November 2010

Greens Desperate to Avoid Blame” was the headline on Darren Samuelsohn and Robin Bravender’s story in Politico on Wednesday. Environmental pressure groups moved quickly to spin the election results as having nothing to do with them.  In particular, they claimed that passage in the House of the Waxman-Markey cap-and-trade bill did not cause Democrats to lose.  On the contrary, the reality is that Waxman-Markey did contribute to the defeat of a number of Democrats, as I argue in Politico’s Energy Arena.

More significant is the fact that the new Republican majority in the House is largely skeptical of the claim that global warming is a potential crisis and is close to unanimously opposed to cap-and-trade and other energy-rationing measures.  Not only is cap-and-trade dead, but there is a good chance that the House next year will move legislation to block or delay the EPA from using the Clean Air Act to regulate greenhouse gas emissions.

The question is, can such a measure pass the Democratic-controlled Senate?  There is certainly a majority in the Senate for blocking EPA, but sixty votes will be needed.  My guess is that there will be more than sixty votes.  As EPA regulations start to bite next year, Senators will start to hear complaints from their constituents.  And a number of Democratic Senators are up for re-election in 2012 and will want to avoid the fate of so many of their colleagues this year.

In the News

Cap-and-Trade Is Political Kryptonite
Myron Ebell, Politico Energy Arena, 5 November 2010

EPA Regs for Rigs
Marlo Lewis, GlobalWarming.org, 5 November 2010

The Wilderness Obsession
Roger Scruton, American Spectator, 5 November 2010

What the Elections Mean for the Greens
Chris Horner, Planet Gore, 4 November 2010

Environmental Toxins
Iain Murray, The Corner, 4 November 2010

High Speed Trains Are a Waste of Money
Robert Samuelson, Washington Post, 1 November 2010

Green Hiring Scandal at the DOE
Eugene Samuel Reich, Nature, 1 November 2010

News You Can Use

Cap-and-Trade Kills Careers in Congress

Thirty-one House Democrats who voted for H.R. 2545, the Waxman-Markey cap-and-trade bill, were defeated in the elections. The Senate did take a vote on cap-and-trade.

Inside the Beltway

Myron Ebell

On Cap-and-Trade: They Lost, We Won

Greens Desperate to Avoid Blame” was the headline on Darren Samuelsohn and Robin Bravender’s story in Politico on Wednesday. Environmental pressure groups moved quickly to spin the election results as having nothing to do with them.  In particular, they claimed that passage in the House of the Waxman-Markey cap-and-trade bill did not cause Democrats to lose.  On the contrary, the reality is that Waxman-Markey did contribute to the defeat of a number of Democrats, as I argue in Politico’s Energy Arena.

More significant is the fact that the new Republican majority in the House is largely skeptical of the claim that global warming is a potential crisis and is close to unanimously opposed to cap-and-trade and other energy-rationing measures.  Not only is cap-and-trade dead, but there is a good chance that the House next year will move legislation to block or delay the EPA from using the Clean Air Act to regulate greenhouse gas emissions.

The question is, can such a measure pass the Democratic-controlled Senate?  There is certainly a majority in the Senate for blocking EPA, but sixty votes will be needed.  My guess is that there will be more than sixty votes.  As EPA regulations start to bite next year, Senators will start to hear complaints from their constituents.  And a number of Democratic Senators are up for re-election in 2012 and will want to avoid the fate of so many of their colleagues this year.

President Obama Reacts

President Barack Obama left on Friday for a ten-day trip to Asia beginning in India.  Before he left, he held a press conference on the election results and gave an interview to Sixty Minutes, which has been released by CBS ahead of its broadcast on Sunday night.  In reply to two questions at his press conference, the President spoke at length about alternatives to cap-and-trade.  He said, “Cap-and-trade was just one way of skinning the cat; it was not the only way.  It was a means, not an end.  And I’m going to be looking for other means to address this problem.”

