May 2009

China and the United States account for almost half of global greenhouse gas emissions, which is why Senator John Kerry (D-Massachusetts) this week told the Sydney Morning Herald that ongoing negotiations between the two nations will “define” the upcoming climate conference in Copenhagen (where the 15^th Conference of the Parties to the United Nations Framework Convention on Climate Change will meet in December to negotiate a successor global warming treaty to the failed Kyoto Protocol). According to U.S. Representative Edward Markey (D-Massachusetts) the climate talks will be “one of the most complex diplomatic negotiations in the history of the world,” as reported by the New York Times.

If the Congressmen are correct, and climate negotiations with China are delicate diplomacy, then why did House Speaker Nancy Pelosi (D-California)-long an irritant to the Chinese government for her vocal criticism of the Communist regime’s human rights record-lead a delegation to China to try to find common ground on global warming? Pelosi told 200 students that climate change is “a place where human rights-looking out for the needs of the poor in terms of climate change and healthy environment-are a human right.” I’m not sure what this statement means, but I bet Chinese diplomats cringed.

Thankfully, U.S. Representative James Sensenbrenner (R-Wisconsin) was there to remind reporters that negotiations with China are pointless, because the Chinese leadership already has decided growing prosperity and poverty reduction will not be hindered by expensive-energy climate treaties.

That may seem counter-intuitive, because burning ethanol merely puts back into the air the carbon dioxide (CO2) that corn crops recently pulled out of it, whereas burning gasoline liberates carbon that had been stored in geologic deposits for millions of years.

But other factors come into play, such as the fossil energy inputs required to produce the corn, turn it into ethanol, and deliver the ethanol to market. 

In addition, as EPA argues in its proposed rule to implement the renewable fuel standard program established by the 2007 Energy Independence and Security Act (EISA), expanding corn production into forest and grass lands can release substantial amounts of carbon stored in soils and trees.

Similarly, when U.S. farmers grow corn in areas previously used to produce soy beans, for example, farmers in Brazil have an incentive to convert forest land into soy plantations.

As you might expect, EPA’s use of life-cycle analysis, although required by EISA, drives the ethanol lobby and its congressional allies up the wall. They claim it is ridiculous to link increased corn production here to increased CO2 emissions in developing countries.

But, as my colleague, agricultural commodity analyst Dave Juday, demonstrates, the numbers paint a very clear picture. With Dave’s permission, I reproduce below an email he sent around earlier today.

*  *  *

With regard to GHG and the EPA’s RFS [renewable fuel standard] 2 rule, … the concept of “indirect land use changes” (ILUC) get criticized for being faulty, but it actually is pretty sound.  

Consider, if ethanol drives up US corn  plantings (which it did) and drives down US soybean plantings and production (which it did, because the US – the largest producer and exporter – has only so much farm land and not much tillable acreage to expand) and thereby raises the world price of soybeans, it raises the incentives to grow soybeans elsewhere in the world.  It just so happens Brazil – which is the world’s second largest producer and exporter – is the most likely place where additional soybeans will be grown on virgin land because that is where the virgin land is. 

The real weak link in this GHG lifecycle emissions concept is the ability to measure and value the carbon emissions and sequestration and the process by which “value” gets assigned to practices and manufacturing processes.  Yet, as might be expected from ethanol advocates, it is the simple, fundamental, and rational economic concept that is argued against.    Consider the perspectives shared by a lobbyist and a US Senator on the issue of “indirect land use changes” driven by US biofuel policy:

•  Basically, the EPA has determined that the production of ethanol in America is forcing land use changes in Brazil and other foreign countries to destroy their valuable rain forests to produce farm commodities to make up for reduced exports of these commodities from the United States. Mr. Chairman, I have been in Washington for a long time, but I have never heard of a more bizarre concept. – Tom Buis, CEO, Growth Energy
•  Every chance I get, I’m going to bring this issue up. It’s so obvious that the EPA’s rationale doesn’t meet the common sense test.  It’s ridiculous to think that Brazilian farmers are looking to see what Iowa farmers are doing to determine how they run their own business, and quite frankly it’s plain unfair to farmers. –  Honorable Charles Grassley, US Senator (R-IA)

Addressing these comments above is one of those cases where a picture is indeed worth 1,000 words:

SOURCE: USDA, Foreign Agricultural Service: Production, Supply, and Distribution Online

Added: May 29, 2009

Lisa Lerer delves into the ”life cycle analysis” controversy in the May 26 issue of Politico.  Farm state Democrats are threatening to oppose the Waxman-Markey bill if, as required by EISA, EPA considers the indirect impacts on land-use changes abroad when determining the life-cycle CO2 emissions of domestic ethanol production. 

