April 2004

In a peculiar echo of the Duke of Wellingtons famous remark that the railways were a bad idea because they let the poor move around the country, Guardian columnist Jackie Ashley suggested on April 15 that something had to be done about poor and middle class Britons flying too much. 


She wrote, And yes, it would meancharging the real environmental cost of cheap air travel, either levied on airports or aviation fuel, or both.  We should recognise that this reduces human happiness for the millions who benefit from it.  As with the congestion charge, we should accept that this would hit some poorer people’s mobility, stealing a recent freedom away from them.  But we should remember that the boom in air travel is mainly fuelled by middle-class people flying more frequently.


The UKs Friends of the Earth has taken up the challenge, pointing out that the poor flying abroad for holidays is not necessary.  Richard Dyer told the BBC (Apr. 27), The vast majority of flights are discretionary, for leisure.   These are not essential.

Following on from the comments by MITs Carl Wunsch that the Gulf Stream is safe as long as the wind blows and the Earth turns, several other scientists have used the pages of Science magazine (Apr. 16) to pour scorn on the conceit behind the forthcoming movie, The Day After Tomorrow.  The movie is predicated on the idea that unchecked global warming will cause an abrupt climate shift that will cause a new ice age in the United States.


Canadian scientists Andrew Weaver of the University of Victoria and Claude Hillaire-Marcel of the Universit de Quebec Montreal tackled the subject in a Perspectives article entitled, Global Warming and the Next Ice Age.  They pointed out that the view of global warming causing an ice age prevails in the popular press despite a relatively solid understanding of glacial inception and growth.


The scientists review of the literature concluded that, It is certainly true that if the AMO [Atlantic Meriodonal Oscillation] were to become inactive, substantial short-term cooling would result in western Europe, especially during the winter.  However, it is important to emphasize that not a single coupled model assessed by the 2001 IPCC Working Group I on Climate Change Science (4) predicted a collapse in the AMO during the 21st century.  Even in those models where the AMO was found to weaken during the 21st century, there would still be warming over Europe due to the radiative forcing associated with increased levels of greenhouse gases.


Pointing out that models that do show AMO collapse are not flux-adjusted like newer models, they conclude, Even the recent observations of freshening in the North Atlantic (a reduction of salinity due to the addition of freshwater) appear to be consistent with the projections of perhaps the most sophisticated nonflux adjusted model.  Ironically, this model suggests that such freshening is associated with an increased AMO (16).  This same model proposes that it is only Labrador Sea Water formation that is susceptible to collapse in response to global warming.


In light of the paleoclimate record and our understanding of the contemporary climate system, it is safe to say that global warming will not lead to the onset of a new ice age.  These same records suggest that it is highly unlikely that global warming will lead to a widespread collapse of the AMOdespite the appealing possibility raised in two recent studiesalthough it is possible that deep convection in the Labrador Sea will cease.  Such an event would have much more minor consequences on the climate downstream over Europe.


In the same issue, pioneering oceanographer Wallace Broecker dismisses the recent report rejected by the Pentagon that is predicated on a similar scenario.  He comments in his letter, Exaggerated scenarios serve only to intensify the existing polarization over global warming.

Lord Lawson, a former British Chancellor of the Exchequer, took the opportunity of an April 21 debate in the United Kingdoms House of Lords to accuse the Intergovernmental Panel on Climate Change of operating an environmentalist closed shop that is unsullied by any acquaintance with economics, statistics or, indeed, economic history.  The debate was initiated by Lord Taverne, a former minister in previous Labour governments, who asked the government whether they were satisfied by the economic and statistical work of the IPCC.   

Lawson said that Taverne had put his finger on what is potentially a major scandal.  The basis for this assessment is the criticism made by Ian Castles and David Henderson of the economic assumptions used by the IPCC (see lead story).  This view is upheld by a new report from the International Policy Network, which assesses the way in which the IPCC predicts future climate change. 

