Marlo Lewis

Are Depressions Green? (An Update)

by Marlo Lewis on November 23, 2010

in Blog

In March 2009, I posted a blog over at MasterResource.Org entitled, “Are Depressions Green?” What prompted that piece was speech by Cambridge University economist Terry Barker at the Copenhagen climate conference.

Barker told delegates that the Great Depression of the 1930s reduced global CO2 emissions by 35%. He opined that if the current economic downturn persists for several years, it might cut global emissions in half.

Citing the International Energy Agency’s CO2 Emissions from Fuel Combustion Highlights (2005 Edition), I offered additional proof of the emission-cutting power of economic collapse. From 1990 to 2003, CO2 emission declined 38% in Bulgaria, 35.3% in Estonia, 52.3% in Latvia, 43.5% in Lithuania, 43.3% in Rumania, 24.5% in Russia, 30.2% in the Slovak Republic, and 50.1% in Ukraine.

I commented:

So clearly, governments do have the power to achieve deep emission cuts in in a single decade or even in a few years. However, there’s not a shred of historical evidence that they can do this without first engineering severe economic contractions.

A new study by University of Exerter scientist Pierre Friedlingstein and colleagues finds that from 2008 to 2009, global emissions declined by 1.3%, the first time since the late 1990s. There were significant regional differences, depending on whether a country’s economy was shrinking or growing. As summarized by USA Today:

The largest decreases occurred in Europe, Japan and North America: 6.9% in the United States, 8.6% in the U.K., 7% in Germany, 11.8% in Japan and 8.4% in Russia.

In contrast, emissions jumped in emerging economies, including 8% in China and 6.2% in India. China remains the top emitter of carbon dioxide from the burning of fossil fuels, followed by the USA, India, Russia and Japan.

A question for the greenhouse lobby: If depressions induce deep emission cuts, then wouldn’t mandating deep cuts prolong or intensify our current economic woes?

Seems like a no-brainer, but they’ll tell you that putting a price on carbon will stimulate the creation of “green jobs” (like window caulkers?) and “industries of the future” (like windmills?). Our friends at the Institute for Energy Research summarize and link to several studies debunking the green jobs myth. 

Here’s how I ended “Are Depressions Green?”:

So-called green industries and jobs were bit players even when the economy was booming. That’s because even when credit markets were flush and fossil energy prices were high, green industries were relatively unproductive. For example, as my colleague Iain Murray estimates, one coal-industry job supports seven times as much electricity as one wind-industry job.

It strains credulity to claim that diverting capital and labor from, e.g., the coal industry to the wind industry will create a macroeconomic benefit, or that economic recovery can be built on jobs and industries that depended heavily on subsidies, tax preferences, and mandates even in prosperous times.

Coal Exports to China Surge (Carbon Leakage with a Vengeance — No Escape from Law of Unintended Consequences)

by Marlo Lewis on November 22, 2010

in Blog

In “Nations that Debate Coal Use Export It to Feed China’s Need,” New York Times reporter Elizabeth Rosenthal exposes a huge unintended consequence of Kyotoism’s assault on coal-fired power plants: U.S. and Australian coal companies are shipping their product to Asian countries, especially China, which in 2008 outstripped the United States as the world’s top emitter of carbon dioxide (CO2).  

Rosenthal explains why this situation drives climate activists up the wall:

Traditionally, coal is burned near where it is mined — particularly so-called thermal or steaming coal, used for heat and electricity. But in the last few years, long-distance international coal exports have been surging because of China’s galloping economy, which now burns half of the six billion tons of coal used globally each year.

As a result, not only are the pollutants that developed countries have tried to reduce finding their way into the atmosphere anyway, but ships chugging halfway around the globe are spewing still more.

This is “carbon leakage” with a vengeance. “Leakage” refers to emissions that migrate overseas as domestic firms offshore production and jobs to countries with less restrictive controls on carbon-based energy. Up to now, nearly all the discussion has focused on “energy-intensive, trade-intensive” industries such as producers of iron, steel, aluminum, copper, cement, glass, ceramics, and paper. Such energy-intensive manufacturers can pick up and leave if domestic climate policy puts them at a competitive disadvantage, and climate campaigners don’t want to be blamed for destroying American jobs.

Policymakers have not considered coal industry jobs in this context, however, because coal mines are pretty much stuck where they are. Besides, Al Gore and the Repower America campaign say we should replace all U.S. electric generation with “zero-carbon” energy by 2018. Who needs coal!

