Archive for the ‘Opinion’ Category

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More Oil Supply

April 29, 2011

By Michael J. Economides
Posted on Apr. 28, 2011

It is unfortunate that on the day when President Barack Obama said perhaps one of the most noteworthy things during his entire Administration, the ridiculous birther issue hijacked the news. On that day he was quoted: “”We are in a lot of conversations with the major oil producers like Saudi Arabia to let them know that it’s not going to be good for them if our economy is hobbled because of high oil prices.” He certainly would like more oil to get into the market.

After oil topped $110 per barrel, after gasoline prices have been flirting with $4 per gallon and after a relentless climb which lasted for weeks, the President felt compelled to do or, at least say, something. Obama can be the subject of criticism for a lot of things but as a campaigner he is almost impeccable. He is campaigning officially and he knows too well that virtually nothing removes votes from an American candidate better than higher gasoline prices.

Of course, it is hard to be the President of wind mills and solar panels and now try to implore foreign countries, raking it in from higher oil prices, to commit financial sacrifice. They are asked to increase the supply of the commodity, which has been labeled by Obama as the “energy source of the past”, and against which his Administration has gleefully declared war in both words and action from the time of the previous presidential campaign to today. One would think that higher oil prices would force people to use solar and wind to drive their cars. Yes, I know this is not possible and it is sarcastic but many of the President’s supporters, behind the public consumption headlines of feeling the consumers’ pain, think that what is happening is good for the energy future they would like to see.

The President, like many of his predecessors of both parties, is missing the opportunity to level with the American people: There are no alternatives to hydrocarbon (oil, gas and coal) energy sources in the foreseeable future. The entire twenty first century will still be dominated by them. Solar and wind are unrealistic today, they are thermodynamically deficient, and they will most likely never amount for much more than one percent of the world energy mix without massive government subsidies.

Ideological environmentalism has trumped economic development and has thwarted economic freedom, which was, ostensibly, the motive of the Cold War which America won but certainly does not act like it did. Al Gore, a precursor to Obama even before the Nobel Prize for the “Inconvenient Truth” wrote that the “internal combustion engine is the biggest threat to humankind.”

Tell that to the Chinese who are buying at least 40,000 new cars per day.

Breaking even the lowest standards of credulity on the same day of the President’s Saudi plea, Lisa Jackson, the EPA administrator said rising gasoline prices were not her agency’s fault. Upward pressure on gas prices was “not coming from any environmental or health regulation.” Really? This from an agency that even its more ardent supporters think as the most intrusive and recalcitrant, ever, an agency that has attempted to regulate by government edict rather than legislative fiat.

Make no mistake: global climate change rhetoric — fully espoused by the Obama Administration — is a frontal attack on the US and the lifestyle that emanates from its economy and system. The Europeans who adopted it in the first place are not averse to admit that they are jealous of America. The Chinese, who are all too aware of the ramifications of mandatory carbon restrictions on both the world and, in particular, their economy, simply will not play along. They are, at best, bemused. Does anybody really believe there would be economically extractable hydrocarbons in this world that would not be produced because we pass legislation in the US? Isn’t the atmosphere the same for all?

To crown a day that surely even Don Quixote would question the credibility of Obama’s adversaries, a third jewel was added to the news menu. Senator Harry Reid said the “Senate will turn as early as next week to Obama’s proposal to repeal tax breaks for the oil and gas industry.” This is the answer. Let’s turn on Big Oil. That will solve the problem.

What are we really talking about? The “subsidies” amount to just $4 billion per year. It may sound a lot of money but here is a quick calculation. The United States is using about 400 million gallons of gasoline per day. At $4 per gallon this translates to $1.6 billion per day, which means that the yearly subsidies to the dreaded oil companies account for less than three days of just the US gasoline bill. The US total oil bill at today’s prices is about $2.3 billion per day. Using a modest multiplier in economic activity, that would make the US oil industry, not counting natural gas, a $10 billion per day economic activity. The “subsidies” trumpeted by the government headlines amount to a few hours of the industry’s size.

Last year the Chinese spanned the globe and spent $200 billion in buying oil properties. I am often in China and my colleagues there are actually bewildered. After a few drinks and when words become looser and in some ways, more lucid, they have two questions: “What is the energy policy of the United States? and “If you are not going to produce your own oil and gas why are you letting us have a free ride in accessing oil supplies everywhere in the world with no resistance and no competition?” I have no answer to either but I do know that the Chinese understand that energy means power and better economics. We no longer seem to get it.

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Obama’s Green-Jobs Fantasies

March 10, 2011

(For some reason WordPress kills the text formatting on some of my posts and the software refuses to register my edits; the result the following “smashed together” post.  My apologies)

By John Stossel

(http://townhall.com/columnists/johnstossel/2011/03/09/obamas_green-jobs_fantasies)
3/9/2011

