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Paul Chesser, Climate Strategies Watch

As I mentioned in an earlier post, North Carolina's Climate Action Plan Advisory Group enlisted the Energy Center at Appalachian State University to apply its mumbo-jumbo economic analysis model (click on "Ponder presentation") to the recommendations that CAPAG produced. Undoubtedly the global warming believers wanted some public entity to tell them how all their energy tax hike and regulation ideas would improve the economy and create jobs, and the Energy Center delivered. They reported that by 2020, North Carolina would see $2.2 billion in new investment and 32,000 new jobs if all CAPAG's recommendations were implemented.

Focusing on details, the Energy Center was particularly optimistic about CAPAG's biofuel subsidy proposals. A proposal to replace 12.5 percent of the state's petroleum diesel fuel consumption with biodiesel by the year 2020 would yield 661 new jobs and $68 million in annual gross state product. Even more exciting, an ethanol subsidy of 23 cents per gallon, to replace gasoline consumption in the state with ethanol by 25 percent by the year 2025, would create more than 12,000 new jobs and increase gross state product by $4.1 billion.

Someone should have sent that memo to employees at Pilgrim's Pride, who closed a chicken processing plant in North Carolina in March, as well as six distribution sites. The reason?

Chief Executive Clint Rivers placed blame for the industry's trouble on the federal government's "deeply flawed" policy of paying subsidies for using corn to produce ethanol for fuel, which he said would cause food prices to rise further.

"American consumers are only just beginning to feel the impact of sharply higher food prices," as food producers pass along more of their higher costs, Rivers said.

Rivers said the company hasn't been able to raise prices fast enough to cover higher feed costs. He called the current situation facing poultry producers "among the most difficult I have seen during my 27 years in the business."

Apparently the science was settled, but the economics was not.

E&E news reporter Monica Trauzzi yesterday interviewed Bob Dinneen, President and CEO of the Renewable Fuels Association (RFA). They discussed the future of the Renewable Fuel Standard (RFS). Today’s post will examine one of Dinneen’s answers that is dense with misinformation. Before examining it, though, some basic background may be helpful.

Background

The RFS is a central planning scheme requiring specified volumes of biofuels to be sold in the nation’s motor fuel supply over a 17-year period. As incorporated into the Clean Air Act by the so-called Energy Independence and Security Act (EISA) of 2007, the quota for total renewable fuels increase from 4 billion gallons in 2006 to 36 billion gallons in 2022.

The RFS, however, also authorizes the Environmental Protection Agency to make annual adjustments to the quota (known as Renewable Volume Obligations or RVOs) if the administrator determines there is an “inadequate domestic supply.”

Renewable fuel lobbyists have been castigating EPA ever since November 2013 when the agency, for the first time, proposed to reduce the statutory targets based on the “blend wall” — a set of market constraints limiting the supply of biofuels that can actually be sold to consumers.  Although the final RVOs adopted by EPA in November 2015 restored much of the cutbacks proposed in 2013, Dinneen and other renewable fuel lobbyists continue to cry foul and demand that EPA force refiners to buy ethanol at the statutory volumes.

Contrary to popular misconception, the RFS does not expire after 2022. Rather, the Clean Air Act leaves it up to EPA to decide post-2022 targets based on the agency’s assessment of various factors such as the impacts of biofuel production and use on the environment, energy security, and job creation.

Bumper Crop of Misinformation

Monica Trauzzi: So you need the RFS post-2022?

Bob Dinneen: Again, until there is a truly free marketplace. You know, ethanol is not subsidized today. The only liquid transportation fuel that receives a subsidy from the taxpayer is, oh, oil. You know, we’re paying refiners to drill deeper in the Gulf of Mexico and to frack in North Dakota and Texas. We aren’t subsidized. I want to see the renewable fuels industry continue to evolve. I want to see new technologies. I want to see new feedstocks. I want to see us get beyond the 10 percent blend wall. All of that happens if the EPA grows a backbone and implements this program in the way that it was intended to be implemented so that refiners have to invest in the infrastructure to allow E85, to enable E15 to be sold. It’s not that hard.

Dinneen has made those points before, so he’s not speaking off the cuff but presenting a settled position. Time for a fact check. [click to continue…]

Summary: Thirty-two House Democrats this week sent a letter to the CEOs of Chevron, ExxonMobil, ConocoPhillips, BP, Shell, and Peabody Energy posing 15 questions about the companies’ (alleged) funding of a “massive campaign of [climate] denial and disinformation.” The gist of the letter, which presumes guilt and demands confessions, is captured by the old joke question: “When did you stop beating your wife?”

In a letter sent this week to the CEOs of Chevron, BP, ExxonMobil, Shell, ConocoPhillips, and Peabody Energy, Reps. Ted Lieu (D-Calif.), Peter Welch (D-Vt.), and 30 other House Democrats ask numerous questions about the companies’ (alleged) role in funding a “massive campaign of denial and disinformation” to hide the terrible “truth” about global warming from policymakers and the public.

