Should Non-Profit Hospitals Boost Redskins’ Profits?

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Not too long ago, sports facility naming rights were reserved for corporations with big bank accounts and grandiose advertising campaigns: automobile companies, banks, technology giants and beer companies. Now another category of advertiser, a disturbing one, has entered the picture: nonprofit hospitals.

Nonprofit hospitals in Virginia, including Inova, have been a part of the chorus urging a dramatic expansion of Medicaid and the effort to block competition through reforming the monopolistic regulations known as the Certificate of Public Need. These nonprofit hospitals say that their finances are shaky and government subsidies are needed.

But last month, the Washington Redskins sold the naming rights to their training facility and headquarters in Ashburn to nonprofit mega-hospital chain Inova Health. While the financial details of the Inova deal have yet to be released, a similar partnership between the Redskins and Bon Secours, another nonprofit health system, may provide some idea.

In 2012, Bon Secours Richmond Health System became the sponsor of the Redskins’ training camp facility in Richmond. It agreed to pay $3.2 million for the naming rights.

Nonprofit hospitals such as Inova and Bon Secours are expected to provide charity care, not advertising for major NFL teams, in exchange for tax exemptions that include not paying property taxes. The Virginia Hospital & Healthcare Association reported that in fiscal 2013 Virginia’s nonprofit hospitals benefited from more than $928 million in tax exemptions. Yet, a Watchdog.org review of 2012-2013 financial reports found that charity care averaged only 4.2 percent of total expenses for Virginia’s nonprofit hospitals.

Inova’s 2014 financial numbers clearly show that it can do a lot more to help those who can’t pay for health care. Inova reported a compensation package for its chief executive that rivals many of the Redskins players’ contracts at about $6 million, a $217.7 million operating surplus and nearly $2 billion net assets on hand.

These numbers make it hard to accept the “we’re hurting financially” argument and show how much Inova could do to help those who need health care but can’t afford it.

If the Inova-Redskins deal is comparable to the one struck by Bon Secours, a lot of needy folks could be helped by this nonprofit hospital. Based on the Centers for Medicare and Medicaid Services, $3.2 million could, for instance, fund 1,407 cancer-detecting biopsies for those who can’t afford them. Money spent on advertising with the Redskins could be better spent increasing the percentage of charity care provided to Virginians in need.

When we are told that our hospitals are in financial trouble and that expanding Medicaid is one way to help this situation or that maintaining noncompetitive practices that tend to force more expensive health-care costs on our patients is needed, let’s take a serious look to see if this is true. Some hospitals might be stressed financially, but not all, and certainly not those such as Inova and Bon Secours that spend millions of dollars helping the bottom line of major professional football teams. These NFL teams can find sponsors in the for-profit sector without too much trouble. Nonprofit hospitals have no reason to invest money into sports training facilities when that money instead could provide care for the needy.

When the General Assembly goes back in session this January, Inova’s lobbyists will likely claim that the hospital’s ability to meet the growing need for charity care is contingent on the legislature maintaining the current anti-competitive Certificate of Public Need law. But if Inova (and other nonprofit hospitals that spend money on sports advertising) were living up to its nonprofit expectations, it would spend those millions of dollars to help those in need.

Nonprofit hospitals should be held accountable on behalf of the taxpayers and patients who are subsidizing them. Our lawmakers should review the 4.2 percent of expenses dedicated to charitable care by our nonprofit hospitals in Virginia and determine if that number should be higher. They should also support meaningful Certificate of Public Need reforms. As a recent study by George Mason University’s Mercatus Center shows, these laws do not keep health-care costs low.

(This article first ran in the Washington Post on August 14, 2016)

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Strategic Investment Funds: Not Just for UVa Anymore

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uva_fog_smallThe University of Virginia’s controversial $2.2 billion Strategic Investment Fund is such a great idea that UVa officials are recommending it as a model for other state universities.

By adopting UVa’s approach and consolidating university reserve funds statewide, a sum that could approach $9 billion, the Commonwealth could establish an investment fund that would generate $450 million annually in extra income, UVa Rector William H. Goodwin said Monday at a Board of Visitors meeting, reports the Richmond Times-Dispatch.