Anyone who understands basic economics already knows that President Obama’s $2.3 billion green-jobs initiative was snake oil. Now, thanks to Kenneth P. Green, we have statistics as well as theory to prove it.
In a new article, “The Myth of Green Energy Jobs: The European Experience,” the environmental scientist and a resident scholar at the American Enterprise Institute writes, “Green programs in Spain destroyed 2.2 jobs for every green job created, while the capital needed for one green job in Italy could create almost five jobs in the general economy.”
Ironically, Obama boasts his initiative “will help close the clean-energy gap between America and other nations.” But Green says, “(C)ountries are cutting these programs because they realize they aren’t sustainable and they are obscenely expensive.”
Obama claims that if we “invest” more, “the transition to clean energy has the potential to grow our economy and create millions of jobs — but only if we accelerate that transition.”
What could make more sense? A little push from the smart politicians and — voila! — we can have an abundance of new good-paying jobs and a cleaner, sustainable environment. It’s the ultimate twofer.
Except it’s an illusion, as economic logic demonstrates.
“It is well understood, among economists, that governments do not ‘create’ jobs,” Green writes. “The willingness of entrepreneurs to invest their capital, paired with consumer demand for goods and services, does that. All the government can do is subsidize some industries while jacking up costs for others. In the green case, it is destroying jobs in the conventional energy sector — and most likely in other industrial sectors — through taxes and subsidies to new green companies that will use taxpayer dollars to undercut the competition. The subsidized jobs ‘created’ are, by definition, less efficient uses of capital than market-created jobs.”
Green is using good, solid economic thinking. Many years ago, Henry Hazlitt wrote in his bestseller, “Economics in One Lesson,” “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
In judging any government initiative, such as Obama’s green-jobs plan, you can’t look just at the credit side of ledger because the government is unable to give without first taking away.
Worse than that: Inevitably, more is taken away — destroyed — than is given because the government substitutes force and taxation for consent and free exchange. Instead of a process driven by consumer preferences, we get one imposed by politicians’ grand social designs. It’s what F.A. Hayek called “the fatal conceit.”
So we shouldn’t be surprised that green-jobs programs make energy more expensive. “(F)orcing green energy on the market (is) much, much more expensive,” Green said. “Using Spain as a model, when you do the math, you realize that creating 3 million new green jobs could cost $2.25 trillion.”
Of course, many people who push “green jobs” want the price of energy to rise so we’ll use less. If the environmental lobby wants Americans to be poorer, it ought to come clean about that.
The advocates of such programs don’t just misunderstand economics. They have lapsed into a pre-economic mentality. Rulers once believed they could do whatever they wanted, subject only to the physical laws of nature. If things didn’t work out as planned, it was because the people had failed to cooperate. But as economist Ludwig von Mises wrote, once economics emerged as an intellectual discipline, “it was learned that in the social realm too there is something operative which power and force are unable to alter and to which they must adjust themselves if they hope to achieve success … .”
That “something” is inescapable economic forces like the law of supply and demand.
Green is right when he says, “Central planners in the United States trying to promote green industry will fare no better (than Europe) at creating jobs or stimulating the economy.”
John Stossel
John Stossel is host of “Stossel” on the Fox Business Network. He’s the author of “Give Me a Break” and of “Myth, Lies, and Downright Stupidity.” To find out more about John Stossel, visit his site at johnstossel.com

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Why the Dollar’s Reign Is Near an End

March 2, 2011

For decades the dollar has served as the world’s main reserve currency, but, argues Barry
Eichengreen, it will soon have to share that role. Here’s why—and what it will mean for international markets and companies.

By BARRY EICHENGREEN

The single most astonishing fact about foreign exchange is not the high volume of transactions, as incredible as that growth has been. Nor is it the volatility of currency rates, as wild as the markets are these days.

Instead, it’s the extent to which the market remains dollar-centric.

Consider this: When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter. Indeed, the dollar is virtually the exclusive vehicle for foreign-exchange transactions between Chile and Korea, despite the fact that less than 20% of the merchandise trade of both countries is with the U.S.

Chile and Korea are hardly an anomaly: Fully 85% of foreign-exchange transactions world-wide are trades of other currencies for dollars. What’s more, what is true of foreign-exchange transactions is true of other international business. The Organization of Petroleum Exporting Countries sets the price of oil in dollars. The dollar is the currency of denomination of half of all international debt securities. More than 60% of the foreign reserves of central banks and governments are in dollars.

The greenback, in other words, is not just America’s currency. It’s the world’s.

But as astonishing as that is, what may be even more astonishing is this: The dollar’s reign is coming to an end.

I believe that over the next 10 years, we’re going to see a profound shift toward a world in which several currencies compete for dominance.

The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar.

The Three Pillars
How could this be? How could the dollar’s longtime most-favored-currency status be in jeopardy?

See the share of global foreign-exchange transactions involving the dollar, and the dollar’s share of official global foreign-exchange reserves.

To understand the dollar’s future, it’s important to understand the dollar’s past—why the dollar became so dominant in the first place. Let me offer three reasons.

First, its allure reflects the singular depth of markets in dollar-denominated debt securities. The sheer scale of those markets allows dealers to offer low bid-ask spreads. The availability of derivative instruments with which to hedge dollar exchange-rate risk is unsurpassed. This makes the dollar the most convenient currency in which to do business for corporations, central banks and governments alike.

Second, there is the fact that the dollar is the world’s safe haven. In crises, investors instinctively flock to it, as they did following the 2008 failure of Lehman Brothers. This tendency reflects the exceptional liquidity of markets in dollar instruments, liquidity being the most precious of all commodities in a crisis. It is a product of the fact that U.S. Treasury securities, the single most important asset bought and sold by international investors, have long had a reputation for stability.

Finally, the dollar benefits from a dearth of alternatives. Other countries that have long enjoyed a reputation for stability, such as Switzerland, or that have recently acquired one, like Australia, are too small for their currencies to account for more than a tiny fraction of international financial transactions.

What’s Changing
But just because this has been true in the past doesn’t guarantee that it will be true in the future. In fact, all three pillars supporting the dollar’s international dominance are eroding.

First, changes in technology are undermining the dollar’s monopoly. Not so long ago, there may have been room in the world for only one true international currency. Given the difficulty of comparing prices in different currencies, it made sense for exporters, importers and bond issuers all to quote their prices and invoice their transactions in dollars, if only to avoid confusing their customers.

Now, however, nearly everyone carries hand-held devices that can be used to compare prices in different currencies in real time. Just as we have learned that in a world of open networks there is room for more than one operating system for personal computers, there is room in the global economic and financial system for more than one international currency.

Second, the dollar is about to have real rivals in the international sphere for the first time in 50 years. There will soon be two viable alternatives, in the form of the euro and China’s yuan.

Americans especially tend to discount the staying power of the euro, but it isn’t going anywhere. Contrary to some predictions, European governments have not abandoned it. Nor will they. They will proceed with long-term deficit reduction, something about which they have shown more resolve than the U.S. And they will issue “e-bonds”—bonds backed by the full faith and credit of euro-area governments as a group—as a step in solving their crisis. This will lay the groundwork for the kind of integrated European bond market needed to create an alternative to U.S. Treasurys as a form in which to hold central-bank reserves.

China, meanwhile, is moving rapidly to internationalize the yuan, also known as the renminbi. The last year has seen a quadrupling of the share of bank deposits in Hong Kong denominated in yuan. Seventy thousand Chinese companies are now doing their cross-border settlements in yuan. Dozens of foreign companies have issued yuan-denominated “dim sum” bonds in Hong Kong. In January the Bank of China began offering yuan-deposit accounts in New York insured by the Federal Deposit Insurance Corp.