The same lawmakers enthusiastically supported the EISA renewable fuel program as a global warming policy when they thought it would rig the market in favor of corn farmers. Now they’re threatening to derail Obama’s cap-and-trade initiative if EPA follows the law they helped enact. 

Obama campaigned on a platform of CHANGE, but he may find that in Washington still, Pork Rules and Corn Is King.

Unless I’m totally misunderstanding the sketch of today’s editorial cartoon by the Washington Post‘s Tom Toles, which unimaginatively illustrates climate change “deniers” like a head-in-the-sand ostrich, he also also has drawn a huge sun which apparently is throwing intense heat on the “deniers” (which are supposed to be Republicans, I guess).

But in drawing the sun Toles has unwittingly made a case for solar activity being a stronger climate driver than greenhouse gases. I think Harvard solar scientist Willie Soon would love it.

Announcements

The Heartland Institute’s Third International Conference on Climate Change will be held in Washington, DC on June 2, 2009 at the Washington Court Hotel, 525 New Jersey Avenue, NW. It will call attention to widespread dissent to the asserted “consensus” on various aspects of climate change and global warming. Register here.

The Competitive Enterprise Institute has a new video campaign–Al Gore, 1984. The web page links to a joint CEI-National Taxpayer Union project that allows you to email your Member of Congress about the Waxman-Markey energy-rationing bill.

In the News

Study Estimates 2.3 Billion Lost Jobs with Waxman-Markey
Marlo Lewis, GlobalWarming.org, 22 May 2009

Waxman-Markey Bill Jury-rigged for Special Interests
Steven Pearlstein, Washington Post, 22 May 2009

The Climate-Industrial Complex
Bjorn Lomborg, Wall Street Journal, 20 May 2009

Democrats May Make Trouble for Climate Bill
Lisa Lerer and Patrick O’Connor, Politico, 22 May 2009

Waxman-Markey Full of Unpleasant Surprises
The Washington Examiner, 22 May 2009

Warnings from the Left Coast
Rep. Tom McClintock, 21 May 2009

California’s Sorry State Points to America’s Future
Iain Murray and William Yeatman, Fox Forum, 20 May 2009

Cap and Trade is a License to Cheat and Steal
William O’Keefe, San Francisco Examiner, 18 May 2009

Cap and Trade or Coaches and Horses
Financial Times, 18 May 2009

Waxman-Markey Will Wreck U.S. Economy
Washington Examiner, 18 May 2009

Is Wind the Next Ethanol?
Ben Lieberman, Washington Times, 17 May 2009

Mark Mills: Prophet in His Own Time?
Marlo Lewis, MasterResource.org, 15 May 2009

News You Can Use

What Happens When You Give Away the Ration Coupons?

As former Congressional Budget Office Director Peter Orszag (now Obama’s Office of Management and Budget Director) said, “If you didn’t auction the permits it would represent the largest corporate welfare program that has ever been enacted in the history of the United States. All of the evidence suggests that what would occur is that corporate profits would increase by approximately the value of the permits.”

Rep. Jay Inslee, Washington Democrat, said lawmakers should not repeat the mistakes of the European Union, which gave away its first round of permits to affected industries free of charge: “When they started the cap-and-trade [plan], they gave away all the permits,” Mr. Inslee said. “It created less controversy and it was a spectacular disaster.” From an article on the hearings by Tom LoBianco published in the Washington Times on 22nd April.

H.R. 2454, the American Clean Energy and Security Act, as passed by the House Energy and Commerce Committee on 21st April gives away 85% of the ration coupons to special interests.

Inside the Beltway

Myron Ebell

House Committee Passes Waxman-Markey, 33-25

The House Energy and Commerce Committee early Thursday evening voted to send the Waxman-Markey energy-rationing bill, H. R. 2454, to the House floor by a vote of 33 to 25. One Republican, Mary Bono Mack of California, voted yes. Four Democrats voted no: Mike Ross of Arkansas, Charles Melancon of Louisiana, John Barrow of Georgia, and Jim Matheson of Utah. Republican Nathan Deal of Georgia was not there to vote, but was opposed to the bill.

Final passage came after four long days of considering amendments. The Democratic majority defeated every Republican attempt to put upper limits on the economic damage the bill could do. They defeated amendments that would have suspended the Act if electricity prices double, gasoline reach five dollars a gallon, or unemployment exceeds fifteen percent. An amendment to suspend the Act if China and India don’t reduce their own emissions was rejected on a straight party-line vote.

