November 2014

In the recent U.S-China climate deal, who snookered whom? Let’s first review what happened and place it in historical context.

Two weeks ago, President Obama and Chinese President Xi Jinping announced a Joint Agreement on Climate and Clean Energy Cooperation designed to “inject momentum into the global climate negotiations on the road to reaching a successful new climate agreement next year in Paris.”

In the past, China had rejected U.S. and EU proposals to adopt legally-binding emission limitations, and demanded that industrialized nations make deep emission cuts and pony up billions of dollars (as much as 1.5% of their combined GDP annually) to help developing countries adapt to climate change.

Without formally repudiating those negotiating positions, Xi pledged that China’s carbon dioxide (CO2) emissions would peak by 2030, and he did not condition that commitment on U.S. financial assistance to developing countries. (Although Xi likely knew that, three days later, at the Nov. 14 G-20 Summit in Australia, Obama would pledge $3 billion in climate assistance for poor countries.)

President Obama, for his part, pledged that America would cut its CO2 emissions 26%-28% below 2005 levels by 2025. That goes beyond the President’s 2009 Copenhagen treaty proposal to cut U.S. CO2 emissions 17% below 2005 levels by 2020.

Some critics conclude that Xi outfoxed Obama, because, under the Joint Agreement, U.S. emissions must begin to decline immediately whereas China’s don’t have to plateau until 14 years after Obama leaves office. Some also argue that Xi simply promised to do what China intends to do anyway.

On the other hand, historian Rupert Darwall, citing the White House briefing memo, points out that the scope of China’s commitment is “truly staggering.” From the memo:

China’s target to expand total energy consumption coming from zero-emission sources to around 20 percent by 2030 is notable. It will require China to deploy an additional 800-1,000 gigawatts of nuclear, wind, solar and other zero emission generation capacity by 2030 – more than all the coal-fired power plants that exist in China today and close to total current electricity generation capacity in the United States.

Last Friday, Bloomberg News published an analysis confirming the colossal scale of China’s commitment under the Joint Agreement.

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Greenwire (subscription required) reports that EPA will pull back from its November 2013 proposal to reduce this year’s Renewable Fuel Standard (RFS) blending targets. However, a final rule establishing RFS targets for 2014 is not expected until 2015.

By law, EPA was supposed to finalize the 2014 targets in November 2013.* EPA only proposed the 2014 targets last November, and things have been on hold since then.

Because the statutory blending target for 2014 exceeded the amount of ethanol that could actually be sold as E10 (motor fuel containing 10% ethanol, the maximum blend millions of vehicles can use without risk of engine damage and voided warranties), the agency proposed to trim the 18.15 billion gallon statutory target to 15.21 billion gallons, a 16% cutback. That ignited a firestorm of protest from the biofuel lobby, and EPA has been dithering ever since.

What’s the policy significance of today’s news?

It’s common knowledge that the RFS is a textbook study in the law of unintended consequences. The program inflates food and fuel costs, exacerbates world hunger, contributes to political instability and violence in developing countries, expands aquatic dead zones, accelerates wetlands conversion and habitat loss, and likely increases net greenhouse gas emissions.

EPA’s more-than-year-long delay in finalizing the 2014 targets reveals what may be the most damning unintended consequence yet: market unpredictability. [click to continue…]

A new study by Energy Ventures Analysis for Peabody Energy examines the cumulative impacts on electricity and natural gas costs from 2012 to 2020 due to recent and proposed EPA regulations.

Regulations examined include: new national ambient air quality standards (NAAQS) for ozone and particulate matter; the Cross State Air Pollution Rule (CSAPR) to address interstate transport of air pollution; Mercury Air Toxics Standards (MATS) Rule; regional haze regulations; and the Clean Power Plan (CCP), proposed in June 2014, to reduce carbon dioxide (CO2) emissions from state electric power sectors.

The study, Energy Market Impacts of Recent Federal Regulations on the Electric Power Sector, forecasts the following real-dollar (inflation-adjusted) impacts in 2020 compared to 2012:

• Annual power and gas costs for residential, commercial, and industrial consumers will be $173 billion higher—a 37% increase.
• Average annual household gas and power bills will increase by $293 or 15%.
• Residential power bills increase the most in Texas, Mississippi, Pennsylvania, Maryland, and Rhode Island. Families in those states will pay $566 more annually for electricity in 2020 than in 2012.

