March 2009

Last week, EPA leaked a Power Point presentation revealing that the agency plans on April 30 to propose a finding that “air pollution” from emissions of greenhouse gases (GHGs), principally carbon dioxide (CO2), ”endanger public health and welfare.”

The endangerment proposal, part of EPA’s response to the Supreme Court’s Massachusetts v. EPA (April 2, 2007) decision, is the essential first step towards establishing GHG emission standards for new motor vehicles under Sec. 202 of the Clean Air Act (CAA).

As I explain in this column, EPA cannot establish GHG standards for new motor vehicles without triggering a regulatory cascade through multiple CAA provisions. The impacts on energy markets and the economy will be subject to the vagaries of litigation, and potentially would be far more costly and intrusive than any climate bill Congress has either rejected or declined to pass.

There are three main risks (indicated in the title of this post). Litigation-driven regulation of CO2 under the CAA could block development and new construction, create a Kyoto-on-Steroids regulatory regime never approved or even voted on by Congress, and empower the greenhouse lobby to extort industry support for cap-and-trade legislation in return for dubious promises of “regulatory certainty.”

In the column, I advise friends of energy abundance, economic growth, and limited government to hang tough. Team Obama has got to know that EPA cannot control the regulatory cascade once it starts, that the results could be economically devastating, and that they won’t be able to blame G.W. Bush. If they open Pandora’s Box, there will be political hell to pay, and they know it.

When the greenhouse gang invoke the specter of CAA regulation if we don’t support their cap-and-trade program, we should say: “First you take that gun away from our head, and then we’ll discuss the merits of your bill.”

Energy Chief Open to a Carbon Trade War
Iain Tally & Tom Barkley, Wall Street Journal, 18 March 2009

Energy Secretary Steven Chu on Tuesday advocated adjusting trade duties as a “weapon” to protect U.S. manufacturing, just a day after one of China’s top climate envoys warned of a trade war if developed countries impose tariffs on carbon-intensive imports.

[N.B. Read commentary on carbon tariffs from CEI’s Fran Smith at www.globalwarming.org]

China Responds to Chu’s Threat of Trade War
Michael Forsythe, Bloomberg, 19 March 2009

China’s top negotiator on climate change said a U.S. proposal to impose duties on imports with countries that don’t try to limit their carbon emissions was “an excuse to impose trade restrictions.”

Climate Hype: Let the Backlash Begin
Iain Murray, DC Examiner Opinion Zone, 17 March 2009

Environmentalists and their allies in the Administration were stunned by the news last week that skepticism about the effects of global warming is growing.  With complete domination of both the mainstream media and the political institutions by true believers in global warming, the news from Gallup that 44 percent of Americans believe that global warming has been exaggerated must have come as a shock.  Yet last week’s news contained two good examples of why this should be, and why the debate that Al Gore claims is over may only just be starting.

White House Admits Cap-and-Trade Costs Triple Their Initial Estimate
Phil Kerpin, Fox News, 17 March 2009

I’ve already explained here on the Forum how the cap-and-trade energy tax works, and would be the biggest tax increase in the history of the country. Now, amazingly, the White House is telling something closer to the truth about this tax hike, admitting that the official budget estimate of $646 billion over 8 years-already a mighty steep price to pay-is far, far lower than the real cost.

Showing that he believes Al Gore’s typical misunderstanding that the Chinese word for crisis is made up of the characters for threat and opportunity (it isn’t), Achim Steiner, head of the UN Environment Program, has said that the global financial crisis provides an opportunity for a global green new deal:

The UNEP report said investments of one percent of global gross domestic product, or about $750 billion, could bankroll a “Global Green New Deal” inspired by the “New Deal” of U.S. President Franklin D. Roosevelt that helped end the depression of the 1930s. [sic]

Investments should be split between more energy efficient buildings, renewable energies, better transport, improved agriculture and measures to safeguard nature — such as fresh water, forests or coral reefs, it said.

The $750bn bill would be paid for by – you guessed it – a tax on oil in rich countries:

“If, for argument’s sake, you were to put a five-year levy in OECD countries of $5 a barrel, you would generate $100 billion per annum. It translates into roughly 3 cents per liter,” he said.

“It would be almost, if not totally, unnoticed by the consumer,” he said, especially since oil prices have fallen from more than $140 a barrel at mid-2008 peaks to about $40.

A barrel of oil contains 158 liters and OECD consumption is about 20 billion barrels a year, he said. “This is just one example, there may be many others,” of funding, he said.