 According to the IPN report, the IPCC appears to have exaggerated its estimates of temperature increases by using highly implausible scenarios of future growth in emissions of greenhouse gases.  It has done so by underestimating technological advancement and greatly overestimating gains in economic growth.  In order to gain credibility, the report argues that the IPCC should rely more heavily on the work of economic historians and statisticians.  (International Policy Network, Apr. 23).


A press release issued by NGO Carbon Trade Watch on April 19 called for the closure of one of the first funds set up to help developing countries cope with the costs of fighting global warming.  The release read, More than 50 environmental and social justice NGOs and other groups have sent a letter of protest to the World Bank calling for the closure of its new emissions trading fund, The Prototype Carbon Fund.

 In the year of the World Banks 60th anniversary and in the run-up to intense protests in Washington, D.C. at their annual meeting this month, the groups state that the Banks new fund is destructive greenwash and has in fact created extra problems for communities and the environment.  The fund was set up in 1999 to facilitate the new trade in greenhouse gases created under the Kyoto Protocol.  The groups state that so far the fund has exacerbated existing human rights violations and furthered environmental destruction.

One of the funds model projects is located in Brazil and involves the expansion of monoculture eucalyptus plantations owned by the corporation, Plantar.  The plantations were originally established by forcibly evicting geraiszeiros peoples from the land and since then the plantations owners have been accused of creating slave-like conditions.  Furthermore, the plantations have heavily polluted surrounding water sources, thus devastating the livelihoods of local farmers and fisher-folk.

The World Bank will fund the expansion of these plantations in order to generate carbon credits for the international trade in greenhouse gases.  However, on top of the impacts upon the local environment and peoples, there is no guarantee that the project will actually have a permanent positive effect on the climate. 

 Marcelo Calazans from local Brazilian NGO, FASE-ES, states, This and many other projects have terrible negative impacts on local people and environments and it is still unclear if there is any real benefits for the climate.  We believe that the Prototype Carbon Fund should cease operations and close down immediately.

Dr. Patrick J. Michaels, a climatologist at the University of Virginia and state climatologist of Virginia, has questioned the credibility of Nature magazine.  In an article in the April 8 issue the technique of regional climate modeling is dismissed as an unreliable exercise to assess and predict climate changes on small land areas such as the lower 48 states (only 2 percent of the planet). 

 Nevertheless, another article in the same issue uses this defective technique of regional climate modeling to conclude that, The Greenland ice-sheet (covering 0.4 percent of the planet) is likely to be eliminated by anthropogenic climate change unless much more substantial emission reductions are made than those envisaged by the IPCC. 

 In response to these contradictions, Michaels states that, Nature published an alarming and completely misleading article predicting the melting of the entire Greenland ice cap in 1,000 yearsusing a regional climate projection.  He continues, If the models are no good over the U.S., theyre worse over Greenland.  This is nothing but tragic, junk science, published by what is (formerly?) the most prestigious science periodical in the world.  (Washington Times, Apr. 27). 

The European Parliament agreed April 20 to the directive expanding the scope of the new emissions trading scheme within the EU from January 1, 2005. 

EUpolitix.com reported, A full sitting of MEPs has backed a report on emissions trading which would mean heavily industrialized EU countries could pay the developing world to pass on its CO2 quotas, dictated by the Kyoto Protocol on climate change.  And, according to amendments made by parliament, the scheme would be compulsory even if the international Kyoto agreement never enters into force.

 Alexander de Roothe Dutch MEP responsible for the proposal in parliamentargues that such a move is necessary for industry to learn how to fight climate change, even without the Russian ratification necessary to make Kyoto legally binding.

 De Roo also commented on a notable omission, Emissions rights from nuclear activities are explicitly excluded.  This legislation is ever greener than the Kyoto Protocol.

 EU Environment Commissioner Margot Wallstrom argued that the directive would be good for business:  The linking of the Kyoto mechanisms to our emissions trading scheme… will reduce costs for the companies participating in emissions trading and provide investors in green technology with the certainty they need.