Vice Rector Frank Conner also recommended the investment strategy for other Virginia public universities. “A lot of people will be calling us,” he said. “This is very creative.”

Members of the UVa board are upset by questions swirling around the creation and purpose of the fund, the existence of which was revealed publicly in aWashington Post op-ed last month by former Rector Helen Dragas before the university could manage the roll-out. Questions have arisen regarding where the money came from and why it won’t be used to dampen tuition increases rather than fund programs to enhance the university’s prestige.

Board members pushed back yesterday against outside criticism. It is “a shame we’re getting arrows in the back for being first,” said James B. Murray Jr.

Barbara J. Fried said the university needed to do more to “overcome lying sound bites.”

But the university has been slow in explaining exactly how UVa’s Strategic Investment Fund was accumulated. A month ago, the official explanation was that the money was cobbled together from $385 million in operating reserves, $620 million in “unrestricted funds and related earnings that had accumulated in [the university’s] history,” and $700 million in earnings on those funds. The university provided no detail on the $620 million in “unrestricted funds and related earnings,” and legislators have called for an accounting.

Goodwin added a bit of new detail Monday. He credited Executive Vice President Patrick D. Hogan with, as the T-D put it, “finding efficiencies in operations during the past few years that, along with investment earnings, were used to create the fund.”

Bacon’s bottom line: Let’s make one thing clear: It is great news to discover that UVa has compiled a $2.2- to $2.3-billion pot of money. That money can do a lot of good.

Apparently, UVa, like other universities, kept a lot of cash sitting around in reserves yielding very low interest rates, and Hogan deserves credit for figuring out how to tap those funds to generate a higher return in other kinds of investments. Among other things, this involved negotiating a line of credit to maintain the university’s liquidity. The payoff from this financial restructuring could be huge. If Goodwin is right and the idea could be applied to other Virginia universities, the innovation could very well revolutionize higher education finance. (The idea must be viewed with caution, however. Not all institutions have a AAA credit rating like UVa; some may not be able to leverage their balance sheets in the same way.)

But no one is criticizing the board for being creative financial stewards and investing the money well.

People have legitimate questions about where the money came from. According to UVa’s own explanation, only $385 million of the seed funding came from operating reserves. Another $620 million came from what is described as “unrestricted funds and related earnings that had accumulated in its history.”

What the hell does that mean?

Well, we learn from Goodwin that a good portion if not all of that $620 million come from operating efficiencies — cost cutting. Again, Hogan deserves kudos for the achievement. But no one is criticizing him for running a tight ship.

These are the questions that people are asking: Should UVa have used the savings from cutting costs to blunt increases in tuition and fees rather than setting them aside and accumulating $620 million? Who set up this operational fund anyway? Did the Board of Visitors ever approve the strategy of setting aside and accumulating funds from cost-cutting initiatives, a strategic decision that should be made by the board and not the administration? Did the board approve handing those monies to the University of Virginia Investment Management Co. (UVIMCO) to invest? When the board recently voted to increase tuition for incoming students by 10%, were members aware that the university had accumulated hundreds of millions of dollars, plus investment returns, from cost cutting? Did board members give consideration to the possibility that the accumulation of those funds represented a form of overcharging students and their families?

Legislators want answers, and I don’t blame them.

(This article first ran in Bacon’s Rebellion on August 16, 2016)

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Ways to Bring Manufacturing Jobs Back to Virginia & the U.S.

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automated_manufacturing_line_300x3001Thomas Jefferson recognized the important role that trade can play to benefit our nation’s economy, saying, “Commerce with other nations is not only necessary and beneficial to all parties, it is a right and a duty…” Yet, he also spoke clearly that trade must be fair, saying, “In order to function properly, however, free trade must be established on a reciprocal basis.”

Take a look at our economy today, and, in particular, our manufacturing sector, and one could easily imagine Jefferson shaking his head in disappointment at the record trade deficits we regularly amass. After all, Jefferson cited public debt as one of the “greatest dangers” to be feared, saying, “To preserve our independence, we must not let our rulers load us with perpetual debt.”

