrorism

An excellent analogy comes from this week’s Economist: the war on terror is like the Cold War. Like the Cold War, it will be extended over 20+ years, and it will be a war that we have to live with at home.

There are those who see the fight against al-Qaeda as a war like the second world war or the cold war. But the first analogy is wrong and the moral of the second is not the one intended.

A hot, total war like the second world war could not last for decades, so the curtailment of domestic liberties was short-lived. But because nobody knew whether the cold war would ever end (it lasted some 40 years), the democracies chose by and large not to let it change the sort of societies they wanted to be. This was a wise choice not only because of the freedom it bestowed on people in the West during those decades, but also because the West’s freedoms became one of the most potent weapons in its struggle against its totalitarian foes.

If the war against terrorism is a war at all, it is like the cold war—one that will last for decades. Although a real threat exists, to let security trump liberty in every case would corrode the civilised world’s sense of what it is and wants to be.

This is simplistic logic, I know. But powerful.

The myth of “abstinence-only” sex education

From this week’s Economist, evidence to suggest that “abstinence-only” sex education (telling children to stop having pre-marital sex) decreases neither pre-marital sex nor risky behavior among teens.

THERE can be no surer way of averting a sexually transmitted infection such as AIDS than avoiding sex. That much is obvious. And it is also convenient for religious lobbyists who believe that premarital sex is a sin. But is it realistic? Those lobbyists argue that a popular alternative—known in the jargon as “abstinence-plus”—which recommends chastity but also explains how to use condoms, is likely to make things worse by encouraging earlier intercourse. “Abstinence-only” teaching, they reckon, should be more effective.

That, of course, is a possibility. But it is a testable possibility. And Kristen Underhill and her colleagues at the University of Oxford have, over the past few months, been testing it. Their conclusion is that it is wrong. Abstinence-only does not work. Abstinence-plus probably does.

 

Last month Dr Underhill published a review of 13 trials involving 16,000 young people in America. The trials compared the sexual behaviour of those given an abstinence-only education with that of those who were provided with no information at all or with whatever their schools normally taught. Pregnancies were as numerous in both groups. Sexually transmitted diseases were as widespread. The number of sexual partners was equally high and unprotected sex just as common.

So much for abstinence-only. What of abstinence-plus? It looks like a small reduction in risky behavior, or no impact at all. It certainly does not, as some claim, increase the prevalence of risky, pre-marital sex.

This tuition—compared, as before, with whatever biology classes and playgrounds provide—reduced the number of pregnancies in three out of seven trials (the remaining four recorded no difference). Four out of 13 trials found that abstinence-plus-educated teenagers had fewer sexual partners, while the remainder showed no change. Fourteen studies reported that it increased condom use; 12 others reported no difference. Furthermore, in the vast majority of cases, abstinence-plus participants knew more about AIDS and HIV (the virus that causes the disease) than their peers did. And the tuition often reduced the frequency of anal sex (which brings a greater chance of passing on HIV than the vaginal option). In contrast to the fears of the protagonists of abstinence-only education, not one of the trials found that teenagers behaved in a riskier fashion in either the long or the short term after receiving abstinence-plus instruction.

Unfortunately (and surprisingly) only two of the studies addressed the question of disease transmission directly, and the numbers involved were too small to find a statistically significant difference between groups.

What distrubs me most about these results is that we needed to do this test at all — did we really think we were going to find evidence to support the religious right’s claims? It turns out that these tests are needed, though, to inform what has been “abstinence-only” oriented in Washington.

America’s government earmarks money for abstinence-only teaching, which is matched by individual states. It should review that policy—which is clearly no better than the alternatives, and is probably worse. Its generosity to needy foreigners is similarly prescriptive. Of the $15 billion promised over five years by PEPFAR, President George Bush’s personal anti-AIDS initiative, $1 billion is reserved for groups that intend to fight AIDS without mentioning condoms. Though Dr Underhill’s results apply only to North America, they do suggest a need to investigate what happens elsewhere, in case PEPFAR’s policy, too, needs to be reviewed.

“Needs to be reviewed” is a nice way of putting. Needs to be discarded, both on moral and efficiency grounds. Foreign aid is meant to alleviate poverty and increase the quality of human life, not preach the “sanctity of marriage.”

Rogoff and Obstfeld prove prescient — “Act II” of the current crisis in the markets

Wolfgang Munchau writes in the Financial Times that we are experiencing only Act I of a more global, longer term crisis.

