Mark Hertsgaard and Christian Parenti, two reporters from The Nation, a far-left periodical, have an oped in syndication about how the federal government’s huge buying power can alter the economics of green energy.

Here’s how it works, in the authors’ own words:

Federal spending is responsible for roughly 25% of the gross national product, giving Washington enormous power to influence marketplace behavior even if annual spending levels are trimmed…If the Pentagon, the Postal Service and other agencies shifted their buying wherever possible from dirty technologies to clean ones, it would give manufacturers…a huge influx of orders. These orders would yield economies of scale that would enable green manufacturers to substantially reduce prices.

As the prices of green technologies fall to near that of dirty technologies, consumers and private companies will begin buying green of their own accord. Their purchases will yield additional economies of scale, enabling green manufacturers to lower prices further and entice more buyers, thus hastening the displacement of dirty technologies.

Hertsgaard and Parenti call their plan the “Big Green Buy.” I call it a “Very Dumb Idea.”

Recent history supports my description over theirs. Evidently unbeknownst to these authors, the federal government already has attempted The Big Green Buy, and it was a disaster.

From 1999 to 2006, the Post Office became the world’s #1 buyer of “flex-fuel” cars capable of running on E-85, a fuel blend containing 85% ethanol, a then-voguish green fuel distilled from the starch in corn. The Post-Office’s 30,000 car buying spree was meant to achieve markets of scale for ethanol production and use.

Unfortunately for the feds, the flex fuel plan backfired. The problem was that E-85 fueling stations were only available in a handful of states; everywhere else, the new Post Office vehicles had to use regular unleaded. And because “flex-fuel” vehicles tended to be SUVs, and were therefore larger and less fuel-efficient than the vehicles they replaced, gasoline consumption increased by almost 1.5 million gallons.

Such are the unintended consequences of Best Laid Plans.

On March 20, 2000, The Independent, a British newspaper, reported that “Snowfalls are just a thing of the past.” Global warming was simply making the UK too warm for heavy snowfalls. The column quotes Dr. David Viner of the Climatic Research Unit (CRU) of the University of East Anglia — yes, the epicenter of what would become the Climategate scandal — as saying that within a few years snowfall will become “a very rare and exciting event.” Indeed, Viner opined, “Children just aren’t going to know what snow is.”

Similarly, David Parker, at the UK’s Hadley Centre for Climate Prediction and Research, said that eventually British children could have only “virtual” experience of snow via movies and the Internet.

Well, last week another British newspaper, the Daily Mail, reported “The Coldest December since records began as temperatures plummet to minus 10C bringing travel chaos across Britain.” Here’s a snippet from the article (also excerpted by Wesley J. Smith in First Things):

Swathes of Britain skidded to a halt today as the big freeze returned – grounding flights, closing rail links and leaving traffic at a standstill. And tonight the nation was braced for another 10 in of snow and yet more sub-zero temperatures – with no let-up in the bitterly cold weather for at least a month, forecasters have warned. The Arctic conditions are set to last through the Christmas and New Year bank holidays and beyond and as temperatures plummeted to -10c (14f) the Met Office said this December was ‘almost certain’ to become the coldest since records began in 1910.

Meanwhile, back in the USA, the lead item in Google News is a Bloomberg story, “Snow Blankets US East Coast, Stranding Travelers.”  Bloomberg reports that, “New York City’s Central Park had 20 inches (51 centimeters) of snow by 8 a.m., the most for the month in 62 years.” This was “the most snow in the park for any December since 1948, the agency’s website showed.”

As in the UK, the record-breaking snowfall is disrupting transportation, keeping travelers snowbound and delaying Santa’s deliveries. It’s also downing power lines and turning off the Christmas lights. Some highlights:

  • “More than 6,000 flights were canceled in the region since yesterday as airports closed.”
  • “The day after Christmas is one of the five busiest shopping days of the year, and it may take retailers two weeks to capture sales lost yesterday,” an industry analyst told Bloomberg.
  • “NJ Transit, which transports about 170,000 commuters to and from New York City daily, suspended bus service as of 8:30 p.m. yesterday, according to a statement.”
  • “Four hundred subway passengers were aboard an A train that was stuck in Queens for more than six hours, until it could be pushed to a station by another train. The Coney Island area was without subway service.”  
  • “Consolidated Edison Inc. reported there were 6,167 customers in Queens, New York, and 1,811 in Westchester County without power. “
  • “National Grid Plc, which provides electricity in New York and Massachusetts, was reporting power outages at 14 sites throughout New York and Massachusetts affecting about 29,727 homes and businesses. The largest was in Norfolk, Massachusetts, where 10,902 customers were without power.”

