October 2010

Rent Seeking Begets More Rent Seeking

by Brian McGraw on October 20, 2010

in Blog

The EPA recently approved a 50% increase in ethanol blends for cars manufactured after 2006, moving from E10 to E15. This means that gas stations are now free to offer E15 as well as E10 as options at the pump. It isn’t likely that many gas stations will be taking advantage of these new rules for a number of reasons.

One important issue is that the EPA has not made it clear who will be liable for consumers who damage their automobiles by using higher blends of ethanol that aren’t appropriate for their vehicle. Automobile manufacturers are worried that they will be held liable through warranties and required to repair engines, retailers share the same concern.

The EPA has not provided sufficient details on these liability issues, despite the E15 approval:

“The EPA said in its proposed E15 label rule that it would not typically hold a fuel retailer liable for customer misfueling into any vehicle, engine or piece of equipment, provided that the station’s pumps were properly labeled. That does little to comfort retail fuel groups such as NACS, which claim that the Clean Air Act includes a provision that allows for citizens to sue retailers for misfuelings. NACS said it is concerned that misfuelings could be both accidental and intentional, and labels may not provide them with enough litigation protection. “

It is funny to see the ethanol industry so frustrated by these burdensome government-imposed regulations, while they ignore the reality that government support of their industry is the basis for much of their revenue in the first place.

In response to problems stemming from confusion at the pump, the National Association of Convenience Stores offered up a brilliant solution: “The easiest way to remedy the situation is to mandate that everything’s full-serve, that you do not allow the customer to have the opportunity to misfuel, either deliberately or unintentionally,” said NACS spokesman Jeff Lenard.

I’m surprised he didn’t mention that it would create millions of green low paying jobs. Mandating full service pumps would benefit large incumbent gasoline franchises at the expense of smaller stations. This was certainly the case in New Jersey (where full-service stations are required), whose gasoline stations were closely involved in overturning propositions to strike down these laws.

A “Do Nothing Congress” on Ethanol Would Do a Lot of Good

by Marlo Lewis on October 20, 2010

in Politics

Congress has a rare opportunity to shave $25-30 billion from the national debt, ease consumers’ pain at the pump, and scale back political manipulation of energy markets by literally doing nothing.

At the stroke of midnight on December 31 of this year, statutory authority for the 45¢ per gallon Volumetric Ethanol Excise Tax Credit (VEETC) and the 54¢ per gallon tariff on imported ethanol will expire.

For economic, humanitarian, and environmental reasons, Congress should sit back and let the grim policy reaper sweep these special-interest giveaways into history’s dustbin, as I explain this week on National Journal’s Energy Blog.

Tomorrow, at the National Press Club, Agriculture Secretary Tom Vilsack will discuss the Obama Administration’s “strategy” to grow the biofuel industry.

I’ve seen no inside info on what Vilsack will say. However, the corn ethanol lobby is pushing for “reforms” that would not only reauthorize the tariff and tax credit but also mandate the production and sale of ethanol-fueled vehicles and provide new subsidies to build a gigantic ethanol pipeline network and install 200,000 ethanol fuel pumps at service stations.

Just in case Vilsack decides to join this bandwagon, and on general principles, the Competitive Enterprise Institute, Freedom Action, and other free-market groups will send an open letter tomorow urging Congress to embrace the unheard of option of doing nothing, thereby benefiting taxpayers, consumers, and the environment.

I plan to attend the Vilsack press conference. Will he come out swinging for renewal of the tariff and tax credit? Will he propose new mandates and subsidies? Or will he keep things vague? Stay tuned.

China Entering “Demand Super Cycle” for Coal

by William Yeatman on October 20, 2010

in Blog

In a story today about the surging profits of Peabody Energy (a major American coal producer), Climatewire (subscription required) quoted Peabody Chairman and CEO Gregory Boyce as saying that coal is entering a “demand super cycle” due to exploding Chinese growth. According to Mr. Boyce, “China now forecasts that 290 gigawatts of coal-fueled generation will come online from 2011 to 2015.” He calls the demographic trends in China “overwhelming.”

Two quick snap responses:

  1. There’s a silly meme being bandied about by the mainstream media that China is winning some sort of green energy great game with America. In fact, China is building two coal fired power plants every three weeks, while in the U.S., environmentalist lawyers recently celebrated the scuttling of 100 coal fired plants. We are losing an energy game with China, but the prize isn’t green energy. Rather, it’s affordable, reliable energy. They are building it. We aren’t.
  2. Peabody is looking for a west coast port to increase the export of low cost coal from Wyoming to China. That is, China is welcoming the coal our country is spurning. As a result, we are heading towards a future where the U.S. buys expensive green energy from China (because it is cheaper to manufacture there), while China buys cheap coal from the U.S. Guess whose energy future is more promising?