The President said that there were several areas where he might be able to find common ground with the Republicans in Congress.  These included natural gas, nuclear power, and electric vehicles.  He also said that, “The EPA is under a court order that says greenhouse gases are a pollutant that fall under their jurisdiction.”  This is a misunderstanding, but he then also seemed to express some openness to congressional intervention in EPA regulation of greenhouse gas emissions: “And I think EPA wants help from the legislature on this.  I don’t think that the desire is to somehow be protective of their powers here.”

The Dream Team Returns

Senator Harry Reid (D-Nev.) survived a tough election challenge and so is expected to be back in the 112th Congress as Majority Leader.  What is much more surprising is that House Speaker Nancy Pelosi (D-San Francisco) announced today that she would run for Minority Leader in the 112th Congress.

Across the States

California

Proposition 23, a California ballot initiative to suspend AB 32, the State’s global warming law, until unemployment decreases to 5.5 %, was defeated on Tuesday by a 61% to 29% vote. Opponents of Prop 23, primarily venture capitalists with a financial stake in green energy mandates, spent more than $30 million to persuade Californians to vote against it. As a result of Proposition 23’s defeat, Governor-elect Jerry Brown will have unlimited power to regulate California’s economy in the name of climate change mitigation. In his previous job as California Attorney General, Brown interpreted AB 32 broadly. Indeed, he used the legislation to sue California counties for failing to address global warming in their transportation plans adequately. Expect more of the same.

New Mexico

Opposition to cap-and-trade featured prominently in the winning campaigns of both New Mexico Governor-elect Susana Martinez (R) and Congressman-elect Steve Pearce (R). Yet, on the very day that New Mexico voters indicated their displeasure with energy-rationing climate policies, outgoing Governor Bill Richardson’s (D) administration committed the state to a regional cap-and-trade program. It remains to be seen whether Richardson can entrench the ruling so that it could withstand a likely challenge from incoming Governor Martinez.

The Cooler Heads Digest is the weekly e-mail publication of the Cooler Heads Coalition. For the latest news and commentary, check out the Coalition’s website, www.GlobalWarming.org.

Today at MasterResource.Org, the free-market energy blog, I offer comentary on the Obama Administration’s proposed rule to establish first-ever greenhouse gas (GHG) emission and fuel economy standards for semi-trucks and other “heavy duty” (HD) motor vehicles.

Although the rule’s ostensible purpose is to reduce carbon dioxide (CO2) emissions and oil imports, about 93% of the claimed net benefits have nothing to do with either climate change or energy security. Supposedly, truckers will make out like bandits by adopting fuel-saving technologies they would already have purchased if they were as smart as the bureaucrats at EPA and the National Highway Traffic Safety Administration (NHTSA).

Sound familiar? Just as cap-and-trade proponents tried to sell their stealth energy tax as a “green jobs” program when they couldn’t sell it as climate protection, so EPA and NHTSA now try to sell their save-the-planet-beyond-petroleum regulations as a fuel-savings bonanza for owners of big rigs, dump trucks, buses, pickups, and vans.

EPA and  NHTSA offer five possible explanations of why truckers “under-invest” in fuel-saving technology even though fuel is a major operating expense, the industry is competitive, and profit margins are often thin. As discussed in my MR column, the agencies provide no solid evidence of “market failure.” Indeed, two of their “potential hypotheses” suggest that truckers are just behaving like prudent buyers, waiting to see whether the technologies perform as advertized and don’t adversely affect truck reliability and maintenance costs.

So what’s really fueling the rule? Well, partly it’s the fuel-economy fetish that Congress has enacted into law, most recently via the misnamed Energy Independence and Security Act of 2007, which requires NHTSA to establish fuel-economy standards for HD vehicles.

Not to be underestimated, though, is the agencies’ organizational interest in expanding their bureaucratic empires. The joint rule will give EPA and NHTSA new control powers over vehicle manufacturers and the freight goods industry. Although the rule targets vehicles manufactured during model years 2014-2018, the agencies look forward to administering, and tightening, GHG/fuel-economy standards for HD vehicles from now through 2050.