In a House Ways and Means hearing last year on the Trade Aspects of Climate Legislation, not one witness mentioned that carbon policies, especially a de-facto ban on new coal-fired power plants, would ramp up coal exports to China, fueling industries that typically emit much more CO2 per unit of output than do their U.S. counterparts.

David Hamilton of the Sierra Club, for example, saw carbon leakage to China as a big problem, but did not say a word about his organization’s “Stopping the Coal Rush” campaign much less whether it might stimulate a surge in coal exports to the (ahem) People’s Republic. Sierra Club now regards this as a big problem, as Rosenthal reports: 

“This is a worst-case scenario,” said David Graham-Caso, spokesman for the Sierra Club, which estimates that its “Beyond Coal” campaign has helped to block 139 proposed coal plants in the United States over the last few years. “We don’t want this coal burned here, but we don’t want it burned at all. This is undermining everything we’ve accomplished.” [Emphasis added.]

This photo from the NYT article shows Australian coal waiting to be shipped to China:

fossil-articlelarge

Rosenthal quotes Vic Svec, senior VP of Peabody Energy, the world’s largest coal company, as saying, “Coal is the fastest-growing fuel in the world and will continue to be largely driven by the enormous appetite for energy in Asia.”

Here are some key facts she reports (in her words):

  • This summer an Australian company signed a $60 billion contract with a state enterprise, China Power International Development, to supply coal to Chinese power stations beginning in 2013 from a vast complex of mines, called China First, to be built in the Australian outback. It was Australia’s largest export contract ever, the company said.
  • For Australia, coal exports to China grew to $5.6 billion from $508 million between 2008 and 2009, government statistics show. While it still sends more coal to its longtime customers Japan and Korea, that balance could shift as Australian coal giants sink billions into new projects like China First.
  • Last year, the United States exported only 2,714 tons of coal to China, according to the United States Energy Information Administration. Yet that figure soared to 2.9 million tons in the first six months of this year alone — huge growth, though still a minuscule fraction of China’s coal imports.
  • The growth and shifts in coal exports to China are impressive, flowering even during the recession. Seaborne trade in thermal coal rose to about 690 million tons this year, up from 385 million in 2001.
  • The price rose to $60 from $40 a ton five years ago to a high of $200 in 2008. Coal delivered to southern China currently sells for $114 per ton.
  • China, which was a perennial coal exporter until 2009, the first year that it imported more than it sent out, is expected to import up to 150 million tons this year.
  • Another emerging customer is India, whose coal imports rose from 36 million tons in 2008 to 60 million tons in 2009, the last full year for which data is available.

How to Improve Sen. Rockefeller’s EPA Proposal

by Marlo Lewis on November 16, 2010

in Blog

This morning, Sen. Jay Rockefeller (D-WV) and Majority Leader Harry Reid (D-NV) were scheduled to discuss a lame duck floor vote on Rockefeller’s proposed two-year suspension of EPA’s plans to regulate greenhouse gas emissions from power plants, factories, and other “stationary sources,” Politico reports.

Reid’s promise in June to hold a vote on the Rockefeller bill after the August recess was likely the critical maneuver defeating Sen. Lisa Murkowski’s resolution (S.J.Res.26) to overturn EPA’s Endangerment Rule. The Endangerment Rule is the trigger, prerequisite, and precedent for a cascade of both mobile and stationary source greenhouse gas regulations under the Clean Air Act.

On June 10, the Senate rejected the Murkowski resolution by a vote of 47-53. All 41 Senate Republicans and six Democrats voted for S.J.Res.26. Had four additional Democrats voted for the resolution, it would have passed.

Reid’s promise to hold a vote on the Rockefeller bill gave fence-straddling Democrats cover to vote against S.J.Res.26. They could profess to oppose EPA’s looming energy tax on power plants and factories while in fact doing nothing to stop it.

Some observers speculated at the time that the Honorable Mr. Reid’s promise was a bait-and-switch — that he’d never get around to scheduling a vote on Rockefeller’s bill. Maybe, maybe not. Time will surely tell.

Now that cap-and-trade is dead, the urgent question facing lawmakers is not what U.S. climate policy should be but who should make it. Should climate policy be made by the people’s elected representatives, or by politically-unaccountable bureaucrats, trial lawyers, and activist judges appointed for life? The U.S. Constitution, which vests “all legislative powers” in Congress, permits only one answer.

