Cooler Heads Digest 2 October 2009

by William Yeatman on October 5, 2009

in Cooler Heads Digest

In the News

Rent-Seekers, Inc.
Kimberley Strassel, Wall Street Journal, 2 October 2009

Nike’s Green Lobbying
Tim Carney, Washington Examiner, 2 October 2009

Don’t Ban the Lightbulb
David Henderson, Washington Post, 2 October 2009

Defects in Hockey Stick Exposed (again)
Ross McKitrick, National Post, 2 October 2009

Paul Krugman Can’t Multiply
Robert Murphy,, 2 October 2009

Cooling Down the Cassandras
George Will, Washington Post, 1 October 2009

EPA Prepares Regulatory Nightmare
Marlo Lewis,, 1 October 2009

Cap-and-Trade: The Economic Suicide Act
John Trudel, Oregonian, 30 September 2009

Investor’s Business Daily
, 30 September 2009

Aristocrats Can Afford Car-Free Days
Sam Kazman, Washington Examiner, 29 September 2009

Green Jobs Aren’t the Answer
John Berlau & William Yeatman, Washington Times, 27 September 2009

News You Can Use

Big Business Loves Cap-and-Trade

This week three major corporations-Exelon, PG&E, and Nike-made high profile exits from the U.S. Chamber of Commerce, supposedly in protest over the Chamber’s skeptical take on global warming. Actually, they left in protest over the Chamber’s skeptical take on energy rationing. Here’s why these big businesses love cap-and-trade:

  • Nike manufactures its shoes in Vietnam; many of its competitors’ shoes are American made. So a cap-and-trade energy tax would give Nike a competitive advantage.
  • Exelon is a leader in nuclear power, which emits no carbon dioxide. According to an internal company memo, cap-and-trade energy rationing would increase Exelon’s revenue by $1.5 billion a year.
  • In a 2006 report, PG&E boasts that the “emissions rate” of its electricity generation portfolio is 58% lower than the national average. If Congress enacts carbon caps on power plant emissions, California-based PG&E could expand into the massive Los Angeles market, which now receives almost half its power from out-of-state coal generators.

Inside the Beltway

Myron Ebell

Energy Rationing Draft Introduced in Senate

Senators John Kerry (D-Mass.) and Barbara Boxer (D-Calif.) released a draft of their version of the Waxman-Markey energy-rationing bill on Wednesday.  The 821-page bill hasn’t been introduced yet, so doesn’t have a number, but it does have a name: “The Clean Energy Jobs and American Power Act.”  The text may be found here and summaries here and here.

The cap-and-trade section has been re-titled “Pollution Reduction and Investment.”  Environment and Energy Daily reported Kerry’s thinking: “I don’t know what ‘cap and trade’ means.  I don’t think the average American does,” Kerry told reporters.  “This is not a cap-and-trade bill, it’s a pollution reduction bill.”

Kerry also stressed that the bill is about security.  I’m not sure from what we will be more secure.  A recent study concluded that Waxman-Markey would double our reliance on imported refined petroleum products.

It is notable that Kerry rather than Boxer is the lead sponsor.  Kerry is not a member of the Environment and Public Works (EPW) Committee, which Boxer chairs and which has primary jurisdiction over the bill.  I assume it’s because Senate Democratic leaders don’t want to repeat the mess Boxer made of managing the Lieberman-Warner bill on the Senate floor in June 2008.  It’s not clear to me that Kerry will be a big improvement as floor manager, but then it’s not clear to me that this bill will ever make it to the Senate floor.

Kerry-Boxer does not detail how the ration coupons will be divvied up among the big business special interests lining up at the trough, but the Washington Post reports what Boxer said in a taped interview with C-SPAN.  The interview is scheduled to be broadcast on Sunday, but C-SPAN has posted it on their web site. According to Juliet Eilperin’s story, Boxer says that “The vast majority of allowances will go to consumers to keep them whole.”

