Post image for Irwin Stelzer’s ‘Conservative’ Carbon Tax. What Would Reagan Do?

Irwin Stelzer has a column in the Weekly Standard titled “Let’s tax carbon: It’s the worst form of energy policy except for all the others that have been tried.” Clever but not wise.

Whether or not a carbon tax is better than other ‘green’ energy schemes, it is not better than the free-market policy President Obama and Sen. Majority Leader Harry Reid won’t let us try: A broad-based strategy to “unleash” what Manhattan Institute scholar Mark Mills calls the “North American energy colossus.”

Stelzer worries the feds will run out of money and be forced to raise other taxes if they can’t tax carbon. He doesn’t explain why taxing carbon is preferable to taxing income, except for a glib remark that it’s better to have “taxes on bad stuff rather than on work and investment.” But carbon taxes are a tax on carbon-based (fossil) fuels, which supply 82% of U.S. commercial energy, and energy, like labor and capital, is a factor of production. In fact, without carbon-based energy, few of us would be employed — or even exist. A carbon tax is an indirect tax on labor and production — the good stuff.

Moreover, as Institute for Energy Research scholar Robert Murphy points out, the smaller the base on which a tax of a given size is levied, the more distortionary the effects. The base of a carbon tax — particular commodities or industries — is narrower than the base for retail sales, income, and labor taxes. Stelzer’s got it backwards. Substituting carbon taxes for income taxes – and especially adding carbon taxes on top of income taxes, as he envisions – would make the tax system less “efficient.”

Besides, there is no hope of avoiding fiscal ruin without sustained robust economic growth, and fossil energy development is one of the few bright spots in the economy. Tax a thing, and you get less of it: Econ 101.

Stelzer professes to like fracking and oil and even coal, but somehow sees nothing problematic about promoting a tax the basic premise of which is that fossil fuels are destroying the planet and should be suppressed. Especially in an election year, conservative politicians cannot adopt an agenda so deeply conflicted without dividing the movement and demoralizing its base. [click to continue…]

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

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

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

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

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

Two things should be obvious to biodiesel producers.

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

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

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

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

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

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

Post image for Regulatory Capture Comes Full Circle at the EPA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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The federal government’s third National Climate Assessment was released yesterday with one message that was repeated throughout the media.  That message is: Climate change is already disrupting the economy, people’s lives, and ecosystems across the country.  IT’S REAL!  IT’S HERE!  IT’S NOW!  AND IT’S BAD!

Here are the first few paragraphs of a story from the Washington Post.

The government’s newest national assessment of climate change declares that increased global warming is affecting every part of the United States.

The report released Tuesday cites wide and severe impacts: more sea-level rise, flooding, storm surges, precipitation and heat waves in the Northeast; frequent water shortages and hurricanes in the Southeast and the Caribbean; and more drought and wildfires in the Southwest.

“For a long time, we have perceived climate change as an issue that’s distant, affecting just polar bears or something that matters to our kids,” said Katharine Hayhoe, a Texas Tech University professor and a co-author of the report. “This shows it’s not just in the future; it matters today. Many people are feeling the effects.”

The federal climate assessment — the third since 2000 — brought together hundreds of experts in academia and government to guide U.S. policy based on the best available climate science.

A quick internet search produced several hundred similar stories.

There are two obvious problems with the National Climate Assessment.  The first is the fact that the global mean temperature has not increased in the past seventeen years.  This means that the Assessment is claiming that the effects (disruption) are preceding the cause (warming).  I guess the disruption will really be bad if temperatures do actually start to go up.

Global Mean Surface Temperatures 1997-2014

Global Mean Surface Temperatures 1997-2014

The second problem with the Assessment is that it does not recognize that all climate disruptions are not created equal.  Does the Obama Administration really think that Americans have already forgotten the past five months of winter?  The fact is that cold, snowy weather is much more disruptive to people’s lives and the economy than hot weather.

As a reminder, here are a few highlights from the winter just past: [click to continue…]

…When I see a headline like this: “Americans Are Outliers in Views on Climate Change.”

The article comes from the New York Times. Here’s the chart that makes the reporter’s point:

According to a recent Pew poll, the figure for the U.S. is closer to 30%

According to a recent Gallup poll, the figure for the U.S. is closer to 30%

On the one hand, this chart may represent Americans’ famed frankness relative to the rest of the world. After all, national populations that purportedly care much more about the supposed threat of catastrophic climate change, like Germany and Japan, are turning to “dirty” coal in increasing volumes as they turn away from nuclear power. When it comes to choosing between carbon intensive electricity and no electricity at all, the Germans and Japanese are going with reliable power, global warming be damned.