Thanks to the Supreme Court’s decision in Massachusetts v. EPA and the agency’s expertise in bureaucratic self-dealing, EPA has positioned itself to regulate fuel economy, set climate policy for the nation, and even amend the Clean Air Act — powers never delegated to it by Congress.

Overturning EPA’s Endangerment Rule would nip all this mischief in the bud. There may be enough votes in the new (112th) Congress to pass a resolution of disapproval. 

In the meantime, opponents of EPA’s greenhouse power grab should consider a beefed-up version of Rockefeller’s two-year suspension. How about this: Suspend greenhouse gas regulation of stationary sources until such time as Congress votes to remove the suspension?

Rockefeller’s bill as written doesn’t take a clear stand on the bedrock constitutional principle that EPA’s power grab endangers. It would merely delay, not stop, EPA from Kyotoizing the U.S. economy notwithstanding the lack of any plausible legislative mandate to do so.

The beefier version suggested above would allow a clear up or down vote on the proposition that EPA’s job is to administer public policy, not enact it. Any Senator opposing such a bill would admit by that very fact that he wants EPA, not Congress, to “legislate” climate policy.

More on Regs for Rigs: Did EPA Emission Standards Crowd Out Investment In Heavy Truck Fuel Economy?

by Marlo Lewis on November 15, 2010

in Blog

Recently on this site and at MasterResource.Org, I discussed the Obama Administration’s proposed rule to establish first-ever greenhouse gas (GHG) and fuel-economy standards for heavy duty (HD) vehicles. The rule, jointly proposed by the EPA and the National Highway Traffic Safety Administration (NHTSA), would set increasingly stringent GHG and fuel economy standards for HD vehicles manufactured during model years (MYs) 2014-2018. HD vehicles include “combination tractors” (semi-trucks), “vocational trucks” (dump trucks, delivery trucks, buses), large pickups and vans.

Do Consumers Undervalue Fuel Economy?

The agencies have long held that “consumers undervalue fuel economy,” as EPA puts it on p. 44413 of its July 2008 Advanced Notice of Proposed Rulemaking: Regulating Greenhouse Gases under the Clean Air Act).  Yes, EPA acknowledges, the addition of fuel saving technology increases the purchase price of a vehicle, but, the agency contends, “the lifetime discounted fuel savings will exceed the initial cost increase substantially” (ANPR, p. 44447).

EPA writes as if the only factors consumers need to weigh and balance when purchasing an automobile are the upfront purchase price and the lifetime fuel costs. Given that premise, consumers who do not spend more for a higher mpg-vehicle are short-sighted (“fuelish”). Like children, they either do not discern their own best interest or lack the self-discipline to pursue it. So the Nanny State must step in and restrict our choices for our own good. Such is the elistist pretension underpinning three-plus decades of fuel-economy regulation.

In reality, consumers are not two-dimensional beings trapped, like agency fuel-economy fetishists, within a two-factor decision framework. In addition to the tradeoff between upfront cost and long-term fuel expenditures, consumers also consider vehicle power, performance, utility, style, safety, comfort, and amenities. Some people, for example, are willing to pay more for gasoline in order to enjoy the panoramic views, cargo space, passenger space, off-road versatility, and towing capacity of a large SUV.

More importantly, when consumers purchase a car, they typically take into account costs that are completely unrelated to the vehicle itself. For example, Mrs. Smith may prefer a lower priced car because she needs more disposable income this year for new home-office equipment, for little Sallie’s music lessons, or for Bill Jr.’s orthodonture. Forcing her to spend more of her disposable income on a higher-mpg vehicle would not enhance her family’s welfare, even if she could recover the extra expense in five years. Each consumer’s welfare is subjective and involves a subtle weighing and balancing of many competing considerations. For EPA to claim that “consumers undervalue fuel economy” is tantamount to saying that Mrs. Smith “overvalues” music lessons.

Do Truckers Underinvest in Fuel Economy?

Okay, so the notion that consumers “undervalue” fuel economy is dubious. In their joint proposed rule, EPA and NHTSA do not claim that truckers undervalue fuel economy. That would not pass the laugh test. As the agencies acknowledge (p. 315), “Unlike in the light-duty vehicle market, the vast majority of vehicles in the medium- and heavy-duty truck market are purchased and operated by businesses with narrow profit margins, and for which fuel costs represent a substantial operating expense.” Indeed, for truckers, fuel is the single biggest operating expense.

 heavy-truck-operating-expenses

Source: EPA-NHTSA, Draft Regulatory Impact Analysis: Proposed Rulemaking to Establish Greenhouse Gas Emission Standards and Fuel Economy Standards for Medium- and Heavy-Duty Engines and Vehicles, Figure 9-1, p. 9-4

Clearly, nobody has a keener incentive to reduce fuel expenditures than people who haul freight for a living.

