1998

Cooler Heads / Buenos Aires

by William Yeatman on November 9, 1998

in Kyoto Negotiations

Produced at the UN global warming conference by the Competitive Enterprise Institute.

The US Congressional delegation today declared the Kyoto Protocol “dead on arrival.” Members of the US Congress expressed hearty disapproval of President Clintons apparent decision to sign the Kyoto Protocol. They also called on Clinton to submit the Protocol to the Senate for ratification as soon as it is signed.

Rep. James Sensenbrenner (R-WI), Chairman of the House Science Committee and head of the US Congressional delegation to COP-4, made two key points. First, he contradicted Undersecretary of State Stuart Eizenstats assertion that President Clintons signing of the Kyoto Protocol, if it occurs, would have only “symbolic” significance. President Clintons signature would carry a great deal of expectation of future US involvement in energy suppression efforts.

Secondly, Chairman Sensenbrenner explained that the Clinton-Gore administration has negotiated itself into a corner with no exit. The US Senates 1997 Byrd-Hagel resolution, passed by a 95-0 margin, preemptively nixes any protocol that does not include emission restrictions for developing countries “within the same compliance period.” The Protocol conspicuously lacks this feature. Without amending the treaty, the Senate will not ratify, but without ratification of the treaty, the UN parties cannot amend it. Thus, the treaty is a dead letter as far as Congress is concerned.

Republican Reps. Joe Barton (TX), Joe Ann Emerson (MO), Joe Knollenberg (MI), and Democratic Representative Ron Klink of Pennsylvania also took part in the briefing. However, Rep. John Dingell (D-MI) boycotted the Buenos Aires conference “in protest” against President Clintons apparent decision to sign the Kyoto treaty.

At issue in the US delegations press briefing was whether desperately poor countries could afford to participate meaningfully in emissions reductions. Rep. Klink emphasized the importance of wealth in protecting people and the environment. Poverty is a leading cause of environmental degradation. Hurricane Mitch has killed thousands in Central America but almost none in Florida. Americans are safer during extreme weather events because they are wealthier. And one reason America has high living standards is that we “built our economy on relatively inexpensive carbon fuels,” said the Pennsylvania Democrat.

Asked what “meaningful participation” by key developing countries means, Chairman Sensenbrenner complained that Undersecretary of State Stuart Eizenstat gave him “three or four possible meanings of meaningful.” In Buenos Aires, meaningful participation seems to mean developing countries agree to be recipients of U.S. money and technology transfers. Few Senators are likely to find these arguments persuasive.

Senator Robert Byrd (D-WV) sent a letter to President Clinton reminding him that signing the Protocol would violate the “plain language” of the Byrd-Hagel resolution. Signing the Protocol now, in Sen. Byrds view, would also undermine U.S. leverage in future negotiations with major developing countries like China and India. Senior Democrats in the House and Senate have remarkably similar opinions about the global warming treaty.

At the US delegations evening press briefing, Undersecretary Eizenstat repeated the Clinton administrationws shopworn claims: the science is settled and recent weather is proof that global warming is upon us. Questions from the press that attempted to challenge his claims were shot down with a curt statement that it is now “too late to talk about the science.” The 17,000 scientists who signed an anti-Kyoto petition organized by the Oregon Institute for Science and Medicine would probably beg to differ.

One reporter asked Eizenstat to name one scientist that believes the science is settled, but the US negotiator was either unable or unwilling to do so. The exchange was proof positive that politics not science is the primary consideration of the US executive branch.

The press conference turned ugly when reporters began engaging in the customary America bashing. Members of the foreign press corps demanded to know why the US would not negotiate certain issues, including caps on emissions trading. Of course, if the rumors are true, Vice President Al Gore will soon be in Buenos Aires to give the UN conference a boost. Upon his arrival, expect a repeat of Kyoto as the US caves in to pressure and compromises its chief negotiating positions.

Last week, conference president Maria Julia Alsogaray held a moment of silence to honor the Central American victims of Hurricane Mitch. The global warming treaty now under negotiation would leave the poor more vulnerable to natural disasters of this type. We think the international communitys failure to consider the plight of the Third Worlds poor at COP-4 demands that conference negotiators spend the rest of the week in silence.

