Solar Tariffs Expose Administration’s Crony Intentions

by David Bier on May 23, 2012

in Blog

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Last week, the Obama administration rolled out new tariffs on Chinese solar manufacturers. These new taxes will make solar energy more expensive, which will make environmentalists’ clean energy dream even more difficult to obtain. In other words, this action shows conclusively that this industry exists to benefit Obama Inc., not the American public.

Obama’s excuse for this move is that China subsidizes their solar industry and sells the panels here at a loss. Forget the absurd hypocrisy for a moment—what this argument really amounts to is an admission that the solar panel industry exists, not for the sake of the American consumer—that is, society in general—but for solar panel producers themselves. President Obama sees the industry collapsing all around him and has chosen to use government force to save it, another sly-bailout for the Bailout King.

China has decided to sell America solar panels at a loss. That’s true, but imagine if McDonald’s decided to do that. Should the government step in and subsidize Burger King, or should Americans just take advantage of the stupidity? You would think that Obama would be happy that another government is subsidizing his clean energy economy, but again, his tariff decision shows that he’s not actually interested in “clean energy” per se. He’s interested in the votes and campaign cash that the clean energy industry brings.

As Peter Schweizer, Hoover Institute Fellow and Throw Them All Out author, points out seventy-five percent of the Department of Energy green energy subsidies went to Obama bundlers or campaign members. Of the $20 billion in grants and loans, $16 billion went to “Obama-related companies,” notes Schweizer. “By that I mean either the chief executive or leading investor was a member of his campaign finance committee or was a bundler for his campaign.”

The Obama administration has lost a subsidy war and has started a trade war, all for the benefit of one politically favored industry. As China officials quickly pointed out, this tariff “will hurt both countries because China imports a large amount of raw materials and equipment from the U.S. to produce solar panels, and it exports such goods to the U.S.” But these industries aren’t as politically connected as the many wannabe Solyndras.

Crony-capitalism dressed in green rhetoric is still crony capitalism. It’s one reason that Congress should adopt a “Gift Clause,” which would ban all corporate subsidies. Only then would we have a true “level playing field” that Obama has advocated so many times.

Ethanol Reduced Gas Prices by $1.09/gal. – Or Didn’t You Notice?

by Marlo Lewis on May 16, 2012

in Blog, Features

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Iowa State University’s Center for Agricultural and Rural Development (CARD) has just updated its 2009 and 2011 studies of ethanol’s impact on gasoline prices. CARD claims that from January 2000 to December 2011, “the growth in ethanol production reduced wholesale gasoline prices by $0.29 per gallon on average across all regions,” and that in 2011 ethanol lowered gasoline prices by a whopping $1.09 per gallon.

I’m no econometrician, but this study does not pass the laugh test. We’re supposed to believe that ethanol has conferred a giant boon on consumers even though gasoline prices have increased as ethanol production has increased, and even though gas prices hit their all-time high when ethanol production hit its all-time high. If that is success, what would failure look like?

CARD’s argument boils down to this. The gasoline sold at the pump today is E-10 — motor fuel blended with 10% ethanol. Ethanol thus makes up 10% of the motor fuel supply for passenger cars. If there were no ethanol, the motor fuel supply would be 10% smaller, and gas prices would be $1.09 per gallon higher (p. 6).

Well, sure, if we assume a drop in supply and no change in demand, prices will rise. But this scenario tells us nothing about what really matters — whether ethanol’s policy privileges, especially the Renewable Fuel Standard (RFS), a.k.a., the ethanol mandate, benefit or harm consumers.*

Note first that even in the absence of government support, billions of gallons of ethanol would be sold each year anyway as an octane booster. So a scenario in which 10% of the motor fuel supply simply disappears does not correspond to any policy choice Congress is actually debating or considering.

More importantly, CARD assumes that if the motor fuel supply were 10% smaller, refiners would not increase output to sell more of their product at higher prices. In other words, refiners would not engage in the economically-rational, profit-maximizing behavior that would bring supply back into balance with demand, thereby moderating the initial price increase.

Why wouldn’t they? There are only two possible explanations. One is that refiners don’t want to get rich, which is absurd. The other is that refiners operate like a cartel, colluding to restrict output in order to charge monopoly rents. CARD gives no sign of endorsing this view, and repeated investigations of the U.S. refining industry by the Federal Trade Commission repeatedly fail to find evidence of such anti-competitive scheming.