Yet the agencies claim that truckers “underinvest” in fuel saving technology. According to their calculations, the proposed rule will compel the trucking industry to invest $7.7 billion in fuel-saving technologies (p. 36), which will cut fuel consumption by 500 million barrels, which will save truckers $28 billion (assuming a 7% discount rate) or $42 billion (assuming a 3% discount rate). In the agencies’ words (p. 315), “the application of fuel-saving technologies in response to the proposed standards would, on average, yield private returns to truck owners of 140% to 420%.”

Unexamined Hypothesis: Opportunity Cost of EPA Emission Control Standards

The agencies propose five “potential hypotheses” to explain why firms with narrow profit margins in a competitive industry where fuel is the chief operating expense are not seizing an opportunity to make billions in easy money. As discsussed in my MasterResource column, none of these explanations demonstrates a “market failure.” In fact, two of the hypotheses suggest that truckers are simply acting like prudent buyers (although, naturally, the agencies don’t put it that way). Specifically, truckers want to make purchasing decisions based on road-tested information, not just agency speculation. Prior to actual deployment of the technologies, nobody knows whether they will yield the promised fuel savings and how they will affect engine reliability and maintenance costs.

The Oak Ridge Laboratory publishes an annual Transportation Energy Data Book. The chapter on heavy vehicles (p. 5-2) reports that the fuel-economy of “single unit” trucks improved 2% annually during 1998-2008. No “underinvestment” there. In contrast, “combination tractor” (semi-truck) fuel economy declined 1.2% annually over that period (p. 5-3). Yet these are the long-haul guys who, according to EPA and NHTSA, will save 18 times as much on fuel as owners of vocational trucks once they comply with the proposed rule (p. 337).

I don’t know if prudent- buyer behavior accounts for the alleged investment “gap” or “energy paradox” (p. 315) in the semi-truck category, but the agencies should have at least mentioned one other obvious “hypothesis”: the opportunity cost of EPA’s emission control mandates.

Back in the year 2000, EPA adopted tough new emission control standards for HD vehicles.  EPA’s Regulatory Impact Analysis (RIA) estimated that the industry’s 11 major diesel manufacturers would have to make substantial commitments of time, money, and personnel to comply with the new standards:

We have therefore estimated that each of the 11 major diesel engine manufacturers will invest approximately $7 million per year on research and development over a period of five years to adapt their engine technology to the advanced emission control technologies described here. Seven million dollars represents the approximate cost for a team of more than 21 engineers and 28 technicians to carry out advanced engine research, including the cost for engine test cell time and prototype system fabrication. [RIA, Chapter V: Economic Impacts, p. V-20]

“In total,” EPA’s RIA continues, “we have estimated that the engine manufacturers will spend approximately $385 million on R&D.” Three hundred and eighty-five million dollars. Presumably, that could crowd out significant R&D on fuel saving technology. Every year for five years, an estimated 21 engineers and 28 technicians at each of 11 major diesel manufacturers would be working on emission control technology. They would likely work less (or not at all) on fuel-saving technology.

The RIA also estimated that, in the “near term” (MY 2007), the average semi would incur fixed, variable, and operating costs of $280, $2,946, $3,785, respectively (p. V-7). So in the near term, owners would have about $7,000 a year less per vehicle to spend on fuel saving technology. For perspective, EPA and NHTSA estimate that their proposed GHG/fuel economy standards will increase the cost of a “combination tractor” by $5,896 in MY 2014 (p. 7-3). Presumably, some truckers who spent $7000-plus for mandated emission control technologies did not have $5,896 to spend for new fuel saving technology.
 
Finally, EPA’s year 2000 RIA says that the diesel particulate filter will “negatively impact fuel economy by approximately one percent” but that this will be “more than offset through optimization of the engine-PM trap-NOx adsorber system” (p. V-32). Whether this forecast turned out to be accurate or not, I do not know. 
 
What does seem clear is that EPA’s own rules may be responsible for the alleged “paradox” that the freight goods industry is not making cost-effective investments in fuel-saving technology.

Request for Information

Unfortunately, the latest information I have found on the industry-wide R&D costs and per-vehicle costs of EPA’s HD vehicle emission standards, and whether the associated technologies enhance or reduce HD vehicle fuel economy, is EPA’s year 2000 RIA, which offers projections rather than a retrospective, real-world, assessment. I would be grateful to anyone who can point me to later information.

