Marlo Lewis

Carbon Taxes: Kick ‘Em While They’re Down

by Marlo Lewis on November 28, 2012

in Features

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House Speaker John Boehner, Majority Leader Eric Cantor, and Majority Whip Kevin McCarthy have signed a No Climate Tax Pledge. Bad news for those pushing carbon taxes as part of a budget deal. 

Friends of affordable energy can ill-afford complacency, however. The Dumb Party has been known to snatch defeat from the jaws of victory, and carbon tax advocates are nothing if not tenacious. So when it comes to carbon taxes, I say kick ‘em while they’re down.

To that end, I excerpt below some insightful comments by several contributors to last week’s National Journal Energy Blog discussion, “Is Washington Ready for a Carbon Tax?”

David Kreutzer (Heritage Foundation) notes the chutzpah of those who, having failed to sell the public on the stealth energy tax called cap-and-trade, now expect the public to buy an open, avowed, unvarnished energy tax:

Once the electorate was made to realize that cap and trade bills (Lieberman-Warner, Waxman-Markey, etc.) were actually taxes on fossil energy, cap and trade became political poison. So it is surprising that an explicit tax on fossil energy is now being pushed in Washington.

Kreutzer then debunks the argument that conservatives should support a “revenue neutral” carbon tax that displaces EPA regulation of greenhouse gases:

The hope among carbon-tax proponents is that they can sugar coat the tax and make it palatable to conservatives, or at least to enough conservatives. This proposed confection has two ingredients. First, the carbon tax is to be a revenue-neutral swap for some even more harmful tax. Second, a carbon tax would obviate the need for regulation of carbon dioxide and for subsidies to low-carbon energy.

“Revenue neutral” is supposed to mean that each dollar raised will cut another tax by a dollar. But with neutrality there is no gravy to spread around to all the special interests—and we are talking about $100s of billions in gravy every year. So revenue neutrality will never happen. . . .

[As for a tax-for-regulation swap:] That logic may work in PowerPoint-filled rooms at think tanks, but not in the proverbial smoke-filled rooms in Congress. If this logic did carry over, then cap and trade also would have eliminated the need for carbon regulation. Instead of reducing regulations, the cap and trade bills added them. For instance, the Waxman-Markey bill went on for nearly 700 pages before it even got to cap and trade.

Just in case there might be some confusion as to whether the left is willing to trade off regulation for a carbon tax, Representative Waxman recently cleared things up: “A carbon tax or a price on carbon would be a strong incentive for the development of new technologies. But because it’s so complicated, I would not support preempting EPA. EPA can assure us that we can actually get the reductions we need.” [click to continue…]

Why the GOP Will not Support Carbon Taxes (if it wants to survive)

by Marlo Lewis on November 26, 2012

in Blog, Features

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Last week on National Journal’s Energy Experts Blog, 16 wonks addressed the question: ”Is Washington Ready for a Carbon Tax?” Your humble servant argued that Washington is not ready — unless Republicans are willing to commit political suicide. That’s no reason for complacency, because spendaholics have on occasion gulled the Dumb Party into providing bi-partisan cover for unpopular tax hikes. President G.H.W. Bush’s disastrous repudiation of his ‘read-my-lips, no-new-taxes’ campaign pledge is the best known example.

To help avoid such debacles in the future, I will recap the main points of my National Journal blog commentary. Later this week, I’ll excerpt insightful comments by other contributors.

Nearly all Republicans in Congress have signed the Taxpayer Protection Pledge, a promise not to increase the net tax burden on their constituents. Although a “revenue neutral” carbon tax is theoretically possible, the sudden interest in carbon taxes is due to their obvious potential to feed Washington’s spending addiction. If even one dollar of the revenues from a carbon tax is used for anything except cutting other taxes, the scheme is a net tax increase and a Pledge violation. Wholesale promise-breaking by GOP leaders would outrage party’s activist base. 

Even if the Taxpayer Protection Pledge did not exist, the GOP is currently the anti-tax, pro-energy alternative to a Democratic leadership that is aggressively anti-energy and pro-tax. Endorsing a massive new energy tax would damage the product differentiation that gives people a reason to vote Republican. Recognizing these realities, House GOP leaders recently signed a ‘no climate tax’ pledge.