They also defeated Rep. Marsha Blackburn’s (R-Tenn.) amendment (based on her bill-H. R. 391) that would have removed greenhouse gases from the list of pollutants regulated by the Clean Air Act. Rep. Edward Markey said in opposing the amendment, “We might as well say that the Earth doesn’t revolve around the sun or the dinosaurs never roamed the Earth as to say that carbon isn’t a pollutant.” (I wrote that down as I listened on C-Span, so it may not be an exact quote.) Yes, there’s no doubt in the U. S. Congress that a naturally-occurring trace gas necessary for life on Earth is a pollutant. As far as I can tell, defeat of the Blackburn amendment means that the cap-and-trade scheme in the bill will run in tandem with regulation of greenhouse gases under some sections of the Clean Air Act.

The debate became more and more unreal as it went on. Chairman Henry Waxman (D-Beverly Hills) and Subcommittee Chairman Edward Markey (D-Mass.) argued that the purpose of giving away 85% of the ration coupons to big businesses was to protect consumers from higher energy prices. But cap-and-trade can only reduce emissions if prices go up. Higher prices force consumers to use less and bring otherwise uncompetitive alternatives, such as wind power, onto the market. Of course, everyone realizes that the real purpose of giving away the coupons is to buy support from big businesses. Jim Rogers of Duke Energy is now looking forward to a big retirement package.

It’s actually unlikely that the bill if enacted will reduce emissions, at least for twenty or thirty years. That’s because nearly all the cuts required can be met by buying offsets, as an analysis by the Breakthrough Institute shows. Many offsets are a scam. Most of the ones that aren’t entirely bogus don’t deliver their emissions offsets until decades after they are purchased. For example, you can buy to have a forest planted with young trees, but they won’t sequester much carbon until they grow much bigger.  A Republican amendment to ban foreign offsets, which are especially hard to monitor and verify, was defeated.

Prospects for Waxman-Markey

Four moderate Democrats voted against H. R. 2454. That spells difficulties when it reaches the House floor, but not insuperable ones. My guess is that the bill can probably pass the House if the Democratic leadership can get it to the floor quickly. But I wouldn’t bet on it passing if the vote occurs after the August recess. That’s because it’s ramshackle (as is any thousand-page bill) and will start falling apart as people begin to explore what’s in it. Right now, the momentum is provided by the big businesses that stand to gain windfall profits from getting free ration coupons.

But there are losers as well, and the losers are going to realize that and then will begin to complain about it. The entire real estate and building industries lose big under Title II.  Even among industries that gets lots of free ration coupons, there are winners and losers. For example, utilities get 35% of the coupons, but in some States utilities get more coupons than their current emissions and in some States they get fewer coupons. How many coupons will Rep. Jay Inslee of Washington be willing to transfer from utilities in his State to some other State in order to gain a vote?

So I think that the momentum is going to change directions fairly quickly. Major far-left environmental pressure groups are opposing the bill largely because it gives away the ration coupons to “polluters.” See here and here.(“Far-left” is not only my adjective. When Greenpeace USA, Friends of the Earth, and Public Citizen sent out a press release criticizing Waxman-Markey, that’s how Greenwire described them.) They will mobilize their supporters as floor action approaches.

Public opinion has already turned strongly against the bill. An in-depth poll conducted by Lauer Johnson Research for the National Rural Electric Co-operative Association in early April found that 58% of those surveyed would oppose any bill to combat global warming that would raise their electricity bills by any amount. We have posted the poll results on the Cooler Heads Coalition web site, globalwarming.org. Waxman and Markey are not going to be able to conceal the likely price increases for long. Initial estimates by the Heritage Foundation, Charles River Associates, and the Congressional Budget Office show much higher costs to consumers than the EPA found in their obviously flawed estimate of 13 cents per person per day. Environmental pressure groups that support Waxman-Markey are using the EPA study, even though one of the reasons it finds such low compliance costs is that it assumes that a lot of new nuclear plants are going to be built.

Obama Raises Car Prices

President Barack took a politically popular step this week in announcing higher fuel economy standards for new cars and trucks. The anti-energy bill enacted in 2007 by the Democratic-controlled Congress and enthusiastically supported by President George W. Bush raised Corporate Average Fuel Economy (CAFÉ) standards to 35 miles per gallon for new cars by 2020 (and included the huge increase in the ethanol mandate as well). President Obama raised that to 35.5 miles per gallon by 2016 (higher for cars, lower for light trucks).

It’s popular because vast efforts have been made to make people assume that they can still buy the same vehicle with the same size and performance at the same price, but after government waves a magic wand it will now get more miles per gallon. That is of course not the case. Big cars and trucks are still going to be produced, but the automakers aren’t going to meet these higher CAFÉ standards if they sell very many of them. Thus prices are going to go up for all cars, but much more for bigger, safer models.