EPA’s Permitting Guidance for Greenhouse Gases – Does It Endanger Coal?

by Marlo Lewis on November 11, 2010

in Blog

Can environmental agencies use BACT determinations to require major emitting facilities to switch fuels?

This arcane-sounding question is of great practical importance to energy consumers and the economy. It is a question addressed in EPA’s long-awaited PSD and Title V Permitting Guidance for Greenhouse Gases, posted online yesterday in Politico.

EPA’s guidance document is intended to assist permit writers and permit applicants determine what constitutes “best available control technology” (BACT) for greenhouse gas (GHG) emitting facilities. On January 2, 2011, EPA’s motor vehicle GHG emission standards will go into effect, making GHGs air pollutants “subject to regulation” under the Clean Air Act’s Prevention of Significant Deterioration (PSD) pre-construction permitting program. Any firm planning to build or modify a large GHG-emitting facility (e.g. a coal-fired power plant, an oil refinery, a cement production facility) will first have to obtain a PSD permit from EPA or a State environmental agency.  To obtain a PSD permit, the applicant will have to demonstrate that the new or modified facility incorporates BACT by virtue of its combustion processes, work practices, technology controls, or some combination thereof.

A question that has come up time and again in discussions of EPA regulation of GHGs is whether BACT can be interpreted to require facilities to change the fuels they use. For example, could a permitting agency decide that an electric generating unit is not BACT-compliant unless the facility switches fuels from coal to natural gas, or from natural gas to a mixture of gas and wind?

Waxman-Markey died in the Senate when the public realized that cap-and-trade is a stealth energy tax.  Cap-and-trade functions as an energy tax in large part because it is designed to suppress and, ultimately, eliminate electricity production from coal, America’s most abundant and affordable electricity fuel.

If BACT can be interpreted to require fuel switching, then it can empower activist bureaucrats to implement the anti-coal agenda that the American people rejected on November 2.

Where does EPA’s guidance document stand on this critical issue? Here’s what it says:

While Step 1 [of the BACT determination process] is intended to capture a broad array of potential options for pollution control, this step of the process is not without limits. EPA has recognized that a Step 1 list of options need not necessarily include inherently lower polluting processes that would fundamentally redefine the nature of the source proposed by the permit applicant.* [p. 25]

* In re Prairie State Generating Company, 13 E.A.D. 1, 23 (EAB 2006).

EPA does not interpret the CAA to prohibit fundamentally redefining the source and has recognized that permitting authorities have the discretion to conduct a broader BACT analysis if they desire.**  The “redefining the source” issue is ultimately a question of degree that is within the discretion of the permitting authority. [p. 28]

** In re Knauf Fiber Glass, 8 E.A.D. at 136; In re Old Dominion Cooperative, 3 E.A.D. at 793.

So, although BACT options “need not necessarily include inherently lower polluting processes that would fundamentally redefine the nature of the source,” EPA “does not interpret” BACT “to prohibit fundamentally redefining the source,” leaving such decisions to the “discretion of the permitting authority.”

It would be prudent to suppose that anti-coal bureaucrats at EPA and State agencies will do whatever they think they can get away with.

“Dramatic Increase” in Climate Litigation – Deutsche Bank

by Marlo Lewis on November 10, 2010

in Blog

Deutsche Bank Climate Change Advisors (DBCCA) have just published Growth of U.S. Climate Change Litigation: Trends and Consequences.  My thanks to climate scientist Chip Knappenberger for spotlighting the DBCCA report in his column yesterday on MasterResource.Org.

DBCCA offer a bird’s eye view of the U.S. climate litigation landscape, provide data on the numbers and types of climate-related lawsuits, discuss their prospects for success and potential consequences, and emphasize that, absent congressional intervention, courts “will make the final decisions” about climate policy.

DBCCA summarize their findings as follows:

  • The number of climate change filings doubled between 2006 and 2007. They then reached a plateau for three years, but already in 2010 are on a path to triple over 2009 levels.
  • The largest increase in litigation has been in the area of challenges to federal action, specifically industry challenges to proposed EPA efforts to regulate greenhouse gas emissions.
  • From 2001 to date, 24% of total climate change-related cases were filed by environmental groups aiming to prevent or restrict the permitting of coal-fired power plants.
  • Approximately 37 states have joined, or have stated their intention to join, either side of the EPA litigation challenge.

