Saturday, February 5, 2011

On Recycled Newspapers, Plastic and Green Energy

or I Don't Care What Harvard Said, You're Not Smarter Than The Market

When I was a little kid, around 10 years old, I somehow learned that I could save up newspapers and sell them to make some money for toys (I believe I wanted a chemistry set).  I vividly remember saving up that stack of papers until it got to be the required size (50 pounds, IIRC) and I also vividly remember how much effort it was to stack up that much paper and how long it took to get my dollar - or whatever it was.  The process convinced me there wasn't enough money to be made saving up newspaper and I think I started mowing lawns. 

Fast forward to the 1980s and the Greenies got an idea going that we should all recycle our garbage.  It would be fantastic: all we had to do was separate our wastes into glass, newspaper and metal cans, stack them in different plastic bins, and they would be whisked away to willing buyers.  Apparently not a thought was given to the waste that would be moved from the garbage can to the sewer system as folks cleaned out the cans and bottles rather than just putting them in the garbage.  Cities would make money selling the recyclables, waste streams would get smaller, we would save energy, and, I don't know, maybe the polar bears would come give us all hugs.  Or wouldn't eat us given half a chance.
As always, it didn't work out the way the environmentalists sold the idea. 

When supplies exceed demand, prices decline.  It's a law you can't change.  In fact, the Law of Supply and Demand is as close to the character of physical law as you get in the social sciences.  Many of the recyclables were just unusable and no market ever started for them.  In Energy Efficiency and Technology magazine, editor Leland Teschler lays out some interesting facts in this editorial:
My friend Terry and I had each finished off a bottle of beer. I looked around for a recycling bin while Terry just pitched his bottle in the trash.

Was Terry indifferent to the environment? Nah. He works at one of the biggest breweries in the U.S. and knows first-hand what happens to recycled glass. “We can’t use recycled glass for making bottles. It’s just too brittle. So glass put in recycling bins generally ends up in landfills anyway,” he explains.

Terry knows what he’s talking about. Canada’s National Post reports that all the glass collected last year by recycling programs in Calgary, Edmonton, and several other Canadian cities ended up landfilled because there were no buyers for it. The situation is similar for plastic. Reports are that Germany has millions of tons of recyclable plastics piled up in fields because nobody wants the stuff. And it is literally more expensive to collect some recyclables than to just pitch them. San Francisco’s Dept. of Waste figures it pays $4,000/ton to recycle plastic bags for which it receives $32/ton.  (emphasis added)
(The article contains some important ideas beyond this one.  It's a trade magazine for the people who are actually designing the high energy efficiency items we actually want, so it's worth reading. )

I rush to add that there really are good markets for some recyclable materials.  Cans and other metals come to mind immediately; many machine shops sell scrap cutoffs of aluminum and steel to reduce their waste costs.  Jewelers have been saving (or selling) gold and silver scrap for a lot longer than you and I have been alive! 

But the fact that there's a market for some products to recycle doesn't negate the fact that you can't create a market for something by wishing it into existence.  If there's a use for X tons of waste newspaper on the market that's provided by a handful of companies (and 10 year old boys), when the supply suddenly goes to 10 X or 100 X, the price is going to fall proportionally, and you're still going to end up with tons of newspaper you have no market for.  How much would you pay for something you had absolutely no use for? 

The same is true for “green energy” programs.  Windmills are among the first such power plants that greenies advocate for.  The UK has adopted the idea and placed thousands of wind turbines around the country.  Everybody knows that wind speed and energy is variable - the wind doesn't blow the same amount everyday anywhere.  The Renewable Energy Foundation reports
“... at 17.30 on the 7th of December 2010, when the 4th highest United Kingdom load of 60,050 MW was recorded, the UK wind fleet of approximately 5,200 MW was producing about 300 MW (i.e. it had a Load Factor of 5.8%). One of the largest wind farms in the United Kingdom, the 322 MW Whitelee Wind Farm was producing approximately 5 MW (i.e. Load Factor 1.6%).”
Back in December, an anonymous commenter here said,
“BTW, you might like to know that, over the Christmas period, our myriad wind turbines (UK) have produced as much as 1.6% of our electrical energy ... and as little as O%. Sometimes, they actually consume energy as they require internal heating in cold, still, weather. They also are driven, in still weather, to prevent damage to the bearings. Or something.”
Tell me how this doesn't guarantee higher prices to consumers?
And, of course, no one ever talks about any problems with the technology, now, do they?

The Green Jobs campaign that Obama has cited repeatedly as his model has failed.  A report from the Spanish cabinet, leaked by the Spanish newspaper La Graceta, has said that every job created by the Green Economy has come at the expense of two “regular” jobs.  Is Van Jones - former Green Jobs advisor to the president and self-declared communist - listening, or does he even care?  If the plan is to put people out of work so you can collapse the country, or to put one group of people out of work so that others can work, maybe this is just the ticket.

Markets work when there is no intervention in them.  Government regulation to ensure fairness is fine; the problem is when companies (cough GE cough) or the unions (cough, SEIU, UAW cough) get in bed with government to suppress their competition.  Perhaps this has something to do with why GE paid 3.6% tax last year and why GM bond holders had their legally binding contracts violated so that the UAW could get a better deal.  Alternative energy sources will have their day when they make market sense, not a minute sooner.  The market can't be fooled with subsidies and other government manipulations.  Those might work short term, but no government is big enough to hold off the world's market forever.    

In my first big blog posting, almost a year ago, I had a quote from Karl Denninger that goes well here: “The market is bigger than any one man or any one nation and it does not suffer arrogance lightly. Virtually everyone who has tried to tangle with it has wound up with their head between their legs after not only their head was chopped off but both arms as well.” When you hear that Windmills or Tidal Generators or any scheme of any kind will deliver thousands of jobs, eliminate our dependence on foreign energy, and all of the usual hype, you should be very suspicious.  If someone is telling you this face to face, put one hand over your wallet and back away slowly. 

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