While I’ve been concentrating on the Waxman-Markey bill for the past few weeks, things have also been happening in the Senate. Next week, I’ll catch up on the hi-jinks in the Senate Energy and Natural Resources Committee.

Around the World

Kyoto II

A draft of the negotiating text for the fifteenth Conference of the Parties to be held in Copenhagen in December has surfaced. It incorporates entirely new approaches to regulate greenhouse gases. It appears that binding time tables and actions are out, while mandatory “official development assistance” is in.

Yet China will be submitting their own position to the United Nations in one week. While the specific details of the document are unknown, Bejing demanded Tuesday that rich countries cut greenhouse gas emissions by 40 per cent by 2020 from 1990 levels and help pay for reduction schemes in poorer countries, including China, with 0.5 to 1 percent of their annual economic worth. And such developing countries should curb emissions only on a voluntary basis, and only if the cuts “accord with their national situations and sustainable development strategies”.

The Chinese government didn’t say whether they would be willing to loan us the hundreds of billions or even trillions of dollars they want us to pay them to reduce their emissions.

In the States

Utah

Utah may be getting a new governor who is more sceptical about climate change policies than the current one. Lieutenant Governor Gary Herbert will replace Governor Jon Huntsman if the Senate confirms President Obama’s nomination of Huntsman to be our Ambassador to China.

It Costs Only 13 Cents Per Day!

Julie Walsh
If you’ve heard environmentalists claim that the Waxman-Markey bill will only cost each person 13 cent a day, they are relying on information from a recent EPA study. However, the EPA’s analysis includes this rather large assumption: “Nuclear power generation is allowed to increase by ~150% from 782 billion kWh in 2005 to 1,982 billion kWh in 2050” (page 27). There have been no new orders for nuclear plants since the 70s, yet we are supposed to believe that environmental pressure groups will allow dozens of new reactors to be built.

Most media coverage of H.R. 2454, the American Clean Energy and Security Act  of 2009 (ACES), focuses on the bill’s cap-and-trade program and the free rationing coupons (emission allowances) that the bill’s co-sponsors, Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), had to hand out to utilities and other interests to secure their support for the legislation.

But the cap-and-trade program occupies only one of four of the bill’s main sections (”titles”).  Other titles contain a host of mandates and “incentives” (carrots and sticks) to reshape energy and transportation markets.   

ACES, for example:

• Requires utilities to meet a certain percentage of their load with electricity generated from renewable sources, like wind, biomass, solar, and geothermal.
• Promotes small-scale “distributed generation” of renewable electricity by offering three renewable electricity credits (instead of one credit) for each MWh produced.
• Authorizes electric power generators to create a Carbon Storage Research Consortium with the power to assess “fees” (aka taxes) totalling approximately $1 billion annually to fund carbon capture and storage (CCS) demonstration plants.
• Directs the EPA Administrator to hand out free rationing coupons to subsidize CCS.
• Establishes a CCS mandate requiring new coal-fired power plants to emit 65% less carbon dioxide if permitted after 2020, and emit 50% less if permitted between 2009 and 2020; also requires EPA to review these standards not later than 2025 and every five years thereafter.
• Requires utilities to ”consider” developing plans to support electric vehicle infrastructure, and provides assistance (including free emission allowances) to subsidize electric vehicles and infrastructure.
• Mandates stricter building codes achieving 30% higher energy efficiency in 2010 and 50% higher in 2016 for new buildings, and establishes a “building retrofit program” for existing residential and nonresidential buildings.
• Mandates tougher energy efficiency standards for indoor and outdoor lighting, hot food holding cabinets, bottle-type drinking water dispensers, hot tubs, commercial-grade natural gas furnaces, televisions, and other appliances.
• Requires the President, EPA, the Department of Transportation (DOT), and California to establish greenhouse gas (GHG)/fuel economy standards for new passenger cars and light trucks.
• Requires and sets deadlines for EPA to establish GHG emission standards for heavy-duty engines and vehicles and non-road vehicles including marine vessels, locomotives, and aircraft.
• Requires States to establish goals and submit transportation plans to reduce transport sector GHG emissions, and imposes sanctions on States that fail to comply.
• Requires the Deparment of Energy (DOE) to establish industrial energy-efficiency standards.