 In related news, Irish electricity prices are expected to rise by 6 percent initially as a result of the new trading scheme.  According to Ireland.com (Apr. 17), the Irish electricity supply company ESB, has warned of significant rises in electricity prices because of new requirements on carbon dioxide emissions.  The company has claimed that its quota allocation under the proposed CO2 emissions trading system for Ireland will cause its power generation costs to rise by up to 40 percent.

 This would in turn result in domestic prices rising by up to 20 percent if the increased costs of production are passed on in full.  Electricity industry sources have indicated a probable rise for consumers of six per cent in the coming years.

On April 29th, EPA Administrator Mike Leavitt announced that the deadline on the final regulation controlling mercury emissions from power plants would be extended to March 15, 2005 from Dec. 15, 2004.  The Natural Resources Defense Council, which obtained the initial deadline as part of a lawsuit settled by the Clinton administration, offered the extension so that EPA could conduct more analysis on the rule and solicit additional public comment.  Leavitt said EPA would conduct whatever analysis is necessary to ensure the right decision is made and meet the goal of protecting public health in the most effective way possible.

 Leavitt has proposed a mercury trading system, but earlier this month 45 Senators urged him to drop this strategy in favor of a new rule that uses the Clean Air Acts Maximum Achievable Control Technology (MACT) provisions.  This would require state-of-the-art pollution controls on all of the nations 1,100 coal- and oil-fired utilities.  John Kerry was among the 45 senators who asked Leavitt to drop the trading proposal.  With a desire to stick to his plan, Leavitt has rejected this request and, when asked, stated that the presidential elections implications on the regulation would be minimal as [EPA is] moving toward concluding [the] decision in an even-handed and proper way.

 EPAs top air pollution official, Jeff Holmstead, has stated that the technologies needed to meet MACT provisions will not be commercially available by the deadline for utilities to reduce emissions.  Accordingly, Scott Segal, director of the Electric Reliability Coordinating Council, said his group would remain committed to working with EPA to highlight the need for realistic assumptions about the current state of mercury control technology.  An inflexible mercury control program can result in unacceptable fuel-switching from coal to natural gas, hurting American consumers, the elderly, and industrial workers. 

 On the other hand, Sen. Patrick Leahy (D-Vt.) said that he would continue to call on EPA to drop its trading plan.  Extending the deadline on this deeply flawed rule moves us back for now from the brink of getting this indefensible plan, but what Administrator Leavitt still needs to do is to withdraw this proposal and produce a new one, grounded in science and in the public’s interest, Leahy said.  We need a mercury plan that honors instead of insults the Clean Air Act. (Greenwire, April 30).

According to a series of Gallup polls around Earth Day, the American public is becoming less concerned about global warming and the environment generally.

 The Aspen Times reported (Apr. 22), A national poll conducted to coincide with Earth Day today shows that Americans are well aware of global warming.  They just aren’t very concerned about it.  The Gallup organization measured concern over environmental issues between March 8-11 and found that 51 percent of Americans worry a great deal or a fair amount about global warming.  That’s down from 58 percent in March 2003.

About 47 percent of respondents both this year and last said they worry only a little or not at all about global warming, according to the Gallup Tuesday Briefing, a branch of the famed national pollster.

 Although the figures suggest a majority of Americans are still concerned about the issue, the Aspen Times was right to play down this aspect of the poll as it has a margin of error of 3 percent, meaning that the two groupings of concern levels overlap in their confidence intervals.  It is perfectly possible that more Americans are unconcerned than concerned about the issue. 

Another Gallup poll ranked concern for the environment against other major issues of the day.  This one found that people are more concerned about healthcare, crime, drugs, terrorism, the economy, illegal immigration, unemployment, hunger and homelessness, and the availability and affordability of energy than they are about the quality of the environment.  Only race relations ranked lower as an issue of concern of the 12 issues suggested.

The poll found that 62 percent of Americans worry a great deal or a fair amount about environmental quality, down from 77 percent in March 2001.