 Especially useful are two charts on p. 5. The first chart breaks down by number and type climate cases filed through Oct. 8, 2010.

 types-of-climate-cases-filed

 Challenges to federal action (91 cases, 27%) make up the largest category of cases, followed by anti-coal litigation (74 cases, 22%).

The second chart shows the trend in climate-related filings since 1989:

 climate-litigation-filings-over-time

 The striking fact here is the upsurge in lawsuits filed by industry. During 2004-2008, industry filed between 1 and 4 climate-related lawsuits per year. In 2009, industry filed 9 such lawsuits, and in 2010, a whopping 82 lawsuits, about 76% of the total number.

DBCCA expect more industry litigation in the future: “EPA is now proceeding to issue technology standards on a sector-by-sector basis, and will continue unless Congress acts or the Court of Appeals issues a stay or annuls the tailoring rule. Every further move by EPA is likely to be challenged in court by industry.”

EPA’s Regs for Rigs – Next Phase of the Fuel Economy Fetish

by Marlo Lewis on November 5, 2010

in Blog

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.

Man Bites Dog Pushes Car in ‘Green’ Hyundai Ad

by Marlo Lewis on October 28, 2010

in Blog

 

Hyundai has released a “green” (carbon-neutral) commercial to market itself as a “green” company. The production set includes rain collectors, solar panels, a tiny wind turbine, and electric generators hooked up to bicyclists (evidently, the solar panels and wind turbine just don’t provide enough juice).

The “greenest” feature, though, is that the car shown in the commercial doesn’t use any gasoline at all. Not one drop. A miracle? An all-electric vehicle?

Not even close. The car emits no greenhouse gases because nobody actually drives it on the set. Instead of the car moving people, people move the car. Literally. Three guys give it a shove to get it moving long enough (a few seconds) for the cameras to create the illusion of auto-mobility.

One of the glories of modern civilization is that it progressively substitutes machine labor for the muscular labor of human backs and limbs. The Hyundai ad implies that reversing this process, working our way back to a handicraft economy based on physical labor and low-density energy from wind, rain, and Sun, is the path of virtue.

Well, humanity has been there, done that. It’s called the Middle Ages. 

An exercise in post-modernist reflexivity, the Hyundai commercial is actually about the making of the commercial, rather than about the car shown in the commerical.  In fact, the vehicle is never mentioned by name, which is strangely fitting, since we never actually get to see it in operation. There is no way to tell from the commercial whether the car as an auto-mobile (a self-moving vehicle) is any good!

Even as an attempt to brand Hyundai as a green company, the ad is a flop. Yes, the film set is crunchy granola, but who says Hyundai had to build a set in the first place, transport a large tech crew to and from the set, buy or rent tons of equipment, and hire real actors? Hyundai could have avoided even more carbon emissions by making the commercial with a laptop and CGI software.

My Subsidy Good, Your Subsidy Bad

by Marlo Lewis on October 27, 2010

in Blog

In discussions of trade and economic policy, China increasingly plays the role that Japan once did — simultaneously vilified and lionized as both threat and model.

In the 1980s, “trade hawks” warned that Japan would “hollow out” our economy unless we adopted Japanese-style industrial policy to counter Japan’s “unfair” trade practices. Today, “progressives” warn that China will “eat our lunch” in the “clean tech race” unless we aggressively subsidize domestic manufacturers of wind turbines, solar panels, and the like, to counter China’s clean-tech subsidies, which, we are told, constitute “unfair” trade practices.

If there is any consistency in these discussions, it is that subsidies are always either good or bad, fair or unfair, depending on whether they rig the market for “our” companies or “their” companies.

Oh yes, there is one other point of consistency — everybody agrees “clean tech” can’t compete without subsidies. This came out during a conference earlier in the week at the Center for Strategic and International Studies. Sun Guoshun, first secretary of the Chinese embassy in Washington, D.C., defended his government’s use of subsidies as necessary to having a clean-tech sector. 

As reported today in Climatewire (subscription required), Mr. Sun said: “It is the consensus of the international community that renewable energy is not in a position to compete with fossil fuel energy. So if you’re not going to subsidize renewable energy, there will be no renewable energy.”

Can the Endangered Species Act Compel America to De-Industrialize?

by Marlo Lewis on October 22, 2010

in Blog

Can the Endangered Species Act (ESA) compel America to de-industrialize?

My colleague William Yeatman alludes to this question at the end of his post on yesterday’s Heritage Foundation symposium, “Saving the Polar Bear or Obama’s CO2 Agenda?”