On the other hand, perhaps the chart is evidence that the U.S.A. really is a City Upon a Hill. In a world rife with clear and present dangers to the immediate welfare of living human beings, among which climate change (“a rich man’s issue“) is decidedly not included, God bless Americans for keeping their priorities in perspective. For my view on the matter, see this interview with SNL. [click to continue…]

Post image for WaPo Gets Another Koch Fact Wrong

In an article today about the White House’s doom and gloom National Climate Assessment, Washington Post reporter Darryl Fears goes out of his way to tar those opposed to economically disastrous and ineffective global warming policies as being under the thumb of libertarian businessmen Charles and David Koch:

Other contrarians include libertarians at the Cato Institute, founded by Charles and David Koch, brothers whose multi-billion dollar fortune is partly derived from fossil fuels, and are well-known to deny the impacts of climate change.

Cato researchers Paul C. Knappenberger and Patrick J. Michaels said the assessment was “biased toward pessimism, the opposite of how Wolfe described it. As a resource, it is meant to justify “federal regulation aimed towards mitigating greenhouse gas emissions.”

However, in an effort to deploy the tired progressive guilt by association argumentum ad Kochum, Fears falls flat: the Cato Institute was not “founded by Charles and David Koch.” As the first line of the Cato Institute Wikipedia article correctly states, Cato was founded “by Ed Crane, Murray Rothbard, and Charles Koch.” If you don’t trust Wikipedia, here’s Will Wilkinson mentioning the three Cato founders in The Economist: “Charles Koch founded the Cato Institute in 1977 with Ed Crane and Murray Rothbard.” To be clear, that is but one brother Koch, not two, as a Cato Institute founder. To be even clearer, Charles was one of the Cato founders, not David. Good? Great.

This isn’t the first time a Washington Post reporter has thrown truth out the window in a sad attempt to smear the Kochs and the organizations they support. Recently, Post reporters Steve Mufson and Juliet Eilperin were caught publishing massive falsehoods regarding Koch Industries’ Canadian oil sands lease holdings. John Hinderacker produced an excellent smack-down of Mufson and Eilperin’s incredibly lazy reporting and their subsequent mealymouthed walk-back.

I know the newspaper business is struggling, but maybe the Post should consider hiring a fact checker for all things Koch. This is just getting embarrassing.

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Today, the Competitive Enterprise Institute sued the White House Office of Science and Technology Policy (OSTP) for flouting the Freedom of Information Act. CEI’s Chris Horner asked OSTP to produce work-related emails that OSTP’s Director, John Holdren, stored in an email account at his former employer, the environmental-pressure group Woods Hole Research Center. OSTP has resisted producing them.

What is ironic about this is that OSTP’s Director, soon after taking office, lectured OSTP employees about not conducting official business using private email accounts, and about the need to forward all work-related communications to their agency email account in order to comply with federal record-keeping laws. (See May 10, 2010 Memo from OSTP Director John Holdren to all OSTP staff, Subject: Reminder: Compliance with the Federal Records Act and the President’s Ethics Pledge, at 1, available as Exhibit B to the letter at this link.)

Apparently, the longer an official is in power, and the less he fears losing power, the less he cares about government transparency and the rule of law. The complaint is reposted immediately below. [click to continue…]

Post image for Carbon Emissions Rule: New Way to Skin the Cat — or Same Old, Same Old?

During his first presidential campaign, then-candidate Barack Obama told the San Francisco Chronicle that his plan for a cap-and-trade program would “bankrupt” anyone who builds a coal-fired power plant. Cap-and-trade died when it was exposed as cap-n-tax — a stealth energy tax that would cause electricity rates to “necessarily skyrocket.” Following the November 2010 defeat of 29 House Democrats who supported the Waxman-Markey cap-and-trade bill, President Obama vowed to find “other ways of skinning the cat.”

If you trust the Obama administration, the “cat” to be skinned is global warming. If you distrust the administration, the “cat” on the cutting board is the coal industry.

Regardless, EPA’s Carbon Pollution Rule, which would establish first-ever new source performance standards (NSPS) for carbon dioxide (CO2) emissions from new fossil-fuel power plants, appears at first glance to be one of those “other ways.” However, in a recent commentary, Nathan Richardson of Resources for the Future argues that, with a little editing, EPA can turn the “carbon pollution” rule into the legal framework for cap-and-trade. [click to continue…]