These measures are economically and environmentally irrational even if you believe that global warming is a “planetary emergency.” As the Charles River Associates (CRA) report for the National Black Chamber of Commerce points out, the renewable electricity, CCS, electric vehicle, and energy efficiency mandates will not yield net emission reductions beyond what the bill’s emission caps already require. The targeted interventions may accelerate GHG reductions in some industries or sectors, but that just allows emissions to increase elsewhere in the economy without breaking the cap.

The rationale for cap-and-trade is that it allows the market to find the least-costly methods of reducing emissions. By superimposing renewable electricity, CCS, electric vehicle, and energy efficiency mandates on that system, Waxman-Markey dictates the means as well as the goals.

There are two possible outcomes. First, which is exceedingly unlikely, the cap motivates reductions in exactly the same ways as the targeted mandates and incentives. In that case, observes CRA, the mandates “would waste resources on needless monitoring, measuring, enforcement and compliance.”

If, as almost certainly would happen, the mandates compel different actions and investments than industry would otherwise undertake to meet the cap, then the same emission reductions would be achieved at higher cost.  The targeted mandates and incentives “can only substitute more costly GHG cuts for those that could have been made at lower cost.”

So what is the point? Why tout cap-and-trade as an “efficient,” “market-based” solution and then gunk it up with cookie-cutter, command-and-control measures?

Several reasons come to mind including deep distrust of markets, an abiding belief in old-fashioned central planning, the desire to rig market outcomes to benefit or punish certain interests, and the desire to create more work (endless full employment) for bureaucrats and lawyers.

One that should not be discounted, though, is the pleasure some people derive from placing their heels on other people’s necks. Politics is chiefly about the organization and application of power. It tends to attract people who enjoy bullying and coercing others. To regulate is to coerce. Command-and-control regulation is more coercive than the market-based variety. So despite their real or feigned enthusiasm for cap-and-trade, many climate activists are hopelessly addicted to mandates.

With the EPA and Congress barreling towards greenhouse gas regulation, you might think that all the states and local governments putting together their own plans might declare victory and move on to more pressing matters like creating make-work with federal stimulus money. You’d be wrong.

The Almanac newspaper reports today that the Menlo Park (Calif.) City Council earlier this week approved a climate action plan created by its volunteer Green Ribbon Citizens’ Committee. As with TARP, however, it appears local leaders may only be willing to go as far as tax-grabbers from larger jurisdictions will pay for them to go:

The City Council approved the plan in a unanimous vote at its May 19 meeting. Prepared by a consultant that specializes in creating climate strategies for local jurisdictions and revised by city staff members, the plan expands upon and fleshes out a dense list of recommendations prepared by the volunteer Green Ribbon Citizens’ Committee in late 2007, council members say.

They acknowledge, however, that (the plan is) incomplete. The city exhausted the $38,000 it expects to receive in grant money to prepare the plan before it had a chance to fully revise the document, and council members look poised to allow a city commission to work on the plan — possibly in consultation with the Green Ribbon committee.

Undoubtedly it was the “consultant” who exhausted the $38k (which the city doesn’t even have yet!). Pretty good gig when these eco-consultants can drop their “climate plan” template on a municipality and collect a cool five-figure (plus?) sum for filling in the blanks. By the way, local watchbloggers, you might check how these consultants are working, lobbying, and wining and dining city officials to get these deals. Back to The Almanac:

Much of the discussion at the May 19 meeting centered on how the city could quantify its efforts to rein in the amount of greenhouse gases emitted into the Earth’s atmosphere. In an impassioned speech to the council, Mitch Slomiak, head of the Green Ribbon committee, urged the city to set measurable goals in reducing emissions, and to treat its “carbon budget” in the same way it regards its general operating fund budget.

You know, like their personal slush fund and favor factory. Like Waxman-Markey.

But council members struggled with how to make the issue tangible.

Easy — make it as tangible as CO2!

Unlike most of the line items in the city’s budget, a decreased carbon output won’t provide a direct benefit to the city.

Hmmm…truly a dilemma for politicians who expect something in exchange for wasting their constituents’ money.

“One might almost conclude that anything we do here is basically symbolic, and setting an example,” said Councilman Andy Cohen.

Money quote: About as close as you’ll get to hearing a global warming alarmist politician saying their climate plans are meaningless.

Councilman John Boyle said he was struggling with the idea of how the plan would fit in with the city’s budget. He noted that even actions that would pay for themselves, such as installing solar panels on city buildings, often take decades to recoup their costs.

But you’re forgetting all the green jobs!

The plan leaves much to be desired, but council members say that approving it is an important gesture — and that its existence may help the city in competing for grants, especially through the federal stimulus bill.

Aha, the real motive — meaningless gestures paid for by (not yet issued) grants, so you can get more grants!