Unfortunately, I fear this is only going to be the end of Act I. Act II plays out in the real world. Act II begins with a sharp slowdown in US economic growth. The two obvious questions that arise from this scenario are: how bad will the US downturn be and how contagious will it be?

It looks as though it will be bad. Some optimists had hoped that the rest of the world could easily withstand a US recession and invented the infamous de-coupling theory. What they did not count on was the rapid decline of the US currency as expectations of a US recession were rising. A weak dollar is going to be the main global transmission mechanism.

Munchau sites a prescient analysis by Ken Rogoff and Maurice Obstfeld in an NBER paper they co-wrote in 2004, called “The Unsustainable U.S. Current Account Position Revisited.“It’s a really a great paper. Though grounded in theory, Rogoff and Obstfeld model out how the U.S. current account deficit will resolve itself — possible scenarios, direct and indirect impact on other economies and currencies. For a great summary of the paper, see this article in the Economist – if you had invested on this little piece of knowledge in late 2004, you would have been making some good money over the past two years (though you would have been early on the housing bubble popping).

A new paper by Maurice Obstfeld, an economist at the University of California, Berkeley, and Kenneth Rogoff, of Harvard, a former head of research at the International Monetary Fund, predicts that the dollar will fall by another 20% in real trade-weighted terms even if America’s external deficit unwinds gradually. If the adjustment is more abrupt, the dollar will dive by more than 40%.

…Mr Obstfeld and Mr Rogoff argue that… America’s current-account deficit reflects inadequate domestic saving. Cutting it therefore requires that American saving rises or that demand in the rest of the world increases. A fall in the dollar would be a by-product of this adjustment. But without an increase in saving, even a big fall in the dollar would make only a small dent in America’s current-account deficit.

The two economists assume that the current-account deficit shrinks as a result either of increased saving by American households (because, for instance, the country’s house-price boom ends) or of a strengthening of demand in Asia and Europe. Then, using a model of the global economy, they focus on the changes in relative prices of traded and non-traded goods needed to ensure that demand matches supply in domestic product markets as the current-account deficit narrows.

Not bad….. Let’s hope it’s the gradual, 20% number, not the sharp, 40% number.

Zimbabwe: When economies fall apart

This isn’t even the worst of what has been brewing in Zimbabwe over the past several years. In the midst of Iran, Iraq, Afghanistan, and Sudan, it is easy to lose track of the tragedy unfolding in Zimbabwe. Unfortunately, this tragedy is rendered even more gloomy by the fact that Zimbabwe was once the breadbasket of Africa, a leading exporter of agricultural goods and cash crops.

Innovator: PolyTherics and Sunil Shaunak

Business 2.0 recently had a great profile of Sunil Shaunak and his start-up, PolyTherics. The firm is trying to up-end the traditional product development cycle for drugs, especially those with smaller markets and/or focused on developing country diseases. Many companies have claimed to do this — OneWorld Health, a nonprofit pharamceutical company is a great example.

Basically, PolyTherics process looks like this:

“What you conventionally do, at the moment, is you make the medicine and test it in Europe and North America, where you have high profit margins, and as prices come down it eventually becomes available in poorer parts of the world,” he says. “We’ve turned the model upside down and said, ‘Let’s make it available first to the masses and then optimize what we’ve learned for the rich.’”

The advantages of this model for PolyTherics are apparent. First, all the money for development and clinical testing is coming from the U.S. government and from Doctors Without Borders; PolyTherics just has to kick in a royalty-free license to Shaunak and Brocchini for the technology.

Second, the trials, again in India, will occur on an accelerated timetable because, as Shaunak says, “there’s such an urgent need out there.”

Finally, if the trials determine that the new technology is safe and effective, PolyTherics can turn around and apply it to lucrative First World drugs, such as advanced antibodies. “A very effective win-win,” Shaunak says.

What I like about this model is the fact that these guys are taking a page from the very playbook of large pharma companies — take a drug/process and tweak it, creating effectively a “new” drug, which hasits own patent protection and testing requirements. There is real research behind these innovations — new delivery mechanisms, chemical compounds, or manufacturing processes, all of which help to bring costs down. But this still looks a lot like what Pfizer does to keep it patent protection for Lipitor — just introduce Lipitor 2.0, with moderately reduced side effects.