Allowing Chinese companies to do cross-border settlements in yuan will free them from having to undertake costly foreign-exchange transactions. They will no longer have to bear the exchange-rate risk created by the fact that their revenues are in dollars but many of their costs are in yuan. Allowing Chinese banks, for their part, to do international transactions in yuan will allow them to grab a bigger slice of the global financial pie.

Admittedly, China has a long way to go in building liquid markets and making its financial instruments attractive to international investors. But doing so is central to Beijing’s economic strategy. Chinese officials have set 2020 as the deadline for transforming Shanghai into a first-class international financial center. We Westerners have underestimated China before. We should not make the same mistake again.

Finally, there is the danger that the dollar’s safe-haven status will be lost. Foreign investors—private and official alike—hold dollars not simply because they are liquid but because they are secure. The U.S. government has a history of honoring its obligations, and it has always had the fiscal capacity to do so.

But now, mainly as a result of the financial crisis, federal debt is approaching 75% of U.S. gross domestic product. Trillion-dollar deficits stretch as far as the eye can see. And as the burden of debt service grows heavier, questions will be asked about whether the U.S. intends to maintain the value of its debts or might resort to inflating them away. Foreign investors will be reluctant to put all their eggs in the dollar basket. At a minimum, the dollar will have to share its safe-haven status with other currencies.

A World More Complicated
How much difference will all this make—to markets, to companies, to households, to governments?

One obvious change will be to the foreign-exchange markets. There will no longer be an automatic jump up in the value of the dollar, and corresponding decline in the value of other major currencies, when financial volatility surges. With the dollar, euro and yuan all trading in liquid markets and all seen as safe havens, there will be movement into all three of them in periods of financial distress. No one currency will rise as strongly as did the dollar following the failure of Lehman Bros. There will be no reason for the rates between them to move sharply, something that would potentially upend investors.

But the impact will extend well beyond the markets. Clearly, the change will make life more complicated for U.S. companies. Until now they have had the convenience of using the same currency—dollars—whether they are paying their workers, importing parts and components, or selling their products to foreign customers. They don’t have to incur the cost of changing foreign-currency earnings into dollars. They don’t have to purchase forward contracts and options to protect against financial losses due to changes in the exchange rate. This will all change in the brave new world that is coming. American companies will have to cope with some of the same exchange-rate risks and exposures as their foreign competitors.

Conversely, life will become easier for European and Chinese banks and companies, which will be able to do more of their international business in their own currencies. The same will be true of companies in other countries that do most of their business with China or Europe. It will be a considerable convenience—and competitive advantage—for them to be able to do that business in yuan or euros rather than having to go through the dollar.

U.S. Impact
In this new monetary world, moreover, the U.S. government will not be able to finance its budget deficits so cheaply, since there will no longer be as big an appetite for U.S. Treasury securities on the part of foreign central banks.

Nor will the U.S. be able to run such large trade and current-account deficits, since financing them will become more expensive. Narrowing the current-account deficit will require exporting more, which will mean making U.S. goods more competitive on foreign markets. That in turn means that the dollar will have to fall on foreign-exchange markets—helping U.S. exporters and hurting those companies that export to the U.S.

My calculations suggest that the dollar will have to fall by roughly 20%. Because the prices of imported goods will rise in the U.S., living standards will be reduced by about 1.5% of GDP—$225 billion in today’s dollars. That is the equivalent to a half-year of normal economic growth. While this is not an economic disaster, Americans will definitely feel it in the wallet.

On the other hand, the next time the U.S. has a real-estate bubble, we won’t have the Chinese helping us blow it.

Dr. Eichengreenis the George C. Pardee and Helen N. Pardee professor of economics and political science at the University of California, Berkeley. His new book is “Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System.” He can be reached at reports@wsj.com

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The corruption of climate science

March 1, 2011

Roy W. Spencer, Ph. D.  (http://www.drroyspencer.com/2011/02/on-the-house-vote-to-defund-the-ipcc/)

Politicians formed the IPCC over 20 years ago with an endgame in mind: to regulate CO2 emissions. I know, because I witnessed some of the behind-the-scenes planning. It is not a scientific organization. It was organized to use the government-funded scientific research establishment to achieve policy goals.

Now, that’s not necessarily a bad thing. But when they are portrayed as representing unbiased science, that IS a bad thing. If anthropogenic global warming – and ocean `acidification’ (now there’s a biased and totally incorrect term) – ends up being largely a false alarm, those who have run the IPCC are out of a job. More on that later.

I don’t want to be misunderstood on this. IF we are destroying the planet with our fossil fuel burning, then something SHOULD be done about it.

But the climate science community has allowed itself to be used on this issue, and as a result, politicians, activists, and the media have successfully portrayed the biased science as settled. They apparently do not realize that `settled science’ is an oxymoron.

The most vocal climate scientists defending the IPCC have lost their objectivity. Yes, they have what I consider to be a plausible theory. But they actively suppress evidence to the contrary, for instance attempts to study natural explanations for recent warming.

That’s one reason why the public was so outraged about the ClimateGate e-mails. ClimateGate doesn’t prove their science is wrong.but it does reveal their bias. Science progresses by investigating alternative explanations for things. Long ago, the IPCC all but abandoned that search.

Oh, they have noted (correctly I believe) that a change in the total output of the sun is not to blame. But there are SO many other possibilities, and all they do is dismiss those possibilities out of hand. They have a theory – more CO2 is to blame – and they religiously stick to it. It guides all of the research they do.

The climate models are indeed great accomplishments. It’s what they are being used for that is suspect. A total of 23 models cover a wide range of warming estimates for our future, and yet there is no way to test them for what they are being used for! climate change predictions.

Virtually all of the models produce decadal time scale warming that exceeds what we have observed in the last 15 years. That fact has been known for years, but its publication in the peer reviewed literature continues to be blocked.

My theory is that a natural change in cloud cover has caused most of the recent warming. Temperature proxy data from around the world suggests that just about every century in the last 2,000 years has experienced warming or cooling. Why should today’s warmth be manmade, when the Medieval Warm Period was not? Just because we finally have one potential explanation – CO2?