In 2015 alone, the United States amassed a record $367 billion goods trade deficit with China – hardly the reciprocity that Jefferson envisioned when touting a system of tade that “function[s] properly.” Make no mistake: This massive trade deficit saps our economy of wealth and jobs and increases our foreign debt.

Currently, China and its state-owned companies are exporting massive amounts of paper, steel, aluminum and other goods to our market at any cost to avoid the pains that come with a slowing economy. The consequences of selling at a loss are absorbed by the Chinese government in order to maintain production, employment, and, in turn, social stability. Here in America, where market forces have real impact, China’s aggressive actions have depressed prices, forced plant closures, and left 15,000 steel workers with layoff notices.

This trend is repeated throughout America in a number of vital industrial sectors. The Commonwealth of Virginia has lost nearly 130,000 manufacturing jobs since 2001 when China was granted permanent duty reductions to the U.S. market and entry into the World Trade Organization (WTO).

This massive decline is a direct result of the obstacles to legitimate commerce that Jefferson spoke of in his 1793 Report on Foreign Commerce when justifying what we today refer to as trade enforcement. “Should any nation, contrary to our wishes, suppose it may better find its advantage by continuing its system of prohibitions, duties and regulations, it behooves us to protect our citizens, their commerce and navigation, by counter prohibitions, duties and regulations also.”

Many U.S. companies are currently suffering from unfair foreign competition, including illegal subsidies granted to overseas producers, good dumped into our market at below market levels, and inequitable enforcement of regulation abroad to benefit their own exporters and impede our attempts to sell goods overseas.

As a result, many U.S. companies have been forced to take the extraordinary step of petitioning their government to stop the flow of illegally-traded goods into the American market. That’s often mislabeled as “protectionism,” but few companies anywhere can compete against the vast resources of a rival operating in a state-directed economy like China’s, home to many powerful state-owned companies.

Another hard truth: As domestic companies work to comply with unparalleled levels of government regulation, we are rewarding companies operating in China with access to our lucrative government procurement markets. Spending hard-earned American tax dollars on foreign made goods – produced free of environmental safeguards and other regulatory protections – for our roads, bridges, water system, and other needs flies in the face of the principles our country was built on. And, from Jefferson’s point of view, conflicts with the idea that “we should encourage home manufactures to the extent of our own consumption.”

Jefferson later came to the resolution that he would “never again…purchase any article of foreign manufacture which can be had of American make, be the difference of price what it may.”

So, then, imagine his reaction to the concept of relying on a potential hostile trading partner like China (or Europe, as it was in his time) to equip our own military. “To make [arms] within ourselves… as well as the other implements of war, is as necessary as to make our bread within ourselves,” he said.

Yet, the United States is increasingly becoming reliant on countries like China and Russia for everything from steel to construct aircraft carriers (like those at Newport News) to the rare earth elements used in night-vision goggles to the communications systems used on the front lines of combat.

There is hope that we may be able to turn this manufacturing crisis around and back on better footing. The solutions are simple: stronger trade enforcement and more effective measures to ensure that trade is a beneficial, two-way street for all involved. And, we must spend Americans’ tax dollars on goods produced here at home.

As the presidential election continues and voters look toward selecting a new leader for our country, solid public policy solutions will be required to eliminate our surging trade deficit with China and put strong penalties in place for currency manipulation, cyber-spying, intellectual property theft and trade cheating.

Thomas Jefferson certainly would have had the will and strong leadership to help the American manufacturing sector get back on its feet.

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Mr. Boos is Senior Vice President, Government Affairs & Policy for the Alliance for American Manufacturing (AAM). Prior to joining AAM, Mr. Boos served as a senior policy adviser to Sen. Arlen Specter of Pennsylvania.