Rocky Start to Buenos Aires Conference

by William Yeatman on November 7, 1998

in Kyoto Negotiations

The global warming conference in Buenos Aires got off to a rocky start. Only 2,000 people reportedly participated in the events first week, a far cry from the 10,000+ that attended the December 1997 conference in Kyoto. The Green non-governmental organization (NGO) lobby appears to be dispirited, and expectations for COP-4 are very low indeed. Early in the conference, China and the Group of 77 underdeveloped countries refused to consider the possibility of voluntarily participating in global carbon suppression efforts under the climate treaty. The Kyoto Protocol probably remains doomed in the US Senate without the Third World consenting to energy use restrictions.

Reminiscent of Kyoto, the Buenos Aires conference is replete with absurd Green symbolism. NGO observers are given a document briefcase full of global warming propaganda. Theres only one problem it is made out of 100 percent recycled cardboard! The case is flimsy enough on a dry day, but on Friday it is raining (because of global warming, perhaps?) and the cardboard will not withstand inclement weather. Such are the sacrifices we must all make for ecology.

On Friday, November 6, the Buenos Aires conference started taking on water, literally. Rainwater leaked into the city Exposition Center, flooding the office facilities of several government and NGO delegations. The delgations of Japan, Canada, and the US were wholly or partially under water. “Were not hit as bad as Japan, but weve had to move all of our computers away from the water,” Acting Assistant Secretary of State Melinda Kimble told Cooler Heads as she scrambled to safety. We always knew the ship of State was adrift, but now we know it is a leaky vessel as well.

The Global Climate Coalition and Edison Electric Institute booths looked like they were struck by a greenhouse hurricane. At first, when it appeared that only the industry coalition was affected, Greenpeace exclaimed that it was “a sign from God.” But their office started getting wet a few minutes later, along with the World Wildlife Funds. All sides are experiencing the perils of government inefficiency in the provision of services, especially in an underdeveloped country.

A fleet of natural gaspowered, eco-buses sits in front of the Exposition Center that is hosting the conference. Good thing they were donated by Mercedes-Benz not many conference-goers are availing themselves of the ecologically correct transportation service. “I have to be somewhere in five minutes,” complained a woman who had just been informed that the eco-shuttles depart every fifteen minutes. She took a taxi, like most folks. One eco-bus was observed leaving the Exposition Center with only one passenger. Thanks, Mercedes-Benz, for reminding us all once again how wasteful eco-transportation really is.

Conference participants were actively herded into a meeting room for an end-of-week wrap up, presented by representatives from WWF, Friends of the Earth, Greenpeace, and Climate Action Network. At the sparsely-attended press conference, a Green activist demanded the creation of “solid frameworks around the flexibility mechanisms.” Multiple oxymoronic phrases like this one are uttered in treaty-speak, often in succession.

If you dont toe the party line, you are not welcome in these halls. The Buenos Aires Journal cancelled a planned interview with atmospheric physicist Dr. Fred Singer, explaining that higher ups had nixed the story. When asked who had ordered the news blackout on Singer, our source denied it was the Argentine government, but admitted it was someone “close to” the government. Only pseudo-science is respected, as when the the Buenos Aires Herald trumpeted WWFs preposterous prediction that global warming will produce an epidemic of dengue fever in Argentina. This despite the fact that the real experts in the field, like Dr. Paul Reiter at the Centers for Disease Control, contend that temperature has abslutely nothing to do with outbreaks of the disease.

At mid-conference, COP-4 has produced nothing in the way of a consensus. Developing countries rejected US overtures to reduce emissions of greenhouse gases, insisting that energy use is deperately needed to overcome poverty. The delegation from China ridiculed US proposals for “voluntary” emissions reduction commitments, noting the contradiction between “voluntary” and “commitment.” Already, work plans are being developed to address virtually all contentious issues at next years conference in either Morocco or Jordan.

In a desperate effort to salvage COP-4, Conference President Maria Julia Alsaguray, Argentinas minister for the environment, is facilitating side negotiations between a handful of developing countries and the U.S. The talks are rumored to include Argentina, Mexico, Chile, and South Korea. These countries are discussing “voluntary commitments” in exchange for generous technology transfers and other aid from the US but only outside the formal treaty framework of the Kyoto Protocol. The big players, China and India, are still firmly opposed to any Third World energy use restrictions being included in the global warming treaty.

The Cooler Heads Coalition, made up of 22 non-profit public policy organizations, is a subgroup of the 4 million member National Consumer Coalition, founded by Consumer Alert. For more information about global warming, contact Jim Sheehan at 312-4061 (Lancaster Hotel) in Buenos Aires or Jonathan Adler or Paul Georgia at 202-331-1010 in Washington, DC

News from Buenos Aires — COP-4

by William Yeatman on November 5, 1998

in Kyoto Negotiations

According to sources in Buenos Aires, not much is moving at the Conference of the Parties 4 (COP-4) on the Kyoto Protocol.

