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To celebrate this human-powered day, we thought it would be great to share some facts about cycling from Sightline’s new book, Seven Wonders for a Cool Planet.

I've been trying to work this tidbit into a post for weeks, but I haven't found an opportune moment.  So here's the news straight up:  new studies suggest that a single part of the brain evaluates both money and social status. 

Sadato and colleagues conducted fMRI scans of the brains of 19 subjects while they engaged in two different exercises. The first task was a simple game in which participants had to choose one of three cards in the hope of winning a cash prize. In the second game, fictional evaluators appraised volunteers' characters based on the results of personality trait questionnaires. The researchers found that the striatum activated in response to high and low appraisals (but did not perk up to more neutral comments); it also responded to monetary wins and losses but was quiet if a player broke even.

"The implication of our study is that the different types of the reward are coded by the same currency system,'' says Sadato, "enabling the comparison between them."

To me, this finding (if it's confirmed) raises all sorts of interesting questions about the relationship between wealth and social standing.  Does society equate the two simply because we use the same part of the brain to process both?  Or is it the reverse -- do our monkey brains map money to status simply because society does as well? Either way, this sheds some light on the all-too-human tendency to equate wealth with worth:  they're both minted coin of the same mental currency.

In a more practical vein, these findings may also have some bearing on the fact that economic inequality makes people sick. The standard economist's view of the inequality-health connection is that economically unequal societies tend to have highly unequal distribution of health care, healthy food, and so forth. By this view, economic inequality denies some people the resources they need to stay healthy. But perhaps the connection is more direct:  if the human brain simply perceives relative poverty in much the same way that monkeys perceive low social status, then poverty could breed ill health in humans in exactly the same way that low status breeds illness in our primate relatives. In both cases, it could be the physiological stress associated with low social status that's the real health risk, not privation per se. I'm sure that's too much to read from a single study; but still, it's broadly consistent with some academics' approach to the subject.

Do not try this at home -- it's illegal, and possibly dangerous.

Still, on the eve of bike-to-work day, it's worth remembering that bikes are often just as speedy as cars -- even on a freeway.  It certainly was for these daredevils.

But even if you're not an adrenaline junkie, bike travel can be a time saver.  First of all, consider the health benefits.  According to one medical researcher in Britain, accident risks of biking are real -- but are vastly outweighed by the health risks of sedentary lifestyles: for every life year lost through accidents, 20 are gained through improved health and fitness.  So even if a bike trip is longer than a car trip, it could save you lots of time in the long run.

Just so, simply owning a car is a time-sink.  By one estimate -- after you factor in the time it takes to earn the money to make car payments and buy gas, plus the time stuck in traffic, searching for parking, and so forth -- the average car travels at a mere 5 miles per hour.  That's a speed that even the tamest of bikers should have no trouble besting. 

So don't think that you have to be a daredevil to travel fast on a bike.  All things considered, it's often the fastest way to go.

(Hat tip for the video to Chris Mayda...)

Predicting the future is hard. It's so difficult that even teams of analysts using fancy models get results like this:

This isn't back-of-the-envelope stuff. This is the US Energy Information Administration's official prediction for oil prices, circa 2007. According to the "high price" scenario, oil may reach $100 per barrel some time around 2030. But wait: oil was at $127 yesterday. So, not only was the EIA projection wrong -- it was wildly and completely wrong.

Okay, everyone makes mistakes, even energy analysts. In 2008, the EIA cleaned up its act and produced this forecast: 

As you can see, in the "high price" scenario, oil will almost reach $120 per barrel around 2030. At the risk of repeating myself, oil was at $127 yesterday! So, the EIA projection is still wildly and completely wrong.

Ordinarily, this would be jolly good fun. But it's not so funny when these kind of projections are used to make decisions with big consequences. These two charts, in fact, come from the Western Climate Initiative's economic analysis, which is being conducted by consultants. (The forecasts shown in the charts are the data inputs for a model that is supposed to inform policymakers and thereby guide the design of the cap and trade program.) But the data inputs are laughably wrong.

Of course the consultants are well aware of the problem. And they're already trying to develop new forecasts to use in their modeling exercise. Plus, in their defense, the reason they planned to use EIA data was that it's probably the best available and it's considered highly credible.

In any event, the WCI consultants will probably use new and improved EIA data to update their models. That would be fine, maybe, but the EIA seems to have a hilariously persistent tic. Check out this chart via Kevin Drum:

Today’s Vancouver Sun gives some ink to a cluster of issues that I’ve been pondering of late: how BC’s carbon tax shift fits with Cap and Trade. I’m famously infatuated with carbon tax shifting. I’m also a zealot for auctioned Cap and Trade.

