Cooler Heads Digest

by William Yeatman on October 17, 2008

In the News

European Nations Back-peddle from Climate Commitments
Stephen Castle, New York Times, 16 October 2008

European Nations Buck Their Climate Commitments
Leo Cendrowicz, Time, 16 October 2008

IPCC Head Endorses Obama
Jeremy van Loon, Bloomberg, 16 October 2008

Green Journalism
Paul Chesser, Spectator, 16 October 2008

Alaska Glaciers Growing Healthily

Craig Medred, Anchorage Daily News, 14 October 2008

Credit Crisis Threatens Climate Goals in Congress

Zachary Coile, San Francisco Chronicle, 13 October 2008

News You Can Use
What Global Warming?

The most sophisticated computer models in the world predict a temperature increase in this decade of about 0.2C due to increased concentrations of atmospheric greenhouse gases.

But this is not at all what we have seen, according to statistician Bjorn Lomoborg. Temperatures in this decade have not been increasing. They have actually decreased by between 0.01 and 0.1C.

Inside the Beltway

What, No Safety-valve?
CEI’s Marlo Lewis

If elected President, Barack Obama will give EPA the green light to regulate carbon dioxide under the Clean Air Act, Bloomberg.com reports. Bloomberg’s source is Obama’s energy adviser, Jason Grumet, who also serves as executive director of the self-styled National Commission on Energy Policy (NCEP).

This is very odd. NCEP is the leading proponent of a price-cap “safety valve” to limit the energy and economic impacts of a carbon trading program (see p. 21 of this report). NCEP touts its safety-valve proposal as the moderate middle between the regulate-at-any-cost Left and the regulate-under-no-circumstances Right. Supposedly, the safety valve would take the economic risk out of regulating carbon, because the government would commit in advance to sell as many permits as might be needed to keep carbon prices within a pre-set cost ceiling. Under the original NCEP plan, for example, the government would guarantee that carbon permit prices do not exceed $7 per ton in the first year, and do not increase by more than 5 percent annually.

Now, EPA’s authority to establish any kind of cap-and-trade program under the Clean Air Act is doubtful. In North Carolina v EPA (July 11, 2008), the D.C. Circuit Court of Appeals vacated EPA’s Clean Air Interstate Rule—a plan to control traditional air pollutants via an interstate cap-and-trade program. There is certainly no provision in the Clean Air Act authorizing EPA to establish an NCEP-style trading program with a safety valve. 

More fundamentally, if Grumet truly believes that climate legislation lacking a safety valve is a non-starter because it would subject U.S. businesses to unacceptable risk, then he should view the Clean Air Act as a flawed, unsuited, and potentially destructive instrument for regulating carbon dioxide. As EPA’s advance notice of proposed rulemaking and other analyses demonstrate (see here, here, and here), regulating carbon dioxide under any Clean Air Act program would trigger a regulatory cascade with enormous potential to inflate energy costs, create massive uncertainty for business, and stifle economic development.
 
It’s not hard to understand why Sen. Barbara Boxer (D-Calif.), Rep. Henry Waxman (D-Calif.), and Rep. Ed Markey (D-Mass.) castigate President Bush and Bush’s EPA for not taking the first steps to regulate carbon dioxide via the Clean Air Act. Boxer, Waxman, and Markey would like nothing better than for Bush to adopt their climate policy agenda, so that they wouldn’t have to vote for it and thereby take responsibility for the economic consequences.

Around the World

EU Climate Plan in Shambles

The European Union’s climate plan is on the brink of collapse after Italian and Polish heads of state used their veto power to win the right to weaken the EU’s global warming policy.

When European leaders met this week for the quarterly European Council meetings, the EU’s pledge to reduce its greenhouse gas emissions 20% below 1990 levels by 2020 was on the agenda. By using their veto threat, Italy and the six east European members deleted all reference to the EU Commission’s climate strategy from the Council statement, and they also won the right to modify the strategy to make it “cost effective.”

Poland opposes the climate plan because it is dependent on coal for 95% of its electricity. Two weeks ago, the EU Parliament endorsed a plan from the EU Commission to reduce greenhouse emissions with a tough cap-and-trade scheme that would price coal out of the energy market, due to its high carbon content. Without coal, Polish officials are worried that they would have to turn to Russian natural gas. For the Poles, however, energy dependence on Russia, their former master, is unacceptable.

Greece, Hungary, Slovakia, Romania and Bulgaria are also coal dependent countries in eastern Europe, and they share Poland’s fear of energy dependence on Russia. That’s why these states agreed to join together to oppose the EU’s climate plan at the European Council.

Instead of energy security, Italian Prime Minister Silvio Berlusconi cited international competition as the reason that Italy opposed the climate plan. "I have announced my intention to exercise my veto," he said. “We do not think that now is the time to be playing the role of Don Quixote, when the big producers of CO2, such as the United States or China, are totally against adherence to our targets.”

France and Germany, two of the EU’s most powerful members, continue to disagree over whether the financial crisis should influence the EU’s climate plan. Three weeks ago in Berlin, German foreign minister Frank-Walter Steinmeier told a conference that “the crisis changes priorities…One cannot rule out that interest in protecting the climate will change because of such a crisis.”

However, French President Nicolas Sarkozy this week told the press that “The deadline on climate change is so important that we cannot use the financial and economic crisis as a pretext for dropping it.”

Across the States

California Releases Climate Plan

California is considered the national leader on climate policy because of Assembly Bill 32, the Global Warming Solutions Act, which Governor Arnold Schwarzenegger signed into law in 2006. The act directs a California agency, the Air Resources Board (CARB), to formulate a strategy that would reduce the state’s greenhouse emissions to 1990 levels by 2020, a thirty percent decrease from business as usual.

This week CARB released the final version of its plan to achieve the emissions cuts, and as we have noted before, it is full of wishful thinking and policies that have already failed.

California now has 3 years to implement a climate plan that is designed to make energy more expensive so consumers use less of it. Then again, there’s no guarantee that California will follow through with its climate strategy. The Golden State could do what the European Union is now doing in the face of economically painful climate regulations: retreat (see “Around the World,” above).

Dodging climate commitments will be an attractive option, given the state of California’s economy. This week the Wall Street Journal reported that California is especially vulnerable to the financial crisis because it is home to so many housing bubbles. Citizens of California, moreover, carry more debt that citizens of other States. That applies to California government, too. Thanks to plummeting housing prices and depressed consumer spending, California faces a budget crisis. According to the article, California’s public debt is likely to surpass anything the State has known before, even the $38 billion deficit in the wake of the dot-com bust.

In fact, the California government narrowly averted a financial meltdown this week by issuing $4.5 billion in short term bonds to help meet a $7 billion shortfall through spring. Before the emergency issue, California Governor Arnold Schwarzenegger (R) sent a letter to U.S. Treasury Secretary Henry Paulson asking the federal government for a bailout.

In this economic environment, it remains to be seen how far California will follow through with its costly climate commitments.

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