Summarizing recent polls and their relationship to the presidential election, AEI scholar Karlyn Bowman wrote in Roll Call (Apr. 28), Democrats lead the GOP as the party better able to handle the environment.  Given the Democrats strength on the issue, its surprising that Bushs marks on handling it have been pretty even during his presidency.  In the March Gallup poll, 41 percent thought the president was doing a good job handling the environment and 46 percent a poor job, down from 44 percent to 43 percent in March 2003.  Bushs ratings on the environment at a couple of points during the presidency have been similar to Bill Clintons at the same stage of his presidency.

 Bushs relatively even ratings may derive from the fact that other issues such as the economy, Iraq, and terrorism loom larger than the environment.  In every poll this year that has asked the question, the environment has ranked close to the bottom as a priority.  Although people have concerns about the environment nationally, they are satisfied with the quality of the environment where they live and that, too, may dampen concern, Bowman concluded.

Dr. Rajendra K. Pachauri, the chairman of the United Nations Intergovernmental Panel on Climate Change (IPCC), compared Bjrn Lomborg, Danish statistician and author of The Skeptical Environmentalist, to Adolf Hitler in an interview with Jyllandsposten, a leading Danish newspaper (Apr. 21).

 Pachauri said, What is the difference between Lomborg’s view of humanity and Hitler’s?  You cannot treat people like cattle.  You must respect the diversity of cultures on earth.  Lomborg thinks of people like numbers.  He thinks it would be cheaper just to evacuate people from the Maldives, rather than trying to prevent world sea levels from rising so that island groups like the Maldives or Tuvalu just disappear into the sea.  But where’s the respect for people in that?  People have a right to live and die in the place where their forefathers have lived and died.  If you were to accept Lomborgs way of thinking, then maybe what Hitler did was the right thing.  (English translation published on the internet by DR Nyheder)  

 The Skeptical Environmentalists longest chapter is devoted to global warming.  In it, Lomborg accepts the IPCCs scientific assessment reports as the basis of his analysis.  What Pachauri apparently objects to is that Lomborg concludes that the Kyoto Protocol would do almost nothing to reduce the rate of global warming, but at enormous expense.  For a fraction of the costs of Kyoto, many pressing environmental problems afflicting poor countries could be addressed.

 In searching for other resemblances between Lomborg and Hitler, it is to be noted that both are vegetarians, although Pachauri may be as well.  Unlike Hitler or Pachauri, Lomborg has been awarded the Julian Simon Prize by the Competitive Enterprise Institute, so in that respect it could be concluded that Pachauri has more in common with Hitler than does Lomborg.

 This is not the first time Pachauri has launched an ad hominem attack on his critics since becoming chairman of the IPCC.  In December in Milan at the ninth Conference of the Parties to the U. N. Framework Convention on Climate Change, Pachauri sent out a press release attacking the motives and affiliations of Ian Castles, former chief statistician of the Australian government, and David Henderson, former chief economist of the OECD.  Castles and Henderson have pointed out that the storylines used to produce IPCCs predictions of future warming are based on ludicrously improbable economic assumptions.

The Edison Electric Institute (EEI), the association of shareholder-owned electric power companies, opposes the Kyoto Protocol, the McCain-Lieberman Climate Stewardship Act, and kindred proposals to regulate carbon dioxide (CO2), the inescapable byproduct of the carbon-based fuelscoal, oil, and natural gasthat supply 86 percent of all the energy Americans use. Why, then, is EEI pressing the Bush Administration to institute an early credit programthe accounting framework and political setup for Kyoto-style energy rationing? Edison has a lot of explaining to do.

Liebermans Ploy

Although the implementing rules of an early credit program can be bewilderingly complex, the basic idea is simple. Under such programs, companies that take steps now to reduce emissions of greenhouse gaseschiefly CO2 from fossil energy useearn credits (emission allowances) they can use later to comply with Kyoto or a similar compulsory regime.

 All such schemes are Trojan horses for Kyoto-type policies. Credits awarded for early reductions are assets that mature and attain full market value only under a mandatory emissions reduction target or cap. Consequently, every credit holder acquires an incentive to lobby for emission caps.