As my colleague Heritage Foundation economist David Kreutzer observed at a panel discussion, winter is the biggest climate-related threat to public health and welfare!

Britain has had three snowy winters in a row, and this year’s Snowmageddon USA follows last year’s Snowpocalypse. Despite global warming, it seems, our children may never enjoy either Florida’s balmy weather in New York and Boston or Mediterranean “liveability” in the British isles.

The corn lobby defeated bipartisan efforts this year to remove two of ethanol’s political privileges, the 45¢ per gallon blender’s tax credit and the 54¢ per gallon protective tariff against imported Brazilian sugarcane ethanol.

However, roughly 60 organizations from across the political spectrum joined forces to challenge King Corn, and many are resolved to work together to carry on the fight next year.

Perhaps even more important, ethanol-subsidy foes now occupy the moral high ground. The Washington Post, the New York Times, and the Chicago Tribune, left-leaning stalwarts that usually applaud every green fad and cheer every government intervention in the economy, all say it’s time to end to the blender’s credit. Politically-correct Time Magazine calls federal ethanol policy “the clean energy scam.” Even Al Gore acknowledges that his previous support for ethanol subsidies was a “mistake” undertaken to win the support of corn farmers in the Iowa presidential primary.

Aside from corn farmers, ethanol distillers, and their mouthpieces in Congress, hardly any informed person disputes that corn ethanol does squat for U.S. energy security, inflates grain prices, shortchanges consumers at the pump, contributes to air and water pollution, and (on a life-cycle basis) emits more carbon dioxide than the gasoline it replaces.

Among the “progressive” organs to turn a skeptical eye on ethanol is National Public Radio, which this week ran a three-part series on the topic. 

In the first segment, Prof. David Swenson at Iowa State University, in the heart of corn country, takes issue with industry ads claiming that ethanol has created “nearly 400,000 jobs.” The actual figure, Swenson says, is “in the neighborhood of 30,000-35,000 jobs.”  

But doesn’t ethanol help insulate us from the rollercoaster of global crude oil prices by providing an alternative to gasoline?

Quite the reverse, explains Iowa State University Prof. Bruce Babcock in NPR’s second segment. Precisely because ethanol competes with gasoline, “we’ve now hitched the price of corn, inextricably linked the price of corn to the price of crude oil.” And because corn competes for land and customers with other grains, is widely used in food processing, and is a key livestock feed, the price of food is now linked to the price of crude oil. NPR comments: “With corn prices more closely tied to oil prices, when the price of gas goes up, it raises the demand for ethanol. That means consumers will feel it in two places: at the pump and on the dinner table.”

EPA recently approved the sale of E-15 — motor fuel blended with 15% ethanol, which contains 50% more ethanol than the E-10 misleadingly sold at service stations as “regular gasoline.” Growth Energy, a leading ethanol industry group, claims that consumers should be happy to fill their tanks with E-15 because that’s what NASCAR drivers now use. An obvious non-sequiter. A diet that’s good for a professional football player or a professional marathon runner is not necessarily good for a couch potato or even a weekend warrior.

To cut through the hype, NPR’s third segment interviews Dan Edmunds, director of vehicle testing at the auto research Website Edmunds.Com. Edmunds drove a flexible-fueled vehicle from San Diego to Las Vegas and back, first using E-10 and then using E-85 (motor fuel blended with 85% ethanol). He made the round trip with 36.5 gallons of gasoline. On E-85 it took 50 gallons — 37% more fuel to go the same distance. 