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The Soaring Costs of the ACA’s Medicaid Expansion

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healthcare costsThe implementation of major legislation such as the Affordable Care Act (ACA) often results in fiscal outcomes that differ significantly from prior projections. Whenever this happens it leads to many questions, much confusion, and several claims and counter-claims. Rarely is it immediately clear whether the law is working differently than envisioned, or whether the unexpected outcomes are due to inevitable projection errors having nothing to do with the law.

On rare occasion, however, a prior projection proves so far off that its significance must be noted. Two weeks ago my colleague Brian Blase uncovered such a development with respect to the ACA’s Medicaid expansion. Recall that the ACA considerably expanded Medicaid eligibility – an expansion made optional for the states in a later Supreme Court ruling. It turns out that the 2015 per-capita cost of this Medicaid expansion is a whopping 49% higher than projections made just one year before.

This disclosure can be found on page 27 of the 2015 Actuarial Report for Medicaid, released this July. Here is how the report described the issue:

“While the newly eligible adult per enrollee costs in 2014 were slightly lower than estimated in last year’s report ($5,488 compared to $5,517, or about 1 percent lower), the estimated per enrollee costs for 2015 in this year’s report are substantially greater ($6,366 compared to $4,281, or about 49 percent higher).”

How can a projection be this far off after only one year? To understand, let’s first discuss more of the “what” of the projection, and then proceed to the “why.”

The 2013 Medicaid report was the last one reflecting expectations prior to the 2014 expansion. Medicaid’s actuaries then expected that the initial per-capita costs of covering newly eligible adults would be comparable to those for previously-eligible adults, but would later become substantially lower. The explanation given in the 2013 report was:

“The estimated average benefit costs for adults who enroll as a result of the expanded eligibility criteria in the Affordable Care Act are significantly lower than those for the average beneficiary. This difference arises partly from the fact that adults in poor health often suffer a loss in income, increasing their likelihood of qualifying for Medicaid under the pre-Affordable Care Act criteria.”

Translated into layman’s terms this just means that sicker people tend to have less income. Thus, the lower-income people previously eligible for Medicaid were more likely to be in poor health than the relatively higher-income people in the expansion population. This higher-income expansion population, being in better health, would be less expensive to cover.

It was also thought then that among the newly-eligible population, the sickest would enroll first and the healthier individuals later, causing per-capita costs to drop during the next few years. The 2013 report projected that the per-capita cost for newly eligible adults would be just 1% lower than previously-eligible adults in the first year, but a good 28% lower in the third.

But this isn’t what happened. First, the initial per-capita cost came in much higher than expected. Here’s how the 2014 report described it:

“Newly eligible adults are estimated to have had average benefit costs of $5,517 in 2014, 19 percent greater than non-newly eligible adults’ average benefit costs of $4,650. These estimates are significantly different from those in previous reports, in which average benefit costs for newly eligible adults in 2014 were estimated to be 1 percent lower than those of non-newly eligible adults.”

The 2014 report offers some explanations for the unexpected cost increase, but I’ll return to those after discussing the results for 2015. Heading into 2015 the actuaries still expected costs per newly eligible adult to drop (by 22%, from $5,488 to $4,281) as healthier individuals enrolled. But instead they rose by 16% (to $6,366). Thus 2015 per-capita costs are 49% higher ($6,366 over $4,281) than previously predicted.

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Why were 2015 costs so high? The 2015 report speculates that some costs incurred in 2014 were reported in 2015. But reporting those costs in 2014 wouldn’t have meant they were any less underestimated. It would just mean that more of the underestimation happened in 2014 than 2015.

The report attempts to explain the underestimation as follows:

“Many States included adjustments to reflect a higher level of acuity or morbidity among newly eligible adults compared to non-newly eligible adults. In most States, these adjustments were positive (in other words, newly eligible adults had a higher level of acuity than non-newly eligible adults), and in some cases the adjustments were substantial. States also included other adjustments in the capitation rates for newly eligible adults. Many States projected increased costs due to pent-up demand, expecting that many enrollees would have been previously uninsured and would use additional services in the first several months of coverage. Some States also included adjustments for adverse selection with the anticipation that the persons who were most likely to enroll in the first year would be those with the greatest health care needs.”

