May 2014

Renewable Fuel Standard: The False “Certainty” of a Rigged Market

by Marlo Lewis on May 17, 2014

in Blog, Features

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The Hill (May 16, 2014) reports that almost 8 in 10 U.S. biodiesel producers have cut back production this year. According to a National Biodiesel Board (NBB) survey, 78% of producers reduced output, 57% of companies have idled or shut down plants, and 66% have downsized workforces or are considering it. 

NBB blames the downturn on “uncertainty” over federal biodiesel programs. Specifically:

Almost all of the surveyed companies attribute the industry’s decline to two recent policy developments: the expiration at the end of last year of the tax credit to produce biodiesel and a proposal last year by the Environmental Protection Agency not to increase the biodiesel mandate in the Renewable Fuel Standard.

This, however, is a tacit confession that the biodiesel market is rigged and begins to fall apart as soon as government relaxes its grip on taxpayers and the industry’s involuntary servants.

Two things should be obvious to biodiesel producers.

(1) What the state can giveth the state can taketh away. Everybody has a natural right to compete for willing buyers in the marketplace. Nobody has a natural right to compel others to buy his products. The Renewable Fuel Standard (RFS) fabricates such rights, but entitlements exist at the pleasure of the powers that contrive and administer them. It is foolish to regard RFS blending targets as property rights that can’t be taken from you — especially when the whole system depends on violating the property rights of others, namely refiners, whose facilities the RFS commandeers to process and sell your product!

(2) The RFS is heading for a crackup. The statutory target for 2014 (18.15 billion gallons) exceeds by approximately 3 billion gallons the amount of biofuel that can actually be sold given the size of the U.S. motor fuel market and the incompatibility of most vehicles and retail fueling infrastructure with blends higher than 10% ethanol. This “blend wall” problem will get worse if refiners’ obligations increase in lockstep with the statutory targets while overall motor-fuel demand declines as forecast. When Soviet-style production quota get too far out of whack with actual market conditions, central planners will make adjustments to avoid outright policy failure and political embarrassment. It is foolish to suppose they will sacrifice their careers to protect biofuel producers’ bottom lines.

Naturally, special interests complain when technical or fiscal constraints intrude on their gravy train. But why should the rest us of bail them out?

We would all be better off in the long-run if government stopped trying to pick energy market winners and losers. The RFS is a system of legal plunder and should be abolished.

In his 1850 classic, The Law, Frederic Bastiat asks: How is legal plunder to be identifed? He answers, in part: “See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.” A sales rep of any company who forced you to buy its products would go to jail.

The pertinent passage from The Law is reproduced below. The final two paragraphs are an apt commentary on the wailing and whining over EPA’s scaleback of the RFS blending targets. [click to continue…]

Cooler Heads Digest 16 May 2014

by William Yeatman on May 16, 2014

in Cooler Heads Digest

Cooler Heads Digest 16 May 2014

To Frack or Not to Frack? A Tale of Unequal Opportunity on the New York-Pennsylvania Border

by Marlo Lewis on May 15, 2014

in Blog

Was Pennsylvania wise to encourage hydraulic fracturing of shale gas and New York foolish to ban it, or vice versa?

Buffalo News reporter Jerry Zremski explores this question today in “Border tale of boom and bust,” the first of a three-part series.

two states 6

Zremski interviewed both experts and work-a-day people living in four northern-tier rural Pennsylvania counties and four adjacent southern-tier rural New York counties. All eight counties sit atop gas reserves in the Marcellus Shale. The article is balanced. People on both sides of the fracking issue get their say. Zremski does not belittle environmental concerns or ignore social costs (truck noise, damaged roads, crime) that can increase along with wealth in a boom town.

Nonetheless, the data he presents paint a stark contrast of growth and opportunity in Pennsylvania versus stagnation and decline in New York: [click to continue…]

Regulatory Capture Comes Full Circle at the EPA

by William Yeatman on May 15, 2014

in Blog, Features

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By 1970, it was commonly held that New Deal era regulatory agencies had been “captured” by the industries they were supposed to oversee. According to this influential school of thought, industry’s political spending and also its close cooperation with regulators led to cozy relationships that undermined effective oversight. The most conspicuous manifestation of regulatory capture was a “revolving door” of employment between regulatory agencies and industry.

The 1970 Clean Air Act was supposed to be the antidote to regulatory capture. The law was unusually long and detailed; it was, moreover, replete with deadlines, which were then a novel legislative tool. Most consequential of all, Congress empowered environmental special interests to litigate in order to enforce the law’s many duties. By so crafting the statute, Members of Congress intended to supplant agency discretion with legislative direction and public oversight, and thereby curtail the possibility of regulatory capture.