Public policy change typically requires odd-couple (“Baptist-Bootlegger“) alliances — a convergence of ideologically-motivated activists with bottom line-motivated business interests. That’s why demoting or even dethroning King Corn is now a real possibility. Ethanol’s fall from ideological grace among green activists and the mainstream media occurs at a time when powerful industry groups are either in open revolt against the King or are resisting his demands for additional privileges.

Rebels include the beef, poultry, hog, and dairy industries. They advocate repeal of the ethanol tariff and tax credit because those policies raise the price of corn, their basic feedstock, making them less competitive.

Earlier this week, several major U.S. oil refiners — direct beneficiaries of the blender’s credit, BTW — said they would not distribute E-15 despite EPA’s authorization to sell the fuel. As reported in the Wall Street Journal, Valero Energy Corp., Marathon Oil Corp., and Tesoro Corp. contend that E-15  could harm older car and truck engines and void their warranties.

The Journal also noted that the Alliance of Automobile Manufacturers, which represents General Motors, Ford, Toyota, and other auto companies “filed a petition with a U.S. appellate court in Washington on Monday challenging the EPA’s approval for the sale of gasoline containing 15% ethanol.”

The lame duck Congress renewed the ethanol tariff and tax credit for another year. But if Congress had debated the issue in 2009, the extension likely would have been for five years. That reflects the growing strength of the bipartisan, left-right, industry-activist anti-subsidy coalition.

A factor that should strengthen rebel forces — the incoming Congress will include many more fiscal conservatives than the one that just adjourned.

In the News

The Congressional Research Service’s Dirty Little Big Green Secret
Ron Arnold, Washington Examiner, 17 December 2010

Duke Energy’s Bad Bet
Chris Horner, Planet Gore, 15 December 2010

Wikileaks Climate Cables Show Obama’s Desperation
John Rossomando, Daily Caller, 15 December 2010

Budget Hawks Oppose Nuclear Loan Guarantees
Jesse Emspak, International Business Times, 15 December 2010

7 Year Moratorium Is a Bad Idea
Phil Ciciora, Illinois News Bureau, 14 December 2010

Energy Policy: 5 Worst Governors
William Yeatman, GlobalWarming.org, 14 December 2010

Ethanol Idiocy Will Not Die
Rich Lowry, National Review, 14 December 2010

Deutsche Bank’s “Corporate Irresponsibility,” Part 1
David Henderson, Financial Post, 13 December 2010

Deutsche Bank’s “Corporate Irresponsibility,” Part 2
Terence Corcoran, Financial Post, 13 December 2010

News you Can Use

Offshore Wind = Ultra Expensive Energy

In a Master Resource post on the economics of offshore wind energy, Lisa Linowes notes that Massachusetts regulators recently approved a contract to buy offshore wind energy for 18.7 cents a kilowatt, “a price that’s three times the cost of in-region natural gas and at least double the cost of other renewable options.”

Inside the Beltway

Myron Ebell

Congress Passes and President Signs Tax Bill with Goodies for Renewables

The Senate and House overwhelmingly passed and President Barack Obama signed the bill to extend the Bush tax cuts of 2001 and 2003 for two years.  There were a lot of other provisions in the bill, including one-year extensions of the 45 cents per gallon taxpayer subsidy and 54 cents tariff for ethanol and the section 1603 up-front taxpayer cash grants of 30% for renewable energy projects.  So we will keep throwing money away on dead-end renewables for at least another year.

Rockefeller Plays Games with Two-Year EPA Delay Bill

Senator Jay Rockefeller (D-WV) suddenly started talking again this week about offering an amendment to delay implementation of Clean Air Act regulation of greenhouse gas emissions for two years.  Then he quickly blamed Republicans for thwarting his efforts by blocking consideration of the Omnibus Appropriations bill.  Having failed to pass any of the twelve appropriations bills for the various federal departments and programs this year, the Omnibus Appropriations bill is the Democratic majority’s last-ditch attempt to lock in colossal spending levels before the Republicans take over the House in January.

Senate Majority Leader Harry Reid (D-Nev.) promised Rockefeller a vote on his amendment last June during the debate on Senator Lisa Murkowski’s (R-Alaska) Resolution of Disapproval under the Congressional Review Act.  Reid peeled enough Democrats away with that promise to defeat the resolution that would have blocked EPA from regulating greenhouse emissions permanently.  But of course, a promise from Senator Reid is not what is sometimes understood by that term.  Everyone knew at the time that Reid was not promising anything.