This only shows how LITTLE we understand about climate change.not how MUCH we know.

Why would scientists allow themselves to be used in this way? When I have pressed them on the science over the years, they all retreat to the position that getting away from fossil fuels is the `right thing to do anyway’.

In other words, they have let their worldviews, their politics, their economic understanding (or lack thereof) affect their scientific judgment. I am ashamed for our scientific discipline and embarrassed by their behavior.

Is it any wonder that scientists have such a bad reputation among the taxpayers who pay them to play in their ivory tower sandboxes? They can make gloom and doom predictions all day long of events far in the future without ever having to suffer any consequences of being wrong.

The perpetual supply of climate change research money also biases them. Everyone in my business knows that as long as manmade climate change remains a serious threat, the money will continue to flow, and climate programs will continue to grow.

Now, I do agree the supply of fossil fuels is not endless. But we will never actually “run out”.we will just slowly stop trying to extract them as they become increasingly scarce (translation – more expensive). That’s the way the world works.

People who claim we are going to wake up one morning and our fossil fuels will be gone are either pandering, or stupid, or both.

But how you transition from fossil fuels to other sources of energy makes all the difference in the world. Making our most abundant and affordable sources of energy artificially more expensive with laws and regulations will end up killing millions of people.

And that’s why I speak out. Poverty kills. Those who argue otherwise from their positions of fossil-fueled health and wealth are like spoiled children.

The truly objective scientist should be asking whether MORE, not less, atmospheric carbon dioxide is what we should be trying to achieve. There is more published real-world evidence for the benefits of more carbon dioxide, than for any damage caused by it. The benefits have been measured, and are real-world. The risks still remain theoretical.

Carbon dioxide is necessary for life on Earth. That it has been so successfully demonized with so little hard evidence is truly a testament to the scientific illiteracy of modern society. If humans were destroying CO2 – rather than creating more – imagine the outrage there would be at THAT!

I would love the opportunity to cross examine these (natural) climate change deniers in a court of law. They have gotten away with too much, for too long. Might they be right? Sure. But the public has no idea how flimsy – and circumstantial – their evidence is.

In the end, I doubt the IPCC will ever be defunded. Last night’s vote in the House is just a warning shot across the bow. But unless the IPCC starts to change its ways, it runs the risk of being totally marginalized. It has almost reached that point, anyway.

And maybe the IPCC leadership doesn’t really care if its pronouncements are ignored, as long as they can jet around the world to meet in exotic destinations and plan where their next meeting should be held. I hear it’s a pretty good gig.

 

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Sputnik State of the Union

February 3, 2011

From Geoffrey Styles’ blog http://energyoutlook.blogspot.com/

Wednesday, January 26, 2011

Energy didn’t feature as prominently in last night’s State of the Union Address as it has in some years, including last year’s speech. Rather than making it a primary focus area, the President seemed to mention it more as an example of his broader innovation and competitiveness agenda. That’s probably a good thing, because the administration’s persistence in pitting conventional energy against renewables reflects the muddle in which US energy policy remains. We’re desperately worried that China is getting ahead of us in renewable energy, yet we don’t seem to notice that China is hardly treating oil and gas as yesterday’s energy. I suspect that from China’s perspective, their focus is not especially on renewable energy or clean energy but on cheap energy, which is what their economy needs to grow. I wouldn’t think we’re so different in that regard.

I won’t waste time dissecting the President’s suggestion to strip the oil & gas industry of its tax benefits in order to fund a new or expanded clean energy innovation effort. If the administration couldn’t make that happen when its party dominated both houses of Congress by large majorities, then this idea is simply dead on arrival in an era of divided government. The best way to address those subsidies, along with the much larger per-barrel subsidy for ethanol, is through the kind of tax reform that would make all US industries more competitive globally. So I was pleased to hear the President suggest simplifying the tax code and reducing the corporate income tax.

Innovation and tax reform will indeed be crucial if the US wants to be a leader in clean energy technology, not just as the favored beneficiary of today’s version of our periodic debate over industrial policy–picking winners–but as one part of a more robust and competitive US manufacturing sector. However, it’s myopic to compare ourselves to China on infrastructure and clean energy innovation while ignoring China’s full-court press to meet its rapidly growing demand for oil and gas. China doesn’t have an offshore drilling moratorium or “permitorium”; instead it has focused on offshore drilling as a primary means for expanding its domestic production and limiting its oil imports, which a few years ago eclipsed those of Japan as the world’s second largest, behind our own. Chinese companies are investing in oil & gas projects, joint ventures and acquisitions all over the world, because China recognizes that oil wasn’t just the dominant fuel of the 20th century; it remains a key energy source in the 21st. And for those worried about China’s lead in renewable energy, exemplified by the news that its wind power capacity surpassed that of the US last year, I recommend Michael Levi’s article in Foreign Policy.

On a more positive note, President Obama seemed to signal his support for moving the debate on a national renewable energy standard toward encompassing all clean energy. His remarks suggested that this would include not just nuclear power–by far our largest source of low-emission energy today–but also natural gas and clean coal. With those inclusions, the goal he suggested of generating 80% of our electricity from “clean energy sources” by 2035 could be the most achievable energy goal his administration has put forward since taking office. With coal’s share of electricity generation currently at 45%, it would require increasing the contribution from nuclear, renewables and natural gas by just under half–or less with some help from efficiency and conservation. Not easy, but not impossible, either, as long as we build enough new nuclear power plants to more than replace the ones that will likely have been retired by then.

Whether or not this is truly “our generation’s Sputnik moment”, the speech’s recurring theme exhorting us to “win the future” was perhaps a bit too reminiscent of another presidential speech centered on a different kind of “WIN”. Ensuring that this initiative doesn’t share the fate of that earlier one in the Ford Administration might just depend on making sure that in an environment of tightening purse strings, the government’s investments in new energy are focused on making clean energy cheap enough to compete without unsustainable subsidies. In the meantime, while we’re waiting for that effort to bear fruit, it’s worth recalling that America’s conventional energy industry is still one sector in which we don’t have to catch up with anyone else, unless we deliberately set out to hamstring it.