 Unsurprisingly, credit for early reductions originated as a brainchild of the Green Left. Senator Joseph Lieberman (D-Conn.), Environmental Defense, and the Pew Center on Global Climate Change championed early credit legislation during the 105th and 106th Congresses. Liebermans bill went nowhere, attracting only 12 co-sponsors on its second go-round. Similarly, a House companion bill in the 106th Congress garnered a mere 15 co-sponsors. Neither bill saw floor action or even made it to the committee markup stage. By mid-2000, credit for early reductions was politically defunct.

 So why is this an issue today? On Valentines Day 2002, the Bush Administration naively resuscitated Liebermans ploy. President Bush directed the Department of Energy (DOE) to enhance the measurement accuracy, reliability, and verifiability of the Voluntary Reporting of Greenhouse Gases Program (VRGGP), established under Section 1605(b) of the 1992 Energy Policy Act. More importantly, Bush tasked DOE to develop recommendations to give transferable credits to companies that can show real emissions reductions under a revised, more rigorous reporting system.

 To carry out those directives, DOE in May 2002 launched an extensive stakeholder dialogue, which has included three public comment periods, four regional workshops in November-December 2002, and a national workshop in Washington, D.C. on January 12, 2004. A fourth comment period is planned for this summer, and DOE may host another workshop as well.

 Legally Challenged

Scores of industry representatives have spent literally thousands of hours helping DOE enhance the VRGGP, and will likely spend thousands more before the years end. Alas, Bush officials not only endorsed early credits without thinking through the political ramifications, they also never bothered to check whether current law allows DOE to set up a credit program in the first place.

 This was not a difficult topic to research. Section 1605(b) is only one and a half pages long. It makes no reference, or even allusion, to tradable credits. Similarly, the Conference Reports discussion of 1605(b) does not say or imply anything about credits. Equally telling, when House and Senate conferees produced the final version of 1605(b), they considered and rejected language that would have established a credit program.

 During the first (May 6-June 5, 2002) comment period, several stakeholders who support early credits in principlethe Pew Center on Global Climate Change, the Northeast States for Coordinated Air Use Management, and a coalition of environmental groups led by the Natural Resources Defense Councilcautioned DOE that it lacks statutory authority to implement a credit program. During the second (September 2002-October 2003) comment period, the Competitive Enterprise Institute debated the issue at length with the Electric Power Industry Climate Initiative, an association of which EEI is a member. In all that time, DOE declined to explain its understanding of the law.

 On November 26, 2003, DOE released its proposed revised general guidelines to make voluntary emissions reporting more rigorous, consistent, and auditable. Startlingly, the guidelines said not a word about credits, even though whole point of the exercise was to build the accounting system for a credit program. Pressed for an explanation at the D.C. stakeholder workshop this past January, a DOE official  s sss stated, sheepishly and without elaboration: DOE has determined it doesnt have explicit authority now to issue transferable credits.

 An EEI representative at the workshop chided DOE for waiting so long to address this matter and never requesting the legal authority it now believes it lacks. Behind the scenes, EEI has been advising the White House to move ahead with a credit program notwithstanding DOEs legal qualms.

Case Against Credits

Several free market organizationsthe Competitive Enterprise Institute, American Conservative Union, Americans for Tax Reform, American Legislative Exchange Council, Citizens Against Government Waste, Citizens for a Sound Economy, Consumer Alert, Frontiers of Freedom, National Taxpayers Union, Small Business Survival Committee, and 60-Plus Associationhave repeatedly warned the Administration about the political and economic perils of early credit programs. Not once has any Bush official attempted to rebut their arguments. 

However, EEI and its member companies spend millions of dollars on campaign contributions, and in politics, money talks.[1] Unless conservatives on Capitol Hill quickly weigh in, Lieberman, Pew, and Environmental Defense may achieve under Bush-Cheney what they could not under Clinton-Gore. In their conversations with DOE and White House officials, the friends of affordable energy in Congress should stress the following points:

(1) Transferable Credits Will Mobilize Pro-Kyoto Lobbying.