The short answer is yes and no. Yes, because once the Fish and Wildlife Service (FWS) listed the polar bear as a “threatened species” on the supposition that carbon dioxide (CO2) emissions are melting the bear’s Arctic habitat, the Endangered Species Act (ESA) logically requires that people stop engaging in CO2-emitting activities. This is worrisome, because CO2 emissions come from energy use, which in turn derives from economic activity. There is hardly any economic activity in the modern world that does not, directly or indirectly, cause or contribute to CO2 emissions. Hence, almost any economic activity can be deemed to threaten the bear and, thus, violate the ESA!  

On the other hand, there are political limits to how far eco-activists can push this logic. The American people will not tolerate being regulated back into the dark ages. Al Gore and his allies know this, which is why they continually try to dress up their anti-growth agenda as a “green jobs” program.

But this means that, at a minimum, the ESA is a specter haunting our economic future, its potential for mischief held in check only by the vigilance of citizens and the political calculus of regulatory zealots.  

On May 14, 2008, when the FWS listed the polar bear as threatened, then Secretary of Interior Dirk Kempthorne claimed the agency’s action “should not open the door to use the ESA to regulate greenhouse gas emissions from automobiles, power plants, and other sources.” Why not? Well, Congress never intended for the ESA to be used as a framework for climate policy. It is not designed for that purpose. The same can be said however about the Clean Air Act, yet in Massachusetts v. EPA, the Supreme Court, unable to resist the temptation to legislate from the bench, authorized and, indeed pushed EPA to begin regulating greenhouse gases (GHGs). EPA is now busy promulgating GHG regulations and setting climate policy for the Nation.

In short, former Secy. Kempthorne was whistling past the graveyard. From day one, regulating GHGs via the ESA was the objective of the eco-litigation groups who petitioned and sued the FWS into listing the polar bear. How do I know? They said so.

CBD Playbook

The Center for Biological Diversity (CBD) was the lead group petitioning the FWS and suing the Department of Interior to list the polar bear under the ESA. Along with Greenpeace and Natural Resources Defense Council, CBD filed the petition on “Kyoto Day” — February 16, 2005, the day the Kyoto Protocol went into effect. In the fall 2007 issue of Natural Resources & Environment, CBD’s Senior Attorney (Brendan Cummings) and Climate Program Director (Kassie Siegel) plainly stated their intent to use the ESA to suppress U.S. fossil energy use.

Consider this excerpt:

In the seminal ESA case, Tennessee Valley Authority v. Hill, 437 U.S. 153 (1978), the Supreme Court held that the ESA’s unequivocal mandate that federal agencies “insure” that their actions do not “jeopardize” any species protected by the statute meant that a multimillion dollar dam project already near completion could not proceed because its completion threatened the existence of the snail darter, a small endemic fish of no know economic value. . . . In the nearly three decades since TVA was decided, courts enforcing the ESA have halted such activities as logging to protect threatened owls, commercial fishing and military activities to protect marine mammals, oil and gas development to protect wolves and grizzly bears, pesticide authorizations to protect imperiled salmon, and numerous other habitat-damaging activities that threatened a particular protected species. Whether GHG emissions can be halted to protect polar bears will be a test of the statute’s continuing relevance in the twenty-first century. [Emphasis added]

Ominously, Cummings and Siegel don’t say that the continuing relevance of the ESA depends on its ability to reduce or limit GHG emissions, but to “halt” them.

The authors go on to discuss Sections 7 and 9 of the ESA, and how those provisions can be used to block energy projects and control energy use.

Section 7 directs all federal agencies to consult with the FWS to ensure that “all actions authorized, funded, or carried out by such agencies are ‘not likely to jeopardize the continued existence’ or ‘result in the destruction or adverse modification of habitat’ of any listed species.” This means that “if the project [authorized, funded, or carried out by an agency] is determined to jeopardize a listed species or adversely modify its critical habitat, the statute can trigger modification or cancellation of the project so as to avoid such impacts.”

Quoting from the Code of Federal Regulations, Cummings and Siegel explain that “jeopardize” means “to engage in an action that reasonably would be expected, directly or indirectly, to reduce appreciably the likelihood of both the survival and recovery of a listed species in the wild by reducing the reproduction, numbers or distribution of that species.” Hence, if an action “appreciably” contributes to the GHG emissions believed to cause global warming, “that action could then be found to jeopardize a listed species.”