Since the enactment of the Clean Air Act, environmental special interests have prospered, primarily by leveraging the unique authorities they were accorded in the statute. In 2012, for example, NRDC and Sierra Club had revenues of approximately $100 million and $80 million, respectively. Thus enriched, both organizations now operate sophisticated campaign to influence political outcomes.**Moreover, by employing a legal strategy known as “sue and settle,” these environmental groups have seized EPA’s regulatory initiative. (Paradoxically, “sue and settle,” which is a means of contemporary regulatory capture, is made possible only by virtue of the Clean Air Act’s many deadlines—i.e., the supposed “solution” to regulatory capture in 1970.) In short, environmental special interests are exhibiting virtually all of the behaviors that defined regulatory capture 40 years ago…

…including a revolving door. Consider the following, non-comprehensive list of current and recent EPA political appointees that have come from green litigation groups (and vice-versa): [click to continue…]

Will EPA’s Carbon “Pollution” Rules Implement the Defunct Waxman-Markey Bill?

by Marlo Lewis on May 14, 2014

in Blog, Features

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Will EPA’s Carbon Rules implement the defunct Waxman-Markey cap-and-trade bill?

That’s a question I addressed in a previous post and more recently in a comment letter to EPA on its proposed Carbon Rule for new fossil-fuel power plants. Today’s post offers a more complete discussion.

The Waxman-Markey bill (H.R. 2454), officially titled the American Clean Energy and Security Act (ACESA) of 2009, aimed to rapidly phase-out coal-based power in the U.S. via three types of carbon dioxide (CO2) regulation:

  1. New source performance standards (NSPS) for coal-fueled power plants (section 116). New coal power plants permitted between Jan. 1, 2009 and Jan. 1, 2020 would have to achieve a 50% reduction in CO2 emissions. The only technology capable of meeting that standard is carbon capture and storage (CCS), which can make new coal power plants 5 times more expensive than new natural gas combined cycle (NGCC) plants (see Table 2 of this EIA report). Unless heavily subsidized, utilities planning to build coal power plants would “fuel switch” and build new NGCC plants instead.
  2. A cap-and-trade program covering all major emitters (Title III). Existing coal power plants and other major emitters would have to achieve aggregate CO2-equivalent greenhouse gas emission reductions of 3% below 2005 levels by 2012, 17% below by 2020, 42% below by 2030, and 83% below by 2050.
  3. A combined efficiency and renewable electricity standard (Title I). Utilities would have to supply increasing percentages of electricity from a combination of efficiency upgrades and renewable sources (6% in 2012, 9.5% in 2014, 13% in 2016, 16.5% in 2018, and 20% in 2020-2039).

Let’s consider the parallels — both obvious and tacit — between the Waxman-Markey regulatory Troika and EPA’s Carbon Rules. [click to continue…]

Perspective on the West Antarctic Ice Sheet Melt

by William Yeatman on May 14, 2014

in Blog

Two teams of scientists released papers this week that rendered the same conclusion: Thanks to global warming, the West Antarctic ice sheet will melt sometime between 200 to 900 years from now, and there’s nothing we can do to stop it. The ice sheet’s demise would lead to 4 feet of sea level rise.

The New Yorker called the research “terrifying.” Mother Jones described it as being a “a holy shit moment for global warming.”

For the purposes of putting this “terrifying,” “holy shit moment” research in perspective, allow me to simply approximate the difference between 200 and 900 years, and assume that the ice sheet completes its unstoppable melt in 500 years. Now, consider what America looked like half a millennium ago:

America, 500 years ago.

America, 500 years ago.

My how times have changed!

I’ve employed this simple thought experiment in order to highlight how yawning a temporal gap is 500 years, in terms of the human experience. Is it really “terrifying” to imagine that citizens of the globe, in five centuries, will have to contend with a world bereft of the West Antarctic ice sheet? The thought experiment also aptly demonstrates the technological advance of human civilization over the last half millennium, and, by extension, our capacity for adaptation. [click to continue…]

Michael Mann’s Hatchet Job on Keystone XL

by Marlo Lewis on May 13, 2014

in Blog

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Despite climategate, the death of cap-and-trade, the 17-year warming pause, the epic failure of climate models, and the growing popularity of skeptic blogs, Hockey Stick inventor Michael Mann still tries to pull rank and tell policymakers what to do because, after all, he and his “colleagues” in the climate alarm movement are “scientists.”

In a recent column inveighing against the Keystone XL pipeline, Mann notes or alludes to his scientific credentials in five places. He remains blithely unaware that scientism — the overreach of experts who try to turn science into a debate-stopping “consensus” and who claim scientific status for partisan and ideological agendas — is off-putting to many Americans and energizes the skeptic movement he despises.

In his recent column in the Guardian, Mann warns that building the Keystone XL pipeline would “greaten the risk of dangerous and potentially irreversible climate changes.” This, we shall see, is nonsense.

After taking obligatory swipes at GOP Senators and the Koch Brothers, Mann scolds Democratic Sen. Mary Landrieu of Louisiana, because she has difficulty understanding why opponents consider Keystone “such a big deal.”