What policy changes should free-marketeers advocate given the big shakeup that has just occurred in the composition and leadership of Congress?

In addition to overturning EPA’s Endangerment Rule, which would put the kibosh on all EPA global warming regulations, the 111th Congress should make NHTSA’s HD fuel-economy standards voluntary. Let the agencies make their case that every dollar truckers invest in fuel economy will generate returns of 140%-420%. But then let the trial-and-error process of the marketplace decide whether what EPA and NHTSA are peddling is smart advice or hype.

Draw up a map of the U.S. and shade in the regions that rely on energy jobs – places like Appalachia, the Rockies, western Gulf states, Alaska – and that’s where we saw some of the strongest anti-Obama sentiment succeeding on election day.
With few exceptions, the only Democratic congressional candidates who won in these areas were those able to distance themselves from President Obama’s energy policies – or to be more accurate, his anti-energy policies. In its first two years, the Obama administration has tried to slam the door shut on domestic production of coal, oil, and natural gas.
But now, many of the administration’s Congressional allies in this effort have gotten a pink slip from their constituents. Obama will soon have to contend with a Congress that sees increased supplies of affordable domestic energy – and the increased jobs that go with it – as things worth fighting for rather than against.
Most notably, costly global warming legislation proved to be political poison. Many Senate incumbents can only be grateful that the administration-endorsed cap-and-trade bill never came to a vote in the upper chamber, as the House-passed version was a major factor in defeating more than two dozen of its supporters. This includes longtime Democratic incumbent Rick Boucher whose rural Virginia district has a number of coal mines.
Voters throughout Appalachia correctly saw cap-and-trade as an energy tax designed to raise the cost of coal and other fossil fuels in order to drive them out of the marketplace. They didn’t like the implications for their electric bills, and they certainly didn’t like the implications for coal mining jobs. In addition to cap-and-trade, attempts by the Environmental Protection Agency to deny new coal mine permits added to the voter outrage throughout coal country. And on top of concerns about coal mining jobs, voters in states like Ohio, Pennsylvania, and Michigan that need affordable coal to maintain manufacturing jobs sent home incumbents who voted for cap-and-trade.
Cap-and-trade was every bit as unpopular in other energy producing regions, including the West where Rep. Harry Teague of New Mexico suffered the same fate as Boucher. The administration’s efforts to reduce oil and natural gas production on federal lands were also a factor. Obama’s Secretary of the Interior Ken Salazar quickly earned a reputation as Secretary No on oil and gas drilling throughout the Rocky Mountain region, blocking many already-approved leases and issuing a record-low number of new ones. The region has the highest unemployment in the nation, and killing high-paying oil and gas industry jobs there was not well received on election day. Another November 2nd victim was Obama supporter John Salazar, incumbent Congressman from an energy-rich but job poor Colorado district – and Ken Salazar’s brother.
It is also worth noting that the BP oil spill in the Gulf of Mexico, hyped by President Obama in a nationwide address as “the worst environmental disaster America has ever faced,” had little impact on the elections. If anything, it was the administration’s attempt to parlay the spill into a deepwater drilling moratorium that sparked anger amongst voters in the Gulf region. Obama’s overreach has already killed jobs in Louisiana and neighboring states. The only reason the moratorium did not play a bigger role in the elections there was that it was denounced by candidates of both parties.
The same is true in Alaska. Nowhere is the energy industry more important to a state economy than in Alaska. And there, the Obama administration has reached a dubious milestone – for the first time in decades, virtually all energy exploration activities in the state have come to a halt. As with Louisiana, the only reason energy wasn’t a bigger issue was that every major candidate had strongly disagreed with the administration and vowed to fight it on issues like opening portions of the Arctic National Wildlife Refuge and National Petroleum Reserve and allowing exploration in the Beaufort and Chukchi seas.
In sum, just about every place in America where there is energy below the ground there were angry voters above it on November 2. The mandate is clear and now it is up to the incoming Congress to bring to Washington something that has been missing for the past two years – a policy that favors American energy production and jobs.