In the News, 20 October 2010

by William Yeatman on October 20, 2010

in Blog

French President Orders Lifting of Fuel Depot Blockade:
“”Trying to reassert authority over the widespread protests against his plans to reform the pension system, President Nicolas Sarkozy said on Wednesday that he had ordered the authorities to break up blockades of fuel depots that have left a third of the country’s gas stations dry .”

Obama Administration Says It Will Investigate China’s Green Tech Trade Policies:
“The Obama administration announced today that it is launching an investigation into China’s green technology trade policies. The investigation is in response to a lengthy petition filed last month by the United Steelworkers.”

Report: In Obama’s Chicago, stimulus weatherization money buys shoddy work, widespread fraud:
“Projects to weatherize homes are a key part of the Obama administration’s fusion of stimulus spending and the green agenda. But a new report by the Department of Energy has found serious problems in stimulus-funded weatherization work — problems so severe that they have resulted in homes that are not only not more energy efficient but are actually dangerous for people to live in.”

Spain’s “Green Energy” Economy Continues to Implode

by Chris Horner on October 19, 2010

in Blog, Politics

Today’s exhibit about Spain’s economic miracle — you could call it a sector-specific collapse — comes from Bloomberg, a heartbreaking tale of the gravy inevitably running out. It is a tale that, pre-collapse, President Obama expressly sought to emulate and California is still actively pursuing, as is typical for the equally bankrupt California. Obama is now silent about Spain as his model and California claims its law is, er…the “world’s first!”

As happened in Spain, California’s bill is certain to come due long before the preening political class expected. The U.K.’s Global Warming Policy Foundation has a roundup with the top six stories in today’s update being relevant, as well.

So, yes, dear, these “green economy” schemes grow the economy. Of course, then so did Mr. Ponzi’s scheme. And, naturally, the plaintiff’s bar grows the economy, too, because we need a bigger court system and people to craft the instructions on shampoo bottles. Except upon slightly more scrutiny than the statists would like, they actually kill jobs. But if you only focus on this part I’m waving my hands at over here…

And upon such scrutiny, their approach of name-calling and fabrication instead of arguing the merits begins to look pretty good.

Do Voters Overwhelmingly Support Clean Energy Candidates?

by Brian McGraw on October 19, 2010

in Blog

The Huffington Post and NRDC’s Action Fund say yes, and are using this poll to edge congressional-hopefuls towards committed support for green energy.

The poll was run in sixteen different states by Public Policy Polling. The results for the different states are here. The results confirm the skepticism many have of public polling—the framing of the question has an enormous effect on the expressed opinions.

Here is an example question (from a section of Ohio):

Congress is considering an energy bill to move America towards a new energy future including investments in wind and solar power. Supporters say the energy bill will create millions of new jobs, reduce our use of foreign oil, hold corporate polluters accountable and cut the pollution that causes climate change. Opponents say the bill will cost companies money and is like an energy tax that would

actually reduce jobs. Do you agree more with supporters of the energy bill or opponents of the energy bill?

Agree more with supporters………………………. 43%

Agree more with opponents ………………………. 41%

Not sure …………………………………………………. 16%

Emphasis mine. The results aren’t important, there is probably even more support for this particular question in other states. The phrasing of the poll controls the outcome. Support for energy legislation is depicted as “moving America towards a new energy future” — which paints a vague picture of a new, brighter future. Do you like new cars or old cars? Do you want a new cell-phone or to keep your old crummy one?

Next, we hear that the legislation will create millions of jobs – 100% of voters love job creation, particularly during periods of high unemployment, and “holding corporate polluters accountable” invokes a standard outrage against the evil tyrannical corporations, who don’t seem to be getting any credit for powering our homes and businesses.

Now look at what they say the opponents of this legislation claim: “that it will cost companies money” and will reduce jobs. Is this what opponents claim? Many do claim a net loss of jobs because of increased energy prices. But do any reasonable opponents claim that the legislation will only cost companies money? No – they correctly explain that much of these costs will be passed onto consumers, a fact which was not-accidentally left out of the poll. It is phrased as a win-win for the average-Joe, who can stick it to the corporations and maybe get one of those awesome new jobs. When you promise an unrealistic win-win future, and throw in some good old corporate-bashing, you shouldn’t be surprised when people believe it.

Here is a poll conducted by Ipsos Public Affairs about a year ago, on support for cap-and-trade. It’s all about the phrasing.

“There’s a proposed system called ‘cap and trade’ that some say would lower the pollution levels that lead to global warming. With Cap and Trade, The government would issue permits limiting the amount of greenhouse gases companies can put out. Companies that did not use all their permits could sell them to other companies. The idea is that many companies would find ways to put out less greenhouse gases, because that would be cheaper than buying permits. Would you support or oppose this system?”

.

Support Oppose Unsure

52% 41% 7%

.