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The “Green” Treason

January 28, 2011

More on REEs.  Mr Wilson has it mostly right.  Reopening of Mountain Pass is on a “fast track” (See http://www.google.com/finance?client=ig&q=NYSE:MCP) and could be in production in less time than is presented in his piece.  Nevertheless, well intentioned but misdirected regulatory oversight could hamstring the mine/mill restart.  Any true push towards “clean energy” requires increasing uses of REEs and why should the US be held hostage to non-domestic supplies.

By Bill Wilson –

It’s the same old story: The U.S. has abundant natural resources, but refuses to extract and produce them, as usual, because of environmental restrictions and regulatory costs. In the meantime, we are exporting our energy security, job security, and now, national security to China and other emerging markets.
Since 2002, the U.S. has not mined any rare earth elements (REEs) — today used in U.S. smart bombs, silent helicopter blades, night vision, missiles, and tank guns, as well as computers, cell phones, DVD players, and other civilian technologies.
These metals are not even that rare. The nation as a whole has about 13 million metric tons in reserves according to the U.S. Geological Survey. We could make them ourselves. But we don’t.
Leaving that aside for a moment, a modern military, and many common conveniences we today take for granted, would not be possible without these metals. They are essential.
Which is why China has rapidly developed its rare earth element mining sector, with over 55 million metric tons in reserves and 130,000 metric tons of annual production. It now controls over 97 percent of REE mining and refinement in the entire world. China is largely able to do so because it holds about 36 percent of global reserves, has lower labor costs, and because it largely ignores the environmental impact of the REEs. Finally, it lacks competition since the U.S. dropped out of the market.
With the rise of China’s REE near-monopoly, concerns have emerged that the communist dictatorship has too much control over these metals that have become critical to defense and other high technology needs.
So, how could China, an adversary, gain so much control over such a strategically critical industry? Call it the green treason.
The problem is that nearly all of the nation’s production of REEs was done by a single company, Molycorp, at a single mine in California, Mountain Pass. From 1965 to 1985, Molycorp was the world’s leader in this industry, but because of a series of main wastewater pipeline spills from the mine, state and federal environmental regulators all but shut it down.
As reported by the Washington Independent, “Mining at Mountain Pass stopped soon after the spills came to light. Industry sources say Union Oil of California, which bought Molycorp in 1977, couldn’t afford to comply with environmental rules and felt that it couldn’t compete with China.” In other words, the environmental regulatory costs made it cost-prohibitive to produce the metals at a competitive price versus the Chinese.
But, rather than help the industry out with the regulatory problems, the government acted punitively against Molycorp. The regulators were indifferent if domestic production was completely turned off. It made sure production of REEs in the U.S. was severely hindered, even though shortages would disrupt the defense supply chain.
Just like that, a few faceless bureaucrats shut down an entire domestic industry — essential to national security — just as the Chinese overseas competitor was emerging. And it was all in the name of radical environmentalism.
Fears of Chinese manipulation in the market have subsequently been confirmed in July when China once again reduced its export quotas for these metals. Since 2005, it has reduced these quotas from over 65,000 metric tons to just over 30,000, according to the Department of Energy. This has caused prices of the metals to skyrocket.
Already, the scarcity of the REEs is having an impact on U.S. defense capabilities. According to a Governmental Accountability Office (GAO) summary, “A 2009 National Defense Stockpile configuration report identified lanthanum, cerium, europium, and gadolinium as having already caused some kind of weapon system production delay and recommended further study to determine the severity of the delays.” Which, unless the U.S. ramps up production, will only get worse as China tightens the entire world’s supply of REEs.
The GAO report notes the decline of the nation’s capabilities in this area: “The United States previously performed all stages of the rare earth material supply chain, but now most rare earth materials processing is performed in China, giving it a dominant position that could affect worldwide supply and prices.” The Department of Defense is undergoing several other evaluations to determine its dependency on these metals, but we already know that it is high.
So, what can be done to ramp up new domestic production? Right now, the U.S. imports about 10,000 metric tons of these metals, or 7.6 percent of global production, according to the USGS.  Unfortunately, the Mountain Pass mine has been gutted. According to the GAO, it “currently lacks the manufacturing assets and facilities to process the rare earth ore into finished components, such as permanent magnets.” It also lacks “substantial amounts of heavy rare earth elements” used in industry and defense. Nonetheless, Molycorp intends to begin mining again this year, and in July offered a successful $393.75 million IPO to rebuild its capabilities.
According to Dr. Madan Singh, director of the Department of Mines and Mineral Resources (DMMR) in Arizona, it could take up to two years to get the mine back online.
But to get the heavy rare earths, we’ll also need to mine in Idaho, Montana, Colorado, Missouri, Utah, and Wyoming. Again, the GAO report is not comforting: “Once a company has secured the necessary capital to start a mine, government and industry officials said it can take from 7 to 15 years to bring a property fully online, largely due to the time it takes to comply with multiple state and federal regulations [emphasis added].”
So, barring regulatory waivers being granted to companies to begin extraction immediately, it won’t be until 2020 at least before the nation’s REE capabilities can be fully reconstituted. In the meantime, it is likely that China will continue to reduce its export quotas, ratchet up prices, and hoard the REEs for its own defense stockpiles.
It’s bad enough that environmental radicalism has made the nation more dependent on foreign sources of fuel, and has exported hundreds of thousands of jobs. Now, it is harming our security as a nation.
It is up to Congress to urgently enact legislation that will cut through the red tape and help this domestic industry get its feet back on the ground. We have to make sure we’re not dependent on a hostile nation like China or a single mine in California in order to maintain first-rate defense capabilities. And our security must not be held hostage to onerous environmental regulations. This green treason must be stopped.
Bill Wilson is the President of Americans for Limited Government.

Read more at NetRightDaily.com: http://netrightdaily.com/2011/01/the-green-treason/#ixzz1CLMlLgto

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Geological Society of London Position Statement – Climate Change

January 26, 2011

The following is a very good summary discussion of climate change from a geological (historical geology ) perspective.  I think it is one of the best I have read that presents how recent climate issues compare to geological climate changes.  My only criticism is that after presenting fact-based information of past climate swings, they interject an opinion statement at the end echoing what I deduce is a form of the “precautionary principal” (that and focusing solely on anthropogenic CO2 emissions!).  That hoary “old-wives-tale” has justly been exposed as complete nonsense.