Ah, the “unnoticable” tax – the revenue stream with no consequences, the Holy Grail of socialists and their fellow travelers. While perhaps not noticable at the gas pump, such a tax would be noticable at the aggregate level of the economy. But why worry about a few jobs lost there, a few families forced into poverty here? It all leads to a much better world in terms of renewable energy, no?

Well, no. As is beginning to dawn on some people, the scale of the problem when it comes to CO2 is far beyond the ability of current renewable technology to solve:

The world used 14 trillion watts (14 terawatts) of power in 2006. Assuming minimal population growth (to 9 billion people), slow economic growth (1.6 percent a year, practically recession level) and—this is key—unprecedented energy efficiency (improvements of 500 percent relative to current U.S. levels, worldwide), it will use 28 terawatts in 2050. (In a business-as-usual scenario, we would need 45 terawatts.) Simple physics shows that in order to keep CO2 to 450 ppm, 26.5 of those terawatts must be zero-carbon. That’s a lot of solar, wind, hydro, biofuels and nuclear, especially since renewables kicked in a measly 0.2 terawatts in 2006 and nuclear provided 0.9 terawatts. Are you a fan of nuclear? To get 10 terawatts, less than half of what we’ll need in 2050, [Cal Tech scientist Nate] Lewis calculates, we’d have to build 10,000 reactors, or one every other day starting now. Do you like wind? If you use every single breeze that blows on land, you’ll get 10 or 15 terawatts. Since it’s impossible to capture all the wind, a more realistic number is 3 terawatts, or 1 million state-of-the art turbines, and even that requires storing the energy—something we don’t know how to do—for when the wind doesn’t blow. Solar? To get 10 terawatts by 2050, Lewis calculates, we’d need to cover 1 million roofs with panels every day from now until then. “It would take an army,” he says. Obama promised green jobs, but still.

In other words, this global green new deal will solve no problems, while exacerbating the current problem of too little money to go around by extracting more money from the viable economy. Just like the original New Deal, then.

Fiona Harvey of the FT is one of the better journalists covering the environmental beat, but I’m afraid that is a bit like saying that someone is one of the better members of Congress. In this blog entry on green jobs she commendably raises some objections to the idea that “green jobs” can be a panacea, but then shows her own biases with an unsupportable assertion:

That said, the move to a low-carbon economy requires such major changes in the way the whole of the economy – from house building to vehicle manufacturing to recycling our rubbish to redesigning our cities – that it is sure to entail a large number of new jobs, which will almost certainly far outweigh the effects of any job losses.

Really? The Heritage Foundation’s analysis of green employment resulting from the weak CO2 restrictions proposed in last year’s Lieberman-Warner bill found a net reduction in American employment of some 900,000 jobs. A German government study found that green technology would only be a positive for employment as long as the country remained a net exporter of the technology, something bound to change as other countries usurped their comparative advantage. A Spanish study by the Instituto Juan de Mariana found that for each green job created in Spain, at least 2.2 “regular” jobs were lost (and also that thanks to the temporary nature of many green jobs, 40,000 such jobs will be lost this year).

Fiona’s assertion reminds me of this statement by Catherine Bennett in The Guardian, 2004:

In short, if we can rise to the challenge, the permanent abolition of the wheel would have the marvelously synergistic effect of creating thousands of new jobs – as blacksmiths, farriers, grooms and so on – at the same time as it conserved energy and saved the planet from otherwise inevitable devastation

The only difference is, Ms. Bennett was clearly joking.

Thanks, Fran, for blogging on the carbon tariff threat to the peace and prosperity of the world.

We should all remember that carbon tariffs are no mere quirk of this or that administration, political party, or government agency. Protectionism is an inherent feature of carbon suppression policies, for three reasons:

(1) Companies and labor unions in carbon-constrained countries will demand carbon tariffs to “level the playing field” vis-a-vis firms in non-carbon constrained countries. Absent carbon tariffs, domestic industry and labor will not support cap-and-trade or carbon taxes.

(2) Carbon suppression programs all exhibit the classic collective action problem. However much it might be in the collective interest of every nation to “save the planet,” it is in the separate interest of each nation to free-ride on the sacrifices of others. The environmental harm any individual country incurs because it cheats on its emission reduction obligations is likely to be immeasurably small (even if we assume that global warming is an unfolding catastrophe), whereas the gains from cheating are likely to be both measurable and substantial. Unless credibly deterred and punished, cheating will be widespread and the system will collapse. Absent the threat or use of military force, trade sanctions (carbon tariffs) are the only way to prevent cheating.