House Democrats who voted for the Waxman-Markey cap-and-trade bill were big losers in the congressional elections. Approximately thirty Democrats who voted for Waxman-Markey were defeated. This does not include Democratic losses in open seats in which the incumbent chose not to run for-re-election.

Representative Rick Boucher, a senior fourteen-term Democrat from Virginia’s coal district (the 9th), negotiated the deal that led to passage of Waxman-Markey by a 219-212 vote on June 26, 2009. Boucher lost and took many coal-state Democrats with him.

“One of the clearest messages voters sent last night was a repudiation of cap-and-trade and other policies to raise energy prices,” said Myron Ebell, Director of CEI’s Center for Energy and Environment.

Other House Democrats who voted for Waxman-Markey and lost include: Betsy Markey in Colorado; Alan Grayson, Allen Boyd, Suzanne Kosmas, and Ron Klein in Florida; Debbie Halvorson and Phil Hare in Illinois; Baron Hill in Indiana; Frank Kratovil in Maryland; Mark Schauer in Michigan; James Oberstar in Minnesota; Ike Skelton in Missouri; Dina Titus in Nevada; Carol Shea-Porter in New Hampshire; John Adler in New Jersey; Harry Teague in New Mexico; John Hall, Michael McMahon, and Scott Murphy in New York; Bob Etheridge in North Carolina; Zack Space, John Boccieri, Steve Driehaus, and Mary Jo Kilroy in Ohio; Patrick Murphy in Pennsylvania; John Spratt in South Carolina; Tom Perriello in Virginia; and Steve Kagen in Wisconsin.

Reconciling the various, final pre-election surveys of voter sentiment indicates a that “it’s the spending, stupid.” It is remarkable how quickly public consciousness has developed to know that debt equals taxes.

Cap-and-trade is now dead, having proven, as we predicted serially, to be the 1993 BTU tax, redux. Members in the House voted on both measures on the assurance the Senate would not leave them hanging out to dry, isolated with that difficult vote, only to see their trust misplaced. As opposition grew more intense from the people-who were not at the table when their wealth was redistributed to various interests-the senators realized that they wanted to save jobs. Theirs.

We also see that cap-and-trade’s ugly Plan B cousin, “green jobs,” is not only sure to be an obsession very soon. The public will equally soon come to understand the bankrupting expense of “green jobs” programs: in President Obama’s erstwhile model, Spain, it cost them $750,000 per (temporary) “green job,” placing the nation’s energy infrastructure and economy in peril leading to an ongoing political crisis.

All over Europe Obama’s previously touted model states are struggling to rein in the subsidy schemes which threatened to expand the Greek contagion. These are economic black holes paying small fortunes for each job created, crowding out private sector growth, displacing real jobs responding to market forces with temporary jobs that disappear when the subsidy does, as it must (see: “census jobs”). All the while they necessitate higher energy costs as part of the plan. That makes them much worse than other make-work programs like ditch-digging-and-filling.

Still, just last week Obama’s Energy Department claimed in the Washington Post that its own stimulus version of the scheme was an “unqualified success”-at a half a million dollars per temporary job created! Moreover, all parties acknowledged in the article that the bubble has to be renewed annually or it bursts. Somehow this disastrous failure proved to the Obama administration that “clean-energy investments [sic] are ready for prime time.” Oh, dear.

The coming, attempted ‘green jobs’ binge is no more than WPA-style spending, which FDR confidantes admitted as a flop, and the debt to underwrite which delays the recovery further, just as the public seems to recognize the Obama agenda has already done.

There is the coming “energy” debate in a nutshell, and how, in a rational world, it will play out. Fortunately, ‘green shoots’ of rationality do seem to be popping up. The public realize “it’s the spending, stupid” and grasp the illusory nature of economic activity predicated on such “stimulus”-style debt-spending.