“What if a cap and trade program significantly lowered greenhouse gases but raised your monthly electrical bill by 10 dollars a month? In that case would you support or oppose it?” N=567

.

Support Oppose Unsure

50% 48% 2%

.

“What if a cap and trade program raised your monthly electrical bill by 10 dollars a month but also created a significant number of ‘GREEN’ jobs in the United States? In that case would you support or oppose it?” N=567

.

Support Oppose Unsure

69% 29% 2%

“What if a cap and trade program significantly lowered greenhouse gases but raised your monthly electrical bill by 25 dollars a month? In that case would you support or oppose it?” N=553

.

Support Oppose Unsure

43% 55% 2%

.

“What if a cap and trade program raised your monthly electrical bill by 25 dollars a month but also created a significant number of ‘GREEN’ jobs in the United States? In that case would you support or oppose it?” N=553

.

Support Oppose Unsure

60% 36% 4%

Links: October 19th

by Brian McGraw on October 19, 2010

in Blog

West Virginia Senate Debate Addresses Climate Change (C-SPAN Video)

Candidates Governor Joe Manchin (D), John Raese (R), Jesse Johnson (Mountain Party), Jeff Becker (Constitution Party). Though the candidates have differing opinions on climate change itself, they’re united in agreement that cap-and-trade legislation would be bad news for West Virginia. Governor Manchin wants to destroy the bill, literally.

The energy discussion takes place from 19:00-25:00.

In Kansas, Climate Skeptics Embrace Cleaner Energy

“Don’t mention global warming,” warned Nancy Jackson, chairwoman of the Climate and Energy Project, a small nonprofit group that aims to get people to rein in the fossil fuel emissions that contribute to climate change. “And don’t mention Al Gore. People out here just hate him.”

A small project in Kansas has led green-energy advocates to realize that some mid-western communities are willing to embrace energy saving programs despite their skepticism over climate change. Instead, advocates rely on promises of reduced dependence on foreign oil, energy conservation, and creating local green jobs.

Ben Lieberman on Consumer Costs of Regulations

by Marc Scribner on October 18, 2010

in videos

[youtube:http://www.youtube.com/watch?v=qRb2U8XzIlY 285 234]

Outsourcing Your Emissions

by Brian McGraw on October 18, 2010

in Blog, Politics

The Guardian reported this weekend on the confusing statistics being employed in Europe’s effort to reduce GHG emissions, “Europe on track for Kyoto targets while emissions from imported goods rise“.

The European Environment Agency reported that Europe is on track to meet agreed-upon emissions reductions of 20% by 2020, having already reduced their emissions by 17% from 1990 levels. A European Think-Tank, Policy Exchange, took a different perspective, noting that during this time emissions from imported goods and services have increased by 40%.

The stringent emissions reductions policy in Europe has caused domestic emissions to be replaced by emissions from foreign imports. If your goal is a global emissions reductions, then by this measure their policy has failed — while raising the price of energy and encouraging manufacturers to relocate abroad.

The European Department for Energy and Climate Change prefers only to look at domestic production, arguing that embedded emissions from imported Chinese produced goods are not the UK’s responsibility, and that “The UK calculates and reports its emissions according to the internationally agreed criteria set out by the UN.” Given China’s clear assertions that Chinese national interests will come first, it seems unlikely that they will be willing to take responsibility for the entirety of emissions from export production.

Walter Russell Mead comments on this topic.

EPA Ozone Standard Would Destroy 7.3 Million Jobs, Study Estimates

by Marlo Lewis on October 18, 2010

in Science

A recent study by the Manufacturer’s Alliance/MAPI finds that EPA’s proposed revision of the “primary” (health-based) national ambient air quality standard (NAAQS) for ozone would have devastating economic impacts, such as:

  • Impose $1 trillion in annual compliance burdens on the economy between 2020 and 2030.
  • Reduce GDP by $687 billion in 2020 (3.5% below the baseline projection).
  • Reduce employment by 7.3 million jobs in 2020 (a figure equal to 4.3% of the projected labor force in 2020).

In a companion report, the Senate Republican Policy Committee estimates the job losses and  “energy tax” burden (compliance cost + GDP reduction) each State will incur if EPA picks the most stringent ozone standard it is considering.

The costs of tightening ozone standards are likely to overwhelm the benefits, if any, as Joel Schwartz and Steven Hayward explain in chapter 7 of their book, Air Quality in America: A Dose of Reality on Air Pollution Levels, Trends, and Health Risks. 

So let’s see — we have emission regulations that function as de-facto energy taxes, and the costs far outweigh the putative benefits. Sound familiar? The resemblance to Waxman-Markey is more than superficial, because if stringent enough, air pollution regulations can restrict fossil energy use no less than carbon taxes or greenhouse cap-and-trade schemes.

For more information on EPA’s proposed ozone NAAQS and the MAPI study, see my post today on CEI’s Open Market.Org.

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