I reproduce the questions below and provide model answers the companies are welcome to use or adapt at their pleasure.

Q1: When did your company first become aware that using fossil fuels could result in climate change and warming of the planet?

A: The question assumes the idea of anthropogenic global warming is of recent vintage. In fact, the potential of carbon dioxide (CO2) emissions to warm the Earth was first estimated by Swedish scientist Svante Arrhenius in 1896. English engineer Guy Callendar made more observationally-constrained estimates in his 1938 study, “The Artificial Production of Carbon Dioxide and its Influence on Temperature.” Unlike many scientists (and non-scientists) today, Callendar did not assume anthropogenic climate change is inherently dangerous:

In conclusion it may be said that the combustion of fossil fuel, whether it be peat from the surface or oil from 10,000 feet below, is likely to prove beneficial to mankind in several ways, besides the provision of heat and power. For instance the above mentioned small increases of mean temperature would be important at the northern margin of cultivation, and the growth of favourably situated plants is directly proportional to the carbon dioxide pressure (Brown and Escombe, 1905): In any case the return of the deadly glaciers should be delayed indefinitely.

Since your letter refers to recent journalistic exposés of “what Exxon knew” about climate change, we assume you’re asking what our scientists knew in the 1970s and 1980s. Our answer (h/t David Middleton) is that some of our scientists knew then what NASA scientist James Hansen knew in 1988 — that CO2 emissions would cause two-to-three times more warming than actually occurred.

Figure explanation. Red: Hansen’s business-as-usual (no climate policy) scenario. Orange: Hansen’s emission freeze at 1980s level scenario. Yellow: Hansen’s drastic emission-reduction scenario. Light blue: Remote Sensing System (RSS) satellite temperature record. Dark blue: University of Alabama in Huntsville (UAH) satellite temperature record. Although emissions increased as much as in Hansen’s BAU scenario, observed temperatures are lower than in Hansen’s drastic emission-reduction scenario. Source: John Christy

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New reports by the Center for Regulatory Solutions (CRS), the research arm of the Small Business & Entrepreneurship Council (SBEC), detail the devastating impacts of the federal Renewable Fuel Standard (RFS) program on California and Illinois. The reports could not be more timely. EPA is expected next week to publish its final rule establishing biofuel quota (known as Renewable Volume Obligations or RVOs) for 2015 and 2016.

According to Fields of Deception: How the Corn Ethanol Mandate Harmed the Prairie State (released today), the RFS imposed roughly $5 billion in higher fuel costs on the people of Illinois between 2005 and 2014, with another nearly $17 billion to come through 2024. The ripple effects of those costs will depress labor income by almost $7 billion over 20 years, depress labor demand by more than 7,000 jobs annually, and impose hundreds of millions of dollars in higher feed costs on Illinois dairy and poultry farmers. Due to all those RFS impacts, Illinois will lose $12 billion in GDP growth by 2024.

“Contrary to conventional wisdom, our report shows that Illinois, an early supporter of ethanol, has lost thousands of jobs and incurred enormous economic costs as a result of the ethanol mandate,” said SBEC President Karen Kerrigan.

According to The Big Corn Sellout: How National Politics and Ethanol Mandates Are Hurting California’s Economy (released 11/17/2015), the RFS has imposed $13.1 billion in higher fuel costs on Golden State consumers since 2005, with another $28.8 billion to come over the next 10 years. The vast majority of that $42 billion “fuel tax” is a wealth transfer to out-of-state ethanol producers. The ripple effects of those costs will depress labor income by almost $18 billion over 20 years, depress labor demand by more than 17,000 jobs every year, and impose hundreds of millions of dollars in higher feed costs on California’s dairy and poultry farmers. Due to all those RFS impacts, California will lose $31.6 billion in GDP growth by 2024.

Both reports detail many other adverse economic and environmental effects of the RFS. Key findings follow.

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As discussed in Part 1 of this series, New York Attorney General Eric Schneiderman has begun a Martin Act investigation of Exxon Mobil. He wants to prove Exxon Mobil defrauded its shareholders by lying about climate change and the associated political risks to the oil industry. At a minimum, he wants to cow other companies into preaching “consensus” climatology in their annual reports.

Schneiderman’s thesis — that Exxon Mobil concealed from investors the financial risks created by the “Keep It In The Ground” global warming movement — is loony. Nonetheless, he poses a real threat to the shareholders he pretends to be protecting. That’s because the Martin Act sets a very low bar for establishing guilt and places no limit on economic losses an AG may impose via damage awards and fines.