CARD’s analysis also ignores the opportunity costs of ethanol’s policy props. Capital is a finite resource. Every dollar refiners are forced or bribed to spend on ethanol is a dollar they cannot spend to produce gasoline. Government cannot rig the market in favor of ethanol without discouraging gasoline production. It is ridiculous to assume that all of the resources (e.g., refining capacity) commandeered by federal policy over the past decade to boost ethanol’s market share would have been left idle and not used to make gasoline in a free market.

In short, CARD’s analysis abstracts from the most basic economic realities we were all supposed to learn in Econ 101: resources are finite, choices have opportunity costs, and incentives (prices) matter.

I leave it to econometricians to quantify the repercussions, but this much is clear. In a free market, refiners would have blended less ethanol and produced more gasoline than they did in the market rigged by the RFS and other pro-ethanol policies. CARD — or, more precisely, CARD’s sponsors, the Renewable Fuel Association (RFA) — would have us believe that refiners would produce no more gasoline in a free market than they would in a market politicized by mandates and subsidies. That assumption is so unrealistic that any analysis based upon it is inappropriate and even fraudulent if used as a justification for maintaining or expanding government support for ethanol. [click to continue…]

Wind Energy: The Wheels Are Coming Off the Gravy Train

by Marita Noon on May 16, 2012

in Blog, Features

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The wind energy industry has been having a hard time. The taxpayer funding that has kept it alive for the last twenty years is coming to an end, and those promoting the industry are panicking.

Perhaps this current wave started when one of wind energy’s most noted supporters, T. Boone Pickens, “Mr. Wind,” in an April 12 interview on MSNBC said, “I’m in the wind business…I lost my ass in the business.”

The industry’s fortunes didn’t get any better when on May 4, the Wall Street Journal (WSJ) wrote an editorial titled, “Gouged by the wind,” in which they stated: “With natural gases not far from $2 per million BTU, the competitiveness of wind power is highly suspect.” Citing a study on renewable energy mandates, the WSJ says: “The states with mandates paid 31.9% more for electricity than states without them.”

Then, last week the Financial Times did a comprehensive story: “US Renewables boom could turn into a bust” in which they predict the “enthusiasm for renewables” … “could fizzle out.” The article says: “US industry is stalling and may be about to go into reverse. …Governments all over the world have been curbing support for renewable energy.”

Michael Liebreich of the research firm Bloomberg New Energy Finance says: “With a financially stressed electorate, it’s really hard to go to them and say: ‘Gas is cheap, but we’ve decided to build wind farms for no good reason that we can articulate.’” Christopher Blansett, who is a top analyst in the alternative-energy sector in the Best on the Street survey, says, “People want cheap energy. They don’t necessarily want clean energy.”

It all boils down to a production tax credit (PTC) that is set to expire at the end 2012. Four attempts to get it extended have already been beaten back so far this year—and we are only in the fifth month. The Financial Times reports: “Time-limited subsidy programmes…face an uphill battle. The biggest to expire this year is the production tax credit for onshore wind power, the most important factor behind the fourfold expansion of US wind generation since 2006. Recent attempts in Congress to extend it have failed.”

[click to continue…]

♫ Corn Is Busting Out All Over ♫ (Update on Global Warming and the Death of Corn)

by Marlo Lewis on May 15, 2012

in Features

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About a year ago on this blog, I offered some skeptical commentary about the gloomy testimony of Dr. Christopher Field of the Carnegie Institution for Science, who warned the House Energy & Commerce Committee that global warming would inflict major losses on U.S. corn crop production unless scientists develop varieties with improved heat resistence.

I noted that long-term U.S. corn production was increasing, including in areas where average summer temperatures exceed 84°F, the threshold beyond which corn yields fall, according to Field.

Well, this just in, courtesy of the Renewable Fuels Association (RFA): USDA projects the U.S. corn crop for 2012 to reach 14.79 billion bushels, the biggest ever. RFA’s objective, of course, is not to debunk climate alarm, but to assure us that we can have our corn (ethanol) and eat it too. Nonetheless, the numbers are mighty impressive and indicate that, in this decade at least, U.S. corn farmers are more than a match for climate change. From RFA’s briefing memo:

At 14.79 billion bushels, the 2012 corn crop would:

  • be a record crop by far, beating the 2009 crop of 13.09 billion bushels by 11%.
  • be 65% larger than the crop from 10 years ago (8.97 billion bushels in 2002).
  • be more than twice as large as the average-sized annual corn crop in the decade of the 1980s (7.15 billion bushels on average).