Because “income growth is being outpaced by inflation for many Americans (the lower earning half of U.S. households experienced a 25% decline in real income from 2001-2014),” the report’s authors believe “it is more appropriate to focus on the results in nominal terms.”

Here are the results presented above in actual (non-inflation-adjusted) dollars: [click to continue…]

Three days ago, the President reached a much ballyhooed “deal” with China to mitigate climate change. In a recent post, my colleague Myron Ebell explained that the agreement is non-binding and therefore empty. Another colleague of mine, Chris Horner, had a more pessimistic take: He argues that the President is trying to establish precedential “customary international law.” Regardless whether the agreement has teeth, it enjoys zero political legitimacy, as is demonstrated by the brief timeline below:

• 2012: President Obama ran to the right of Mitt Romney on energy policy during the 2012 election. In so doing, the President took great pains to avoid mentioning climate change.

• June 2013: Despite having dodged the issue of climate change during his reelection campaign, President Obama in June 2013 announced his Climate Action Plan, which would use executive authority to reduce U.S. greenhouse gases 17 percent below 2005 levels by 2020. In normal times, such a climate policy would come from Congress. However, in the age of Obama, congressional inaction became a justification for executive policymaking without a popular mandate [again, he campaigned to the right of Romney on energy].

• November 2014: Environmentalists spend an unprecedented sum to make climate change a major issue in the midterm elections. However, upon realizing that voters simply don’t care about climate change, the greens shifted tactics and instead spent their money on run of the mill attack ads. They still lost.

To recap: Polling data and election results demonstrate clearly that American voters give ultra-low priority to climate change. This explains why opposition to cap-and-trade in the Congress is healthily bipartisan. It also explains why Obama dodged the issue of climate change in 2012. And it explains why environmental special interest had to shelve climate change as an issue in the 2014 midterm elections, even though they desperately wanted to harp about it. Finally, the absence of a popular mandate explains why the President’s climate “deal” with China is flavored so authoritarian: According to the White House, the “deal”—which, as described by various editorial boards is “landmark” international diplomacy—does not require congressional approval, because it is based on executive actions that he’s taking without congressional approval. It’s a closed loop of executive power!

The Energy and Enterprise Initiative, an advocacy group headed by former South Carolina Republican congressman Bob Inglis, launched a new Web site today: republicEn.org. In an inaugural blog post, Mr. Inglis opines about the post-election day prospects for enacting a carbon tax:

The timing couldn’t be better as far as we’re concerned. On Election Day 2014, Republicans won the majority in the Senate and increased their majority in the House, creating a huge opportunity for real conservative reform. . . . Now’s the time to step up with free-market solutions and show the country that clean air and clean-energy innovation are best achieved by accountable free enterprise, not big government.”

Huh? What Inglis means by “accountable free enterprise” is a carbon tax. Republicans “won the majority in the Senate and increased their majority in the House” despite Tom Steyer, Environmental Defense Action Fund, NRDC Action Fund, League of Conservation Voters, and Sierra Club spending an unprecedented $85 million to elect ‘climate champions’ and unseat ‘climate deniers.’ Consistent with survey research finding climate change to be among voters’ lowest priorities, the election results indicate that Republicans are less vulnerable than ever to green attack ads.

So why is now the time for a Constructive Republican Alternative Proposal that would raise energy prices, deny Americans the benefits of affordable, plentiful, reliable coal-based power, and have negligible impacts on potential climate change?

Suppose the attacks had worked, and the GOP sustained huge losses; what would Inglis say then? Very likely, ‘I told you so.’ He would blame Republicans for failing to offer a ‘free-market’ solution (viz. carbon taxes), leaving voters no choice but to support Obama’s climate policies. Now more than ever, he would undoubtedly say, Republicans need to rally round the carbon tax or become irrelevant to the national debate. In short, from opposite results, Inglis would likely draw the same conclusion.

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