Sen. Landrieu is right to be perplexed. The KXL controversy is completely artificial, a creature of green politics. As noted previously on this blog, the lifestyles of Al Gore, Bill McKibben, and IPCC scientists like Michael Mann are among the most oil-fueled in the world. If even they need oil, ordinary folks do too. And if oil is an essential commodity, then it should be brought to market by the most efficient and safest means. In the case of Canadian crude, that best delivery option is the Keystone XL pipeline. It’s this simple logic that Keystone bashers either can’t wrap their heads around or refuse to acknowledge. [click to continue…]

The Fix Is In: On Ozone NAAQS, EPA Relies on EPA Science

by William Yeatman on May 13, 2014

in Blog, Features

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On Monday, in draft comments to EPA’s “Second Draft Policy Assessment for the Review of the Ozone National Ambient Air Quality Standards,” the Clean Air Scientific Advisory Committee (CASAC) endorsed the agency’s decision to set the lower bound of a national ozone standard at 60 parts per billion.

CASAC’s  finding could have terrible consequences for the U.S. economy. As I’ve explained in a previous post, the D.C. Circuit Court gives controlling weight to CASAC’s assertions. As such, these draft comments legitimize an ozone standard—i.e., one set at 60 ppb—that EPA estimates would cost $90 billion annually. Such a standard would plunge 97% of the country into “non-attainment,” which triggers ultra-stringent controls.

Given the stakes, you’d think EPA and CASAC would rely on only the latest, most independent science, right? Alas, that isn’t the case. Instead, all of the clinical studies cited by CASAC in support of the 60 ppb standard were created by the EPA—the organization that proposed the limit. Thus, the science on which the economy’s fate hinges suffers from a troubling absence of independence. Moreover, all of the non-EPA literature (on health impacts of 60 ppb ozone) cited by CASAC does NOT support a 60 ppb standard. This dichotomy is further disconcerting.

[click to continue…]

CEI Submits Comments on EPA’s “Carbon Pollution Standards”

by William Yeatman on May 12, 2014

in Blog

Last Friday, May 9th, the Competitive Enterprise Institute submitted a set of comments on EPA’s “Carbon Pollution Standards.” The regulation, which was proposed January 8th, would effectively ban the construction of new coal-fired power plants, by requiring the installation of carbon capture and sequestration, an exorbitantly expensive technology that isn’t yet market viable. EPA Administrator Gina McCarthy concedes the rule would have no impact on global temperatures.

My colleague Marlo Lewis made the following points,

  • The current proposal is a de facto fuel-switching mandate, which Congress clearly never intended.
  • A leaked OMB document and environmental group analyses indicates that the real purpose of the regulation is to establish the legal predicate for suppressing existing coal power plants via carbon cap-and-trade programs.
  • Public trust in government is in free fall. EPA cannot continue to steamroll through congressional gridlock and dictate climate policy without de-legitimizing itself.

And my comments included the following points:

  • The Carbon Pollution Standards would actually increase greenhouse gas emissions. To be precise, a typical coal plant in compliance with EPA’s Carbon Pollution Standards would emit 1.3 million more kilograms of CO2 annually.
  • Carbon capture and sequestration is neither “adequately demonstrated” nor “achievable,” and is, therefore, an impermissible basis for the Carbon Pollution Standards.

Finally, in a separate comment, I collaborated with Darin R. Bartram and Justin J. Schwab, of BakerHostetler in Washington, D.C., to rebut EPA’s argument that the Carbon Pollution Standard doesn’t conflict with the 2005 Energy Policy Act. Below, I’ve posted each of the comments in full. [click to continue…]

The President’s Pathetic Political Pandering on Climate Change

by William Yeatman on May 11, 2014

in Blog

Reports the LA Times,

President Obama capped a weeklong focus on climate change with a push for greater energy efficiency, a pitch particularly attuned to reaching two groups: big-dollar donors in the green movement and activists once inspired by his 2008 ambition to heal the planet. Both groups will play a role in turning out Democratic voters in November, a crucial factor for the party’s hope to retain control of the Senate.

The President’s green pivot is, in fact, the essence of political cynicism. It should put the lie, once and for all, to any notion that “Hope” and “Change” were ever anything more than empty campaign slogans.

Remember, President Obama wouldn’t touch green politics with a ten-foot pole when he was running for reelection in 2012. During the second debate, the President actually argued that he was to the right of Mitch Mitt Romney on energy policy. That Obama—the one trying to win the general public—loved fossil fuels (including coal!), global warming be damned. Indeed, he—the guy debating Mitt Romney—didn’t even mention global warming. Of course, that’s what he had to do to win. Poll after poll demonstrates that the preponderance of Americans give high priority to economic growth and low priority to  global warming.

Present-day Obama doesn’t have to win a national election. Instead, he’s got to motivate his base for a mid-term election, for which his party’s odds are long. So he’s desperate. And what does he do? He goes green, in order to get millionaire & billionaire environmentalists to spend money in support of candidates fielded by the Democratic Party. (Citizens United, Picketty, and all that be damned!). It is, therefore, evident that the President’s energy/environment beliefs are wholly dependent on the immediate politics at hand. Again, this is the apotheosis of political cynicism.

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