It will be interesting to hear Boxer explain how protecting consumers from energy cost increases will reduce emissions.  As Dr. Peter Orszag, now director of the White House Office of Management and Budget, explained in congressional testimony on 24th April 2008 when he was head of the Congressional Budget Office: “Under a cap-and-trade program, firms would not ultimately bear most of the costs of the allowances but instead would pass them along to their customers in the form of higher prices. Such price increases would stem from the restriction on emissions and would occur regardless of whether the government sold emission allowances or gave them away. Indeed, the price increases would be essential to the success of a cap-and-trade program because they would be the most important mechanism through which businesses and households would be encouraged to make investments and behavioral changes that reduced CO2 emissions.”

Boxer also acknowledges in the interview that they don’t yet have the 60 votes necessary for Senate passage.  Initial reactions from other Senators were not encouraging.  Senator James Inhofe (R-Okla.), ranking Republican on the EPW Committee, blasted the bill, but several other Senators who are considered to be undecided swing votes were critical as well. For instance, Senator Jay Rockefeller (D-WV), Chairman of the Commerce Committee, said that Kerry-Boxer was, “a disappointing step in the wrong direction.”

The pro-labor union Economic Policy Institute warned in a report that four million jobs could be lost to foreign competition if cap-and-trade legislation does not include carbon tariffs on imported goods produced in countries without carbon reduction regimes.  The report also noted that total global greenhouse gas emissions would likely increase as production shifted to countries that have less energy-efficient industries.

EPA Issues Illegal Climate Rule

The Environmental Protection Agency this week released a proposed rule to regulate major emitters of greenhouse gas emissions under the Clean Air Act.  The proposed rule will be open for public comment for sixty days.

The most interesting aspect is that EPA is not proposing to regulate stationary sources that emit more than 250 tons per year, but rather only sources that emit more than 25,000 tons per year.  The Clean Air Act is explicit.  Once a substance is listed as a criteria pollutant (which EPA is in the process of doing for carbon dioxide and other greenhouse gases), all sources over 250 tons must be regulated.  As my colleague Marlo Lewis points out, EPA recognizes that this would cause regulatory and economic havoc and so has decided simply to ignore the law.

Is Treasury Hiding True Cost of Energy-Rationing?

The Competitive Enterprise Institute on Tuesday notified the Treasury Department of their intent to file suit in federal court to compel release of all the documents related to Treasury’s cap-and-trade plan.  Treasury in September responded to a Freedom of Information Act (FOIA) request by CEI’s Chris Horner by releasing only redacted parts of five documents.  The notice of intent to sue was contained in a FOIA appeal to Treasury.

CEI had learned that Bush Administration Treasury Secretary Henry Paulson had created a team of fifteen professional economists to devise a cap-and-trade program.  The documents released by Treasury revealed cost estimates ranging from $100 to $200 billion per year to the U. S. economy.  After a week of negative publicity, Treasury released the redacted portions of the parts of the five documents, which contained cost estimates of $300 to $400 billion per year.

Around the World

Bangkok Blues

Diplomats met in Bangkok this week for the final round of major negotiations before the 15th Conference of the Parties to the UN Framework Convention on Climate Change this December in Copenhagen, where environmentalists hope the world will agree to a climate change mitigation treaty.

Negotiators in Bangkok made no progress on the key issue of burden sharing. Economically developed countries still won’t commit to a treaty that doesn’t include China and India, and these rapidly developing countries still won’t accept costly carbon controls that hurt their economies. Developing counties will only agree to a treaty if they get hundreds of billions of dollars each year to finance a conversion to green energy, but developed countries won’t pay. It’s the same gridlock that has doomed climate treaty talks for years.

There are only three months until Copenhagen, and global warming alarmists are getting worried. The UN Secretary General Ban Ki-moon bemoaned the “glacial pace” of the talks. And UNFCCC chair Yvo de Boer complained that “we’re not seeing any real advances.”

India: Senate Climate Bill Is “Measly”

India isn’t impressed with the new Kerry-Boxer cap-and-trade legislation. According to ClimateWire. Indian environmental minister Jairem Ramesh yesterday told a Yale forum that the Senate bill only called for a “measly” 5% reduction of U.S. emissions below 1990 levels.

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