Senator Rockefeller vowed that, “I will be back fighting hard for my two-year bill as my first order of business in the new Congress.”  That may be true, but events have passed beyond the Senator from West Virginia.  House Republicans will be looking to move a permanent suspension of EPA greenhouse gas regulations.

Across the States

California

By a 9 to 1 vote, the California Air Resources Board this week approved a state-wide cap-and-trade scheme. The adopted regulation is more than 3,000 pages long, but most of the details have yet to be worked out as the CARB rushed to meet a December 31 deadline set by the 2006 Global Warming Solutions Act, legislation that authorizes the CARB to reduce the State’s greenhouse gases to 1990 levels by 2020. In order to protect California businesses from out-of-state competition, the CARB will allocate emissions credits (a.k.a. energy-rationing coupons) for free. The European Union Emissions Trading Scheme is the only precedent for free allocation of carbon credits, and it resulted in windfall profits for politically-connected industries and higher electricity prices for consumers.

Kansas

In October 2007, Kansas Health and Environmental Secretary Roderick Bremby denied permits for two proposed 700 MW coal-fired power plants in western Kansas. In 2008 and 2009, the State Legislature passed four bills to allow Sunflower to build the plants, but then-Governor Kathleen Sebelius (currently the Secretary of the U.S. Department of Health and Human Services) vetoed them all. After she left office to join the Obama administration, her successor Mark Parkinson immediately brokered a deal to allow for a scaled-down version of the project. This week, John Mitchell, the state’s acting secretary of health and environment, issued an air-quality permit for an 895 megawatt plant. The permit was issued only weeks before the start of new EPA regulations for greenhouse gases. Environmentalists have promised to litigate.

Around the World

Cancun Wrap-up

Last week’s Cooler Heads Digest was published before the conclusion of the 16th Conference of the Parties to the United Nations Framework Convention on Climate Change in Cancun, Mexico; nonetheless, we predicted that the negotiators ultimately would “produce an agreement to meet again.” We were right. The “Cancun Agreement” achieved a near-consensus (Bolivia was the only country to object) by deferring all decisions to future negotiations. The parties agreed to meet in Durbin, South Africa for COP-17 in December 2011.

The Cooler Heads Digest is the weekly e-mail publication of the Cooler Heads Coalition. For the latest news and commentary, check out the Coalition’s website, www.GlobalWarming.org

5.       New Jersey Governor Chris Christie
Christie’s skepticism of global warming alarmism is great. What’s not so great is his continued participation in a regional cap-and-trade energy rationing scheme. For whatever reason, the climate skeptic sounding governor has yet to pull his state out of the Regional Greenhouse Gas Initiative, the aforementioned energy tax.

4.       Florida Governor Charlie Crist (lame duck)
In 2007, Crist signed a series of environmentalist executive orders, which, thankfully, never came to fruition because they were spurned by the State Legislature. Crist earned his spot on this list for his invertebrate take on offshore drilling. When he campaigned for Governor, he opposed offshore drilling; when gas prices spiked in the summer of 2008, he supported drilling; and after the Gulf oil spill this past summer, he reverted back to opposing the practice.

3.       California Governor Arnold Schwarzenegger (lame-duck)
As I’ve explained here, here, and here, the Governator’s environmentalist pandering is empty blathering. For all the talk about California going green, the fact of the matter is that California’s environmentalist energy policies have been ineffectual at achieving anything other than higher energy prices. Rather than environmentalist accomplishments, Schwarzenegger’s only lasting legacy will be the almost-unlimited power he has bequeathed to his successor, Governor-elect Jerry “Moonbeam” Brown. Starting in 2011, the law accords the Governor amorphous, yet absolute, authority to mitigate climate change.