On November 4, the parties reestablished the Joint Contact Group on Flexible Mechanisms. That group will handle discussions on International Emission Trading, Joint Implementation, and the Clean Development Mechanism all three hot-button issues relating to the treaty.

At its meeting papers were distributed, including one from the so-called Umbrella Group (they’re ready for more rainfall from global warming). It consists of U.S., Japan, Canada, Australia, New Zealand, Iceland, Norway and Russia. Sources note that it seems as if this group, particularly the U.S., would like to see the COP-4 meetings focus on the Flexibility Mechanisms and come up with a work plan/programme.

However, many developing countries want COP-4 to result in work plans on all the key issues. One major issue for developing countries is compensation, that is, monies to be paid to developing countries from developed nations’ actions under the Kyoto Protocol and the Framework Convention. That means that if the developed countries’ cutbacks in fossil fuel use not only cause problems for them but also have a ripple effect on developing countries, those countries would be compensated. (In other parlance, it’s called a double whammy.)

The parties also established a series of other contact groups to address the critical issues.

Some are concerned that strict deadlines for decisions by the next meeting COP-5 will be set. Since the issues, such as emission trading, are extremely complex, such early deadlines for “rules of the game” could be ill-conceived.

Buenos Aires Global Warming Conference Update

by William Yeatman on October 29, 1998

in Politics

The Fourth Session of the Conference of the Parties to the Convention (COP-4) was held in Buenos Aires from November 2-13, 1998. This page provides a recap of the highlights of the conference.

North America Absorbing Carbon; Antarctic Ice Cap is Not Shrinking

by William Yeatman on October 27, 1998

in Science

North America Absorbing Carbon

One of the biggest mysteries in the global warming debate is the disappearance a large amounts of man-made greenhouse gases. Humans emit 7.1 petagrams of carbon dioxide each year. It is estimated that about half enters the atmosphere, 2 petagrams go into the oceans and 1.1 to 2.2 petagrams are absorbed by plants. What happens to the remainder is still unknown.

A new study in Science (October 16, 1998), however, argues that North America absorbs 1.7 petagrams of carbon per year, much more than previously thought. If true this means that not every gram of carbon released in the United States and Canada enters the atmosphere, but many are absorbed by the newly detected sink.

The researchers used data on carbon dioxide levels taken from 1988 to 1992 at 63 ocean-sampling stations. They plugged the data into two computer models, one which estimates ocean uptake and release of carbon dioxide, the other which estimates the how carbon dioxide is distributed by wind currents. What the researchers found is that carbon dioxide levels slightly decreased from west to east across North America even though levels were expected to increase as a result of fossil fuel emissions. This suggests a large North American sink.

The study is being criticized in some quarters, however. Inez Fung, a climate modeler with the University of California at Berkeley, argues that the models “could be off by just a little bit, and you get a very different conclusion.” Others point out that the study period includes the Mount Pinatubo eruption, a period where cooler and wetter conditions increased carbon uptake. Other studies trying to measure carbon uptake by sinks have come up with different results.

According to one of the team members, Jorge Sarmiento of Princeton University, part of the reason why other studies have failed to find such a large sink is that they “missed a lot of forest regrowth on abondoned farmland and formerly logged forests in the east fertilized by CO2 or nitrogen pollution, and that they fail to account for carbon stored in soils and wetlands.”

Another study in the same issue of Science finds that South American tropical forests account for about 40 percent of the missing sink. While preliminary and contradictory, these studies suggest that much is still unknown about the carbon cycle. As stated by Heimann, “the most obvious conclusion” would be that “theres no need for the U.S. and Canada to curb emissions.”

Antarctic Ice Cap is Not Shrinking

The Intergovernmental Panel on Climate Change predicts that a warming planet will cause the worlds glaciers to melt and raise sea levels to potentially dangerous heights. A new study published in Science (October 16, 1998), however, shows that the Antarctic ice cap is not melting as a result of global warming. Measurements taken by remote sensing satellites show that on average the height of the ice cap is changing by less than 1 cm per year

There seems, however, to be an unspoken rule among warming proponents that good news must be reinterpreted as bad news. Instead of evidence against global warming, these findings suggest that the consequences of global warming may be worse than believed, according to Professor Duncan Wingham of the University College London, who led the research.