Transferable credit programs are inherently mischievous. Credits awarded for early reductions become valuable assets only under a legally binding emissions cap. That is because, although many companies would like to sell carbon creditsespecially if they can earn the credits by reducing or, easier still, avoiding emissions they would reduce or avoid anyway, in the normal course of business operationsno company will buy credits unless faced with a cap or the threat of a cap. Without buyers, there are no sellers and, hence, no market.

 Consider the embarrassingly low opening bids at the Chicago Climate Exchange (CCE). The Greenwire news service reported that, at the first auction, the exchanges 22 member companies and municipalities paid an average of less than $1 for the right to emit one ton of CO2.[2]  Why? Former CCE senior vice president for sales and marketing Ethan Hodel explained: Without regulation and governmentally imposed sanctions, the early evidence is that the American business community is not very interested in a voluntary greenhouse gas cap-and-trade program. Were it not for the risk that Congress may cap carbon emissions in the future, the bid price for credits today would be zero.

 Enacting a cap would instantly pump up demand, boosting credit prices by orders of magnitude. For example, according to the Energy Information Administration (EIA), carbon equivalent credits that sell for next to nothing today would fetch $93-$122 per ton under Sen. James Jeffordss (I-Vt.) Clean Power Act, $79-$223 per ton under McCain-Lieberman, and $67-$348 per ton under Kyoto.[3]  Clearly, credit holders must lobby for regulation and governmentally imposed sanctions if they want to turn voluntary reductions into real money.

(2) A Credit Program Will Coerce Companies to Volunteer.

 Proponents are fond of describing credits as voluntary and win-win (good for business, good for the environment). In reality, transferable credits would set up a coercive zero-sum game in which one companys gain is anothers loss.

 A explained above, credits have no value apart from an actual or anticipated emissions capa legal limit on the quantity of emissions a firm, sector, or nation may release. The cap makes credits valuable by creating an artificial scarcity in the right to produce or use carbon-based energy. Both the market value of the credits and the programs environmental integrity absolutely depend on enforcement of the cap.

 And theres the rub. If the cap is not to be broken, then the quantity of credits allocated to companies in the mandatory period must be reduced by the exact number awarded for early reductions in the voluntary period. Thus, for every company that earns a credit for early action, there must be another that loses a credit under the cap. Companies that do not volunteer will be penalizedforced in the mandatory period to make deeper emission cuts than the cap itself would require, or pay higher credit prices than would otherwise prevail.

 The coercive, zero-sum nature of an early credit program is easily illustrated. Assume for simplicitys sake that there are only four companies in the United States (A, B, C, and D), each emitting 25 metric tons (MT) of CO2, for a national total of 100 MT. Also assume that Congress enacts a mandatory emissions reduction target of 80 MT, and authorizes the Environmental Protection Agency to issue 80 tradable allowances or credits (1 credit being an authorization to emit 1 MT). Absent an early credit program, each company would receive 20 allowances during the compliance period, and have to reduce its emissions by 5 MT.

 Now assume there is an early action program that sets aside 20 allowances for reductions achieved before the compliance period. That reduces each companys compliance period allocation from 20 credits to 15 (4 companies X 15 credits each = 60 + 20 early action credits = 80, the total U.S. emissions budget). Finally, assume that Companies A and B each earns 10 credits for early reductions. In the compliance period, A and B will have 25 credits apiece (10 + 15), which is 5 more (25 instead of 20) than an equal share under the cap would give them. In contrast, C and D will each have 5 fewer credits (15 instead of 20). C and D must make deeper reductions than the cap would otherwise requireor they must purchase additional credits from A and B. Either way, the early reducers gain at the expense of non-participants.

 Programs that penalize non-participants are coercive, not voluntary. Programs that enrich participants at the expense of non-participants are zero-sum, not win-win.