2.       New Mexico Governor Bill Richardson (lame duck)
Using authority derived from 1978 state law, New Mexico Governor Bill Richardson (D) last month imposed a cap-and-trade energy rationing scheme. The lame-duck Governor enacted the energy-rationing scheme administratively on November 2, the same day that voters indicated their displeasure with expensive energy climate policies by electing Susana Martinez (R) to succeed Richardson. She had campaigned against cap-and-trade. To be sure, Richardson’s energy policy is largely toothless; nonetheless, the executive power grab is disconcerting.

1.       Colorado Governor Bill Ritter (lame duck)
It will take a generation for Coloradans to undo the harm inflicted by the Governor Bill Ritter’s much-ballyhooed “New Energy Economy.” At Ritter’s behest: the General Assembly changed the mission of state utilities from providing “least cost” electricity, to fighting climate change; the Public Utilities Commission allowed the nation’s first carbon tax; and Department of Public Health and Environment exaggerated the threat of federal air quality regulations in order to justify legislation that picks winners and losers in the electricity industry.

The Environmental Protection Agency sprang two surprises last week. First, EPA asked a federal judge to allow them to delay issuing the boiler MACT (Maximum Available Control Technology) rule until April 2012, which would give EPA time to reconsider and rewrite the proposed regulation.  The rule is designed to cut air pollution from approximately 200,000 industrial boilers, process heaters, solid waste incinerators, etc.  Industrial users of boilers have made a good case that the proposed standards were going to be impossible to meet in many cases.

Next, EPA announced that the ozone or smog rule would be delayed until July 2011, while it reconsidered the scientific and health studies on smog’s effects.  The announcement suggests that EPA has bowed to intense opposition from Congress, state and local governments, and industry and is now going to re-write the smog rule so that it is less economically catastrophic.  EPA nonetheless is going ahead with regulating greenhouse gas emissions from major stationary sources on January 1, 2011.  There is little reason to think that those regulations are any less damaging than the smog rule.

The EPA also announced last week that it was holding its second National Bed Bug Summit meeting in early February. You may laugh, but at least with bed bugs EPA is addressing a real environmental health problem.

Los Angeles Mayor Antonio Villaraigosa’s green energy plan will increase utility bills 3%-8% annually for twenty years, according to the LA Department of Water and Power. Currently, Los Angeles gets almost 50% of its electricity from out-of-state coal power plants, which is the primary reason that its ratepayers avoided the price spikes that plagued California during the 2000 electricity crisis, but the Mayor’s energy plan would have the Department of Water and Power disinvest from its Nevada coal generating facility and replace this power with expensive renewable energy.

Ethanol Payoffs Survive Again

by Myron Ebell on December 12, 2010

in Blog

Senate Majority Leader Harry Reid’s (D-Nev.) version of the tax deal agreed between President Barack Obama and senior House and Senate negotiators reportedly includes a one year renewal of the 45 cents per gallon ethanol tax credit and the 54 cents per gallon ethanol tariff.  Several other giveaways to renewable energy special interests are included in the Senate version of the package.  They include the multi-billion-dollar Section 1603 grant program for renewable energy projects (such as wind turbines), an extension of the bio-diesel tax credit, and a bunch of credits for energy-efficient appliances, energy-efficient new homes, and the 30% credit for installing E-85 pumps at gas stations.  All these boondoggles add up to many billions of dollars of wasted taxpayer dollars lavished on big business special interests.  The result is higher energy prices for consumers.

However, it is not clear that the tax deal is going to be enacted.  House Democrats led by Speaker Nancy Pelosi (D-Calif.) have voted to oppose it. Unless Pelosi schedules a House vote, it won’t come up this year.  It appears the White House was taken by surprise by this House Democratic revolt against their own President, but I expect the White House is twisting a lot of arms to get them to change their minds.  If the tax hikes take effect on January 1st and it’s up to the 112th Congress to repeal them, then I expect the new Republican majority in the House will want a significantly different package.  My advice is not to bet against ethanol subsidies.

Sen. James Inhofe (R-Okla.), Ranking Member of the Senate Committee on Environment and Public Works, last week released a new minority report, titled, “The Real Story Behind China’s Energy Policy-And What American Can Learn From It.” The report shows that, regardless of its wind and solar production, China is predominantly relying on coal, oil, and natural gas, along with hydro and nuclear power, to fuel its economy.

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