The Geological Society has prepared a position statement on climate change, focusing specifically on the geological evidence. A drafting group was convened, with the aim of producing a clear and concise summation, accessible to a general audience, of the scientific certainties and uncertainties; as well as including references to further sources of information.

The drafting group met on 18 February and 2 July. The resulting document has been discussed, revised and agreed by the External Relations Committee, and by Council. If you have any questions about the document, please contact sarah.day@geolsoc.org.uk.

A statement by the Geological Society of London

November 2010 • Download a pdf of the statement (.pdf79 Kb)

Climate change is a defining issue for our time. The geological record contains abundant evidence of the ways in which Earth’s climate has changed in the past. That evidence is highly relevant to understanding how it may change in the future. The Council of the Society is issuing this statement as part of the Society’s work “to promote all forms of education, awareness and understanding of the Earth and their practical applications for the benefit of the public globally”. The statement is intended for non-specialists and Fellows of the Society. It is based on analysis of geological evidence, and not on analysis of recent temperature or satellite data, or climate model projections. It contains references to support key statements, indicated by superscript numbers, and a reading list for those who wish to explore the subject further.

What is climate change, and how do geologists know about it?

The Earth’s temperature and weather patterns change naturally over time scales ranging from decades, to hundreds of thousands, to millions of years1. The climate is the statistical average of the weather taken over a long period, typically 30 years. It is never static, but subject to constant disturbances, sometimes minor in nature and effect, but at other times much larger. In some cases these changes are gradual and in others abrupt.

Evidence for climate change is preserved in a wide range of geological settings, including marine and lake sediments, ice sheets, fossil corals, stalagmites and fossil tree rings. Advances in field observation, laboratory techniques and numerical modelling allow geoscientists to show, with increasing confidence, how and why climate has changed in the past. For example, cores drilled through the ice sheets yield a record of polar temperatures and atmospheric composition ranging back to 120,000 years in Greenland and 800,000 years in Antarctica. Oceanic sediments preserve a record reaching back tens of millions of years, and older sedimentary rocks extend the record to hundreds of millions of years. This vital baseline of knowledge about the past provides the context for estimating likely changes in the future.

What are the grounds for concern?

The last century has seen a rapidly growing global population and much more intensive use of resources, leading to greatly increased emissions of gases, such as carbon dioxide and methane, from the burning of fossil fuels (oil, gas and coal), and from agriculture, cement production and deforestation. Evidence from the geological record is consistent with the physics that shows that adding large amounts of carbon dioxide to the atmosphere warms the world and may lead to: higher sea levels and flooding of low-lying coasts; greatly changed patterns of rainfall2; increased acidity of the oceans 3,4,5,6; and decreased oxygen levels in seawater7,8,9.

There is now widespread concern that the Earth’s climate will warm further, not only because of the lingering effects of the added carbon already in the system, but also because of further additions as human population continues to grow. Life on Earth has survived large climate changes in the past, but extinctions and major redistribution of species have been associated with many of them. When the human population was small and nomadic, a rise in sea level of a few metres would have had very little effect on Homo sapiens. With the current and growing global population, much of which is concentrated in coastal cities, such a rise in sea level would have a drastic effect on our complex society, especially if the climate were to change as suddenly as it has at times in the past. Equally, it seems likely that as warming continues some areas may experience less precipitation leading to drought. With both rising seas and increasing drought, pressure for human migration could result on a large scale.

When and how did today’s climate become established?

The Earth’s climate has been gradually cooling for most of the last 50 million years. At the beginning of that cooling (in the early Eocene), the global average temperature was about 6-7 ºC warmer than now10,11. About 34 million years ago, at the end of the Eocene, ice caps coalesced to form a continental ice sheet on Antarctica12,13. In the northern hemisphere, as global cooling continued, local ice caps and mountain glaciers gave way to large ice sheets around 2.6 million years ago14.

Over the past 2.6 million years (the Pleistocene and Holocene), the Earth’s climate has been on average cooler than today, and often much colder. That period is known as the ‘Ice Age’, a series of glacial episodes separated by short warm ‘interglacial’ periods that lasted between 10,000-30,000 years15,16. We are currently living through one of these interglacial periods. The present warm period (known as the Holocene) became established only 11,500 years ago, since then our climate has been relatively stable. Although we currently lack the large Northern Hemisphere ice sheets of the Pleistocene, there are of course still large ice sheets on Greenland and Antarctica1.

What drives climate change?

The Sun warms the Earth, heating the tropics most and the poles least. Seasons come and go as the Earth orbits the Sun on its tilted axis. Many factors, interacting on a variety of time scales, drive climate change by altering the amount of the Sun’s heat retained at the Earth’s surface and the distribution of that heat around the planet. Over millions of years the continents move, ocean basins open and close, and mountains rise and fall. All of these changes affect the circulation of the oceans and of the atmosphere. Major volcanic eruptions eject gas and dust high into the atmosphere, causing temporary cooling. Changes in the abundance in the atmosphere of gases such as water vapour, carbon dioxide and methane affect climate through the Greenhouse Effect – described below.

As well as the long-term cooling trend, evidence from ice and sediment cores reveal cycles of climate change tens of thousands to hundreds of thousands of years long. These can be related to small but predictable changes in the Earth’s orbit and in the tilt of the Earth’s axis. Those predictable changes set the pace for the glacial-interglacial cycles of the ice age of the past 2.6 million years17. In addition, the heat emitted by the Sun varies with time. Most notably, the 11-year sunspot cycle causes the Earth to warm very slightly when there are more sunspots and cool very slightly when there are few. Complex patterns of atmospheric and oceanic circulation cause the El Niño events and related climatic oscillations on the scale of a few years1,18.

What is the Greenhouse Effect?

The Greenhouse Effect arises because certain gases (the so-called greenhouse gases) in the atmosphere absorb the long wavelength infrared radiation emitted by the Earth’s surface and re-radiate it, so warming the atmosphere. This natural effect keeps our atmosphere some 30ºC warmer than it would be without those gases. Increasing the concentration of such gases will increase the effect (i.e. warm the atmosphere more)19.