Since the sea level is currently rising by 1.8 cm per decade, one would expect the Antarctic ice cap to have shrunk by 5 cm to account for the observed sea level rise. This must mean that global warming is causing greater thermal expansion than expected. Global warming, concludes Wingham, will cause sea levels to rise by one meter over the next century, entirely due to thermal expansion (Financial Times (London), October 16, 1998).

Emissions Trading No Solution; Rent Seekers Eye Profits From Kyoto

by William Yeatman on October 27, 1998

in Kyoto Negotiations, Science

Emissions Trading No Solution

The Clinton Administrations economic analysis of the costs of implementing the Kyoto Protocol rely heavily on the assumption that there will be unlimited emissions trading between the developed countries who are signatories to the UN Framework Convention on Climate Change. Many have criticized this assumption in light of the resistance to emissions trading from the European Union. It may be, however, that even with a full-blown emissions trading system little if any cost savings would result.

On October 23, the Competitive Enterprise Institute sponsored an economics briefing for congressional staff and media featuring Robert A. Reinstein, President of Reinstein & Associates International, and the former chairman of Working Group III and of Working Group II of the UN Intergovernmental Panel on Climate Change (IPCC).

Mr. Reinstein argued that even with full emissions trading there would not be enough emissions credits available to meet the demand. The demand for credits among OECD (Organization for Economic Cooperation and Development) countries would be between 1.8 and 3.1 billion tons of carbon dioxide equivalent, the largest part of which would come from the United States. The potential supply from non-OECD countries will be between 270 million and a little over 1 billion tons.

Reinstein also touched on some of the administrations other assumptions. The Clinton Administration claims, for example, that much of the reductions can be achieved easily and cheaply by increasing energy efficiency. It argues that many energy saving technologies are available and waiting to be taken advantage of. Reinstein pointed out, however, that energy prices were higher in years past, making investments in energy efficiency even more profitable than they are today, yet the investments werent made.

Rent Seekers Eye Profits From Kyoto

Many businesses have boarded the global warming bandwagon in anticipation of securing profit from government policies (known as rent seeking) to reduce carbon emissions. In a recent Washington speech, utility analyst Leonard Hyman with Salomon Smith Barney unabashedly promoted this notion. A sophisticated carbon dioxide trading system could be a cash cow for some businesses in a market that could reach a value of $13 trillion by 2050, claims to Hyman.

“Think of the trading opportunities in a market of that size,” he said. “Think of the new technologies required to help people lower their CO2 output in order to cash in on permit sales. Think of the surveillance, metering and compliance needs . . . The United States has the leadership position in almost all of the skills required to make this market work. Isnt this an opportunity for American financial and technological firms?” (The Electricity Daily, October 16, 1998)

Adaptation is Still the Best Policy

So far the debate on what to do about global warming has focused almost exclusively on reducing energy use. The Kyoto Protocol sets greenhouse gas emission targets for the participating countries. Other options are available, however, if global warming were to occur. In an article in Nature (October 22, 1998) several British researchers argue that “we should . . . be thinking seriously about how we can best adapt to climate change.”

Martin Parry, et. al., argue that even if the Kyoto Protocol is fully implemented it will only reduce the amount of warming by only 0.05 degrees C by 2050. And even if the participating countries reduced emissions by a massive 20 percent, warming would be reduced by only 0.1 degrees C by 2050. “These minor reductions in the expected warming mean that the projected impacts of change are barely affected,” say the authors.

Though the authors call for an international agreement on adaptation, another avenue along these lines would be to reduce the barriers in government policies which slow down or prevent individuals from adapting to changing conditions. The authors argue that to “ignore adaptation is both unrealistic and perilous.”

EPA Lacks Authority to Regulate CO2; Congress Boosts Green Funding; Big Business Bids for Early Emission Reduction Credits

by William Yeatman on October 27, 1998

in Kyoto Negotiations, Politics, Science

EPA Lacks Authority to Regulate CO2

Following the completion of the Kyoto Protocol, Carol Browner, Administrator of the Environmental Protection Agency (EPA), testified before Congress that the EPA possessed the authority to meet the targets set at Kyoto. She claimed that the EPA could, under existing law, characterize carbon dioxide as a pollutant and regulate it under the Clean Air Act (CAA).