So which agency actions appreciably contributing to GHG emissions might be controlled or stopped under the ESA? The setting of fuel economy standards and the granting of offshore oil and gas leases are prime candidates, Cummings and Siegel opine, but many others would also come under carbon discipline:

The GHG emissions from numerous other actions present in the approval of new coal-fired power plants, oil shale leasing programs, limestone mines for cement manufacturing, and dozens perhaps hundreds of other projects are individually and cumulatively having an appreciable effect on the atmosphere. These are all agency “actions” as defined by the ESA, which “may affect” listed species, and therefore trigger the consultation requirements of Section 7.

The authors conclude: “There is no reason GHG emissions, which jeopardize polar bears, should be treated any differently than pesticides that harm salmon or logging that harms owls.”

Eventually, the ESA would also impose carbon discipline on the private behavior of firms and individuals. Section 9 of the ESA prohibits “any person,” including private individuals and corporations, from “taking” any endangered or threatened species. “Take” has several meanings, including “harass,” “kill,” and “harm.” “Harm” includes “significant habitat modification or degradation where it . . . injures wildlife by significantly impairing essential behavioral patterns, including breeding, feeding, or sheltering.” Polar bears breed, feed, and shelter on ice floes. If GHG emissions are melting the ice, then GHG emissions are “taking” polar bears. To repeat, almost any economic activity by almost any private entity directly or indirectly causes GHG emissions.

Finally, Cummings and Siegel argue, “The ESA requires that a recovery plan for the polar bear be prepared and implemented. There is no hope for recovery, much less survival, of the polar bear absent substantial reductions in GHG emissions. Any legally adequate recovery plan must therefore include mandates to reduce such emissions” (emphasis added).

So there you have it, straight from the source. The objective of listing the polar is to set the predicate for “mandates” to reduce GHG emissions.

What Next?

Under the ESA, a “threatened” species is one that is expected to become “endangered” in the future whereas an “endangered” species is one that currently faces extinction in part or all of its range. Although the ESA prohibits “takings” of both threatened and endangered species, if the species is listed as “threatened,” FWS has the option, under ESA Sec. 4d, “to relax the normal ESA restrictions to reduce conflicts between people and the protections” provided by the Act. On the same day that Secy. Kempthorne listed the polar bear as threatened, he issued a 4d rule that allows both “subsistence” hunting by native Alaskans and “environmentally sound” development of natural resources by oil and gas companies.

In May 2009, Obama Administration Interior Secretary Ken Salazar reaffirmed Kempthorne’s 4d rule, explaining that, “The Endangered Species Act is not the proper tool to deal with a global issue — with global warming,” adding: “We need to move forward with a comprehensive climate change and energy plan we can be proud of.” In addition to preferring “comprehensive” climate legislation à la Waxman-Markey, Team Obama may have wanted to protect EPA’s newly won power to call the shots on climate policy.

As you might expect, the CBD is challenging the 4d rule in the D.C. Circuit Court of Appeals, arguing that the Department of Interior should have listed the polar bear as “endangered.” Greenwire (subscription required), the online news service, comments: “If they [the polar bears] were reclassified as endangered, the 4(d) rule would no longer have any bearing and environmental groups would have greater leverage to argue that the government should require reduced greenhouse gas emissions in order to protect the bears.”

Several business groups (American Petroleum Institute, the U.S. Chamber of Commerce, National Mining Association, National Manufacturers Association, American Iron and Steel Institute)  and the State of Alaska have intervened in support of the 4d rule, arguing that the ESA should not be used to regulate GHGs. They may prevail, but it is entirely possible that, by listing the polar bear as threatened, the Department of Interior has painted itself into a legal corner.

Nonetheless, I see a bright future ahead. Recall that on June 10, all 41 Senate Republicans and six Democrats voted to overturn EPA’s Endangerment Rule, the trigger and precedent for a cascade of GHG regulations under the Clean Air Act. The resolution of disapproval lost by a mere four votes (47-53), and only because Senate Majority Leader Harry Reid (D-NV) promised fence-sitters an opportunity to vote on Sen. Jay Rockefeller’s competing legislation to prohibit EPA regulation of GHGs from stationary sources for two years. It is a promise the Honorable Mr. Reid has not yet kept, though there might be a vote in the lame duck.

My point, though, is that the next Congress is expected to include many more members opposed to cap-and-trade and other stealth energy taxes. ESA regulation of GHGs is potentially much more costly than cap-and-trade proposals like Waxman-Markey. So in all likelihood, the next Congress will have even less patience than the current one with climate hysteria-inspired regulatory excess.

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