That’s good news. But this is a season of fiscal panic and I was there (in 1990) when the strength of Republicans failed. Perhaps the best time to kick carbon taxes is when they are down. So let’s review additional reasons to oppose a carbon tax. [click to continue…]

Why Courts Should Repeal EPA’s ‘Carbon Pollution’ Standard (and why you should care)

by Marlo Lewis on November 19, 2012

in Features

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Note: A nearly identical version of this column appeared last week in Forbes Online. I am reposting it here with many additional hyperlinks so that readers may more easily access the evidence supporting my conclusions.

The November 2012 elections ensure that President Obama’s war on coal will continue for at least two more years. The administration’s preferred M.O. has been for the EPA to ‘enact’ anti-coal policies that Congress would reject if such measures were introduced as legislation and put to a vote. Had Gov. Romney won the presidential race and the GOP gained control of the Senate, affordable energy advocates could now go on offense and pursue a legislative strategy to roll back various EPA global warming regulations, air pollution regulations, and restrictions on mountaintop mining. But Romney lost and Democrats gained two Senate seats.

Consequently, defenders of free-market energy are stuck playing defense and their main weapon now is litigation. This is a hard slog because courts usually defer to agency interpretations of the statutes they administer. But sometimes petitioners win. In August, the U.S. Court of Appeals struck down the EPA’s Cross State Air Pollution Rule (CSAPR), a regulation chiefly targeting coal-fired power plants. The Court found that the CSAPR exceeded the agency’s statutory authority. Similarly, in March, the Court ruled that the EPA exceeded its authority when it revoked a Clean Water Act permit for Arch Coal’s Spruce Mine No. 1 in Logan County, West Virginia.

A key litigation target in 2013 is EPA’s proposal to establish greenhouse gas (GHG) “new source performance standards” (NSPS) for power plants. This so-called carbon pollution standard is not based on policy-neutral health or scientific criteria. Rather, the EPA contrived the standard so that commercially-viable coal plants cannot meet it. The rule effectively bans investment in new coal generation.

We Can Win This One

Prospects for overturning the rule are good for three main reasons. [click to continue…]

Hurricane Sandy and Global Warming

by Marlo Lewis on November 2, 2012

in Features

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Both the blogosphere and the mainstream media have been abuzz with commentary blaming global warming for Hurricane Sandy and the associated deaths and devastation. Bloomberg BusinessWeek epitomizes this brand of journalism. Its magazine cover proclaims the culpability of global warming as an obvious fact:

Part of the thinking here is simply that certain aspects of the storm (lowest barometric pressure for a winter cyclone in the Northeast) and its consequences (worst flooding of the New York City subway system) are “unprecedented,” so what more proof do we need that our fuelish ways have dangerously loaded the climate dice to produce ever more terrible extremes?

After all, argues Climate Progress blogger Brad Johnston, quoting hockey stick inventor Michael Mann, “climate change is present in every single meteorological event.” Here’s Mann’s explanation:

The fact remains that there is 4 percent more water vapor – and associated additional moist energy – available both to power individual storms and to produce intense rainfall from them. Climate change is present in every single meteorological event, in that these events are occurring within a baseline atmospheric environment that has shifted in favor of more intense weather events.

Well sure, climate is average weather over a period of time, so as climate changes, so does the weather. But that tautology tells us nothing about how much — or even how — global warming influences any particular event. Moreover, if “climate change is present in every single meteorological event,” then it is also present in ”good” weather (however defined) as well as “bad.”

Anthony Watts makes this criticism on his indispensable blog, noting that as carbon dioxide (CO2) concentrations have risen, the frequency of hurricanes making landfall in the U.S. has declined.

The US Has Had 285 Hurricane Strikes Since 1850: ‘The U.S. has always been vulnerable to hurricanes. 86% of U.S. hurricane strikes occurred with CO2 below [NASA scientist James] Hansen’s safe level of 350 PPM.’

If there’s anything in this data at all, it looks like CO2 is preventing more US landfalling hurricanes.