The 2012 projected yield of 166 bushels per acre would:

  • be a record yield, beating out the 2009 average yield of 164.7 bushels per acre.
  • be only the third time in history yields have topped 160 bu/acre, the others being 2009 (164.7) and 2004 (160.4).
  • be 35% higher than the average yield from the 1990s and 12% higher than the average yield since 2000.

Buffett’s Support Signals Movement on Keystone Pipeline

by Myron Ebell on May 14, 2012

in Blog, Features

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The House and Senate conference committee on re-authorizing the highway bill met for the first time on Tuesday, 8th May.  One of the most contentious issues is House language that would require permitting of the 1700-mile Keystone XL pipeline from Alberta’s oil sands to Gulf refineries. Initial reactions were that the Keystone provision has little chance of being included in the final conference report.  However, there are signs that the ground is shifting.

Representative John Mica (R-Fla.), Chairman of the House Transportation and Infrastructure Committee, said last Thursday that he thought the Keystone provision was making great progress toward being included in the final bill. Mica noted that eleven Democratic Senators and 69 Democratic House members (out of 190) have recently voted for permitting the pipeline.

Perhaps more importantly, billionaire investor Warren Buffett told Fox Business News last week that he supports building the Keystone XL Pipeline. Buffett is a close supporter of President Barack Obama.  It has been speculated that Buffett was one of those advising Obama to deny the Keystone permit last fall out of self interest.  Buffett’s Berkshire Hathaway owns the Burlington Northern Santa Fe Railroad, which because of the lack of pipeline capacity has become a major shipper of crude oil from the Bakken Formation in North Dakota and Montana to refineries.  The Keystone XL would transport oil from the Bakken Formation as well as from Alberta’s oil sands.

Buffett may well have been offering his own opinion without consulting the White House first.  On the other hand, his comments may be a sign that the White House is maneuvering to save face and let the Keystone permit go through.  President Obama’s political advisers clearly understand that the President is on the wrong side of public opinion on Keystone.  Letting the Congress overrule the President this summer would largely take away a campaign issue in the fall.

Iron Man: Capitalist Hero

by Matt Patterson on May 11, 2012

in Blog, Features

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In the new movie The Avengers (which is excellent: see my review for National Review Online here), Iron man’s alter-ego Tony Stark (Robert Downey, Jr.) perfects a renewable, clean energy source, and uses it to light up his company’s new Manhattan skyscraper.

In spite of this green street-cred, Stark is a hero designed—literally—to drive liberals crazy.  Stan Lee, who co-created Iron Man in the 1960’s, has often reminisced to interviewers about his motives for creating Stark.  After helping to create a string of popular heroes for Marvel Comics, including Spider-Man and the Fantastic Four, Lee had decided to give himself a challenge, and asked himself:  Who do young people (read: liberals) hate?  The military, Lee thought right away (it was the 60’s, after all), and the wealthy.  So for his next hero, Lee decided to create a millionaire industrialist who made weapons for the army, and then make him likable.  Iron Man was born.

Now, Filmmakers who have brought Tony Stark to the big screen in a string of recent blockbusters—Iron Man (2008), Iron Man 2 (2010), The Avengers (2012)—have made him even more unpalatable to liberals.  After all, what other super-hero is regularly shown blasting terrorists out of their caves in Afghanistan, or working side-by-side with the United States Military?

Imagine how queasy greens must feel to see that this arch-capitalist be the one to invent renewable energy in the Marvel universe.  And worse, he didn’t do it for the good of Mankind.  He did for entirely selfish reasons, indeed, the most selfish reason:  He built the first, miniature version of his energy source in the first Iron Man film in order to power his wounded heart, which had been shredded by enemy shrapnel.
More unforgivable from the environmentalists’ perspective, however, is that Stark did all of this without a Department of Energy grant.  Unlike Solyndra, he needed no government incentives or funding.  Unlike Solyndra, he succeeded.   Now, in The Avengers, Stark uses this technology to power a gigantic monument to himself, a gleaming tower with “Stark” emblazoned in bright letters at its apex.

True, Stark and his exploits are fiction.  But can there be any doubt that, if and when an actual, viable green tech is invented, that it will be by someone like Stark, a self-reliant, independent genius, as opposed to a pasty-faced D.O.E. bureaucrat?  Can there be any doubt that it will be a capitalist, working for his or her own selfish ends, that will provide the breakthroughs that environmentalists insist the government must provide and/or subsidize?

And won’t that drive them crazy?