“Big Pharma makes Rolls-Royce medicines for a small part of the world. What we’re saying is that we could make Coca-Cola medicines, where the profit on each item is quite modest but the penetration will be so large that it would end up being much more valuable.”

Offshoring – Not what we thought it would be

Barron’s offers a great perspective on the real economic impact offshoring. Despite all the scare-mongering, offshoring has not really had that much impact on the American jobs picture. Gen Epstein carefully pieces apart the argument that offshoring is sucking away American jobs. He starts with facts that any good economist can tell you — the net impact of offshoring is miniscule compared to the churn in the labor markets that we see on a regular basis every year.

First, some context. Most job-destruction in the U.S. has little to do with offshoring. According to the Bureau of Labor Statistics (BLS), in fourth-quarter 2006 alone, 7.7 million jobs were created while 7.2 million disappeared. The media will often report in such cases that 500,000 jobs were “created.” But the term “created” is misleading — because the net change in the total numbers does not necessarily mean new jobs have been created.

Even if we believe the widely cited projections of consultants Forrester Research that 3.4 million service jobs will have moved offshore between 2000 and 2015, that’s only a little more than half the jobs created and lost in a single quarter. And even if we believe Forrester’s estimate that approximately 800,000 service jobs moved offshore between 2002 and 2006, that’s only a little over the 10% of the jobs created and lost in a single quarter.

Epstein then looks at the global trade numbers in Business, Professional, and Technical Services (BPT). The numbers look pretty good for the U.S.

Based on the balance of trade in BPT, offshoring is a flow that moves in both directions. And so far, it seems to have created more jobs onshore in the U.S. than in other countries. A trade surplus measured in dollars does not necessarily represent jobs. But when that surplus runs $33.1 billion in 2005 against exports of $80.8 billion (the most recent year for which data are available), a surplus in jobs seems quite plausible.

Moreover, most trade in BPT is apparently carried on between the U.S. and other industrial economies rather than, as is commonly thought, between the U.S. and developing economies. So it does not involve high-paid workers in the U.S. competing with the low-paid abroad so much as high-paid workers in various parts of the world competing with each other. A job surplus based on the dollar-denominated trade surplus is therefore all the more likely.

Then he comes with the kicker. Jobs in the most “vulnerable” categories have actually grown in the past five years, and have on average grown faster than overall job growth.

THE NUMBER OF U.S.-BASED service jobs that some claim are most vulnerable to offshoring have, in fact, generally increased over the past few years, as BLS data readily confirm. To establish this, Barron’s reviewed the BLS job categories for which Forrester Research projected an unusually high percentage of offshore movement — those in one of its top two segments of its five-tier ranking of those “most likely to move.” These came from the firm’s May 2004 report, “Near-Term Growth of Offshoring Accelerating.”

Barron’s grouped these jobs according to their five broad occupational categories (as Forrester had done), and tracked the near-term trend in the totals from 2002 through 2006.

How did growth in these highly vulnerable jobs do in comparison to the overall trend in U.S. service employment? Over the same four years, all U.S. service jobs grew by 4.5%, while those in the vulnerable groups rose 7.7%, to more than 10 million.

This article provides further evidence of my fundamental belief — that what makes America great is our flexible markets, for both labor and products. This flexibility creates churn and the inevitable sense of a changing, shifting foundation. It also creates an entrepreneur-friendly environment in which businesses and individuals can respond rapidly to the market’s evolving needs.

Neat profile of Raj Chetty

A recent profile in The American highlights some of the great work of Raj Chetty, really pushing the boundaries of economic theory by bringing new evidence to light. I especially like his work on the salience of taxes — I’ve always liked the European system, where prices are quoted inclusive of VAT. After all, consumers only care about how much I am paying in total — the price before taxes isn’t helpful to me at all. This is especially noticeable when buying plane tickets, for example, when taxes and fees can vary widely, making a ticket to London seem ridiculously cheap until you try to pay for it, whereas a ticket from NYC to SFO can seem relatively expensive.

Chetty is drawn to the psychological underpinnings of economic theory. Before deciding on a change to the tax code, he argues, politicians should study how consumers think about taxes. With that in mind, he created an experiment to determine whether separately labeling the sales tax on an item would affect a shopper’s behavior. He persuaded a large grocery chain to allow him to post tags next to 750 of their products for three weeks, showing how much the item would cost after sales tax was added. Fearing the experiment would result in lower sales, the chain did not allow Chetty to post signs on its most popular items.