Data Source: NOAA; Figure Source: Steve Goddard [click to continue…]

Production Tax Credit: Remove Big Wind’s Training Wheels, Report Argues

by Marlo Lewis on November 1, 2012

in Features

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“Remove Big Wind’s training wheels” and let the production tax credit (PTC) expire, argues University of Lousiana State University Professor David Dismukes in a report published by the American Energy Alliance (AEA), a grassroots free-market research and advocacy group.

Wind energy lobbyists and their congressional allies are pushing for a one-year extension of the PTC, first enacted in 1992. The Joint Committee on Taxation estimates the one-year extension would increase the cumulative federal deficit by $12.2 billion over the next 10 years. Wind industry lobbyists warn that not renewing the PTC would kill jobs. One could reply that jobs dependent on market-rigging tax breaks impose a net loss on the economy and should not be created in the first place.

The AEA report, however, does not take this tack. Rather, the report argues that wind doesn’t need the PTC because it is already competitive and will become more so as efficiencies improve. For example, the report cites a Breakthrough Institute estimate that unsubsidized wind costs $60 to $90/MWh, which “compares favorably with new combined cycle natural gas generation, at around $52 to $72/MWh,” making wind generation “likely already competitive with natural gas in areas that have high wind speeds.”

I’m not persuaded because, as explained in other posts, a megawatt of unpredictable, unreliable wind capacity has less value than a megawatt of predictable, reliable natural gas or coal capacity. Nonetheless, the AEA report presents several criticisms of the PTC that strike me as spot on, three of which are discussed below. [click to continue…]

Production Tax Credit: High Cost Subsidy for Low Value Power

by Marlo Lewis on October 29, 2012

in Blog, Features

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In Wind Intermittency and the Production Tax Credit: A High Cost Subsidy for Low Value Power, economist Jonathan Lesser finds that “the vast majority of the Nation’s wind resources fail to produce any electricity when our customers need it most.” He also cautions that the wind energy production tax credit (PTC), which would add $12.2 billion to the federal deficit if Congress extends it for another year, adds billions of dollars in hidden costs to ratepayers “while undermining the reliability of the grid.”

Lesser’s analysis is based on nearly four years of data from three interconnection regions that account for over half of total U.S. installed wind capacity: Electric Reliability Council of Texas (ERCOT— over 10,000 MW of wind capacity), the Midwest ISO (MISO — almost 12,000 MW of wind capacity), and PJM Interconnection (PJM — over 5,000 MW of wind capacity).

In all three regions, over 84% of the installed wind generation infrastructure fails to produce electricity when electric demand is greatest.

In MISO, only 1.8% to 7.6% of wind infrastructure generated power during the peak hours on the highest demand days. In ERCOT, 6.0% to 15.9% of installed wind generated power, and in PJM, between 8.2% and 14.6% of wind produced power.

Demand for electricity is highest in the summer, especially during heat waves. But that is often when the wind stops blowing. The July 2012 heat wave is a case in point:

The July 2012 heat wave in Illinois, where temperatures soared to 103 degrees in Chicago, provides a compelling example of wind generation’s failure to perform when needed most. During this heat wave, Illinois wind generated less than 5% of its capacity during the record breaking heat, producing only an average of 120 MW of electricity from the over 2,700 MW installed. On July 6, 2012, when the demand for electricity in northern Illinois and Chicago averaged 22,000 MW, the average amount of wind power available during the day was a virtually nonexistent 4 MW.

[click to continue…]

U.S. Biofuel Expansion Cost Developing Countries $6.6 Billion: Tufts

by Marlo Lewis on October 12, 2012

in Features

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U.S. biofuel expansion has cost developing countries $6.6 billion in higher food costs, estimates Tufts University economist Timothy A. Wise in Fueling the Food Crisis, a report published by ActionAid. A 10-minute video interview with Wise about his research is available here.

The 2007 Renewable Fuel Standard (RFS), established by the Energy Independence and Security Act (EISA), exerts long-term upward pressure on grain prices by diverting an ever-growing quantity of corn from food and feed to auto fuel. This is great for corn farmers but not good for U.S. consumers and harmful to millions of people in developing countries, many of whom live in extreme poverty.

“Commodity prices are a small percentage of the retail price of food in the US” because “we heavily process our food,” notes Wise. In contrast, in developing countries, ”commodity prices are a bigger percentage of the retail price, in part because people buy whole foods more often than processed foods.” Even small commodity price increases ”can have a big impact on local market prices in developing countries.”