Again a translation may be in order: Basically states established far higher expenditure requirements for the expansion population than the federal government expected, by positing that beneficiaries would be in need of more health services.

Why did this happen? Remember, the ACA established an initial 100% federal matching payment for state Medicaid expansion costs, contrasting with historical federal match rates that averaged 57%. Even when the feds paid 57% of the bill there was a longstanding concern that states were insufficiently accountable for their cost-expanding decisions, with much of that cost being shifted to federal taxpayers. But the ACA’s current 100% match means that states make the decisions about expanding Medicaid while the federal government picks up all the costs. Even after the ACA is fully phased in, the feds will still pay for 90%. Under such arrangements, cost overruns are predictable.

The fact that the states set payment rates higher than the federal government expected carries additional implications. If the states set payment rates too high for the expansion population, then per their risk-sharing arrangements with insurance plans some money will flow back to the federal government. If this happens to the extent the Medicaid actuaries expect, recent per-capita costs will be about 9% less than shown in the 2015 report – though still dramatically higher than estimated last year.

The rising cost of Medicaid expansion leads to worsening budgetary evaluations for the ACA. Contained in CBO’s recent projections are harbingers of this:

Blahouse 2

The slight uptick in CBO’s latest cost projections reflects higher enrollment as well as growth in per-capita costs. If the latest Medicaid actuaries’ report is any indication, future cost projections may well get significantly worse. Thus far CBO’s adjustments to per capita costs do not appear to fully reflect an increase of the magnitude shown in the latest Medicaid report.  Remember also that the program’s actuaries still assume that due to risk-sharing payments and other factors, per-capita expansion costs will decline in 2016 and 2017. If this assumption proves incorrect, future costs will be higher still.

Having federal taxpayers pick up between 90-100% of the cost of state Medicaid expansions was one of many questionable policy decisions made in the ACA. It’s also proving to be much more expensive than the federal government expected.

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Charles Blahous is a senior research fellow for the Mercatus Center, a visiting fellow at the Hoover Institution, and a contributor to E21. He recently served as a public trustee for Social Security and Medicare.

 

 

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Energy Facts & Figures for Dummies Part II

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(Editor’s note: Last week we introduced Part 1, which can be read HEREThis is a continuation of this in depth look at facts pertaining the energy.  These facts will hopefully make our debate over energy issues become ore fact-based and less emotionally based.)

Introductory Notes

In keeping with Just Facts’ Standards of Credibility, all graphs show the full range of available data, and all facts are cited based upon availability and relevance, not to slant results by singling out specific years that are different from others.


just-facts-energy 150

Pollutants

When modern energy is unavailable or expensive, people tend to burn more wood, crop waste, manure, and coal in open fires and simple home stoves. Open fires and home stoves do not burn fuel as efficiently as commercial energy technologies, and hence, they produce elevated levels of outdoor and indoor pollutants. The added consumption of wood also causes deforestation. [63] [64] [65] [66] [67]

* Assessing the full environmental impacts of different energy technologies requires looking beyond the effects at a single point of production, use, or disposal. To do this, researchers perform “life cycle assessments” or LCAs. Per the U.S. Environmental Protection Agency (EPA), LCAs allow for:
the estimation of the cumulative environmental impacts resulting from all stages in the product life cycle, often including impacts not considered in more traditional analyses (e.g., raw material extraction, material transportation, ultimate product disposal, etc.). By including the impacts throughout the product life cycle, LCA provides a comprehensive view of the environmental aspects of the product or process and a more accurate picture of the true environmental trade-offs in product and process selection.[68] [69]

* Per a 2008 paper in Environmental Science & Technology:

Indeed, all anthropogenic [manmade] means of generating energy, including solar electric, create pollutants when their entire life cycle is taken into account. Life-cycle emissions result from using fossil-fuel-based energy to produce the materials for solar cells, modules, and systems, as well as directly from smelting, production, and manufacturing facilities. [70]