What effect do natural cycles of climate change have on the planet?

Global sea level is very sensitive to changes in global temperatures. Ice sheets grow when the Earth cools and melt when it warms. Warming also heats the ocean, causing the water to expand and the sea level to rise. When ice sheets were at a maximum during the Pleistocene, world sea level fell to at least 120 m below where it stands today. Relatively small increases in global temperature in the past have led to sea level rises of several metres. During parts of the previous interglacial period, when polar temperatures reached 3-5°C above today’s20, global sea levels were higher than today’s by around 4-9m21. Global patterns of rainfall during glacial times were very different from today.

Has sudden climate change occurred before?

Yes. About 55 million years ago, at the end of the Paleocene, there was a sudden warming event in which temperatures rose by about 6ºC globally and by 10-20ºC at the poles22. Carbon isotopic data show that this warming event (called by some the Paleocene-Eocene Thermal Maximum, or PETM) was accompanied by a major release of 1500-2000 billion tonnes or more of carbon into the ocean and atmosphere. This injection of carbon may have come mainly from the breakdown of methane hydrates beneath the deep sea floor10, perhaps triggered by volcanic activity superimposed on an underlying gradual global warming trend that peaked some 50 million years ago in the early Eocene. CO2 levels were already high at the time, but the additional CO2 injected into the atmosphere and ocean made the ocean even warmer, less well oxygenated and more acidic, and was accompanied by the extinction of many species on the deep sea floor. Similar sudden warming events are known from the more distant past, for example at around 120 and 183 million years ago23,24. In all of these events it took the Earth’s climate around 100,000 years or more to recover, showing that a CO2 release of such magnitude may affect the Earth’s climate for that length of time25.

Are there more recent examples of rapid climate change?

Abrupt shifts in climate can occur over much shorter timescales. Greenland ice cores record that during the last glacial stage (100,000 – 11,500 years ago) the temperature there alternately warmed and cooled several times by more than 10ºC 26,27. This was accompanied by major climate change around the northern hemisphere, felt particularly strongly in the North Atlantic region. Each warm and cold episode took just a few decades to develop and lasted for a few hundred years. The climate system in those glacial times was clearly unstable and liable to switch rapidly with little warning between two contrasting states. These changes werealmost certainly caused by changes in the way the oceans transported heat between the hemispheres.

How did levels of CO2 in the atmosphere change during the ice age?

The atmosphere of the past 800,000 years can be sampled from air bubbles trapped in Antarctic ice cores. The concentrations of CO2 and other gases in these bubbles follow closely the pattern of rising and falling temperature between glacial and interglacial periods. For example CO2 levels varied from an average of 180 ppm (parts per million) in glacial maxima to around 280 ppm during interglacials. During warmings from glacial to interglacial, temperature and CO2 rose together for several thousand years, although the best estimate from the end of the last glacial is that the temperature probably started to rise a few centuries before the CO2 showed any reaction. Palaeoclimatologists think that initial warming driven by changes in the Earth’s orbit and axial tilt eventually caused CO2 to be released from the warming ocean and thus, via positive feedback, to reinforce the temperature rise already in train28. Additional positive feedback reinforcing the temperature rise would have come from increased water vapour evaporated from the warmer ocean, water being another greenhouse gas, along with a decrease in sea ice, and eventually in the size of the northern hemisphere ice sheets, resulting in less reflection of solar energy back into space.

How has carbon dioxide (CO2) in the atmosphere changed over the longer term?

Estimating past levels of CO2 in the atmosphere for periods older than those sampled by ice cores is difficult and is the subject of continuing research. Most estimates agree that there was a significant decrease of CO2 in the atmosphere from more than1000 ppm at 50 million years ago (during the Eocene) to the range recorded in the ice cores of the past 800,000 years22. This decrease in CO2 was probably one of the main causes of the cooling that led to the formation of the great ice sheets on Antarctica29. Changes in ocean circulation around Antarctica may also have also played a role in the timing and extent of formation of those ice sheets30,31,32.

How has carbon dioxide in the atmosphere changed in recent times?

Atmospheric CO2 is currently at a level of 390 ppm. It has increased by one third in the last 200 years33. One half of that increase has happened in the last 30 years. This level and rate of increase are unprecedented when compared with the range of CO2 in air bubbles locked in the ice cores (170-300 ppm). There is some evidence that the rate of increase in CO2 in the atmosphere during the abrupt global warming 183 million years ago (Early Jurassic), and perhaps also 55 million years ago (the PETM), was broadly similar to today’s rate34.

When was CO2 last at today’s level, and what was the world like then?

The most recent estimates35 suggest that at times between 5.2 and 2.6 million years ago (during the Pliocene), the carbon dioxide concentrations in the atmosphere reached between 330 and 400 ppm. During those periods, global temperatures were 2-3°C higher than now, and sea levels were higher than now by 10 – 25 metres, implying that global ice volume was much less than today36. There were large fluctuations in ice cover on Greenland and West Antarctica during the Pliocene, and during the warm intervals those areas were probably largely free of ice37,38,39. Some ice may also have been lost from parts of East Antarctica during the warm intervals40. Coniferous forests replaced tundra in the high latitudes of the Northern Hemisphere41, and the Arctic Ocean may have been seasonally free of sea-ice42.

When global temperature changed, did the same change in temperature happen everywhere?

No. During the glacial periods in the Pleistocene the drop in temperature was much greater in polar regions than in the tropics. There is good evidence that the difference between polar and tropical temperatures in the warmer climate of the Eocene to Pliocene was smaller than it is today. The ice core record also shows differences between Greenland and Antarctica in the size and details of the temperature history in the two places, reflecting slow oceanic heat transport between the two poles16.

In conclusion – what does the geological record tell us about the potential effect of continued emissions of CO2?

Over at least the last 200 million years the fossil and sedimentary record shows that the Earth has undergone many fluctuations in climate, from warmer than the present climate to much colder, on many different timescales. Several warming events can be associated with increases in the ‘greenhouse gas’ CO2. There is evidence for sudden major injections of carbon to the atmosphere occurring at 55, 120 and 183 million years ago, perhaps from the sudden breakdown of methane hydrates beneath the seabed. At those times the associated warming would have increased the evaporation of water vapour from the ocean, making CO2 the trigger rather than the sole agent for change. During the Ice Age of the past two and a half million years or so, periodic warming of the Earth through changes in its position in relation to the sun also heated the oceans, releasing both CO2 and water vapour, which amplified the ongoing warming into warm interglacial periods. That process was magnified by the melting of sea ice and land ice, darkening the Earth’s surface and reducing the reflection of the Sun’s energy back into space.