As it happens, during the same period that U.S. ethanol production and corn prices increased, many developing countries became more dependent on grain imports to feed their people and livestock. The recent drought-induced spike in U.S. corn prices is “just the latest episode in a devastating, protracted global food crisis that has pushed millions into poverty and hunger around the globe over the past 6 years,” argues the ActionAid report.

To assess the impact of biofuel expansion on developing countries, Wise used a conservative estimate of ethanol’s contribution to corn prices and multiplied that by the quantity of U.S. corn imported by those countries. A summary of key findings follows:

  • Net Food Importing Developing Countries, among the most vulnerable to food price increases, incurred ethanol-related costs of $2.1 billion.
  • Thirteen developing countries incurred per-capita impacts greater than Mexico’s (where tortilla prices have risen 69% since 2005), and they include a wide spectrum of large and small countries from all regions of the developing world – Colombia, Malaysia, Botswana, Syria.
  • North African countries saw large impacts, with $1.4 billion in ethanol-related import costs, led by Egypt ($679 million). Other countries experiencing social unrest – Tunisia, Libya, Syria, Iran, Yemen – also suffered high impacts, highlighting the link between rising food prices and political instability.
  • Central American countries felt impacts nearly those of Mexico, scaled to population. The region has seen its dependence on food imports rise over the last 20 years, and corn imports cost an extra $368 million from 2006-11 due to U.S. ethanol expansion. Guatemala saw the largest impacts, with $91 million in related costs. In 2010-11 alone, U.S. biofuel expansion cost Guatemalans $28 million – an amount nearly equivalent to U.S. food aid to Guatemala over the same period.
  • Latin American partners to trade agreements with the United States saw high costs, as import-dependence grows. The six-year ethanol-related cost of corn imports was $2.4 billion for Latin American nations involved in NAFTA, CAFTA-DR, and the bilateral agreements with Panama, Colombia, Peru, and Chile.

Why Can’t We Get All Our Electricity from Wind?

by Marlo Lewis on October 4, 2012

in Features

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Wind energy advocates often point out that a State, the U.S., or the entire world has enough wind energy to supply all of its electricity needs many times over. Writing in Scientific American, for example, Mark Jacobson and Mark Delucchi note that the world in 2030 is projected to consume 16.9 trillion watts (terawatts, or TW) of power, with about 2.8 TW consumed in the U.S. Total wind flows worldwide generate about 1,700 TW, and accessible wind resources total an estimated 40-85 TW. 

Based on such math, the American Wind Energy Association (AWEA) argues, for instance, that Arizona has enough wind to meet 40% of its electricity needs, Michigan wind resources could meet 160% of the State’s electricity needs, and wind in Oklahoma could provide nearly 31 times the State’s electricity needs. Yet despite ratepayer subsidies, special tax breaks, and renewable energy mandates and goals in 37 States, wind supplied 2.2% of total U.S. electric generation in 2010. Why don’t we get lots more of our electricity from this ’free,’ ‘non-polluting’ ‘renewable’ source?

The chief impediments are wind energy’s inherent drawbacks. First, wind energy is intermittent — at any given time the wind may blow too hard or too soft or not blow at all. Second, wind is non-dispatchable. When Shakespeare’s Owen Glendower boasted, “I can call spirits from the vasty deep,” Henry Hotspur replied: “Why, so can I, or so can any man; but will they come when you do call for them?” Like Glendower’s spirits, the winds answer to no man. The wind is not ours to ’dispatch’ as electricity demand rises or falls. 

There are three main ways of compensating for wind’s intermittency and non-dispatchability — pumped storage (pump water uphill when there’s too much wind relative to demand; let it run downhill and drive turbines when there’s too little wind), natural gas backup generation, and wind dumping (idle the turbines when demand is low). Incorporating those techniques to keep supply in balance with demand adds to the cost of wind electricity, which is typically more costly than coal- and gas-generated electricity even without storage and backup.