* The air pollutants generated by energy sources vary with factors such as combustion methods, manufacturing techniques, and pollution control technologies.[71] [72] For example, bituminous coal combusted in a fluidized bed boiler without pollution controls produces one tenth the sulfur dioxide of the same fuel burned in a cyclone boiler without pollution controls. [73] [74] [75]

* In general:

  • electricity generated by nuclear, hydropower, solar, geothermal, and wind energy emits a fraction of the air pollutants of fossil fuels. [76] [77] [78] [79] [80]
  • geothermal heat pumps generate less pollutants than any other technology for heating and cooling. [81]
  • biofuels usually emit less air pollutants than petroleum-based fuels, although some biofuels emit more nitrogen oxides and volatile organic compounds over their lifecycles. [82] [83] [84] [85] [86]
  • natural gas combustion generates the lowest air pollutant emissions of all fossil fuels.[87] [88] [89] [90] [91]
  • as of 2000, electricity generated by coal combustion created more sulfur dioxide and nitrogen oxides than any other fuel. [92]

* Per the U.S. Department of Energy (2010):
While coal used to be a dirty fuel to burn, technology advances have helped to greatly improve air quality, especially in the last 20 years. Scientists have developed ways to capture the pollutants trapped in coal before they escape into the atmosphere. Today, technology can filter out 99 percent of the tiny particles and remove more than 95 percent of the acid rain pollutants in coal, and also help control mercury. [93] [94]

* In the U.S. from 1990 through 2015, sulfur dioxide (SO2) emissions per Btu of coal-generated energy decreased by 86%, and nitrogen oxides (NOx) emissions decreased by 78%. [95]

* Since the late 1970s, new automobiles have been equipped with catalytic converters, an “anti-pollution device” that converts “exhaust pollutants … to normal atmospheric gases such as nitrogen, carbon dioxide, and water.” [96] [97][98]

* Facts about air pollution levels and their effects are detailed in Just Facts’ research on pollution.

Greenhouse Gases

* Carbon dioxide (CO2) contributes more to the greenhouse effect than any other gas released by human activity.[99][100]

* In general:

  • electricity generated by nuclear, solar, geothermal, and wind energy emits a fraction of the greenhouse gases of fossil fuels.[101] [102] [103] [104] [105]
  • hydropower’s “air emissions are negligible because no fuels are burned. However, if a large amount of vegetation is growing along the riverbed when a dam is built, it can decay in the lake that is created, causing the buildup and release of methane, a potent greenhouse gas.”[106]
  • when extracting natural gas, coal, and petroleum from the ground, uncombusted methane can be released. Methane is a greenhouse gas that is 28 times more potent (per unit mass) than CO2.[107] [108] [109]
  • When combusted, fossil fuels emit the following amounts of CO2:

energy pollutants chart 1
* Biofuels such as ethanol generate CO2 when burned, but the crops used to make these fuels absorb an equal amount of CO2 as they grow. However, planting, fertilizing, harvesting, processing, and distributing ethanol emits more CO2 than extracting, refining, and distributing gasoline.[111] [112] [113] [114] [115]

* Per the U.S. Congressional Budget Office (CBO), lifecycle analyses comparing CO2 emissions of corn-based ethanol and gasoline have produced varying results, but the most authoritative study in the eyes of the federal government (conducted by Argonne National Laboratory) estimates that, on average, corn-based ethanol produces about 20% less CO2 than gasoline.[116]

* Another type of biofuel called cellulosic ethanol has the potential to produce 60-95% less CO2 emissions than gasoline. This fuel is more difficult to manufacture than regular ethanol, and as of 2016, producers have been unable to make enough of it to meet the mandated amounts specified in federal law.[117] [118] [119] [120][121] [122] [123]

* Converting undeveloped land to cultivate crops for biofuels creates CO2 emissions because existing plant life is removed and the soil is disrupted. If this land is repeatedly used to produce biofuels, the net CO2 emissions will be less than using fossil fuels. The timeframe until this breakeven point occurs depends upon factors such as the type of land converted and type of biofuel produced. Per a 2008 paper in the journal Science, the CO2 breakeven time of converting:

  • wetter portions of Brazil’s woodland/savanna region to produce sugarcane ethanol is about 17 years.
  • dryer portions of Brazil’s woodland/savanna region to produce soy biodiesel is about 37 years.
  • central grasslands of the U.S. to produce corn ethanol is about 93 years.
  • lowland tropical rainforest of Indonesia and Malaysia to produce palm biodiesel is about 320 years.
  • Amazonian rainforest to produce soy biodiesel is about 320 years.
  • tropical peatland rainforest to produce palm biodiesel is about 840 years.[124]

* Per the U.S. Energy Information Administration:

Most of the biodiesel produced in the United States is made from soybean oil. Some biodiesel is also produced from used oils or fats, including recycled restaurant grease. In some parts of the world, large areas of natural vegetation and forests have been cleared and burned to grow soybeans and palm oil trees to make biodiesel. The negative environmental impacts of land clearing may be greater than any potential benefits of using biodiesel produced from soybeans and palm oil trees.[125]

* Facts about greenhouse gases and climate change are detailed in Just Facts’ research on global warming.

* In order to perform useful work, energy usually must be converted from one form to another. Most energy on earth ultimately comes from the sun, and this energy typically undergoes multiple conversions before it is used to accomplish a particular task. For example, the energy that ultimately powers a light bulb may have the following history:

  • The process of fusion converts the nuclear energy of elements in the sun into sunlight (electromagnetic energy).
  • When sunlight strikes the earth’s oceans, some of it is converted to thermal energy.
  • This thermal energy heats the water and causes it to evaporate and rise, thus converting some of it to gravitational energy.
  • When this water falls as rain, it fills rivers that drive the turbines of hydroelectric dams, thus converting some of it to mechanical energy.
  • This mechanical energy is used to turn generators, thus converting some of it to electrical energy.
  • When this electrical energy flows through light bulbs, some of it is converted back to electromagnetic energy (light).[126] [127]

* With each conversion process, some amount of the energy is dispersed, thus making it less useful for performing work. Per the U.S. National Academy of Sciences:

Every time energy changes forms, some portion is “lost.” It doesn’t disappear, of course. In nature, energy is always conserved. That is, there is exactly as much of it around after something happens as there was before. But with each change, some amount of the original energy turns into forms we don’t want or can’t use, typically as so-called waste heat that is so diffuse it can’t be captured.

Reducing the amount lost – also known as increasing efficiency – is as important to our energy future as finding new sources because gigantic amounts of energy are lost every minute of every day in conversions.[128] [129] [130] [131]

* In the U.S. from 1949 to 2015, energy consumption per inflation-adjusted dollar of economic output decreased by 63%:

* Homes built in the U.S. from 2000-2009 are about 30% larger than homes built prior to this period, but they use about 2% more total energy. This result is primarily due to better insulation and increased efficiencies of heating and air conditioning technologies.[133]

* Homes built in the U.S. from 2000-2009 use about 18% more energy on appliances, electronics, and lighting than older homes.[134] This is because newer homes are more likely to have “dishwashers, clothes washers, clothes dryers, and two or more refrigerators.” Also, because they have more square footage, newer homes tend to have more “computers, TVs, and TV peripherals such as digital video recorders (DVRs) and video game systems.”[135]

* Increasing the efficiency of electronics, appliances, and lighting reduce the demand for energy and can save consumers money if the added cost of making these products more efficient does not exceed the cost of the energy saved.[136] [137]* Energy Star is a joint program of the U.S. Environmental Protection Agency and Department of Energy. Per the program’s website:

If looking for new household products, look for ones that have earned the Energy Star. They meet strict energy efficiency guidelines set by the EPA and US Department of Energy.[138]

* In 2010, the U.S. Government Accountability Office (GAO) published an investigation of Energy Star in which GAO submitted 20 “bogus products” for approval. Fifteen of the products were approved, 2 were rejected, and 3 were unanswered at the time the report was published. Among the products certified as Energy Star compliant were:

  • a gasoline powered alarm clock.
  • a geothermal heat pump eligible for federal tax credits and state rebate programs that purportedly had higher efficiency than any Energy Star product.
  • a computer monitor that was approved within 30 minutes of submission.
  • “a room cleaner represented by a photograph of a feather duster adhered to a space heater on our [fake] manufacturer’s Web site.”