The store management’s fears were well founded. When consumers knew just how much more taxes would cost them, they reduced their purchases of the items by about 7 percent. As part of the working paper—titled “Salience and Taxation: Theory and Evidence,” coauthored by Adam Looney of the Federal Reserve Board and Kory Kroft of Berkeley’s economics department—Chetty surveyed customers entering the store to determine whether they knew which goods were taxed and which ones weren’t. They were generally able to distinguish the two categories. In other words, they knew that an item was taxable, but actually seeing the total cost—including the tax—at the time of a potential purchase discouraged them from buying it.

His study of the Earned Income Tax Credit (EITC) is, like most blazing economic insights, simple and intuitive, after it has been explained and demonstrated with date. The supposed incentive to work created by the EITC is not actually understood by those directly impacted by it.

Given that consumers seem to weigh taxes more heavily when they are reminded of the burden, Chetty wondered whether Americans understand the implications of the Earned Income Tax Credit, a program meant to motivate low-income people to work by subsidizing their wages. Enacted in 1975, the program was expanded in 1986, 1990, 1993, and 2001. It is considered one of the government’s central anti-poverty policies. Under the program, those who earn, say, $10,000 a year might be given a credit once a year for $4,000, or 40 percent of their salary. But after surveying some of the beneficiaries of the EITC , Chetty found that most people who get it don’t understand how it works.

“They just know that after they file their taxes, they get a big check,” Chetty said. “That is seriously problematic for public policy, because the whole point of the program is to give people an incentive to work. To give them an incentive to work, they really need to understand that they’re really being paid $14 an hour, not $10 an hour.”

Scary.

Mountains Beyond Mountains

Any self-respecting do-gooder has heard of this book by this point, but for economists, especially, and those outside of the international development field, Mountains Beyond Mountains is a must read. Why?

(1) Paul Farmer proves the “strong man” theory of history. He has single-handedly changed the way tuberculosis is treated around the world, leading by example. Economists will struggle to understand Farmer’s incentives — what the hell drives him to work himself sick tending patients in Haiti, Siberia, and Peru, as well as the Brigham in Boston? Not money. Not prestige even. He is a study in altruism.

(2) The book highlights the importance of on-the-ground work to making effective policy, and the inherent tension between effective policy-making and implementing policy on the ground. Farmer is a doctor. He wants to save lives. He doesn’t give a crap about cost effectiveness. The WHO has limited resources, and is officially tasked with treating and ultimately eradicating infectious disease in the developing world. These perspectives are at loggerheads. It’s a tension that dominates, in my opinion, much of policy-making. I won’t give away the resolution, but the book demonstrates the struggle, and the necessary compromises on both sides, required to reconcile policy-making and effective implementation.

(3) For young do-gooders, there can be little more inspirational than Farmer. I’m a born skeptic, and I finished this book thinking to myself, “How can I be more like that guy?” Of course, I woke up the next day with the same sense of futility that we all feel when we think about the scope of the world’s poverty problem.

Use your ecoimagination

“‘Can’t you just shut up and sell us stuff?’ That would be a paraphrase, maybe with a few blanks in between.”

Such is the response that Jeff Immelt, of General Electric, says he is getting after two years of pushing his environmentally friendly campaign on his customers, employees, and suppliers. The Wall Street Journal exposes how difficult it is for old economy businesses to go green, no matter how emphatically they trumpet their green credentials in their annual Corporate Sustainability Report.

Immelt’s ecoimagination campaign is truly innovative, pushing the envelope of how and why to embrace the green movement, but the experience to-date really highlights the time and effort it takes to make these initiatives work, especially when 75%+ of your business is still driven by those carbon-emitting, environment-destroying technologies that fly our planes, power our cars, manufacture our toys, and turn on the lights.

There are a lot of nuts and bolts in there…..

Counting the emissions was a big challenge for a company with more than 3,000 facilities in 73 countries. One nettlesome question: How should GE count emissions from power plants in which its financing arm owned a stake?

Executives from the finance unit argued against counting the emissions, according to people familiar with the matter. The executives worried that counting the emissions could limit their investments and force them to cut emissions, under Mr. Immelt’s initiative. The executives argued that GE shouldn’t count these emissions because it didn’t operate many of the plants. For the moment, these executives prevailed.