What’s more, according to a new Reason Foundation/Independence Institute report, the storage, backup, and idling costs become prohibitive as wind’s share of total generation increases beyond 10-20%. [click to continue…]

Polling Purple, Spinning Green

by Marlo Lewis on September 28, 2012

in Features

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Polling these days is often a form a spin. Pollsters artfully phrase and sequence questions to elicit the answers the sponsor is paying for. The sponsor then uses the answers to influence the voter attitudes he pretends the poll merely reflects. The sponsor bets that more voters will support his agenda if they believe (however mistakenly) that most of their neighbors do too. It’s the old self-fulfilling prophesy trick.

Especially during the silly season, some organizations spend lots of cash trying to manufacture the appearance that their preferred candidate has already won. Their operative premise is that you can fool most of the people most of the time — or at least hoodwink enough people in swing (purple) states to make a difference at the ballot box.

What prompts this reflection is an article in today’s Greenwire about an opinion survey of swing state voters conducted by Public Policy Polling for the Natural Resources Defense Council (NRDC). The poll allegedly finds that voters in eight swing states prefer by 57% to 32% a presidential candidate who supports EPA regulation of mercury emissions from coal-fired power plants. That candidate, of course, is Barack Obama.

As discussed in previous posts on voter surveys conducted by Public Policy Polling, the trick is to frame the question so that most respondents give the sponsor’s preferred answer. Here’s the question as described in Greenwire:

Without specifying Obama’s or Romney’s position, the telephone survey asked voters: “One candidate for president supports EPA standards to reduce toxic mercury pollution from power plants; the other candidate says these limits would be bad for business and EPA should not reduce mercury pollution. Would you be more likely to vote for a candidate who supports EPA standards to reduce toxic mercury pollution or one who opposes them?”

In essence, do you want more or less “toxic mercury pollution” in the environment? Unless you happen to be a ”toxic mercury polluter,” you are more likely to respond that you are “more likely” to vote for the guy who wants to reduce “toxic mercury pollution.” This framing abstracts from all the scientific, technical, and economic information that a presidential candidate would need to make a rational choice in the public interest. 

By the EPA’s own reckoning, the costs of the mercury reductions required by the agency’s Utility MACT Rule exceed the quantifiable health benefits by a ratio of 1,600 to one or even 19,200 to one. And in the 22 years since Congress tasked the EPA to study the health risks of mercury, the agency has not identified a single child whose learning or other disabilities can be traced to power-plant mercury emissions. 

Include those facts in the question along with the statement that the EPA policy would be ”bad for business,” and the results would undoubtedly be very different from those NRDC is touting to the media.

Cloud Computing and Kyotoism: An Update

by Marlo Lewis on September 26, 2012

in Features

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Wouldn’t you know it, the day after I review Mark Mills’s analyses (in 1999 and 2011) of the digital economy as a key driver of demand growth for coal-fired electric power, I receive an EnergyFactsWeekly in my email box featuring new analysis by Mills on that very topic. It also contains links to two other related commentaries by Mills.

In The Efficiency Wall and the Future of the Internet’s Energy Cost, Mills reports that “the historic gains in computing energy efficiency started slowing down in 2005″ due to the “inherent physics” of existing chip technology. During the same period, however, ”the growth in global traffic on the Internet has continued rising at the same old staggering exponential rate.” The upshot? “This combination arithmetically guarantees a higher growth rate now in the total energy consumed by the Internet.”

 

Computing efficiency gains are rapidly approaching an “asymptotic wall” much as the power of jet engines and cruise speed of jet aircraft did in 1960.   

Jet engine power (measured in terms of the critical aviation metric, power per unit of weight) rose exponentially for the 20 years after invention, then hit a wall dictated by the inherent physics of the engines and materials. Consequently, the average cruise speed of jet aircraft also hit a wall.

“But,” notes Mills, ”there is a critical difference between aviation and digital traffic: the former rises linearly with population and wealth, while the latter grows exponentially as new applications continue to explode for Big Data.”

New materials and technologies are improving the energy efficiency of computing, but, says Mills, not enough to halt the growth in aggregate demand. He concludes with two predictions and a policy recommendation:

  • Digital energy consumption will rise, locked into the physics of supply and economics of demand, and
  • Energy costs will be increasingly dominated by factors external to the Internet, especially the cost of electricity. Cheap power will matter even more in the future.

We return to a familiar refrain? Dig more coal. [click to continue…]

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