Fossil Fuel Shill Sierra Club Bites the Hand That Fed It

by Myron Ebell on May 7, 2012

in Blog, Features

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National Journal’s Amy Harder reported last week that the Sierra Club is re-branding its anti-natural gas efforts as “Beyond Natural Gas.”  Beyond Natural Gas joins the Sierra Club’s other two anti-energy campaigns, Beyond Coal and Beyond Oil (Beyond Nuclear is a separate organization founded in 2007 and headquartered in Takoma Park, Maryland, which has been an official nuclear-free zone since 1983).

Here’s how the Sierra Club introduces its Beyond Natural Gas web page: “The natural gas industry is dirty, dangerous, and running amok. Government loopholes exempt natural gas drillers from the Clean Air Act, the Clean Water Act, and the Safe Drinking Water Act — and at the same time, don’t require them to disclose the frequently toxic chemicals they use in hydraulic fracturing, or “fracking,” the violent process they employ to dislodge gas deposits from shalerock formations. The closer we look at natural gas, the dirtier it appears; and the less of it we burn, the better off we will be.”

The Sierra Club’s timing, whether intentionally or not, kicks Aubrey McClendon, their former patron, when he is down.  Time Magazine reported earlier this year that McClendon gave the Sierra Club $26 million between 2007 and 2010 for their Beyond Coal campaign.  This week McClendon was relieved of his duties as chairman of one of the U. S.’s largest natural gas producers, Chesapeake Energy, although he remains CEO.  It also became public knowledge last week that the Securities and Exchange Commission has launched an investigation into McClendon and Chesapeake.

The SEC investigation and the decision by Chesapeake’s board to replace McClendon as chairman are the result of revelations by Reuters on 18th April that McClendon, the founder of Chesapeake, had a sweetheart deal with the company to borrow over $1 billion and use it to buy personal shares in Chesapeake gas wells.

Eco Crowd Growing Desperate—and Dangerous

by Matt Patterson on April 27, 2012

in Blog

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The climate scaremongers are losing the public relations battle on global warming—and it’s driving them absolutely batty.

Take eco-warrior Steve Zwick. Writing for FORBES Zwick calls on so-called “climate deniers” to be treated like war criminals:

Let’s take a page from those Tennessee firemen we heard about a few times last year—the ones who stood idly by as houses burned to the ground because their owners had refused to pay a measly $75 fee. We can apply this same logic to climate change.

We know who the active denialists are—not the people who buy the lies, mind you, but the people who create the lies. Let’s start keeping track of them now, and when the famines come, let’s make them pay.  Let’s let their houses burn until the innocent are rescued. Let’s swap their safe land for submerged islands.  Let’s force them to bear the cost of rising food prices.  They broke the climate.  Why should the rest of us have to pay for it?

Notice that arguments contrary to what Zwick believes are not honest differences of opinion—they are “lies.” Those who disagree with him are not merely mistaken, they are malevolent. They are not worthy of being converted to his point of view via honest debate; they deserve only to have their homes razed.

This is fascism, pure and simple, and it is more and more a feature of environmentalist rhetoric.

The violent imagery has even seeped into the pronouncements of the eco-priests at the Environmental Protection Agency. Recently a video surfaced of EPA Region VI Administrator Al Armendariz admitting that his agency’s philosophy is to “crucify” oil a gas companies:

I was in a meeting once and I gave an analogy to my staff about my philosophy of enforcement, and I think it was probably a little crude and maybe not appropriate for the meeting, but I’ll go ahead and tell you what I said:

It was kind of like how the Romans used to, you know, conquer villages in the Mediterranean.  They’d go in to a little Turkish town somewhere, they’d find the first five guys they saw and they’d crucify them. Then, you know, that town was really easy to manage for the next few years.

How can anyone, whether on the Left or the Right, not be chilled to the bone to hear a government official talk in such a manner about private companies and individuals?

[click to continue…]

CAFE, RFS Endanger Convenience Stores, Study Cautions

by Marlo Lewis on April 25, 2012

in Features

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Today, the National Association of Convenience Stores (NACS) published a study on the challenges facing the more than 120,000 U.S. convenience stores that sell motor fuel in a market increasingly shaped by the competing requirements of two federal programs: renewable fuel standard (RFS, a.k.a. the ethanol mandate) and corporate average fuel economy (CAFE).

I may have more to say about the study in a later post, but the skinny is that RFS and CAFE may whipsaw the retail fuel outlets upon which most of us depend to fill our tanks. CAFE will decrease the amount of fuel purchased and the frequency of consumer transactions at convenience stores, while the RFS will force convenience stores to make costly investments in storage tanks and blender pumps to sell increasing amounts and percentages of high-ethanol blends.