A new report by the National Mining Association, CO2: A Pollutant? The Authority of EPA to Regulate Carbon Dioxide Under the Clean Air Act, analyzes the language, legal structure, and legislative history of the CAA to determine whether Congress intended for EPA to regulate carbon dioxide. The report concludes that Congress did not provide EPA the authority to regulate carbon dioxide. “Instead, Congress deliberately limited EPAs endeavors in this area to non-regulatory activities,” according to the report.

None of the CAA sections cited by the EPA as “potentially applicable” authorizes the agency to regulate carbon dioxide. The EPAs legal analysis relies entirely on general language contained in the CAA. But, contends the report, such language “cannot defeat the specific intent of Congress.” In 1990, Congress specifically debated and rejected proposals to allow EPA to regulate carbon dioxide. “Congress authorized EPA only to study certain greenhouse gases, not regulate them.”

Finally, the report argues that even if Congress had intended to give such power to the EPA it would still need to show that carbon dioxide “causes harmful effects to the public health, welfare or the environment.” The complexities of global warming and the “serious flaws in some of the fundamental evidence” would make it very difficult for EPA to support such a finding. For additional information contact John Grasser or Karen Batra of NMA at (202) 463-2651.

In a supporting study, the Greening Earth Society reviews “carbon dioxides effects on human health, welfare and the environment.” The study finds that: “There is no direct effect of any anticipated level of atmospheric carbon dioxide on human health,” and, “There is an overwhelming body of evidence that the direct effect of carbon dioxide on food production is highly positive.” For instance, “Carbon dioxide is currently increasing the vegetative biomass of the planet and has increased agricultural production by 10 percent.” The report can be obtained by contacting GES at (703) 907-6168.

Congress Boosts Green Funding

In a surprise move, Congress agreed to appropriate $193 million for the World Banks Global Environment Facility in the fiscal 1999 federal budget deal. The money, critics fear, may be used in part to induce the developing countries to participate in the global warming treaty inked in Kyoto, Japan. In addition, numerous environmental pressure groups, such as the World Wildlife Fund, contract with the GEF to implement carbon emissions reduction projects in the Third World.

The Senate had previously rejected any further funding for the GEF, and the House had voted to cut $47 million from the appropriation. But when the House and Senate met in conference committee, the massive increase was inserted as a provision to pay back “arrears,” Cooler Heads has learned. The amount reflects the difference between what the Clinton Administration pledged and what the Congress actually appropriated during the past three years.

“It will help improve the tone of discussions in Buenos Aires by putting more money on the table for clean projects,” according to Alden Meyer of the Union of Concerned Scientists (The Washington Times, October 22, 1998).

Big Business Bids for Early Emission Reduction Credits

The Presidents Council on Sustainable Development (PCSD) has sent President Clinton a set of principles that would give early credit to companies who voluntarily reduce greenhouse gas emissions. One of the principles would give credit for “legitimate and verifiable measures that reduce overall greenhouse gas emissions relative to defined benchmarks,” and calls for “all levels of government to lead the way in cutting emissions.”

The PCSD, created in 1993 by President Clinton, is a commission that advises the president on “sustainable development, economic, environmental, and equity issues.” The group is made up of representatives from industry, environmental groups and government officials. The letter to the President states that voluntary action “is justified entirely on its own merits because it will improve economic performance and will reduce local environmental pollution as well as greenhouse gases.”

Steve Percy, chairman and CEO of BP America Inc. and co-chair the PCSD task force, said, “Even before any binding treaties or other requirements are in place, Americas businesses, communities, government agencies, and individuals need to get ready to tackle the challenge of climate change” (BNA Daily Environment Report, October 28, 1998).

Knollenberg Amendment Weakened

On October 21, President Bill Clinton signed the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1999, which contains the Knollenberg amendment which bars the EPA from implementing the Kyoto Protocol before it is ratified by the U.S. Senate.

Already, however, the White House is seeking to turn the amendment into permission to regulate carbon dioxide. In a speech following the signing, Clinton stated, “I am pleased that the Congress modified the language in the Act concerning the Kyoto Protocol on global climate change and clarified what this language means in the Statement of Managers.

“In particular, the Congress made it clear that it does not intend to limit my Administrations ability to carry out common-sense actions to reduce greenhouse gas emissions; its intent, rather, is only to limit funding that would implement actions called for solely under the Kyoto Protocol.” (U.S. Newswire, October 21, 1998).

