Marlo Lewis

As I write, the Senate Environment and Public Works Committee is holding a hearing on climate policy. In his testimony, Dr. Benny Peiser, director of the UK-based Global Warming Policy Foundation, argues that the European Union (EU) badly miscalculated when it decided, in the early 2000s, that development of a low-carbon economy based on renewable sources would make Europe the world’s most dynamic, competitive marketplace.

As a result of Europe’s climate policies, energy prices have risen sharply, putting European manufacturers at a competitive disadvantage in global markets.

European energy prices are now more than double those in the USA.

Peiser discuss the effects of EU climate policy on two industries, chemical manufacturing and steel production. “While Europe’s high cost policies have become an existential threat to the long-term survival of the chemical industry, cheap energy is reviving the fortunes of the industry in the US,” he contends.

High energy costs contribute to Europe’s declining share of global steel production.

EU climate policies also inflate consumer energy costs, transfer wealth from low-income households to special interests, and intensify the problem of fuel poverty:

As wealthy homeowners and business owners install wind turbines on their land and solar panels on their homes and commercial buildings, low-income families all over Europe have had to foot the skyrocketing electric bills. Many can no longer afford to pay, so the utilities are cutting off their power. The German Association of Energy Consumers estimates that up to 800,000 Germans have had their power cut off because they were unable to pay the country’s rising electricity bills.

But at least EU policymakers are saving the planet, right? Nope. Energy-intensive goods EU countries can no longer afford to produce at home they increasingly import from overseas. When we factor in emissions ’embedded’ in imported goods, EU climate policy has achieved no net reduction in CO2 emissions.

And now the best part of Peiser’s testimony. Peiser reveals that EU subsidies for renewable energy have led — via the iron law of unintended consequences — to subsidies for coal- and gas-generation.

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In what the Wall Street Journal calls a “setback for the Obama administration,” the Supreme Court today announced it will review a challenge by more than 20 states and industry groups to EPA’s Clean Air Mercury Air Toxics Standards (MATS) Rule, also known as the Utility MACT (Maximum Achievable Control Technology) Rule.

Petitioners argue that the Clean Air Act (CAA) required EPA to take implementation costs into account when deciding whether MACT regulation of hazardous air pollutant (HAP) emissions from power plants is “appropriate and necessary.” EPA did not do so.

By EPA’s own estimate, the MATS Rule will cost utilities $9.6 billion in 2016. Yet the HAP reductions that are the Rule’s ostensible purpose would yield only $0.5 million to $6 million in health benefits in the same year, even making outlandish assumptions in the rule’s favor.

My colleague William Yeatman predicted, back in April, that D.C. Circuit Court of Appeals Judge Brett Kavanaugh’s powerful dissent in White Stallion Energy Center LLC et al. v. EPA et al. would persuade the Supreme Court to review the decision. Here’s the nub of the commentary I posted at the time:

Perhaps more importantly, §112 [of the Clean Air Act] tasks EPA to determine whether MACT regulation of HAPs is “appropriate and necessary” only for “electric steam generating units.” For all other major sources of HAP emissions, EPA has no discretion and is simply required to promulgate MACT regulations. The statute thus seems to contemplate that, in the special case of coal power plants, MACT regulation may not be appropriate even if the associated HAP emissions pose public health hazards. In other words, a less stringent form of Clean Air Act regulation (such as new source performance standards) or state-level regulation might be “appropriate.”

Yeatman opines that Kavanaugh’s dissent may persuade the Supreme Court to review the case. If so, the Court might rule that EPA is allowed or even required to consider costs when determining what is “appropriate” when regulating HAP emissions from power plants. That, in turn, could set the stage for litigation on whether the MATS Rule is too costly to be “appropriate” within the meaning of the statute.

 

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…]

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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Greenwire (paywall protected) reports that KiOR, Inc., a biofuel company backed by billionaire Vinod Kohsla, missed a $1.8 million loan payment to the state of Mississippi, now owes more than $312 million, and filed for Chapter 11 bankruptcy protection late Sunday:

The company estimated its assets are worth between $10 million and $50 million and reported debts between $100 million and $500 million (Jeff Amy, AP/ABC News, Nov. 10).

In addition, the Pasadena, Texas-based company said its default on the Mississippi loan triggered provisions of other loans, making an additional $234 million immediately due (AP/Fuel Fix, Nov. 7). — SP

EPA once pinned its hopes on KiOR to supply 9 million of the agency’s 17 million gallon 2014 cellulosic biofuel quota. As of July, however, U.S. cellulosic production was about 50,000 gallons, or 0.3% of EPA’s target, according to Platts energy analyst Herman Wang. EPA’s target is itself less than 1% of the statutory 1.75 billion gallon cellulosic target for 2014.

More proof, if any were needed, that the point of central planning is not to accomplish its stated purposes but to amass power, rig markets, and (in democratic countries) buy votes.

On August 20, commodity analyst Dave Juday contributed a guest editorial to this blog titled “KiOR News Underscores Problems with Renewable Energy Industrial Policy.” Because the column is even more timely today, I repost it (lightly edited) below:

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