The good news is that with careful policy design, Cap and Tax can be better than either Cap or Tax. The Tax toughens the Cap, the way steel rebar strengthens concrete. The bad news is that without careful design, the two could weaken each other.

The challenge for policy makers is gaming—firms’ aptitude for subverting market rules established with good intentions. Remember how Enron and its ilk manipulated the California electricity market in 2001? The interaction of a carbon tax in British Columbia with a regionwide carbon Cap-and-Trade system in the West could open channels for such profiteering. In the worst case, gaming could both undermine and discredit the policies, risking their political survival. Fortunately, such gaming is preventable, as I’ll explain in a moment.

First, though, the upsides:

 Kevin Drum takes a crack at explaining the woes of "grandfathering", and nails it:

If you give away permits [under a cap and trade system], common sense suggests that since there are no additional costs to emitters, they won't raise their prices. But it turns out this isn't true. Thanks to the opportunity cost of the permits, they'll raise their prices just as much as if they'd bought the permit in an auction. (This isn't just a theory, either. That's how the European cap-and-trade system worked initially, and prices really did go up. If you want the gritty detail on why it works this way, read this paper.) So: power plants end up raising their prices, but since the emission permits are free their costs don't change. Result: a huge windfall profit for GHG emitters. Some get more and some get less, but the overall net result is lots of extra profit, with the biggest polluters getting the biggest profit.

Soon enough, if everyone who understands this point keeps repeating it, it'll sink in.  And then--hopefully--the press will stop looking at us cockeyed when we explain that giving permits away for free WON'T help consumers.

But let's hope it sinks in before Congress, or individual states and provinces, pass some misguided cap-and-trade legislation that gives away lots of permits for free.

No kidding, the American Trucking Association wants trucks to go slower:

The plan calls for governors on new trucks to limit speeds to no more than 68 mph, a call to reduce the national speed limit to 65 mph for all vehicles...

The proposal isn't just altruism. It's another instance in which self-interest and the public interest are aligned. Soaring diesel prices make it economical to reduce speed, thereby saving fuel and carbon emissions.

We've heard anecdotes about this, and we even seen some empirical research. Now we're seeing intentional policy. There's other good stuff in the plan too:

Also on the list is reducing engine idling, improving highways, using more productive truck combinations, and setting fuel economy standards for trucks.

Apparently, a number of trucking companies are already taking the initiative to get creative about reducing fuel use. They're crunching the numbers to find savings -- and then they're reducing load weights, switching to effiicient tires, upgrading lubricants, and installing aerodynamic panels.

Chalk this up as more evidence that the transportation sector really does respond to price signals. Just as in other energy sectors, smart policies can wring all kinds of efficiencies out of the transportation system.

[Hat tip to Ross McFarlane; photo by Geognerd, distributed under a Creative Commons license.]

Today, John McCain traveled to Portland, Oregon and speechified on his new climate policy. His plan is far from perfect -- more on that later -- but it's a remarkable departure from a certain president who shall remain nameless:

Instead of idly debating the precise extent of global warming, or the precise timeline of global warming, we need to deal with the central facts of rising temperatures, rising waters, and all the endless troubles that global warming will bring. We stand warned by serious and credible scientists across the world that time is short and the dangers are great. The most relevant question now is whether our own government is equal to the challenge.

That's a darn good question to be asking! And to the extent that McCain's new proposal, flawed as it is, constitutes the lower bound of new national climate policy, we've just made a gigantic step forward.

So what's wrong with McCain's plan? 

Oregon policymakers are now developing a very large transportation package that may go before voters this fall. As they design the package, officials should heed a recent cautionary tale: Puget Sound's big roads-and-transit ballot measure that was defeated in 2007. As far as we know, it was the first time in US history that concerns about climate change played a pivotal role in a public vote on transportation development.

There's every reason to believe that there is a growing segment of Pacific Northwest voters that is aware of the connection between climate and transportation. And Northwest voters are willing to vote against transportation investments that could increase climate-warming emissions. In fact, independent polls suggest that this voting dynamic contributed to the defeat of Proposition 1.

There is a straightforward solution, however. Including highway transportation fuels in a comprehensive cap and trade program could largely inoculate transportation packages from this voting dynamic. If cap-and-trade policies effectively guarantee reductions in climate-warming emissions, then proponents of transportation measures can convincingly argue that new transportation projects won’t, in fact, lead to higher global-warming emissions. But leaving transportation fuels out of a cap could subject future transportation mega-packages to the same political dynamic that sank Puget Sound’s transportation measure.

Details are below the jump.

Big three-day series in the Seattle Times on Puget Sound launches today. Day one is great.