Not to mention internal resistance

The skeptics included GE’s lead regulatory lawyer Steve Ramsey, whom Mr. Immelt had put in charge of developing the emissions inventory. Mr. Ramsey suggested his staff lawyers read a speech by novelist Michael Crichton, in which the author compared belief in global warming to religious fanaticism.

A former EPA lawyer, Mr. Ramsey says, “I’m not a scientist. I’m an English major and a lawyer.”

The Crichton speech is pretty good. Despite my antagonism towards pop scientists (I don’t get my politics from Susan Sarandon, why should I take my science from an exceptional fiction writer?), Crichton’s line of argument is well-reasoned and well-researched. Essentially, he argues that we can’t know how much “noise” is normal in temperature variations, which is absolutely true, and therefore the recent upward trend, which is undisputed (though its relative magnitude is disputed), can easily be noise. Crichton sites one fairly amusing example that occured in the 1970’s, when everyone thought there was going to be another ice age.

In the first Earth Day in 1970, UC Davis’s Kenneth Watt said, “If present trends continue, the world will be about four degrees colder in 1990, but eleven degrees colder by the year 2000. This is about twice what it would take to put us in an ice age.”  International Wildlife warned “a new ice age must now stand alongside nuclear war” as a threat to mankind. Science Digest said “we must prepare for the next ice age.”  The Christian Science Monitor noted that armadillos had moved out of Nebraska because it was too cold, glaciers had begun to advance, and growing seasons had shortened around the world. Newsweek reported “ominous signs” of a “fundamental change in the world’s weather.” 

But in fact, every one of these statements was wrong. Fears of an ice age had vanished within five years, to be replaced by fears of global warming. These fears were heightened because population was exploding. By 1995, it was 5.7 billion, up 10% in the last five years.

I particularly enjoy this one:

Think how incredibly the world has changed in 100 years. It will change vastly more in the next century. A hundred years ago there were no airplanes and almost no cars. Do you really believe that 100 years from now we will still be burning fossil fuels and driving around in cars and airplanes?

And of course, his conclusion:

What is wrong with us that we ignore this human misery and focus on events a hundred years from now?  What must we do to awaken this phenomenally rich, spoiled and self-centered society to the issues of the wider world?  The global crisis is not 100 years from now—it is right now.  We should be addressing it.  But we are not.  Instead, we cling to the reactionary and antihuman doctrines of outdated environmentalism and turn our backs to the cries of the dying and the starving and the diseased of our shared world. 

And if we are going to remain too self-involved to care about the third world, can we at least care about our own?  We live in a country where 40% of high school graduates are functionally illiterate.  Where schoolchildren pass through metal detectors on the way to class. Where one child in four says they have seen a murdered person. Where millions of our fellow citizens have no health care, no decent education, no prospects for the future.  If we really have trillions of dollars to spend, let us spend it on our fellow human beings. And let us spend it now. And not on our impossible fantasies of what may happen one hundred years from now.

 

 

 

Viral philanthropy

I recently received an interesting email from a friend trying to raise money for ALS (Lou Gehrig’s disease). The email asked for $1 to contribute to a prize which will be awarded to a researcher who makes a major breakthrough (as measured against set benchmarks) in the fight against ALS. While ALS is not in my top ten list of causes to which I wish to donate, I like the concept for two reasons. First, it embraces the “incentivization” approach to philanthropy, offering compensation for a desired out come. Second, I like the innovative idea of asking a whole lot of people for $1. This isn’t Sally Struthers asking for the price of a cup of coffee per day (which, over the course of the month, actually adds up to about what I spend on my cellphone bill). These guys really only want a buck — as much as they value your contribution, they also value the fact that they are raising awareness. From a donor’s perspective, $1 is next to nothing. But it makes more of an impact ON ME than, for example, all the other random charitable emails receive asking for large donations, which I summarily delete. So much so that I blogged about it!

For those who are interested, the body of the email reads as follows:

One dollar isn’t much. It is less than a cup of coffee. It is the change you find in the seat of your car, the tip you leave when you order a beer, almost enough money to take the bus or the subway.

But if after reading this email, you choose to give a dollar and to tell your friends, if you put the information on your blog and on your website, if people see it and they give and tell people too, then that one dollar will quickly become $100 and then $1,000 and eventually $1 million. Just by letting others know about the Dollar4Life campaign, you could help us raise a million dollars. That million dollars could save my life and the lives of the 150,000 people around the world who have ALS (Lou Gehrig’s Disease). One of us dies every four minutes. And by going to www.dollar4life.org you could help us live.