 (3) Credits Will Corrupt the Politics of Energy Policy.

 Once companies figure out that the program will transfer wealthin the form of tradable emission allowancesfrom those who do not act early to those who do, many will volunteer just to avoid getting stuck in the shallow end of the credit pool later on. The predictable outcome is a surge in the number of companies holding conditional energy rationing couponsassets worth little or nothing under current law but worth millions or billions of dollars under Kyoto, McCain-Lieberman, or the Clean Power Act. Credits will swell the ranks of companies lobbying for anti-consumer, anti-energy policies.

 (4) Credits Will Limit Fuel Diversity.

 Coal is the most carbon-intensive fuel (CO2 emissions per unit of energy obtained from coal are nearly 80 percent higher than those from natural gas and about 35 percent higher than those from gasoline).[4] Consequently, Kyoto-type policies can easily decimate coal as a fuel source for electric power generation. For example, according to EIAs analysis, the McCain-Lieberman bill would reduce U.S. coal-fired electric generation in 2025 by 80 percentfrom 2,803 billion kilowatt hours to 560 billion kilowatt hours.[5]

 A transferable credit program will send a political signal that mandatory reductions are in the offing and, hence, that coals days are numbered. As environmental lawyer William Pedersen observes, the Administrations plan to develop company-by-company greenhouse emissions accounts makes little sense except as a step towards legally binding controls. Indeed, why would firms go to the trouble and expense of earning offsets applicable to a future regulatory program unless they believed such a program was coming?[6] DOE cannot issue or certify early credits without ratifying the opinion, tirelessly asserted by green groups, that some form of carbon regulation is inevitable. Anticipating such constraints, many companies will make plans to switch from coal to natural gas. That, in turn, will put additional pressure on already tight natural gas supplies.

 According to a recent study by the Industrial Energy Consumers of America, the 46-month natural gas supply crunch has increased average natural gas prices by 86 percent, costing residential and industrial consumers $130 billion. High gas prices have also contributed to job and export losses, because many manufacturing firms use natural gas both as a feedstock and as fuel to power their plants.[7]

 However unfairly, Democratic candidates blame Bush and the GOP for the loss of 2.8 million manufacturing jobs since January 2001. Politically speaking, the last thing the Administration can afford to do is imperil additional manufacturing jobs by driving up further the demand for and cost of natural gas. An early credit program would have exactly those effects.

 (5) Credits Have No Redeeming Environmental Value.

 A study in the November 1, 2002 issue of the journal Science examined possible technology options that might be used in coming decades to stabilize atmospheric CO2 concentrations.[8] Such options include wind and solar energy, nuclear fission and fusion, biomass fuels, efficiency improvements, carbon sequestration, and hydrogen fuel cells. The report found that, All these approaches currently have severe deficiencies that limit their ability to stabilize global climate. It specifically disagreed with the U.N. Intergovernmental Panel on Climate Changes claim that, known technological options could achieve a broad range of atmospheric CO2 stabilization levels, such as 550 ppm, 450 ppm or below over the next 100 years.

 As the study noted, world energy demand could triple by 2050. Yet, Energy sources that can produce 100 to 300 percent of present world power consumption without greenhouse emissions do not exist operationally or as pilot plants. The bottom line: CO2 is a combustion product vital to how civilization is powered; it cannot be regulated away.

 Given current and foreseeable technological capabilities, any serious attempt to stabilize CO2 levels via regulation would be economically devastating and, thus, politically unsustainable.

 Why is this relevant to the debate on early credits? No good purpose is served by creating the pre-regulatory ramp-up to unsustainable regulation. An early start on a journey one cannot complete and should not take is not progress; it is wasted effort.

 Insuring Disaster

 The rejoinder to the foregoing criticisms is that companies participating in the Administrations voluntary climate programs need credits as an insurance policy, hedging strategy, or baseline protection mechanism so that they will not have to do double duty (reduce emissions from already lowered baselines) under a future climate policy.