The excerpts below from NACS’s press release paint a disturbing picture on an industry caught in the regulatory cross hairs:

“RFS and CAFE policies cannot coexist without substantial changes in the retail and vehicle markets to accommodate significantly higher concentrations of renewable fuels, an unlikely scenario given that we may not even meet current requirements as they stand in 2012,” said John Eichberger, NACS vice president of government relations and the author of the new NACS whitepaper, The Future of Fuels: An Analysis of Future Energy Trends and Potential Retail Market Opportunities.

The Renewable Fuels Standard, revised by Congress as part of the Energy Independence and Security Act of 2007 (EISA), requires that increasing amounts of qualified renewable fuels be integrated into the motor fuels supply, culminating at a minimum of 36 billion gallons in 2022. This mandate was expected to increase renewables to approximately 20% to 25% of the overall gasoline market in 2022, about double the rate of 10.4% last year.

Meanwhile, in 2011 the Obama administration proposed new CAFE standards, which are expected to be finalized this summer, that seek to increase the average fleet fuel efficiency to an equivalent of 54.5 miles per gallon by 2025. The cumulative effect of the two mandates is that renewable fuels will be required to represent a significantly greater share of the market than originally anticipated — perhaps as much as 40%, or four times higher than today.

“This level of renewable fuels penetration in the market will impose significant economic burdens on the retail fuels market and consumers,” said Eichberger. “To meet such a high renewable fuels concentration, it is likely that most retailers in the country will have to replace their underground storage tank systems and fuel dispensers. For the convenience industry alone, this will require a minimum infrastructure investment that will add nearly $22 billion to the cost of retailing fuels.” [And where will they get the scratch, I wonder, with CAFE depressing motor fuel demand and sales?]

Even after this enormous infrastructure investment, it still may be impossible to satisfy the RFS, considering that only one in six consumers will drive vehicles capable of running on the mandated fuels. The U.S. Energy Information Administration (EIA) projects only 16% of on-road vehicles in 2022 will be flexible fuel vehicles.

“Unless something dramatic happens, we will hit the ‘blend wall’ within the next two years and will not be able to meet RFS requirements. This will trigger massive fines throughout the petroleum distribution system that will increase the cost to sell motor fuels,” said Eichberger.

An industry expert explains the problem to me as follows: [click to continue…]

EPA’s MATS Economic Analysis Omits Economy from Analysis

by David Bier on April 24, 2012

in Blog, Features

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The Environmental Protection Agency concedes that its recently finalized Mercury and Air Toxics Standards rule, also known as the Utility MACT, would cost $10 billion annually. Industry estimates are much, much higher. Even EPA’s (likely lowball) figure makes the MATS rule one of the most expensive direct regulations ever.

Despite these evident costs, EPA claims that the regulation will not only save the environment, but also benefit the economy. EPA Deputy Administrator Robert Perciasepe testified, for example, “Our analysis shows, particularly on these utility rules, that it will create jobs.” Head Administrator Lisa Jackson has repeated the same claim. “Every model that we run,” she said last year, “shows… that it would actually create jobs.”

But these claims are entirely disingenuous. EPA analysis does not show that the Utility MACT will result in net job creation, only that it will create jobs in the coal industry and those industries that produce pollution abatement equipment. The wider economic implications are ignored. As EPA’s Regulatory Impacts Assessment (RIA) states, “the Agency has not quantified the rule’s effects on all labor in other sectors not regulated by the [mercury standard].” In other words, “every model” Jackson ran cooked the books in favor of EPA’s conclusion.

In economics, such analysis is known as a “broken-window fallacy,” which views only a narrow range of effects of a particular action. “There is only one difference between a bad economist and a good one,” wrote 19th century economist Frederic Bastiat. “The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” EPA focuses on the “seen”—the workers required to install pollution controls—while it ignores the unseen—the workers who lose their jobs or are forced to take pay cuts due to higher electricity prices.

Nevertheless, EPA continues to promulgate this myth that the Utility MACT will benefit the economy. But consider what it means to benefit the economy. As Bastiat writes, economic development “diminishes the ratio of effort to result… that is, [it] lessens the effort needed to have a given quantity.” EPA regulations do the opposite. The agency’s RIA notes, “regulation leads to more labor being used to produce a given amount of output.” In other words, it increases the ratio of effort to result—it increases the effort needed to have a given quality. In sum, unnecessary regulations do not develop an economy—they impoverish it.

[click to continue…]

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