* The U.S. Green Building Council, per its website, is a “nonprofit organization committed to a prosperous and sustainable future for our nation through cost-efficient and energy-saving green buildings.”[140] This organization provides various types of green building certifications that qualify the owners for government incentives, such as tax breaks and zoning allowances. This rating system is named LEED for “Leadership in Energy and Environmental Design.”[141]

* In 2012, USA Today conducted an investigation of schools with green building certifications (such as LEED) and found:

  • “More than 200 states, federal agencies and municipalities require LEED certification for public buildings.”
  • out of 239 schools in the Houston (Texas) Independent School District, three newly built “green schools” ranked 46th, 155th, and 239th for energy costs per student.
  • “Building a LEED-certified school often adds 2% to 3% to construction costs, and as much as 10% in the case of a Selinsgrove, Pa., high school….”
  • a Green Building Council brochure had claimed that “green schools save money” based upon pre-construction cost estimates of 30 schools. One of these schools, located in Olympia, Washington, was projected to use 28% less energy than conventional schools. In its’ first two years of operations, the school used 19% more energy than conventional schools.
  • a Green Building Council brochure had claimed that “green schools help improve student performance,” but aUSA Today “review of student test scores for 65 schools in 11 states that have been rebuilt to get LEED certification and have been open for at least two years” found “no clear pattern” of improved student performance.[142]

* Per the U.S. National Academy of Sciences:
Another familiar form of conversion loss occurs in a vehicle’s internal combustion engine. The chemical energy in the gasoline is converted to heat energy, which provides pressure on the pistons. That mechanical energy is then transferred to the wheels, increasing the vehicle’s kinetic energy. Even with a host of modern improvements, current vehicles use only about 20% of the energy content of the fuel as power, with the rest wasted as heat.

Electric motors typically have much higher efficiency ratings. But the rating only describes how much of the electricity input they turn into power; it does not reflect how much of the original, primary energy is lost in generating the electricity in the first place and then getting it to the motor.

Efficiencies of heat engines can be improved further, but only to a degree. Principles of physics place upper limits on how efficient they can be. Still, efforts are being made to capture more of the energy that is lost and to make use of it. This already happens in vehicles in the winter months, when heat loss is captured and used to warm the interior for passengers.[143] [144]


Costs of Transportation Fuels

* Transportation fuels have different energy densities, and thus, the price per volume of each fuel does not accurately reflect the energy supplied to consumers. For example, the energy content of a gallon of ethanol is 31% less than a gallon of gasoline. Hence, a car fueled with E85 (a mixture of 70-85% ethanol and 15-30% gasoline) will get 25-30% less miles per gallon than the same car when it is fueled with pure gasoline.[145] [146] [147] [148] [149]

* Like ethanol, the volume of biodiesel blended with regular diesel is shown by a number that follows the first letter of the named fuel. Thus, B20 contains 20% biodiesel and 80% regular diesel.[150]

* On an energy-equivalent basis, the average subsidized retail prices (including taxes) for transportation fuels during 2015 were as follows:

fuel chart 1

[151]

* A federal law known as the “Renewable Fuel Standard” requires U.S. consumers to use certain amounts of ethanol and other biofuels. This mandate uses a compliance mechanism that transfers some of the costs of producing these fuels from biofuel companies to petroleum companies. These added costs are then passed on to consumers in the form of higher gas prices.[152] [153] [154] [155]

* During 2015, a federal tax credit subsidized biodiesel at a rate of $1.00 per gallon.[156]

* Federal payments, tax breaks, loans, and loan guarantees subsidize petroleum and natural gas production at a rate of about $0.01 per gasoline-gallon equivalent.[157]

* Combining the data above yields the following average prices for transportation fuels during 2015 without federal subsidies:

fuel chart 2

[158]

To be continued…

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