 However, an insurance policy that makes the insured-against event much likelier to happen is a prescription for disaster. Kyoto insurance in the form of early credits would do exactly that. To repeat, credits worth little or nothing under current law would be worth big bucks under a carbon cap-and-trade program. Early credit holders stand to gain windfall profits if they successfully lobby for mandatory reductions. A Kyoto hedge fund dramatically increases the odds that Congress will enact Kyoto-like policies.

 Not all hedging strategies deserve approbation and support. A prizefighter caught placing bets on his opponent might sayand possibly even believethat he was just hedging. However, most people would conclude the fix was in. That early credits are part and parcel of a Kyoto fix for U.S. energy markets may be inferred not only from the cap-and-trade clientele such a program would build, but also from the fact that Kyoto insurance salesmen work both sides of the street.

 Many leading proponents of early creditsSen. Lieberman, Environmental Defense, the Pew Center on Global Climate Change, Resources for the Future, Dupont Co., British Petroleum, and the Clean Energy Groupare also among the leading proponents of emissions cap-and-trade programs. They are in the odd position of advocating a hedge against, or demanding baseline protection from, the very policies they promote!

 The U.S. Senate would never ratify Kyoto, nor would Congress ever enact McCain-Lieberman or the Clean Power Act, unless pushed to do so by many of the same policymakers, companies, and activist groups advocating credit for early reductions. If they really wanted to, Sen. Lieberman, Pew, Dupont, et al. could easily ensure that good corporate citizens are not penalized in the future for voluntary reductions today. All they would need to do is disavow their support for cap-and-trade!

 Instead, those worthies try to sell protection from a threat they have in large measure created. Moreover, they do so knowing full well that Kyoto insurance would (a) make the threat of carbon suppression more imminent and certain, and (b) penalize firms whose only offense is not complying in advance with emission control requirements that Congress has not yet enacted.

Economy in the balance

 The carbon in coal, oil, and natural gas is not an impurity or contaminant but an intrinsic component of their chemistry as fuels. That is why carbon dioxide is an unavoidable combustion byproduct of those fuels, why capping CO2 emissions is a form of energy rationing, and why there is no logical stopping point short of total suppression once government starts to regulate energy production based on the carbon content of emissions or fuels. 

 The core issue underlying all climate policy debates is whether politicians and bureaucrats should have the power to regulate America into a condition of energy poverty. The Edison Electric Institute surely believes government should not have such power, which is why it opposes Kyoto and other carbon cap-and-trade schemes. Yet EEI, beguiled by the prospect of turning voluntary reductions into easy cash, is leading the charge for transferable creditsa political force multiplier for the Kyoto agenda of climate alarmism and energy suppression. This is about as sensible as selling the rope by which one will be hanged. The nations premier electric industry lobby can and should do better.


[1] For a list of EEI members, see http://www.eei.org/about_EEI/membership/US_Shareholder-Owned_Electric_Companies/index.htm.  For information on their 2004 election cycle campaign contributions, see http://www.opensecrets.org/industries/contrib.asp?Ind=E08.

[2] Lauren Miura, Voluntary emissions trading draws mild interest, criticism, Greenwire, October 3, 2003.

[3] Energy Information Administration, Analysis of Strategies for Reducing Multiple Emissions from Electric Power Plants with Advanced Technology Scenarios, October 2001, Table 4, p. 22; Analysis of S. 139, The Climate Stewardship Act of 2003, June 2003, p. 65; Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, October 1998, p. xiv.

[4] EIA, Analysis of S. 139, p. 173.

[5] EIA, Analysis of S. 139, p. 176.

[6] William Pedersen, Inside the Bush Greenhouse, The Weekly Standard, October 27, 2003.

[7] Industrial Energy Consumers of America, 46 Month Natural Gas Crisis Has Cost Consumers Over $130 Billion, March 23, 2004, http://www.ieca-us.com/downloads/natgas/$130billion.doc.

[8] Martin I. Hoffert et al., Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet, Science, Vol. 298, 1 November 2002, 981-987.