My name is Avi Kremer and I am just like you, except that I have ALS. Two years ago, I was a normal, healthy 29-year old. I was a student. I had big dreams: finish school, get a job, marry my girlfriend, start a family… Now I am in a wheelchair, and I can barely use my hands. Typing is hard; ALS is rapidly destroying all of my physical functions. It is fatal and there is no cure. Unless we find one, I will die within three years. I may never get to be 35.

Many drug companies don’t invest in ALS research because they don’t understand enough about the disease and aren’t sure where to start. I refuse to let their decision not to invest in a cure be the reason that I die. We need to raise money to find a cure. To achieve that goal, I’ve joined forces with top researchers in the field and founded Prize4Life – an organization that is already removing the obstacles that stand in the way of finding a cure. But we need your help.

I am asking you to give me a few more minutes to speak with you. Visit www.dollar4life.org to see the video I shot in December, when I could still speak, and to contribute one dollar. Prize4Life will receive the full amount of every donation and use it to find a breakthrough treatment for ALS.

For me, and for ALS patients everywhere, this is a race against time. While you read this email, one of us took our last breath. Please send this email on to everyone you know. Please make a donation at www.dollar4life.org. You probably won’t notice the missing dollar, but I can promise you that I will notice living another day.

Thank you,

Avi

Iran succeeds in pricing oil in yen

Iran recently realized a long sought after goal of pricing some of its oil contracts in yen, striking a deal with Nippon Oil of Japan, the largest importer of Iranian oil. The move comes about partially in response to heightened U.S. pressure on Iran, especially banks doing business with Iran. However, this is something the Iranians have fought for for over thirty years.

There is an underlying issue here — the dollar is becoming an increasingly poor store of value. And therefore, oil-producing countries would like to hold their wealth in other currencies.

“There is also another key issue that you are seeing, not just in Iran, but in other oil producers, especially Gulf oil producers, is given the depreciation of the dollar, it is better to hold their reserves at least in euros, it is a better store of wealth. Some of the other Gulf producers will accept payment in euros. They won’t price their oil in euros or yen, and even if they are receiving payments in dollars, most likely they are converting a substantial share of that every month into other currency,” [according to David Kirsch, the manager for market intelligence at the international energy consultancy PFC Energy].

However, most experts seem to pass of this underlying cause, suggesting that switching costs are too high.

“But in terms of whether, is oil formally going to be priced in yen, renminbi, or the euro, I don’t think that is going to happen. Simply because you would have to establish a whole new contract and an exchange for that, and that can be quite costly. It is also, you have to find a contract that the investment community is willing to embrace, and until you need to do that, I think they will be satisfied sticking with the contracts from the NYMEX and the International Petroleum Exchange,” Kirsch said. 

Why not? When geopolitical forces, security concerns, and economic motivations combine, they make a powerful cocktail — witness U.S. policy towards renewable energy. I think there is a real risk that as long as we continue to run excessive budget deficits and to saddle up with more long-term liabilities (think: prescription drug benefit, the social security “lockbox”), other countries, especially those with hatred and/or fear of the U.S., are going to seek to move away from dollar-denominated assets. Wouldn’t we?

Jatropha in Mali?

The New York Times continues to hype jatropha. I’ve got my fingers crossed for this plant as a feedstock for biofuels, given its many benefits over more traditional feedstocks, such as corn ethanol or rapeseed oil. These include the fact that jatropha can be interspersed among food crops, can be grown on semi-arid land, uses less water than many other biofuels feedstocks, does not destroy require rainforest destruction, and has a long history of growing (wild) in many developing countries. The only problem? No commercial-scale pilot of jatropha has taken place, so we just don’t know how successful large-scale jatropha oil production could be.

FYI, this risky technology with high potential upside represents a perfect intervention opportunity for international donors. t seems this is starting to some extent:

Here in Mali, a Dutch entrepreneur, Hugo Verkuijl, has started a company with the backing of investors and assistance from the Dutch government, to produce biodiesel from jatropha seeds.

Mr. Verkuijl, 39, an economist who has worked for nonprofit groups, is part of a new breed of entrepreneurs who are marrying the traditional aims of aid groups working in Africa with a capitalist ethos they hope will bring longevity to their efforts.

“An aid project will live or die by its funders,” Mr. Verkuijl said, but “a business has momentum and a motive to keep going, even if its founders move on.”