A power crisis that erupted in California in 2000 threw the state into disarray, created a vast economic and political firestorm, and shook the entire nation’s electric power system. The brownouts and economic mayhem that rolled over the Golden State would have been expected in a struggling developing nation, but not in the state that was home to Disneyland, and that had given birth to Silicon Valley, the very embodiment of technology and innovation. After all, California was, if an independent country, the seventh-largest economy in the world.
What unfolded in California graphically exposed the dangers of misdesigning a regulatory system. It was also a case study of how short-term politics can overwhelm the needs of sound policy.
According to popular lore, the crisis was manufactured and manipulated by cynical and wily out-of-state power traders, the worst being Enron, the Houston-based natural gas and energy company. Its traders and those of other companies were accused of creating and then exploiting the crisis with a host of complex strategies. Some traders certainly did blatantly, and even illegally, exploit the system and thus accentuated its flaws. Yet that skims over the fundamental cause of the crisis. For, by then, the system was already broken.
The California crisis resulted from three fundamental factors: The first was an unworkable form of partial deregulation that explicitly rejected the normal power-market stabilizers that could have helped avoid or at least blunt the crisis but instead built instability into the new system. The second was a sharp, adverse turn in supply and demand. The third was a political culture that wanted the benefits of increased electric power but without the costs.
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[California] was in an uproar; its economy, disrupted. In April 2001, after listening to Governor Davis threaten the utilities with expropriation, the management of PG&E, the state’s largest utility, serving Northern California, decided that it had no choice but to file for bankruptcy protection. San Diego Gas & Electric teetered on the edge of bankruptcy. The management of one of the state’s major utilities hurriedly put together an analysis of urban disruption to try to prepare for the distress and social breakdown—and potential mayhem—that could result if the blackouts really got out of hand. They foresaw the possibility of riots, looting, and rampant vandalism, and feared for the physical safety of California’s citizens.
But Governor Gray Davis was still dead set against the one thing that would have immediately ameliorated the situation — letting retail prices rise. Instead he had the state step in and negotiate, of all things, long-term contracts, as far out as twenty years. Here the state demonstrated a stunning lack of commercial acumen—buying at the top of the market, committing $40 billion for electricity that would probably be worth only $20 billion in the years to come. With this the state transferred the financial crisis of the utilities to its own books, transforming California’s projected budget surplus of $8 billion into a multibillion-dollar state deficit.
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a question troubled Saussure as he traipsed through the Swiss mountains. Why, he asked, did not all the earth’s heat escape into space at night? To try to find an answer, he built in the 1770s what became known as his “hot box”—sort of mini greenhouse. The sides and bottom were covered with darkened cork. The top was glass. As heat and light flowed into the box, it was trapped, and the temperature inside would rise. Perhaps, he mused, the atmosphere did the same thing as the glass. Perhaps the atmosphere was a lid over the earth’s surface, a giant greenhouse, letting the light in but retaining some of the heat, keeping the earth warm even when the sun had disappeared from the sky.
The French mathematician Joseph Fourier — a friend of Napoléon’s and a sometime governor of Egypt — was fascinated by the experiments of Saussure, whom he admiringly described as “the celebrated voyager.” Fourier, who devoted much research to heat flows, was convinced that Saussure was right. The atmosphere, Fourier thought, had to function as some sort of top or lid, retaining heat. Otherwise, the earth’s temperature at night would be well below freezing.
But how to prove it? In the 1820s Fourier set out to do the mathematics. But the work was daunting and extremely inexact, and his inability to work out the calculations left him deeply frustrated. “It is difficult to know up to what point the atmosphere influences the average temperature of the globe,” he lamented, for he could find “no regular mathematical theory” to explain it. With that, he figuratively threw up his hands, leaving the problem to others.
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In 1938 an amateur meteorologist stood up to deliver a paper to the Royal Meteorological Society in London. Guy Stewart Callendar was not a professional scientist, but rather a steam engineer. The paper he was about to present would restate Arrhenius’s argument with new documentation. Callendar began by admitting that the CO2 theory had had a “chequered history.” But not for him. He was obsessed with carbon dioxide and its impact on climate; he spent all his spare time collecting and analyzing data on weather patterns and carbon emissions. Amateur though he was, he had more systematically and fully collected the data than anyone else. His work bore out Arrhenius. The results seemed to show that CO2 was indeed increasing in the atmosphere and that would lead to a change in the climate—more specifically, global warming. 13
While Callendar found this obsessively interesting, he, like Arrhenius, was hardly worried. He too thought this would make for a better, more pleasant world—“beneficial to mankind”—providing, among other things, a boon for agriculture. And there was a great bonus. “The return of the deadly glaciers should be delayed indefinitely.”
But Callendar was an amateur, and the professionals in attendance that night at the Royal Meteorological Society did not take him very seriously. After all, he was a steam engineer.
Yet what Callendar described — the role of CO2 in climate change — eventually became known as the Callendar Effect. “His claims rescued the idea of global warming from obscurity and thrust it into the marketplace of ideas,” wrote one historian. But it was only a temporary recovery. For over a number of years thereafter the idea was roundly dismissed. In 1951 a prominent climatologist observed that the CO2 theory of climate change “was never widely accepted and was abandoned.” No one seemed to take it very seriously.
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