While these past climatic changes can be related to geological events, it is not possible to relate the Earth’s warming since 1970 to anything recognisable as having a geological cause (such as volcanic activity, continental displacement, or changes in the energy received from the sun)43. This recent warming is accompanied by an increase in CO2 and a decrease in Arctic sea ice, both of which – based on physical theory and geological analogues – would be expected to warm the climate44. Various lines of evidence, reviewed by the Intergovernmental Panel on Climate Change clearly show that a large part of the modern increase in CO2 is the result of burning fossil fuels, with some contribution from cement manufacture and some from deforestation44. In total, human activities have emitted over 500 billion tonnes of carbon (hence over 1850 billion tons of CO2) to the atmosphere since around 1750, some 65% of that being from the burning of fossil fuels18,45,46,47,48. Some of the carbon input to the atmosphere comes from volcanoes49,50, but carbon from that source is equivalent to only about 1% of what human activities add annually and is not contributing to a net increase.

In the coming centuries, continued emissions of carbon from burning oil, gas and coal at close to or higher than today’s levels, and from related human activities, could increase the total to close to the amounts added during the 55 million year warming event – some 1500 to 2000 billion tonnes. Further contributions from ‘natural’ sources (wetlands, tundra, methane hydrates, etc.) may come as the Earth warms22. The geological evidence from the 55 million year event and from earlier warming episodes suggests that such an addition is likely to raise average global temperatures by at least 5-6ºC, and possibly more, and that recovery of the Earth’s climate in the absence of any mitigation measures could take 100,000 years or more. Numerical models of the climate system support such an interpretation44. In the light of the evidence presented here it is reasonable to conclude that emitting further large amounts of CO2 into the atmosphere over time is likely to be unwise, uncomfortable though that fact may be.
Acknowledgements
Members of the working group:

Dr C Summerhayes Prof J Lowe
Chairman and GSL Vice-President Department of Geography,
Scott Polar Research Institute, Royal Holloway University of London
Cambridge University

Prof J Cann FRS Prof N McCave
School of Earth and Environment, Department of Earth Sciences
Leeds University University of Cambridge

Dr A Cohen Prof P Pearson
Department of Earth and Environmental School of Earth and Ocean Sciences,
Sciences, The Open University Cardiff University

Prof J Francis Dr E Wolff FRS
School of Earth and Environment, British Antarctic Survey,
Leeds University Cambridge

Dr A Haywood
School of Earth and Environment, Ms S Day
Leeds University Earth Science Communicator, GSL

Dr R Larter Mr E Nickless
British Antarctic Survey, Cambridge Executive Secretary, GSL

Background Reading

For those wishing to read further, the following provide an accessible overview of the topic:

Alley, R.B., 2000, The Two-Mile Time Machine: Ice Cores, Abrupt Climate Change, and Our Future. Princeton University Press.

Bell, M. and Walker, M.J.C, 2005, Late Quaternary Environmental Change: Physical and Human Perspectives, (2nd edition). Pearson/Prentice Hall.

Dansgaard, W., 2005, Frozen Annals: Greenland Ice Sheet Research. Neils Bohr Institute, Copenhagen. The book can be downloaded for free fromhttp://www.iceandclimate.nbi.ku.dk/publications/FrozenAnnals.pdf/

Houghton, J., 2009, Global Warming: The Complete Briefing, (4th edition). Cambridge University Press.

Imbrie, J. and Imbrie, K.P, 1979, Ice Ages: Solving the Mystery. MacMillan, London.

IPCC, Climate Change 2007: The Physical Science Basis. Working Group I Contribution to the Report of the Intergovernmental Panel on Climate Change. Cambridge University Press. Available online at http://www.ipcc.ch/publications_and_data/publications_and_data_reports.shtml

Lamb, H.H., 1995, Climate, History and the Modern World, (2nd edition). Routledge, London.

Lovell, B., 2010, Challenged by Carbon: The Oil Industry and Climate Change. Cambridge University Press.

Mayewski, P.A. and White, F., 2002, The Ice Chronicles: The Quest to Understand Global Climate Change. University of New Hampshire/University Press of New England.

Ruddiman, W.F., 2005, Plows, Plagues and Petroleum: How Humans Took Control of Climate. Princeton University Press.
For the more intrepid:
Alverson, K.D., Bradley, R.S. and Pedersen, T.F., (eds.) 2003, Paleoclimate, Global Change and the Future. The IGBP Series, Springer-Verlag, New York.

Burroughs, W.J., 2007, Climate Change: A Multidisciplinary Approach, (2nd edition). Cambridge University Press.

Cronin, T.M., 2009, Paleoclimates: Understanding Climate Change Past and Present. Columbia University Press.

Gibbard, P. and Pillans, B., (eds.), 2008, Special Issue on the Quaternary period/system. Episodes (IUGS Journal of International Geoscience), vol. 31, No.2., (a collection of papers summarising the history of Earth’s environmental and climatic oscillations during the last 2.7 million years).

Langway, Jr., C., 2008, The History of Early Polar Ice-Core records. U.S. Army Corps of Engineers, Research and Development Center. Available online at:
http://www.nicl-smo.sr.unh.edu/Langway_2008_Early_polar_ice_cores.pdf

Lowe, J.J. and Walker, M.J.C., 1997, Reconstructing Quaternary Environments, (2nd edition). Addison Wesley Longman Ltd.

Milne, G.A., Gehrels, W.R., Hughes, C.W. and Tamisiea, M.E., 2009, Identifying the causes of sea-level change. Nature Geoscience.

Ruddiman, W.F., 2001, Earth’s Climate: Past and Future. W.H. Freeman.

A collection of articles on various aspects of Rapid Climate Change is available from the proceedings of the National Academy of Sciences web site at:http://www.pnas.org/cgi/collection/rapid_climate

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