To win the case, Schneiderman does not have prove that Exxon Mobil intended to defraud anyone. Nor does he have to show that any shareholder was actually injured, that any shareholder relied on the company’s “misrepresentation” when purchasing stock, or that the company made false statements. He just has to persuade a jury that Exxon Mobil failed to present “material” facts — such as, presumably, the gloom-and-doom assessments of consensus climatology.

Schneiderman’s probe of Exxon Mobil is conveniently timed to feed off the green campaign to indict fossil-fuel industry executives under the Racketeer Influenced Corrupt Organizations (RICO) Act, and recent media reports claiming Exxon has known since the 1970s how bad its products are for the global climate system.

But the probe also appears to be part of a long-term strategy. Earlier this week, Schneiderman announced he had reached a Settlement Agreement with coal giant Peabody Energy — the culmination of a three-year Martin Act inquiry. Maybe he chose to go after the smaller opponent first to establish climate-related precedents for hunting bigger prey.

Let’s review the Settlement Agreement (SA) and consider how Peabody should respond to it.

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New York attorney general Eric Schneiderman could severely depress Exxon Mobil stock values while piously claiming to protect shareholders from fraud. Welcome to the Orwellian world of climate-policy sanctimony.

Schneiderman “has begun an investigation of Exxon Mobil to determine whether the company lied to the public about the risks of climate change or to investors about how such risks might hurt the oil business,” the New York Times reported last week. According to the Times, Schneiderman is investigating the company under the State’s 1921 Martin Act, the envy of regulatory bullies throughout the land. The statute gives New York’s AG “extraordinary powers and discretion” that “exceed those given any regulatory in any other U.S. State” (Wiki). As one commentator describes it:

The purpose of the Martin Act is to arm the New York attorney general to combat financial fraud. It empowers him to subpoena any document he wants from anyone doing business in the state; to keep an investigation totally secret or to make it totally public; and to choose between filing civil or criminal charges whenever he wants. People called in for questioning during Martin Act investigations do not have a right to counsel or a right against self-incrimination. Combined, the act’s powers exceed those given any regulator in any other state.

Now for the scary part: To win a case, the AG doesn’t have to prove that the defendant intended to defraud anyone, that a transaction took place, or that anyone actually was defrauded. Plus, when the prosecution is over, trial lawyers can gain access to the hoards of documents that the act has churned up and use them as the basis for civil suits. “It’s the legal equivalent of a weapon of mass destruction,” said a lawyer at a major New York firm who represents defendants in Martin Act cases (and who didn’t want his name used because he feared retribution by [former AG Eliot] Spitzer). “The damage that can be done under the statute is unlimited.”

According to Deschert LLP, the Martin Act sets a low bar for establishing guilt. To convict a company of fraud, the AG does not have to show evidence of scienter — an intent to mislead. All he has to show is that the company misrepresented a “material fact” about its securities, and the Act defines “misrepresentation” broadly to include omissions of material facts as well as affirmations of false facts. By that logic, if Exxon Mobil’s public statements on climate-change or oil-market projections omit worst-case scenarios the company does not regard as credible, then it is guilty of defrauding shareholders.

Apparently, Schneiderman wants to build a case that Exxon Mobil misrepresented the seriousness of climate change risks, hiding from investors the financial risks the company will face when science triumphs over denial and governments act to curb the production and use of fossil fuels. It’s a preposterous green fairy tale. [click to continue…]

[Editor’s note: This is the latest in a semi-regular series whose purpose is to correct the record whenever New York Magazine’s Jonathan Chait writes a story about climate change politics or policy]

Earlier this month, Jonathan Chait penned a cover story for New York Magazine on climate change, which he has since described thusly:

My story in the magazine describes how political pressure and technological innovation are feeding into each other, producing a virtuous cycle of affordable green energy and stronger willpower to reduce emissions.

As always, Chait’s climate change story is peppered with factual inaccuracies. For example, writes Chait:

[I]n 2010, President Obama, temporarily enjoying swollen Democratic majorities in both houses, tried to pass a cap-and-trade law that would bring the U.S. into compliance with the reductions it had pledged in Copenhagen. A handful of Democrats from fossil-fuel states joined with nearly every Republican to filibuster it.

For starters, President Obama did not “try to pass a cap-and-trade law.” In fact, the “cap-and-trade” in question never made it out of the democrat party caucus in the Senate. More to the point, the President effectively killed the effort by punting on a meeting about the measure with Senate democrat leadership. Also, while it’s true that opposition to the bill was bipartisan, there was never a filibuster. Again, the bill never made it out of the democrat Senate caucus, due to intra-party opposition. Republicans didn’t have to lift a finger. So Chait’s history is totally wrong (again).

Of course, there are more mistakes in the piece, but the two most prominent errors undercut his thesis altogether. Chait’s argument is that we should be optimistic because green energy is taking off, and also because China is fervently doing everything it can to reduce emissions. As fate would have it, both of Chait’s primary talking points were refuted by events in only the 17 days since he published his ill-destined article. [click to continue…]