If you're time-pressed, here it is, shorter: Sprawl is the real killer of the sound. Cities--complete, compact communities--are the solution.

Fortuitously, that's exactly what Cascadia needs for jobs, health, energy independence, and climate security too.

Teaching old dogs new tricks? It took soaring fuel prices for old habits to shift. But they're shifting alright.  Just take a look at these poll results - Gallup finds that big numbers of Americans are making changes in their daily lives to deal with higher gas prices. Here's a snapshot:

Via Calculated Risk, USAToday is reporting that SUV resale value is plummeting.

[W]holesale prices on big SUVs such as Chevrolet Tahoes, Ford Expeditions and Toyota Sequoias are down 17% from a year ago. Full-size pickups have fallen as much as 15%...

The reason, obviously, is that soaring gas prices are souring car buyers on the big guzzlers.  When a gallon of gas was cheaper than a cuppa joe, size and power seemed like nifty luxuries.  But with gas nudging $4, the luxuries have become albatrosses.

There's absolutely no reason for "I-told-you-so's" here.  Cars are the second largest purchase most people ever make, next to their homes, so rapid depreciation will be a serious hit to a lot of families.  Still, there's not all that much to be done:  SUV owners, whether they knew it or not, were making a bet that oil would stay cheap for a good, long while.  It didn't, and they're paying the price for a bet gone bad.

The only thing that we can do, collectively, is to stop assuming that oil will be cheaper in the future than it is today.  Maybe it will be; but the experience of the last 8 years suggests otherwise.  Still, despite price hikes that outstripped most predictions, there are all sorts of decisions -- from what kind of cars to buy, to what kinds of neighborhoods to build, to what kind of transportation investments we should pay for -- that are being made under the tacit assumption that gas prices will come back to earth. 

That's a risky bet.  Just ask someone who's trying to trade in a Toyota Sequoia.

[Picture courtesy of Flickr user joguldi, distributed under a Creative Commons license.]

An economy-wide cap on climate warming emissions – our preferred climate policy  – has one enormous sticking point:  once the cap is in place, who gets the right to pollute?

That’s the core of the debate over the “allocation” of emissions permits.  Literally billions of dollars are at stake.  And not too surprisingly, just about every industry you can think of believes that, once strict emissions limits are imposed, they should get a generous slice of permits for free. 

Much of this is just money-grubbing, plain and simple.  Permits will have a market value, so giving away permits is a lot like giving away free money.  Free permits will mean big windfall profits to large emitters – an idea that shareholders and execs LOVE, but consumers and taxpayers should hate.

But in some cases, the arguments against free emissions permits aren’t so clear-cut.  In much of the US West, for example, investor-owned electric utilities can't set their own prices; instead, their rates are set by public utility commissions. And if those commissions are attentive and careful, the investor-owned utilities have a pretty hard time raising prices to capture “windfall” profits. Moreover, some utilities are actually owned by the public, or by the customers they serve – which makes the whole “windfall” issue moot.

Many utilities are arguing – in good faith, we think – that it would be better to simply give utilities permits, so that customers don’t have to pay for the cost of buying permits at an auction.  Free permits will benefit consumers, their argument goes, by limiting electricity rate increases.

Are the utilities right about this? Could free allocation to utilities be a real boon to consumers?

We don’t think so.  In fact, handing out permits to utilities for free has the potential to backfire, raising the overall cost of emissions reductions -- thereby increasing the cost that consumers pay for all of their other energy needs.

Seems like, every time I turn around, someone else has written about the virtues of auctioning carbon permits:  not just auctioning some of them, but auctioning all of them.  Kevin Drum of The Washington Monthly has the latest examples.

Update 5/15 by Eric: We send memos too. Here is a fuller version of our concerns.

***

The Western Climate Initiative -- the multi-state, multi-province pact designing a cap-and-trade system for the Western U.S. and, now, large swaths of Canada as well -- has contracted out a bunch of economic modeling, in an attempt to get a handle on how various cap-and-trade policies might play out in the real world.

That's a good thing.  Entering blindly into a cap and trade system would be dopey. 

That said, your friendly neighborhood research nerds are a little worried about how the economic analysis is being done.  It's not that we have specific complaints about the model itself.  It's the opposite -- we can't possibly complain, because the company that the WCI chose to do the modeling won't tell anyone how their model works.  It's a proprietary, closed system, you see, so there's absolutely no way to tell what inherent biases the model may have. 

That's obviously a substantive problem:  without a lot of eyes scrutinizing the model, flaws can go undetected.  But -- far worse -- it's a perception problem.  No matter how the model results turn out, people can point to the fact that the model is closed to challenge or outright reject its conclusions.

We even wrote a little letter to the WCI about these issues.