COP-4 Provisional Agenda and Annotations

by William Yeatman on October 21, 1998

in Politics

This addendum to the provisional agenda and annotations for the Conference of the Parties (COP) at its fourth session contains information on:

Documents that have been prepared for the session and documents from previous sessions that will be made available (annex I);

The proposed allocation of each item on the provisional agenda and the relevant documentation (annex II); and

A tentative schedule of meetings for the COP plenary, the Subsidiary Body for Scientific and Technological Advice (SBSTA) and the Subsidiary Body for Implementation (SBI) (annex III).

Click here for the full document (PDF).

Little Progress Expected in Buenos Aires

by William Yeatman on October 21, 1998

in Kyoto Negotiations

The fourth Conference of the Parties (COP-4) will meet in Buenos Aires, Argentina on November 2-13 to further discuss greenhouse gas reductions. According to Melinda Kimble, acting assistant secretary of state, there probably will be little progress toward reaching the administrations goals. “Buenos Aires has the potential to be a small step forward,” Kimble testified on October 6 before the House Commerce Subcommittee on Energy and Power.

The biggest hurdle is emissions trading. Different countries have different ideas on what an emission trading system would look like under the Kyoto Protocol though views have converged in recent weeks.

Kimble was questioned about the administrations definition of “meaningful participation” by developing countries. She admitted that the administration has “no definition.” But, she said, it will not be a “one-size-fits-all solution.” Targets for poorer countries with low emissions will be different than for richer developing countries with higher emissions (BNA Daily Environment Report, October 7, 1998).

Government Study Contradicts Administrations Cost Estimates; Energy Conservation May not be Such a Good Deal

by William Yeatman on October 19, 1998

in Kyoto Negotiations

Government Study Contradicts Administrations Cost Estimates

Several studies done by private, econometric modeling firms show the costs of complying with the Kyoto Protocol to be high. Critics argue that these studies cannot be trusted given that they were funded by the fossil fuel industry. A new government study, however, has just been released which validate the findings of the industry-funded studies, and counters claims by the Clinton Administration the costs will be negligible.

The report by the federal Energy Information Agency (EIA) “assumes that the U.S. State Departments assessment of the accounting of carbon-absorbing sinks and offsets from reductions in other greenhouse gases will reduce the binding U.S. emissions target to 3 percent below the 1990 level of emissions,” rather than the stated target of 7 percent below 1990 levels.

The EIA estimates that the Kyoto Protocol will cost the U.S. economy $64 billion per year. Under a carbon tax, energy prices will double by 2010 and then “decline to 79 percent above reference case price levels in 2020.” Gasoline prices could rise by 53 percent and electricity prices could rise by as much as 86 percent by 2010. Overall the EIA study paints a rather gloomy economic picture under the Kyoto Protocol. The study is available on the web at http://www.eia.doe.gov/oiaf/kyoto/kyotorpt.html

Energy Conservation May not be Such a Good Deal

One of the solutions to global warming, according to Clinton Administration officials, is the greater use of energy efficient technologies. Weve been told that all of the technologies necessary to cheaply reduce fossil fuel use are already available and its just a matter of using them. One of President Bill Clintons favorite examples of energy saving technology is energy efficient fluorescent lighting.

It is generally argued that investments in energy conservation measures, such as replacing incandescent light bulbs with fluorescent light bulbs or insulation, pays for themselves in a short period of time. Some estimates show very high rates of return to energy conservation investments. Advocates of energy efficiency, however, have been puzzled by the lack of consumer interest in such potentially lucrative investment. This “Energy Paradox,” they believe, can best be explained by invoking consumer ignorance, arguing that they “apply very high discount rates to these investment opportunities.” A solution to this problem is an aggressive public education campaign.

In a paper delivered at a conference sponsored by the American Enterprise Institute on September 14, Gilbert Metcalf, an economist at Tufts University, and Kevin Hassett with the American Enterprise Insitute, give a different explanation. They believe that the “engineering estimates of potential energy savings which are often provided by the manufacturer of the relevant product misrepresent savings because they are based on highly controlled studies that do not perfectly apply to actual realized savings in a representative house.”

The paper, Measuring the Energy Savings from Home Improvement Investments: Evidence from Monthly Billing Data, estimates the return on attic insulation. One study found that the returns “can easily be on the order of 50 percent per year.” Metcalf and Hassett, however, find actual returns to be around 9.9 percent per year.

For a variety of reasons consumers rarely achieve the level of savings theoretically possible. They conclude, “We find that the data which may well be the most comprehensive yet applied to this question provide little evidence of an Energy Paradox.”

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