(3) The EU-IPCC-Al Gore goal of achieving a 50% reduction in global emissions by mid-century is impossible absent deep emission cuts in developing countries. As this U.S. Chamber of Commerce presentation shows, the vast majority of the growth in global emissions is projected to occur in developing countries. Thus, even if industrialized countries go cold turkey and cut their net emissions to zero by 2050, developing countries would have to cut their CO2 emissions 62% below baseline projections to achieve a 50% reduction in global emissions. Whether trade sanctions would be enough to bully China and India into cutting their emissions is doubtful. One thing is certain: Preaching Gorethodoxy is not going to make them stop building coal plants and buying automobiles.

For more on the insanity of carbon tariffs, there’s an excellent 2008 article by the National Post’s Terence Corcoran appropriately titled “Blowing up the WTO.”  Here’s what he says:

This is a legal and practical quagmire. To figure out the appropriate tax level would require a mind-blowingly elaborate carbon-measurement scheme, created on a global scale. It would have to be able to determine how much carbon emissions are embedded in the power drill that is nominally made in China, but is actually assembled from parts made in a dozen other countries. Some of those countries may or may not have carbon control programs in place.

Corcoran concludes:

. . . all this is a recipe for global trade wars. It would mean, in effect, blowing up the WTO trade system to create a parallel Carbon Trade System that would be based on the opposite principles. The objective would be to restrict trade, not increase it; to control trade, not liberate it; to increase trade conflict, not reduce it; to weaken the economy, not strengthen it.

And these ideas are coming from economists?

Just as the World Bank put out a report on increased trade protectionism in the world, U.S. Energy Secretary Steven Chu came out in favor of using carbon tariffs as a “weapon” against countries that aren’t taking steps to reduce their carbon emissions and as a way to protect U.S. manufacturers.

He seemed not to notice that the day before China’s top climate change official Li Gao had warned that carbon tariffs imposed on developing countries would be a “disaster” and perhaps start a trade war.

Li had suggested too that maybe those rich countries that import goods from China might themselves pay for offsetting the emissions in their production.

We are at the low end of the production line for the global economy. We produce products and these products are consumed by other countries, especially the developed countries. This share of emissions should be taken by the consumers but not the producers.

Chu also doesn’t seem to remember that the European Union likes the idea of carbon tariffs against such countries as – gasp – the U.S.

Smoot and Hawley ain’t seen nothing yet if carbon tariffs play out.

Elitist Enviros Hurt Blue-Collar Americans
Joel Kotkin, Forbes, 17 March 2009

The great Central Valley of California has never been an easy place. Dry and almost uninhabitable by nature, the state’s engineering marvels brought water down from the north and the high Sierra, turning semi-desert into some of the richest farmland in the world.

UK, Running out of $, Halts Green Investments
Ashley Seagen, Guardian, 17 March 2009

The government ran into a storm of criticism yesterday after quietly closing its grant program for solar energy last week, which campaigners said made a mockery of its commitment to build a low-carbon economy.

Senate Democrats Revolt against Obama’s Climate Policies
Andrew Taylor, AP, 16 March 2009

Eight Senate Democrats are opposing speedy action on President Barack Obama’s bill to combat global warming, complicating prospects for the legislation and creating problems for their party’s leaders.

White House Open to Drilling in Alaska?
H Josef Herbert, AP, 16 March 2009

Interior Secretary Ken Salazar said Monday he would consider tapping oil from Alaska’s Arctic National Wildlife Refuge by drilling outside its boundaries if it can be shown that the refuge’s wildlife and environment will remain undisturbed. But Salazar emphasized that the Obama administration stands firm that the Alaska refuge, known as ANWR, “is a very special place” that must be protected and that he is not yet convinced directional drilling would meet that test.

The Independent in London this week ran with the latest claim about sea level rise. Their headline illustrated perfectly how ridiculous predictions quickly transform into facts. The story was headlined, “Sea levels rising twice as fast as predicted.” The first sentence did not agree with the headline: “Sea levels are predicted to rise twice as fast as was forecast by the United Nations only two years ago….” That is, the soothsayers have read their chicken entrails again and decided that their previous divinations were not dire enough. This has nothing to do with actual sea level rise. For the past several years, sea level rise has been below the average rate of the twentieth century, which in total was about seven inches.