According to the AP, an administrative judge last week capped at $45 million the cost-overruns of Xcel’s “Smart Grid City” demonstration project in Boulder, Colorado. I haven’t been following this particular project, but I have been tracking similar cases in other cities, and I assure you, smart grid is the biggest rip-off in contemporary energy policy (after ethanol).

Ask anyone what a “smart grid” is, and you’ll get a different answer every time. In Boulder, it’s a fiber optical network. In Baltimore, it’s a “ZigBee” local area network. In Oklahoma City, it’s GE Smart Meters. They all were spawned of the stimulus, which showered more than $3 billion to utilities across the country to subsidize any boondoggle that called itself “smart grid.”

This is the sort of social policy that makes regulated utilities salivate. It’s ill-defined and capital intensive. Moreover, it promises to grow, like the blob. Today, it’s scores of millions of dollars of cost overruns in Boulder; tomorrow, it’s hundreds of millions of dollars in Denver.

And for what? Smart grid is a means to an end–namely, “demand side management.” The idea is to “manage” energy demand by, say, remotely adjusting thermostats in the homes of hundreds of thousands of utility customers , so as to draw down demand and avoid taxing the electricity grid. With smart grid technologies, your local utility can become your Big Brother.

There is, of course, a much easier way to “manage” demand: Price electricity what it costs.  Energy consumers would voluntarily reduce consumption during periods of high demand, because they would have an incentive (higher prices) to do so.

Unfortunately, local politicians have every incentive to maintain control over the price of electricity. After all, energy is the “master-resource,” so controlling its cost is a powerful political chip. Hence, the allure of “demand side management.” It affords local politicians control over the price of electricity AND control over demand. That way, they can avoid the inimical effects of price controls by controlling demand (that is, by controlling your thermostat). The losers, naturally, are the consumers, who must shoulder the added costs and inefficiencies inherent to a “managed” market.

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

Inside the Beltway

by Myron Ebell on November 1, 2010

in Blog

Elections: Running from Cap-and-Trade

Campaigns often become annoying as election day approaches, but they do have the benefit of sucking all the energy out of Washington.  Congress has been out for a month to allow Members to campaign, and even the agencies tend to go silent just before an election for fear that announcing some new rule or policy could become a damaging campaign issue.

But when Washington springs alive again after next Tuesday, it will be a city transformed by the election results.  Even if the rout of House and Senate Democrats occurs precisely as predicted (minus 50 House seats and 7 Senate seats is the average guess; here is a typical forecast), it will all look and feel different after it has happened than in anticipating it.

While the reactions to big election swings are often surprising, one thing that is absolutely clear already is that cap-and-trade has been a significant issue in the campaign and that cap-and-trade will be totally dead after November 2nd.  Every Republican incumbent and challenger is running against cap-and-trade.  Most are running against global warming alarmism.  House Democrats who voted against the Waxman-Markey bill are featuring that vote in their campaigns.  Only a handful of the more than 200 Democrats who voted to pass Waxman-Markey in 2009 are even mentioning it in their campaigns.

Cap-and-trade is especially potent as an issue in coal country.  In West Virginia, it has become so toxic that Governor Joe Manchin (D) revived his Senate campaign against John Raese by running a television ad in which he shoots a copy of one of the Senate cap-and-trade bills.   Rep. Nick Joe Rahall (D-WV)), the Chairman of the House Natural Resources Committee, voted against Waxman-Markey, but is now in the race of his life against a challenger, Elliott Maynard, who is scoring points with voters by arguing that Rahall’s opposition was weak and that he in effect supports cap-and-trade because he voted for Rep. Nancy Pelosi (D-Calif.) for Speaker.

Rep. Rick Boucher (D-Va.) is in even worse shape in his nearby district in Virginia.  Boucher put the interests of his party ahead of the interests of his coal-mining district when he made a deal and rounded up the votes necessary to pass Waxman-Markey on June 26, 2009.  In 2008, Boucher didn’t have a Republican opponent.  This year Morgan Griffith appears to be running a very close race. Boucher’s loss would send an unmistakable signal to congressional candidates in energy-producing and energy-using manufacturing districts for many elections to come.